Chino Pty Ltd v Transport Infrastructure Development Corporation

Reported Decision: 153 LGERA 136

Land and Environment Court

of New South Wales

CITATION: Chino Pty Limited v Transport Infrastructure Development Corporation and Anor [2006] NSWLEC 768

PARTIES: APPLICANT
Chino Pty Limited
FIRST RESPONDENT
Transport Infrastructure Development Corporation
SECOND RESPONDENT
Willoughby City Council

FILE NUMBER(S): 30242 of 2005; 30243 of 2005

CORAM: Pain J

KEY ISSUES: Valuation of Land :- extinguishment of easement for support - does public purpose of acquisition include reinstatement of easement for support - whether before and after method of valuation should apply - whether s 88K Conveyancing Act 1919 should apply - whether matters after date of acquisition can be taken into account

LEGISLATION CITED: Conveyancing Act 1919 s88K
Land Acquisition (Just Terms Compensation) Act 1991 s4, s19, s20, s31, s37, s54, s55, s56
Public Works Act 1912
Real Property Act 1900
Transport Administration Act 1988 s18

CASES CITED: Anderson v Valuer-General [2005] NSWLEC 151;
Antipas v Kutcher (2006) 144 LGERA 289 ;
Besmaw Pty Ltd v Sydney Water Corporation (2001) 113 LGERA 246;
Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259 ;
Brisbane City Council v Thorpe (1965) 12 LGRA 31;
Broken Bay Peninsular Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 (1997) NSWLEC 165 ;
Commissioner of Highway v George Eblen Pty Limited (1975) 34 LGERA 207 ;
Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of SA Ltd (1947) 74 CLR 358 ;
Council of the City of Liverpool v Commonwealth of Australia (1993) 46 FCR 67;
D & C Dwight v Sydney Water Corporation Ltd [1995] NSWLEC 72 ;
Gosford Shire Council v Green (1980) 48 LGRA 201;
Harman v City and County of San Francisco (1972) 7 Cal. 3d 150 ;
Hemmerling v Tomlev Inc. (1967) 67 Cal. 2d 572;
Hornsby Shire Council v Roads and Traffic Authority (1998) 100 LGERA 105 ;
Housing Commission of NSW v Falconer [1981] 1 NSWLR 547;
Mir Bros Unit Constructions Pty Limited v Roads and Traffic Authority of New South Wales [2005] NSWLEC 419;
Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] 2 All ER 317 ;
Redevelopment Agency of the City of Concord v Michael Tobriner (“Tobriner 1”) (1984) 153 Cal. App. 3d 367;
Redevelopment Agency of the City of Concord v Tobriner (“Tobriner 2”) 215 Cal. App. 3d 1087;
Roads and Traffic Authority v Perry [2001] 52 NSWLR 222;
Spencer v The Commonwealth (1907) 5 CLR 418;
Sydney Water Corporation v Besmaw [2002] NSWCA 147;
The People ex rel. Department of Public Works v Logan (1961) Cal. App. 2d 581;
United States v Welch (1910) 217 US 333;
William Henry Kater v Electricity Transmission Authority of New South Wales, (NSWLEC, Pearlman J, 9 February 1996, unreported)

DATES OF HEARING: 29/05/2006
30/05/2006
01/06/2006
21/11/2005
22/11/2005
23/11/2005
24/11/2005
25/11/2005
29/05/2006
30/05/2006
01/06/2006
02/06/2006
09/08/2006
10/08/2006
06/09/2006

DATE OF JUDGMENT:
12/22/2006

LEGAL REPRESENTATIVES: APPLICANT
Mr J Ayling SC
Ms H Irish
SOLICITORS
Mallesons Stephen Jaques
FIRST RESPONDENT
Mr J Maston
SOLICITORS
Clayton Utz
SECOND RESPONDENT
Mr P Tomasetti
SOLICITORS
Pike Pike & Fenwick

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Pain J

22 December 2006

30242 of 2005, 30243 of 2005 Chino Pty Limited v Transport Infrastructure Development Corporation and Willoughby City Council
JUDGMENT

1 Her Honour: These two appeals concern the compulsory acquisition of land and an interest in land in and around the old Chatswood railway station as part of the development of the new Chatswood Transport Interchange (the “CTI”). The case is unusual because the acquisition extinguished an easement for support appurtenant to land leased by the Applicant from Willoughby Council. The land which benefited from the easement was not acquired and continues in the possession of the Applicant. The parties agreed that the evidence tendered could be relied on in both appeals.

Proceedings 30243 of 2005

2 The First Respondent, Transport Infrastructure Development Corporation, (“TIDC”) compulsorily acquired Lots 14 and 15 in DP 817116 from Willoughby City Council (“the Council”) pursuant to s 19(1) of the Land Acquisition (Just Terms Compensation) Act 1991 (“Just Terms Act”) on 27 August 2004. These lots were the former Bus-Rail Interchange at Chatswood.

3 Lots 14 and 15 were both burdened by registered easements one of which entitled any development of Lot 12, an air stratum immediately above Lots 14 and 15, to be supported by those lots. The acquisition of Lots 14 and 15 extinguished a number of easements which benefited Lot 12. The only easement at issue in these proceedings is the easement for support BB in DP802469. Lot 12 is an air stratum unlimited in height but limited in depth as at the date of acquisition to RL 101.3. The site area of Lot 12 is 102m2. The registered proprietor is Willoughby City Council.

4 Immediately before 27 August 2004 the Applicant held the following interests in land:

(a) Freehold interest in Lot 6 DP 530717 (“freehold”); and

(b) Leasehold interest in Lot 12 in DP 817116 – 98 year and 51 day lease commencing on 1 May 1990.

5 Erected on 430 is a three storey building in the following configuration:

(a) Ground floor. Single tenancy contained wholly within Lot 6 in DP 530717.

(b) First floor. The Applicant owns this freehold and it has two tenancies. One tenancy is wholly contained within Lot 6 in DP 530717. The second tenancy comprises both freehold and air stratum leasehold land. The only means of access to either tenancy is through Lot 12, the air stratum; and

(c) Second floor. Single tenancy comprising both freehold (Lot 6) and air stratum land (Lot 12). The only direct access to the second floor immediately prior to 27 August 2004 was via an escalator on the adjoining land which was the former Bus-Rail Interchange.

6 The only means of access to the tenancies on the first floor and second floor is through the air stratum (Lot 12). Access to the air stratum could be obtained either:

7 By Compensation Notice dated 4 March 2005 issued under s 42(2) of the Just Terms Act, TIDC notified the Applicant that the amount of compensation, as determined by the Valuer General, to be offered to the Applicant for the compulsory acquisition was $25,000 for disturbance. The Applicant appealed to this Court pursuant to s 66 of the Just Terms Act.

Proceedings No 30242 of 2005

8 On 25 January 2005 TIDC compulsorily acquired the Applicant’s leasehold in Lot 16 pursuant to s 19(1) of the Just Terms Act. Lot 16 provided a pedestrian link between Lot 12 and the “Spanish Steps” which lead to the retail concourse of the old Chatswood Railway Station. As a result of the existing functional link between Lot 12 and Lot 6 (430), Lot 16 provided further access for the public to Lot 6 and the retail concourse of the railway station.

9 Immediately prior to 25 January 2005, the Applicant held a leasehold interest in Lot 16 in DP 817116, a 95 year and 311 day lease commencing on 12 August 1992. Immediately prior to 25 January 2005, the registered proprietor was Willoughby City Council.

10 By Compensation Notice dated 4 March 2005 issued under s 42(2) of the Just Terms Act, TIDC notified the Applicant that the amount of compensation to be offered to the Applicant as determined by the Valuer-General for the compulsory acquisition was $10,000 for disturbance. The Applicant has appealed to this Court pursuant to s 66 of the Just Terms Act.

11 Both proceedings were originally commenced by the Applicant against TIDC. While the matter was part-heard TIDC raised s 56(2) of the Just Terms Act as a relevant matter because the acquired lands Lots 14, 15 and 16 were owned by the Council. Consequently it too had a potential claim for market value. Section 56(2) states:

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.

12 Ultimately the Council sought to be joined as a party in both proceedings so that the total amount of market value in relation to the two acquisitions the subject of these appeals can be determined at the same time. It is now the Second Respondent in both proceedings. It is accepted that both the Applicant and the Council had an interest in land which was acquired and gives rise to a compensation claim.

Events since acquisition

13 Since acquisition construction work has resulted in the demolition of the old Bus-Rail Interchange. Four concrete columns on TIDC land continue to provide support to Lot 12. A temporary lift has been built to enable access to Lot 12. Access to the upper levels of 430 can also be obtained via a temporary steel staircase which is located within land owned entirely by TIDC as a result of a further compulsory acquisition by TIDC in 2005.

14 TIDC advised that on 29 July 2005 it had compulsorily acquired the Council’s freehold interest in approximately 50 per cent of the airspace occupied by the first floor slab, within Lot 12 (51m2 in plan), so that it had the legal right to cut through the slab to install the steel staircase from the ground floor. The lease to the Applicant was excepted from the acquisition so that the Applicant has no rights in relation to this staircase. The Applicant has no more than a leasehold interest in the air space, to the thickness of the slab and a little above it, at the riser of the top step of the staircase. This compulsory acquisition is not before the Court in the sense that any claim for compensation which may arise is not raised in these proceedings. I have identified the matter here as part of TIDC’s argument is that access has continued to be provided to Lot 12 and hence 430 since acquisition.

Relevant legislation

15 In s 4 of the Just Terms Act the definition of “land” includes any interest in land, and “interest in land” means

(a) a legal or equitable estate or interest in the land, or

(b) an easement, right, charge, power or privilege over, or in connection with, the land.

16 The land acquired is an interest in land (s 4) being an easement for support only.

17 “Public purpose” is defined in s 4 of the Just Terms Act as:

… any purpose for which land may by law be acquired by compulsory process under this Act.

18 Section 20(1)(b) of the Just Terms Act states:

(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:

(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.

19 Consequently the acquisition of Lots 14 and 15 extinguished the easement for support BB benefiting Lot 12.

20 Under s 20(2) of the Just Terms Act TIDC could have excepted from the acquisition of Lots 14 and 15 the easements Lot 12 enjoyed but did not do so. Section 20(2) states:

If:

(a) the acquisition notice excepted an easement from acquisition…
…

then (unless otherwise specified in the acquisition notice) the restriction continues to have effect as if the acquisition had not taken place.

21 Section 31 allows for the rescission of a compulsory acquisition. This has not been done in this case.

22 Section 37 of the Just Terms Act provides:

An owner of an interest in land which is divested,

extinguished

[emphasis added] 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.

23 A key issue in the case is what are the relevant matters to be considered in determining the amount of compensation as provided for in s 55 of the Just Terms Act. Section 55 provides:

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.

24 Section 56(1) of the Just Terms Act states:

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

Compensation claim

25 In the Third Further Amended Points of Claim the Applicant is seeking $4,715,000 for both appeals under s 55(a) of the Just Terms Act (excluding $10,000 for loss of services and ventilation entitlements no longer pressed but in the original claim). This amount was reduced during the hearing. Part of the amount claimed under s 55(a) is a separate amount of $175,000 in relation to losses incurred as a result of the acquisition of Lot 16. Under s 55(d), disturbance, past rental losses actually incurred of $167,377.58 and future rental losses likely to be incurred of $948,339.12 were also claimed and other disturbance items of $86,954.94. Future rental losses and past rental losses were claimed in the alternative under s 55(f).

26 Issues relevant to the Applicant’s claim are what is the nature of an appurtenant easement and under what sections of s 55 of the Just Terms Act compensation is recoverable if one is acquired. An appurtenant easement is:

… an easement may be defined as “a right annexed to land to utilise other land of different ownership in a particular manner (not involving the taking of any part of the natural produce of that land or any part of its soil) or to prevent the owner of the other land from utilising his land in a particular manner”.

Land Law

27 The Applicant argued it was not legally correct to consider the appurtenant easement for support BB was severed from land (Lot 12) or that it adjoined land (Lot 12) as referred to in s 55(f) because it is part of Lot 12. The Applicant’s primary claim is therefore under s 55(a), and s 55(f) in the alternative.

28 The Council is claiming $146,000 for both appeals under s 55 as it says it is impossible to identify a separate amount of compensation for Lot 16. It does not seek as the Applicant does separate amounts under s 55(a) and (f) but says that under the valuation methodology adopted by its valuer, the before and after approach, the amount arrived at addresses all relevant heads of consideration under s 55(a) and (f). It is appropriate to consider a claim for compensation under s 55(f) as well as s 55(a) in relation to the loss of the easement for support BB.

29 TIDC argued in relation to both claimants that it was always intended as part of the public purpose underlying the compulsory acquisition that the easement for support which was compulsorily acquired be reinstated. The amount of compensation payable under s 55(a) and (f) was $44,000, the estimated legal cost of an application under s 88K of the Conveyancing Act 1919 for the grant of an easement for support. Further it argued the dominant tenement was Lot 12 being the land which benefited from the easement for support, not Lot 6. It argued Lot 12 was severed from the easement for support and was therefore “any other land” to which s 55(f) applied.

30 The Applicant argued that s 55(f) is not relevant to the extinguishment of an appurtenant easement because of its legal nature as a right annexed to land (par 26). As the easement is appurtenant to land it benefits it is therefore indivisible from it. Given that interest in land under the Just Terms Act specifically includes an easement (par 15) it is relevant to consider that the extinguishment of that easement from Lot 12 means that Lot 12 is land severed from that easement. Compensation under s 55(f) is therefore relevant to this claim.

Evidence

31 The Applicant relied on the statement of evidence of Robert Chambers, town planner, dated 28 September 2005. TIDC relied on two statements of Anthony Rowan, a town planning consultant dated November 2005 and 12 April 2006. The Council relied on a statement of evidence of Leonie de Carvalho, a senior development planner with the Council dated 20 March 2006, and a statement of evidence of John McFadden, town planner, dated March 2006. The planners also gave oral evidence at the hearing. Two joint planning reports were also relied on dated 16 November 2005 and 11 May 2006.

32 The planners agreed on the relevant statutory controls relating to Lot 12 (SREP 5 and 5(a) Special Uses), Lot 6 (SREP 5, 3(c1) Business Retail) and Lot 16 (SREP 5, uncoloured on zoning map). They agreed that for the columns supporting Lot 12, located on Lot 14, demolition for the existing columns would require development consent. There was also agreement about the applicable floor space ratio (FSR) for the existing building on Lot 6 and the access points to Lot 6/Lot 12 at the date of acquisition and under the CTI plans.

33 Mr Chambers considered the columns supporting Lot 12 were not shown on the plans forming part of DA119-5-2004 approved by the Minister in December 2004. Mr Rowan considered that development application did not relate to this part of Lot 14 where the support columns for Lot 12 were located so that consent was not sought for any work in this area.

34 There was also disagreement between the Council’s planners and Mr Rowan about whether Lot 12 has the benefit of a 3.5:1 FSR independent of the area of Lot 14. As no particular issue arose in relation to this issue in relation to the valuation evidence I will not consider it further. On the issue of whether Lot 12 could be developed independently of Lot 6 or Lots 14 and 15 at the date of acquisition having regard to the access and support arrangements in place, Mr Rowan considered this was unlikely as a practical matter. The Council’s planner considered this was theoretically possible but that a purchaser would investigate other options first.

35 Evidence of valuation experts was also relied on. The Applicant relied on the statement of evidence of Terry Davis, dated 28 September 2005 (Exhibit B), and a supplementary statement of evidence of Terry Davis, dated 4 November 2005 (Exhibit D) and a supplementary statement of evidence dated 8 November 205 (Exhibit C), an additional supplementary statement of Terry Davis, dated 22 November 2005 (Exhibit M), and Further Supplementary Statement of Evidence (Post Joint Conference) dated 17 November 2005 (Exhibit E). The First Respondent relied on the statement of evidence of Peter Dempsey, dated 1 November 2005 (Exhibit 3), Peter Dempsey’s reply to the statement of evidence of Tim Simpson, dated 18 November 2005 (Exhibit 6), and Peter Dempsey’s reply to the statement of evidence of Terry Davis, dated 11 April 2006 (Exhibit alpha). The Council relied on the statement of evidence of Terry Dundas, dated 2 March 2006 (Exhibit 1D). Numerous joint reports of the valuers were also relied on, dated 11 November 2005 (Exhibit H), 16 November 2005 (Exhibit J), 21 November 2005 (Exhibit 4) and 26 April 2006 (Exhibit 1G). The valuers also gave oral evidence at the hearing.

36 Mr Simpson, manager of Century 21 J Brough & Son, swore two affidavits dated 15 November 2005 and 16 November 2005, dealing with the history of rent paid at the premises to the Applicant and the loss of past rent. He states that the total amount of rent lost up to 20 November 2005 as a result of the two acquisitions was $167,377.58. There was an additional loss of $12,457.50 incurred as a result of additional management and advertising fees lost as a result of the acquisition. He also anticipated the total amount of rent lost up to the anticipated conclusion of the Respondent’s works in mid-2008 would be $902,644.78. His affidavit of 16 November 2005 stated that if the Applicant were unable to release the premises between 1 December 2005 and mid-2008 then the total amount of rent lost would be $125,007.04. Mr Tobin swore an affidavit particularising the income which the Council had received from 430 and the amount of rent expected to be lost during construction.

37 Mr Keats, surveyor, gave oral evidence about instructions he received from TIDC to prepare certain instruments enabling the creation of lots and the registration of easements, inter alia, during 2004 and 2005.

Issues

Public purpose

38 The parties disagreed on what the public purpose was for which the lands were acquired and what evidence could be considered in determining that issue. The acquisition notices specified that the acquisitions were for the purposes of the CTI. That is a public purpose within the meaning of s 4 of the Just Terms Act because of the combined operation of the Transport Administration Act 1988 s 18B, s 18D and s 18F and the Public Works Act 1912. The effect of the acquisition notice acquiring Lots 14 and 15 was to remove the easement for support benefiting Lot 12.

Chronology

39 In order to understand TIDC’s arguments, the following chronology is set out. It includes events before and after the date of acquisition. The Applicant and Council argued that any events after the date of compulsory acquisition are irrelevant and that is an issue which I need to resolve.

(i) 26 February 2002 – Approval was given by the relevant Minister under Pt 5 of the Environmental Planning and Assessment Act 1979 (“the EP&A Act) for the Parramatta Rail Link (“PRL”).

(ii) January 2004 – First Respondent established as a statutory body of the Crown; Transport Administration Act amended to make First Respondent the proponent and determining authority for the PRL project.

(iii) February 2004 – Letterbox flyer distributed in respect of the concept design and a review of environmental factors.

(iv) 20 May 2004 – First development application for CTI lodged with the Minister for Planning, including details of the retail uses proposed.

(v) 31 May 2004 to 29 June 2004 – Statement of environmental effects and modification to Pt 5 approval placed on public exhibition.

(vi) 1 June 2004 – Jeff Burns, TIDC’s agent, sends the Property Report and plans for the CTI to Chino’s agent. This is argued by TIDC to include a report relating to the maintenance and regrant of the easement for support BB.

(vii) 23 July 2004 – Brewster-Murray Pty Ltd consultants’ report prepared for Chino’s solicitor, Mr Wee.

(viii) 27 August 2004 – Gazette notice published for compulsory acquisition of Lots 14 and 15.

(ix) 17 December 2004 – Development consent granted by the Minister for Infrastructure and Planning, subject to conditions of consent, for development application 119-5-2004, for first stage of the development of the CTI Project, involving a podium level for landscaping, three separate building envelopes, two levels of underground parking, area for retail space and ancillary uses.

(x) 28 January 2005 – Gazette notice published for compulsory acquisition of Lot 16.

(xi) 6 February 2005 – Information centre at Chatswood Railway Station concourse opened to the public, containing information relating to both the Pt 5 EP&A Act and Stage 1 development application under Pt 4 of the EP&A Act aspects of the CTI.

(xii) 22 August 2005 – Development consent 131-05-2005 granted by the Minister for Planning, for the second stage of the development of the CTI Project, for the construction and use of three residential buildings, construction and use of retail development, three basement levels for car parking, a residential loading dock, two retail loading docks, access to the residential drop-off for two of the towers, landscaping on the podium roof and stratum subdivision of the site.

Pre-acquisition documents

40 TIDC relied on documents produced before the date of acquisition as demonstrating the public purpose included TIDC’s intention at all times to reinstate the easement for support that was BB. Three documents were considered in some detail, the Brewster Murray Pty Ltd report (see par 39(vii)), the Property Report (par 39(vi)) and the Call for Detailed Proposals for the CTI (“the Call Document”).

41 The Brewster-Murray report dated 23 July 2004 concerning the impact of the new development on Chino Pty Limited was sent to Mr Wee, the Applicant’s solicitor. It refers to a meeting held on 13 July 2004 between Mr Burn of Michael Collins & Associates (TIDC’s agent), Mr Simpson of Century 21 (Applicant’s agent), Mr Wee and Mr Auyeung of Brewster-Murray Pty Ltd. In the background section of the letter reference is made to the easement for support (columns) to Lot 12. The letter states:

1. The ground floor (RL.98.0) will remain unchanged. The existing concrete stair and columns supporting level 2 and level 3 will remain.

2. The stair in the mall (Lot 16) will be demolished. The existing escalator will also be removed.

3. Level 2 (RL.102) the existing concrete stair and concourse will remain. The concrete stair also links to level 3. The link to the new Interchange is uncertain.

4. Level 3 (RL.106) the existing stair and concourse will remain. The link to the new Interchange will be blocked.

42 Plans were annexed which show the four support columns on Lot 12. Also attached to the letter were:

(a) the Property Report,

(b) a detailed concept plan for the adjoining property, 430,

(d) detail of easements.

43 The Property Report forms part of the documentation prepared by TIDC for the Call Document. The Call Document was not attached to the Brewster Murray report. The Property Report states that it was provided to assist proponents in evaluating the opportunity to bid for the public/private partnership to undertake the CTI. The Report provides information about the CTI site, surrounding development, and interaction with adjoining properties in providing access to Chatswood Station. Aspects of the CTI addressed include land titles and affectations. Adjoining property includes a reference to 430 which is described. Chapter 8 states that TIDC intends to amalgamate the CTI sites and consolidate current titles for future subdivision to create stratum lots. It refers to the acquisition of Lots 14 and 15 by TIDC. Chapter 10 deals with easements. TIDC particularly relied on the following:

Easements recorded on current land titles for lots partly or wholly within the CTI site are summarised in the attached schedule …

These easements principally relate to rights of way and the provisions of … structural support and services to the CTI site and adjoining properties.

In finalising the CTI site amalgamation and title consolidation, the owner intends to adopt the following approach in respect of easements

1. Easements that do not burden or benefit another property or authority will be extinguished prior to or during the Integrated Construction Works.

However, the development will require the developer entity to:

(i) Observe the intent of all easements on current land titles as if these easements continued to affect the land title of the CTI site, to the extent that the function or requirements of the easement are not obsolete due to redevelopment.

(ii) …

(iii) Ensure that … structural support to other properties [is] maintained, including … structures that are not protected by easements on Current Land Titles.

(iv) Permit reinstatement on newly created titles of all existing easements that are to be retained.

44 Section 11 is titled “Proposed Arrangements Relating to Adjoining Properties” and provides:

Subject to the terms of the CFDP

, the following arrangements with or relating to adjoining owners are proposed to give effect to the development concept envisaged in the Reference Concept Design …

11.1 12/817116 and 430 Victoria Avenue

At first and second floor levels, commercial tenancies include areas within 430 Victoria Avenue and lot 12, DP 817116…

Lot 12 is a stratum above part of the area available for the Retail Centre Stratum.

TIDC proposes to acquire and extinguish the Lot 16 lease and procure alternative access to Lot 12 in accordance with the ICW Specification.

The ICW specification requires the Developer Entity to provide stairs from ground level beneath Lot 12 to link with the first floor corridor within Lot 12.

45 Section 13 of the Property Report is entitled “CTI site – Schedule of Easements on Current Land Titles”. Relevantly, for present purposes the schedule refers to DP 802469 – Easement for Support – BB.

46 Appendix 7 to the Brewster Murray Report is a copy of the survey report prepared by Whelans Surveyors. Sheet 7 of 9 depicts the stratum subdivision in the plan. This is not a strata plan for the purposes of the Strata Titles – Freehold Development Act 1974. The strata are proposed to be lots in deposited plans. On sheet 7 of 9, a cross section B-B is depicted. On sheet 9 of 9 a cross-section BB is shown in elevation with its reduced levels. Lot 12, DP 817116 is depicted in section BB as elevated above RL 98 and commencing RL 101.3. According to TIDC this makes quite clear that Lot 12 was to be retained in situ in separate ownership, but abutting and overlying the proposed stratum Lot 102, which includes former Lot 14.

47 Appendix 8 to the Brewster Murray Report is titled “Detail of Easements”. It consists of a schedule and a bundle of title searches. The schedule is headed “Encumbrance Affectations – Chatswood Transport Interchange – Chino Pty Ltd”. The third last entry is identified as BB DP 802469. The type of easement affectation is “support”, the benefit is for Lot 12 (described as “off site”). Lot 40 is shown as the lot burdened. This is the former reference to the current Lot 14, DP 817116. Under the heading “Status” the word “modify” is entered. The comment for this: Support to lots 12 and 16. Check slab location relative to RLs and stratum. “Modify” in the schedule means “extinguish prior to works any interests that burden the site, retain any benefit if appropriate, and modify or replace after works to suit redevelopment”.

The Call Document

48 The Call Document issued by TIDC invited proposals from parties wishing to undertake development of the CTI. The Call Document summarised the scope of the CTI and outlined the proposed contractual and commercial framework, including details of the development agreement to be entered into with the developer entity and the associated property sale and lease documents.

49 Section 1.3 states in part:

The stratum lots purchased by the developer entity and those retained by Rail Corp will be burdened with and benefit from easements for pedestrian access, services [and]

structural support

…

50 The obligations of the developer entity are set out in s 2 – “Delivery”. Section 2.9 Operational and Staging Requirements during Construction states:

During the delivery of the CTI, including the integrated construction works, the developer entity must maintain, relocate or replace existing access, services and

structural support for adjoining properties

. The rights of adjoining property owners, tenants and other users of the accesses and services are to be respected and managed during the delivery of the CTI.

51 Section 3 of the Call Document is entitled “Legal Framework”. In s 3.1, item 7 (stratum subdivision plan) states that the stratum subdivision plan is the concept stratum subdivision plan which, for the reference concept design, describes the stratum lots which will be created following completion of the integrated construction works to permit the stratum sales contemplated for the CTI.

52 Within section 3, par 3.3 entitled “Site Access and Ownership Issues” states:

A document entitled “CTI Property Report” is included in Part 2.4. The CTI Property Report presents a consolidated summary of various property-related matters including:

· The CTI site, surrounding development and the current interaction with adjoining properties in providing access to Chatswood Station

· Existing buildings and services

· Land titles and affectations, including the proposed consolidation of titles and the stratum sub-division plan based on the reference concept design

· Property-related obligations in the envisaged development agreement

53 The following note appears in the report:

Note: This report is intended to provide an introduction and must not be relied on. Proponents must fully investigate all land titles and related information including deposited plans, 88B instruments and other dealings. These investigations must include CTI and any other property/interests that are considered to be relevant.

54 No direct evidence was provided that the Property Report and the Call Document were publicly available although TIDC submitted they were because the Call Document states that submissions were due on 19 July 2004.

55 TIDC also relied on the Statement of Environmental Effects (exhibit 15) for the CTI dated May 2005 which was prepared as part of the first development application and publicly exhibited in February and May to June 2004. TIDC also argued there was information available from TIDC about the CTI which would have been considered by a prudent hypothetical purchaser.

Post-acquisition documents

56 Documents TIDC sought to rely on post-acquisition were extensive. The Applicant and the Council objected to relying on any documents produced after the dates of compulsory acquisition (27 August 2004 for Lots 14 and 15 and 25 January 2005 for Lot 16), on the basis these were irrelevant to the issues before the Court.

57 TIDC emphasised in argument that the two development consents for the CTI dated 17 December 2004 and 22 August 2005 were closely linked and were able to be considered as part of confirming the public purpose at the date of acquisition. Its submissions referred to the Stage 1 and Stage 2 development consents suggesting these were staged developments as provided for under the EP&A Act. The “Planning Assessment Report” from the Department of Planning (undated, tendered as Exhibit IJ by the Council) states that the two development consents are not staged consents under the EP&A Act and are separate, as the Council stressed in its submissions. This was conceded by TIDC but it nevertheless submitted that this was a matter of form only, as the two development consents were clearly related.

58 TIDC in its submissions took the Court to a number of plans attached to the two development consents granted after the first date of acquisition which show the premises on and next to Lot 12 continuing in their current form and the four concrete pillars supporting Lot 12.

59 TIDC also relied on draft deeds sent to the Applicant’s agents on or about 7 December 2004 and 8 March 2005. On or about 7 December 2004 TIDC’s agent sent to the Applicant’s agent a draft deed which TIDC’s agent stated “has been developed to document its [TIDC’s] proposal to maintain the intent of easements extinguished upon acquisition and reinstate those easements upon completion of works”. That draft deed provided inter alia for Chino’s release and indemnity to the effect that TIDC was released unconditionally and forever from its obligations to comply with the statutory processes under the Act. Chino, at cl 7 of the deed, covenanted that:

(a) to the extent that the parties, acting reasonably, agree:

(i) the Dominant Tenement requires the benefit of easements to the effect and intent of the Interests, and

(ii) the Project Works do not render the effect and intent of the Interests obsolete,

TIDC covenants with Chino that TIDC will use reasonable endeavours to cause the creation of the Substituted Interests so as to provide the Dominant Tenement with benefits equivalent to the benefit previously provided by the Interests.

(b) Clause 7(a) does not prevent the creation of such new easements benefiting the Dominant Tenement as the parties may reasonably agree, being new easements in addition to the Substituted Interests.

60 The Applicant argued that deed was quite unreasonable in its terms, and provided no guarantee to the Applicant that the easement for support would be reinstated.

61 A further draft deed was sent in March 2005 with different provisions. These documents, TIDC argued, confirmed its intention to maintain the easement for support extinguished upon acquisition and reinstate those easements upon completion of the works. No agreement has been reached to date with the Applicant. Any documents tendered on this issue by TIDC were objected to by the two other parties on the basis they were irrelevant and their tender was allowed by me subject to arriving at a final conclusion on whether TIDC’s case relying on these documents was valid. At the last hearing in September 2006 TIDC tendered, over similar objections of the other parties, an instrument (“Transfer Granting Easement”) which required the Council’s consent to enable an easement for support the same as BB to be registered under the Real Property Act 1900. The Council’s letter in response with numerous objections to that instrument was also tendered. There continues to be no legally enforceable right to require TIDC to support Lot 12.

TIDC submissions on public purpose

62 TIDC argued that it had confirmed before and after acquisition that it will be providing ongoing rights of support to Lot 12 and that the Applicant and the Council cannot therefore argue this case on the basis that it does not yet have those rights. The conduct of the public purpose was relevant to the claim under s 55(f).

63 TIDC argued that if a “fact” is part of the public purpose or the proposal to carry out the public purpose, then it must be assumed by the valuers and the Court in arriving at compensation.

64 TIDC argued that the public purpose of the acquisition for the CTI project included the intention to restore the easement for support benefiting Lot 12 and hence Lot 6. That intention was able to be known by a prudent hypothetical purchaser at the date of acquisition from the documents then available and from inquiry at TIDC, and is confirmed by events since the date of acquisition which are able to be taken into account. TIDC argued that the carrying out of the proposal for which the land was acquired after acquisition is directly relevant evidence under s 55(f) because that refers to the increase or decrease in value of other land 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.

65 TIDC’s case was based on an extensive examination of the documents and plans prepared by or for TIDC in relation to the CTI development before and after the date of acquisition. Based on this material TIDC argued that a prudent hypothetical purchaser would have been aware at the date of acquisition that it was part of the public purpose that the easement for support be reinstated. The extinguishment of the easement was a step in the scheme whereby the removal of the easement was temporary. Assurances were given to the Applicant before (and after) acquisition that the easement would be effectively regranted. According to TIDC, it was never in a position to deny support because the public purpose included the retention of that support. TIDC is constrained in dealing with Lot 12 by its planning approval to carry out the public purpose and the absence of development consent to demolish the supporting structures. TIDC‘s intentions were confirmed by the documents relied on after the acquisition, such as the first and second development consents and the plans attached to those which show Lot 12 continuing with concrete columns.

66 While generally events after acquisition are not able to be taken into account, subsequent or future events can be considered in the following circumstances:

(a) Where the future events were foreseeable, evidence of them is inadmissible not to prove a hindsight, but to confirm a foresight: Housing Commission of NSW v Falconer [1981] 1 NSWLR 547 at 558 per Hope JA;

(b) If inquiries by a prudent purchaser on the date of acquisition would have been sufficient to establish what was to occur. This includes inquiries of the resuming authority in cases where injurious affection or increase in value after acquisition is being considered. In Brisbane City Council v Thorpe (1965) 13 LGRA 31, the Council compulsorily acquired a strip across the front of the claimant’s house and two years after the date of acquisition (and before the conclusion of the hearing of the claim for compensation) offered to move the improvements wholly onto the retained land. In holding that this offer could be taken into account by the Court in assessing compensation, Gibbs J, said (at 37):

It was reasonable to expect that the Council would offer to make the building available, since the purpose of the resumption was to widen a road and possession of a portion of a building could be of no use to the Council. The fact that it has since made the offer may be regarded to show that as at the date of resumption, the building would have been available.

(c) Where a course of events is in process and comes to fruition proximate in time to the acquisition date but after it, that is, events or policy development which commenced prior to resumption may be followed to their result after resumption: Marcus Jacobs, The Law of Resumption Compensation in Australia, LBC Information Services, North Ryde, 1998.

67 TIDC’s arguments emphasised that it was a statutory authority under Ministerial control, and had given a specific undertaking to the Applicant after the acquisition that it would reinstate the easement. This continued what had already been made clear as part of the public purpose at the time of the acquisition.

Applicant’s submissions

68 The Applicant argued that the public purpose is what is stated in the acquisition notices, namely the CTI. As a result of the acquisition the easement for support BB was extinguished and that must be taken to be part of the public purpose.

69 Both the Applicant (and the Council) argued that any documentation after the date of acquisition was inadmissible as evidence because the point at which compensation is determined is the date of acquisition. That is clear from the terms of s 55(a) and (f) which refer to the assessment of the value of land at the date of acquisition. Further, the TIDC argument confused the identification of public purpose with the means of achieving that public purpose. It is not correct that every means of carrying out a public purpose becomes part of the public purpose for the purposes of compensation. At the date of acquisition the Applicant lost a significant interest in land for which the Just Terms Act entitles it to be compensated.

70 If the documents available at the date of acquisition are considered, namely the Property Report and the Call Document, whether the intention to pass on the vague requirements in the documents relied on to a “developer entity” is not known. Nor can it be seen how such a body could ever be legally obliged, at the Applicant’s demand, to comply, taking into account the lack of privity of contract and the apparent difficulty such an entity would have in granting easements over TIDC-owned land. Nor is it apparent that the Property Report was a public document. As a document prepared specifically for, and available only to, tenderers for a large commercial development, it is more likely to be “commercial-in-confidence”. TIDC’s willingness to hand it out to the agent of the Applicant, Brewster Murray Pty Ltd, consultants, can be seen as self-serving, and shows there was no other material that TIDC could produce that gave any support at all to its contention that the “public purpose” extended to the reinstatement of the easement because it or the Call Document do not state that.

71 Access to the upper levels of 430 continues now, as has been the case since the acquisitions, to be at the discretion of TIDC. In fact and law the continued existence of so much of 430 as lies within Lot 12, and any capacity it may retain as a whole to function as commercial premises, is at TIDC’s discretion.

Council’s arguments

72 The public purpose must be determined at the date of acquisition to enable compensation to be determined. No documents after the date of acquisition can be considered; see Gosford Shire Council v Green (1980) 48 LGRA 201. Firstly, it is illogical to argue that the same purpose contemplates that an easement be regranted when it clearly was extinguished at the time of the compulsory acquisition. Secondly, if a mistake was made it could have been corrected but was not. Thirdly, there is no statement before or after acquisition that easement BB will be reinstated. The Property Report is designed to obtain expressions of interest from developers to carry out the development, and states that nothing in it should be relied on. It creates no legal obligations on any body. TIDC’s intentions could change at any time.

73 The only reference in plans to the reinstatement of the easement occurs after litigation commenced. Mr Keats’ oral evidence of 1 June 2006 was that he was instructed by TIDC’s solicitors after this case was commenced to prepare the relevant plan to enable the creation of an easement for support. The deed now relied on by TIDC (dated 8 March 2005) was provided only after the litigation commenced (18 March 2005) and was not provided to the Council in any event. The matters relied on by TIDC as demonstrating its intention to reinstate the easement for support are irrelevant to the issue of compensation payable to the Council for the acquisition.

74 The Applicant and the Council relied on BesmawPty Ltd v Sydney Water Corporation (2001) 113 LGERA 246 to support their argument that what has been acquired must be determined by examining the terms of the acquisition and it is irrelevant that the acquiring authority asserts that it will not take advantage of the rights acquired. The Applicant and the Council argued that the reasoning in Besmaw has direct application to this case. The fact that Besmaw related to a claim for disturbance under s 59(f) does not limit its application.

75 Besmaw concerned an application for compensation for the compulsory acquisition of an easement for access to enable the construction of a sewer main by the acquiring authority. Market value was agreed at $9000 and was not in dispute. Besmaw claimed compensation for disturbance under s 55(d) and 59(f) of the Just Terms Act. Section 59(f) relates to any other financial costs reasonably incurred relating to the actual use of the land as a result of the acquisition. Besmaw claimed $1,515,900 under that section as the cost of providing alternative access to the land, as it argued that the loss of the easement would give the acquiring authority the right to deny them physical access across the land. The acquiring authority disputed the applicant’s entitlement to recover this amount, and argued that the rights of the acquiring authority were not wide enough to actually exclude the applicant from the land or from any real exercise of its proprietary rights.

76 Sheahan J held that on its proper construction the easement did not totally deny Besmaw’s right of access to the land, but allowed the holder of the easement to deny Besmaw access adequate enough to enable it to continue carrying out its use of the land for sandmining and tourist development. Therefore his Honour held that the easement seriously impeded Besmaw maintaining its access arrangements. Further, assurances given by the resuming authority to Besmaw that the difficulties it anticipated would not eventuate could not be relied on in lieu of compensation. His Honour gave his reasons for this at [19], stating:

[The applicant] can never come back for more money if ownership of the easement, or any relevant exploitation policy regarding it, might change in the future. Its loss of rights is permanent, and any assurances given by [the acquiring authority] regarding exercise of the acquired rights may be illusory, transient, and/or not binding on any of its successors.

77 In commenting on the law relating to easements in general, and the acquisition of them, Sheahan J at [56]-[57] held:

The rights taken away from the landowner must be measured, not by what the acquiring authority at any given time might plan to do, or what its policies are, or what assurances or understandings may be given or communicated about the way its rights may be exercised, but by what its enabling instrument allows it to do.

Easements acquired compulsorily must be construed in the same manner as those which have been freely granted, and the courts will infer such ancillary rights as are reasonably necessary to the reasonable exercise and enjoyment of the rights expressly granted.

78 Sheahan J held at [62] - [71] that the acquisition of the easement denied the applicant full access to its proprietary rights. Therefore, he awarded an amount of $1,515,900 for disturbance for the costs of building alternative access under s 59(f) (at [81]). The decision was upheld on appeal, Sydney Water Corporation v Besmaw [2002] NSWCA 147.

TIDC on Besmaw

79 TIDC argued that Besmaw should be distinguished because it concerned a claim for disturbance under s 59(f), rather than market value and injurious affection under s 55(a) and (f) as is the case here. It was only relevant to claims under s 59(f) which concerns costs incurred, actual and expected, as a result of the acquisition, in relation to the actual use of the land acquired.

80 The refusal by Sydney Water after the date of acquisition to limit the ambit of the easement was referred to by Meagher JA on appeal at [5] and this is relevant, according to TIDC, to this case. TIDC has made clear before and after acquisition its intention to reinstate the easement for support and that can therefore be considered.

Finding on public purpose/application of Besmaw

(i) What is the public purpose?

81 TIDC argued that the public purpose is demonstrated through an examination of the documentation prepared by or on behalf of TIDC before and after the date of acquisition which shows that it included the intention to maintain support for Lot 12 and reinstate the easement for support extinguished by the compulsory acquisition. Although TIDC’s argument was framed as defining the public purpose of the acquisition which was necessary for the determination of a claim under s 55(f), what must be considered as the starting point is when a right to compensation arises, and for what, under the Just Terms Act.

82 The Just Terms Act provides that if an acquiring authority exercises its right to compulsorily acquire an interest in land for a public purpose the Act requires that compensation, calculated in accordance with the Act, is payable. The Applicant and the Council’s right to seek compensation arises under s 19(1), which provides for compulsory acquisition effected by notice published in the Gazette. The legal effect and consequent loss of an interest in land resulting from the compulsory acquisitions in this case arises by virtue of s 20(1)(b) because at the date the acquisition notice is published in the Gazette the acquired land is freed of all easements, inter alia. Under s 37 the right to compensation arises at the date of acquisition when that interest in land is extinguished by the acquisition notice, as it was in this case. The legal effect of the compulsory acquisition which results in extinguishment of an interest in land determines what is compensable within the Just Terms Act under s 54(1). Section 54(1) provides:

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.

Market value s 55(a)

83 Although TIDC argued that the carrying out of the public purpose related to s 55(f) it is also necessary for the resolution of all relevant issues that I consider the argument on public purpose in relation to market value. Market value under s 55(a) is assessed at the date of acquisition. Even if an examination of documents available up to the date of acquisition did make clear to a resumee that the resuming authority was only intending to temporarily remove an easement for support, taken under the Just Terms Act a resumee’s entitlement to compensation for market value crystallises on the date of acquisition. In this case the Applicant and the Council lost an interest in land which meant that they had no enforceable legal right to require TIDC to maintain the support of Lot 12. TIDC’s intentions about the maintenance of an easement for support in the future are irrelevant to the entitlement to compensation for market value under the Act.

84 The Applicant and the Council argued that the public purpose is that stated in the acquisition notice, that is, the CTI. While there are numerous cases where the scope of a project which is the public purpose of the acquisition are identified through documents created before the acquisition, in this case the issue of public purpose is essentially determined by both the content and the legal effect of the gazette notice. Part of that purpose as manifested in or because of the notice was the extinguishment of easement BB because that was the legal consequence of the compulsory acquisition effected by TIDC. TIDC made no use of the mechanism available to it under s 20(2) of the Just Terms Act to provide for the easement to be maintained.

85 While TIDC stressed that it is a public authority and the Court should assume it would act properly in the exercise of its functions, I also consider that TIDC must have acted deliberately in removing the easement for support, clearly a significant legal entitlement for the Applicant and the Council. In the circumstances of a compulsory acquisition the Applicant and the Council are entitled to assume that the authority will exercise fully its legal rights. In this case that is the right to remove support to Lot 12. Even accepting there was some intention shown in documents prior to the acquisition to maintain support of Lot 12, the Applicant and the Council had no enforceable right as against TIDC to maintain that support and hence the right to compensation is provided for under the Just Terms Act.

Section 55(f) – injurious affection

86 TIDC argued that compensation under s 55(f) for injurious affection is relevant to the claim for compensation and that requires the carrying out of the public purpose to be considered. TIDC argued that the documents available up to the date of acquisition would have demonstrated to a prudent hypothetical purchaser that it was TIDC’s intention to maintain the easement for support benefiting Lot 12 and this was part of the public purpose. This argument, while framed as defining the public purpose of the compulsory acquisition, really concerns whether matters relevant to the assessment of compensation under s 55 would be known to a prudent hypothetical purchaser. I have already held that the public purpose is defined by the legal effect of the acquisition notice.

87 Further support for my view in relation to s 55(a) and (f) is found in Besmaw. I agree with the Applicant and the Council that Sheahan J’s comments at [19] and [56] -[57] are apposite (see par 76 - 77 above) and also agree with their arguments about the application of the reasoning in that case to this case. That reasoning applies to the circumstances here and is not confined to a claim for disturbance. The obiter observations of Meagher JA on appeal concerning a failure by the acquiring authority to limit the ambit of the easement, relied on by TIDC at [78] to distinguish its actions in seeking to reinstate the easement, are not relevant here given the terms of the Just Terms Act which I must apply.

(ii) Pre-acquisition documents

88 Documents up to the date of acquisition are able to be considered and that was not disputed by the parties and is settled law and practice. What such documents disclose or whether these are relevant are separate issues.

89 I have already held at par 84 - 85 that even if the documents available before acquisition did suggest that the compulsory acquisition of the easement for support was temporary that would not diminish the claim for market value under s 55(a). As referred to at par 86 in relation to a s 55(f) claim, assuming that TIDC’s intentions in relation to the easement for support are relevant to consider in relation to what a hypothetical purchaser may consider (and assuming that the valuation methodology adopted requires such a consideration) I will consider the pre-acquisition documents.

90 TIDC argued the pre-acquisition documents show unequivocally that the easement for support and provision of access to 430 will be reinstated. While I have set out parts of the Call Document, Property Report and the Brewster Murray report and attached documents in some detail above at par 41-53, there is no document in evidence before the date of acquisition of Lots 14 and 15 which explicitly states that it is TIDC’s intention to maintain support of Lot 12 through the reinstatement of an easement despite TIDC’s claims at par 46 and elsewhere in its arguments.

91 As identified above the Property Report and Call Document were prepared to assist commercial tenderers wishing to undertake the construction of the CTI to tender. The Call Document and the documents attached to the Brewster-Murray report, including the Property Report, do not make any explicit statement that the easement for support BB must be reinstated nor could it be said that such an implication arises from these documents. The references to easements in the Property Report at par 43, are made in general terms and refer to ensuring that structural support to other properties is maintained, including structures that are not protected by easements on current land title. Section 11 of the Property Report refers to procuring alternative access to Lot 12.

92 The Detail of Easements attached to the Brewster Murray Report (par 47) refers to easement BB and states it is to be modified. That means “extinguish … retain any benefit if appropriate, and modify or replace after works to suit redevelopment”.

93 The Call Document extracted in part at par 48 - 53 refers to the maintenance of structural support to adjoining properties generally but the note set out at par 53 emphasises that the document is introductory only and should not be relied on.

94 It is clear that the concrete columns supporting Lot 12 are contained in several plans referred to in the evidence. However, the Property Report and Call Document do not give rise to any enforceable legal right for the Applicant and the Council or anyone else. No development consent had been granted for the CTI at the time these documents were brought into existence and they simply do not provide the certainty TIDC claims for them about its intentions. This material could clearly be considered by a prudent hypothetical purchaser and would suggest that TIDC is unlikely to remove support in the immediate future but does not provide any legal basis to overcome the effect of the acquisition notice.

(iii) Are post-acquisition documents able to be considered?

95 TIDC argued that because s 55(f) refers to the value of other land severed from the acquired land by reason of the carrying out of the public purpose, its intentions in relation to how the public purpose would be carried out must be considered and that can include consideration of matters before and after the date of acquisition.

96 The cases it relied on to support this argument such as D & C Dwight v Sydney Water Corporation Ltd [1995] NSWLEC 72 and Roads and Traffic Authority v Perry [2001] 52 NSWLR 222 concern quite different circumstances and do not support this argument in this case. In Perry the acquisition was for the construction of the Pacific Highway. At issue was the “ambit” of the scheme as to whether it included road works going beyond a certain point. That is simply not a circumstance relevant to this case.

97 In Dwight documents of the acquiring authority were admitted and referred to for the purpose of identifying the nature of the public purpose and the way in which it was to be carried out, in order to determine impacts on the retained land (including future environmental impacts). The nature of the public purpose as stated in the gazette notice was for the purposes of the Water Board Act 1987, but in order to know the specific works and the specific uses to which the acquired land was to be put, the authority’s plans, documents and correspondence had to be examined. It was agreed that the public purpose of the acquisition was for providing trunk drainage alongside a creek and for artificial wetlands to enhance the in-stream purification of treated effluent from a sewage treatment plant being developed by the Respondent. Here the acquisition notice and its legal effect could not be clearer.

98 Injurious affection under s 55(f) is determined at the date of acquisition in accordance with the wording of that section. The Court must decide what a prudent hypothetical purchaser making all proper inquiries would take into account. Cases have held that circumstances after acquisition can be taken into account in limited situations, and this can only be done where an event was foreseeable at the date of acquisition and aids in confirming a hindsight and not to prove a foresight. As stated at par 66, TIDC relied on Falconer in argument. The Council relied on Gosford City Council v Green (1980) 48 LGERA 201.

99 In Gosford v Green, the owner’s land was acquired by the Council for the public purpose of a carpark. Its final design was different to what was originally proposed at the time of acquisition. The change in design occurred after the acquisition, but before the hearing. The change was more detrimental to the residue land on which Green’s shop was erected, than what would have been the case under the original proposal. Reynolds JA (Samuels JA and Mahoney JA concurring) held at 207 that the fact that the change of design was unknowable at the date of acquisition meant that it was not to be taken into account in assessing compensation for injurious affection. Reynolds JA stated at 207 that:

In my opinion, as a matter of principle, what in fact happened can have no logical probative relationship to what a reasonable purchaser would at an earlier date have expected to happen.

In my respectful view, the unsoundness of the present situation was demonstrated in the judgment of Sugerman J in

(1951) 18 LGR 113, at p.116, where he makes it clear that in such an inquiry as must be undertaken in this case, which is value at the time the notice was published in the Gazette, there is no question of preferring actuality to prophecy…

100 Mahoney JA added further at 210 that:

It is agreed that the question whether the relevant works enhanced the value of the land remaining with Mr Green is to be determined as at the date of resumption…The extent to which events subsequently occurring can be taken into account in determining the value of property as at a particular date, need not be considered in detail…I think that the knowledge to be attributed to the notional purchaser is that which as a prudent purchaser making all proper inquiries, he would have at the date of the resumption…

101 However, based on this, TIDC asserted that all of the “knowable” aspects of the public purpose and the proposal to carry it out, which are ascertainable by a prudent hypothetical purchaser at the time of acquisition, notwithstanding they may occur in the future, must be taken into account. TIDC argues that Gosford v Green proceeds on this assumption.

102 Falconer concerned an owner of land being compensated for actual, and future, increases in costs which occurred during delays in the owner’s building programme following resumption. On appeal, it was held by Hope JA that the trial judge’s findings were correct in allowing for future building costs, so that in valuing the compensation payable, the Court was [at 557]:

… bound to take the anticipated amount of the loss into account.

103 Hope JA, at 557, considered Gosford v Green, but at 558 distinguished it from other cases where evidence of future events has been held admissible to confirm a foresight, but not prove a hindsight. His Honour applied that principle to the situation in Falconer and held at 558 that:

A prudent purchaser, if properly advised, would certainly have anticipated a significant rise in building costs...Accordingly, a prudent purchaser would have taken into account the probability, indeed certainty, of increasing building costs…the actual increases could be looked at in confirmation of what the hypothetical purchaser, properly advised at the time of resumption, would have foreseen.

104 While Falconer allowed events after the date of acquisition to be considered there is a threshold issue which TIDC must overcome in this argument which is that at the date of acquisition the easement for support was extinguished. I have already held at pars 84-86 that TIDC’s subjective intentions in relation to reinstatement of the easement up to the date of acquisition are not relevant to s 55(a) and (f) in terms of the argument about the scope of the public purpose. I consider the same must hold in the circumstances of this case in relation to the carrying out of the public purpose after the date of acquisition, because that purpose demonstrably included the removal of the easement for support at the date of acquisition. This legal view is further reinforced at a factual level in this case given my finding that the pre-acquisition documents could not have disclosed to the Applicant or a prudent hypothetical purchaser any statement that the easement will be reinstated.

105 Documents available to the public after acquisition cannot be considered. This includes the development consent conditions and plans for the CTI which TIDC relied on which were not approved until after the first acquisition in August 2004.

106 The first draft deed sent to TIDC’s agent on or about 7 December 2004 is after the date of acquisition of Lots 14 and 15 on 27 August 2004. Whether, given its less than favourable terms to the Applicant, it can be relied on as evidence of TIDC’s intentions to reinstate easement BB is debatable in any event. The further deed addressed to the Applicant relied on by TIDC is dated 8 March 2005. The deeds sent to the Applicant relating to the attempts by TIDC to reinstate the easement for support and the instrument tendered as Exhibit 20 at the hearing (see par 61) are also not able to be considered.

Other legal protection available to Lot 12?

107 Another matter raised to support TIDC’s argument that a hypothetical purchaser would be sure that the support for Lot 12 is to be maintained, is the fact that consent for demolition is required under SREP No 5 – Chatswood Town Centre from the consent authority (either the relevant Minister or the Council) and such consent is unlikely to be given. The development consents granted were after the acquisition date for Lots 14 and 15 in any event.

108 I agree with the Applicant and the Council that this situation vests no legal rights in them in relation to the maintenance of support. It is immaterial to the calculation of market value. Further, given that projects can and do change I do not consider it would or should be assumed that consent for demolition would never be granted. Expert planning opinion that under the current CTI scheme consent for demolition is unlikely to be granted is immaterial in this part of my analysis in relation to public purpose. That CTI scheme may change. As I consider later, the requirement to obtain consent for demolition is a relevant factor for a hypothetical purchaser to consider.

How should loss of an easement for support be valued?

109 Few cases in this Court have considered what is the appropriate compensation where an easement for support is acquired.

110 Because of the parties’ different views about public purpose the valuers in the matter have taken very different positions. The Applicant and Council’s respective valuers adopted a before and after approach to value the acquired easement for support resulting, in the Applicant’s case, in a multimillion dollar claim. The valuer called by TIDC, Mr Dempsey, valued the loss of the easement, on the basis of legal advice from TIDC’s solicitors, as the cost of an application to the Supreme Court of New South Wales under s 88K of the Conveyancing Act for an order restoring the easement for support. This cost was said to be $44,000 by TIDC’s solicitors, which amount Mr Dempsey adopted.

Approach to valuation - Application under s 88K or before and after method?

111 TIDC through the valuer Mr Dempsey argued that because there is a legal right available to the Applicant and the Council under s 88K of the Conveyancing Act the cost of that application was the appropriate measure of compensation. This approach was said to accord with fundamental assumptions for establishing market value under the Just Terms Act and the principle in Spencer v The Commonwealth (1907) 5 CLR 418. Section 88K of the Conveyancing Act 1919 states:

(1) The Court may make an order imposing an easement over land if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement.

(2) Such an order may be made only if the Court is satisfied that:

(a) use of the land having the benefit of the easement will not be inconsistent with the public interest, and

(b) the owner of the land to be burdened by the easement and each other person having an estate or interest in that land that is evidenced by an instrument registered in the General Register of Deeds or the Register kept under the Real Property Act 1900 can be adequately compensated for any loss or other disadvantage that will arise from imposition of the easement, and

(c) all reasonable attempts have been made by the applicant for the order to obtain the easement or an easement having the same effect but have been unsuccessful.

…

(4) The Court is to provide in the order for payment by the applicant to specified persons of such compensation as the Court considers appropriate, unless the Court determines that compensation is not payable because of the special circumstances of the case.

(5) The costs of the proceedings are payable by the applicant, subject to any order of the Court to the contrary.

…

112 TIDC argued that the valuation of what a prudent hypothetical purchaser would pay must not ignore any “facts” raised by the parties including legal rights or restrictions on the land. A prudent hypothetical purchaser would obtain legal advice on the legal rights relevant to the purchase of 430. In this case the purchaser would be advised of the availability of s 88K of the Conveyancing Act which gives rise to a right to seek an easement for support in the Supreme Court of New South Wales. Cases relied on in support were Hornsby Shire Council v Roads and Traffic Authority (NSW) (1998) 100 LGERA 105 and Council of the City of Liverpool v Commonwealth of Australia (1993) 46 FCR 67. Legal advice about cases such as Antipas v Kutcher (2006) 144 LGERA 289 would be obtained.

113 TIDC’s counsel argued that I should undertake an analysis of the likelihood of success of a s 88K application in the circumstances of this case, and argued that success was virtually certain. TIDC argued the correct approach was the cost of the reinstatement of the easement which was estimated to be $44,000. Reliance was placed Nott C’s decision in Andersonv Valuer-General [2005] NSWLEC 151.

Applicant/Council on s 88K argument

114 Both the Applicant and the Council argued that TIDC’s argument in relation to s 88K was fundamentally flawed. It was contrary to any known method of valuation, was not based on the valuer’s own approach but simply reflected his acceptance of the advice of TIDC’s lawyers to that effect. It is not a simple matter to make a s 88K application to the Supreme Court and success is in no way guaranteed, as demonstrated by a list of cases under s 88K a large number of which were unsuccessful. Given that the easement has been resumed by TIDC and that compensation has to be calculated at the date of acquisition, the approach in Besmaw at par 77-78 must apply.

Before and after method

115 The Applicant argued the before and after method was the correct approach to the calculation of market value of the easement. The before and after method allows the value of 430 before the acquisition to be compared with the value after the removal of the easement for support. As the acquisition of the easement is the acquisition of part of the land the before and after method is the most reliable method of valuation see Alan Hyam The Law Affecting Valuation of Land in Australia (3rd ed), The Federation Press, Sydney, 2004, p 114. Where an acquiring authority resumes an easement the before and after method is generally used and not the value to the acquiring authority of the rights acquired. The appropriate approach is to look to the market value of the whole of the land to which the easement was appurtenant with the easement in place, compared to the market value of the whole of the land without the easement in place. This approach in this case requires consideration of the loss of future rental income. The difference is the value to the owner of the easement. As Lot 12 and Lot 6 are interlinked within the one structure then the whole of the Applicant’s land 430 has to be considered.

116 The Applicant originally claimed a separate amount for loss of future rent under s 55(f) but advised the Court during the hearing this claim would not be pursued. I consider this modification of the Applicant’s claim was necessary as it would otherwise have been “double dipping” in relation to loss of future rental income.

117 Reliance was placed on cases from the United States on valuing the loss of an easement for support due to the paucity of Australian and United Kingdom cases on this issue. According to the Applicant, English law does not generally allow the extinguishment of easements.

118 The Council agreed with the Applicant that the before and after method was the correct approach to valuation of the easement. This approach incorporated both s 55(a) and (f) of the Just Terms Act (see Mir Bros Unit Constructions Pty Limited v Roads and Traffic Authority of New South Wales [2005] NSWLEC 419). Lot 12 was not acquired and is therefore “other” land to that which was acquired but was injuriously affected by the extinguishment of the easement; reliance was placed on Graham L Fricke, Compulsory Acquisition of Land in Australia (2nd Ed.), Law Book Company, Sydney, 1982. It is land 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 and compensation under s 55(f) is therefore payable. Lot 6 is also other land which benefited from the easement and is reduced in value as a result of the acquisition and can also be the subject of a claim under s 55(f).

TIDC on before and after method of valuation

119 As TIDC proposed a completely different valuation approach, it opposed the use of the before and after approach. Specific criticisms of Mr Davis’ valuation approach are set out below at par 148.

Finding on valuation methodology
(i) General principles

120 The principle in Spencer v Commonwealth (1907) 5 CLR 418 at 441 in relation to s 55(a) “market value” is that there is a hypothetical sale involving a willing but not anxious seller and buyer. That is, neither may be assumed to be “so anxious … that he would overlook any ordinary business consideration”.

121 As the Applicant stated the fact that an interest in land has no ‘market’ does not mean there is no market value. The only possible parties to the hypothetical transaction are the actual parties to the acquisition in this case, but as held in Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] 2 All ER 317 (“Raja’s case”), it is the value to the owner that has to be estimated. The owner is assumed to be a willing but not anxious seller and must not be assumed as willing to part with land for other than its value to that owner.

122 Any doubt as to the amount properly payable by way of compensation must be “resolved in favour of a more liberal estimate” as stated in Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358 at 374.

(ii) Is s 88K avenue valid?

123 TIDC argued that the public purpose of the acquisition included the reinstatement of the easement for support. The cost of an application under s 88K of the Conveyancing Act is the basis on which valuation should therefore be assessed.

124 In this case I need to determine what compensation is payable under s 55 as that is the only basis on which it can be awarded under the Just Terms Act. If the terms of s 55 are considered, it is clear that the cost of a legal action under s 88K which may lead to reinstatement of the interest in land extinguished by the compulsory acquisition is not a head of compensation recoverable under s 55(a) as market value or s 55(f) or as injurious affection at the date of acquisition given that the public purpose included the extinguishment of the easement for support. I agree with the Applicant and the Council that is simply not an approach supported by valuation methodology in relation to the assessment of market value or any other head of compensation under s 55.

125 Anderson, the only case relied on by TIDC, was an appeal under the Valuation of Land Act 1916. It is not a decision binding on me. In that case the subject land originally had a right of way for access to a public road, however the council resumed that right of way for the purpose of providing a right of way for the council and easement for a pipeline. The effect of this resumption was to extinguish the existing rights of way attached to the land. However the owners continued to access the road without a formal legal arrangement. The valuer argued the access could be obtained by negotiated agreement, or sought pursuant to s 88K of the Conveyancing Act. The applicant argued it should obtain the cost of the carrying out of the construction of a bitumen-sealed road. In determining which approach to take, Nott C had regard at [9] to the history of the land. At [14]-[15] Nott C declined to accept the applicant’s method of valuation for the land, and held that an intending purchaser could expect to negotiate the purchase of a right of way, or obtain an easement pursuant to s 88K.

126 I do not consider the approach in Anderson is applicable in this case. It is an ex tempore decision delivered in a valuation of land case where it does not appear that the arguments I have heard were before the Commissioner. It was not considering the express terms of the Just Terms Act.

127 I also agree with the Applicant’s submissions as to why Mr Dempsey’s approach is flawed. Mr Dempsey, a valuer appearing for TIDC, valued the easement on the basis that the appropriate figure was the cost of reinstatement of the easement under s 88K of the Conveyancing Act. This cost was $44,000 on the basis of legal advice apparently received from TIDC’s solicitors, Clayton Utz. There is no separate evidence to support the accuracy of that amount apart from its appearance in Mr Dempsey’s evidence. It appears a low estimate. He was asked to assume, and he did, that there was a very high likelihood such an application would be granted. Mr Dempsey stated in oral evidence that had he not been instructed by TIDC’s solicitors in relation to the Conveyancing Act s 88K application, which advice he accepted, he would have applied the before and after method also. The Applicant criticised Mr Dempsey’s approach because he failed to apply his own independent analysis or to take any other legal advice but chose to rely entirely on the advice of TIDC’s solicitors. He equated the advice he received from TIDC’s lawyers to the advice that a prudent hypothetical purchaser would receive. I agree with that criticism. I therefore found his views of limited assistance in understanding why he considered this was an appropriate methodology to apply.

128 The assumption by TIDC and Mr Dempsey that a s 88K application is bound to succeed assumes that where an easement is acquired for a public purpose, s 88K(2)(a) of the Conveyancing Act is satisfied, in other words, that the grant of the easement will not be inconsistent with the public interest. Given that the easement has been acquired for a public purpose under the Just Terms Act I do not consider I can assume this requirement will be fulfilled. Further, compensation is potentially payable under s 88K(2)(b) of the Conveyancing Act to the owner of land on whom the easement is imposed, that is, TIDC. Advice from TIDC’s counsel that it would not seek compensation is speculative.

129 The Applicant’s counsel raised the issue of whether a tenant could apply under s 88K(1) at all given that it is a tenant of Lot 12, not the owner. This was unresolved, TIDC arguing that a tenant such as the Applicant could. I do not need to decide this issue.

130 The existence of s 88K of the Conveyancing Act is a matter about which a prudent hypothetical purchaser could obtain legal advice. Section 88K provides a right to apply to the Supreme Court of New South Wales for the grant of an easement. It does not provide a right to an easement.

131 The acquisition of a property at the date of acquisition dependent on a right of support which was only obtainable by undertaking litigation has to raise some consideration of risk for a prudent hypothetical purchaser. TIDC’s approach as expressed by Mr Dempsey makes no allowance at all for any risk.

Before and after method

132 The only other valuation methodology proposed by the valuers in this case is the before and after method. The case law relied on to support that approach was the United States case law relied on by the Applicant. In particular, the Applicant relied on the case of United States v Welch (1910) 217 US 333, where Oliver Wendell Holmes J held that the value of the easement cannot be ascertained without reference to the dominant estate to which it was attached.

133 The People ex rel. Department of Public Works v Logan (1961) Cal. App. 2d 581, Court of Appeal, California, was also relied on. That case held that both the land actually taken and the remaining land were damaged by the taking of the easement, and therefore an award of severance damages and damages for the property actually taken was given.

134 In Hemmerling v Tomlev Inc. (1967) 67 Cal. 2d 572, Supreme Court of California, it was held that the value of the easements resumed was the diminution in the market value of the dominant tenement caused by its loss.

135 Harman v City and County of San Francisco (1972) 7 Cal. 3d 150 Supreme Court of California, held at [25] that:

modern appraisal practice dictates that the value of an easement be determined by comparing the market value of the dominant estates before and after the easement is terminated.

136 Similarly, Redevelopment Agency of the City of Concord v Michael Tobriner (“Tobriner 1”) (1984) 153 Cal. App. 3d 367, Court of Appeal of California, held that:

the well-established legal standard for evaluating an easement requires an analysis of the decrease in value of the dominant estate (or dominant tenement) resulting from the taking of the easement. The measurement of this decrease must be derived from an appraisal of the value of the dominant estate before and after the taking.

Redevelopment Agency of the City of Concord v Tobriner (“Tobriner 2”)

137 TIDC’s counsel distinguished the United States cases the Applicant relied on because there is no suggestion that there was a similar statutory regime such as s 88K available or that s 55(f) was available. The existence of these factors was said to have a fundamental impact on how the valuation in this case should be approached. I do not consider the broad principles in the United States cases are undermined by this argument.

138 In Tobriner No 2 at p 1099 there is an illustration of how the value of an appurtenant easement can operate as follows:

Illustrations:

…

2. Blackacre, owned by A but subject to an easement appurtenant to Whiteacre, owned by B, is condemned for use as a public way. The market value of Whiteacre is unaffected by the destruction of the easement since the public way establish[ed] by the condemnation is fullt as serviceable for Whiteacre as was the private way, the easement extinguished by the condemnation. B is entitled to no award despite the fact the market value of Blackacre free of the easement would be $1000 higher than it is when subject to the easement . (emphasis added).

139 This was argued by TIDC’s counsel to be directly applicable to this case because here an easement for support was removed and there is a proposal to restore it so that no compensation is payable. The illustration is a statement of broad principle. I do not consider the illustration is directly analogous to this case given the provisions of s 55 which refer to the determination of value at the date of acquisition. It is an illustration and no more.

140 The United States cases relied on by the Applicant are clear, no contrary authority, apart from Anderson, or authoritative text have been produced to contradict them and I adopt the submissions based on them. It follows that the appropriate way to value the loss of the easement for support is the loss in value to the property which benefited from it. Even if the United States cases were not relied on by the Applicant, New South Wales cases which have considered the resumption of easements have also considered that a before and after approach is appropriate, see cases in Alan A Hyam, The Law Affecting Valuation of Land in Australia (3rd Ed), Federation Press, Sydney, 2004 at pp 262-268, and Handley JA in Electricity Commission (NSW) (t/as Pacific Power) v Arrow (1994) 85 LGERA 418 at 421. While this case concerns the extinguishment of an easement for support this situation is analogous. William Henry Kater v Electricity Transmission Authority of New South Wales, (NSWLEC, Pearlman J, 9 February 1996, unreported) dealt with the valuation of land over which a part of an electricity transmission line easement was acquired. That case dealt with the creation of an easement over land. As noted in Kater, Pearlman J considered the before and after approach and the piecemeal approach to assessment of compensation before concluding there was no principle requiring the adoption of either.

Valuation evidence

141 It is therefore necessary to consider the valuation evidence of the Applicant and the Council in relation to the before and after method. Both the valuers called by the Applicant and the Council value the loss to the whole of 430 which includes Lot 12, the dominant tenement, and Lot 6. Counsel for TIDC argued that only Lot 12 should be valued as it alone was the dominant tenement. While Lot 6 was not the dominant tenement, because of the way in which 430 is constructed, access to Lot 6 on the first and second floor is through Lot 12. The use of Lot 6 is therefore inextricably bound to Lot 12. Only the use of the ground floor of Lot 6 is not dependent on access through Lot 12. If access through Lot 12 was removed it would be necessary to provide access from the ground floor to the other levels of Lot 6, presumably by a new staircase in the ground floor tenancy. I consider the loss to the whole of 430 must be valued, as the valuers have done.

142 I also note that in TIDC’s submissions there is some suggestion that there will be betterment to Lot 12 and Lot 6 as a result of the construction of the CTI because of the new development to which these lots will be connected. No attempt to quantify an amount for betterment is made and I do not need to further consider that issue.

Applicant’s valuation

143 Mr Davis valued the easement for the Applicant using the before and after method. As set out above in pars 4 and 5, 430 consists of a freehold interest being Lot 6 and a leasehold interest in Lot 12. He valued 430 on the basis of the freehold and the leasehold portion which is held in two separate leases. One is the Easements Lease registered dealing E416369C which allows access over the main portion of the stratum (Lot 12) adjoining Lot 6, and the other is the Steps Lease over the strata (Lot 16) linking the previous Spanish Steps with level 1. He identified the relevant zoning in his report as:

(a) in respect of the freehold component, Business Retail 3(c1); and

(b) in respect of the leasehold component, Special Uses “A” Zone 5(a).

144 430 has several tenancies being a newsagent at ground floor, dentist and internet café on first floor, medical centre on the second floor. Mr Davis makes the following observations:

430 comprises a three storey retail and commercial premises, occupying a prime location in the pedestrianised portion of Victoria Avenue and adjacent to Chatswood Railway Station and Bus/Rail Interchange. The property has excellent exposure to concentrated pedestrian traffic flows and has the additional benefit of a lengthy ground floor return frontage along Orchard Road.

The ground floor and upper levels of 430 are partly occupied as retail and commercial tenancy areas. Access to the ground floor newsagency shop is available from the Victoria Avenue and Orchard Road frontages. Access to the upper levels is entirely dependent (apart from the internal fire stairs, which are unsuitable for public access) upon the Easements Lease and the Steps lease.

145 Mr Davis calculated the amount of rental that would be payable under the various tenancies to the Applicant and applied a capitalisation rate to that amount to arrive at a before value being the figure a willing buyer and seller engaging in an arm’s length transaction would agree on. While initially disagreeing, Mr Dempsey and Mr Davis agreed a before value of $6,875,000 in their joint report dated 21 November 2005 (Exhibit 4), applying a capitalisation rate of 5.25 per cent. They disagreed on the after value.

146 Mr Davis considered the after value was calculated by considering the amount of rent that would be lost for Lot 6 (held as freehold) under the 99 year lease of Lot 12 on the basis that a prudent hypothetical purchaser would assess the risk that the upper levels of 430 would cease to function if the columns supporting Lot 12 were removed and loss of rent would result. He assumed the newsagent on the ground floor would be able to continue operating as access was from Victoria Avenue and therefore did not rely on entry via Lot 12 as did the upper levels of Lot 6. He considered the prudent hypothetical purchaser would take a conservative approach and adopted a nominal one year of income in combination with a risk adjusted equivalent yield of 8 per cent because a prudent hypothetical purchaser would not pay for the prospect of an income stream that could be terminated at any time. In addition, the risk of termination may reasonably be expected to affect the ability of tenants in the upper levels of 430 as security of tenure would not be assured. He therefore adopted a capitalisation rate of 8 per cent rather than 5.25 per cent adopted for the before valuation. In his first report (Exhibit B) Mr Davis considered the after value was $3,310,000 resulting in compensation of $3,625,000. He provided a “sensitivity” analysis which also calculated compensation assuming from two to five years income from the upper level might be reflected in a commensurate reduction in the purchase price. In his Supplementary Statement (Post Joint Conference) (Exhibit E) he provides revised calculations and claims compensation payable is $4,305,000. Further “sensitivity” calculations are also provided. Subsequent to this supplementary report of Mr Davis the valuers jointly agreed on a different amount for the before value (Exhibit 4).

147 Mr Dempsey did not agree with the capitalisation rate used by Mr Davis in the after valuation as he considered the same rate should be applied as in the before situation, that is 5.25 per cent because there was no likelihood of diminution in rental for 430. The ground floor premises rent is unaffected in the before and after situation, the premises at 430 continue to be in a prime commercial location and the installation of stairs at ground floor level overcomes access issues to the first and second floors. It is unlikely that physical support for Lot 12 will be removed. He therefore considered there was unlikely to be any loss of rent. In the valuers’ joint report, Exhibit J p 13, he states that he would have assessed the Applicant’s loss at $3.2 million if he had been applying the before and after method and adopted by Mr Davis’ assumptions.

148 TIDC’s counsel made a number of criticisms of Mr Davis’ approach as follows:

(a) There is a failure to compare “like with like”. The before and after method is directed to the situation where the properties affected by a partial acquisition remain closely comparable. Mr Davis considers the before land to be the whole of 430, that is Lot 12, Lot 6 and the easement for support, however in the after he treats the property as a one year investment only with a prudent hypothetical purchaser considering the need to confront the likelihood of being required to remove or be faced with the removal of most of the structures on Lots 6 and 12. This approach is legally flawed.

(b) Mr Davis fails to take into account the existence of s 88K or the effects of planning law which require development consent for demolition to be obtained.

(c) Mr Davis fails to consider the position of the hypothetical vendor, who would seek legal advice and advise a prudent hypothetical purchaser of the legal remedies available, such as s 88K, and that development consent was needed for demolition.

Council’s valuation

149 The Council’s loss was based on the loss of ground rent it received under the long term leases held by Chino at the date of acquisition. Mr Dundas, valuer for the Council, also applied the before and after method but with a different capitalisation rate to that of Mr Davis. He valued the interest prior to the acquisition as the value of a steady and secure cash flow in Lot 12 for the term of the 95 year, 51 day lease and Lot 16 with lease termination on 20 June 2088, applying a capitalisation rate of four per cent, with the value of the reversion to freehold to the Council including improvements at the end of the lease, an amount of $156,000 in the before scenario ($133,000 for Lot 12 and $23,000 for Lot 16). In the after scenario he considered a prudent hypothetical purchaser would be aware that there is no legally enforceable access to or means of support to Lot 12. He considered no prudent hypothetical purchaser would purchase the property as finance would not be obtainable. He considered a purchaser would only pay a very limited amount of, at most, two years ground rent which he capitalised at 10 per cent to reflect the additional risk, say $10,000. The loss in value is therefore $146,000.

150 Mr Dempsey disputed the Council’s claim for compensation and considered it was not entitled to any because in his view the public purpose included reinstatement of the easement so that he did not consider the rent derived from Lot 12 was or will be temporarily or permanently lost. Mr Dempsey considers Lot 12 will have the same or greater rental value after the CTI has been completed in accordance with the public purpose as argued for by TIDC, that is, with the intention to reinstate. Nor will the Council suffer any loss from alteration of the reversionary interest in Lot 12. He did not directly criticise the figures used by Mr Dundas in his calculations so that I do not have any evidence contradicting these precise calculations.

151 TIDC’s counsel submitted Mr Dundas’ approach was also incorrect for similar reasons advanced in relation to Mr Davis at par 148.

Finding on valuation

152 As I am the judicial valuer I must arrive at my own conclusions taking into account relevant evidence in making my determination. I have determined that the before and after approach is the appropriate methodology and this determines the compensation payable under s 55 (a) and (f) in this case.

(i) Applicant

153 In Kater Pearlman J refused to accept uncontradicted valuation evidence without adjustment in circumstances where other valuers had not adopted the same approach. The Court of Appeal in Hornsby Shire Council v Roads and Traffic Authority (NSW) (1998) 100 LGERA 105 held at 108-109 that a judge was:

…entitled, if not bound, to do “the best that he could” on the basis of the whole of the evidence….acting as the judicial valuer…involves making inferences and applying experience and judgment in order to determine what are really hypothetical questions – questions which may (permissibly) involve subjective judgments.

154 Here the valuers for TIDC and the Applicant have applied entirely different methodologies and I have accepted that the overall approach of Mr Davis is correct. Mr Dempsey has commented on Mr Davis’ approach although he did not apply this methodology. As identified at par 145, the valuers agreed that the before value of 430 was $6,875,000 applying a capitalisation rate of 5.25 per cent. It is therefore necessary to determine the after value so that this can be deducted from the before value to arrive at the appropriate amount of compensation.

155 The lower the capitalisation rate used, the higher the net present value of an asset. A low risk secure investment therefore attracts a low rate. 430 is in a prime location and has a secure income return. That location and potential for secure income return continues in the after situation but with greater risk.

156 There are two principal issues to consider in terms of assessing the loss of future cash flows, namely the appropriate capitalisation rate to apply given the risk of loss of support due to the lack of an easement for support, and what period should be assumed for the continuation of rent in that after scenario. It is also relevant for a purchaser to consider that the business on the ground floor of 430 (Lot 6) can continue regardless of whether support is withdrawn to upper floors.

157 The availability of an application to the Supreme Court of NSW under s 88K of the Conveyancing Act and the requirement for development consent for demolition of Lot 12 are matters which a prudent hypothetical purchaser on obtaining legal advice is likely to take into account in considering the likely risk of removal of support. I accept the criticisms of Mr Davis’ approach made by TIDC’s counsel (see par 148(b) and (c)) that he failed to have regard to these factors but as the Applicant’s and Council’s valuers noted, and as stated at par 131, a purchaser would be very careful about the acquisition of a property when successful litigation would be required to reinstate the necessary easement.

158 While I do not agree as already indicated with TIDC’s argument that the sum total of compensation payable is the cost of an application under s 88K, the possibility of such an application being made is a factor which a prudent hypothetical purchaser may well obtain legal advice about and take into account. I do not consider I am able to draw any certain conclusion as to the likelihood of success of such an action and have already indicated that I do not accept TIDC’s argument that success is virtually assured. The availability of such a right to apply to the Supreme Court of New South Wales for reinstatement of the easement should be assumed as having the possibility of success in the mind of a prudent hypothetical purchaser, based on legal advice.

159 I also consider that a prudent hypothetical purchaser would consider it is unlikely that development consent for the demolition of Lot 12 would be granted quickly. As referred to at par 94, a prudent hypothetical purchaser would also be able to review the publicly available information from TIDC up to the date of acquisition as set out at par 41 – 53 (and assuming that is all publicly available, about which there is some dispute). That information would suggest that there is not an immediate intention to remove support.

160 Consequently a prudent hypothetical purchaser would consider there was some risk of loss of support but not to the extent Mr Davis allows, represented by his valuation in the after scenario based on only one year of rent continuing and a capitalisation rate of eight per cent. While I do not accept the criticisms made by TIDC that Mr Davis is not comparing “like with like” (par 148(a)) in the before and after approach it is appropriate to adjust for less “risk” of loss of support in the mind of a prudent hypothetical purchaser. That means a calculation with a lower capitalisation rate in the after scenario that is less than the eight per cent applied by Mr Davis but greater than the 5.25 per cent agreed by Mr Dempsey and Mr Davis in the before scenario.

161 Mr Davis provided in his original report (Exhibit B) and supplementary report (Exhibit E) a “sensitivity” analysis assuming up to five years of rent continuing based on a capitalisation rate of eight per cent. There is no evidence I am aware of for a sensitivity analysis for different rent periods applying different capitalisation rates. Exhibit E does provide a sensitivity analysis for different capitalisation rates based by implication on only one year of rent (par 10 of Exhibit E). Further assistance from the Applicant is sought in this regard. A short mention to consider that report and determine if additional evidence is necessary is required before I can arrive at a final figure for the Applicant’s compensation under s 55(a) and (f).

162 TIDC argued there should not be a separate award of compensation for Lot 16. I consider the separate amount claimed for the acquisition of Lot 16 of $175,000 is also claimable by the Applicant given that Lot 16 was compulsorily acquired and there was reduction in access to Lot 12 as a result. I accept the evidence of Mr Davis regarding that amount as identified in his supplementary statement of evidence dated 8 November 2005 (Exhibit C).

163 I note that $10,000 originally claimed for loss of ventilation is not pressed.

(ii) Council

164 The interests of the Applicant and the Council are not synonymous because the Applicant owns Lot 6 which is connected to Lot 12 and that enlivens an injurious affection claim not available to the Council. Further, the Applicant does not have the benefit of a windfall at the end of the lease. The capitalisation rate adopted by Mr Dundas in the before scenario is appropriate and need not be the same as that applied by Mr Davis.

165 Because I have not accepted TIDC’s argument that the public purpose of acquisition included the reinstatement of the easement for support, and hence did not accept the application of s 88K of the Conveyancing Act, I also do not accept Mr Dempsey’s view that there is no loss of rent in the after scenario. I consider I should accept Mr Dundas’ valuation for the Council with the capitalisation rates he adopts in the before situation.

166 As stated in par 160 I consider the after scenario should be considered less “risky” than Mr Davis did and that must also apply to Mr Dundas’ application of a capitalisation rate of 10 per cent with a rental period of two years. Further clarification of whether an additional sensitivity analysis need be provided by the Council is necessary before I finalise the amount of compensation payable under s 55(a) and (f).

167 TIDC argued that no amount of compensation should be allowed for Lot 16 because there was no separately identifiable loss attributed to that acquisition by the Council. Lot 16 was acquired and there was a reduction in access to Lot 12 as a result. Mr Dundas allowed an amount of $10,000 for the loss of Lot 16 which I agree should be awarded.

(iii) Section 56(2)

168 Given the different interests in land of the Applicant and the Council I consider that the market value under s 55 for both is able to be determined by the addition of the Applicant and the Council’s claims for the purposes of s 56(2).

Disturbance

169 The Applicant claimed disturbance under s 59(a) and (f) in the amounts of $86,954.94 and $167,377.58 for loss of past rent as detailed in the affidavit(s) of Mr Simpson. The lost rent is due to the inability to use the premises in part during the construction phase. The figure of $86,954.94 for legal and valuation costs is not disputed.

170 The claim for loss of past rent of $167,377.58 is disputed by TIDC because there is no actual “physical” use of land to which s 55(f) refers, given that an easement for support was acquired. Further, support for and access to Lot 12 has continued to be provided so that use of Lot 12 and Lot 6 has continued and rent has continued to be received. Consequently, there have been no costs incurred as a direct and natural consequence of the acquisition. Reliance was placed on Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259 and Broken Bay Peninsular Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 (1997) NSWLEC 165 in which Cowdroy J held there was no actual use being made of the “land” acquired. The costs must be reasonably incurred as a direct and natural consequence of the acquisition and were not in this case.

171 Given that access to Lot 12 and hence Lot 6 has continued to be provided by TIDC with a temporary lift and stairs to Lot 12, I do not consider the loss of rent claimed by the Applicant is attributable to the acquisition for the reasons given by TIDC. I do not consider this part of the claim for disturbance is recoverable under s 55(f). The amount of disturbance that is agreed, $86,954.94 should be awarded to the Applicant.

Conclusion

172 Clarification of evidence in relation to the sensitivity analysis of Mr Davis and Mr Dundas is needed from the Applicant and the Council before final orders can issue. A short mention before me is required as soon as convenient to the parties.

CITATION:	Chino Pty Limited v Transport Infrastructure Development Corporation and Anor [2006] NSWLEC 768
PARTIES:	APPLICANT Chino Pty Limited FIRST RESPONDENT Transport Infrastructure Development Corporation SECOND RESPONDENT Willoughby City Council
FILE NUMBER(S):	30242 of 2005; 30243 of 2005
CORAM:	Pain J
KEY ISSUES:	Valuation of Land :- extinguishment of easement for support - does public purpose of acquisition include reinstatement of easement for support - whether before and after method of valuation should apply - whether s 88K Conveyancing Act 1919 should apply - whether matters after date of acquisition can be taken into account
LEGISLATION CITED:	Conveyancing Act 1919 s88K Land Acquisition (Just Terms Compensation) Act 1991 s4, s19, s20, s31, s37, s54, s55, s56 Public Works Act 1912 Real Property Act 1900 Transport Administration Act 1988 s18
CASES CITED:	Anderson v Valuer-General [2005] NSWLEC 151; Antipas v Kutcher (2006) 144 LGERA 289 ; Besmaw Pty Ltd v Sydney Water Corporation (2001) 113 LGERA 246; Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259 ; Brisbane City Council v Thorpe (1965) 12 LGRA 31; Broken Bay Peninsular Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 (1997) NSWLEC 165 ; Commissioner of Highway v George Eblen Pty Limited (1975) 34 LGERA 207 ; Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of SA Ltd (1947) 74 CLR 358 ; Council of the City of Liverpool v Commonwealth of Australia (1993) 46 FCR 67; D & C Dwight v Sydney Water Corporation Ltd [1995] NSWLEC 72 ; Gosford Shire Council v Green (1980) 48 LGRA 201; Harman v City and County of San Francisco (1972) 7 Cal. 3d 150 ; Hemmerling v Tomlev Inc. (1967) 67 Cal. 2d 572; Hornsby Shire Council v Roads and Traffic Authority (1998) 100 LGERA 105 ; Housing Commission of NSW v Falconer [1981] 1 NSWLR 547; Mir Bros Unit Constructions Pty Limited v Roads and Traffic Authority of New South Wales [2005] NSWLEC 419; Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] 2 All ER 317 ; Redevelopment Agency of the City of Concord v Michael Tobriner (“Tobriner 1”) (1984) 153 Cal. App. 3d 367; Redevelopment Agency of the City of Concord v Tobriner (“Tobriner 2”) 215 Cal. App. 3d 1087; Roads and Traffic Authority v Perry [2001] 52 NSWLR 222; Spencer v The Commonwealth (1907) 5 CLR 418; Sydney Water Corporation v Besmaw [2002] NSWCA 147; The People ex rel. Department of Public Works v Logan (1961) Cal. App. 2d 581; United States v Welch (1910) 217 US 333; William Henry Kater v Electricity Transmission Authority of New South Wales, (NSWLEC, Pearlman J, 9 February 1996, unreported)
DATES OF HEARING:	29/05/2006 30/05/2006 01/06/2006 21/11/2005 22/11/2005 23/11/2005 24/11/2005 25/11/2005 29/05/2006 30/05/2006 01/06/2006 02/06/2006 09/08/2006 10/08/2006 06/09/2006
DATE OF JUDGMENT:	12/22/2006
LEGAL REPRESENTATIVES:	APPLICANT Mr J Ayling SC Ms H Irish SOLICITORS Mallesons Stephen Jaques FIRST RESPONDENT Mr J Maston SOLICITORS Clayton Utz SECOND RESPONDENT Mr P Tomasetti SOLICITORS Pike Pike & Fenwick

[2006] NSWLEC 768

22/12/2006