Coffs Harbour City Council v Noubia Pty Ltd

[2024] NSWCA 19

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Coffs Harbour City Council v Noubia Pty Ltd [2024] NSWCA 19

Hearing dates:

12 December 2023

Date of orders:

12 February 2024

Decision date:

12 February 2024

Before:

Payne JA at [1]
Kirk JA at [130]
Preston CJ of LEC at [131]

Decision:

(1)    Appeal allowed.

(2)    Orders 1 and 2 made in the Land and Environment Court dated 5 May 2023 be set aside.

(3)    The Court declares the value of Lot 94 in Deposited Plan 1111430, as at the date of transfer on 18 May 2007, is determined in the sum of $110,000.

(4)    The respondent pay the appellant's costs of this appeal.

(5)    The question of the costs of the proceedings in the Land and Environment Court including the costs of the proceedings before Sheahan J be remitted to the Land and Environment Court.

Notation:

The Court notes the appellant’s undertaking in Exhibit A1 to pay interest on the amount of $110,000 from the date of transfer, 18 May 2007, to the date of payment, 28 August 2017, pursuant to ss 49 and 50 of the Land Acquisition (Just Terms Compensation) Act 1991.

Catchwords:

VALUATION OF LAND – Compulsory acquisition – land transferred to public authority as condition of development consent – Compensation – land valued according to principles of compulsory acquisition – Construction of s 56(1)(a) of Land Acquisition (Just Terms Compensation) Act 1991 (NSW) – Determination of market value – decrease in land value attributed to public purpose – Statutory disregard – Identification of public purpose

CAUSATION – whether public purpose caused decrease in land’s value – where owners sought and obtained development consent – whether owners proved a decrease in value of land by comparison with hypothetical use which would have occurred but for public purpose

Legislation Cited:

Environmental Planning and Assessment Act 1979 (NSW) Pt 4, Pt 5, ss 4.2, 7.11

Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ss 3, 4, 37, 54, 55, 56

Land and Environment Court Act 1979 (NSW) s 58

Public Works Act1912 (NSW) s 42

Uniform Civil Procedure Rules 2005 (NSW) r 36.16(3A).

Cases Cited:

Bunderra Holdings Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd (subject to Deed of Company Arrangement) (2017) 96 NSWLR 434; [2017] NSWCA 263

Coffs Harbour City Council v Noubia Pty Ltd (2020) 246 LGERA 56; [2020] NSWCA 142

Council of the City of Ryde v Azizi [2019] NSWSC 1605

Leichhardt Council v Roads & Traffic Authority (NSW) (2006) 149 LGERA 439; [2006] NSWCA 353

Lloyd v Robinson (1962) 107 CLR 142; [1962] HCA 36

Nelungaloo Pty Ltd v Commonwealth (1948) 75 CLR 495; [1947] HCA 58

Noubia Pty Ltd v Coffs Harbour City Council [2019] NSWLEC 113

RD Miller Pty Ltd v Roads and Maritime Services NSW (2020) 103 NSWLR 234; [2020] NSWCA 241

Roads and Maritime Services v Desane Properties Pty Ltd (2018) 98 NSWLR 820; [2018] NSWCA 196

Roads and Traffic Authority (NSW) v Mosca (2006) 146 LGERA 335; [2006] NSWCA 159

Spencer v The Commonwealthof Australia (1907) 5 CLR 418

Sydney Metro v G & J Drivas Pty Ltd [2024] NSWCA 5

Tolson v Roads and Maritime Services [2014] NSWCA 161

Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5

Western Australian Planning Commission v Temwood Holdings Pty Ltd (2004) 221 CLR 30; [2004] HCA 63

Category:

Principal judgment

Parties:

Coffs Harbour City Council (appellant)
Noubia Pty Ltd (respondent)

Representation:

Counsel:
I Hemmings SC; A Pearman (appellant)
R Lancaster SC; H Irish (respondent)
Solicitors:
Wilshire Webb Staunton Beattie Lawyers (appellant)
Pikes and Verekers Lawyers (respondent)

File Number(s):

2023/176861

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Land and Environment Court

Jurisdiction:

Class 4

Citation:

[2023] NSWLEC 36

Date of Decision:

31 March 2023

Before:

Pain J

File Number(s):

2017/83167

HEADNOTE

[This headnote is not to be read as part of the judgment]

In 2003, the respondent, Noubia, obtained development consent (“the Consent”) from Coffs Harbour City Council, the appellant, to construct a residential “Lakes Estate” comprising 160 residential lots, a community centre lot and land for public reserves on land Noubia owned in North Boambee Valley, New South Wales. The relevant land included what later became Lot 94, the subject of this appeal. Noubia sought and obtained the Consent on the basis that it would address stormwater and drainage issues by building a “five lakes” scheme, including creating two lakes (Lakes 3 and 4) on what became Lot 94.

Condition 1 of the Consent, as amended in 2006, required Noubia to transfer land, including the land which became Lot 94, to the Council. Condition 1 required the Council to “compensate” Noubia for transferred land, the value of which was to be “determined at the date of transfer or dedication in accordance with ss 54(1) and 55 of the Land Acquisition (Just Terms Compensation) Act1991” (“Just Terms Act”). Noubia constructed the five lakes, in accordance with the Consent, including Lakes 3 and 4 on what became Lot 94. In 2007, Lot 94 was created by subdivision and transferred to the Council.

The Council offered Noubia $110,000 as compensation for Lot 94, on the basis that, at the date of transfer (18 May 2007), that was the value of a constrained plot of land bearing two lakes. Noubia sought a higher figure and brought proceedings in the Land and Environment Court’s Class 4 jurisdiction. After a successful appeal from the first decision (Coffs Harbour City Council v Noubia Pty Ltd (2020) 246 LGERA 56; [2020] NSWCA 142), the remitted matter came before the primary judge. The primary judge held that, applying s 56(1)(a) of the Just Terms Act and disregarding what she found was a decrease in value caused by the Council’s “public purpose” in acquiring the land, Lot 94 should be valued at $2,965,000. The Council appealed.

The issues before the Court were:

1. How should s 56(1)(a) of Just Terms Act be applied, given there was no compulsory acquisition?

2. What was the Council’s public purpose in “acquiring” Lot 94?

3. Did the Council’s public purpose cause a decrease in Lot 94’s value?

4. Did the primary judge err in failing to reach a factual conclusion on whether Noubia’s hypothetical alternative development proposal would have been granted?

The Court (per Payne JA, Kirk JA and Preston CJ of LEC agreeing) allowed the appeal, holding:

On issue (i):

1. Section 56(1)(a) of the Just Terms Act applies only to land that has been compulsorily acquired: Payne JA at [54], Preston CJ of LEC at [132]. Lot 94 was never compulsorily acquired, since under the Consent, Noubia was only required to transfer Lot 94 if it voluntarily carried out the Lakes Estate development: Payne JA at [54]; Kirk JA at [130]; Preston CJ of LEC at [133]-[135].

2. However, because the parties litigated on the basis that s 56(1)(a) could apply, the Court would do its best to give effect to the parties’ decision to litigate on that basis: Payne JA at [55]; Kirk JA at [130]; Preston CJ of LEC at [142]. Three assumptions were required. One, the transfer of Lot 94 was assumed to be an acquisition within the Just Terms Act. Two, the date of acquisition was assumed to be 18 May 2007, the date Noubia transferred Lot 94 to the Council. Three, there was a public purpose for acquiring Lot 94, which is the purpose for which condition 1 of the Consent was imposed: Preston CJ of LEC at [142].

On issue (ii):

1. In applying s 56(1)(a), there are no “clear rules” for determining the relevant public purpose at an appropriate level of generality. Factors will include the degree of continuity of various elements of what is proposed and done, as well as fairness to both the claimant and acquiring authority. In addressing the “fairness” factor, an important touchstone is the concept of “compensation on just terms”: Payne JA at [62]-[65]; Kirk JA at [130]; Preston CJ of LEC at [144]-[146].

   Roads and Traffic Authority v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 applied. Leichhardt Council v Roads & Traffic Authority (NSW) (2006) 149 LGERA 439; [2006] NSWCA 353 at [37] and Nelungaloo Pty Ltd v Commonwealth (1948) 75 CLR 495 at 571; [1947] HCA 58 referred to.

2. The Council’s suggested public purpose – that Lot 94 was acquired for managing the developed, and only the developed, upstream flows of water – was correct: Payne JA at [109]; Kirk JA at [130]; Preston CJ of LEC at [144]-[146].

On issue (iii):

1. Section 56(1)(a) requires the court to disregard any change in value caused by carrying out the public purpose or the proposal to do so. Changes in value caused only by an owner’s choices made prior to acquisition cannot be regarded as changes in value “caused” by the public purpose. There must be a “direct” (and not indirect) causal connection between the change in value and the carrying out of the public purpose: Payne JA at [59]-[67]; Kirk JA at [130]; Preston CJ of LEC at [147]-[148].

   Sydney Metro v G & J Drivas Pty Ltd [2024] NSWCA 5 at [87] applied. RD Miller Pty Ltd v Roads and Maritime Services NSW (2020) 103 NSWLR 234; [2020] NSWCA 241 at [180] applied. Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 at [53]-[54] applied.

2. The primary judge was wrong to find that causation was established by the simple fact that Noubia transferred Lot 94 for the public purpose: Payne JA at [76]-[77], [84], [86]. Noubia had to show that, but for the actual or proposed public purpose, Lot 94 would have been available for a more lucrative purpose at the date of transfer in 2007 and therefore more valuable: Payne JA at [77]-[80]; Kirk JA at [130]; Preston CJ of LEC at [147]-[148].

3. Noubia had to demonstrate that but for the public purpose, Lot 94 would not have been the site of two lakes. It was Noubia’s own choice to propose the “five lakes scheme” and to build two lakes on what became Lot 94. The Council’s public purpose did not compel Noubia to take this course. Noubia failed to prove its case: Payne JA at [83]-[86]; Kirk JA at [130]; Preston CJ of LEC at [147]-[148].

On issue (iv):

1. The primary judge erred in holding that the test was whether a hypothetical party to a sale of Lot 94 thought it likely Noubia would obtain consent to its hypothetical alternative development. Proving a decrease in value was a matter of mixed fact and law, and required the court to reach a conclusion, on the balance of probabilities: Payne JA at [120]-[121]; Kirk JA at [130]; Preston CJ of LEC at [149]-[150].

JUDGMENT

1. PAYNE JA: This is a second time this matter has come before this Court on appeal from the Land and Environment Court, pursuant to s 58 of the Land and Environment Court Act 1979 (NSW). This Court has power to review findings of fact as well as determinations of law: Coffs Harbour City Council v Noubia Pty Ltd (2020) 246 LGERA 56; [2020] NSWCA 142 (“Noubia CA 2020”). In the remitted hearing, the primary judge, Pain J, found that the respondent, Noubia Pty Ltd (“Noubia”), was entitled to compensation in the amount of $2,965,000 for one parcel of land which in 2007 Noubia had transferred to Coffs Harbour City Council (“the Council”). The parcel of land was Lot 94 of Deposited Plan 1111430 (“Lot 94”).

2. The case arose in an unusual way. On 11 April 2003, the Council granted Noubia development consent to subdivide a large parcel of land owned by Noubia in Coffs Harbour (“the Consent”). The Consent was for a staged subdivision creating 160 residential lots, a community centre lot and land for public reserves. Noubia identified and sold the subdivided lots as part of the “Lakes Estate”.

3. Noubia constructed the “Lakes Estate” pursuant to the Consent and created five artificial lakes on its land to address stormwater and drainage issues. Prior to the transfer of land in 2007, Noubia constructed Lakes 3 and 4 on that part of Noubia’s land which became Lot 94. Lot 94 was transferred to the Council pursuant to Condition 1 of the Consent.

4. Condition 1, as originally drafted, required that what ultimately became Lot 94 would be transferred by Noubia to the Council on terms to be agreed and recorded in a Deed. In 2006, Condition 1 was modified. In the modified Condition 1, the parties agreed that the transferred land would be valued by reference to the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (“Just Terms Act”).

5. The proceeding before the primary judge concerned the correct value of Lot 94. It was agreed that the relevant date for the valuation was 18 May 2007, the date Noubia transferred Lot 94 to the Council. By reason of the unusual way in which the case arose, the proceedings were in the Class 4 jurisdiction of the Land and Environment Court and not Class 3, as proceedings involving the Just Terms Act usually are.

Relevant facts

6. The relevant development is of a large parcel of land in North Boambee Valley, near Coffs Harbour in northern NSW. Prior to 1991 the land was rural in character.

7. In 1991, the Council commenced investigations about a possible release of land for urban development in the North Boambee Valley release area. It commissioned a study by Bewsher Consulting Pty Ltd (“the Bewsher study”) to "define the 1% AEP floodplain in the North Boambee Valley Development Area as part of the draft LEP [local environmental plan] process".

8. The chance of a flood event occurring can be described using a variety of terms, but one method often used is the Annual Exceedance Probability (AEP). Apparently, a 1% AEP was an “acceptable” risk for the Council’s planning purposes.

9. In 1997, the Council commissioned an Environmental Impact Statement (“EIS”) from GHD Pty Ltd for the North Boambee Valley to examine the construction and operation of permanent stormwater pollution control structures (that is, detention ponds, artificial wetlands and stormwater pollution control structures) to facilitate the Stage 1 Release Area, the first urban release stage identified in the Council's Masterplan for the North Boambee Valley. The EIS had regard to the Bewsher study. The EIS proposed a “two lakes” scheme to deal with stormwater issues in Stage 1.

10. There are a number of peculiarities about this EIS which were not explored in the evidence by either party. The land was not owned by the Council. An EIS is normally associated with an activity under Part 5 of the Environmental Planning and Assessment Act 1979 (NSW), or a designated development under Part 4. Mr Hemmings SC for the Council explained that the Council applied to itself for a Part 5 approval for the “two lakes scheme”. Given the Council did not then own the land, its use of the Part 5 approval process is a surprising one, apparently without legal significance, and which neither party suggested should affect the outcome of any issue in this appeal.

11. On 20 April 2000, the Coffs Harbour Council Local Environmental Plan came into operation. The North Boambee Valley Stage 1 Release Area Developer Contributions Plan 1999 (“the Contributions Plan”) came into operation on 23 February 2000 and was amended on 16 October 2003.

12. The Contributions Plan enabled the Council to levy contributions under then existing s 94 of the Environmental Planning and Assessment Act where the anticipated development will or is likely to increase the demand for public facilities. The Contributions Plan showed diagrammatically the Stage 1, Stage 2 and Stage 3 proposed release areas. The Stage 1 release area in detail was shown in the following conceptual map forming part of the Contributions Plan:

13. The Contributions Plan, under the heading “Stormwater Management” explained that the site was greenfield and there was no existing stormwater drainage infrastructure. The Valley formed part of the catchment of Newports Creek. The Contributions Plan explained that as the Stage 1 release area was located upstream of existing urban development, it would be necessary to provide flow retarding basins to maintain the 1% AEP flood discharge from the development area at the rate it was prior to any new urban development. Under the heading “Water Quality”, the Plan provided that the export of nutrients from urbanisation of the Boambee Valley must not exceed the levels existing prior to urbanisation.

14. On 22 September 2000, the Council adopted the North Boambee Valley Information Sheet relating to the Stage 1 release area, which was a relevant policy at the time Noubia's development application was being considered. The land developed by Noubia included land which became Lot 94 as part of the Stage 1 release area. The Information Sheet explained that the Council’s strategy was to allow the establishment of three residential villages corresponding to the three-staged release of land in the North Boambee Valley for development. The Council planned to provide design controls and environmental protection controls relating to flora, fauna, soil and water management and building design. As part of the Landscape and Recreation Strategy, the Council planned to “develop wetland areas and retention basins as landscape features”. The second part of the Information Sheet, titled “Controls”, provided that “Drainage and Layout of proposed subdivisions are to be compatible with the stormwater pollution control measures and flood detention structures shown in the Drainage and Water Quality Diagram”. That diagram showed the two large lakes which are depicted at about the centre of the conceptual diagram shown at [12] above.

15. Mr Jamieson of Umwelt (Australia) Pty Ltd (“Umwelt”) was commissioned by Noubia and produced for it a development concept which modified the “two lakes scheme” shown in the Contributions Plan and Information Sheet to a “five lakes scheme”. As I will explain, Mr Jamieson subsequently appeared on behalf of Noubia as an expert witness before the primary judge.

16. On or about 20 September 2002, Noubia lodged with the Council development application DA 575/03. This ultimately led to the Consent for the staged subdivision of land (including what became Lot 94) to create 160 residential lots, a community centre lot, public reserves and one future development lot (collectively to be known as the Lakes Estate). A plan in evidence demonstrating the “five lakes scheme” developed by Mr Jamieson for Noubia superimposed over earlier proposals shown as the “1997 EIS Lakes” and the “1997 EIS Riparian Corridor” was Exhibit R4:

17. It is important to note at this stage that the “five lakes scheme” covered only 2.3ha of Noubia’s land compared to 4.5ha covered by the concept plans for the original “two lakes scheme”. Relevantly, the essence of Noubia’s proposal was that, as part of its development, it would construct the “five lakes scheme”, to address water quality and stormwater management. The Consent was granted by the Council to Noubia’s application. Condition 1 of the original Consent provided:

Development Application No. 575/03: Schedule of conditions:

Acquisition of Land for Public Purpose

1. •   The developer entering into a deed of agreement with Council prior to the release of the linen plan of subdivision to the effect that land nominated under the North Boambee Valley Stage 1 Release Area Developer Contributions Plan for koala management, traffic management, water quality and community facilities that affects this site be transferred to Council following registration of the linen plan of subdivision upon terms agreed between the parties.

•   Acquisition of public land by Council is to occur on a staged basis. The staging is to coincide with the release of adjoining land by the developer unless other arrangements have been made to the satisfaction of Council.

•   Additional lands proposed by the developer for public ownership not detailed in the North Boambee Valley Stage 1 Release Area Developer Contributions Plan are to be dedicated at no cost to Council at the time of linen plan registration.

•   Lands being dedicated to or acquired by Council for a public purpose being improved by the removal of dead and dangerous trees, weeds, rubbish and all plants on Council’s list of undesirable species and left in a usable and mowable condition to the satisfaction of Council.

18. The key points to note about Condition 1 in its original form are that the relevant transfer of land to the Council was to be under a deed entered into prior to the release of the linen plan of subdivision and “upon terms agreed between the parties”. There was no obligation contained in Condition 1 to the 2003 Development Consent requiring the Council to make any payment for the land so acquired.

19. In 2006, the Consent was amended by substituting the original text of Condition 1 with the following:

1. •   The applicant must transfer or dedicate the lands set aside for acquisition within the approved plan of subdivision the subject of the development application, being those lands identified in the North Boambee Valley Stage 1 Release Area Developer Contributions Plan for koala management, traffic management, water quality and community facilities.

The lands must be transferred or dedicated to the Council in fee simple free of encumbrances, other than those acceptable to Council at or prior to the registration of the plan of subdivision.

The Council must compensate the applicant for the lands. The value is to be determined at the date of transfer or dedication in accordance with Section 54(1) of the Land Acquisition (Just Terms Compensation) Act 1991 with the relevant matters to be considered as set down by Section 55 of the Act.

•   Acquisition of public land by Council is to occur on a staged basis. The staging is to coincide with the release of adjoining land by the developer unless other arrangements have been made to the satisfaction of Council.

•   Additional lands proposed by the developer for public ownership not detailed in the North Boambee Valley Stage 1 Release Area Developer Contributions Plan are to be dedicated at no cost to Council at the time of linen plan registration.

•   Lands being dedicated to or acquired by Council for a public purpose being improved by the removal of dead and dangerous trees, weeds, rubbish and all plants on Council's list of undesirable species and left in a usable and mowable condition to the satisfaction of Council."

20. This was the first occasion the Council was placed under an obligation to pay compensation to Noubia for the land being transferred.

21. Noubia constructed the Lakes Estate pursuant to the Consent, including the creation of five lakes. Lakes 3 and 4 were constructed on the land which became Lot 94 prior to the creation of and transfer of Lot 94 to the Council in 2007.

22. On or about 18 May 2007, Noubia transferred Lot 94 to the Council in accordance with Condition 1. Lot 94 is 2.719ha and was created by subdivision immediately prior to the transfer.

Primary judgment

23. Noubia filed a summons dated 17 March 2017, amended on 8 September 2017. Supreme Court proceedings were also commenced and subsequently transferred to the Land and Environment Court (those proceedings have since been discontinued following an undertaking given by the Council to pay any amount awarded to Noubia in the present proceedings).

24. In Noubia Pty Ltd v Coffs Harbour City Council [2019] NSWLEC 113, Sheahan J determined matters in favour of Noubia and ordered compensation for the three lots then in issue. The amount awarded for Lot 94 was $3,256,000. Sheahan J’s orders were each set aside by this Court in Noubia CA 2020. This Court remitted the matter to the Land and Environment Court for a rehearing regarding the valuation of Lots 94 and 163.

25. Prior to the remitted hearing, the parties agreed on compensation payable for Lot 163. On the remitted hearing, Noubia’s position was that Lot 94 should be valued on the hypothetical basis that, but for what it asserted was the carrying out of the Council’s public purpose, Lot 94 would have been used to develop 32 residential lots, and the two lakes actually built on the land would not have been built. The essence of Noubia’s position was that the Council’s “public purpose” in acquiring the land was “for water quality and stormwater management purposes” and that Noubia’s development of the two lakes was a manifestation of that public purpose which therefore was to be disregarded, pursuant to 56(1)(a) of the Just Terms Act. In the hypothetical world where “water quality and stormwater management purposes” did not exist as the Council’s public purpose for the “acquisition”, so the argument went, Noubia would have proceeded with a residential development on Lot 94. Because the Just Terms Act requires a valuer to ignore the effect of the public purpose on the acquired land’s value, Noubia maintained that the correct basis on which to value Lot 94 was the hypothetical value of that residential development.

26. In dealing with Noubia’s case, Pain J’s detailed judgment addressed three issues:

1. Whether, in valuing Lot 94 in accordance with Condition 1, Noubia could rely on the “statutory disregard” contained in s 56(1)(a) of the Just Terms Act. The “statutory disregard” instructs a valuer to ignore any increase or decrease in the value of acquired land attributable to the “public purpose” for which the land was acquired. There were two sub-issues:

1. What was the “public purpose” for which Lot 94 was acquired?

2. Did the carrying out of this public purpose cause a decrease in Lot 94’s value, as Noubia claimed?

2. Whether the hypothetical residential development of Lot 94, including hypothetical alternative drainage systems, “was likely” to have been approved by the Council in 2003, at the time of Noubia’s original five lake drainage proposal.

3. The correct valuation of Lot 94 presuming the hypothetical residential development had occurred.

Issue 1 – Statutory disregard

Issue 1(a): Formulation of the relevant “public purpose”

27. The parties formulated different “public purposes” for the acquisition of Lot 94. Noubia’s pleaded public purpose of acquisition was use “for water quality and stormwater management purposes”. The Council advanced a narrower public purpose, the management of stormwater arising from the developed upstream catchment (in contrast to flows created by Noubia’s development and the natural flow of upstream water from undeveloped land). The primary judge took the view that the Council developed this formulation of the “public purpose” only in oral submissions, a conclusion the Council took issue with on appeal.

28. The Council submitted that Noubia was already responsible for flows created by its own development and for management of natural stormwater flows arising from undeveloped upstream catchments. These flows were an inherent characteristic of the land and could not form part of the public purpose. The purpose of the “five lake scheme” and subsequent transfer of Lot 94 must, therefore, have been the management of flows from developed upstream sites. The primary judge rejected the Council’s formulation of the public purpose. Her Honour decided that the point in time at which the public purpose should be identified was the period between 2003 and May 2007.

29. The primary judge found that the “source” of the public purpose was the Council, since the Council was the body requiring the transfer and undertaking relevant planning for the area. Noubia relied on evidence emanating from the Council during the relevant 2003-2007 period, for example an affidavit of a long-term Council employee Mr Mutkins, who deposed the public purpose for acquiring Lot 94 was “for water quality and stormwater management purposes”; a “Planning, Environmental and Development Committee report” dated 20 March 2003 which explained the relevant subdivision would include “stormwater pollution control structures and public reserves”; and the subdivision plan creating Lot 94 which labelled the Lot as a “public reserve”.

30. The primary judge found that this evidence showed the Council required the transfer of Lot 94 for “management of water quality and stormwater management”.

31. None of the evidence led by the Council, her Honour found, supported the “narrow public purpose” it advanced. She described the Council’s reliance on Mr Jamieson’s evidence and the distinction he drew between different categories of stormwater as “irrelevant”, since that evidence was not in terms directed to the public purpose question, was prepared in 2019-2022 rather than the relevant 2003-2007 period, and because Mr Jamieson, who was never a Council employee, had little if any insight into what public purpose the Council had formulated in 2003-2007.

32. Her Honour was also unconvinced by the Council’s submission that Basten JA’s judgment in Noubia CA 2020 was helpful in determining the public purpose. She described the cited paragraphs as “obiter dictum”, since the decisive issue in Noubia CA 2020 was the Land and Environment Court’s constructive failure to exercise jurisdiction, not its formulation of the relevant public purpose. Her Honour also found that Basten JA’s comments at [88]-[90] explained the correct approach to the legal issues involved in, as here, applying provisions on compulsory acquisition to the valuation of land whose transfer is required as a condition of a development consent. That explanation did not itself resolve what her Honour described as a factual dispute. Finally, her Honour found that Basten JA’s tentative observations about Mr Jamieson’s evidence at [90] were incorrect, which suggested caution was required in applying Basten JA’s judgment.

33. On those bases, the primary judge accepted Noubia’s broad formulation of the public purpose, finding that Lot 94 was acquired “for water quality and stormwater management purposes”.

Issue 1(b): Did carrying out of the public purpose decrease Lot 94’s value?

34. The primary judge accepted that Noubia was required to prove a causal connection between the carrying out of the public purpose and the decrease in the value of Lot 94.

35. The Council submitted that Noubia bore the onus of proving that the approved “five lakes scheme” was caused by the carrying out of the public purpose, while Noubia submitted that, given the hypothetical exercise required in determining market value under the Act and the effect of Condition 1, it was not required to satisfy the Court of this question. The Council also submitted that Noubia was required to satisfy the Court that in 2003 Noubia would successfully have sought consent for the revised alternative hypothetical subdivision. That onus, the Council said, Noubia failed to discharge.

36. The primary judge accepted Noubia’s submission that the Council was asking the wrong question. Her Honour found that to address the causation question, no comparison was required of the alternative hypothetical subdivision of Lot 94 with the “five lakes scheme” actually constructed. Her Honour found that the valuation exercise required asking only what the development potential of Lot 94 was, based on the highest and best use of that Lot at the relevant time. Her Honour accepted Noubia’s submission that the land being transferred could not fairly be valued on the basis that the land was subject to the requirements of the Consent where that Consent required the transfer in order to effect the public purpose.

37. The primary judge found that the carrying out (by Noubia) of the Council’s public purpose of managing water quality and stormwater on Lot 94, through the construction of Lakes 3 and 4, caused a decrease in the value of Lot 94. Her Honour found that Condition 1, in mandating compensation be paid, acknowledged that there had been a decrease in value caused by carrying out that public purpose and that Lot 94, necessarily, had a higher and better use. Her Honour regarded as significant the fact that the same Consent which approved the five lakes scheme required the transfer of Lot 94.

38. Her Honour found that the decrease in the value of the land caused by the carrying out of the public purpose must be disregarded and the market value of the land therefore should be determined on the basis that Lot 94 could be developed for residential subdivision.

39. The primary judge agreed with Noubia that the Council’s submission did not address the correct question for the purposes of the hypothetical exercise required. That Noubia undertook an extensive process to develop the proposal for a “five lakes system” was found to be irrelevant to the value of Lot 94 in 2007. Her Honour also found that it was irrelevant whether in 2003 Noubia would have successfully sought an alternative development.

40. Her Honour concluded that a decrease in the value of Lot 94 was caused by the carrying out of the public purpose of water quality and stormwater management “underpinning” the transfer of Lot 94 to the Council.

Issue 2 – Would the hypothetical residential development have been approved?

41. The parties fought this issue as raising the question of whether in 2003 the Council would, on the balance of probabilities, have been likely to grant development consent to Noubia for an alternative hypothetical subdivision and drainage scheme which provided for the building of 32 residential lots on Lot 94.

42. Noubia accepted that in undertaking this exercise it was necessary to hypothesise the alternative stormwater controls that could have been put in place to service the alternative hypothetical subdivision of Lot 94, while leaving Lot 94 itself free for residential use. The alternative controls it proposed were a “channelised alternative system” where, instead of water flows passing through lakes on Lot 94, a large channel would be constructed connecting other lakes in the management system, allowing the development’s stormwater control system to function without building and using Lakes 3 and 4.

43. Mr Jamieson, Noubia’s hydrology expert, gave evidence that the hypothetical channelised system would have complied with the Council’s water management requirements in 2003:

21. I am of the opinion that the amended Alternate Hypothetical subdivision layout could be constructed to comply with hydraulic conveyance (flow), water quality and detention requirements for the Lakes Estate site and existing (i.e. undeveloped) upstream flows of 27m³/s during a 1 in 100 Year Average Recurrence Interval event.

44. The parties debated two areas of expert evidence: riparian corridor and town planning concerns. Her Honour ruled that the Council could not revisit earlier riparian corridor evidence from engineers and there is no appeal from that finding.

45. Noubia submitted that no town planning issues stood in the way of the likely approval of the alternative hypothetical subdivision. Noubia and the Council obtained their own town planners to give evidence, Ms Hunter and Ms Brown respectively. Noubia also relied on the evidence of Mr Jamieson to show that hydrological issues would not have prevented the land from being developed for residential purposes.

46. Despite stating at the outset that the question was whether in 2003 the Council would, on the balance of probabilities, have been likely to grant development consent to Noubia’s hypothetical subdivision of Lot 94 into 32 residential lots, the primary judge ultimately applied a different test, namely: whether (presumably in 2003) a prudent hypothetical purchaser would have been likely to consider at that date that development consent for the alternative hypothetical subdivision on Lot 94 would have been granted. Her Honour concluded:

[151]    For the reasons given by Noubia development consent for the alternative hypothetical subdivision on Lot 94 was likely to have been granted by the Council in 2003. More accurately given that compensation for market value is to be determined in accordance with the JT Act a prudent hypothetical purchaser would have been likely to consider at that date development consent for the alternative hypothetical subdivision on Lot 94 would have been granted. (italics added)

Issue 3 – Correct valuation of the hypothetical residential development

47. The parties disagreed on the appropriate approach to the valuation of Lot 94 in accordance with the Just Terms Act. Noubia and the Council each retained an expert valuer, Mr Maher and Mr Davis respectively.

48. Her Honour did not consider the primary valuation made by Mr Davis of $110,000 based on a constrained land analysis of Lot 94 occupied by lakes rather than lots. Based on her Honour’s earlier findings, the land was to be valued on the basis of the hypothetical subdivision containing 32 residential lots.

49. Mr Maher in his original report valued the land at $3,256,000, but later in 2021 reduced this amount to $2,965,000. The primary judge ultimately accepted that the “market value” of Lot 94 was $2,965,000.

Grounds of appeal

50. The Council advanced three grounds of appeal in its Notice of Appeal:

Public Purpose

1   In assessing compensation for Lot 94 in Deposited Plan 1111430 (Lot 94) the Court below, in invoking a statutory provision for the assessment of compensation for compulsory acquisition as a basis for valuing land which is dedicated as a condition of a development consent, erred in its application of section 56 of the Land Acquisition (Just Terms Compensation) Act 1991 (the Act), specifically the “public purpose” statutory disregard.

Particulars

a.   The Court below erred in failing to find that the public purpose was limited to only developed upstream flows.

b.   In disregarding Lakes 3 and 4 the Court below failed to distinguish between developed upstream flows which were the "public purpose" and the flows the applicant was obliged to accept and manage being the undeveloped upstream flows and developed flows from the applicant's own land.

c.   In failing to have regard to the difference between water quality and stormwater management with and without the developed upstream flows the Court below erroneously disregarded the impact on value caused by the applicant's own water quality and stormwater management works.

d.   By disregarding the impact on value of the applicant's own water quality and stormwater management works, the Court erred in failing to find, absent the public purpose the applicant's own stormwater management system would have been materially similar to that approved and constructed.

e.   By disregarding the impact on value of the applicant's own water quality and stormwater management works, the Court below failed to value the highest and best use of Lot 94 as highly constrained undevelopable land (with a value of $110,000) and instead erroneously valued Lot 94 as residential land with 32 lots (with a value of $2,965,000).

Causation

2 In invoking a statutory provision for the assessment of compensation for compulsory acquisition as a basis for valuing land which is dedicated as a condition of a development consent, the Court below erred in its application of section 56 of the Act, specifically "causation" and the "public purpose".

Particulars

a.   the Court below failed to find that Lakes 3 and 4 were not caused by the proposal to carry out the public purpose, but caused instead by the applicant's own design choices.

b.   By failing to give any weight to the applicant's design choices to implement Lakes 3 and 4 rather than an additional 32 lots, the Court failed to have proper regard to whether the carrying out of the public purpose caused any decrease in value that was to be disregarded.

Incorrect Test

3 Further, in invoking a statutory provision for the assessment of compensation for compulsory acquisition as a basis for valuing land which is dedicated as a condition of a development consent, pursuant to section 56 of the Act, it was necessary for the Court to come to a conclusion of fact whether, but for the proposal to carry out the public purpose, in 2003 development consent for the alternative subdivision would have been approved. The Court below erred in not coming to a conclusion of fact.

Particulars

a.   The Court below applied a different and incorrect test, that is whether a hypothetical purchaser would have thought it likely that Council would have granted consent.

b. In applying this incorrect test, the Court below erred in applying section 56 of the Act.

Construction of the Just Terms Act

51. Section 37 of the Just Terms Act sets out the right to compensation for interests in land which an acquiring authority has compulsorily acquired:

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

52. Sections 54-56 are in a Division headed “Determination of amount of compensation”. They address the entitlement to compensation, matters to be considered in determining the amount of compensation, and the notion of market value:

54    Entitlement to just compensation

(1)    The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land.

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

55    Relevant matters to be considered in determining amount of compensation

In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division)—

(a)    the market value of the land on the date of its acquisition,

(b)    any special value of the land to the person on the date of its acquisition,

(c)    any loss attributable to severance,

(d)    any loss attributable to disturbance,

(e)    the disadvantage resulting from relocation,

(f)    any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

56    Market value

(1)    In this Act—

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

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

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

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

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

(3)    If—

(a)    the land is used for a particular purpose and there is no general market for land used for that purpose, and

(b)    the owner genuinely proposes to continue after the acquisition to use other land for that purpose,

the market value of the land is taken, for the purpose of paying compensation, to be the reasonable cost to the owner of equivalent reinstatement in some other location. That cost is to be reduced by any costs for which compensation is payable for loss attributable to disturbance and by any likely improvement in the owner’s financial position because of the relocation.

53. Relevant terms are defined as follows in s 4(1) of the Act:

acquisition of land means an acquisition of land or of any interest in land. …

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. …

land includes any interest in land. …

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

54. At the outset of the appeal a question was raised by the Court about how it was, given there had been no compulsory acquisition of land by the Council, that there was any scope for the application of s 56(1)(a), which only applies upon identification of the public purpose for which the land “was acquired”. The transfer of Lot 94 by Noubia to the Council was not an acquisition of land to which the Just Terms Act applied. Even applied by analogy, s 56(1)(a) of the Just Terms Act directs attention to the public purpose of the Council for which the land was acquired in 2007. It is tolerably clear that the purpose of the “acquisition” of the land in 2007 (in truth the transfer of the land by Noubia pursuant to Condition 1 of the Consent) was the future use and management of the land. In 2007, when the land was transferred, there is no reason to think the Council was giving effect to any public purpose related to prior steps in the development. The Council’s public purpose was to ensure proper future management of water quality and stormwater issues, no doubt at a cost to the Council. In 2007, future management of water quality and stormwater issues could have no relevant effect on the value of Lot 94: Noubia had already decided, some years before, to forego any residential subdivision of the land which became Lot 94, to instead propose and build a water management scheme to occupy (inter alia) the land that would become Lot 94, an integral part of which was the five lakes scheme, including the two lakes on Lot 94. But for the way the parties approached this case, I would have concluded that future management of water quality and stormwater issues was the public purpose for which the land was acquired and that carrying out that public purpose had no adverse effect on the value of Lot 94.

55. There are several highly unsatisfactory consequences of introducing statutory concepts relevant to compulsory acquisition to the transfer of land as a condition of development consent, which is essentially a voluntary process. Nevertheless, the parties chose to fight the case on the basis that there was a public purpose capable of adversely affecting the value of Lot 94 in a way relevant to s 56(1)(a). Accordingly, determination of the present case involves the Court in doing its best to apply the Just Terms Act to an essentially voluntary process and in doing so to decide between the competing “public purposes” presented by the parties.

56. The following principles are relevant to the application of the Just Terms Act. The land being acquired must be valued at the date of its acquisition in its existing condition, including all its potentialities: Roads and Traffic Authority (NSW) v Mosca (2006) 146 LGERA 335; [2006] NSWCA 159 at [15]. Thus, for example, where the land has the potential to be rezoned in a way that will affect its value, that will be taken into account in assessing the market value of the land, just as the potential rezoning would have been a factor if the property was sold in the open market on the day of its compulsory acquisition. This, however, still involves valuing the land as it is on the date of acquisition.

57. Section 56(1)(a) might require the assessment of market value to proceed on the basis that the land would in fact have been rezoned as at the date of acquisition, if it was established on the facts that a rezoning would have occurred but for the giving effect to the public purpose for which the land was acquired: see for example, my acceptance of this construction of s 56(1)(a) in Council of the City of Ryde v Azizi [2019] NSWSC 1605 at [52]-[53]. In such a case, a decrease in value of the land acquired could be shown to be caused by the giving effect to the public purpose for which the land was acquired.

58. Section 56(1)(a) of the Just Terms Act involves a causation inquiry. The court is to disregard 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.

59. As Kirk JA explained in Sydney Metro v G & J Drivas Pty Ltd [2024] NSWCA 5, after analysing the text, context, subject matter, scope and purpose of s 56(1)(a) of the Just Terms Act:

[88] …An increase or decrease in value caused only by choices made by an owner prior to the date of acquisition in relation to the land, being choices made because of the possibility or certainty of the land being acquired, are not the types of effects on value which can be regarded as having been caused by the actual or proposed carrying out of the public purpose for which the relevant authority is acquiring the land. Section 56(1)(a) does not require that the land be valued on a hypothetical basis as if such choices had not been made. Her Honour erred in concluding to the contrary. The grounds of appeal relating to assessment of market value should thus be upheld.

60. Kirk JA went on at [89] to explain that:

[89]    … That does not mean that the likelihood of a rezoning or development consent being obtained by the date of acquisition but for the actual or proposed carrying out of the public purpose is necessarily to be ignored, even though doing so may have involved taking account of steps that would have been taken by the owner. That is so because a step in the causal analysis in such cases may be that any application for rezoning or for consent would likely have been refused because of the public purpose. Thus the public purpose itself in such a case has causal significance in the analysis beyond steps the owner would or would not have taken because of the proposed acquisition.

61. In identifying the public purpose for which the land was acquired, it is clear that it is the public purpose of the acquiring authority which is relevant. The predecessor to the Just Terms Act, the Public Works Act1912 (NSW), in s 42, expressly required a statement of the public purpose by the acquiring authority: see further Roads and Maritime Services v Desane Properties Pty Ltd (2018) 98 NSWLR 820; [2018] NSWCA 196 at [255]-[277]. The Just Terms Act contains no such requirement.

62. The appropriate identification of the public purpose of the acquisition is nevertheless important in the operation of s 56(1)(a). Hodgson JA in Roads and Traffic Authority v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 explained at [100] that there are no “clear rules” determining how the relevant public purpose at the appropriate level of generality is to be determined. Factors to be taken into account include the degree of continuity and consistency of various elements of what is proposed and done, and fairness to both the claimant and the acquiring authority.

63. There will be cases where the appropriate level of generality for framing the public purpose may turn on the degree of continuity and consistency of various elements of what is proposed and done. Examples drawn from decided cases in which this factor may have been important include RTA v Mosca, where the public purpose was the development of part of the M7 motorway, linking the M2 and M5 motorways, rather than individual steps in developing the motorway. The recent case of Sydney Metro is also likely such a case, where the public purpose was agreed to be the building of the Metro, rather than any of its component parts.

64. In addressing fairness to both the claimant and the acquiring authority, the legislative purpose of the Just Terms Act is important. Section 3(1) sets out the objects of the Act, which include the following:

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

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

65. No doubt the reference in paragraph (a) to the “market value of the land (unaffected by the proposal)” is a reference to s 56(1)(a) but s 3(1)(a) does not indicate what sorts of effects of the proposal are to be taken into account. Of more significance is paragraph (b), which refers to ensuring “compensation on just terms”. That intention is further manifest by s 54(1) of the Act, which provides that the amount of compensation to which a person is entitled “is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land”. It is that which is the “dominant test”: Leichhardt Council v Roads & Traffic Authority (NSW) (2006) 149 LGERA 439; [2006] NSWCA 353 at [37]. As has been said in a related context, “[c]ompensation prima facie means recompense for loss”: Nelungaloo Pty Ltd v Commonwealth (1948) 75 CLR 495 at 571; [1947] HCA 58. A key purpose of the Just Terms Act is to provide just recompense for loss. Whilst there will often be a contest about what amounts to just recompense for loss, s 3(1)(b) provides an important touchstone in applying Hodgson JA’s dictum and properly identifying the public purpose of the acquisition at the appropriate level of generality.

66. When interpreting s 56(1)(a), the Pointe Gourde principle has little, if any, application. The statutory language of s 56(1)(a) must be applied on its own terms: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 at [45]. It follows that earlier decisions in this Court which applied the Pointe Gourde principle should be approached with considerable caution. In Tolson v Roads and Maritime Services [2014] NSWCA 161, Basten JA explained:

36   In some circumstances, knowledge of preceding case law is useful in understanding the concepts used in this area of the law, such as "injurious affection", "betterment" and "the Pointe Gourde principle". However, the Land Acquisition Act contains language which is largely defined within the Act, so that its construction is a matter to be addressed primarily by reference to its own terminology: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; 233 CLR 259 at [35].

67. In RD Miller Pty Ltd v Roads and Maritime Services NSW (2020) 103 NSWLR 234; [2020] NSWCA 241 at [180] Preston CJ of the LEC explained that it was clear after Walker Corporation that s 56(1)(a) required a direct causal connection between a decrease in value of the land and the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. An “indirect relationship”, such as the maintenance of an essentially consistent planning restriction by a Council prior to acquisition of the land by a different authority, was not sufficient:

[180] The sufficiency of the casual connection between an event or conduct and an increase or decrease in the value of the land will vary depending on the statutory language. This is shown by the difference in statutory language between s 124 of the Public Works Act and s 56(1)(a) of the Land Acquisition Act. The language of the matter to be disregarded under s 124 of the Public Works Act, namely an alteration in value “arising from the establishment of…[the] public works upon or for which such land was resumed”, differs significantly from the language of the matter to be disregarded under s 56(1)(a) of the Land Acquisition Act, namely an increase or decrease in value “caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired” (see Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (2005) 63 NSWLR 407; [2005] NSWCA 25 at [47] per Basten JA). This significant difference in the language in which the disregard was expressed in these statutes led the High Court in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority to hold that the proposition drawn from San Sebastian that an “indirect relationship”, where the maintenance of the planning restriction by the Council was seen as a “step in the process of resumption”, was a sufficient causal connection was not applicable to s 56(1)(a) of the Land Acquisition where a direct causal connection was required (at [53]-[54]).

68. Having sketched these principles applying to s 56(1)(a), it is necessary to turn to the three grounds of appeal. I will first address ground 2, causation, as the conclusion I have reached is dispositive of the appeal.

Ground 2 – causation

69. It is convenient to address ground 2 first, because both parties’ respective approaches to the causation issue remain essentially unchanged whatever conclusion is reached about ground 1, which concerns the breadth of the public purpose here engaged.

70. The Council submitted that the proposal to carry out the public purpose, whichever formulation is accepted in the present case, cannot be said to have caused any decrease in the value of Lot 94 by causing the presence of Lakes 3 and 4 on the land rather than an additional 32 residential lots.

71. The Council’s case is that it was always open to Noubia in 2003 to seek approval for a subdivision in any form it chose. However it did so, Noubia would have been required to address its water quality and stormwater management obligations in some way. Noubia proposed a “five lakes system” as part of its proposed Lakes Estate.

72. The essence of Noubia’s case was that whether broadly or narrowly expressed, the public purpose was an element inherent in the development application that was actually made by Noubia in 2003. Noubia asserted, and the primary judge agreed, that the effect on the value of Lot 94 occasioned by Noubia’s own development application must be disregarded. That is, Noubia asserted that the primary judge correctly disregarded the effect of Noubia’s own development application and instead considered whether consent was likely to have been given in 2003 to some other proposed development for the land which became Lot 94.

73. Noubia submitted that it did not make a design choice to adopt a water management scheme that involved building Lakes 3 and 4. Rather, Noubia submitted that the Council required it to build the “five lakes system”. Noubia claimed that, in 2003, both parties’ expectation was that the public purpose set out by the Contributions Plan was required to be carried out. Noubia submitted that the design of the approved “five lakes scheme” served the public purpose as an orderly and economic use of the developed land. The “five lakes scheme” required less volume and took up less area than the two detention basin design in the original indicative proposal (shown at [16] above), while still achieving compatibility with the Council’s requirements.

74. Noubia asserted that the Council’s construction of s 56(1)(a) was “artificial and misdirected”. There can be “no doubt”, Noubia said, that the public purpose of the acquisition of what became Lot 94 was inherent in the 2003 Consent. Thus, Noubia submitted, the existence of the “five lakes scheme” was to be disregarded pursuant to s 56(1)(a) when addressing the value of Lot 94. Noubia submitted that the statutory question posed was: what sort of subdivision would the hypothetical parties have believed was required to be achieved having regard to the characteristics of the land and the likelihood of council approval at the time.

75. Noubia asserted that the inundation was caused by the public purpose. This is because the carrying out of the public purpose was “truly inherent in the Consent”. Condition 1 expressly identified the part of the land carried out for the public purpose. It expressly required the transfer of that land. Thus, it was submitted, that this was a clear case where “causation” was made out.

Consideration of ground 2

76. The debate between the parties was resolved by the primary judge in the following critical passages:

[86]    The Council’s submission that Noubia had to show that its five lakes system was caused by the public purpose, and could not because that design resulted from a multifaceted process which included lot yield maximisation inter alia, is not addressing the correct question for the purposes of the hypothetical exercise I must consider. The Council approved the five lakes system underpinning Noubia’s DA in 2003 presumably then accepting that it met the requirements of the North Boambee Valley Stage 1 release area requirements in relation to water quality and stormwater management. As Noubia highlighted the SEE identified that the five lakes scheme met the requirements of the 1997 EIS. That Noubia undertook an extensive process to develop the proposal as identified in the Astoria developments letter dated 6 August 2002, Senior Environmental Engineer’s email dated 19 June 2002, the Doug Gow & Associates report of 6 August 2002, the SEE dated 19 September 2002, the Umwelt letter dated 1 October 2002 as relied on by the Council as set out above in [62] is ultimately irrelevant to the question I must address in valuing Lot 94 under the JT Act.

[87] As Noubia submitted above in [75], the question as posed by the Council is inconsistent with Condition 1 of the Consent. The land being transferred cannot fairly be valued on the basis that the land was subject to the requirements of the Consent where that Consent required the transfer in order to put into effect the public purpose. ‘Causation’ of the loss of value of Lot 94 arises from the transfer to the Council for the public purpose. Noubia is not required to establish more in terms of causation and certainly not that its five lakes scheme was caused by the public purpose.

77. I do not accept the primary judge’s conclusion. It is correct, as Kirk JA explained in Sydney Metro at [89], that the likelihood of a development consent being obtained by the date of acquisition but for the actual or proposed carrying out of the public purpose may be relevant to the s 56(1)(a) inquiry, even though doing so may involve taking account of steps that would have been taken prior to the acquisition by the acquiring authority. The public purpose itself in such a case has causal significance in the analysis beyond steps the owner would or would not have taken because of the proposed acquisition.

78. It is not, however, correct that causation in this case is established merely by the transfer of land to the Council for the public purpose. The statement about causation by the primary judge in the conclusion at [87] reflects only part of the relevant inquiry. Noubia was required to prove that there was a decrease in the value of the land caused by the actual or proposed carrying out of the public purpose.

79. The date of the valuation of Lot 94 for the purposes of the Just Terms Act was 18 May 2007. The land on that day had two lakes on it constructed by Noubia. The land was constrained by the presence of the lakes and the best evidence of its market value on that day was $110,000. It was only if Noubia proved that a s 56(1)(a) decrease in value was shown that it could recover any amount greater than $110,000.

80. To establish a relevant decrease in the value of the land within the meaning of s 56(1)(a) Noubia was required to prove that but for the actual or proposed carrying out of the Council’s “public purpose”, the land would have been more valuable in 2007 than it actually was. That conclusion required Noubia to prove that but for the Council’s carrying out of, or proposal to carry out the public purpose, Noubia would not have constructed two lakes on the land but, rather, the land would have been available for some more lucrative use. The only more lucrative use suggested by Noubia was the building of 32 residential lots as envisaged by Mr Jamieson’s alternative “channel development scheme”. At Noubia’s urging, however, the primary judge found that both subjects (whether, but for the public purpose, either lakes or 32 residential lots would have been built on Lot 94) were irrelevant to the question of causation in a Just Terms Act valuation. This was an error.

81. The Council’s public purpose did not cause Noubia to build the “five lakes scheme” as part of its Lakes Estate. The reason in 2007 that there were two lakes on Lot 94 and not 32 residential lots was that in 2003 Noubia successfully applied for the Consent and built the Lakes Estate, including two lakes on what became Lot 94, in accordance with that Consent. The five lakes scheme was Noubia’s own proposal, contained in its development application, with the proposed lakes depicted on the plans Noubia submitted for approval. Noubia’s decision to make this application in the form it did in 2003 was not caused by the actual or proposed carrying out of the Council’s “public purpose”. Of course, Noubia, like any developer, was obliged to carry out development in accordance with the Consent and the plans. But Condition 1 of the Consent did not require the building of the lakes on what became Lot 94, and while the plans specified lake construction on future Lot 94, those plans were approved in the form Noubia proposed. No doubt any development application made by Noubia had to address water quality and stormwater management issues to the Council’s satisfaction. But Noubia simply did not prove that the Council’s purpose of ensuring water quality and adequate stormwater management as part of any development caused the two lakes to be built on the land which became Lot 94. Rather, Noubia’s positive case was inconsistent with any such finding. A central part of that case was that if Noubia had in 2003 sought consent to build the alternative “channel development scheme”, which contained no plans for lake building on what became Lot 94, the Council would have granted development consent.

82. No doubt it is correct that the Council approved the “five lakes scheme” in Noubia’s development application in 2003, in part, because that development application was consistent with the requirements of the North Boambee Valley Stage 1 release area in relation to water quality and stormwater management. It does not follow that the Council’s public purpose for eventually acquiring the land, “for water quality and stormwater management purposes”, caused Noubia to propose and build the “five lakes scheme” (containing two lakes on Lot 94), rather than, for example, “the channel development scheme” (containing no lakes on Lot 94). Noubia did not prove that the Council’s carrying out of, or the proposal to carry out, the public purpose of water quality and stormwater management caused Noubia to build two lakes on Lot 94.

83. It was Noubia’s decision, and only Noubia’s decision, what design features to include in its development application. It was Noubia’s decision, and only Noubia’s decision, to cause two lakes to be built on the land which became Lot 94. It was Noubia’s decision, and only Noubia’s decision, which by 2007 resulted in Lot 94 being the site of two lakes. The primary judge’s finding that the Council’s acceptance that Noubia’s development application “met the requirements of the North Boambee Valley Stage 1 release area requirements in relation to water quality and stormwater management” was not a finding of causation relevant to the s 56(1)(a) test. At best for Noubia, it might be characterised as a finding that Noubia’s development application was compliant with the Council’s requirements. It was not even a finding of indirect causation of the kind referred to by the High Court in Walker Corporation at [53]; see also the remarks of Preston CJ of the LEC in RD Miller extracted at [67] above. In any event, as was held in Walker Corporation at [53]-[54], indirect causation is not a sufficient basis to prove a decrease in the value of land within the meaning of s 56(1)(a).

84. The primary judge erred in concluding that the “land being transferred cannot fairly be valued on the basis that the land was subject to the requirements of the Consent”. It was an incorrect statement of principle to conclude that “[c]ausation of the loss of value of Lot 94 arises from the transfer to the Council for the public purpose”. There was no “loss of value” occasioned by the transfer to the Council of Lot 94 in 2007. Noubia was required to prove a decrease in the value of Lot 94 caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. The only potential decrease in value identified by Noubia was the difference in 2007 between land the site of two lakes and land the site of 32 residential lots. This difference was occasioned by Noubia’s choice in 2003 to propose the “five lakes scheme” and not the “channel development scheme”.

85. The primary judge erred in paragraphs [88] and [89] in concluding that Noubia was not required to prove that in 2003 it would have successfully sought consent for the alternative hypothetical subdivision containing 32 residential lots on Lot 94. It was incorrect for the primary judge to conclude at [89] that “[w]hether an alternative development could have been sought in 2003 by Noubia, the hypothetical three lakes scheme, is irrelevant to the hypothetical exercise I am undertaking”. As Basten JA explained in Noubia CA 2020 at [90]-[91], for s 56(1)(a) to apply here, the primary judge was required to find facts about what would have occurred in relation to the development of the land, but for the actual or proposed carrying out of the Council’s “public purpose”.

86. Noubia did not show any decrease in the value of Lot 94 by simply asserting the land was, in 2007, “inundated”. Lot 94, when it was transferred by Noubia to the Council in 2007, was inundated because Noubia chose to build a “five lakes scheme” to deal with the three types of stormwater it had to address in order to construct the “Lakes Estate”. To show that the value of the land decreased by the carrying out of, or the proposal to carry out, the public purpose, Noubia was required to prove that but for the carrying out of, or the proposal to carry out, the public purpose Noubia would have successfully applied for development consent which did not include the building of two lakes on what became Lot 94. The only evidence led by Noubia on that question was that the hypothetical “channel development scheme” would have been approved by the Council in 2003. Rather than prove that case, Noubia successfully persuaded the primary judge that both of the essential integers of any decrease in the value of the land were “irrelevant” enquiries. That conclusion was an error. Whether, but for the public purpose, the “five lakes scheme” would not have been built and some other more valuable use of the land which became Lot 94 would have been made were not irrelevant matters. They were central to Noubia’s claim that there had been a 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. Noubia bore the onus of proof. Noubia failed to discharge that onus.

87. To the extent there is a finding by the primary judge at [90] that “[t]he inundation of Lot 94 resulted in loss of value of that land which must be valued for the purposes of the JT Act”, that finding is an error. Merely to identify the state of the land as a consequence of the carrying out of the Consent, which Noubia itself had applied for, does not satisfy the requirements of s 56(1)(a). The primary judge’s reasons do not address the correct question of whether the state of the land was a consequence of the carrying out of the public purpose or, as the Council repeatedly and correctly submitted below, was because of choices made by Noubia to propose a “five lakes scheme”.

88. The value of the land in 2007 was the result of choices made by Noubia in seeking development consent for the “five lakes scheme” in 2003. It was not shown that the carrying out of, or proposal to carry out, the public purpose by the Council caused the land which became Lot 94 to be inundated. The primary judge erred in concluding that Noubia demonstrated any decrease in value of Lot 94 caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

89. Ground 2 should be upheld. This conclusion is dispositive of the appeal. I will nevertheless briefly address the remaining grounds.

Ground 1 – public purpose

90. The Council submitted that the public purpose for which the land was acquired was the public purpose of managing the developed, and only the developed, upstream flows of water. The Council submitted that Noubia, as the developer of the relevant land, was always obliged to decide, as part of its subdivision design, how it would deal with stormwater flows created by the proposed development and the pre-existing undeveloped upstream catchment water flows. Noubia was always responsible for management of natural stormwater flows arising from undeveloped upstream catchments. These flows were an inherent characteristic of the land and did not form part of the public purpose. It was submitted that the Court should have concluded that the “public purpose” here engaged was limited to “the management of stormwater arising from the developed upstream catchment”, and not the natural flow of upstream water from undeveloped land and stormwater flows created by Noubia’s development itself.

91. The Council’s case about public purpose was encapsulated in the following exchange:

PRESTON CJ of LEC: If 56(1)(a) is to apply at all, the only way you say we could make it apply and for the council to have any purpose at all in this is if the developer added the capacity in these lakes to accept the developed upstream?

HEMMINGS: Correct.

PRESTON CJ of LEC: That's why you focused on that part as saying that's the bit of the purpose that is the council's purpose. The rest of it, the undeveloped upstream plus the developed subdivision, is Noubia's purpose, not council's purpose.

HEMMINGS: Their purpose, their problem, their responsibility.

92. On appeal, Noubia complained that the Council had not properly advanced this narrower public purpose before the primary judge. Noubia, by contrast, maintained a broader public purpose: that the land was acquired “for water quality and stormwater management purposes”. Noubia submitted that the public purpose had two aspects: water quality and stormwater management, and whether by the two lakes system or the five lakes system, the public purpose was satisfied. It further submitted that this public purpose was an element “inherent” in the development consent that was actually sought by Noubia and granted in 2003. It was submitted, therefore, that the effect on the value of Lot 94 occasioned by Noubia’s own development application must be disregarded.

93. Noubia submitted that Condition 1 is itself evidence of the broader public purpose and proves an “inherent connection” between the carrying out of the public purpose and the grant of development consent. Noubia submitted that the making of express provision for compensation in Condition 1 was a clear indication that the provision of amenities by Noubia, the lakes system, exceeded what a residential subdivision development would otherwise have required.

94. Secondly, Noubia submitted that the Contributions Plan was the primary source of identification of the public purpose for the purposes of section 56(1)(a), complemented by the "Information Sheet".

95. Thirdly, for the broader public purpose, Noubia relied upon the Points of Claim admitted by the Council's Amended Points of Defence and the evidence of Mr Mutkins who said in his affidavit of 5 February 2019 that "Lot 94 is identified in the Contributions Plan for water quality and stormwater quality purposes".

96. Finally, Noubia submitted that the observations of Basten JA in Noubia CA 2020 should be ignored, as in an earlier passage his Honour mistakenly concluded that Noubia's hydrologist, Mr Jamieson, assumed that s 56(1)(a) required that all upstream water, developed and undeveloped, was to be disregarded.

Consideration of ground 1

97. Noubia’s complaint that the Council’s narrower public purpose had not been properly pleaded or advanced before the primary judge should be rejected. The primary judge dealt in terms with the narrower public purpose relied upon by the Council (at [53]-[58]). Both parties had a fair opportunity to address the issue. Noubia did not submit in this Court that the narrower public purpose relied upon by the Council was not open to it on this appeal. The scope of the relevant public purpose was a matter properly before this Court.

98. No doubt at a level of sufficient generality there is a “public purpose” relating to water quality and stormwater quality discernible in all development consents. That is not the present question. The public purpose which must be determined here is the “public purpose” at the level of generality appropriate for considering the s 56(1)(a) question.

99. I have set out above the relevant principles in determining the relevant public purpose at the appropriate level of generality. There are no clear rules for making that determination. As Hodgson JA explained in Roads and Traffic Authority v Perry, factors to be taken into account include the degree of continuity and consistency of various elements of what is proposed and done, and fairness to both the claimant and the acquiring authority.

100. As to the first matter, the Council’s original indicative proposal, the “two lakes scheme”, was fundamentally different from the “five lakes scheme” which Noubia successfully proposed. The degree of continuity and consistency of various elements of what is proposed and done is at best neutral here. It does not throw light on the appropriate level of generality at which to identify the public purpose.

101. Fairness to both the claimant and the acquiring authority tends in favour of the narrow public purpose identified by the Council. In addressing development applications, consent authorities must take into account the extent to which the proposed development affects water quality and stormwater management. An example of debates which often emerge about the scope of a development consent and the way it addresses pre-existing water flows and stormwater management is found in Bunderra Holdings Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd (subject to Deed of Company Arrangement) (2017) 96 NSWLR 434; [2017] NSWCA 263.

102. Fairness to both parties tends in favour of the conclusion that the public purpose for which the land was acquired was managing the developed, and only developed, upstream flows of water. Noubia, as the developer of the land, was always obliged to decide, as part of its subdivision design, how it would deal with stormwater flows created by its proposed development and the pre-existing undeveloped upstream catchment water flows which would affect the development it was building. The Council is correct that Noubia was responsible for management of both sources of water. These flows were an inherent characteristic of the land and did not form part of the public purpose here.

103. The vice in the respondent’s identified broad public purpose is demonstrated by the submission made by Noubia that the effect on the value of Lot 94 occasioned by Noubia’s own development application must be disregarded. That vice permeated Noubia’s case. Responsibility for independent decisions by Noubia in making its development application, for its own commercial purposes, do not become the public purpose of the Council by granting that Consent. As the High Court explained in a slightly different context in Walker Corporation (at [54]), s 56(1)(a) reflects “a policy to require a disregard only of that increase or decrease … in value for which the resuming authority is responsible”.

97. I reject the fundamental premise of Noubia’s case about a broad public purpose. Condition 1 of the Consent is not evidence of Noubia’s asserted broad public purpose for which the land was acquired. The grant of development consent shows the Council permitted Noubia to build the Lakes Estate. I do not accept that Noubia proved that the amenities built by Noubia, the lakes system, “exceeded what a residential subdivision development would otherwise have required”. The Council is correct that any development of the Stage 1 release area would need to deal with both stormwater flows created by the proposed development and the pre-existing undeveloped upstream catchment water flows. Noubia, as the developer of the new release area, was always responsible for management of natural stormwater flows arising from undeveloped upstream catchments. The existence of Condition 1 does not convert Noubia’s responsibility to manage natural stormwater flows arising from undeveloped upstream catchments into the Council’s public purpose for its “acquisition” of the land.

98. I reject Noubia’s submission that the broad public purpose for which it contends may be derived from the Contributions Plan and the Information Sheet. It is correct that the land which became Lot 94 was described as land set aside for acquisition within the approved plan of subdivision the subject of the development application, being those lands identified in the North Boambee Valley Stage 1 Release Area Developer Contributions Plan. Contrary to Noubia’s submission, that description rather tends to emphasise the primacy of Noubia’s purpose rather than any public purpose in relation to the land set aside for acquisition within the approved plan of subdivision.

99. I do not accept that the Council's Amended Points of Defence made any relevant admission about the breadth of the public purpose. Nor does the evidence of Mr Mutkins about the Contributions Plan take Noubia very far in proving the broader public purpose for which it contends. That is because the Contributions Plan envisions that future Lot 94 (along with other land) would house the two lakes scheme, a very different plan in size and scope from the five lakes scheme proposed and built by Noubia.

100. Contrary to Noubia’s submission, the value of Lot 94 is critically affected by design choices made by Noubia in Noubia’s development application. It is incorrect to assert that the public purpose was inherent in the five lakes scheme. The five lakes scheme was devised and built by Noubia. It was the consequence of Noubia’s choices that the land later known as Lot 94 was inundated by Lakes 3 and 4. To value Lot 94 in 2007 as if the lakes built by Noubia had not been built but, rather, as though the land was vacant and zoned to permit residential subdivision would be to disregard Noubia’s commercial purposes in applying for and constructing the Lakes Estate, and would not be to disregard any public purpose of the Council.

101. It is of course correct that Lot 94 was not inundated prior to the excavation that created the artificial lakes that became Lakes 3 and 4. That inundation was caused by the carrying out of Noubia's design choice, the five lakes scheme, at the heart of Noubia’s development application.

102. The primary judge should have concluded that Noubia, as the developer of the land, was always obliged to decide, as part of its subdivision design, how it would deal with stormwater flows created by the proposed development and the pre-existing undeveloped upstream catchment water flows. Noubia was responsible for management of these flows. The primary judge should have concluded that management of those flows did not form part of the public purpose for which the land was acquired. The Court should have concluded that the “public purpose” for which the land was acquired here engaged was limited to the management of stormwater arising from the developed upstream catchment and not the management of flows from Noubia’s own development or the natural flow of upstream water from undeveloped land.

103. Ground 1 should be upheld.

Ground 3 – proof of the alternative development proposal

111. The Council submitted that the primary judge rejected the need to make a finding of fact about whether the alternative development consent for the channel subdivision “would” have been granted, and instead considered merely the likelihood that it would have been. The Council submitted that in applying this incorrect test, the Court below then erred in applying s 56 of the Act. On the evidence, this Court would not be satisfied that, but for the proposal to carry out the public purpose, development consent for the alternative channel development would have been granted. The Council submitted that the land would still have been inundated when it was transferred in 2007. It would then be valued on Mr Davis’ approach as constrained land, at a sum of $110,000.

112. Noubia submitted that the Court below did not err in not coming to a conclusion of fact that, but for the proposal to carry out the public purpose, development consent for the alternative subdivision "would have been approved" in 2003. It was submitted that the ground of appeal relies on an unjustifiably strict linguistic standard when a trial judge is making findings about a hypothetical “Spencer” transaction for the sale of land in the past. A determination of market value under s 56 of the Just Terms Act involves findings about an event that did not occur. Integral to the event of the hypothetical sale is the participation of two hypothetical parties who are assumed to possess relevant information and a willingness to agree on a price.

113. Noubia asserted that there is no requirement of law that such findings must make express reference to things that “would” occur.

Consideration of ground 3

114. There are two crucial errors in the decision of the primary judge concerning the role of Noubia’s mooted alternative subdivision. The first was the finding at [88]-[89] that it was irrelevant to causation whether Noubia would successfully have applied for the alternative development consent in 2003, but for the giving effect to the Council’s public purpose. As I have explained at [84]-[86], that finding was an error.

115. I have earlier at [46] set out the ultimate (and inconsistent) finding the primary judge also reached on this issue at [151] of her judgment. On the correct construction of s 56 of the Just Terms Act, it was necessary for the Court to come to a conclusion of fact whether, but for the proposal to carry out the public purpose, development consent for the alternative subdivision would in 2003 have been approved. The Court below erred in not coming to a conclusion of fact.

116. It is true that at [151] the primary judge appears to find that “the alternative hypothetical subdivision on Lot 94 was likely to have been granted by the Council in 2003”. I was initially attracted to Noubia’s submission that despite verbal infelicities, it was not an error, in and of itself, for the primary judge to conclude the alternative hypothetical subdivision on Lot 94 was “likely” to have been granted by the Council in 2003. Upon reflection, however, the primary judge framed the remainder of [151] as an explanation of what the Just Terms Act provides about likelihood, in terms that require correction.

117. As I have earlier explained, for Noubia to succeed in proving that there was a decrease in the value of Lot 94 within the meaning of the Just Terms Act, Noubia was required to prove that the state of the land in 2007 when it was transferred by Noubia to the Council would have been different, but for the carrying out of the public purpose for which the land was acquired. It is true that the Spencer test involves a hypothetical transaction involving a hypothetical vendor and a hypothetical purchaser. The relevant hypothetical transaction here is a sale of lot 94 in 2007 by a willing but not anxious vendor to a willing but not anxious purchaser. Lot 94, in 2007, was the site of two lakes which had been constructed by Nobia. The Spencer test market value of that land, on the date it was acquired, was $110,000.

118. It is only if Noubia proved that pursuant to s 56(1)(a) of the Just Terms Act that there was a decrease in the value of the land caused by the giving effect to the public purpose or the proposal to give effect to the public purpose that any greater value could be ascribed to the land under the Just Terms Act.

119. Proof of that matter had two critical integers. The first was that but for the public purpose, or the proposal to give effect to the public purpose, in 2007 on the date it was transferred, Lot 94 would not have been the site of two lakes. The second, and related, critical integer in proving a decrease in the value of the land was that in 2003, Noubia but for the public purpose, or the proposal to give effect to the public purpose, would have successfully applied for consent to build the “channel development scheme”.

120. These critical integers in Noubia’s s 56(1)(a) case were matters of mixed fact and law. Neither of these critical steps have anything whatever to do with the views of a hypothetical purchaser of the land in 2003, much less in 2007. The primary judge erred in concluding that they did. In particular, the finding about what a prudent hypothetical purchaser would have been likely to consider in 2003 or 2007 (it is unclear what date her Honour is referring to) was not relevant to the question posed by s 56(1)(a),

121. The primary judge’s task was not to consider what a hypothetical party to a transaction in 2003 might have thought about the prospects of Noubia obtaining a different development consent. There was, on any view of the facts, no acquisition of land in 2003. The only acquisition of land was in 2007. In addressing s 56(1)(a), the Court was required to determine whether, absent the proposal to carry out the public purpose, the different development consent suggested by Noubia would have been sought and granted in 2003. True it is that question is to be determined on the balance of probabilities, but the views of hypothetical purchasers of the land about the prospects or “likelihood” of the Council granting a different consent were irrelevant.

122. Before leaving this ground, it should be noted that in NoubiaCA2020 at [91] Basten JA clearly explained that the question of whether an alternative hypothetical subdivision would have obtained consent was a relevant matter “and was simply not addressed in the reasons of the trial judge”. I agree with Basten JA that it was a relevant matter to ask whether an alternative hypothetical subdivision would have obtained consent. That principle should have been applied by the primary judge. It was an error by the primary judge to fail to follow Basten JA’s clear statement of the relevant task on the remitted hearing.

123. Ground 3 should be upheld.

Orders and Costs

124. For the foregoing reasons the appeal should be upheld. The Council maintained at all times that it was obliged to pay Noubia $110,000. It in fact did so on 28 August 2017. Compensation was ordered to be paid by the primary judge on an incorrect basis. There was no notice of contention filed by Noubia and the Court is in as good a position as the primary judge to exercise the power to award compensation on the correct basis. The Council’s basis of valuation of Lot 94 was as constrained land. Noubia filed no evidence contradicting that valuation, save that relevant to the s 56(1)(a) case I have rejected. The Court therefore has the uncontested evidence from the appellant’s valuer that the constrained value of Lot 94 is $110,000. The appropriate award for the market value of Lot 94 is $110,000. Noubia did not demonstrate that the value of the land was decreased by giving effect to the public purpose for which the land was acquired.

125. A declaration should be made that the value of Lot 94 is $110,000, noting that the Council has already paid this amount to Noubia. The orders I propose will note the undertaking about interest the Council gave to resolve the jurisdictional logjam which existed at the commencement of these proceedings. The amount of interest the Council must pay has not been quantified. Rather than delay making final orders now, if there is any dispute about the amount of interest to be paid it is desirable that the dispute be brought back to the Court within 14 days by motion pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 36.16(3A).

126. The Council, having succeeded on the appeal, is entitled to its costs of the appeal. As to the costs of the trial, I was tentatively of the view that an order should be made awarding the costs of the trial before the primary judge and before Sheahan J to the Council. However, Mr Lancaster SC for Noubia submitted:

We respectfully submit that this Court would only deal with the costs of the appeal, whatever the outcome of the appeal. The costs at first instance is likely to turn out to be a complicated and contested one, whichever way the decision in this Court goes, given a number of issues in respect of a number of lots, a number of different interlocutory applications with different results, and all the more the case that there would need to be argument about costs in the event that the first ground that your Honour's raised which controverted the common ground of the parties was the reason the appellant was successful. There would need to be real consideration of costs in that context.

127. In an email sent to the Court with leave on 13 December 2023, solicitors for the Council essentially agreed and submitted that the question of the costs of the proceedings below including the costs of the proceedings before Sheahan J be remitted to the Land and Environment Court.

128. That limited order of remittal should be made. I propose to order that the question of the costs of the proceedings below including the costs of the proceedings before Sheahan J be remitted to the Land and Environment Court.

Conclusion and proposed orders

129. For the foregoing reasons I propose the following orders:

1. Appeal allowed.

2. Orders 1 and 2 made in the Land and Environment Court dated 5 May 2023 be set aside.

3. The Court declares the value of Lot 94 in Deposited Plan 1111430, as at the date of transfer on 18 May 2007, is determined in the sum of $110,000.

4. The respondent pay the appellant's costs of this appeal.

5. The question of the costs of the proceedings in the Land and Environment Court including the costs of the proceedings before Sheahan J be remitted to the Land and Environment Court.

Notation:

The Court notes the appellant’s undertaking in Exhibit A1 to pay interest on the amount of $110,000 from the date of transfer, 18 May 2007, to the date of payment, 28 August 2017, pursuant to ss 49 and 50 of the Land Acquisition (Just Terms Compensation) Act 1991.

130. KIRK JA: I agree with Payne JA.

131. PRESTON CJ of LEC: I have had the advantage of reading in draft the judgment of Payne JA. I agree with the orders proposed for the reasons given. By way of supplementation and not substitution of those reasons, I add the following reasons.

132. As Payne JA observed in [54]-[55], the application of a statutory scheme for determining compensation for the compulsory acquisition of land to the voluntary transfer of land pursuant to a condition of development consent has several highly unsatisfactory consequences.

133. The first is that there is in fact no compulsory acquisition of land. Notwithstanding that a condition of development consent requires the transfer of the land identified in the condition to the Council, the holder of the development consent is not obliged to do so unless the holder voluntarily chooses to carry out the approved development in accordance with the development consent. The grant of development consent entitles the holder to carry out the approved development but does not oblige the holder to do so.

134. The conditions on which development consent is granted for the subdivision of land may impose costs on the holder in carrying out the approved development. One condition may be to dedicate or transfer land to the consent authority for purposes relevant to the approved subdivision. In circumstances where s 7.11 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) applies (the former s 94), that transfer or dedication of land is free of cost to the consent authority. But even in that circumstance, there is no confiscation of the land. As the High Court said in Lloyd v Robinson (1962) 107 CLR 142 at 154; [1962] HCA 36:

If approval is obtained for the subdivision of one area of land by complying with a condition which requires the giving up of another area of land for purposes relevant to the subdivision of the first, it is a misuse of terms to say that there has been a confiscation of the second. For the giving up of the second a quid pro quo is received, namely the restored right to subdivide the first. It may be that the quid pro quo is inadequate, and that the landowner, though under no legal compulsion to give up the second area of land if he chooses to forego the idea of subdividing the first, is nevertheless under some real compulsion, in a practical sense, to submit to the loss of it because of the importance to him of obtaining the approval. But there is no room for reading the Act [Town Planning and Development Act 1928 (WA)] down in some fashion by appealing to a principle of construction that has to do with confiscation. If the Board has performed its statutory duty by giving approval to the subdivision subject only to conditions imposed in good faith and not with a view of achieving ends or objects extraneous to the purposes for which the discretion exists, the inescapable effect of the Act is that the landowner must decide for himself whether the right to subdivide will be bought too dearly at the price of complying with the conditions.

(See also Western Australian Planning Commission v Temwood Holdings Pty Ltd (2004) 221 CLR 30; [2004] HCA 63 at [50]-[51].)

135. Equally, the grant of development consent for the subdivision of land on a condition that land is transferred to the consent authority at the cost of the consent authority does not involve the compulsory acquisition of the transferred land by the consent authority. The holder of the development consent can choose whether to carry out the approved subdivision or not. If the holder chooses to carry out the subdivision, the holder must carry it out in accordance with the development consent (see s 4.2(1)(b) of the EPA Act). This includes complying with any condition requiring the transfer of land to and at the cost of the consent authority. The transfer of the land to the consent authority does not involve a compulsory acquisition of the land by the consent authority but merely the carrying out of the subdivision in accordance with the development consent as required by s 4.2(1)(b) of the EPA Act.

136. The second unsatisfactory consequence flows from the first. As there is no compulsory acquisition of the land by the consent authority, there can be no public purpose for which the land may by law be acquired by compulsory process: see the definition of “public purpose” in s 4(1) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Land Acquisition Act). The purpose for which the land is transferred to the consent authority pursuant to a condition of development consent must be a purpose relevant to the subdivision approved by the development consent. If development consent is granted for the subdivision of one area of land on a condition requiring the giving up of another area of land, that giving up of the other area of land must be for purposes relevant to the subdivision of the first area in order for the exercise of the power to grant development consent subject to that condition to be lawful: Lloyd v Robinson at 154.

137. A condition attached to a development consent for any development, including subdivision, needs not only to be authorised by the planning legislation (see s 4.17(1) and the other sections referred to therein, including s 7.11, of the EPA Act), but also to meet three other criteria: first, be for a planning purpose and not for any ulterior purpose, which ordinarily means it must relate to any matter referred to in s 4.15(1) of the EPA Act of relevance to the development the subject of the consent; second, reasonably and fairly relate to the development approved; and third, not be so unreasonable that no reasonable consent authority could have imposed the condition: see Western Australian Planning Commission v Temwood Holding Pty Ltd at [51]. These criteria for validity of a condition of development consent frame the purpose for which a condition requiring the transfer or dedication of land may validly be imposed on a development consent. These purposes can be, but need not be, a public purpose for which land may be acquired by compulsory process.

135. The third unsatisfactory consequence also flows from the first two. The statutory scheme for determining the compensation payable for the compulsory acquisition of land includes determining the amount of the market value of the land by disregarding “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” (s 56(1)(a) of the Land Acquisition Act). If there is no acquisition of the land by compulsory process and there is no public purpose for which the land was acquired, there can be no increase or decrease in the value of the land by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

136. Nevertheless, as Payne JA observed at [55], the parties chose to contest the case on the basis that s56(1)(a) of the Land Acquisition Act does apply. That agreed position does not follow necessarily from the terms of the condition of the development consent requiring the transfer of the land at the cost of the Council. The modified condition stated:

The Council must compensate the applicant for the lands. The value is to be determined on the date of transfer or dedication in accordance with s 54(1) of the Land Acquisition (Just Terms Compensation) Act 1991 with the relevant matters to be considered as set down by section 55 of the Act.

140. In terms, this condition does not directly refer to s 56(1)(a). Section 55 does indirectly refer to s 56 in that it requires regard to be had, in determining the amount of compensation, to the matters stated in s 55, including the market value of the land, and the assessment of those matters to be “in accordance with this Division”. Section 56(1), in the Division, provides a definition of “market value” which incorporates the statutory disregard of 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.

141. However, the condition of development consent requires “the relevant matters” in s 55 to be considered. Whilst the market value of the land is clearly a relevant matter, the assessment of the market value “in accordance with this Division” has to be understood as involving an assessment in accordance with the relevant provisions of the Division only in so far as the provisions are applicable. This includes the definition of “market value” in s 56(1). The opening phrase of s 56(1) reflecting the test in Spencer v The Commonwealthof Australia (1907) 5 CLR 418 for determining market value is clearly appliable but the statutory disregard in paragraph (a) is not obviously applicable where there has been no compulsory acquisition of the land and hence no public purpose for which the land was compulsorily acquired.

142. However, as the proceedings have been contested on the basis that s 56(1)(a) is applicable, this Court ought to decide the appeal on the same basis. But in order to do so, three assumptions need to be made. The first is that the transfer of the land pursuant to the condition of development consent is assumed to be an acquisition for the purposes of the Land Acquisition Act. The second is that the date of acquisition of the land is assumed to be the date on which Noubia transferred title to the land to the Council. The third is that there is a purpose for which the land was acquired, which is assumed to be the “public purpose” for which the land was acquired for the purposes of s 56(1)(a). This purpose is the purpose for which the condition of development consent requiring the transfer of the land was imposed. As earlier noted, this purpose needs to be a purpose relevant to the subdivision approved by the development consent in order for the condition to be valid. This purpose needs to be ascertained.

143. When these assumptions are made, the errors in the primary judge’s findings more readily become apparent.

144. The error raised by ground 1 of the appeal concerns the identification of the public purpose for which the land was acquired. The primary judge accepted Noubia’s articulation of the purpose as being generally “water quality and stormwater management purposes”, rejecting the Council’s articulation of a narrower purpose of “management of stormwater arising from the developed upstream catchment.” Once it is appreciated that the “public purpose for which the land was acquired” is assumed to be the purpose for which the condition of development consent requiring the transfer of the land was imposed, the purpose cannot be the general purpose articulated by Noubia and accepted by the primary judge, but rather is the narrower purpose articulated by the Council.

145. The approved subdivision involved construction of two lakes on the land transferred to the Council in order to deal with water flows from three sources: water flows generated by the subdivision and the subsequent development of the residential estate; pre-existing water flows from the undeveloped upstream catchment; and future water flows from the developed upstream catchment. Noubia had to deal with the first two sources of water flows in any development of the land. Dealing with those water flows by constructing not only the two lakes on the transferred land but also another three lakes elsewhere in the subdivision did not require the transfer of the land on which the two lakes were constructed to the Council. That land could be retained by Noubia as part of the residential development of the estate. Transfer of the land to the Council was only required because the two lakes on the land would have to deal in the future with the third source of water flows from the developed upstream catchment. The two lakes were designed and constructed to be able to deal with those future water flows as the upstream catchment was developed. It was appropriate for the land to be in the ownership of the Council so that it could maintain on an ongoing basis the lakes on the land to deal with the future water flows from the development of the upstream catchment.

146. The purpose for which the condition of development consent requiring the transfer of the land on which the two lakes were constructed was imposed was, therefore, the management of water flows from the developed upstream catchment. This is the assumed public purpose for which the land was acquired.

147. The error raised by ground 2 of the appeal concerns the primary judge’s findings of causation. As Payne JA has explained, the relevant causal connection that Noubia had to establish in order for the statutory disregard in s 56(1)(a) to operate was between “the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired” and “any increase or decrease in the value of the land”. Once it is appreciated that “the public purpose for which the land was acquired” is the purpose for which the condition of development consent requiring the transfer of the land was imposed, and that this purpose is the management of future water flows from the developed upstream catchment, it can be seen that the carrying out of this purpose by the transfer of the land in accordance with the condition could have no relevant effect on the market value of the transferred land. Payne JA has explained why this is so, in [77]-[88] of his judgment. Any decrease in the market value of the land transferred to the Council was caused by Noubia carrying out the subdivision for which it had obtained development consent, including constructing the two lakes on the land, in accordance with the development consent, not from the carrying out of the purpose for which the land was acquired.

148. The upshot is that, even assuming the applicability of the statutory disregard in s 56(1)(a), it did not apply in the circumstances, as the carrying out of the purpose for which the land was acquired did not cause any decrease in the value of the land.

149. The errors of the primary judge raised in ground 3 of the appeal concern her findings as to what development a hypothetical buyer was likely to have considered the Council was likely to have approved in 2003 had it not granted the development consent it actually granted. As Payne JA has explained in [114]-[122], this was to ask the wrong question.

150. Once it is appreciated that the relevant purpose for application of the statutory disregard in s 56(1)(a) is the purpose for which the condition of development consent requiring the transfer of the land was imposed, and this purpose was for the management of future water flows from the developed upstream catchment, there is no justification for asking whether the Council would have or was likely to have granted development consent to some alternative development rather than the actual development for which Noubia sought and the Council granted development consent. That question does not arise.

151. For these additional reasons, the primary judge erred in the ways raised in grounds 1, 2 and 3. I agree with the orders Payne JA has proposed in [129].

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Amendments

12 February 2024 - Amended orders to correct Deposited Plan number

Decision last updated: 12 February 2024