Croghan v Blacktown City Council

[2019] NSWLEC 2

Land and Environment Court

New South Wales

Medium Neutral Citation:	Croghan v Blacktown City Council [2019] NSWLEC 2
Hearing dates:	12, 13, 14, 15 and 20 February 2018
Date of orders:	09 January 2019
Decision date:	09 January 2019
Jurisdiction:	Class 3
Before:	Molesworth AJ
Decision:	See orders at [165]
Catchwords:	VALUATION OF LAND – valuation methodology - whether “piecemeal” or “before and after” approach is most appropriate – degree of flood affectation and effect on development potential – extent to which potential purchaser would seek advice on flood affectation– parameters of “public purpose for which the land was acquired” per s 56(1)(a) of the Valuation of Land (Just Terms Compensation) Act 1991 – whether statutory disregard in this instance requires that s 94 contributions plan, or SEPP or Council flood mapping, be disregarded – statutory disregard of public purpose applies only to the land that has been acquired – whether changed access arrangements constituted injurious affection – whether any betterment offset injurious affection
Legislation Cited:	Land Acquisition (Just Terms Compensation) Act 1991 ss 3, 55, 56, 66 Blacktown Local Environmental Plan 2015 State Environmental Planning Policy (Sydney Region Growth Centres) 2006
Cases Cited:	Al Amanah College Incorporated v Minister for Education and Training [2011] NSWLEC 189 Attard v Transport for NSW [2014] NSWLEC 44 Barkat v Roads and Maritime Services [2018] NSWLEC 209 Carson v Minister for Environment and Planning (1990) 70 LGRA 215 Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358 ; [1947] HCA 10 Constantine v Blacktown City Council (No 2) (2016) NSWLEC 81 Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68 Makita v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 Maloney v Minister Administering the Environmental Planning and Assessment Act 1979 (2011) LGERA 386; [2011] NSWLEC 121 Marroun v Roads and Maritime Services [2012] NSWLEC 199 Mir Bros Unit Constructions Pty Limited v Roads and Traffic Authority of New South Wales [2006] NSWCA 314 Roads and Traffic Authority (NSW) v Damjanovic (2006) 146 LGERA 403; [2006] NSWCA 166 Roads and Traffic Authority (NSW) v Muir Properties Pty Ltd (2005) 143 LGERA 192; [2005] NSWCA 460 Roads & Traffic Authority (NSW) v Perry & Anor (2001) 116 LGERA 244; [2001] NSWCA 251 Rocco Fraietta v Roads and Maritime Services [2017] NSWLEC 11 Sebastian Cannavo and Alfia Jennifer Busa v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570 Spencer v the Commonwealth of Australia (1907) 5 CLR 418; [1907] HCA 82 Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 Tolson v Roads and Maritime Services [2014] NSWCA 161 Vilro Pty Ltd (In Voluntary Liquidation) v Roads and Traffic Authority of NSW [2010] NSWLEC 234
Category:	Principal judgment
Parties:	Alan Croghan (Applicant) Blacktown City Council (Respondent)
Representation:	Counsel: Michael Hall SC (Applicant) Nick Eastman (Respondent)   Solicitors: Project Lawyers (Applicant) Matthews Folbigg Lawyers (Respondent)
File Number(s):	2016/357169

TABLE OF CONTENTS

Mr Croghan’s Land is compulsorily acquired

The Land

The dispute

Relevant statutory provisions

Relevant evidence

Statutory disregard

Applicant’s submissions on statutory disregard

Respondent Council’s submissions on statutory disregard

Court’s conclusion regarding the s 56(1)(a) statutory disregard

Hydrological evidence

Applicant’s submissions with respect to hydrology

Respondent Council’s submissions with respect to hydrology

Court’s conclusion on hydrological issues

Valuation approach

Applicant’s submissions on valuation approach

Respondent Council’s submissions on valuation approach

Valuation evidence – adjustments to comparable sales

Time

Demolition

Location

Zoning

Size

Valuation – rates to apply to land

Flood-free land

Flood liable but capable of being rendered flood-free

Flood liable and non-developable

Education-zoned land

Conclusions

Severance/injurious affection claim

Betterment

Disturbance

Costs

Orders

Annexure A

Annexure B

JUDGMENT

Mr Croghan’s Land is compulsorily acquired

1. The Applicant, Mr Alan Croghan, was the owner of land at 1568 Windsor Road, Vineyard (Land), formerly identified as Lot 2 in DP 1042658.

2. On 23 November 2015, some nine months ahead of the 12 August 2016 Acquisition Date, the Respondent Council, Blacktown City Council, effected a subdivision of the Land, which had the effect of creating three smaller blocks, now known as Lots 10, 11 and 12 of Deposited Plan 1214217 (DP 1214217).

3. On the Acquisition Date, the Respondent Council compulsorily acquired Lots 10 and 11 of DP 1214217 (Acquired Land) for the stated public purpose of drainage and public recreation. The Applicant retained ownership of Lot 12 of DP 12141217 (Retained Land).

4. On 13 October 2016, the Valuer-General determined compensation payable for the acquisition of the Acquired Land pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) of $4,802,000, comprising market value of $4,791,000 and disturbance of $11,000.

The Land

5. The Land is located within the Riverstone Precinct of the North West Growth Centre. That precinct was nominated as part of the North West Priority Growth Area, rezoned in 2010 pursuant to the State Environmental Planning Policy (Sydney Region Growth Centres) 2006 (Growth Centres SEPP), and is subject to the Blacktown City Council Growth Centre Precincts Development Control Plan (DCP), an Indicative Layout Plan (ILP) and the Blacktown City Council Section 94 Contributions Plan No. 20 – Riverstone & Alex Avenue Precincts (s 94 Plan).

6. The Land is bordered by Windsor Road to the east, abutting the Retained Land, and a two-lane sealed road known as O’Connell Street to the west, abutting the Acquired Land, as indicated on the below extract from DP 1214217 (as contained in the joint report of the parties’ valuation experts). Windsor Road is a ‘State Road’ under the care and control of Roads and Maritime Services (RMS) which provides a primary transport function, being the main road access between Parramatta and Windsor (Court Book, p 130, [2.1]). The road comprises four lanes, with a 3.6-metre-wide medium strip dividing the road, leaving two lanes in each direction. There is no crossover in the Windsor Road medium strip proximate to the Retained Land, consequently all vehicles exiting can only turn left. Further, due to the medium strip, vehicles travelling south-east are unable to gain direct access, rather ingress to the Retained Land can only be effected via a left-in turn from the north-west travelling lanes. A shared pedestrian and cycle path, three metres in width, is provided along the frontage of the Retained Land.

7. On the Acquisition Date, the part of the Land comprising Lot 10:

1. was zoned RE1 Public Recreation under the Blacktown Local Environmental Plan 2015 (Blacktown LEP);

2. had an area of 1.361 hectares;

3. was irregular in shape, with a frontage to O’Connell Street of 49.6 metres;

4. was lightly timbered and had no built improvements upon it.

8. On the Acquisition Date, the part of the Land comprising Lot 11:

1. was zoned SP2 Drainage under the Blacktown LEP;

2. had an area of 0.7564 hectares;

3. had an irregular shape with a frontage to O’Connell Street of 86 metres;

4. contained a dam, but otherwise had no built improvements on it.

9. On the Acquisition Date, the Retained Land:

1. was zoned partly R2 Low Density Residential and partly SP2 Educational Establishment;

2. had an area of 3.433 hectares;

3. had a frontage to Windsor Road of 121 metres and no frontage to any other road;

4. was largely comprised of cleared paddock, with some bush or timbered area towards the rear or south-western boundary;

5. had no significant built improvements on it, but it did contain some temporary sheds and shelters for livestock. It was apparent during the Court’s view, that at that time the Retained Land was being utilised for horse agistment.

The dispute

10. The Applicant objected to the offer of compensation and, on 29 November 2016, commenced proceedings in this Court under s 66 of the Just Terms Act, seeking compensation as follows:

1. market value, pursuant to s 55(a) of the Just Terms Act, of $5,975,000;

2. severance, pursuant to s 55(d) (noting that the Class 3 application referred to s 55(d), but was clearly an error, as the ground was pleaded elsewhere under s 55(c), or in the alternative, s 55(f)) of the Just Terms Act, of $5,150,000 (subsequently, on the basis of its valuation evidence, revised to $2.4 million); and

3. loss attributed to disturbance, pursuant to s 55(d) of the Just Terms Act, of $30,751.88 (however see the discussion at [160] below).

11. The primary issues in dispute between the parties relate to:

1. appropriate valuation methodology;

2. flood affectation – the degree of affectation and the effect of that flood affectation on the development potential of the Land;

3. whether or not the Applicant is entitled to compensation for loss of value to the Retained Land;

4. the adjustment of comparable sales in order to determine the appropriate rate per square metre for the Land, the Retained Land, and the Acquired Land.

12. In order to address these issues, it is first necessary to set out the relevant statutory provisions, the relevant evidence that was before the Court, and the respective positions of the parties.

Relevant statutory provisions

13. The Just Terms Act governs the acquisition of land in New South Wales by an authority of the State where that authority is empowered to acquire the land by compulsory process. Its purpose is, inter alia, to guarantee that where land is so acquired, the amount of compensation is not less than the market value of that land at the date of acquisition: s 3(1)(a).

14. The amount of compensation payable is determined having regard to the matters at s 55:

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.

15. Section 56 set out the meaning of ‘market value’ for the purposes of the Just Terms Act.

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.

Relevant evidence

16. Although it is not necessary to go through each party’s evidence in detail, it is nonetheless useful to set out, by way of context, the most pertinent aspects of the evidentiary material.

17. The expert evidence in this matter was provided in relation to a number of fields: valuation, hydrology, traffic engineering, surveying, and town planning.

18. The hydrological evidence comprised a joint expert report (Flooding joint report) and oral evidence of the Applicant’s civil engineer, Mr Drew Bewsher, and the Respondent Council’s environmental engineer, Dr Daniel Martens.

19. The valuation evidence consisted of a joint expert report and the oral evidence of the Applicant’s valuer, Mr Peter Phippen, and the Respondent Council’s valuer, Mr David Lunney.

20. The traffic evidence comprised separate reports prepared by both Mr Ken Hind, for the Applicant, and Mr Andrew Morse, for the Respondent Council, a joint expert report, and oral evidence from the two experts.

21. The surveying evidence came in the form of a joint expert report prepared by Mr Stephen Sampson for the Applicant, and Mr Gregory Oxley, for the Respondent Council, and the town planning evidence was by way of a joint expert report prepared by Mr Gary Rhodes, for the Applicant, and Mr Neil Kennan, for the Respondent Council. The matters in contention between the parties narrowed prior to the hearing to the extent that neither the surveyors nor town planners were required to give oral evidence

22. As part of the hearing, on the morning of Tuesday 13 February 2018, the Court visited the Land (the Court’s View) and the properties selected as comparable sales by the Applicant’s valuer, Mr Phippen.

Statutory disregard

23. A significant point of contention between the parties was the correct approach to be taken with respect to the statutory disregard mandated by s 56(1)(a) of the Just Terms Act. That is, the requirement for the Court, in determining the market value of the land that has been compulsorily acquired, 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.

24. The correct application of the statutory disregard was the subject of argument with respect to hydrology, the 2015 subdivision of the Land, and the impact of the acquisition of the Acquired Land on the value of the Retained Land.

25. Core issues with respect to determining the parameters of the public purpose, for the purposes of deciding the extent of the statutory disregard, necessitate an examination of the s 94 Plan. The initial s 94 Plan was approved by the Respondent Council on 24 November 2010, just three months short of six years prior to the Acquisition Date. After review in 2014, the s 94 Plan was revised, with the revised version coming into force on 24 June 2015, still some 14 months prior to the Acquisition Date (Exhibit C, p 100 [1.2]). Passages from the revised s 94 Plan, which are material to the issues in contention include the following:

1.2   Purpose of Plan

This Contributions Plan outlines Council’s policy regarding the application of Section 94 (S.94) of the Environmental Planning and Assessment Act, 1979 in relation to the provision of local infrastructure and baseline facilities within the Riverstone & Alex Avenue Precincts.

Within the Riverstone & Alex Avenue Precincts S.94 contributions are levied for the following amenities and services:

•   Water Cycle Management Facilities;

•   ….

•   Open Space and Recreation Facilities; and

•   ….

…

1.4   Principles of Section 94

Section 94 permits Council to require persons or entities developing land to pay monetary contributions, provide capital works (works in kind), and/or dedicate land in order to help fund the increased demand for public amenities and public services (amenities and services) generated through their developments.

2   Water Cycle Management Facilities

2.1   Nexus

…

The nexus between development and the increased demand for water cycle management works is based on the community held expectation that urban land, especially residential land, should be satisfactorily drained and flood free. Development produces hard impervious areas and this results in increased stormwater runoff and greater flows occurring in the natural drainage system. If these flows are not controlled by an appropriate drainage system, inundation from floodwaters may occur both within the area being developed and further downstream. The increased flows can also result in damage to downstream watercourses through increased erosion and bank instability. An appropriate drainage system may include pipes, channels, culverts and detention basins.

…

2.2   Water Sensitive Urban Design (WSUD)

…

WSUD encompasses all aspects of urban water cycle management including water supply, wastewater and stormwater management that promotes opportunities for linking water infrastructure, landscape design and the urban built form to minimize the impacts of development upon the water cycle and achieve sustainable outcomes.

…

The initial planning approach to flood mitigation was based on stormwater detention basins being located outside designated riparian corridors. However, as part of the post exhibition review, the Department of Planning obtained further advice from Department of Environment Climate Change and Water that now permits some stormwater detention basins within riparian land. Two of these basins are located on First Ponds Creek and encroach into the future Riverstone East Precinct. The GHD report gives no indication of how theses basins make provision for the future Riverstone East Precinct. Therefore, for the purpose of this contributions plan, the full cost of construction has been included, assuming that this will be offset by the land acquisition required in the Riverstone East Precinct.

The GHD report states that numerical modelling was used to test the effectiveness of the WSUD strategy and included modelling of flood peaks and flood levels for the creeks within the Riverstone and Alex Avenue precincts using RAFTS and Mike 11. Volumes of detention that responded as best possible to the Indicative Layout Plans (ILPs) and restricted flood peaks to pre-development levels were calculated using RAFTS. Stormwater quality management and Stream Stability requirements were determined using MUSIC.

The GHD report also states that the proposed WSUD strategy together with the flood plain management can satisfy the requirements of the Growth Centres Development Code (GCC, 2006), Blacktown City Council Engineering Guideline for Development (BCC, 2005), Blacktown Development Control Plan 2006 (BCC, 2006), and the NSW Floodplain Development Manual for management of stormwater quantity, quality and flooding in or at the precincts. …

Blacktown City Council (BCC) has used WSUD strategy and current available information to form the basis of the regional stormwater drainage infrastructure works. As part of the post exhibition review of the planning and infrastructure requirements for the Precincts, concept designs for drainage basins and channels have been prepared by GHD on behalf of the Department of Planning. These concept designs have generally been used as the basis for the stormwater infrastructure cost estimates.

…

Applicant’s submissions on statutory disregard

26. The Applicant, relying on Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 (Caruso), argued that s 56(1)(a) is restricted to the operation of s 55(a) in the assessment of market value of acquired land and does not require the effect of the public purpose to be disregarded for any other purpose. The Applicant submitted that s 56(1)(a) only required the disregard of changes in the value of the Acquired Land brought about by the public purpose, and that there was no obligation to disregard aspects of the carrying out of the public purpose which were not reflected in a change in value, such as the subdivision.

Respondent Council’s submissions on statutory disregard

27. The Respondent Council, relying on Roads & Traffic Authority (NSW) v Perry & Anor(2001) 116 LGERA 244; [2001] NSWCA 251 and Maloney v Minister Administering the Environmental Planning and Assessment Act 1979 (2011) 184 LGERA 386; [2011] NSWLEC 121, argued that the identification of the public purpose ought be determined in a manner that is not too broad or too narrow (Respondent’s opening submissions, [6]; Respondent’s closing submissions, [42]) (Respondent’s closing submissions, [47], citing ChinoPty Limited v Transport Infrastructure Development Corporation and Anor [2006] NSWLEC 768 in relation to what documents may be looked at to obtain the public purpose), specifically, not so broadly as set out in the Gazette Notice alone, but “not so narrowly as to refer to a specific engineering or construction plan pursuant to which the works will be carried out” (Respondent’s opening submissions, [6]).

Court’s conclusion regarding the s 56(1)(a) statutory disregard

28. The Court accepts the Applicant’s contention that, for the purposes of determining market value pursuant to s 55(a), the s 56(1)(a) statutory disregard only applies to the Acquired Land, and only relates to any increase or decrease in the value of that Acquired Land arising as a consequence of the public purpose. In short, as the Applicant submitted, s 56(1)(a) has a comparatively restricted application. This interpretation is confirmed in Caruso at [66].

29. The public purpose for which the Acquired Land was acquired was stated to be “drainage and public recreation”. The Applicant’s case was, correctly, that the public purpose did not need to be disregarded in the “after” case for the assessment of compensation pursuant to s 55(f), insofar as it related to other land, that is, the Retained Land. That section provides for consideration of an increase or decrease in the value of any other land of the person which adjoins or is severed from the land that has been acquired, which, in this case, means the Retained Land, which obviously “adjoins” the Acquired Land. So if the carrying out of the public purpose, such as the proposed drainage works, on the Acquired Land has the effect of increasing or decreasing the value of the adjoining Retained Land, then that effect is clearly a matter to be considered pursuant to s 55(f) in determining compensation.

30. For instance, if it were to be shown that the floodway management works proposed for the Acquired Land had the effect of, indirectly, better draining the Retained Land, then conceivably the Retained Land would be more capable of being developed, such as for housing, or more comprehensively available for development for a foreshadowed school, thereby adding to its potential and so value. Similarly, and perhaps more clearly in this case on the facts, with the drainage works on the Acquired Land requiring the retention of open space, with some of it engineered to become a drainage basin, and thereafter set aside for public recreation, development on the Retained Land must gain from the amenity of being located alongside a public recreation reserve. Such amenity must surely add value to the Retained Land, whether it be used eventually, in part, for housing and, in part, for the foreshadowed school. This was discussed briefly at hearing (at Transcript, 265.26-267.23), however no evidence on the matter was adduced (see further the discussion at [157]-[159] below).

31. The Applicant’s senior counsel submitted that the subdivision, which occurred some nine months prior to the Acquisition Date, was not required to be disregarded as part of the public purpose as he said, “there is no obligation to disregard aspects of the carrying out of the public purpose which are not reflected in a change in value”. The Court accepts that it is only “any increase or decrease in the value of the [acquired] land” caused by the proposal to implement the public purpose that is to be disregarded. Clearly, with the subdivision having created the lots comprising the Acquired Land and the lot constituting the Retained Land, that catalytic first step must be considered to be part of the public purpose. Given that the subdivision was a component part of an overall scheme which included the division of the original Land as a necessary precursor to the carrying out of a drainage scheme clearly considered essential to address the flooding issues in the locality, and thereafter allocate the engineered open space to public recreation, it is a matter for determination by evidence whether the subdivision per se would or would not have increased or decreased the value of the Acquired Land (thereby giving rise to the question whether there is an effect that is to be disregarded pursuant to s 56(1)(a)).

32. Further, it is the case that the nexus between the subdivision and the subsequent drainage scheme demonstrates that they were so integrally intertwined as components of the one public purpose proposal, that logically separating the components achieves no purpose. Each component being interdependent means that if the drainage scheme has an impact on value, then those components required to be in place for the purposes of that scheme must be concurrently considered to be responsible for that impact on value. The Court has concluded that such a nexus did in fact exist, with the subdivision, the drainage scheme and the s 94 Plan being inextricably bound components of the same public purpose proposal. To the extent those elements of an integrated public-purpose-whole have affected the value of the Acquired Land, they are to be disregarded.

33. With respect to the Retained Land, given that the Court has decided that the subdivision and the s 94 Plan are clearly component parts of the public purpose for which the Acquired Land was acquired (hereafter referred to, for ease of reference, as ‘the public purpose project’), albeit transacted prior to the Acquisition Date, whether there would or would not have been caused an increase or decrease in the value of the Retained Land is bound to a consideration of the implications of the drainage scheme proposed to be carried out. By virtue of s 55(f), regard must be had to any increase or decrease in the value of the Retained Land as a consequence of those matters. As intimated above at [30], there are at least two plausible reasons why there would be a positive impact on the value of the Retained Land as a direct consequence of the implementation of the public purpose on the Acquired Land.

34. As far as the Acquired Land is concerned, the public purpose component directed at drainage includes, for the purposes of facilitating its implementation, the s 94 Plan. To the extent that the s 94 Plan influences a variation in value of the Acquired Land, either an increase or a decrease, it is to be disregarded. However, as confirmed in the previous paragraph, being part of the public purpose, the s 94 Plan nevertheless remains a consideration to which regard must be had if there is any increase or decrease in the value of the Retained Land. It is plain, from the text of the s 94 Plan, (cited earlier at [25]) that the plan was intended to generate funds to pay for water cycle management facilities, and open space and recreation facilities. All property owners pursuing development proposals in the relevant area would be required to financially contribute pursuant to the s 94 Plan (being an impost, a conceivably negative influence on value), however it would result in a clearly beneficial scheme being implemented (a likely positive influence on value outweighing the initial cost).

35. On the basis that s 56(1)(a) only requires a disregard of the public purpose proposal to the extent that it influences an increase or decrease in value of the land that is being acquired, the question arose with respect to the Acquired Land whether the disregard was to the effect that the drainage scheme was to be taken as not existing at all. The answer to that question had to rely upon an analysis of the evidence, as, in circumstances where the public purpose clearly impacted upon the market value of the Acquired Land, it was difficult to conceptualise circumstances where there was any aspect of the public purpose proposal that was capable of being considered, or, in terms of the subsection, not disregarded. The Applicant squarely contended that “there is no obligation to disregard aspects of the carrying out of the public purpose which are not reflected in a change in value” (Applicant’s closing submissions, [14]). On its face, that proposition may appear correct but in reality, accepting the proposition, the question then became: what is left to be considered?

36. This issue becomes highly material when considering the contextual neighbourhood of the Acquired Land, in particular abutting properties. It is clear that the public purpose project was required as the floodway mapping (see Exhibit A, being the diagrams 4 and 5 extracted from the Flooding joint report; Court Book, pp 62 and 63) confirms a necessity to address flooding issues. It would be fair to surmise that whatever was to happen on the Acquired Land and its immediate neighbourhood, the flooding issues would inevitably have had to be addressed. With the neighbourhood being within the Riverstone Precinct of the North West Growth Centre, the necessity to address the flooding issues became even more important. Accordingly, with or without the public purpose project, when focusing on the Acquired Land, there had to be a consideration of the necessity to carry out drainage works on that land. The Applicant argued that, for the purposes of the Court’s valuation exercise, the s 94 Plan, with the associated contemplated or designed drainage works, is taken to be in place, effectively, to the boundaries of the Acquired Land, thereby giving a lead as to what related drainage would need to be carried out on the property. The Respondent’s contrary proposition was that there was in effect a ‘free hand’ to design whatever drainage works are required on the property, as the s 94 Plan and its associated drainage works are simply to be disregarded, being components of the public purpose which will have an influence upon value.

37. The Court reiterates that the implementation of the s 94 Plan and its associated drainage works constitute the public purpose and would have had an influence on the value of the Acquired Land and so, to that extent, must be disregarded. Likewise, the nexus between what was proposed on the adjoining properties, also pursuant to that same s 94 Plan and its associated drainage works, and what was to occur on the Acquired Land, was such that they were inextricably linked. Even if the works within the Acquired Land differed in scope or scale, if pursuant to the public purpose the ingress of floodwaters from an adjoining property was better managed, that beneficial fact alone would logically have a positive effect on value. Therefore the ‘particulars’ or specifics of the s 94 Plan and its associated drainage works on abutting properties are to be similarly disregarded, in circumstances where value is impacted upon. They are to be disregarded as they are part of the same public purpose that would inevitably have an influence on the value of the Acquired Land. However, critically, the Court does not take the disregard to the extent that it is assumed that there would be no s 94 Plan and no associated drainage works put in place. The Court accepts that pre-acquisition physical conditions were such that it was a necessity that such a public purpose scheme would have to be put in place, most probably of similar ilk or scope. On this basis, there is freedom to surmise what would be the extent, form and nature of a hypothetical drainage scheme that would be put in place on the Acquired Land and abutting properties. Conceivably, one such scheme, within a range of possibilities, might be similar or identical to the public purpose scheme affecting the Acquired Land.

Hydrological evidence

38. Mr Bewsher and Dr Martens’ Flooding joint report dealt with flood affectation of the Land, the extent to which any flood affectation may have constrained its development potential, and what flood mitigation works might, in the absence of the public purpose for which the land was acquired, have been adopted to enable the Land to reach its highest and best use.

39. Mr Bewsher calculated the area of the site currently affected by flooding based on the flood extents shown by flood mapping contained in the Growth Centres SEPP, and determined that, without any flood mitigation works, 10,210 square metres of the Land was flood affected (Court Book, p 52; Flooding joint report, [5]). The Respondent Council’s expert, Dr Martens, gave evidence that, in his opinion, without any mitigation works, approximately 12,631 square metres, or more than 50% of the Acquired Land, would be inundated in a 1% Annual Exceedence Probability flood. This was larger than the area shown on the Growth Centres SEPP flood mapping, Dr Martens said, because it included overland flows which enter the Land at the south-eastern boundary (Court Book, p 52; Flooding joint report, [6]).

40. The Flooding joint report noted that the s 94 Plan contained stormwater works in the vicinity of the Land, including:

1. a 28-metre-wide landscaped open channel upstream of the Land;

2. five 3,600 x 1,200-millimetre culverts under O’Connell Street;

3. a gross pollutant trap;

4. a detention basin extending partially into the Land;

5. a 1,200-millimetre drainage line through the Land draining catchments from the south-east.

41. As to the public purpose for which the Acquired Land was acquired (for the purposes of the statutory disregard at s 56 of the Just Terms Act), Mr Bewsher considered that purpose to be “the use of the site for open space (predominant use) together with the use of a small part for a detention basin”, and Dr Martens understood it to include “drainage and open space, and that the s 94 contribution plan is a reflection of that public purpose” (Flooding joint report, [8]). Accordingly, Dr Martens disregarded the s 94 Plan for the purposes of his analysis.

42. The Court considers that Dr Martens’ understanding of the scope and characterisation of the public purpose project is more correct than that proffered by Mr Bewsher, as the evidence clearly shows that the creation of the public open space will be a consequence of the necessity for public authorities to address the flooding issues which have been experienced in the subject district as clearly shown in the flood mapping in the Growth Centres SEPP. With flooding issues required to be addressed, via the requisite engineering works, which include the creation of a detention basin to contain flood waters when an inevitable future flood occurs, it is not surprising that the consequential open space would be given over to public recreation. Such drainage basin areas could never be given over to more intensive development, due to the necessity to retain open ground as a contingency to cope with future flood waters. The Court surmises that had there been no flood issues requiring attention, then the assigning of land to drainage/public recreation might never have occurred, rather, being located within a district covered by the Growth Centres SEPP, the same land would most probably have been made available for housing within a new housing estate. As it is, given the reality of the flooding issues, the town planners agreed (Court Book, p 45 [17]) that, in the absence of the public purpose, the underlying zoning would be part R2 Low Density Residential and part E2 Environmental Conservation.

43. With respect to, absent the public purpose, what flood mitigation works would be likely, Mr Bewsher assumed that a scheme similar to the extant s 94 Plan would be in place, save for the detention basin. Mr Bewsher considered that a channel, 28 metres wide, would be more than sufficient to carry a one-in-100-year flood flow. He chose the 28-metre width, he said, “for consistency with the upstream corridor proposal” contained in the s 94 Plan. This recommendation, Mr Bewsher said, would render all but 2,403 square metres of the Acquired Land developable. The Court accepts, as just one possible scenario, Mr Bewsher’s proposition that, absent the public purpose, a scheme similar to the s 94 Plan would be brought into place, however the Court does not accept that such a hypothetical scheme would not include a detention basin. Mr Bewsher’s full reliance on the extant mapping that led to the current s 94 Plan as being sufficient to formulate his estimate of what would be required, erroneously limits himself to the particulars of the current scheme as it relates to the Acquired Land. It is true that he can take the regional material into account to the extent that it confirms the necessity to address drainage issues, but with the statutory disregard, the specific application to the property of the particulars of the extant scheme is to be disregarded (being a scheme inevitably impacting upon value). It is in this respect that Dr Martens’ site-specific and locale‑specific examination of the drainage needs of the Land is, in the Court’s opinion, the correct approach. It is the approach, in the Court’s opinion, that a hypothetical prospective purchaser would require of the expert hydrologist which they could be expected to consult prior to offering to purchase the property.

44. Dr Martens considered that “there can be no certainty in respect of what the s 94 contributions plan may have comprised absent the public purpose” (Court Book, p 53; Flooding joint report, [8b]). He noted that floodwater would, in any event, need to be conveyed through the site, and so if the s 94 Plan did not include a regional floodway corridor, in order to reduce flood affectation, the potential buyer would need to undertake earthworks within the site that would not detrimentally affect those upstream or downstream or prepare a private “regional” drainage scheme with the agreement of neighbouring owners. However, such a private scheme would be – by virtue of requiring the agreement of a range of landholders – less certain than a scheme imposed by a s 94 contributions plan. If a regional scheme were implemented, Dr Martens estimated a channel approximately 100 metres long, with an average width of 33 metres, which would mean a total area of flood affectation of 3,300 square metres. In the absence of a regional scheme, a site-specific scheme, Dr Martens estimated, would result in flood affectation of the Land of 5,460 square metres (Flooding joint report, p 4).

45. It is appropriate to consider the hydrology evidence, in particular Dr Martens’ more extensive estimated required flood mitigation works, in the context of the whole picture. Beyond the significant 50% proportion of the Acquired Land (about 11,000 square metres) affected by flood water during a 1% annual exceedence probability (AEP) flood event, Dr Martens’ evidence was that the entirety of the Acquired Land is affected by a Probable Maximum Flood (PMF) event. Dr Martens’ evidence, that there is a need to contract or reduce the extent of flood-prone areas across the whole of the Acquired Land, is accepted by the Court. Further, and significantly, Dr Martens did not agree with Mr Bewsher’s contention that a considerably smaller area was non‑developable, nor did he agree that the final scheme could dispense with the detention basin.

Applicant’s submissions with respect to hydrology

46. The Applicant took the position, taking the lead from Mr Bewsher’s approach, that the hypothetical potential purchaser would have looked to the publicly available flood affectation map at Appendix 4 of the Growth Centres SEPP in its assessment of the area of land that may be flood affected. To the extent that this flood affectation map is at a regional scale providing relatively high level information, the Court agrees that this approach contended by the Applicant was correct - as, the Court stresses, a starting point. As for Dr Martens’ evidence with respect to the need for specific assessment of flood affectation as it relates to the Acquired Land, that proposition is also accepted. To the extent that the SEPP map is the basis for the detailed strategies and works identified in the s 94 Plan generally, it is material that can be considered as confirming that a drainage scheme or floodway management is required across the region in the areas as shown in the map. However, to the extent that it purports to determine the parameters of the public purpose with respect to the Acquired Land in a manner that would affect the value of the Acquired Land, it is to be disregarded. It is not to be so disregarded as to negate an understanding that floodway management will be required, but it is to be disregarded if it is said to set the parameters of the particular works required on the Acquired Land (with such works inevitably likely to affect value). As the Court has concluded earlier, the hypothetical prospective purchaser can be presumed to accept advice that a more precise and cautious approach to floodway management would be required.

46. The Applicant rejected the Respondent Council’s contention that this mapping ought to be disregarded, and submitted that s 56 required that only changes in the value of the land be disregarded. It did not require, in the Applicant’s opinion, a disregard of all surrounding circumstances. The Applicant submitted that the mapping of flood affected areas did not change the value of the land, but merely assisted interested persons in assessing the extent of a pre-existing issue. The Court agrees with that proposition. Further, the Applicant argued that there was no basis for concluding that the Growth Centres SEPP map was published as part of the public purpose for which the land was acquired, given it was published by a different authority some six years prior to the acquisition. The public purpose for which the land was acquired was “public recreation and drainage”, the Applicant contended, but the Growth Centres SEPP mapping is unrelated to public recreation, and only obliquely connected to drainage, as “all land has to be drained, flood affected or not”. The Applicant argued that to characterise the public purpose so broadly as to make the 2010 map become part of the 2016 drainage works, as the Applicant submitted the Respondent Council was doing, would be to deprive the concept of all meaning.

47. The hypothetical purchaser as described in Spencer v the Commonwealth of Australia(1907) 5 CLR 418; [1907] HCA 82 at 441, the Applicant submitted, is not anxiously seeking to find fault with land, and would not – as suggested by the Respondent Council – go beyond a published flood map and hire experts to seek to extend the area of affectation beyond that identified by the Council. The Applicant posited that if flooding in the area marked on the Growth Centres SEPP map is addressed, the Council would be satisfied that the remainder of the land is able to be developed, and the hypothetical purchaser would “not go looking for trouble” (Applicant’s closing submissions, [6]).

48. The Court disagrees with these propositions of the Applicant: as said earlier, the broad district-wide information provided by the SEPP map is relevant and ought not be disregarded, however where the s 94 Plan takes that information to the next level of specific application to the Acquired Land, the statutory disregard is triggered. The specifics as they relate to the Acquired Land would affect value. The general information in the SEPP map, on the other hand, provides logical confirmation that drainage works within a spectrum of options, would be necessary. It is not a question of the hypothetical purchaser “looking for trouble” as suggested by the Applicant, rather it is a question of whether the hypothetical purchaser is accessing relevant information so as to be informed of what may or may not be required to be done within the boundaries of the Acquired Land, in order to address the identified flooding issues.

49. The Applicant submitted that the Court should prefer the evidence of Mr Bewsher with respect to which scheme would be adopted. The Applicant argued that the circumstances of the land fully supported Mr Bewsher’s evidence that, even without the public purpose, it was likely that a scheme similar to the current s 94 Plan would be adopted by the Respondent Council or the upstream landowners as part of a cooperative development. These circumstances, according to the Applicant, included that the land title in the lots south of O’Connell Street was highly fragmented and that if a voluntary scheme was to be adopted, would require the agreement and cooperation of many (even hundreds) of landowners. Such a scheme, the Applicant submitted, would therefore be unlikely to eventuate and, as such, a s 94 scheme would appeal to Council. Mr Bewsher asserted that his conclusions were based on the practicality of developing the land, noting that a strategy would have to be in place (Transcript, 73.3-4). The Applicant argued that the Respondent Council’s expert, Dr Martens, agreed with much of this, stating that, even disregarding the public purpose, the Council would have an obligation to facilitate the release of land for development, that it was more than likely that they would formulate a regional drainage scheme, and that the large number of small lots south of O’Connell Street made the use of a s 94 scheme likely (Transcript, 76.29-34).

50. The Applicant submitted that Mr Bewsher provided preliminary advice as to appropriate flood mitigation works independently of the s 94 Plan, and that such advice was therefore unaffected by the Respondent Council’s submission that the s 94 Plan ought to be disregarded. Mr Bewsher observed in his oral evidence :

I provided some advice, very preliminarily, I thought a channel about 28 m actually. And I should say just coincidentally it's the same as the s 94 plan. Often when you do these assessments they don't come out the same but it turned out to be the same as the s 94 plan which I discovered sometime later. (Transcript, 79.27-31).

52. As to the issue of overland flow raised by Mr Lunney, the Applicant relied on Mr Bewsher’s opinion that that secondary overland flow would be dealt with using “routine” storm water drainage methods (Transcript, 70.49-71.7).

53. The Applicant concluded that a hypothetical purchaser assessing the Acquired Land at the acquisition date would have concluded that by implementing the scheme put forward by Mr Bewsher, the use of a 28-metre wide, 86-metre long channel, the issue of flooding could be addressed and additional developable land would be released. The prudent hypothetical purchaser, the Applicant argued, would not have considered any further work to be required. The Court has rejected the Applicant’s submissions in this regard earlier at [46]. With Mr Bewsher’s scheme being, in effect, the s 94 Plan approach, the Court considers the more comprehensive, site-specific, approach preferred by Dr Martens is more plausible, especially if one was to accept that a more cautious approach was more likely to be embraced by a hypothetical prospective purchaser.

Respondent Council’s submissions with respect to hydrology

54. Relying on the evidence given by Dr Martens, the Respondent Council submitted that a significant proportion – 12,631 square metres or more than 50% – of the Acquired Land would be flood affected during a 1% AEP flood event and would not, without mitigation works, be suitable for development. As explained earlier, the Court has accepted this analysis.

55. With regard to the extent of flood affectation on the Land, absent any mitigation works, and the difference between the approaches taken by Mr Bewsher and Dr Martens, the Respondent Council submitted that the question was whether or not a purchaser would obtain advice from a hydraulic engineer, or would rely on the published flood mapping alone (Applicant’s closing submissions, [11]). For reasons, explained earlier, the Court rejects that the latter suggestion is the more likely.

56. The Respondent Council argued, relying on Vilro Pty Ltd (In Voluntary Liquidation) v Roads and Traffic Authority of NSW [2010] NSWLEC 234 per Pain J at [16], that for the parties to be “perfectly acquainted with the land, and cognizant of all circumstances which might affect ... [its] value” in the case of the Land, they must have knowledge of the depression in the south-eastern part of the Land which is flood-prone but not shown on the Respondent Council’s or Growth Centres SEPP flood mapping (but which was depicted in Dr Martens’ modelling and his Figure 4). As indicated earlier, the Court accepts such assumptions regarding the required investigations leading to the requisite knowledge are apposite to the hypothetical prospective purchaser’s considerations with respect to the Acquired Land.

57. The Respondent Council noted the evidence given by its valuer, Mr Lunney, that “[i]n my experience, a purchaser of a large en globo development site such as the Land which is known to be affected by flooding would almost certainly obtain professional advice in relation to flooding and, in my opinion, would rely on the contents of the site specific flood map produced by Dr Martens rather than the Growth Centres SEPP map or existing Council mapping” (Valuers’ joint report, p 29, [108]). The Respondent Council contended that this evidence was not contradicted by Mr Phippen for the Applicant and, as such, ought to be accepted.

58. The Respondent Council contended that Dr Martens’ approach ought to be preferred because, by disregarding the s 94 Plan (which the Respondent Council posited is part of the public purpose), he took the correct approach to the public purpose and the statutory disregard in s 56(1). The s 94 Plan ought to be disregarded, the Respondent Council argued, because “if it was not for the proposal to carry out the public purpose, the Council, as the acquiring authority would not have, or need to have, a s 94 Plan that relates to the work”. The Respondent Council further argued that the existence of the s 94 Plan has an effect on the value of the Acquired Land and it therefore, as part of the public purpose, must be disregarded pursuant to s 56(1)(a) of the Just Terms Act. That is, if the public purpose was properly disregarded, the Respondent Council, as the acquiring authority, would not be carrying out drainage works. Mr Bewsher on the other hand, argued the Respondent Council, did not disregard the s 94 Plan and in fact relied on it to justify his conclusions.

59. This distinction is a somewhat artificial construct but nevertheless critical: the Court considers it is necessary to disregard the actual s 94 Plan to the extent that it affects the value of the Acquired Land, but nevertheless accepts that a scheme of similar ilk would at some stage be required prior to development. That hypothetical scheme is a relevant consideration, just as knowledge of the extent of the flooding issues is a relevant consideration. As the Respondent Council argued, at [43] of its closing submissions, “If it was not for the proposal to carry out the public purpose, the Council, as the acquiring authority would not have, or need to have, a s 94 contribution plan that relates to the work”. The catalyst for necessary drainage works (generically expressed) is the topographical lie of the land that gives rise to flooding: it is that fact that gives rise to the necessity for drainage works, either the extant s 94 Plan which is to be disregarded as it specifically relates to the Acquired Land, or a hypothetical scheme, in relation to which Dr Martens has the freedom to explore its parameters. The base data, which is in part captured in the floodway plans which led to the extant s 94 Plan, ought not be disregarded, as that same data would be part of the contextual information that would lead to any hypothetical future scheme, supplemented by any further research or information that hydrologists such as Dr Martens might provide as advice to the hypothetical prospective purchaser.

60. The Respondent Council argued that Dr Martens’ view that a purchaser may be required to implement a site-specific rather than regional scheme was the correct view. The Court agrees. A fully informed, not anxious purchaser, the Respondent Council argued, based on the advice of Dr Martens, would assume that it was uncertain and risky as to whether neighbouring landowners would cooperate in implementing a regional scheme, however would assume that a site-specific scheme could be implemented if necessary. (Respondent’s closing submissions, [64]). The Respondent Council argued that, properly applying the statutory disregard, Mr Bewsher’s evidence could not be accepted on this point, and Dr Martens’ ought to be preferred and accepted.

61. Therefore, the Respondent Council submitted, Dr Martens took the correct approach to the likely width and location of the corridor and therefore the amount of the Land subject to flood affectation after flood mitigation works. It was in this context that Dr Martens divided the Land into three categories: that which is developable, that which is potentially developable, and that which is not capable of becoming developable.

62. The Court is of the view that the hypothetical purchaser, being informed of the necessity to address drainage issues generally and guided by the district-wide SEPP flood mapping and Council flood mapping which would initially inform the purchaser of the prima facie extent of the drainage issues, would be advised and accept, somewhat on a contingency basis, that, absent a regional scheme, they would need to address the drainage issues within a site-specific property drainage scheme. The Court does not agree that the prospective purchaser would necessarily assume that a regional scheme would not be implemented, on the contrary, the district-wide material, such as the mapping to which resort may be had, would suggest the likelihood that such a scheme would come to pass. Further, with the Acquired Land being a property geographically located in the midst of such a scheme (logically because the mapping confirms its central location within the flow paths), the prospective purchaser could properly assume the Acquired Land would be part of any regional scheme. Again, it is only the particulars of the actual public purpose project, including the s 94 Plan, as it specifically impacts upon the value of the Acquired Land that is to be disregarded.

63. This approach, of distinguishing the actual detail of the public purpose scheme as it relates to the Acquired Land from the wider regional information confirming such a scheme is a necessity and so a likelihood, means the hypothetical prospective purchaser would commence the exercise of determining what needs to be done from the regional material but would be free to, and need to, seek advice on a property-specific basis. The Court therefore considers Dr Martens’ hesitancy to refer to the regional material, such as the Growth Areas SEPP floodway mapping, was misplaced (on the basis that he thought it might have to be disregarded); however the Court firmly rejects the Applicant’s contention (encouraged by Mr Bewsher) that property‑specific analysis of the flooding issues would not be required.

64. Dr Martens is correct that there “is no certainty as to what the s 94 contribution plan may have comprised absent the public purpose” provided, the Court adds, that absence of certainty is as it relates to the Acquired Land. The Court has said earlier that the base data, such as set out in the Growth Areas SEPP, confirms, in the broad, a regional approach to addressing drainage is highly likely. However, that likelihood does not foreclose the option of a property-focused approach, addressing floodway issues, being put in place, if a regional approach did not proceed or was considered inadequate. That is a contingency that a hypothetical prospective purchaser would have to consider and take into account as a factor likely to affect value. It is a perfectly plausible scenario, one of a likely range of options. Further, given that the Court is endeavouring to assess what a hypothetical potential purchaser would consider, whilst formulating the estimated value upon which an offer to purchase would be based, it is plausible that, upon consulting a hydrologist such as Dr Martens, a more cautious approach is adopted.

65. Comparing the differing approaches that Dr Martens and Mr Bewsher adopted, it would be fair to observe that Dr Martens adopted a more cautious approach to that of Mr Bewsher, determining that when giving advice to a prospective purchaser, greater account of overland flows should be considered than that identified in the Growth Centres SEPP flood mapping, Council flood mapping and proposed to be addressed in the s 94 Plan. Counsel for the Respondent Council stressed that, on the basis of Dr Martens’ evidence, “a prudent purchaser would approach this [issue] cautiously and say ‘I might have to end up going this alone. If I did that, I have Dr Martens’ advice as to the likely amount of land that I could render flood free’” (Transcript 285.27-30). The Court has noted that such a cautious approach, a heightened awareness of risk, to floodway management appears to be emerging amongst hydrologists as a responsible professional stance to adopt.

66. In the recent decision of Barkat v Roads and Maritime Services [2018] NSWLEC 209 (Barkat), in response to evidence from hydrologists regarding the predicted impact of climate change on rainfall in the Greater Sydney region, I reached certain conclusions on the subject, as set out in the following quoted passage. The exchange between the hydrologists and the Court in Barkat is instructive, specifically with respect to the consideration of the PMF level.

215   As a necessary adjunct to the Court’s examination of the floodway issues, the Court, being cognizant of cl 6.3, relating to flood planning, in the SLEP 2012, had observed that in par (b) of cl 6.3(1), one objective of the clause is “to allow development on land that is compatible with the land’s flood hazard, taking into account projected changes as a result of climate change” (emphasis added). The following extract from the transcript, setting out part of the hydrologists’ cross-examination is pertinent to the Court’s decision regarding the implications of the floodway affecting the Underwood Land.

HIS HONOUR: Now, if I can ask for A01 to be put on the screen, which is the Strathfield LEP clause 6.3, page 37 of 90. Gentlemen, you will see that the objects of this clause are as follows, ‘to minimise flood risk of life and property associated with the use of land, and to allow development on the land that is compatible with the land's flood hazard, taking into account projected changes as a result of climate change’. In giving your respective advice with respect to the floodway management, and predicting what may or may not happen with respect to the water flowing down that channel, do either of you consider it relevant to consider the aspects of the projected changes as a result of climate change, and what would that mean?

WITNESS PHILLIPS: I'm happy to go first. So, in relation to climate change, the site is an elevation where I don't believe sea level rise is a consideration. The other aspect of climate change is a potential increase in rainfall intensities. There is some guidance available at this point in time; it's a little bit general, but it is in terms of potential 10% or 20%, maybe even a 30% increase in rainfall intensities, and that would be a consideration for the 100 year event. At this point in time, I am unaware of any guidance with regards to climate change and adjustments of the probable maximum precipitation, which in turn generates the PMF, so at this point in time the PMF is estimated in the way that it has always been estimated when considering climate change.

WITNESS MARTENS: Thank you. Ordinarily, climate change would be considered. In this circumstance, perhaps disagree a little bit with Dr Phillips in the sense that sea level rise would probably affect, given the position of the channel with respect to the tidal limit, what's called the backwater effects. So if sea level were to be higher than the base level to which the site drains to would also be higher, it would reduce the gradient of the flow which would cause a minor elevation of the flood levels. So, in my experience in these sorts of circumstances, it may raise the flood level in the order of between 100 and maybe 250 millimetres, and I haven't modelled that, that is just an educated guess. The second factor, as Dr Phillips pointed out, is that ordinarily, if climate change is to be assessed in accordance with the LEP requirements, the other factor is rainfall intensity. There has been a lot of debate about how much rainfall is likely to increase in terms of intensity, but the ranges of 10%, 20% and perhaps 30% increase mentioned by Dr Phillips are the ones that would ordinarily be considered, they may add another, for example if the 20% rainfall intensity increase were utilised, perhaps another 100 millimetres to the flood levels.

HIS HONOUR: In light of your answers, as hydrologists giving advice, should a hydrologist adopt a cautionary approach and take a more conservative estimate of what may or may not be the flow of water when examining what the impact of a floodway might be on, say, the subject land? Is there any relevance for the precautionary principle being applied to the interpretation? I assume both of you understand what the precautionary principle means?

WITNESS PHILLIPS: Yes.

HIS HONOUR: In that context, what is the position a hydrologist should adopt in giving advice to their client?

WITNESS PHILLIPS: My advice would remain unchanged, in relation to statements that I have put into my evidence, that my recommendation to anybody considering developing on this site is that the appropriate approach would be to set the ground floor level above the PMF level, and I would expect that under those circumstances any potential climate change impacts would be less than the resulting flood levels, or lower than the PMF level, and accordingly, if development was set above the PMF level, then that is taking into consideration all possible flooding regimes through the property.

WITNESS MARTENS: So my response to that is that I would advise a developer at a site that if the words "climate change to be considered" are in the instrument, then that is something they would need to do. ….If those words were in the instrument, and they are not in all instruments but in this case they appear to be, then I would advise the developer that that needs to be considered. I would advise the developer that the council may not necessarily have any standards in relation to what level of climate change impacts need to be considered. So it would be a position where you take the first step and council would respond to that position. I agree with Dr Phillips that an appropriate response for the building would be to have the floor levels at the PMF but I would also advise the developer that the other factors that come out of considering climate change are that the risks, in terms of hazard and floodway conditions to the access road, Underwood Road in particular, would be potentially made more hazardous and that would be something that the consent authority would consider.

HIS HONOUR: In the context of your responses being an agreement that PMF is the appropriate yardstick by which one designs a response to the possible floodway, again adopting a cautionary approach, on the site, the subject site, is it your expectation that it would be better to, what one might describe in the former times as over engineer as distinct from adopting a precautionary approach and increasing the level of protection, defensiveness against the highest levels of floods that might be predictable?

WITNESS MARTENS: Well I think the adoption of a PMF as a design floor level … would be over-engineering of a site in response to the hazard that the site presents

HIS HONOUR: All right. And Dr Phillips?

WITNESS PHILLIPS: I think, so in relation to the probable maximum flood level because of the relationship on this particular site between the probable maximum flood and the one hundred year flood level, that is it's within a reasonable range above that flood-prone land it's my view that it is entirely feasible to adopt that for development of property like this. Involved with properties on flood-prone land elsewhere in Sydney where the PMF is 4 metres higher than the one hundred year flood level and under those circumstances sorry. Under those circumstances it is less feasible to base the ground floor level 5 metres up in the air. But in this particular instance the PMF level in relation to the surface level within the property is of the order of a metre, possibly to 1.2 metres, and in that particular instance I think that form of development is amenable to adopting the PMF for the ground floor level.

216   RMS in its closing submissions at par 3.11(f) submitted that this evidence showed that: “it is agreed that climate change would exacerbate the flooding risks associated with the Acquired Land”.

217   Considering the responses to the Court’s questions, the Court has concluded that:

(1)   hydrologists would advise a hypothetical prospective purchaser that when considering the potential floodway impact on the Underwood Land that the implications of climate change should include projected increases in rainfall intensity within a range of 10% to 30%;

(2)   that with respect to such climate change implications, it is appropriate to adopt a precautionary approach;

(3)   that in the context of a potential redevelopment of the Underwood Land that ground floor levels should be constructed above the PMF level;

(4)   that on current estimations, extra floodwaters that might result from increased rainfall intensity as a consequence of climate change would give rise to flood levels below the PMF level in the vicinity of the land; and

(5)   it would remain feasible for development of the land to proceed providing the necessary cautionary engineering designs are adopted taking into account the need to be above the PMF level.

218   On the basis of the foregoing anticipated advice that hypothetical hydrologists would give to a hypothetical prospective purchaser, such advice being responsible and within the scope of advice that they would be professionally obliged to give, the Court concluded that the prospective purchaser would accept such advice. Taking these considerations into account, they would accept that, after proposing an appropriately designed compatible development, using the words in cl 6.3(1)(b), consent authorities would “allow development on [the] land that is compatible with the land’s flood hazard”. Accordingly, a hypothetical prospective purchaser would make an offer to purchase, but adjust the purchase price downwards to reflect the required precautionary approach described above.

Court’s conclusion on hydrological issues

67. In the context of the s 56(1)(a), disregard of the public purpose of “drainage and public recreation”, to the extent that the carrying out of, or proposal to carry out, that public purpose will increase or decrease the market value of the Acquired Land, the Court is unable to discern any component of the public purpose project which would not have a ‘shared’ likelihood of impacting upon value. Despite the Applicant seeking that the Court effectively dissect the public purpose into component parts, distinguishing between that which would impact upon value and that which, he asserted, would not impact upon value, the Court does not accept that the public purpose project in this matter is capable of being treated as anything other than an integrated whole. As said earlier, at [31], the subdivision of the Land was as much a component of the public purpose project as the s 94 Plan, as indeed will be the actual engineering works which will implement the drainage measures to address the identified flooding issues across the Acquired Land. It follows that the Court has concluded that the public purpose project, as an integrated whole, will materially impact upon the market value of the Acquired Land, therefore, in accordance with s 56(1)(a), the integrated whole of the public purpose project is to be disregarded. (This is, of course, in contradistinction to the situation with respect to the Retained Land, in relation to which, in accordance with s 55(f), the public purpose project must be taken into consideration, accepting, as the Court does, that the project will have an impact on the value of the Retained Land.)

68. As raised earlier, the disregard of the public purpose project, as part encapsulated in the s 94 Plan, does not bring about a disregard of the basis for such a scheme. The disregard is with respect to the impact on value of the Acquired Land, nothing more. Accordingly, it is to be presumed given the circumstances of the area, both hydrological and projected future demographic, that a similar hypothetical scheme would be required and implemented. That hypothetical scheme would be informed by the publicly available information and data regarding the floodway characteristics of the district. Consequently, there will be relevant material in the Growth Centres SEPP map or other existing Council flood mapping, which are not themselves part of the public purpose, that would be relevant as an information source and so not disregarded.

69. Where the disregard becomes most pertinent is where the public purpose project set out specific proposals for the Acquired Land, or on adjoining lands where relevantly connected works were proposed (see earlier at [37] for a description of such works). Those specific proposals for the Acquired Land would obviously impact on value and so must be disregarded. However the Court agrees with the Applicant that it would be nonsensical (the Court’s word) to disregard all the data underlying such proposals, such as can be obtained from the Council’s flood maps and SEPP flood maps, that would go towards informing the hypothetical prospective purchaser of the need to address flooding issues – providing, as said above, it is accepted that investigations would need to go beyond the publicly available data.

70. So, focusing on what information the hypothetical prospective purchaser would seek and rely upon, the Court confirms as follows. First, the district-wide information, such as Council or SEPP flood maps, would not be disregarded, but would inform the purchaser that drainage works were necessary, and that given the extent of flooding, that a drainage scheme with a funding arrangement pursuant to a s 94 contributions plan would be likely to be put in place. As was stated at [54] of the Respondent’s closing submissions:

Both parties accept that the hypothetical purchaser would have available both the Council Flood Maps as well as the SEPP Flood Maps (it should be noted, Dr Martens was uncertain about this and did not express a view, and the respondent accepts that the existence of the SEPP Flood Maps is not to be disregarded pursuant to s 56(1)).

71. However, the Court considers that contrary to the stance adopted by the Applicant, and agreeing with the Respondent Council, the exercise would not stop there. With the actual works or approach proposed for the Acquired Land to be disregarded, the Court accepts that, with the hypothetical prospective purchaser being alerted to the necessity to address flooding issues, they would seek out and obtain property-specific information of the kind suggested by Dr Martens so as to be in a position to explore a range of options that might be adopted to address the identified flooding issues. Understanding such issues, properly informed as to options, would guide the hypothetical purchaser to make appropriate adjustments to the price they might have otherwise have offered to purchase the property.

72. On the basis of the foregoing conclusions as to what is to be disregarded, what information would be sought from a hydrologist for a site-specific analysis of flooding issues affecting the Acquired Land, the cautious approach that a hypothetical prospective purchaser would adopt upon receiving plausible advice of the kind that would be given by Dr Martens, the Court has concluded that Dr Martens approach is to be preferred to that contended by Mr Bewsher. Accordingly, as to the areas affected by flooding and the likely works considered necessary to address them, the spatial figures contended by Dr Martens and adopted by the Respondent Council in its submissions are adopted as being appropriate to assist the Court in determining the value of the Acquired Land.

Valuation approach

73. The expert valuers were at odds as to whether the so-called “piecemeal” approach or the “before and after” approach was the more appropriate in the circumstances of this acquisition.

74. As the Applicant’s senior counsel noted, quoting Tobias JA in Caruso at [70]:

It is a matter of judgment whether a ‘piecemeal approach’ as distinct from a ‘before and after’ approach is appropriate when dealing with issues of injurious affectation or betterment ...

75. The Applicant’s valuation expert, Mr Phippen, relied on the “piecemeal” approach, calculating rates per square metre for the following three different categories of land comprising the Acquired Land:

1. flood-free;

2. able to be rendered flood-free; and

3. flood affected.

76. As discussed above, the Applicant relied on the evidence of Mr Bewsher in determining how much of the Acquired Land fell within each category. As will be seen, the Court has rejected Mr Bewsher’s evidence in this regard (see earlier at [71]).

77. The Respondent Council’s expert, Mr Lunney, on the other hand, preferred the “before and after” approach, in which he determined the value of the Land pre-acquisition, and then the value of the Retained Land, the difference being the value of the Acquired Land.

Applicant’s submissions on valuation approach

78. The Applicant submitted that the “piecemeal” approach of Mr Phippen ought to be preferred in this instance.

79. First, the Applicant argued, such an approach valued the transaction in question, being the acquisition of the discrete parcels (Lots 10 and 11) comprising the Acquired Land, whereas on the Respondent Council’s “before and after” approach, the value of this transaction was never determined. The Applicant argued that it was important, in order to determine the value of the acquisition, to (as Mr Phippen did) take into account that the Land was subdivided prior to the acquisition and that the acquiring authority purchased separate discrete parcels which the owner could have sold in a hypothetical transaction while retaining the remaining land.

80. In response to the Respondent Council’s contention that the subdivision was carried out in anticipation of the acquisition, and was therefore part of the public purpose, (see discussion at [32]) the Applicant argued that, even if this were to be the case, there was no basis in the Just Terms Act for disregarding it. The Applicant submitted that the disregard in s 56 related only to changes in the value of the land brought about by reason of the public purpose and had no application to the nature of the title held by the dispossessed owner.

81. Secondly, the Applicant argued that the circumstances of the acquisition were not those in which courts have generally considered the “before and after” approach to be the preferable approach. Those circumstances, the Applicant posited, are where the land was undivided or indivisible prior to the acquisition or where the land acquired would not have formed a readily saleable separate parcel (citing Hemmings J in Carson v Minister for Environment and Planning (1990) 70 LGRA 215 at 220-22; Roads and Traffic Authority (NSW) v Damjanovic (2006) 146 LGERA 403; [2006] NSWCA 166, and Roads and Traffic Authority (NSW) v Muir Properties Pty Ltd (2005) 143 LGERA 192; [2005] NSWCA 460). The Acquired Land in the present circumstances, the Applicant argued, was a developable lot in its own right.

82. Thirdly, the Applicant submitted that the selection of comparable sales agreed on by the valuers meant that the “before and after” method would be inappropriate, because none of the comparable sales were actually comparable to the “before” scenario (that is, the 55,000-square-metre Land), with most being a quarter of the size of the Land. The failure of the Respondent Council’s valuer to choose such a comparable sale, the Applicant argued, made the Respondent Council’s use of the “before and after” approach unreliable. To apply the “before and after” method safely, the Applicant submitted, would require analysis of the market for 55,000-square‑metre lots with dual street frontage, however, that no such analysis was undertaken and the Respondent Council sought to extrapolate a value for the Land by “grossing up” the value of the smaller lot of the Acquired Land.

Respondent Council’s submissions on valuation approach

83. In closing submissions on this point, counsel for the Respondent Council pointed to an exercise undertaken on the evening of the first day of the hearing by the Applicant’s valuer, Mr Phippen, who performed a “before and after” analysis (based on both Mr Bewsher’s and Dr Martens’ figures) and came to substantially the same figure (as his “piecemeal” analysis) (Respondent’s closing submissions, [34]). This analysis was tendered to the Court and admitted as Exhibit 2. The Respondent Council put great weight (Respondent’s closing submissions, [34]-[35]) on a statement of Mr Phippen made in cross-examination, that using the “before and after” method in relation to this acquisition is “not inappropriate. When you’ve got two methodologies that are going to determine the same figure, it doesn’t matter which one you use. In this case that’s exactly what happened” (Transcript, 121.43-45). The Respondent Council appears to have taken this as an admission by the Applicant that the “before and after” approach ought to be used, however, as discussed above, senior counsel for the Applicant in closing submissions nonetheless argued in favour of the “piecemeal” approach being preferable.

84. Counsel for the Respondent Council argued that, when determining which valuation expert’s evidence to prefer, the Court should prefer the evidence of Mr Lunney over Mr Phippen. This is because, counsel for the Respondent Council submitted, “Mr Phippen’s evidence is a combination of unexplained assertion and/or speculation. In almost all cases, Mr Lunney’s evidence is clearly set out, the basis for adopting figures is explained with a plausible, transparent rationale, and where matters are to be adjusted for he makes a deliberate effort to ascertain the quantum of the adjustment by recourse to market evidence (his Annexures 2 and 3 being a case in point)” (Respondent’s closing submissions, [75]).

85. Counsel for the Respondent Council, noting Makita v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 at [87], Graham Trilby Pty Ltd v Valuer‑General [2011] NSWLEC 68 at [22]-[25], Marroun v Roads and Maritime Services [2012] NSWLEC 199 at [195] argued that Mr Phippen’s evidence did not set out his reasoning process, which deprived the Court of the opportunity to properly test his evidence (Respondent’s closing submissions, [76]-[77]). The Respondent Council criticised Mr Phippen’s evidence on a number of other grounds, including (but not limited to) that “he did not properly respond, or respond at all, to the matters raised by Mr Lunney in the joint report”, “he did not express the facts, assumptions and basis, in his written material for forming the views that he formed and there were significant omissions in his written material”, and that “many things were explained for the first time in the witness box” (Respondent’s closing submissions, [81]).

86. The Court has carefully weighed the submissions regarding the reliability of Mr Phippen’s evidence, in the context of the approach and methodologies of Mr Lunney. During the course of the hearing, in particular during the course of cross-examination of the valuers, the Court did have a growing concern that Mr Phippen’s approach to his evidence lacked much of the reasoning process required for the Court to travel down the same path of analysis to determine whether or not conclusions reached were sustainable. There is a very real distinction between a conclusion founded on a confident assertion and a conclusion founded on the rational analysis of propositions regarding available evidence. It is always a regretful position to reach, to observe that an expert has failed to meet the requisite standards. Without drawing the matter out, the Court simply concludes this point by indicating that it found Mr Lunney’s approach to be the proper one: his reasoning was clearly apparent and the rationale for each of his conclusions were explained. Where there was a contest between the conclusions reached by the valuers, the Court has decided that Mr Lunney’s approach was more persuasive. Unless otherwise indicated later in this judgment with respect to a particular matter, there is force in the criticisms made of Mr Phippen’s evidence as listed by counsel for the Respondent Council at [81] of the Respondent’s closing submissions. In concluding the current discussion, in the circumstances of this case where Mr Lunney’s reasoning and adjustments are transparent and plausible, the “before and after” method is accepted as being the appropriate methodology rather than Mr Phippen’s proffered “piecemeal” approach.

117. The Applicant submitted that, therefore, Mr Phippen’s determination ought to be preferred, as 10 years have passed since the Caruso matter, the underlying zoning of the Acquired Land supported a higher value than that in Caruso, and the Land has value for the developer (such as contributing to floor space ratio calculations and other calculations) which it did not have in Caruso because the land in that case was land zoned rural (Applicant’s closing submissions, [45]-[46]). The Applicant placed reliance on the contention that the underlying zoning was residential. Yet at this point in the analysis, the Court observes that the land in question is that which is required for drainage management because of flooding issues. The flooding issues cannot be disregarded, rather they must be addressed, as confirmed by the flood-mapping data. Further, it is this land, the undevelopable drainage land, that has an underlying zoning of E2 Environmental Conservation, not a residential zoning. Whereas the Court acknowledges that such land may have amenity value for the development of the Retained Land, no such benefit can attach to the Acquired Land pursuant to s 56(1)(a) of the Just Terms Act.

118. Analysing the above contentions, it is to be noted that the six ‘sales’ of constrained drainage land in Mr Lunney’s Annexure 3, extending over a period from mid-2012 to mid-2015, were all acquisitions by a public authority achieved via negotiation with the respective landowners. The Applicant criticised the usefulness of this material on the basis that none of them are true sales, being public acquisitions. Mr Phippen during cross‑examination said: “They’re not sales. They are statutory acquisitions” (Transcript, p 207, line 22). One might rhetorically ask what the distinction is between the current case and those six negotiated transactions. Is not the current case an instance of a statutory acquisition? Just as the Applicant in this case chose to reject a Valuer-General’s compensation determination which might have led to an agreement as to purchase price with the Respondent Council, there is no apparent reason why a similar path might not have been followed by the owners in each of the Annexure 3 examples. Sections 55 and 56 of the Just Terms Act apply to such acquisitions as they apply in the current case. Presumably all of the original landowners might have held out for a higher acquisition price. Presumably any one of the acquisitions might have gone down the compulsory acquisition path, had a vendor refused to negotiate a purchase price to their satisfaction. All of these transactions were most probably settled in the belief that market value, as defined in s 56(1) of the Just Terms Act, had been determined hypothetically between “a willing but not anxious seller to a willing but not anxious buyer”.

119. Beyond the precise detail provided for each of the other five sales in the Annexure 3 document, usefully the Court was provided with a more detailed analysis of the most recent sale, a property in Schofields, being an acquisition from a vendor described as an experienced developer. The Court finds the analysis persuasive.

120. Of importance, it is noted that an analysis of these six ‘sales’ reveals the dollars per metre rate ranged from $37.50 to $61.39 per square metre. Reference was also made by Mr Lunney to the decision of Moore J in Constantine v Blacktown City Council (No 2) [2016] NSWLEC 81 in which the judicial valuation arrived at $80 per square metre. Mr Lunney expressed the view that the subject land in that matter had greater utility than the subject Acquired Land, albeit it was traversed by an electricity transmission line easement and had environmentally significant vegetation. In conclusion, Mr Lunney said that the recent “drainage” sale at part 14 Schofields Road, Schofields, would indicate that the rate of $80 per square metre, which Mr Lunney contended was appropriate in this case, is too high. Mr Lunney, however, still settled on the $80 figure on the basis that the doubt should be resolved in favour of the Applicant.

121. By comparison, Mr Phippen did not provide equivalent helpful evidence, rather he repeatedly relied upon Caruso, which the Applicant’s senior counsel referred to as being the benchmark over many years. Rereading the transcript of Mr Phippen’s oral evidence, in particular the cross-examination of him on this current issue, leaves the Court with no doubt that he fails to rebuff the careful analysis provided by Mr Lunney. The Court concludes that it is appropriate to accept Mr Lunney’s evidence and adopt his figure of $80 per square metre for flood-prone land which is incapable of being rendered developable.

Education-zoned land

126. Mr Phippen, having originally conducted the “piecemeal” approach with respect to the Acquired Land, did not have cause to consider the education zoning of the Retained Land. However, when, during the course of the hearing, he subsequently conducted a “before and after” exercise for the purposes of comparison, he did not apply a discount to the education-zoned land on the basis that the ILP set out both the school to be built on the education-zoned land, and the drainage works on the Acquired Land. As such, on Mr Phippen’s reasoning, the public purpose for which the land was acquired and to which the statutory disregard applied encompassed the education zoning on the Retained Land.

127. Mr Lunney for the Respondent Council was of the opinion that, with respect to a “before” scenario, a developer would anticipate developing the land which had an actual or underlying zoning of R2 Low Density Residential, and on-selling the land zoned SP2 Infrastructure (Educational Establishment) to the relevant department at some point in the future (Court Book, p 100, Valuers’ joint report, [85]). Mr Lunney considered the education zoning would be considered to be a disadvantage and accordingly made an adjustment of a 20% discount to that land. The Respondent Council posited that this was the methodology adopted by the Court in Cannavo and Busa (Court Book, p 102; Valuers’ joint report, [93]; Respondent’s closing submissions, [113](d)).

128. The Applicant argued that the Respondent Council’s approach to the education land would be unjust and would contradict the object of the Just Terms Act that a dispossessed owner must be properly compensated for the compulsory acquisition of their land. This approach, the Applicant contended, would mean that where a piece of land was potentially affected by two different public purposes, the compulsory acquirer would obtain a discount because “the second public purpose affected the value of the land to a hypothetical independent purchaser but could not be disregarded because the first public purpose was the one motivating the immediate acquisition” (Applicant’s closing submissions, [48]).

129. The Applicant argued that the only just way to deal with the education-zoned land was “to accept the reality that on any future purchase of the education land the education purpose will be disregarded and it will be sold at a value reflecting its capacity to be developed for residential use plus any education premium” (Applicant’s closing submissions, [51]). As such, the Applicant contended, Mr Phippen’s approach, that the whole of the land be assessed as having its value as residential land, should be preferred.

130. The Applicant criticised Mr Lunney’s “remarkable flexibility” in evidence on education sales, contrasting the approach taken by Mr Lunney in this matter with his approach in previous matters, such as Attard v Transport for NSW [2014] NSWLEC 44 and Al Amanah College Incorporated v Minister for Education and Training [2011] NSWLEC 189, in neither of which, the Applicant asserted, did he suggest that education zoning reduced market value. This was robustly contested by the Respondent Council.

131. The Respondent Council contended that the statutory disregard in s 56(1) only applied to the public purpose for which the Acquired Land was acquired, being drainage and open space, and not a future public purpose of another acquiring authority. The Respondent Council further argued that a developer would buy the Land knowing that, although the relevant department would acquire the education land at some point in the future for market price, there would be delay, holding costs, and uncertainty, which would lead to a purchaser not themselves paying full market price for that land. Further, the Respondent Council contended that Mr Phippen himself had adopted this approach to zoning for one of his comparable sales (Sale 3).

132. The Court agrees with the Respondent Council’s contentions regarding the land zoned SP2 Infrastructure (Educational Establishment). The intention inherent in that zoning, to build a school partly on the Retained Land, has not yet matured into acquisition. There is no statutory disregard with respect to this education-zoned land in this instance. There is only one s 56(1) statutory disregard operative in this case and that is that which relates to the Acquired Land in relation to drainage and public recreation (to the extent that it affects the value of the Acquired Land). The approach adopted by Mr Lunney as summarised in [127] is correct in law and as an exercise in valuation. This is clear on the terms of ss 55 and 56, the statutory disregard is in relation to “the land”, that is, the land being acquired, and is only to disregard “the public purpose for which the land is to be acquired” (in this instance being drainage and public recreation, not education). By contrast, the approach adopted by Mr Phippen, applying the statutory disregard to the education-zoned land, at this stage, is entirely erroneous and so rejected by the Court.

Conclusions

133. Mr Lunney conducted “before and after” analyses using both Dr Martens’ figures and those of Mr Bewsher. The Court has already explained, somewhat exhaustively, that it has rejected Mr Bewsher’s approach to determining the respective areas within the Acquired Land that are: incapable of being rendered developable; capable of being rendered developable; and flood-free and developable. On the other hand, Dr Martens’ analysis has been accepted. However, for completeness, the Court sets out the final “before and after” assessments, on the basis of both Dr Martens and Mr Bewsher’s respective evidence, as determined by Mr Lunney (incorporating concessions made in oral evidence and as contained in the Respondent’s closing submissions at [122]).

134. Given the conclusions the Court has reached with respect to Mr Phippen’s evidence, the Court will simply confirm that it has found Mr Lunney’s analysis to be entirely plausible and his final calculations correct. Accordingly, save for that which appears in Annexure A to this judgment, it is not necessary to set out further summary material from Mr Phippen. Exhibit 2, being Mr Phippen’s final calculations, prepared on a “before and after” basis has been analysed. It does not alter the Court’s conclusions, that Mr Lunney’s final “before and after” calculations are to be preferred.

135. On the basis of the foregoing, where the Court has accepted Dr Martens’ evidence over Mr Bewsher’s as to the extent of areas permanently flood‑prone, etc, referring to the tables at [133] above, the “before and after” figures based on Dr Martens’ assessment are accepted. The resultant figure, amounting to the compensation that should be payable, amounts to $4,195,000, as set out in the first of Mr Lunney’s tables set out above.

136. Confusingly, despite counsel for the Respondent Council pressing the Court, appropriately, as I have concluded, to adopt Dr Martens’ evidence, the Respondent’s closing submissions at [140] state that “the total of $4,872,314.98 should be the total amount of compensation awarded in this case, having regard to the revised before and after figure above, and the agreed amount of disturbance”. That figure embraces the $4,840,000 figure arrived at pursuant to Mr Bewsher’s assessment, as set out in the second table in [133] above. Lest this confusing reversion by the Respondent to Mr Bewsher’s evidence, rather than Dr Martens’ evidence, as pressed throughout the hearing, is thought to be an inadvertent typographical error, in the closing oral submissions by counsel for the Respondent there were two references to the $4,872,000 figure (as recorded in the transcript at Transcript, 278.13 and Transcript, 302.20-26).

137. The Court remains of the view that Dr Martens’ evidence is to be preferred to that of Mr Bewsher. Further, applying Mr Lunney’s figure to Dr Martens’ evidence as to flood-prone land etc, the bottom line identification of compensation is accurately stated in the first table in [133] above, that is $4,195,000. It is noted that this sum is less than the Valuer‑General’s determination of $4,802,000 of market value pursuant s 55(a) of the Just Terms Act. In these circumstances, the Court will reserve its final order with respect to the market value determination for a period of seven days, so as to enable the parties to advise the Court of their final position on the compensation sum to be awarded. This was in fact a course suggested by counsel for the Respondent Council (at Transcript, 278.19-23), should the Court form the view that it needed assistance as to final calculation.

Severance/injurious affection claim

138. The Applicant’s claim for severance (or in the alternative, injurious affection) was based on the effect the acquisition was said to have had on access to the Retained Land, and therefore on the market price of that land. It was common ground between the traffic experts that access to the Retained Land is only by way of Windsor Road, which is a restricted access road.

139. The Applicant argued that, but for the acquisition, the Applicant’s whole parcel would have been developable by constructing a series of internal roads with access to O’Connell Street and without requiring the agreement of neighbouring owners or the provision of access to the restricted access section of Windsor Road. The acquisition, the Applicant contended, had therefore diminished the value of the Retained Land in that it meant that either an agreement with neighbouring landowners to permit access over future private roads, or permission from RMS, would need to be obtained prior to any development, which would result in increased costs and delay.

140. The Respondent Council, however, argued that temporary vehicular access to Windsor Road would in all likelihood be granted to enable development to proceed. Furthermore, it argued, the ILP set out under the Growth Centres SEPP designated a road layout over the Retained Land and adjoining properties that meant it would be difficult to undertake a subdivision of the Land or the Retained Land in isolation of other adjoining properties, necessitating agreement with neighbouring landholders in any event. Additionally, the Respondent Council submitted, the amalgamation with one or more adjoining properties would be required with or without the public purpose to enable an efficient subdivision which conformed to the ILP.

141. The Respondent Council argued that the road pattern layout in the ILP was not caused by the proposal to carry out the public purpose and is not to be disregarded. It argued that the road pattern layout was primarily the result of the designation of part of the Retained Land and adjoining land for future use as a public school. As such, it submitted, the road pattern layout which is shown in the ILP should not be ignored or disregarded for valuation purposes (Respondents closing submissions, [16]).

142. Mr Phippen was of the opinion that “[a]ny developer who would still be interested in acquiring Lot 12 would, without any doubt, not be prepared to pay the full market value. I would suggest that such a potentially, fully informed purchaser would discount the value of this land by 50% or more. However, as the Caruso case ultimately only allowed a 20% deduction from market value, I have only adopted this rate” (Valuers’ joint report, [46]). The Court has concluded that the Applicant’s claim for discount, essentially based upon the perspective held by Mr Phippen is very much overstated, especially given Mr Phippen’s preferred discount of 50%. The Court rejects the proposition that a 20% discount is warranted, essentially for the reasons expressed by the Respondent Council, summarised above at [140]-[141].

143. The Applicant submitted that compensation payable for injurious affection (based largely on the fact that access to O’Connell Street was no longer available) was 20% of the value of the Retained Land, ignoring the public purpose of education (Applicant closing submissions, [57]; Valuers’ joint report). Relying on Mr Phippen’s rate of $350 per square metre, such compensation, the Applicant argued, would be $2,400,000. This was a revision from the $5,150,000 originally sought (see, for example, Court Book, p 2 (the Class 3 Application dated 29 September 2016)).

144. In closing argument, senior counsel for the Applicant conceded that the claim described as severance and made under s 55(c) of the Just Terms Act (noting that the Class 3 Application claims this under s 55(d), however that subsequent references to this aspect of the Applicant’s claim refer to s 55(c)), with respect to the Retained Land’s only access being from Windsor Road was not severance as was characterised by the Court of Appeal in Mir Bros Unit Constructions Pty Limited v Roads and Traffic Authority of New South Wales [2006] NSWCA 314 (Mir Bros), but rather fell under a different head of damage for the purposes of s 56 of the Just Terms Act. The Applicant made a wise decision to change his stance regarding the original claim for severance, as it was clear from the outset to the Court that severance, pursuant to s 55(c), was never available, given a simple analysis of the facts confirming the access to Windsor Road and the prospective ILP roads, proper statutory interpretation and the authority of Mir Bros.

145. Senior counsel for the Applicant and counsel for the Respondent Council were in agreement that any compensation payable with respect to the access issue would be in any event available under s 55(f). The Court agrees that with the Retained Land adjoining the Acquired Land, it is proper to apply s 55(f) to the question whether there has been any increase or decrease in the value by reason of the proposal to carry out the public purpose.

146. The Respondent Council conceded that access to the Retained Land (the “after” scenario) is less desirable than was access to the Land (that is, the “before” scenario), however submitted that this would represent a 5% diminution to the value of the Retained Land, rather than the 20% put forward by the Applicant (Respondent’s closing submissions, [128]-[129]). The Court, after analysing the particular circumstances of the Retained Land, assisted by a physical examination of it during the Court’s view, during which particular attention was given to the interface with Windsor Road, has concluded that the disadvantage should be equated to no more than the 5% contended by the Respondent Council. The Court considers that the alleged disadvantage was grossly overstated by the Applicant.

147. The Respondent Council argued that, contrary to the position in Caruso, on which Mr Phippen relied and in which a 20% diminution in value was accepted by the Court, where the parcel in question was rendered “landlocked” and only able to be purchased by a neighbouring developer, as in Mr Croghan’s case, the Retained Land is likely, on the traffic engineers’ evidence, to be accessible by way of Windsor Road (Respondent’s closing submissions, [131]). The Court considers that the circumstances examined in Caruso have little equivalence to the circumstances in this case, being different in very material respects. In particular, the Court, after considering the evidence of both Mr Morse and Mr Hind, considers that there are relatively easy means of securing, by appropriate engineering design, temporary safe and workable ingress from and egress to Windsor Road. Further, the Court does not accept that there would be particular difficulties or prolonged delays from gaining the necessary approvals from RMS. Accordingly, to assert that a 20% diminution was required because the facts in the case meant that Caruso’s 20% reduction should be applied was an unsustainable proposition.

138. In reaching these conclusions, the Court notes the Respondent Council’s own DCP includes provisions at cl 3.4.4 relating to temporary access to arterial and sub-arterial roads. Subject to the approval of RMS, temporary access may be made available for the purpose of carrying out development provided traffic safety is not compromised. These matters were referred to at [26]-[27] of the Planners’ joint report and by Mr Lunney in the Valuers’ joint report at [112]-[117].

139. The Respondent Council contended that market evidence, in the form of the sales in Garfield Road East (that is, Sales 8 and 9), showed that any issue about a diminution in value brought about by access is not borne out of the actual sale evidence (Respondent’s closing submissions, [133]-[134]). That is, the Respondent Council said, “where a development site is available, and able to be developed using ILP roads, that the issue of access is a secondary concern to that developer and no diminution is paid because of it.”

140. The Court accepts that contention and finds that the sales evidence relied upon by the Respondent Council is persuasive. The Court is of the view that the Applicant has effectively given insufficient weight to the distinction between that which is to be statutorily disregarded and that which remains in place (as a consideration) which is to be taken into account with respect to the Retained Land. The only relevant statutory disregard is that which applies to the Acquired Land, and that is restricted to the public purpose (as the Court has described it earlier) and only insofar as it affects value. Insofar as the Growth Areas SEPP, the ILP, and the proposed school that will require access are concerned, these are all relevant considerations which are in place, to be taken to be ‘settled’ planning policy which ought to be taken into account. To the extent that they have a sufficiently associated relationship to the public purpose which triggered the acquisition of the Acquired Land, then s 55(f) makes it clear that regard must be had to them should there be any increase or decrease in value of the Retained Land (being adjoining ‘other land’ for the purpose of s 55(f)). It is in this context that the Court is to consider the question of injurious affection. The proposed access roads as shown in the ILP, albeit “indicative”, confirms sufficient certainty to the Court that there will be put in place road access arrangements to the advantage of the Retained Land. There is no basis for it to be argued that there is any serious uncertainty with respect to the ILP road access scheme, given its ‘dovetailing’ role within the Growth Areas SEPP. Any future developer of the adjoining land, over which the ILP road layout scheme is shown, will be subject to the same policies and controls. To conjure up uncertainty or difficulties, as Mr Phippen and the Applicant contended, is unwarranted. Any future developer is hardly likely to strike out on a frolic of its own, pursuing a path radically divergent from the ILP. Obviously, refinements are conceivable, quite possibly likely, but it is sufficiently certain for the Court to accept that there will be connecting subdivision roads created on land abutting the Retained Land, roads that would clearly benefit the Retained Land. The Court considers that with such ILP access roads being schematically proposed, it is quite likely that any initially perceived disadvantage would be dispelled.

141. Mr Lunney also referred to the very significant majority portion of the Retained Land being zoned SP2 Infrastructure (Educational Establishment). He indicated that the time frame for the foreshadowed school may be some years away, depending upon the progress of the residential subdivisions within its proximity. For the purposes of considering the implications for the Retained Land of the public purpose proposed for the Acquired Land, there is no basis for disregarding the school zoning of the Retained Land and its future public purpose. At some future point in time, the public purpose for establishing the school will be disregarded for the purposes of determining value for the future acquisition of that land, but until that time, the school zoning is a reality and so the expectation for the use of the majority of the Retained Land will be for that of a school. The traffic, and so road design requirements for a school, as the ILP confirms, are noticeably different to that which might be expected for housing had the whole of the land been given over to housing. In short, these observations raised by Mr Lunney regarding the school zoning further reinforce his contention that 5% be allowed as a maximum.

142. In the Court’s view, there is no basis for concluding that there would be any greater disadvantage to the Retained Land by reason of the access rearrangement than the 5% accepted by Mr Lunney. The Court accepts the 5%, because of the careful and rational case he puts for that amount. Accordingly, the Court considers the Applicant’s alternative propositions, seeking to secure 20% discount, cannot be sustained.

Betterment

153. Further, the Respondent Council noted the evidence given by Mr Lunney in which he contended that the 5% diminution would be offset by a 5% adjustment for betterment on the basis of the reduced size of the Retained Land (Respondent’s closing submissions, [136]-[138]). Reliance was placed on the Court of Appeal decision in Tolson v Roads and Maritime Services [2014] NSWCA 161. It is generally accepted as being an orthodox approach to the valuation of comparative development blocks that smaller lots do attract a higher value per square metre than larger lots, with all other factors being equal. Mr Lunney set out his conclusions in this regard at [126]‑[127] of the Valuers’ joint report after having earlier explained the rationale for adjusting values for size at [70]. Counsel for the Respondent Council, in his closing submissions at [96]-[101], analysed the competing stances on adjustments for size, concluding with a somewhat harsh comparison: “There is no reason to accept Mr Phippen. He is inconsistent in his evidence. He did not apply the statutory disregard. He took an unorthodox position because it suited him. Contrary to that Mr Lunney provided a legally correct, and orthodox approach, which he clearly explained and set out his reasoning. Because of that, his [Mr Lunney’s] evidence ought be accepted”. The Court has concluded that Mr Lunney’s approach is correct and the criticism of Mr Phippen’s approach is well founded. The Court accepts the Respondent Council’s conclusion on this point.

154. The Applicant countered that the Respondent Council’s arguments in relation to both the 5% diminution and the offsetting 5% betterment, were false. In fact, the Applicant contended, “5% grossly under values the uncertainty and risk associated with the development and the reduction in value of the lots in any future subdivision”. Further, with respect to the betterment argument, the Applicant argued that to the extent a smaller parcel yielded a higher rate per square metre, “[a]ny increase in the value per square metre of the retained land on the basis that smaller lots sell for more is not caused by the carrying out of the public purpose, but was value Mr Croghan already possessed – he could always have sold a smaller piece of land had he chosen” (Applicant’s closing submissions, [56]).

155. The Applicant’s argument against the 5% betterment due to Lot 12 being smaller than the Land, on the basis that potential ‘small lot’ value was always inherent in the land, has little merit. It was implied that the Applicant as the original owner of the whole original title could simply have chosen to create out of the Land smaller lots at any time releasing them successively as small parcels, rather than as a larger aggregated lot, thereby securing the supposed increased value attributable to smaller lots. The Applicant’s proposition overlooks the distinction between what must be considered and other hypothetical scenarios that have less credence. Pursuant to s 55(f) regard must be had to any increase or decrease in the Retained Land by reason of the carrying out of the public purpose or the proposal to carry out the public purpose. From the earlier discussion in the judgment, the Court has confirmed its identification of the public purpose as being the drainage measures to address the flooding issues and then the setting aside of the land for public recreation (logically performing the dual role of negating housing in an area required for floodway management whilst concurrently ensuring that such land so assigned, such as to a drainage basin, is thereafter usefully available for public recreation).

156. Critical to this small-lot-value issue, as I have earlier found at [32], the subdivision which created the three lots was inextricably bound to the achievement of that public purpose. So, for the purposes of s 55(f), the creation of Lot 12 is a factor to which regard must be had. As Lot 12 was in fact created, it is the creation of that lot which is to be considered, not a conceivable plethora of smaller lots (to take the Applicant’s proposition to its Nth degree) that the Applicant might opportunistically have created so as to take advantage of the supposed value of a smaller lot. The fact is, in the real world, the Applicant did not attempt to create smaller lots to sell, nor has there been any suggestion that such a concept was ever within contemplation. On the other hand, there was a Lot 12 actually created, the creation of which was inextricably bound to the public purpose, and so s 55(f) requires it to be considered as to whether there are valuation implications. In conclusion, the Court finds that the Applicant’s proposition, regarding inherent value due to some hypothetical potential to have always had the option to subdivide the Land into smaller lots so as to create value, is not a consideration of equal weight.

157. Although the Court has indicated that it is prepared to determine the 5% betterment due to the size reduction in accordance with the submissions of the Respondent Council, the Court is not satisfied that the discussions of betterment comprehensively considered all ‘influences’. It appears to the Court that the valuers failed to consider two potential beneficial implications of the proposal to carry out the public purpose on the Acquired Land. The Court has already foreshadowed its view in this regard in [30] above.

158. Section 55(f) charges this Court, as judicial valuer, to have regard to any increase or decrease in value of the Retained Land by reason of the carrying out of, or the proposal to carry out, the public purpose. As the Court observed above at [30]: “if it were to be shown that the floodway management works proposed for the Acquired Land had the effect of, indirectly, better draining the Retained Land, then conceivably the Retained Land would be more capable of being developed, such as for housing or more comprehensively available for development for a foreshadowed school, thereby adding to its potential and so value”. Similarly, and perhaps more clearly in this case on the facts, with the drainage works on the Acquired Land requiring the retention of open space, with some of it engineered to become a drainage basin, and thereafter set aside for public recreation, development on the Retained Land must gain from the amenity of being located alongside a public recreation reserve. Such amenity must surely add value to the Retained Land whether it be used eventually, in part, for housing and, in part, for the foreshadowed school. Housing-land abutting a recreation reserve should surely be able to achieve higher market value due the amenity of ‘parkland next door’. Likewise, land for a foreshadowed school must surely be more valuable if it is to adjoin a recreation reserve, capable of benefiting a school in a multiplicity of ways, not the least being informal playing fields or basic recreational space in a more pleasant environment.

159. Although the Court is acting as a judicial valuer and so has considerable discretion to determine land values, and despite it considering the observations regarding betterment discussed in the previous paragraph leads to both logical and obvious conclusions, as neither valuer nor counsel explored these aspects of betterment in their evidence, the Court is constrained to make no more than obiter observations. Had the valuers explored these issues, the Court predicts it would have found, in addition to the conclusion reached in [153], that there would be no injurious affection by reason of the proposed public purpose on the adjoining Acquired Land on the basis of identified betterment. The Court would have expected arguments establishing the likelihood of betterment to have been sustained. However, in the circumstances, the Court is not in a position to so determine.

Disturbance

160. At the conclusion of the hearing the Court found that there remained some confusion with respect to the disturbance claim, being the usual miscellaneous claim items for valuation fees and legal costs pursuant to s 55(d). There was a discrepancy between the final sum claimed. The Respondent in its opening submissions at [28] and its closing submissions at [28] stated that the claim made by the Applicant is accepted by the Respondent and so there is no dispute in relation to those expenses. There then followed at [29] in both of the Respondent Council’s submissions a summary table stating that in both the Applicant’s Points of Claim and in the Respondent’s Points of Defence the figure for disturbance was $32,314.98. That same sum was identified in closing oral submissions by counsel for the Respondent Council as the agreed sum (see Transcript, 302.20-23). However, confusingly, the Applicant’s senior counsel in his opening submissions at [22] and then again in his closing submissions at [58] stated the disturbance sum was $30,751.88. In the latter instance he stated this sum was agreed, whereas, as I have recorded, the higher figure had been accepted by the Respondent.

161. As the Court is charged to err in favour of an applicant in such circumstances, giving the benefit of the doubt to the higher figure, the Court has decided to award $32,314.98 for disturbance pursuant to s 55(d), being the items allowable pursuant to s 59(1)(a) and (b).

Costs

162. The Court’s final position, with respect to costs, shall await final orders.

Orders

163. As foreshadowed earlier at [137], in view of the Court’s conclusions and the discrepancy in the Respondent Council’s position discussed in [136]-[137], the Court will not make final orders regarding the award of compensation pursuant to s 55(a) or with respect to costs until after the parties provide to the Court in writing, within seven days, their respective final positions as to quantum.

164. There will be no order awarding compensation pursuant to s 55(f) for injurious affection in relation to ‘other land’ which adjoins the Acquired Land, being Lot 12 in DP 1214217 (being the Retained Land).

165. The Court orders:

1. The parties shall, within seven (7) days of the date of these orders, in the context of the Court’s findings, notify the Court in writing of their respective final positions with respect to:

1. the quantum of the final award of compensation to be awarded pursuant to s 55(a); and

2. any costs order that the Court should make;

2. Pursuant to s 55(d), compensation shall be paid by the Respondent Council to the Applicant for disturbance of $32,314.98 – comprising $15,406.20 for legal costs pursuant to s 59(1)(a) and $16,845.68 for valuation fees pursuant to s 59(1)(b).

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Annexure A - Ex G Phippen sales (78.1 KB, docx)

Annexure B - Lunny sales (77.4 KB, docx)

Decision last updated: 10 January 2019