Davies v Sydney Water Corporation - [2012] NSWLEC 130

Land and Environment Court

New South Wales

Amendment notes

Medium Neutral Citation: Davies v Sydney Water Corporation [2012] NSWLEC 130
Hearing dates: 19-21, 24-26 May 2010 17 June 2010
Decision date: 06 June 2012
Jurisdiction: Class 3
Before: Craig J
Decision:
1. Stand over the proceedings to Friday 15 June 2012 for the purpose of making final orders.
2. Direct that the parties prepare draft Short Minutes of Order to give effect to this judgment, that draft to be provided to my Associate by 4.00pm on 14 June 2012.
3. In the event of disagreement, each party must provide to my Associate by that date and time a draft of the Short Minutes of Order for which they each contend.
4. If an order for costs of the proceedings cannot be agreed between the parties, that question is to be argued when the matter is before me on 15 June, with an outline of submissions by each party on that question also to be provided to my Associate by 4.00pm on 14 June 2012.

Catchwords: COMPULSORY ACQUISITION OF LAND - compensation - land acquired for trunk drainage - 'public purpose' of acquisition - 'disregard' under s 56(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 - land within area released and rezoned for residential purposes - existing creek passing through land - development of flood prone land - need for local or regional trunk drainage in creek corridor to facilitate residential development - market value of acquired land - severance
Legislation Cited:
Baulkham Hills Local Environment Plan 2005

Environmental Planning and Assessment Act 1979

Land Acquisition (Just Terms Compensation) Act 1991

Rivers and Foreshore Improvement Act 1948

State Regional Environmental Plan No 19 - Rouse Hill Development Area

Sydney Water Act 1994
Water Board Act 1987
Cases Cited:
Cassidy v Sydney Water Corporation [2008] NSWLEC 223

Caruso v Sydney Water Corporation [2008] NSWLEC 320

Roads and Traffic Authority (NSW) v Collex Pty Ltd [2009] NSWCA 101; (2009) 165 LGERA 419

Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (No 2) [2006] NSWCA 386; (2006) 68 NSWLR 487

Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259
Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47
Category: Principal judgment
Parties:
Joseph Leslie Davies (First Applicant)
Irene Davies (Second Applicant)
Sydney Water Corporation (Respondent)
Representation: I J Hemmings (Applicants)
J J Webster SC (Respondent)
Hunt and Hunt Lawyers (Applicants)
Bartier Perry (Respondent)

File Number(s): 31229 of 2008

Judgment

CONTENTS

Paragraphs

INTRODUCTION

1 - 4

THE SITE

5 -10

THE SITE: ITS PLANNING CONTEXT

11 -18

THE JUST TERMS ACT

19 - 22

THE SPECIAL USES 5(a) ZONE IS TO BE DISREGARDED

23 - 29

HISTORY OF THE LAND RELEASE FOR THE BALMORAL ROAD RELEASE AREA

30 - 61

PUBLIC PURPOSE

62 - 92

THE ASSUMED OR UNDERLYING ZONING OF THE ACQUIRED LAND

93 - 130

ASSUMED PROVISION FOR DRAINAGE

131 - 164

MARKET VALUE

165 - 198

CONCLUSION ON MARKET VALUE

199 - 203

OTHER HEADS OF COMPENSATION

204 - 210

Severance

211 -217

ORDERS

218 -219

The annexed plan (aerial photograph)

Introduction

Joseph Leslie Davies and Irene Davies were the registered proprietors of land known as 3 Arnold Avenue, Kellyville, being Lot 57 in Deposited Plan 224917 (Lot 57). By notice published in the Government Gazette on 7 December 2007, the respondent, Sydney Water Corporation (Sydney Water), compulsorily acquired part of Lot 57. The part so acquired was identified as Lot 1 in Deposited Plan 1109254 (Lot 1).

Mr and Mrs Davies claimed compensation from Sydney Water for the acquisition of Lot 57. In accordance with s 42 of the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act), Sydney Water offered compensation as determined by the Valuer-General. The sum so determined was $345,200. Mr and Mrs Davies lodged an objection to the amount of compensation offered in accordance with s 66(1) of the Just Terms Act. In the result, it falls to this Court to hear and dispose of their claim: s 66(2).

There is a significant difference between the parties as to the amount of compensation properly payable to Mr and Mrs Davies. The essential difference between them relates to that component of compensation which is reflected in the market value of Lot 1. For their part, Mr and Mrs Davies contend that the market value of Lot 1 is $1,380,000 while Sydney Water contends that the value is $750,000. That difference is largely explained by three factors reflecting the principal issues debated in the proceedings.

Those issues were:

(i) the land use zoning which is assumed to be applicable to Lot 1 at the date of acquisition for the purpose of determining its market value;

(ii) the assumption to be made as to trunk drainage measures required for development of Lot 57 at the date of acquisition and their impact, if any, upon the determination of market value; and

(iii) the proper analysis and application of comparable sales identified and relied upon by the expert valuers retained by the parties.

Before turning to these issues, it is necessary to relate some background facts.

The site

Lot 57 had an area of 20,225m2 with a frontage of 82.46m to Arnold Avenue. The Lot lies on an east-west axis with its western boundary forming the street frontage to Arnold Avenue. It is substantially cleared, with a large single storey dwelling established in landscaped gardens located towards the street frontage. Other buildings on the Lot include a detached three space carport located to the south of the dwelling and a large metal rural shed separated from an additional accommodation facility by a double tandem carport. These latter buildings are located to the rear of the main dwelling on the northern side of the Lot.

Effluent from the dwelling on Lot 57 was treated and disposed of by an aerated septic system, which discharged towards the rear or eastern section of the site. Likewise, a stormwater drainage line servicing all structures and paved areas on the site ran towards the rear.

Strangers Creek, previously known as Smalls Creek, bisects Lot 57, running across the site in a direction from south-east to north-west. The line of the creek was altered in the 1960s when it was straightened and a channel for its passage excavated. This work was not confined to Lot 57. At the time at which that work was undertaken, riparian vegetation on and in the vicinity of Lot 57 was substantially cleared. The Creek remains a weed-infested channel for the passage of water. A small timber and metal bridge in a poor state of repair traversed the Creek within Lot 57.

Lot 1 has an area of 8,735m2 which includes Strangers Creek. The Lot is trapezoidal in shape with an approximate width of 83m and depth on the north of about 103m and on the south a depth of about 113m. The area of Lot 1 includes a portion of the additional accommodation facility erected on former Lot 57. Lot 1 also includes the area used for the aerated septic system associated with the existing dwelling. The existing stormwater drainage line from that dwelling also traverses Lot 1.

The eastern and western boundaries of Lot 1 are each located within the former Lot 57. That has the consequence that Lot 1 severs Lot 57. The residue of Lot 57 is now Lot 2 in Deposited Plan 1109254 (Lot 2), albeit that Lot 2 is in two sections. The western section on which the existing dwelling and other improvements are located has an area of 8,269m2 while the eastern section of Lot 2 has an area of 3,221m2. The latter section is landlocked with no lawful means of access available to it.

It is common ground that part of Lot 57 was liable to inundation in a 1:100 year flood event. Floodwater, in such an event, is assessed as having only a minor depth and low velocity flow. Both the eastern and western boundaries of Lot 1 lie inside or below the calculated boundaries of the 1:100 year flood lines for Lot 57.

The site: its planning context

Kellyville is located in the north-western sector of the Sydney Metropolitan Area. Large parts of that area were, until recent years, rural both in character and in land use. The sector has long been identified as an area appropriate for urban development. As part of a strategy for that development, the New South Wales Government identified the Rouse Hill Development Area (the RHDA) as the first sector within that area for land release in which urban development could be undertaken. Part of the RHDA is known as the Balmoral Road Release Area. Lot 57 was located within the latter area. It will be necessary to consider in due course the planning history for this area and its release for urban development. It is sufficient to notice for present purposes that the Balmoral Road Release Area is within the local government area of Baulkham Hills.

On 26 August 2005, the Minister made Baulkham Hills Local Environment Plan 2005 (the 2005 LEP). This Plan applied to the entire local government area of Baulkham Hills. By Baulkham Hills Local Environment Plan 2005 (Amendment No 5) (Amendment 5), made on 13 April 2006, the Balmoral Road Release Area was rezoned so as to permit residential development. As a consequence of this amendment, Lot 57 was the subject of four different zonings. The section of the site that ultimately became Lot 1 was zoned Special Uses 5(a). The special use for which that zoning was imposed was indicated by black lettering on the zoning map as being "Trunk Drainage".

The area of Lot 57 located to the west of what became Lot 1 was zoned Residential 2(a2). On land so zoned, medium density housing in the form of townhouses and villas was permissible with consent.

The area of Lot 57 that was east of the area that became Lot 1 was rezoned in two ways. A small triangular section adjacent to the northern boundary was zoned Public Open Space 6(a), while the residue of this secton was zoned Residential 2(b1). Land falling within the latter zone was primarily intended for single dwelling house use, with a minimum lot size of 700m2.

There are two provisions of the 2005 LEP, as amended by Amendment 5, that need to be noticed. The first is cl 23 which provides:

"23 Development of flood liable land

(1)Consent must not be granted for development of land that, in the opinion of the consent authority, may be subject to flooding, unless the consent authority has taken into account the following aim of this plan:

to reduce the impact of flooding on owners and occupiers and to reduce private and public losses resulting from flooding, whilst ensuring the environment is conserved and protected.

(2)Despite any other provision of this plan, development must not be carried out on land that is subject to the flood standard, except with development consent."

The expression "flood standard" is defined in cl 5 of the 2005 LEP. It is a reference to a 1:100 flood event as identified in the Flood Plain Management Manual: The Management of Flood Liable Land published by the NSW Government in 2001 (the Flood Plain Manual). It applied to the central section of Lot 57.

The second provision of the 2005 LEP to be noticed is cl 25. It provides:

"25 Protection of riparian land near creeks

(1) Consent must not be granted to the carrying out of development within 200 metres of a creek, unless the consent authority is satisfied that the development will not have a detrimental impact on natural ecosystems, flora and fauna, water quality, natural drainage channels, visual amenity, flooding, soil erosion or topographical features.

(2) Despite any other provision of this plan, development (other than development for the purpose of bridges, demolition of existing structures, environmental protection works, public open space and storm water drainage) must not be carried out on land within 20 metres of the centreline of a creek, as shown on the map marked 'Baulkham Hills Local Environmental Plan 2005 (Amendment No 5)'."

The provisions of the 2005 LEP, including the zoning imposed upon Lot 57 by Amendment 5, are those that applied at the time at which Lot 1 was compulsorily acquired by Sydney Water. The question succinctly raised by the first issue that I have earlier identified is whether the zoning of Lot 1 as Special Uses 5(a) for trunk drainage is to be ignored for the purpose of determining market value and, if it is, what zoning should be assumed for that Lot.

The Just Terms Act

The statutory foundation for determining the issues that I have identified is to be found in Div 4 of Pt 3 of the Just Terms Act. Section 55, which is found in that Division, relevantly provides in these terms:

"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,

...

(c) any loss attributable to severance,

(d) any loss attributable to disturbance,

...

(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."

Of particular significance in the context of the issues in this case are the provisions of s 56. The latter section defines the expression "market value" as used in s 55(a). It does so as follows:

"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 ... ".

In order to address "the disregard" required by s 56(1)(a) a three step process would appear to be involved (Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (No 2) [2006] NSWCA 386; (2006) 68 NSWLR 487 at [57]-[61]). Those steps are:

(i) identify the zoning of the land at the date of acquisition;

(ii) determine whether the imposition or retention of that zoning was part of the carrying out of the public purpose or part of the proposal to carry out the public purpose for which the land was acquired; and

(iii) if the response to step (ii) is in the affirmative, the zoning is notionally set aside and the potential of the land, ultimately reflected in its market value, is answered by determining how the land would have been zoned, at the date of acquisition, but for the proposal to carry out the public purpose.

The first of those steps has already been addressed. The zoning of Lot 1 has been identified as Special Uses 5(a). The principal purpose for which development may be carried out on land so zoned is, by reference to the land use table to cl 13 of the 2005 LEP, that indicated by black lettering on the zoning map. As I have indicated, the black lettering indicates the purpose to be "Trunk Drainage". It is the determination involved in the second and third steps that I have identified which requires more detailed consideration.

The Special Uses 5(a) zone is to be disregarded

Both parties agree that in the present case, the Special Uses 5(a) zone applicable to Lot 1 should be disregarded. The precise manner in which the public purpose should be stated was not agreed between the parties. However, each accepted that an aspect of the public purpose was the acquisition of land by Sydney Water to permit the provision of trunk drainage for new residential development. Sydney Water had accepted responsibility to provide that trunk drainage.

The acquisition notice published in the Gazette on 7 September 2007 stated that Lot 1 was acquired "for the purpose of the Sydney Water Act 1994". The power of Sydney Water to acquire land for the purpose of the Sydney Water Act 1994 is contained in s 47 of that Act. By s 5(2), the principal functions of Sydney Water are identified as those referred to in s 12 " ... and that are the subject of one or more operating licences." By s 12(1), the Governor is authorised to grant one or more operating licences enabling Sydney Water:

"(1) ... to provide, construct, operate, manage or maintain systems or services for:

...

(c) providing stormwater drainage systems, ... ".

At the date of acquisition of Lot 1, there was a current operating licence granted by the Governor to Sydney Water under s 12 of the Sydney Water Act. The licence related to an area that included the Balmoral Road Release Area: it extended to the provision of stormwater drainage services.

It will therefore be seen that in acquiring Lot 1 for the purpose of the Sydney Water Act, Sydney Water was doing so in order to implement drainage services consistent with the provision of "trunk drainage", that being the nominated use for which the Special Uses 5(a) zone was made applicable to that land. It is also to be noticed that by cl 42 of the 2005 LEP, Sydney Water is the public authority required to acquire land that is zoned 5(a) and lettered on the map "... 'Trunk Drainage' ".

I am satisfied that the concession made by the parties that the 5(a) zoning applicable to Lot 1 is to be disregarded for the purpose of determining its market value is a concession properly made. That zoning was imposed as part of and in aid of the proposal of Sydney Water to carry out trunk drainage works within the Baulkham Hills local government area (cf Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 at [53]-[54]).

The detailed articulation of the public purpose upon which the parties differ is really related to the consideration necessary to be directed to the third of the three steps that I have identified when addressing the disregard required by s 56(1)(a) of the Just Terms Act. For their part, Mr and Mrs Davies contend that the public purpose for which the land was acquired was for Sydney Water to provide a trunk drainage scheme in the Balmoral Road Release Area. For its part, Sydney Water contended that the public purpose was to vest in it all of the land required for the regional or trunk drainage strategy adopted by the Department of Planning and Baulkham Hills Council (the Council) for the Balmoral Road Release Area. That was the manner in which the purpose was articulated by Mr Rowan, Sydney Water's consultant planner.

These differing expressions of the public purpose necessitate consideration of the manner in which the need for drainage within the Balmoral Road Release Area had been addressed prior to the making of the 2005 LEP. This consideration also has implications for the assumed zoning of both Lots 1 and 2 in the absence of acquisition of Lot 1 by Sydney Water in order to implement its trunk drainage purpose.

History of the land release for the Balmoral Road Release Area

The release of rural land within the RHDA for residential or urban development was signalled by the NSW Government in the mid 1980s when it published for public comment a draft regional environmental plan known as Sydney Regional Environmental Plan No 19 - Rouse Hill Development Area (SREP 19). The area of land which was the subject of the draft regional plan was about 9,400 hectares and was anticipated to have a capacity to accommodate about 70,000 new dwellings.

Following an extensive period of public consultation, the Minister made SREP 19 as a regional environmental planning instrument on 30 June 1989. Explanatory or background documents accompanied the making of this instrument, indicating that land within the RHDA would involve the staged release of land for urban purposes. Among the policies expressed in the explanatory material accompanying the planning instrument was a policy requiring the provision of services in advance of development. In this context, the explanatory document indicated that private funding of infrastructure could affect the land release program identified by the planning instrument itself.

At or about the time at which SREP 19 was made, the Government accepted a proposal from a group of major landholders within the RHDA to provide funding for water, sewage and drainage services. For this purpose, these landholders formed a consortium and ultimately a company incorporated as Rouse Hill Infrastructure Consortium Pty Ltd (RHIC) for the purpose of implementing the provision of infrastructure as agreed with the Government. The funding provided by RHIC for the provision of infrastructure was to be recouped from statutory bodies which, in turn, could impose charges upon individual developers in accordance with the statutes applicable to the performance of their statutory functions.

The landholders responsible for the incorporation of RHIC are said to have owned about 60 per cent of the areas within the RHDA proposed for the first stage of residential release. None of the incorporators owned land within the Balmoral Road Release Area which, as I have earlier indicated, was part of the RHDA.

While identifying the whole of the land area within the RHDA for urban development, SREP 19 did not, by its own terms, release land for residential development. Rather, by cl 6(1), the Minister was empowered to declare land within the RHDA to be a release area by giving notice to that effect to the relevant council or councils after first forming "the opinion that the land is required for urban development". Before making any such declaration the Minister was required to be satisfied that "a council or other public authority which will be required to provide services to the land if the land is to be developed for urban purposes has been given an adequate opportunity to comment on the proposal to release the land": cl 6(2). Once such a declaration was made, it was then for the local council to prepare a draft local environmental plan for land so declared, making provision for urban development consistent with the general land uses identified in the Table to cl 7 of SREP 19.

Clause 12 of SREP 19 made specific provisions for "flood liable land". It required that local environmental plans be prepared having regard to the NSW Government Flood Plain Development Manual (in the form it then took). Where a draft local environmental plan applied to flood liable land, it was required to contain provisions regulating development on such lands:

"(a) to reduce the impact of flooding and flood liability on individual owners and occupiers; and

(b) to reduce private and public losses resulting from flooding."

By 1989 the RHDA had been declared as a drainage area for the purposes of the Water Board Act 1987 (now repealed). This declaration enabled the then Water Board to levy service charges for the provision of infrastructure on land within the RHDA. The Water Board was the statutory predecessor to Sydney Water and the current legislation, namely the Sydney Water Act relevantly includes an entitlement for Sydney Water to levy service charges in a similar manner to that provided by the Water Board Act. At a practical level, the power to impose these charges was the means by which Sydney Water (or its predecessor) was able to repay the up-front infrastructure costs outlaid by RHIC. (Further reference to Sydney Water includes reference to the Water Board where the latter was the relevant statutory body at the time).

Kinhill Engineers were retained by the Department of Planning to investigate and report upon drainage within the RHDA. The report of that investigation was prepared in June 1989. Its purpose was to establish "design flood extents, for planning purposes" and develop principles "for the conceptual design of the drainage system." The report identified a trunk drainage scheme to manage increased flows consequent upon the anticipated urban development. The trunk drainage system proposed would consist of a 'natural' channel system with in-line detention basins. For the section of land between Memorial Avenue and Windsor Road, Kellyville, being part of the Balmoral Road Release Area within which Lot 57 was located, three detention basins were in contemplation along the line of Strangers Creek.

In February 1990, the Council made a submission to the Minister directed to rezoning of land within the RHDA and the consequent preparation of draft local environmental plans necessary to achieve rezoning. The purpose of the submission was to identify matters that, according to the Council, required resolution before it could proceed with the exhibition of any draft planning instrument. Matters so identified included drainage. In that context it made reference to the drainage strategy identified in the Kinhill Report which the Council considered to be "essential". It submitted that until the acquisition of land below the 1:100 flood level was resolved and the policy known in relation to the Board's works and its intentions for the land upon which those works were to be carried out, those flood liable lands should remain zoned for rural purposes. The outstanding issues identified in the Council's submissions in relation to drainage were:

" - the signing of the Water Board/Consortium Agreement which would enable necessary infrastructure to be in place so that development can proceed;

- possible conflicts between the Water Board and Council over land use controls in the 1:100 area; and

- on-going maintenance of drainage areas."

The "issues" identified by the Council arose out of advice from the Water Board that it would be willing to acquire and maintain certain lands required for drainage but not land within the remainder of the floodway proposed for control by other means. Details of the ownership, control and maintenance of trunk drainage were to be the subject of further discussions between the Board and the Council.

The first area identified for release within the RHDA was an area known as the Parklea Release Area. That area was also identified in the Government's Urban Development Program. It was the area within which the incorporators of RHIC had a majority landholding.

In early 1990, a draft local environmental plan was prepared for urban development within the RHDA. The draft planning instrument related not only to the Parklea Release Area but also to additional areas. Consistent with the Council's submission to the Department in February 1990, the draft planning instrument proposed that lands below the 1:100 flood level be zoned Rural 1(a).

The Department of Planning rejected the Council's attempt to include land outside the Parklea Release Area. As a consequence, exhibition of the draft instrument proposing residential development outside the Parklea Release Area was not allowed. A draft local environmental plan was subsequently exhibited consistent with the Department's requirements.

In December 1990, Sinclair Knight & Partners, Consulting Engineers, completed a report entitled "Rouse Hill Urban Release Area Drainage Concept Finalisation", commissioned by RHIC. It expressly "refined" the trunk drainage strategy that was the subject of the 1989 report prepared for the Department of Planning by Kinhill Engineers. While some changes to the detail of the scheme recommended by Kinhill were suggested by Sinclair Knight, the essential elements of the Kinhill scheme remained intact, namely the provision of trunk drainage using major creeks and in-line detention basins. The object was to ensure that, on a catchment wide basis, post development flows did not exceed pre-development flows at a number of identified locations. The Sinclair Knight report did recommend a different location for and reduction of the number of basins between Memorial Avenue and Windsor Road along Strangers Creek.

In January 1991 a staff report was submitted to the Council concerning its then draft local environmental plan. In respect of those areas that were to be rezoned for urban development, the report indicated that land previously identified in the Rural 1(a) zone, intended to accommodate drainage requirements, would now be rezoned as either 5(a) Special Uses for trunk drainage, to be acquired by the Water Board for that purpose, or would be zoned Open Space 6(a), where land was intended to be acquired by the Council. Where land was to be retained in private ownership, the report indicated a zoning in accordance with the adjoining zone was intended, subject to special provisions restricting development on that land where it was being used for drainage purposes.

Also in January 1991, an agreement was entered into between the Water Board and RHIC whereby the Board agreed to take responsibility for delivery of the trunk drainage system in the RHDA, including the necessary acquisition of property for that purpose. The agreement contemplated that RHIC would be responsible for obtaining and implementing design of the drainage system, no doubt subject to input form the Board. RHIC accepted responsibility for carrying out the work for which it would be reimbursed by the Board. The Board would, in turn, recoup its payments to RHIC by the imposition of charges under its governing legislation.

Baulkham Hills Local Environmental Plan 1991 (the 1991 LEP) was subsequently made. The Parklea Release Area was rezoned for urban purposes while the area within the Balmoral Road Release Area retained a Rural 1(a) zoning. No different zoning was imposed upon land along and adjacent to Strangers Creek.

In 1998 the Minister for Planning declared the Balmoral Road Release Area to be a release area pursuant to cl 6(1) of SREP 19. This release area was identified in the structure plan to SREP 19 as a "Living Area". Following the declaration, the Council commissioned the preparation of a local environmental study for the area, conformably with the provisions of Pt 3 of the Environmental Planning and Assessment Act 1979 (the EPA Act).

For the purpose of preparing the local environmental study, a number of separate reports were either prepared or commissioned to assess the impacts of future urban development and the controls appropriate to be applied to that form of development. Background documents identified the release area as comprising about 500 hectares of land that was substantially cleared and traversed by two creeks, one of those being Strangers Creek. The background documents also identified the fragmented ownership of the area with over 230 land owners. The preference for maintaining creeks in their "natural" form over engineered drainage channels so as to increase development areas was recorded, although it was acknowledged that Sydney Water would be responsible for providing drainage infrastructure and was undertaking its own studies for that purpose.

A report directed to future planning was prepared for the Council in August 2001. That report followed exhibition of the environmental study. The report recorded that a "preliminary drainage strategy" for the release area had identified several potential drainage options. It also recorded that Sydney Water was liaising with the Department of Land and Water Conservation and the Council in order to "concur on the most preferred drainage strategy (both environmentally and economically) for the release area."

Drainage strategy for the Balmoral Road Release Area was the subject of a report prepared by Gutteridge Haskins and Davey, Consulting Engineers, in December 2001 (the GHD Report). This Report assessed a number of strategies for trunk drainage, indicating the preference of Sydney Water for the implementation of a trunk drainage system "that would incorporate the use of off-line detention basins to supplement the water sensitive design being undertaken by Council."

The GHD Report addressed five strategies for trunk drainage but recommended that which was described as Strategy 4. That strategy essentially involved use of the existing creek system but with off-line detention basins. Water quality would be controlled by a water sensitive subdivision design, with discharges initially into the detention basins before discharge into the creek system. By this means, the manner in which individual developments were designed would address water quality while the trunk drainage system would address the quantity of water to be carried away. No detention basin was proposed to be located on Lot 57.

Before preparing a draft local environmental plan, the Council prepared and publicly exhibited what it described as a structure plan or draft master plan for the Balmoral Road Release Area. It adopted this approach in accordance with a report prepared for it on 28 October 2003. Relevantly, the report addressed the topic "Flood Plain Risk Management" as follows:

"● All currently rural-zoned land identified as being below the estimated 1-in-100-year-flood level to be zoned Special Uses 5(a) (Trunk Drainage) or 5(c) (Trunk Drainage and Conservation) and to be acquired by Sydney Water.

● Sydney Water to be responsible for management of drainage corridors.

● Sydney Water to manage stormwater quantity through provision of five detention basins.

● No public stormwater drainage to pass through private property. To be contained within drainage corridors or roads."

The map demonstrating the draft master plan that appears to have been adopted at that time shows that an area approximating the western third of Lot 57 was proposed for medium density development, the central section of the Lot to be zoned Special Uses for trunk drainage and a small section adjacent to the eastern boundary would be a combination of riparian corridor, road and open space. The central section identified as Special Uses for trunk drainage was a much larger area than that which ultimately comprised Lot 1 resulting from the gazettal of Amendment 5 to the 2005 LEP.

The Council resolved to prepare the draft local environmental plan for the Balmoral Road Release Area following consideration of a report from its staff on 20 July 2004. That report addressed submissions received by the Council following exhibition of the release area structure plan. The report recorded that a number of submissions had been received in relation to the proposed riparian corridor designation in that plan. The report also recorded that a review of the plan had resulted in reduction of the riparian corridor along the two main water courses (one of which was Strangers Creek). The width of that corridor had been reduced to 40m.

On 5 March 2004 Sydney Water entered into an infrastructure deed with Rouse Hill Infrastructure (Stage 3) Pty Ltd (RH 3), the nominee of RHIC, for the financing, design, supply, construction, commissioning and completion of infrastructure for the Balmoral Road Release Area, described in that deed as being "Stage 3 Works". RHIC was described in the deed as being a not for profit organisation, facilitating and procuring the carrying out of water based infrastructure in the RHDA.

In April 2005, the Government published the Flood Plain Development Manual which replaced earlier editions of that Manual published in 1986 and again in 2001. The primary objective of the Government Flood Prone Land Policy expressed in the Manual is to reduce the impact of flooding and flood liability on individual owners and occupiers of flood prone property and to reduce private and public losses resulting from floods. The Policy also expresses recognition of the benefits that result from the use, occupation and development of flood prone land. In that context the Policy seeks to promote the use of a merit approach, balancing "social, economic, environmental and flood risk parameters to determine whether particular development or use of the floodplain is appropriate and sustainable". By taking such an approach to development within the flood plain, the Policy is expressed to avoid the unnecessary sterilisation of flood prone land while ensuring such land is not developed in a manner that is "inconsistent with its exposure to flooding."

In about September 2005, the Minister for Planning issued a new direction under s 117 of the EPA Act in respect of flood prone land. An expressed objective of the direction was to ensure that the development of flood prone land is consistent with the Flood Prone Land Policy and the development Manual that accompanies that policy. The direction was expressed to apply when a council prepared a draft local environmental plan that creates, removes or alters a zone or provision that affects flood prone land.

One of the restrictions expressed in the direction is that flood prone land that is zoned rural should not be rezoned to a residential zone. However, the direction recognised a capacity to prepare a draft local environmental plan that is inconsistent with the general restriction otherwise imposed if the Director-General is satisfied that variation or exclusion of the restriction should be considered, having regard to the objects of the EPA Act and other matters identified in the direction.

By July 2005, the Council had not only prepared and exhibited a draft local environmental plan for the Balmoral Road Release Area but had also prepared and exhibited a draft local environmental plan for the whole local government area of Baulkham Hills. As I have earlier indicated, the general local environmental plan which I have described as the 2005 LEP was made on 26 August 2005. At the time at which that plan was made, it zoned the Balmoral Road Release Area as Rural 1(a). It was not until Amendment 5 to the LEP was made on 13 April 2006 that the Balmoral Road Release Area was zoned for urban development, resulting in Lot 57 being zoned in the manner described earlier in this judgment. As will be apparent from the description of those zones that applied to the land, they differed from the land use zones indicated on the structure plan or draft master plan that had been publicly notified in late 2003. Of present relevance, the Council had removed any riparian corridor zone and the Special Uses zone for trunk drainage had been reduced in width, as it affected Lot 57, from that indicated on the structural plan.

I have earlier recorded the fact that the eastern and western boundaries of Lot 1 do not coincide with the 1:100 year flood line as calculated prior to residential development. The more significant difference is to the west. The land area within what is now Lot 2 extends to the east of the 1:100 year flood line and is zoned Residential 2(a2). An area of about 1163m2 is so zoned and lies to the east of that flood line.

The background to the release of land within the Balmoral Road Release Area for residential purposes is the basis upon which the issues raised by the parties can be addressed. In order to address the first of those issues that I have earlier identified, namely the land use zoning assumed to be applicable to Lot 1, it is first necessary to say more about the "public purpose" for which that Lot was acquired by the Respondent.

Public purpose

While, for reasons earlier indicated, I have accepted the agreement between the parties that the Special Uses 5(a) zone applicable to Lot 1 at the date of acquisition should be disregarded for the purpose of determining market value, it is necessary to identify that public purpose with a little more particularity than has earlier been stated. It is the full description of that public purpose that informs the 'disregard' for the purpose of applying s 56(1)(a) of the Just Terms Act. This articulation is required because the proper description of the public purpose impacts upon the zoning assumed to apply to the acquired land at the date of acquisition.

The parties rely upon the public purpose as being that articulated by their respective town planning consultants.

As I have earlier indicated at [28], Mr and Mrs Davies articulate the purpose of acquisition by Sydney Water as being the provision of trunk drainage in the Balmoral Road Release Area. As articulated by their consultant planner, Mr Grech, that purpose "is to use public [sic] owned land to accommodate a stormwater drainage system, including potential works to creeks and tributaries and associated structures, in particular detention basins, to facilitate urban development in the catchment." The identification of the purpose in this matter would have the consequence that there would need to be disregarded for the purpose of s 56(1)(a) any proposal that involved the provision of trunk drainage within Lot 1.

When identifying the public purpose for which Sydney Water contends, its consultant planner, Mr Rowan, relies upon the judgment of Jagot J in Cassidy v Sydney Water Corporation [2008] NSWLEC 223. In that case, her Honour was required to determine compensation payable to the owners of land within the Balmoral Road Release Area, part of whose land had been compulsorily acquired by Sydney Water. The land there acquired had also been zoned Special Uses 5(a) under Amendment 5 to the 2005 LEP. Her Honour indicated that, based upon the evidence adduced and submissions of the parties before her, there were four possible descriptions of the public purpose. The first and fourth of those descriptions were ultimately rejected by her Honour but the second and third descriptions of public purpose remain apt. Those she described at [55] as follows:

" ... (ii)the respondent providing trunk drainage in the Balmoral Road Release area ... , (iii) vesting in the respondent all of the land required for the regional or trunk drainage strategy adopted by the Department of Planning and the Council for the Balmoral Road Release Area or, putting it another way, bringing that land into the respondent's ownership in addition to its ownership of the works comprising the trunk drainage system by dint of s 37 of the Sydney Water Act 1994....".

Mr Rowan embraces description (iii) as articulated by Jagot J in Cassidy. He states in the joint report prepared by the planners that the "adopted" trunk drainage strategy to which reference is made is not, itself, part of the public purpose as such a scheme would have been implemented by others, absent the role of Sydney Water to acquire land so as to facilitate its release for urban purposes. So understood, the purpose is simply the vesting of the land zoned Special Uses 5(a) without the necessity to include in that purpose the basis upon which the acquisition was founded. The disregard therefore required would be the Special Uses 5(a) zoning, as conceded by Sydney Water, together with Sydney Water's ownership of the land. I do not accept that the public purpose can be so confined.

I have earlier made reference to the notice published in the Gazette, which effected the compulsory acquisition of Lot 1 by Sydney Water. That Notice states that the land was acquired "for the purpose of the Sydney Water Act". Those purposes are many and varied. In the context of a provision such as s 56(1)(a) of the Just Terms Act, the purpose for which land is acquired by compulsory process must be determined at a level of particularity that is greater than mere reference to the purpose of legislation under which the resuming authority is constituted and from which its power of acquisition is derived. That particularity is provided by the circumstance that engendered exercise of the compulsory acquisition of power by the relevant "authority of the state": s 5 of the Just Terms Act.

In the present case, the particular circumstance that engendered the exercise of power by Sydney Water was the provision of a trunk drainage system within the RHDA generally and, in particular, within the Balmoral Road Release Area. As I have earlier identified by reference to s 12 of the Sydney Water Act, one of the functions of Sydney Water is the provision of trunk drainage. That is a purpose for which land can be acquired by it.

Having identified trunk drainage as a purpose of Sydney Water in acquiring the land, it is necessary to consider whether that purpose requires greater particularity for the purpose of s 56(1)(a) of the Just Terms Act. It is necessary to consider whether the public purpose extends to:

(i) the trunk drainage strategy and infrastructure that has been adopted by and implemented for and on behalf of Sydney Water by RHIC, or

(ii) any other trunk drainage strategy affecting Lot 1.

It does seem to me that the actual strategy or scheme, with its associated infrastructure, that has been or is sought to be implemented by or on behalf of Sydney Water is part of the public purpose for which the land was acquired.

Having identified that the particular scheme embraced by Sydney Water at the date of acquisition was part of the public purpose and therefore should be disregarded, it is next necessary to consider whether that disregard should extend to any other trunk drainage strategy. It will be remembered that Sydney Water contended that the public purpose should extend to the strategy adopted by both the Department of Planning and the Council whereas Mr and Mrs Davies contended, in effect, that the purpose extended even more broadly to any stormwater drainage system intended to facilitate urban development in the catchment.

I interpose that there have been two prior decisions of this Court addressing claims for compensation following acquisition of land by Sydney Water in the Balmoral Road Release Area. The first of those is the decision of Jagot J in Cassidy v Sydney Water Corporation to which I have earlier referred. The second is the decision of Pain J in Caruso v Sydney Water Corporation [2008] NSWLEC 320. It is trite to observe that the ultimate determination made in each case turned upon the evidence adduced in each of those matters. I make this observation because it would appear that the evidence tendered before me, particularly that which addressed the background to release of the Balmoral Road Release Area, differed from that tendered in the earlier proceedings. In particular, that difference relates to evidence of an adopted trunk drainage strategy by the Council.

I have earlier identified Mr Rowan's evidence as to the public purpose being expressed by reference to a trunk drainage strategy adopted by the Council. Dr D Martens, a civil environmental engineer specialising in hydrology, prepared his evidence "taking into account the trunk drainage strategy adopted by the Council for the Site". Dr Martens was called to give evidence by Sydney Water. In making reference to the strategy "adopted by the Council", each of these witnesses appeared to be repeating the observations of Jagot J at [50] in Cassidy. The document principally relied upon by Sydney Water's witnesses as evidencing this strategy took the form of a report apparently prepared within the offices of the Council. It is entitled "Balmoral Road Release Area Drainage Strategy". The second page bears the words "Published October 2001". Notwithstanding that statement, a perusal of the document indicates that it was a draft. Part B of the document is headed "Trunk Drainage Strategy". Section 1 of that Part has some opening observations while section 2 is headed "Archeological Study". Beneath that heading there was no text. Sections 3.2 to 3.9 contain a series of headings, clearly intended to be addressed by text but no text appears beneath those headings. Relevantly, section 3.9 is headed "Flooding" beneath which appears the note "Hydrological Reports". Section 3.11 is headed "Evaluation of Options" while section 3.12 is headed "Adopted Strategy". No text appears beneath any of those headings. In short, no strategy for drainage is able to be identified in this document.

When identifying the background documents relevant to his Statement of Evidence, Dr Martens refers to the fact that in "October 2001, Council published a drainage strategy prepared by GHD for the Balmoral Road Release Area (Incorporating the Site) with the object of providing a rehabilitated creek system and easily accessible trunk drainage." There is no report prepared by GHD that is dated October 2001. The only October 2001 report identified is the internal document, clearly in draft, to which I have already referred.

As my earlier recitation of events leading to the release of the Balmoral Road Release Area indicates, there was a report prepared by GHD in December 2001. The text of that document revealed that it was prepared either for Sydney Water or for RHIC for consideration by Sydney Water. Clearly, it was not prepared at the behest of the Council.

Recognising the difficulties presented by the misunderstanding of these documents, Sydney Water was invited during the course of the hearing to provide evidence that the Council had adopted a trunk drainage strategy as was suggested to be the case. No resolution of the Council was produced and Mr Webster SC, who appeared for Sydney Water, candidly conceded that none could be located.

In the absence of evidence of any resolution of the Council identifying a trunk drainage strategy adopted by it, Mr Webster sought to gain an inference that such a strategy had been adopted by reference to statutory reports prepared by the Council and submitted to the Department of Planning. The first report prepared was by way of notification pursuant to s 54(4) of the EPA Act prepared on 30 September 2004. Its purpose was to notify the Director-General of the Department of Planning of the Council's resolution to prepare a draft local environmental plan that ultimately became the 2005 LEP. Under the heading "environmental impacts", the report indicated that the draft instrument "aims to protect and rehabilitate" those areas of environmental significance that relate to the two existing creek systems within the Balmoral Road Release Area by introducing a new "Environmental Protection (Urban Stream Conservation) Zone". The report continues:

"The proposed zone permits only a very restricted range of permissible uses with its main objective being to protect and conserve land within a 40-metre-wide corridor for each of the two main water courses running through the release area."

That observation says nothing, in terms, directed to a particular trunk drainage strategy.

The s 54 report of 30 September 2004 identified the local environmental study undertaken for the Balmoral Road Release Area and the "components" that were included in that study. Following reference to those components, the report referred to studies undertaken by Sydney Water and RHIC, including "the BRRA Trunk Drainage Strategy". That may be a reference to the GHD Report which I have earlier identified. However, the evidence does not otherwise establish that to be the case.

On 10 February 2005 the Council prepared a report under s 64 of the EPA Act for the purpose of obtaining a certificate under s 65 enabling the draft local environmental plan to be publicly exhibited. After identifying the fact that the Council had prepared a local environmental study for the Balmoral Road Release Area and the components of that study, studies undertaken by Sydney Water were identified, including "the BRRA Trunk Drainage Strategy". The text of the report indicates that the "studies" to which reference was made were those sent to the Department with the s 54 report of 30 September 2004.

References in these reports to the "BRRA Trunk Drainage Strategy", without more, does not enable me to draw an inference that a specific trunk drainage strategy had been adopted by the Council.

As I understood the evidence of Mr Rowan, it was his opinion that if the Council's trunk drainage strategy could not be discerned from the documents and reports prepared between 2001 and 2005, its position could be inferred from decisions made prior to the decision of Sydney Water to accept responsibility for trunk drainage within the RHDA. It was his position that generally land below the 1:100 year flood level be zoned Rural 1(a) in order to accommodate trunk drainage. He expressed the opinion that the map prepared by the Council for the draft local environmental plan exhibited in 1990 showed the flood liable land, that is land inundated in the 1:100 year flood, to be zoned Rural 1(a) when the surrounding land was proposed to be zoned for residential purposes. This was at a time at which the Kinhill drainage strategy had been prepared for the Department of Planning.

A consideration of plans contained in the Kinhill Report for in-line works and storage basins along Strangers Creek indicates that the land required for these works coincided with the land intended to be rezoned Rural 1(a) in the Council's then proposed local environment plan. Expressed differently, the land intended to be so zoned was to accommodate the trunk drainage works suggested by Kinhill rather than to identify lands that fell below the 1:100 year flood line. So much was accepted by Mr Rowan in cross-examination.

When summarising his evidence as it related to the Council's adopted trunk drainage strategy, Mr Rowan stated that the Sinclair Knight Report of December 1990 had been prepared for the Council. Mr Rowan had apparently overlooked the introduction to that Report which states that it was commissioned by RHIC, an oversight which was acknowledged by him in cross-examination.

As I have earlier indicated, the 1990 Sinclair Knight Report did not alter the essential strategy proposed by Kinhill but rather refined it. It proposed modification to the existing creek system by provision of grass-lined floodways with a number of in-line detention basins.

Mr Rowan's reliance upon the Council's position in relation to trunk drainage in 1990 needs to be considered in context. The Council's prime concern was that responsibility for trunk drainage should be assumed by Sydney Water. This assumption of responsibility in fact occurred in January 1991. As a consequence, it is necessary to consider whether from that time until Lot 1 was compulsorily acquired in December 2007, there is manifestation of a trunk drainage strategy on the part of the Council.

Between 1991 and 2007, the only evidence directly manifesting trunk drainage strategy relates to the actions of Sydney Water in accepting the design, construction and delivery of works by RHIC. Through RHIC, the trunk drainage strategy continued to evolve.

The key evidence manifesting that evolution emerges from the report provided in December 2001 by GHD. That Report altered the earlier strategy by nominating a reduced number of detention basins that were located off the line of the two creeks within the Balmoral Road Release Area. The selection of Strategy 4 recommended by GHD would result in the initial discharge from developed areas being taken to the detention basins from where water would be discharged to the two creeks. The Council would be responsible for water sensitive subdivision design which would treat water quality. Sydney Water would be responsible for the provision and sizing of structures, including the detention basins, to address water quantity. The number of detention basins identified in the 2001 GHD Report were subsequently reduced in number.

I have earlier identified the deed entered into between Sydney Water and RHIC through its nominee RH 3 in relation to infrastructure works. The Council is not a party to that deed. The deed recites that "Sydney Water has certain responsibilities for the ... provision of ... stormwater drainage systems ... ". As works are completed in accordance with the deed, they become the property and responsibility of Sydney Water (cl 15).

Following execution of the deed, it is apparent that the trunk drainage strategy being implemented by Sydney Water, through RHIC is the GHD strategy, as refined. That is evident from the fact that on 9 December 2004 the Council granted a development consent for the construction of a detention basin known as Detention Basin No 31 in the Balmoral Road Release Area.

The next relevant event to be noticed is the rezoning of the Balmoral Road Release Area, effected by Amendment 5. So much of the land as is there zoned Special Uses 5(a) for the purpose of trunk drainage along and adjacent to the line of Strangers Creek does not, as I have earlier demonstrated, reflect the 1:100 year flood line for the release area either in its pre-development or post development state. It reflects only the land required to accommodate the flood drainage strategy formulated for and accepted by Sydney Water.

I have identified the events that have occurred between January 1991 and December 2007 in order to demonstrate that there is no particular strategy for trunk drainage adopted by the Council. The evidence to which I have referred indicates that once Sydney Water accepted responsibility for trunk drainage, the Council accommodated Sydney Water's requirements by zoning land accordingly. Thus, I cannot conclude that the Council has, independently, adopted a specific trunk drainage strategy.

While this review of the Council's position confirms my view that the particular scheme or strategy ultimately adopted by Sydney Water is to be disregarded for the purpose of determining market value, it does not follow that any trunk drainage scheme along the line of or within the vicinity of Strangers Creek is to be disregarded. This latter conclusion is the consequence of understanding the topography of land within the Strangers Creek catchment between Memorial Avenue and Windsor Road. It is also supported by evidence adduced as to the Council's approach to the provision of water sensitive design to be incorporated in the subdivision of land for residential purposes. It is that evidence which must be considered as relevant to both the first and second of the principle issues that I earlier identified, namely the assumed land zoning applicable to Lot 1 and the assumptions to be made as to trunk drainage measures for Lot 57 on the hypothesis that Lot 1, as a component part of Lot 57, had not been zoned to accommodate the purpose of Sydney Water.

The assumed or underlying zoning of the acquired land

The parties, through the evidence of their respective planning consultants, have not agreed upon the assumed or underlying zoning for Lot 1 at the date of acquisition. For their part, Mr and Mrs Davies contend that the underlying zoning is that propounded by Mr Grech. In his statement of evidence and in the report jointly prepared with Mr Rowan, Mr Grech opined that from its western boundary to the western bank of Strangers Creek, the underlying zone of Lot 1 is the same as that which, in fact, pertained to the western section of Lot 2, namely Residential 2(a2). From the western bank of the creek to the eastern boundary of Lot 1, Mr Grech is of the opinion that the zoning would be Open Space 6(a).

For his part, Mr Rowan has expressed his opinion as to the underlying zoning in different terms at different times. In his statement of evidence, Mr Rowan contended that Lot 1 would have been zoned Rural 1(a) under the provisions of the 2005 LEP. In the statement jointly prepared with Mr Grech, Mr Rowan advanced an alternative and more restrictive zoning. He advanced the possibility of an underlying hybrid zone with objectives consistent with those applicable to the Special Uses 5(a) zone and permissible land uses similar to those provided for in the Special Uses 5(c) (Trunk Drainage and Conservation) Zone.

In considering the debate between the planning consultants, it is important to note matters upon which they agreed in their joint statement of evidence under the rubric of "underlying zoning". They agreed that as at April 2006 "or thereabouts" the Balmoral Road Release Area would have been rezoned for residential purposes. They also agreed upon the effect of the report prepared by Council officers in 1991 directed to progress of rezoning of land within the RHDA for urban purposes which, it will be remembered, then contemplated inclusion of the Balmoral Road Release Area. Their agreement as to the implications of those reports is expressed as follows:

"(a) The report of 21 January 1991, after agreement of [Sydney Water] to acquire land for trunk drainage, and to manage future trunk drainage, indicates that land affected by the 100 year flood would be zoned in three ways: land required for trunk drainage to be acquired by Sydney Water and the remainder of the land zoned Open Space or retained under private ownership.

(b) The report of 24 January 1991 after agreement of [Sydney Water] to acquire land for trunk drainage, and to manage future trunk drainage, indicates that land affected by the 100 year flood would be zoned in three ways: land required for trunk drainage would be zoned Special Uses 5(a) Trunk Drainage to be acquired by Sydney Water and the remainder of the land to be zoned Open Space 6(a) or [under private ownership] zoned in accordance with the adjoining zone but subject to restrictions.

(c) The rezoning of the BRRA in 2006 did include instances of land not required for trunk drainage purposes but affected by the rural (i.e. urban development) 100 year flood extent being zoned within an urban residential zone."

The expression of Mr Rowan's alternate statement of underlying zoning emerges from the options for underlying zoning expressed as "scenarios" in the joint statement. Those alternatives are expressed to be:

"Scenario 1: The 5(a) zoned land would have been Zone 1(a) Rural (or similar trunk drainage specific zone) accompanied by the same zone objectives as exist for the Zone 5(a); with permissible land uses similar to Zone 5(c); but without an acquisition clause.

Scenario 2: The site remains zoned 1(a) Rural under BLEP 2005 with controls as applying to that zone.

Scenario 3: the 5(a) zoned land being absorbed into the adjoining Residential 2(b1) [sic] zone but with restrictions as contained within the current LEP or zoned 6(a) Public Open Space and acquired by Council."

Subsequent to the tender of the joint statement, reference to the Residential 2(b1) zone in 'Senario 3' was amended to be a reference to the Residential 2(a2) zone.

The agreement between the planners as to the Council's position in 1991 can readily be accepted. Relevantly, the position then advanced was that land not required for trunk drainage and which remained in private ownership would assume the zoning of adjoining land. As was also apparent from the position then expressed, if privately owned land had previously been zoned for rural purposes and was land not required by Sydney Water for trunk drainage purposes, resulting in that land assuming the zoning of adjoining land, so much of it as was below the 1:100 year flood level would be subject to such controls as applied to flood liable land.

That concept saw refinement in the development of the strategy for release of the Balmoral Road Release Area. The notion of a riparian corridor was the subject of the Council's advertised strategy, following preparation of the local environmental study which preceded preparation of the 2005 draft local environmental plan. In a report to which I have earlier referred, prepared for a meeting of the Council on 28 October 2003, reference was made to the Council's riparian corridor strategy in the following terms:

"Although DIPNR has given in-principle support to Council's riparian corridor strategy, final endorsement will require the resolution of the long-term maintenance and conservation strategy to be required of land owners, including Sydney Water.

Meetings are continuing between Council, DIPNR and Sydney Water to come to agreement on this issue."

Subsequently, as I have also recorded, submissions made in response to the draft local environmental plan that had indicated proposed riparian corridor zones were considered. As a result of those submissions it was concluded that along the two watercourses within the Balmoral Road Release Area, the riparian corridor should be reduced to 40m in width. That same report also recorded that a contributions plan under s 94 of the EPA Act would "not provide a viable mechanism to acquire land within riparian corridors unless the land can be shown to contribute to public recreation needs."

There is a further matter that needs to be noticed. I have earlier referred to the development consent granted by the Council in December 2004 for the construction of Basin 31 to be constructed as part of the trunk drainage scheme for Sydney Water. This Basin was to be constructed by RH 3, the nominee of RHIC. Basin 31 was to be located north-west of Lot 57 on land that also had frontage to Arnold Avenue.

In February 2005, RH 3 wrote to the then Department of Infrastructure, Planning and Natural Resources (DIPNR), seeking approval to reduce the width of the creek tributary that led to the proposed Basin 31. The proposal by RH 3 was that the creek be reformed to provide a drainage channel of 17m in width. The proposal was made on the basis that the revised draft of the local environmental plan for the Balmoral Road Release Area had removed the intention to zone riparian corridors in this location.

DIPNR refused this request. It did so in a letter dated 3 May 2005 in which it referred to the Balmoral Road Release Area Draft LEP as proposing an amendment to cl 25 of the 2005 LEP by inserting subclause (2). That amendment would have the effect of restricting development within 20 metres of the centre line of the creek. The letter continued:

"These provisions imply, in the Department's view, that the creek lines will be preserved. While the zoning provisions don't specify a 'riparian' corridor, the potential for it to function as one has not been extinguished.

While the Department recognises that the naturalness of the water course in the release area has been severely compromised by past developments, it does have policy objectives that seek to preserve and restore the natural qualities as much as possible within the context of urban development. These objectives have been consistently introduced into the extensive consultations for the development of the LEP and the infrastructure proposals. In coming to agreed positions the Department has made concessions in terms of riparian widths, engineering aspects of water infrastructure, an on-line detention basin, etc. In exchange it expects that the areas remaining for riparian functions and natural amenity generally, are rehabilitated and landscaped to a very high standard, and are not diminished by fragmentation, encroachments and edge effects."

RH 3 responded by acknowledging that a 40m corridor would be maintained for the creek that feeds into proposed Basin 31. In its letter, RH3 stated that as the 1:100 year urban flood would be outside the 40m area, "it will be necessary to fill and shape the surrounding land to contain the urban flows to within the 40m corridor." In short, RH 3 sought the sanction of DIPNR to reshape the creek within the 1:100 year urban flood level and then to fill to the 40m line.

On 17 June 2005, DIPNR responded in the following terms:

"I refer to your letter of 30 May 2005 in which you agree to adopt a 40m riparian zone corridor for the lateral trunk drainage between Arnold Avenue and the proposed Detention Basin no. 31.

Your proposal to fill and shape the surrounding land to accommodate the 1:100 ARI (and plant the corridor according to the Landscape Rehabilitation and Restoration Plan) is acceptable to the Department."

It is against this background of consideration both by the Council and the Department that Amendment 5 came to be made as an amending planning instrument. Land that was affected by the 1:100 year flood but not required by Sydney Water was rezoned from Rural 1(a). That rezoning is exemplified by what occurred in respect of Lot 57. As I have earlier indicated, part of the western section of Lot 2 that was rezoned as Residential 2(a2) was below the 1:100 year flood line, as determined in both a predevelopment and also a post development state.

The only provision of the LEP that seeks to control development on land by reference to the 1:100 year flood line is cl 23 (earlier quoted at [15]). That clause does not, in terms, prohibit development on land so affected. Certainly, it is the case that development on land so affected can neither qualify as exempt development (cl 8) nor as complying development (cl 9). However, those clauses simply result in any development proposed for such land necessitating the grant of development consent in accordance with cl 23.

However, the provisions of Amendment 5 do address additional controls upon development proposed for land in proximity to a creek. The first of those amendments was the introduction of a new clause 18A which is in the following terms:

"18A Subdivision of land in Zone 2(b1)

(1) Land within Zone 2(b1) must not be subdivided to create an allotment to be used for residential purposes unless the allotment has an area not less than the minimum area, which is 700m2.

(2) Despite subclause (1) if an allotment is to include land within 20 metres of the centre line of a creek (the creek being identified as trunk drainage on the map) the minimum area of that allotment is 700m2 in addition to any area of that allotment that is within 20m of the centre line of the creek."

The second amendment of relevance introduced by Amendment 5 was the addition of subclause (2) to cl 25. That subclause has earlier been quoted at [17].

The only other provision of the 2005 LEP that needs to be noticed is cl 45. That clause was neither introduced by nor or amended by Amendment 5. The clause relevantly provides that consent must not be granted -

" ... for the erection of a building, the carrying out of a work or a change of building use unless the consent authority is satisfied that adequate arrangements have been made for any provision or augmentation of the following that will be needed because of the carrying out of the proposed development:

(a) ... drainage services,

... ".

The matters that I have identified as being the background against which Amendment 5 was made, together with the provisions of the 2005 LEP and the manner in which those provisions were amended or supplemented by Amendment 5, add support to the general submission made by Mr and Mrs Davies that the underlying zoning of Lot 1 should be that which reflects the zoning of adjoining land. Specifically, those matters support the underlying zoning reflected in 'Scenario 3' formulated by the consultant planners.

As I have earlier recorded, Mr Grech expressed the opinion that the underlying zoning of 6(a) Open Space would apply to that part of Lot 1 that is east of the western bank of Strangers Creek. The zoning imposed by Amendment 5 provided that the part of Lot 2 immediately adjoining Lot 1 to the north-east was zoned 6(a) Open Space while the balance of the adjoining land was zoned Residential 2(b1). Mr Grech contends for the Open Space strip east of the Creek on the basis that it provides land to fulfil a trunk drainage function and also provide access pathways conformably with the development control plan that was being prepared in conjunction with the draft local environmental plan that ultimately became Amendment 5. The draft development control plan was the subject of report and recommendations to the Council on 20 July 2004. The development control plan ultimately adopted for the Balmoral Road Release Area in January 2007 identified a proposed road adjoining the eastern boundary of Lot 1 before veering to the north-east so as to form the eastern boundary of the area zoned as Open Space. The path or cycleway suggested by Mr Grech as being within the underlying 6(a) zoning east of Strangers Creek would be a path or cycleway adjoining the road proposed in the development control plan.

As it happens, the precise identification of zoning for the land east of Strangers Creek within Lot 1 is unimportant for the ultimate determination of market value. This is because of agreement reached between the valuers retained by the parties as to the value that should be attributed to this part of the acquired site.

For his part, Mr Rowan identifies 'Scenario 1' as the most appropriate expression of the underlying zoning. Although his alternate position is reflected in 'Scenario 2', he does not favour that position because, in his opinion, it would create a false expectation for future development of land so zoned.

Mr Rowan's opinion is founded upon statements in various reports directed both to flood liable land and drainage dating back to the mid 1980s. He refers to the regional environmental study prepared as the precursor to SREP 19 in which Government policy of discouraging development within the area below the 1:100 year flood level was identified. That statement is then linked with the 1986 Flood Plain Manual and Flood Prone Land Policy in which it is stated:

"Rezoning to minimise exposure to flood losses is readily applicable where there is little or no expectations, demands or rights for development such as in rural areas. In general, Councils should maintain existing low development zones over land liable to significant flooding and adopt development strategies which avoid any expectations or demands for development on flood liable land."

Reliance upon such a statement does, however, need to be balanced against other statements appearing in that Policy. In Appendix D in which flood plain management measures are addressed, reference is made to the zoning of land. In that context, the following statement appears:

"The Flood Policy does not, however, support the use of zoning to unjustifiably restrict development simply because land is flood liable. Zones over flood liable land should be based on an objective assessment of hazard and environmental and other factors, ... ".

Factors then identified in the Policy require consideration both of the hazard or floodway category and also consideration of existing planning controls. There is no evidence to suggest that in the section of Strangers Creek between Memorial Avenue and Windsor Road, the flood affected land is in the high hazard category. Indeed, the description earlier given of flooding in the 1:100 year flood event as being of shallow depth and low flow would, in the context of the descriptors used in the 1986 Flood Plan Manual, speak against categorisation as "high hazard". In that circumstance, the Policy would not require a Rural 1(a) zoning in order to control development on flood liable land where the flood risk was of the kind applicable to Lot 57.

In support of his opinion, Mr Rowan also referred to the Kinhill Study of 1989 in which the author is said to express an approach of retaining water courses in their natural condition, where possible, throughout the RHDA. While that was a generally expressed concept, consideration of the Kinhill strategy does indicate modification to creeks and drainage channels in a manner to which I have earlier referred. So far as it is relevant to consideration of the underlying zoning, Mr Rowan acknowledged that the land identified in the Council's draft local environmental plan of 1990 as being zoned Rural 1(a) was land required to implement the Kinhill scheme and was not zoned to identify land below the 1:100 year flood level.

The subsequent "refinement" of the Kinhill strategy was acknowledged by Mr Rowan. Nonetheless, he properly identified, from the various reports to which reference was made, the need for both trunk drainage and the control on development below the 1:100 year flood level. The Council's adoption of the 2004 strategy which identified riparian zones is said to be a manifestation of the need for the latter control.

Some change in approach on behalf of the Council and, presumably the Department of Planning, is acknowledged by Mr Rowan by reference to the adopted drainage strategy referred to as water sensitive urban design. Essentially, this involved an approach to elements of urban subdivision design that sought to address the quality of run-off, with the rate of discharge controlled through detention basins. The provision of drainage basins is proposed to have the effect of returning flows in major drainage lines or creeks to their pre-development levels, so preserving the quality of creek lines and their respective ecosystems. This approach to local and trunk drainage was addressed in the 2001 GHD Report in which Strategy 4 is identified as the preferred option. It would appear to be this option or a further refinement of it that has subsequently been implemented.

Finally, Mr Rowan identified the formulation by the Council of the development control plan concurrently with the preparation of the draft local environmental plan for the Balmoral Road Release Area in addressing his hypothesis as to the underlying zoning. Clause 7.1(a) of the Development Control Plan provides that no residential, employment or commercial development should occur below the "estimated" 1:100 year flood level "as identified on the development control plan map as trunk drainage land." However, this provision may not be an accurate reflection of the Council's intentions. There are a number of reasons for saying this:

(i) If the control was intended to be absolute, one might have expected it to be included in the local environmental plan itself. It is not. As I have earlier identified, the only provision of the planning instrument directed to the 1:100 year flood is cl 23 which necessitates the grant of development consent for development on land so affected and identifies those matters to be taken into account when determining a development application for flood affected land.

(ii) The land identified on the development control plan map as "trunk drainage land" is the same land that is zoned Special Uses 5(a) for trunk drainage on the map to Amendment 5. As the evidence otherwise indicates, the land so zoned does not in fact correspond with the boundaries of land affected by the 1:100 year flood either in the pre-development or post development state of the area.

(iii) While the purpose of the development control provision was clearly directed to preserving land below the 1:100 year flood level for trunk drainage, other provisions within cl 7.1 of the Development Control Plan indicate that the flood line, as applied on a property by property basis, was not necessarily reflected in the development control plan map. So much is apparent from paragraphs (j) and (k) which identify a mechanism for determination of the "inundation line" other than by reference to the map.

Having considered the competing positions taken by the consultant planners, I prefer the opinion expressed by Mr Grech and essentially for the reasons he has given. Both parties accept that in imposing planning controls upon Lot 57, those controls would impose limitations upon development within the creek corridor. As controls evolved in respect of that corridor, culminating in cl 25 of the 2005 LEP, that corridor has a width of 40m. If I understand correctly the evidence given by Mr Grech, this corridor would accommodate not only the width of Strangers Creek but would also accommodate the provision of trunk drainage for development of Lot 57. Thus the controls upon permissible development conformably with the adjoining residential zones extend beyond those controls contained in the land use table for those zones. By use of those additional controls, the Council could provide for trunk drainage as well as limit development upon flood liable land by determining any proposed development on merit. That approach would accord with the 2001 Flood Plain Manual.

It is noteworthy that following the making of Amendment 5, no land within the Balmoral Road Release Area retained a Rural 1(a) zoning. Moreover, those sections of zoning maps which are in evidence and that pertain to urban land surrounding the Balmoral Road Release Area do not reveal any land upon which a Rural 1(a) zone is maintained. No example was given by Mr Rowan of any land within urban release areas that had retained a rural zoning. In a similar position is the hybrid zone, identified as 'Scenario 1' in the joint report prepared by the town planning consultants. That is the underlying zone favoured by Mr Rowan. It is a zone which in the objectives and land use controls which he posits, finds no expression in any planning instrument that he was able to identify.

In the result, I have concluded that the land within Lot 1 from the western bank of Strangers Creek to the western boundary of that Lot has an underlying zoning of Residential 2(a2) under the provisions of the 2005 LEP. As would be apparent from what I have written, land use would not only be subject to the restrictions imposed by the land use table for that zone but, relevantly for present purposes, also the controls imposed by cll 23, 25 and 45 in the form which that planning instrument took following the making of Amendment 5.

There are two sales primarily relied upon by Mr Dyson to support his opinion that the value of land zoned Rural 1(a) under the 2005 LEP should, when applied to the subject site, be at the rate of $250/m2. His first sale involves land at 71 Samantha Riley Drive, Kellyville, not far distant from Lot 57. That land was sold in May 2007 for $5,700,000. It had an area of 2.02 hectares which, when applied to the sale price, shows a rate of $282/m2. Although used as a market garden at the time of sale, it was purchased with the intention of establishing a nursing home on the site which fell within a permissible category of development on land within the Rural 1(a) zone. It has since been rezoned for residential purposes. Its location is comparable to that of Lot 57, although it is located on a busy road. It is not flood liable land. As a sale that occurred five months prior to the acquisition date of Lot 57, no adjustment is said to be required to the price by reason of a difference in the relevant acquisition dates.

The second of the primary sales upon which Mr Dyson relies involves the property known as 16 Hezlett Road, Kellyville, contracts for the sale of that property having been exchanged in April 2008. The sale price was $4,250,000. This property also had an area of 2.02 hectares which calculates at a value of $210/m2 when applied to the subject property. It was visited in company with the parties on site inspection and presents as an attractive property at the corner of two streets. It is said to have been purchased by a religious organisation with the intent of establishing a school. There is a watercourse that runs through the property. It also has since been rezoned to permit residential development. As a sale that occurred four months after acquisition of Lot 1, it is not suggested that any adjustment is required to be made to the deduced sale price by reason of time difference between the time of that sale and the date of acquisition of the subject land.

Two further sales were relied upon by Mr Dyson as supporting his Rural 1(a) value of the subject land. They were sales for land at 57 Samantha Riley Drive, Kellyville and 812 Windsor Road, Rouse Hill. Contracts for each of those sales were exchanged in June 2005 and January 2005 respectively. At the time of sale, they showed a price of $200/m2 and $208/m2 respectively. However, upward adjustment of those rates was said to be required in order to account for the fact that the sales occurred more than two years before Lot 1 was acquired. According to Mr Dyson, if those prices were adjusted, they would show a rate of $250/m2 and $260/m2 respectively.

In support of his contention that flood affected rural land was properly assessed at $85/m2, Mr Good identified two sales which indicated the manner in which prospective purchases would treat flood affected land. The first was the sale of a property at 12 Stringer Road, Kellyville for which contracts had been exchanged in April 2010 for a consideration of $1,415,000. Part only of the property was acquired by the Council for the purpose of its use both for water management and open space. The acquired land has an area of 12,211m2. Mr Good describes some of the acquired land as having "an underlying residential zoning" with a riparian corridor and water management land. Different rates were assigned to each of these areas but whether this is an internal allocation or reflected in the contract is not clear. The rate that was assigned by Mr Good for the riparian corridor land is $33.75/m2 while the rate assigned for the water management land is $54/m2.

The second sale to which Mr Good refers for this purpose is for land at Milcroft Way, Beaumont Hills. The contract was entered into in February 2010 for a price of $4,685,000. The land has an area of nearly 3.56 hectares. It was purchased by the Council for open space. Mr Good identified approximately 14,000 m2 of flood free land and the balance as flood affected land. Reference is made in his description to the "compensation" as having been assessed on an underlying residential on-en globo basis. Mr Good assigned a value of $235/m2 to the flood free land and $64.63/m2 to the flood affected land. It does not appear to be an open market transaction.

Mr Dyson does not accept that the transactions relied upon by Mr Good appropriately reflect a value to be attributed to the relevant part of the subject land. In respect of the Stringer Road property he observed that the land acquired by the Council comprised a steeper section of the parent property, that section being "mostly covered in established trees". As well as being in a riparian corridor there were environmental reasons why development would have been difficult and expensive by reason of the steepness of the site. Significantly, he observes that the sale having occurred more than two years after acquisition of Lot 1, adjustment would be required for time and in the context where the downward impact of the global financial crisis had impacted upon property values, in particular, I infer, for property in this area intended for residential development.

The latter observation and criticism is also made by Mr Dyson in relation to the Millcroft Way sale. He also observed that this was low lying land, surrounded by a trunk drainage reserve on three sides. Significant areas of the land along the existing creek were covered in dense bush and trees with the remainder of the land appearing to be boggy, with substantial stands of trees. The level of the land was about half a metre below the level of land in established urban areas to the south.

That land was in no way comparable to Lot 57, the description of which was generally agreed between the valuers and confirmed on the site inspection which was held with the parties. Mr Good describes Lot 57 as having "an essentially level topography with a gentle slope towards the east".

For his part, Mr Good criticised the reliance by Mr Dyson upon the Samantha Riley Drive sales as well as the sale of the Hezett Road property. Essentially his criticism is that the price paid for these properties reflected a component of consideration which anticipated the future rezoning of the land for residential purposes. As I have earlier recorded, that anticipation came to fruition. This is so notwithstanding the apparent intention of the purchaser in each case to develop the land for a purpose that was permissible in the Rural 1(a) zone.

Having considered the competing opinions of the valuers and visited a number of the properties identified by them as comparable sales, I generally prefer the evidence of Mr Dyson. As I have earlier determined that the underlying zoning of the land between the Bewsher western boundary and the western boundary of Lot 1 is Residential 2(a2), I accept his agreed starting point for determination of the value of that land. However, I do not accept the two stepped discount in value of land between the flood line and the Bewsher western boundary which Mr Dyson propounds. My reason is that I do not accept as being realistic the claim that development in isolation of the Bewsher Scheme would have been acceptable to the Council. I have earlier addressed that topic.

This conclusion yields a result that accords neither with the conclusion reached by Mr Dyson nor with that reached by Mr Good. It means that the entire section of the former Lot 57 between the flood line and the Bewsher western boundary should be valued at $200/m2. I accept this figure, applying generally the discounts that Mr Dyson had applied when reaching his two stepped values of $215 and $200 respectively for the same area. This may not lend itself to precise calculation but such is the nature of judicial valuation (Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47 per Handley JA at 182-3). It also involves the "commonsense reality check" identified by Hodgson JA as being appropriate in Roads and Traffic Authority (NSW) v Collex Pty Ltd [2009] NSWCA 101; (2009) 165 LGERA 419.

My conclusion in this regard also has the result that for land between the flood line and the western boundary of Lot 1 (an area of 1163m2), the rate is less than that advanced by Mr Good on behalf of Sydney Water. It will be remembered that for this area, as with the other areas zoned Residential 2(a2), he considered that the rate of $275 per square metres was appropriate.

I should indicate that in assigning a value of $200/m2 to the area in contention I find support in the evidence directed to the value of the land on the assumption that so much of it as was within Lot 1 would have been zoned Rural 1(a). There is no dispute between the valuers that land so zoned, even unaffected by any drainage proposal, would be less than the value assigned to land in the Residential 2(a2) zone, having the characteristics of the flood free portion of Lot 57. Mr Dyson assigned a value of $250/m2 to that land. While I accept that if discounts earlier identified had been applied to land with a commencing value of $250, the result would have been a little less than $200, the fact that the difference is not significant, confirms to me that a rate of $200/m2 for the land in question is appropriate.

In their final joint report (Exhibit N) the valuers concluded that the main difference of opinion relating to the Rural 1(a) value was, in effect, the discount rate to be applied to allow for the Bewsher Scheme, in particular the capacity to fill land to the west of the Bewsher western boundary to a level above the 1:100 year flood level. Mr Good considered that as the prospect of acceptance was only 25 to 30 per cent, he would maintain his $85/m2 rate.

The evidence does not persuade me that such a relatively low prospect of approval and construction is appropriate. There are two pieces of evidence that I have already identified that are significant in this regard. First, the evidence in relation to the narrowing of the channel to 40m leading to proposed Basin 31 and acceptance by DIPNR that fill to above the 1:100 year flood level could be undertaken is significant. So also are the expressions of opinion from senior officers of the Council directed to the Bewsher Scheme and contained in the "minutes" recorded by each of Mr Grech and Mr Rowan following discussions with those officers around the time at which Lot 1 was acquired.

Further, the prospect of filling land to enable it to be used in a manner associated with residential development is not gainsaid by the provisions of the Flood Plain Manual, particularly in the context of an area that is agreed to be within a low inundation low flow area in the 1:100 year flood. While the provisions of cl 23 of the 2005 LEP address land that is below the flood line, they do not, in terms, proscribe development within that area.

This evidence confirms to me that the "top down" approach taken by Mr Dyson and which, in substance, I have adopted for the purpose of determining value is appropriate.

Conclusion on market value

It will be apparent from the manner in which various parts of both Lot 57 and Lot 1 have been assigned values, either by agreement or by my determination, that the total figure for market value depends upon the areas of the relevant parts of those Lots expressed in square metres. The plans before me are not entirely consistent as to these areas.

In arriving at a market value for Lot 1 on the "before and after" method, I have used two plans that are in evidence. The first is the plan that is Attachment B to the Statement of Evidence and Report of Mr Bewsher (Exhibit F). Save for the small triangular section of land that has been zoned 6(a) Open Space within the eastern section of Lot 2, all other areas discussed in the course of this judgment are included in that plan. The aggregate of all areas in that plan accords with the aggregate area for Lots 1 and 2 in Deposited Plan 1109254, being the plan prepared and registered for the purpose of effecting the acquisition of Lot 1. That aggregate area does not precisely coincide with that used by the valuers for the purpose of carrying out their calculation.

The second plan to which I have referred is a plan of proposed subdivision of Lot 2 which is annexed to the first joint report prepared by the valuers (Exhibit K). The only purpose for which I rely upon that plan is to identify the area of land within Lot 2 that is zoned 6(a) Open Space. All other areas are taken from the plan to which I first referred. I add that the valuers assumed a coincidence of boundary between the eastern boundary of Lot 1 and the eastern 1:100 year flood line. I accept that it is appropriate to proceed on this basis for the purpose of area calculations.

Based on these plans, I calculate that the market value of Lot 1 is to be determined in accordance with the following table:

Market Value

Before

Land Use zone

Land area (m2)

Rate $/m2

Total ($)

2(a2) above flood line (agreed)

7,106

275 (agreed)

1,954,150

2(a2) below flood line to Bewsher western boundary

4,989

200

997,800

2(b1) (agreed)

2,662

250 (agreed)

665,500

Bewsher Creek corridor

4,893

85 (agreed)

415,905

6(a)

575

250

143,750

20,225m2

$4,033,355

After (Lot 1 area: 8,735m2)

2(a2) above flood line

7,099

275

1,952,225

2(a2) below flood line to western boundary of Lot 1

1,154

200

230,800

2(b1)

2,662

250

665,500

6(a)

575

250

143,750

11,490m2

$2,992,275

Summary

Area difference

Lot 57
Lot 1

20,225m2
8,735m2

Lot 2 as per DP1109254

11,490m2

Value of land
before
after

4,033,355
2,992,275

Market value

$1,041,080

This shows a value of $1,041,080, say $1,041,100.

Other heads of compensation

Mr and Mrs Davies have claimed loss attributable to disturbance by reason of the acquisition of Lot 1 (ss 55(d) and 59 of the Just Terms Act). The claim by them for legal costs and valuation fees in accordance with s 59(a) and (b) has been agreed in the sum of $50,000.

As I have earlier recorded in this judgment, there are existing services on the former Lot 57 which have long since served the needs of Mr and Mrs Davies. Stormwater drains from the developed portions of the former Lot 57 into the area of Lot 1. The cost of addressing this requirement was part of the claim made by Mr and Mrs Davies under s 59(f). Sydney Water has agreed to provide an easement for drainage of stormwater through the existing line of pipes eventually discharging into Strangers Creek. The form of easement will need to be framed and agreed before final orders are made.

Sewage treatment from the existing residence of Mr and Mrs Davies is provided by an on-site disposal system. Part of the infrastructure for that system is now located within Lot 1. Sydney Water has agreed:

(i) to grant an easement enabling the existing sewage treatment structures within Lot 1 to remain and to enable so much of Lot 1 as is presently used for the irrigation of treated effluent to continue so long as Lot 2 continues to be used as a single residence; and

(ii) to create the easements, at its cost, as well as an entitlement to connect to Sydney Water's sewage system generally in the location shown for that connection in Figure D1 in Attachment D to the Statement of Evidence of Mr Bewsher (Exhibit F).

On the basis that the easements identified will be granted by Sydney Water, Mr and Mrs Davies no longer press their claim for the cost of connection to the sewer main. Once again, the requisite easements will need to be drafted and provided to me before final orders are made.

A further claim made by Mr and Mrs Davies under s 59(f) related to the provision of a right of carriageway across Lot 1 to afford access to the eastern section of Lot 2. Sydney Water has agreed to grant a right of carriageway across Lot 1 utilising the existing bridge structure but only until the earlier of the sale by the applicants of the eastern section of Lot 2, the availability of public road access to that land or the cessation of use of the western section of Lot 2 as a single residence. Sydney Water also requires that an indemnity be provided to it arising from the use of the existing bridge structure for the purpose of exercising the right of access which is to be granted.

Mr and Mrs Davies accept the offer made in this regard by Sydney Water. Once again, the terms of the agreement reached between the parties in this regard will need to be framed in a manner appropriate to form part of the final orders that are to be made disposing of these proceedings.

Sydney Water has also agreed to grant Mr and Mrs Davies a licence to retain those structures presently erected on the former Lot 57 which encroach onto Lot 1. That licence would enable those structures to remain in their present state until either their removal or until the western section of Lot 2 is sold, whichever event first occurs. Once again, this agreement will need to be reflected in a form that can be made the subject of final orders.

Severance

A claim for severance does not fall for determination under cl 59 but rather is a component of the market value of land: s 58. However, it is raised in the present case in the context of the interim right of access that Sydney Water has agreed to provide across Lot 1 in favour of Lot 2. Mr and Mrs Davies contend that apart from the provision of this facility, the market value of their land on the "after basis" should reflect the circumstance that it has been severed by the acquisition of Lot 1.

The component of value said to be affected is the eastern section of Lot 2 which is zoned Residential 2(b1). In his "before and after" valuation exercise, Mr Dyson assigned a discount of 25 per cent to the agreed rate per square metre of that land in order to reflect the severance component. Mr Good made no such allowance.

While it is clear that the acquisition of Lot 1 did, in fact, sever the land formerly held as Lot 57, I do not accept that an appropriate allowance for this component is not reflected in the market value of the land, having regard to the basis upon which I have determined that market value should be assessed. Critical in this regard is my acceptance of the underlying zoning of Lot 1 propounded on behalf of Mr and Mrs Davies by Mr Grech. That zoning indicated that the land within Lot 1 that adjoined the Residential 2(b1) zone would be zoned 6(a) Open Space. In the context of developing the former Lot 57, that zoning would, in a practical sense, have severed the property as a single development entity for residential purposes.

Moreover, the Council's development control plan, which would clearly have a significant impact upon the manner in which the Residential 2(b1) land could be developed, contemplated that part of the land was required to be used for road purposes. Development of that land would always then have been contemplated by the hypothetical purchaser as being undertaken in conjunction with adjoining land to the east.

Given the pressures for development within the Balmoral Road Release Area, it could reasonably have been anticipated by the hypothetical purchaser of Lot 57 at the acquisition date that by the time residential development of the Lot came to fruition, development to the east would be at a sufficiently advanced stage such that road access would be available to the Residential 2(b1) land. That, was, at least in part, the reason offered by Mr Good as to why no component for severance was included in the determination of market value. I accept his evidence in this regard.

Mr Good also expressed the view that as Strangers Creek severed the property, a component for severance was not appropriate because it notionally applied in both the "before" and the "after" determination. Although an example of some bridging of Strangers Creek was adverted to in respect of an upstream property, it was his evidence that bridging of the Creek for medium scale residential development was not generally favoured by the Council and was therefore unlikely to be approved. So much more would this be the case if bridging was proposed across land that was zoned 6(a) Open Space.

In summary, I am not disposed to make an allowance for severance. Any such allowance would, to my mind, involve unjustified double counting in favour of Mr and Mrs Davies.

Orders

For reasons that I have explained, I am not presently able to make final orders disposing of these proceedings. I have indicated the manner in which the market value of Lot 1 is to be determined and will adopt the value indicated at [203] unless it can be shown that any plans upon which I have relied in order to determine areas used for the purpose of calculation are more accurately reflected in some other plan. The monetary components of other compensation items are agreed but the terms of easements and rights to be granted over Lot 1 are yet to be framed. It is to be hoped that the terms in which those documents are to be framed can be agreed between the parties.

Pending the making of final orders, the orders that I presently make are as follows:

1. Stand over the proceedings to Friday 15 June 2012 for the purpose of making final orders.

2. Direct that the parties prepare draft Short Minutes of Order to give effect to this judgment, that draft to be provided to my Associate by 4.00pm on 14 June 2012.

3. In the event of disagreement, each party must provide to my Associate by that date and time a draft of the Short Minutes of Order for which they each contend.

4. If an order for costs of the proceedings cannot be agreed between the parties, that question is to be argued when the matter is before me on 15 June, with an outline of submissions by each party on that question also to be provided to my Associate by 4.00pm on 14 June 2012.

**********

Amendments

01 August 2012 - typographical error (retianed) - retainedtypographical error (Stangers Creek) - Strangers Creek

Amended paragraphs: 147, 216

Decision last updated: 01 August 2012

Medium Neutral Citation:	Davies v Sydney Water Corporation [2012] NSWLEC 130
Hearing dates:	19-21, 24-26 May 2010 17 June 2010
Decision date:	06 June 2012
Jurisdiction:	Class 3
Before:	Craig J
Decision:	1. Stand over the proceedings to Friday 15 June 2012 for the purpose of making final orders. 2. Direct that the parties prepare draft Short Minutes of Order to give effect to this judgment, that draft to be provided to my Associate by 4.00pm on 14 June 2012. 3. In the event of disagreement, each party must provide to my Associate by that date and time a draft of the Short Minutes of Order for which they each contend. 4. If an order for costs of the proceedings cannot be agreed between the parties, that question is to be argued when the matter is before me on 15 June, with an outline of submissions by each party on that question also to be provided to my Associate by 4.00pm on 14 June 2012.
Catchwords:	COMPULSORY ACQUISITION OF LAND - compensation - land acquired for trunk drainage - 'public purpose' of acquisition - 'disregard' under s 56(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 - land within area released and rezoned for residential purposes - existing creek passing through land - development of flood prone land - need for local or regional trunk drainage in creek corridor to facilitate residential development - market value of acquired land - severance
Legislation Cited:	Baulkham Hills Local Environment Plan 2005 Environmental Planning and Assessment Act 1979 Land Acquisition (Just Terms Compensation) Act 1991 Rivers and Foreshore Improvement Act 1948 State Regional Environmental Plan No 19 - Rouse Hill Development Area Sydney Water Act 1994 Water Board Act 1987
Cases Cited:	Cassidy v Sydney Water Corporation [2008] NSWLEC 223 Caruso v Sydney Water Corporation [2008] NSWLEC 320 Roads and Traffic Authority (NSW) v Collex Pty Ltd [2009] NSWCA 101; (2009) 165 LGERA 419 Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (No 2) [2006] NSWCA 386; (2006) 68 NSWLR 487 Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47
Category:	Principal judgment
Parties:	Joseph Leslie Davies (First Applicant) Irene Davies (Second Applicant) Sydney Water Corporation (Respondent)
Representation:	I J Hemmings (Applicants) J J Webster SC (Respondent) Hunt and Hunt Lawyers (Applicants) Bartier Perry (Respondent)
File Number(s):	31229 of 2008

CONTENTS	Paragraphs
INTRODUCTION	1 - 4
THE SITE	5 -10
THE SITE: ITS PLANNING CONTEXT	11 -18
THE JUST TERMS ACT	19 - 22
THE SPECIAL USES 5(a) ZONE IS TO BE DISREGARDED	23 - 29
HISTORY OF THE LAND RELEASE FOR THE BALMORAL ROAD RELEASE AREA	30 - 61
PUBLIC PURPOSE	62 - 92
THE ASSUMED OR UNDERLYING ZONING OF THE ACQUIRED LAND	93 - 130
ASSUMED PROVISION FOR DRAINAGE	131 - 164
MARKET VALUE	165 - 198
CONCLUSION ON MARKET VALUE	199 - 203
OTHER HEADS OF COMPENSATION	204 - 210
Severance	211 -217
ORDERS	218 -219
The annexed plan (aerial photograph)

Before
Land Use zone	Land area (m2)	Rate $/m2	Total ($)
2(a2) above flood line (agreed)	7,106	275 (agreed)	1,954,150
2(a2) below flood line to Bewsher western boundary	4,989	200	997,800
2(b1) (agreed)	2,662	250 (agreed)	665,500
Bewsher Creek corridor	4,893	85 (agreed)	415,905
6(a)	575	250	143,750
20,225m2	$4,033,355
After (Lot 1 area: 8,735m2)
2(a2) above flood line	7,099	275	1,952,225
2(a2) below flood line to western boundary of Lot 1	1,154	200	230,800
2(b1)	2,662	250	665,500
6(a)	575	250	143,750
11,490m2	$2,992,275
Summary
Area difference
Lot 57 Lot 1	20,225m2 8,735m2
Lot 2 as per DP1109254	11,490m2
Value of land before after	4,033,355 2,992,275
Market value	$1,041,080