Denshire v Roads and Maritime Services

[2017] NSWLEC 181

Land and Environment Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Denshire v Roads and Maritime Services [2017] NSWLEC 181
Hearing dates:	14-16 August, 25 October 2017
Date of orders:	30 January 2018
Decision date:	18 December 2017
Jurisdiction:	Class 3
Before:	Pain J
Decision:	Compensation is determined in the sum of $92,416.43 comprising: • market value under section 55(a): $70,000; and • disturbance under section 55(d): $22,416.43. The respondent is to pay the applicant’s costs up until 14 August 2017. The parties are to bear their own costs on and from 14 August 2017. Exhibits may be returned.
Catchwords:	COMPULSORY ACQUISITION – compensation payable for acquisition of part of land for highway upgrade – market value and disturbance agreed –residential subdivision potential of land part of market value – option to develop residential subdivision by applicant’s father and third party did not amount to special value to applicant – no special value in addition to market value
Legislation Cited:	Clarence Valley Local Environmental Plan 2011 Environmental Planning and Assessment Act 1979 s 96 Land and Environment Court Act 1979 ss 19, 63 Land Acquisition (Just Terms Compensation) Act 1991 ss 54, 55, 57, 66 Maclean Local Environmental Plan 2001
Cases Cited:	Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36 Beckers v Road and Traffic Authority of New South Wales [2006] NSWLEC 717 Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209; [1999] HCA 64 Bronzel v State Planning Authority (1979) 21 SASR 513; 44 LGRA 34 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1983) 149 CLR 337; [1982] HCA 24 Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 Metcalf v Permanent Building Society (in liq) (1993) 10 WAR 145 Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWCA 314 Roads and Traffic Authority v Hurstville City Council (2001) 112 LGERA 223; [2001] NSWCA 11 Roads and Traffic Authority of New South Wales v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 Scanlon’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169; [1943] HCA 43 Speter v Roads and Maritime Services [2016] NSWLEC 128 Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156; 73 LGRA 47
Category:	Principal judgment
Parties:	Steven Matthew Denshire (Applicant) Roads and Maritime Services (Respondent)
Representation:	COUNSEL: Nicholas Ryan Denshire, agent; Warwick Maxwell Denshire, agent; J Dooley (Applicant) N Eastman (Respondent)   SOLICITORS: Patey & Murphy Solicitors (Applicant) Clayton Utz (Respondent)
File Number(s):	16/155857

Judgment

Special value claim after compulsory acquisition of part of land

1. The Applicant Steven Denshire owns land known as 21 Jubilee Street Townsend (the Land). Part of the Land was compulsorily acquired on 27 February 2015 by the Respondent the Roads and Maritime Services (RMS) for the Pacific Highway upgrade between Woolgoolga and Ballina. Steven Denshire commenced an appeal under s 66(1) of the Land Acquisition (Just Terms Compensation) Act1991 (Just Terms Act) in relation to the compensation payable for the partial acquisition of the Land. The Court has jurisdiction to determine these appeals under s 19(e) of the Land and Environment Court Act1979 (Court Act). I thank Acting Commissioner Maston for his valuable assistance in determining this matter.

2. On 11 January 2008 Steven Denshire granted a general power of attorney appointing Warwick Denshire his father and Nicholas Denshire his brother as his attorneys. The power of attorney appoints the two attorneys jointly and severally. He was represented by lawyers in these proceedings until 10 working days before the hearing. Steven Denshire was represented in the first phase of the hearing by his brother and then his father acting consecutively under the power of attorney and/or as agent under s 63(2) of the Court Act.

3. The parties agreed market value and disturbance. At issue is a claim of special value as first identified by Steven Denshire on the first day of the hearing. After three days of hearing the matter was adjourned for several weeks to provide the opportunity to Steven Denshire to prepare his submissions in response to those of RMS. The RMS presented its arguments first in the interests of fairness to Steven Denshire, contrary to the usual course in such matters. At the reconvened hearing Steven Denshire was again legally represented.

4. The Court is acting as the judicial valuer in this case per Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 at [3], [35], [37], [146] and [150] and Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156; 73 LGRA 47.

5. In Roads and Traffic Authority of New South Wales v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 Handley JA (Powell and Hodgson JJA) explained that an applicant bears the onus of proving their claim for compensation in compulsory acquisition matters, at [67]:

The [Just Terms] Act defines the right of a former land owner to compensation in both positive and negative terms. This definition, including its negative as well as its positive aspects, is “a statement of the complete factual situation which must be found to exist” before a landowner has a right to compensation and he therefore bears the onus of proof.

Land Acquisition (Just Terms Compensation) Act 1991

6. The Just Terms Act relevantly provides:

Division 4 Determination of amount of compensation

54 Entitlement to just compensation

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

…

55 Relevant matters to be considered in determining amount of compensation

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

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

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

…

(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.

…

57 Special value

In this Act:

special value of land means the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person’s use of the land.

Description of land at date of acquisition

7. The parent parcel Lot 2 DP 807072 was 2.9344 ha, fronted Jubilee Street Townsend and was bounded by Schwonberg Street on the western boundary. The acquired land is Lot 5 DP 1202603 comprising 0.4415 ha or 15% of the parent parcel adjoining the Pacific Highway at the rear of the Land. The residue land is Lot 2 DP 1202603 comprising 2.4929 ha. The frontage to Jubilee Street and boundary on Schwonberg Street were unaffected by the acquisition.

8. The land was zoned R2 Low Density Residential and SP2 Infrastructure (Classified Road) under the Clarence Valley Local Environmental Plan 2011 at the date of acquisition. At the date of acquisition the land had on it a single level weatherboard/iron dwelling built in the 1950s.

Evidence

9. The RMS tendered the Court Book which became Exhibit 1. It contained lay evidence in the form of affidavits and expert reports which are summarised below to the extent these were relevant at the hearing. Exhibit 2 was the Tender Bundle. It contained several documents related to the Land, the proposed Pacific Highway upgrade and the compulsory acquisition process. Mr Lunney valuer for RMS prepared a supplementary expert valuation report which became Exhibit 3.

10. Steven Denshire tendered a supplementary Tender Bundle which became Exhibit A. He also tendered a stamped copy of the Put and Call Option (P&C Option), an important document in these proceedings, which became Exhibit B.

Chronology

11. The Court does not understand the following chronology to be contentious.

Date

Event

25 November 2004

Clarence Valley Council grants Development consent 2004/0418 for 24 lot subdivision of the future Denshire property (including the Acquired Land).

October 2005

RMS announces Pacific Highway Upgrade route options and provides a display for community comment.

September 2006

RMS announces preferred route and provides a display for community comment.

10 January 2008

Steven Denshire purchases the property for $645,000.

11 January 2008

Steven Denshire gives Power of Attorney to Warwick Denshire and Nicholas Ryan Denshire.

January 2009

RMS announces concept design and provides a display for community comment.

May 2009

The Minister for Roads asks RMS to work with local cane growers and affected landowners to investigate the feasibility of an alternative route that avoids the high value cane land along the south arm of the Clarence River between Tyndale and Maclean.

October 2010

Following community feedback, RMS announces alternative alignment near Tyndale and provides a display for community comment.

20 October 2010

Proposed Residential Subdivision Plans for the Denshire property are finalised.

20 October 2010

Construction Certificate 2008/0028 for subdivision works on the Denshire property is issued.

February 2011

RMS provides a Pacific Highway Upgrade Community update.

August 2011

RMS decides to include the alternative route between Tyndale and Maclean in the Environmental Assessment for the Woolgoolga to Ballina Project (after receiving feedback from the community concerning the discussion paper for the alternative alignment).

October 2011

RMS provides a Pacific Highway Upgrade Community update.

23 December 2011

The Denshire property is part zoned SP2 - Infrastructure under Clarence Valley LEP 2011. Previously, the whole of the Denshire property was zoned R2(a) - Residential.

March 2012

RMS holds a community information session at Tyndale and sends out an information session letter prior to the session.

20 October 2012

Construction Certificate 2008/0028 expires.

October 2012

RMS provides a Pacific Highway Upgrade Community update.

December 2012

RMS provides a Pacific Highway Upgrade Community Update regarding the EIS.

12 December 2012 to February 18 2013

Woolgoolga to Ballina Project EIS is published and on display to the public for community comment.

January 2013

RMS holds public information sessions for community on:

• 16 January 2013 – Tyndale

• 17 January 2013 – Gulmarrad

• 18 January 2013 – Maclean

March 2013

RMS sends the Maclean Interchange alternative options letter and map out to relevant households and invites the community to comment on the two alternative routes developed for the Maclean Interchange and access to Townsend and Gulmarrad.

15 March 2013

Put and Call Option Agreement entered into by Mr Taylor and Warwick Denshire.

13 May 2013

John Moreton (RMS) emails Warwick Denshire concerning the proposed acquisition.

24 June 2014

NSW Planning Minister grants Infrastructure Planning Approval for the Woolgoolga to Ballina Pacific Highway Upgrade Project.

25 November 2014

RMS issues a Proposed Acquisition Notice to the Applicant for the Acquired Land.

27 February 2015

Date of Acquisition of the Acquired Land (ie. Gazette notice published).

Summary of claim

12. Steven Denshire’s claim under s 55 was articulated for the first time on the first day of the hearing as follows:

a. Market value under ss 55(a) / (f): $70,000;

b. Special value under s 55(b): $2,280,000;

c. Disturbance under s 55(d): $22,416.43.

13. Market value and disturbance are agreed. The outstanding issues concern the special value claim. This claim is said to arise from the P&C Option dated 15 March 2013 between Warwick Denshire (as grantor) and a business associate Mr Taylor (as grantee) concerning subdivision development of the Land and sale of the constructed lots. As articulated at the hearing this claim is calculated as follows:

The total realised from the P&C [Option] for the execution of the Call plus the 3 excluded lots @ $145K each less the construction cost less the Residual value of $400K.

$3,115,000	+ $435,000	- $800,000	- $400,000
(profits per Sch 1)	(Lots 5, 6, 7)	(cost of construction)	(market value of residue land)

+ interest @ 15% as per P&C [Option]

14. A development consent granted in 2004 permitted a 24 lot subdivision on the Land. It was explained by Warwick Denshire that the figure of $3,115,000 was the total of the sale prices for 21 lots listed in Item 3 of the first schedule of the P&C Option between Warwick Denshire and Mr Taylor dated 15 March 2013. The second figure of $435,000 represented the value of the three lots excluded from the P&C Option, namely, Lots 5, 6 and 7 in the draft plan of subdivision attached to the P&C Option. The $800,000 figure represents the total amount for which Warwick Denshire agreed with Steven Denshire he would carry out the subdivision works in compliance with the development consent for the subdivision and obtain registration of the approved plan of subdivision (development agreement). At the final day of the hearing Steven Denshire’s counsel proposed two additional alternatives to the calculation of special value of $3,100,000 (no deduction for construction costs) or $1,181,896 (Mr Philpott’s construction costs deducted, see par 37 below).

Put and Call Option dated 15 March 2013

15. Relevant sections of the P&C Option between Warwick Denshire and Mr Taylor are as follows:

                                                       PUT & CALL OPTION

DATED 15th day of March 2013

BETWEEN: WARWICK MAXWELL DENSHIRE of 10 Phoenix Road, Black Hill in the State of New South Wales (“the Grantor”)

AND: GLEN TAYLOR of 20 McEwan Street Belmont South, in the state of New South Wales; Company Director (the Grantee)

PREAMBLE:

A.   The Grantor has authority from the registered owner of the land described in Item 1 of the First Schedule, to enter into sales agreements relating to the land.

B.   The Grantee has requested the Grantor to grant to the Grantee a Call Option on the basis that the Grantor will have the right to require the Grantee to purchase the land by exercising the put option.

…

1.   Definitions

1.1   In this Agreement, unless the context otherwise requires:

…

“Call option” means the option granted in Clause 2.1;

“Call Option Expiry Date” means the date as set out in Item 5 of the First Schedule;

…

“Contract” means a Contract for the sale and purchase of a lot or the land as the case may be on the terms set out in the Contract referred to in the Second Schedule;

...

“Put option Expiry Date” means 14 days from the expiry of the Call Option or such later date as is provided for in Clause 4.2.(b).

…

1A.   Development Application

Development Application 2004/0418 was approved on 16th November 2004 for a 24 lot subdivision. The Grantee agrees to construct the lots as shown in the plan to comply with the conditions of consent.

1B. Registration of the plan

The Grantor agrees to register the plan of subdivision in a timely manner and will supply the Grantee a [sic] with a copy of a Sales Contract for each new lot as well as two title searches for two of the new lots indicating that registration has been completed PROVIDED THAT the Grantor may in his absolute discretion register the subdivision.

2. Call Option

2.1   In consideration of the payment of the Option Fee by the Grantee to the Grantor, the Grantor offers to sell to the Grantee or its nominee all of the lots by one or more Contracts at the price per lot set out in Item 3 of the First Schedule.

2.2   The Grantee or its nominee may purchase any one or more of the lots individually or together at any one or more times for the amount per lot specified by the Grantee but not less than the amount set out in the First Schedule.

2.3   The Call Option is irrevocable until the Call Option Expiry Date and will lapse at 5.00pm on such date.

3.   Exercise of Call Option

3.1   The Grantee may with respect to any one or more of the lots exercise the Call Option at any time prior to 5.00pm on the Call Option Expiry Date by delivering to the Grantor’s Solicitor two copies of a Contract for sale executed by the Grantee or its nominee with the name and address of the Grantee or its nominee with the name and address of the Grantee or its nominee as Purchaser, details of the Purchaser’s Solicitor and the price nominated by the Grantee as provided in Clause 2.2 inserted in the Contract and the deposit as specified in the sales contract. The Contract shall be otherwise completed with the title reference to the land and shall have attached a copy of the Folio Identifier, Deposited Plan and Section 88B Instrument.

…

4.   Put Option

4.1   If the Grantee has not exercised the Call Option with respect to any lot by the Call Option Expiry Date the Grantee grants to the Grantor an option to require the Grantee to purchase any of such lots at the price set out in the First Schedule for the relevant lots and on the terms set out in the Sales Contract.

4.2   The Put Option is irrevocable and can be exercised at any time after the Call Option Expiry Date and will lapse without further notice at 5.00pm on the date which is fourteen (14) days after the last to happen of:

(a)   The Call Option Expiry Date;

(b)   The rescission or termination of any Contract entered into as a result of the exercise of the Call Option with relation to any lot

5.   Exercise of Put Option

The Grantor may exercise the Put Option by delivering to the Grantee or its Solicitors two (2) copies of the Sales Contract completed by adding appropriate details of the Grantee, the price and the date for completion ascertained in accordance with the provisions hereof and signed by the Grantor as Vendor. The Grantor shall annex to the Contract a copy of the Folio Identifier, Deposited Plan and Section 88B Instrument. The Grantee or its nominee shall sign and return one copy of such Contract with the deposit as specified in the sales contract, to the grantor within fourteen (14) days of the exercise of the Put Option.

…

9.   Access

9.1   From the date of execution of this Agreement the Grantee and its contractors and consultants may enter upon any or all of the lots for the purposes of inspection, survey, and selling. All such entry shall be at the sole risk of the Grantee.

9.2   In exercising its rights under Clause 9.1 the Grantee acknowledges that:

9.2.1   nothing shall permit or authorise interruption to the Grantor’s quiet enjoyment of the lots;

9.2.2   any such right of entry shall be exercised at the risk of the Grantee and any other person entering pursuant thereto;

9.2.3   The Grantee shall be responsible to make good at its expense any damage to any of the lots caused directly or indirectly by any person entering the lots pursuant to this clause;

9.2.4   The Grantee agrees to indemnify the Grantor and to hold the Grantor always indemnified against any claim for civil damages or prosecution for breach of any law if such claim or prosecution arises out of or in consequence or the exercise by the Grantee of its rights under this Clause;

9.2.5   The Grantee further indemnifies the Grantor in respect of any action, claim, suit or demand of whatsoever nature or kind and which may be made or brought against the Grantor as a result of the Grantee or any persons authorised by the Grantee entering upon any or all of the lots.

9.3   The Grantee will effect and maintain at its own expense public risk insurance for an amount of $10 million for any one claim and workers’ compensation insurance cover to the extent that all persons who may frequent the land may be appropriately insured.

…

FIRST SCHEDULE

1.   Land

Lot 2 DP807072

2.   Lots in proposed Plan of Subdivision (Annexed Plan)

Proposed Lots 1-24

3.   Price

Lot 1	$145,000
Lot 2	$140,000
Lot 3	$140,000
Lot 4	$140,000
Lot 8	$140,000
Lot 9	$135,000
Lot 10	$140,000
Lot 11	$145,000
Lot 12	$155,000
Lot 13	$155,000
Lot 14	$135,000
Lot 15	$125,000
Lot 16	$130,000
Lot 17	$130,000
Lot 18	$130,000
Lot 19	$130,000
Lot 20	$130,000
Lot 21	$170,000
Lot 22	$140,000
Lot 23	$250,000
Lot 24	$210,000

4.   Option Fee

When practical construction starts $10,000

5.   Call Option Expiry Date

The date shall be 30 days after registration of the plan of subdivision.

16. Annexed to the P&C Option in the second schedule was a contract for the sale of land identifying Steven Denshire as the vendor. Clause 19 of the special conditions of sale states:

The purchasers acknowledge that they are aware that the Pacific Highway is located to the north of the subject land. The purchasers agree not to make any objection, requisition or claim for compensation as a result of any restrictions which may be applied to the land as a result of the re-location of the Highway by the relevant authorities. The purchasers agree and acknowledge that they have made their own enquiries in relation to the above matters.

Affidavits of Warwick Denshire

Affidavit 21 November 2016

17. Warwick Denshire swore three affidavits in these proceedings. The first sworn 21 November 2016 addressed the formation of the P&C Option and the process by which the acquisition occurred. Warwick Denshire is a farmer and property developer. He stated that he has considerable experience developing residential land by way of subdivision for sale. Warwick Denshire holds a general power of attorney on behalf of Steven Denshire.

18. Warwick Denshire deposed that Steven Denshire purchased the Land in 2008 with an intention to develop the property by way of subdivision and sell the individual lots. Development consent to subdivide the Land into 24 residential lots had been obtained prior to the purchase. The purchase was made with a loan of $600,000 from Kiriwina Finance Company Ltd (Kiriwina). An additional loan was approved to cover development costs.

19. On 15 March 2013 Warwick Denshire prepared and entered into a P&C Option to sell 21 of the 24 lots to be created from the subdivision to Mr Taylor. Warwick Denshire deposed that Steven Denshire was to receive $3,050,000 from the sale of the 21 lots according to the prices listed in the First Schedule of the P&C Option.

20. Warwick Denshire deposed in his affidavit that cl 1A contains a mistake. “Grantee” (Mr Taylor) should read “grantor” (Warwick Denshire) in the second sentence. Warwick Denshire intended to construct the subdivision. He would be paid $800,000 by Steven Denshire for this work.

21. Warwick Denshire was contacted by RMS by phone on 13 May 2013 to advise him that part of the Land may be acquired. Warwick Denshire then placed the subdivision on hold as a result of uncertainty surrounding the potential acquisition. He received a written offer from RMS dated 18 September 2013 to purchase part of the Land for $90,000 plus valuation and legal costs. Agreement to purchase was not reached. On 24 November 2014 RMS sent a proposed acquisition notice and claim for compensation form to Warwick Denshire. The acquisition was gazetted on 27 February 2015. A report prepared for RMS determined compensation for market value and disturbance in the sum of $139,338.

22. Warwick Denshire asserted that the acquisition has rendered the Land “materially different to that to which the [P&C] Option refers with a result that the terms of the Option are incapable of being implemented”. The subdivision works have not been carried out and the lots remain unsold.

Affidavit 10 July 2017

23. Warwick Denshire swore a second affidavit dated 10 July 2017 which expanded on matters deposed to in the first affidavit. Warwick Denshire provided further detail about his experience with residential subdivisions. He attached copies of four P&C Options related to subdivision development in Fletcher, in three of which Mr Taylor was grantee. Warwick Denshire deposed that the P&C Option in the present case was prepared by him without the assistance of a solicitor using the previous P&C Options with Mr Taylor as templates. He stated that all previous dealings with Mr Taylor involved Warwick Denshire doing subdivision construction works and another party selling the lots. It is clear that the words “grantee” and “grantor” were mixed up in cl 1A of the P&C Option owing to Warwick Denshire’s lack of legal expertise.

24. Warwick Denshire deposed to a telephone conversation with Steven Denshire in which Warwick Denshire offered that if Steven Denshire lent him the profit from sales under the subdivision Warwick Denshire would do all the work including registration for $800,000, the rest of the profit would be Steven Denshire’s and that could be rolled into the development of Fletcher.

25. Warwick Denshire deposed that at the time the P&C Option was signed it was “common knowledge that the Pacific Highway was going to be upgraded”. He did not know any details about the upgrade at that time. He spoke to an RMS employee about the acquisition process in June 2013 then contacted Mr Taylor in July 2013 to suggest placing the subdivision on hold. Warwick Denshire deposed that Mr Taylor became “increasingly agitated and abusive towards me about the delay” apparently due to the disruption this would cause to sales off the plan at the Fletcher development. Mr Taylor indicated that he no longer wanted to proceed with the deal due to uncertainty on 8 April 2014. At no point has Mr Taylor attempted to enforce the P&C Option. Warwick Denshire deposed that he would have undertaken the subdivision works, registered the subdivision and sold 21 lots to Mr Taylor under the P&C Option had it not been for the acquisition by RMS.

26. Warwick Denshire deposed that Kiriwina approved a further loan of $450,000 to cover development costs on the Land. In addition to loan obligations to Kiriwina, Council rates have been incurred since 15 March 2015.

27. Warwick Denshire deposed that he arranged a commercial lease agreement with a tenant to use part of the Land for storage purposes as he thought it would be useful to have a local on site for security reasons. A copy of the lease was attached to the affidavit. The lease was granted by a company of Warwick Denshire called Wentworth Development (NSW) Pty Ltd from 15 March 2013 to 15 March 2014 with no options to renew. In fact the lease was held over under cl 3 of the lease and continued up to the date of acquisition on 27 February 2015. The lease related to part of the subject land. The land leased was described as “21 Jubilee Street – Property Lot 23 & 24”. Lots 23 and 24 are the only two lots with frontage to Jubilee Street as shown on a sketched plan of the proposed subdivision attached to the lease. The permitted use was described in the lease as “commercial/storage use – the timber building on the land is uninhabitable”. A special condition emphasised that the timber building was to be used for storage purposes only. Warwick Denshire deposed in his affidavit that the lease did not prevent him from carrying out the subdivision works.

Affidavit 3 August 2017

28. Warwick Denshire swore a third affidavit dated 3 August 2017 attesting to an agreement with Steven Denshire to carry out subdivision works on the Land and register the subdivision for $800,000. In his affidavit Warwick Denshire clarified that he did not personally intend to carry out all works associated with the subdivision under the development agreement with Steven Denshire. Attached to the affidavit were undated file notes which Warwick Denshire said showed his calculations relating to cash flow available to construct the subdivision and a “fixed price lump sum contract” to carry out these works for $800,000. Warwick Denshire would be paid for this work from the sale proceeds of the lots sold to Mr Taylor under the P&C Option. Warwick Denshire deposed that at no point did he intend to make a profit for this work.

29. Warwick Denshire deposed that as a result of the acquisition none of the sales to Mr Taylor under the P&C Option or at Fletcher occurred and their business relationship was destroyed.

Affidavit of Ms Reid

30. Ms Reid solicitor for RMS affirmed an affidavit dated 14 July 2017. In her affidavit Ms Reid attested to numerous efforts made to contact Mr Taylor in connection with these proceedings including the issuance of a subpoena to produce documents filed 12 May 2017 to which no documents were returned.

31. Some efforts to contact Mr Taylor were successful. Attached to Ms Reid’s affidavit was correspondence between Mr Taylor and the solicitors for RMS between 23 May 2016 and 10 May 2017. In an email Mr Taylor alleged that Warwick Denshire had cost him over $1.5 million after failing to develop land at Fletcher for which pre-sales had already been made.

32. A file note made by Ms Reid of a phone call with Mr Taylor dated 10 March 2017 indicated his intention to provide affidavit evidence in these proceedings concerning the origin of the P&C Option. Ms Reid stated that she has not received any correspondence from Mr Taylor since 12 July 2017 to organise the preparation of his affidavit.

Town planning and bushfire expert evidence

33. The RMS filed a report of a bushfire expert which was ultimately not relevant in these proceedings.

34. The parties filed expert town planning reports including a joint expert report. The town planners agreed that the 24 lot subdivision granted in 2004 approved lots ranging in size from 620 m2 to 2,214 m2 with access via a new road to be constructed off Schwonberg Street. They agreed the development consent had not lapsed and had been confirmed by the Council as having been practically commenced in April 2014.

35. The planners agreed that following acquisition it would be possible for Steven Denshire to lodge an application under s 96 of the Environmental Planning and Assessment Act 1979 (EPA Act) to modify the consent so that no residential lots were located within the acquired land. The number of lots which could be accommodated on the residue land is between 20 and 24. It is likely the Council would approve a s 96 application to modify the consent for that number of lots. In the town planners’ opinion the highest and best use of the land was for rural subdivision.

36. The town planners did not agree on whether the s 96 modification application would be under s 96(1A) or s 96(2), or whether it would be assessed under the now repealed Maclean Local Environmental Plan 2001 or the Clarence Valley Local Environmental Plan 2011 and associated development control plans. Nor did they agree the costs of doing so. It is unnecessary to resolve the issues on which they disagreed. Neither party considered cross-examination of the town planners was necessary.

Quantity surveying

37. Mr Philpott an experienced quantity surveyor prepared three expert reports dated 17 November 2016, 1 August and 11 August 2017. Mr Philpott estimated that the cost of completing the approved 24 lot subdivision is $1,918,110. It is not necessary to summarise other aspects of Mr Philpott’s reports.

Cross-examination of Mr Philpott

38. Mr Philpott was asked about the advice he would give a hypothetical landowner who had been offered a quote by a contractor to subdivide the Land for $800,000. Mr Philpott said that he would advise the landowner to be cautious as it was unlikely that the development could be done for that price.

39. Mr Philpott was also asked about his experience with “fixed price lump sum contracts”, whether he costed specific machinery in his assessment, whether he considered the familial or “in house” context of the alleged development agreement, his experience with lending institutions, joint ventures between a landowner and development contractor and risks associated with under-costing development contracts. It is not necessary to summarise cross-examination on these topics.

Valuation evidence

40. Mr Dempsey valuer instructed on behalf of Steven Denshire stated in his report dated 25 July 2017 that he considered market value, special value and disturbance were relevant to the assessment of compensation. He adopted the town planner’s opinion that the highest and best use of the land prior to acquisition was for the approved 24 lot subdivision. Mr Dempsey referred to 22 sales placing most reliance (least adjustment necessary) on the sale of the adjacent land at 33 Jubilee Street. The market value of the acquired land based on this use was $57,000 once costs of construction as calculated by Mr Philpott of $1.9 million were deducted from the gross realisation of $3,450,000, allowing for a cost of debt of 8% and profit margin of 25%. Adopting Mr Philpott’s costs resulted in a value below the market value of the parent parcel as a rural home site which Mr Dempsey assessed at $387,000. The other lesser construction costs provided to Mr Dempsey were from a construction company Daracon, whose evidence was not ultimately read in these proceedings and an estimate by Warwick Denshire of $800,000. No further mention of special value appears in his report.

41. Mr Lunney valuer for RMS prepared a report dated 26 July 2017 in which he concluded that the approved subdivision was economically unviable both before and after acquisition. He undertook a hypothetical development calculation which derived a residual land value of $95,000, significantly lower than the market value of the parent parcel based on its use as a rural lifestyle property. Mr Lunney analysed the adjacent property 33 Jubilee Street which was the best evidence of the market value of the parent parcel at the date of acquisition. The land at 33 Jubilee Street had a similar area to the parent parcel, enjoyed the benefit of a development consent for a 23 lot subdivision and sold 22 days prior to the date of acquisition. It sold for $525,000, which confirmed Mr Lunney’s opinion that the highest and best use of the parent parcel at the date of acquisition was as a rural lifestyle property and not a residential subdivision. On this basis he valued the parent parcel at $480,000.

42. The valuers prepared a joint valuation report dated 3 August 2017. They agreed that the market for vacant residential land at Townsend was not strong at the date of acquisition in light of the approved subdivisions in the immediate area which supplied the demand for that type of land. The hypothetical development model they undertook was not economically viable unless the P&C Option was legally enforceable. Various development scenarios were identified in a table including different assumptions of costs applying Mr Philpott’s and Warwick Denshire’s costings. It is only necessary to set out two scenarios considered.

Calculation	Assumptions	Calculated Residual Land Value
…
7	•  Parent Parcel •   Assumes option was valid •   Assumes Mr Denshire’s cost estimate	$1,607,000
8	•   Parent Parcel •   Assumes option was valid •   Assumes Mr Philpott’s cost estimate	$520,000

29.   As the table shows, we agree that a number of these calculations derived a residual land value which was in excess of the agreed “rural lifestyle value” of $470,000.

30.   We note that the calculation which exceeds the agreed rural lifestyle value by the greatest margin is Calculation 7 which assumes that the approved subdivision could have been completed at a cost of $800,000 as estimated by Mr Warwick Denshire.

31.   We note that Mr Philpott, in his supplementary report has addressed Mr Warwick Denshire’s estimated development cost. He has concluded that this cost estimate is too low. He has expressed the opinion that it would not have been possible to complete “all the work to registration” for $800,000.

32.   Mr Lunney is of the opinion that an intending purchaser of the Parent Parcel, as at the Date of Acquisition, would be unlikely to place any significant weight on a development cost estimate which was prepared by the vendor or a relative of the vendor. An intending purchaser which had the benefit of Mr Philpott’s report and Mr Philpott’s supplementary report would likely form the opinion that the cost which would be incurred by the purchaser in completing the approved subdivision would be between $1,823,044 and $1,918,104.

33.   Mr Dempsey makes no assumptions as to cost as this is outside his expertise. He also notes the Applicant has not retained a cost expert report and consequently we do not have the benefit of a joint report dealing with cost. I agree with Mr Lunney that a purchaser would make their own enquiries in relation to cost and once that information is received would likely take that information into account along with all other contractual conditions in arriving at a purchase price.

43. The valuers ultimately agreed market value of the acquired land of $70,000 on the basis that the P&C Option was not legally binding and enforceable at the date of acquisition and hence a residential subdivision was not economically viable. The residual land value of $400,000 was less than the agreed rural lifestyle value of the parent parcel of $470,000.

44. At the hearing Steven Denshire did not rely on Mr Dempsey’s report beyond accepting that market value should be $70,000. Mr Dempsey did not appear to give evidence in person.

45. Mr Lunney also prepared a supplementary report (Exhibit 3) dated 14 August 2017 during the hearing which addressed the issue of special value. Steven Denshire’s special value claim was not identified until the first day of hearing on 13 August 2017. In his supplementary report Mr Lunney expressed his opinion that the P&C Option had a depressing effect on the value of the Land to the owner because:

1. Clause 1A states that “the Grantee agrees to construct the lots as shown in the plan to comply with the conditions of consent”;

2. Clause 1B provides that the grantor agrees to register the plan of subdivision in a timely manner at his discretion;

3. the call option gives the grantee the right to “call” (or require) the grantor to enter into a contract of sale of land for any one or more of the nominated 21 of the 24 lots the subject of the development consent (as determined by the grantee) on valid exercise of the call option before the call option expiry date;

4. the put option entitles the grantor, on valid exercise of the put option before the put option expiry date, to require the grantee to enter into a contract to purchase from the grantor any one or more of the nominated lots which the grantee has not required the grantor to sell to the grantee;

5. there is no stipulation as to the time frame over which the grantee would be required to “construct the lots” and thus enable the grantor to register the subdivision so as to trigger the call option or, in turn, the put option.

46. Calculation 7 above assumes that the total cost to complete the approved subdivision to registration would be $800,000. In his reports of 1 August and 10 August 2017, Mr Philpott expressed the opinion that Warwick Denshire’s cost estimate of $800,000 was too low and that it would not have been possible to cover all of the necessary works required for completion to registration, even without taking any labour costs into account. Mr Lunney did not have sufficient information and documents available to enable him to form an opinion as to the capacity (including the financial capacity and ability to raise construction finance) to undertake the subdivision works at the relevant time for $800,000.

47. Given the significant disparity between Warwick Denshire’s estimate of development costs and the “fixed price lump sum contract” and Mr Philpott’s estimate of development costs, Mr Lunney’s opinion was that calculation 7 and the residual land value derived by that calculation is of no assistance in determining either the market value of the parent parcel or any special value.

46. In Mr Lunney’s opinion, some limited assistance can be gained from calculation 8. This calculation derived a residual land value of $520,000 which is greater than the agreed rural lifestyle value of $470,000. Both calculations are based on the assumption that the P&C Option was “valid”. Mr Lunney was instructed that, in its existing form, the P&C Option did not operate in this manner. As such, it would be necessary to make a downward adjustment of the residual land value under calculation 8 to take into account the perceived time, cost and risk associated with the potential rectification of the P&C Option in the Supreme Court. Although the quantification of such adjustment would be a difficult and subjective exercise, the necessary adjustment will be significant and the resultant residual land value would almost certainly be lower than the agreed rural lifestyle value of $470,000.

47. From this analysis it is apparent that the only calculations which would result in a residual land value being calculated which was higher than the agreed rural lifestyle value of $470,000 (having regard to the need to rectify the P&C Option) are calculations based on an unrealistically low development cost. These are inconsistent with Mr Philpott’s expert evidence, or calculations which assume Warwick Denshire’s estimated development cost as set out in the “fixed price lump sum contract”.

Cross-examination of Mr Lunney by Warwick Denshire

50. In his oral evidence, Mr Lunney was asked by Warwick Denshire about a number of his assumptions. He said:

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T-181 line 28 to T-182 line 2

Q. And was to receive $800,000 no questions asked; that's the figure, there's not all the - you would be familiar that there are often rise and fall components of some types of contracts. But it's a lump sum fixed price contract. The price is 800,000, and--

A. Just pausing there. To make that assumption, that's quite broad. So as a valuer, I would ordinarily say who is that contract with, what is underpinning that contract, what are the terms of that contract, what is the enforceability of that contract.

To give you an example; if the grantee of this put and call agreement was, for example, Lend Lease or Stockland, and there was guarantees from the parent company, and there was absolutely no doubt about the terms, wording and enforceability of the contract, and so therefore the developer had contracted out of any material realisation risk. And if there was a similarly water tight construction contract with a well known construction company that was iron clad, and had appropriate bank guarantees and it was rock solid in its terms, there would certainly be an argument that a developer would take on that project for a profit risk margin significantly lower than 25%.

So it really depends on what you're asking me to assume. If you're asking me to assume that it was Lend Lease and it was a construction contract to one of the big well known civil contracting companies on those terms, yes that would dictate how I would do the calculation. But if you're asking me to make different assumptions to that, that would sound in different integers in this calculation.

51. Mr Lunney then said:

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T- 183 lines 6 to 27

A. That is possible. Just to put some context in para 43, I think one really needs to start reading from paragraph 39 and what I say there is that before a purchaser was to place any real weight on the Put and Call Agreement for the purpose of establishing market value they would want to satisfy themselves that Mr Taylor was prepared to proceed, willing to proceed, able to proceed, financially able to proceed, and the point that I’m making here is it was not possible for me to make those inquiries. Despite Ms Reed’s attempts to contact Mr Taylor she was unable to do so.

I’m not saying for one minute that Mr Taylor himself is a risky operator. I’m saying the fact that nobody can make those relevant inquiries to get answers to those very important questions would raise alarm bells in the purchaser’s mind and, for that reason, as I said, I don’t think a purchaser in the circumstances on the basis of the information that I’ve got available would place any weight on the agreement.

Q. Do you accept that it may be that if those inquiries were made at the date of the put and call or the date of acquisition that the answers might have been different to some years later?

A. That’s speculative.

HER HONOUR: That’s unknoweable.

52. In terms of the reliability of placing weight on the alleged development agreement, Mr Lunney said:

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T- 182 lines 15 to 27

Q. So you would take no account as a valuer of a family relationship between people. You don't think there's any more on or [sic - honour] amongst family than there is amongst Thiess [sic - thieves], for example; which I've often called developers for.

A. Perhaps I can answer that with - let's say this valuation was being done for purposes completely unrelated to these proceedings, for example mortgage finances purposes. The mortgage finance valuer would not place any weight at all on verbal agreement as a construction cost estimate unless there were contracts and guarantees and so forth. If your question to me is should I place more weight on it, either for market value or special value, I don't think I can. There needs - to my mind at least, I might be wrong, I'm happy to be persuaded otherwise - there needs to be some means of objectively testing something like the $800,000. And I've heard what Mr Philpott said to that, and I don't know how much further I can take that.

Special value claim

53. Whether the claim for special value satisfies the definition in s 57 of the Just Terms Act arises. The issues identified by Steven Denshire are:

1. Does cl 1A of the P&C Option require construction of lots in a reasonable time?

2. How is Steven Denshire’s case affected by the conclusion as to who, under cl 1A of the P&C Option, is to construct the lots?

3. On whom was the obligation, in cl 1A, placed “to construct the lots”?

4. As at the date of acquisition, was there any financial advantage, in addition to market value, to Steven Denshire which was incidental to his use of the land?

5. Was any such financial advantage lost on the acquisition?

6. How should special value be assessed?

54. Steven Denshire’s counsel submitted that, alternatively, the Court can find that Steven Denshire possibly through Warwick Denshire was entitled to step in and carry out the subdivision works regardless.

55. The RMS submitted there were five aspects of the definition of special value in s 57 which must be satisfied if s 55(b) is to apply to Steven Denshire’s claim. Firstly, did the claim identify financial value, secondly, was any advantage identified, thirdly, was that advantage above market value, fourthly, the identity of the person claiming special value and, fifthly, whether the claim was incidental to the use of the land. According to RMS the substantive questions are:

1. Does the P&C Option confer financial advantage on Steven Denshire?

2. Does the development agreement with Warwick Denshire confer financial advantage on Steven Denshire?

3. Is any advantage lost or interfered with as a consequence of the acquisition?

56. The Court did not have the benefit of hearing from Mr Taylor, one of the parties to the P&C Option. Ms Reid’s affidavit attests to attempts made to contact him, initially successfully. Ultimately no evidence prepared by Mr Taylor was before the Court.

Construction of P&C Option

Steven Denshire’s submissions

Construing grantee and grantor in cl 1A

57. Clause 1A of the P&C Option should be construed so that “grantee” is read as “grantor” in the second sentence. Properly construed this avoids an absurd result. Warwick Denshire should be responsible for the construction of lots as to construe cl 1A otherwise would lead to an unreasonable result, relying on Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36 at 109 per Gibbs J (dissenting, but not on this issue). To impose the obligation on Mr Taylor to build the subdivision would be an absurd and inconsistent operation of the P&C Option.

58. Clause 9 of the P&C Option is inconsistent with the construction that Mr Taylor had imposed on Warwick Denshire an obligation to “construct the lots”. Clause 9 expressly provides that Mr Taylor had limited rights to enter the lots for the purposes of inspection, survey and selling – to which were attached several specific obligations detailed elsewhere in the P&C Option (such as not interrupting Warwick Denshire’s quiet enjoyment, indemnities and the obligation to have insurance). The specific and relatively detailed nature of the obligations under cl 9 in respect of access for the seemingly non-invasive purposes of inspection, survey and selling is inconsistent with a construction of cl 1A that contains no details concerning the much more onerous obligation to “construct the lots”.

59. Clause 1B provides that the grantor Warwick Denshire may at his absolute discretion register the subdivision. Options only commence when registered. That the options are not readily engaged is absurd giving rise to no contractual benefit to Mr Taylor.

60. There is no suggestion in the evidence that, other than the second sentence of cl 1A, the obligations upon Mr Taylor to “construct the lots” are detailed. It would be absurd to conclude that this single sentence, absent any other agreement, was sufficient to cast upon Mr Taylor the obligation to perform a subdivision at a cost of $800,000 (if he were to perform the work in accordance with the costs the subject of the development agreement between Steven and Warwick Denshire) or $1.9 million (on Mr Philpott’s evidence).

61. The proposition that the second sentence of cl 1A, on its proper construction, imposes an obligation on Warwick Denshire is consonant with the evidence concerning an agreement between Warwick and Steven Denshire for construction of the lots. There is no suggestion in the evidence of an agreement between Mr Taylor and Steven Denshire for construction of the lots. Mr Taylor also sent an email to the solicitors for RMS on 24 May 2016 which stated that “He [Warwick Denshire] never went ahead and did the development”, indicating that the agreement was between Warwick and Steven Denshire. A construction of cl 1A that imposed the obligation to construct the lots on Warwick Denshire would avoid an unreasonable result as it would conform to the underlying evidence.

Infer reasonable time

62. The obligation to construct lots and register the subdivision must be inferred as being required within a reasonable time. Regardless of who has responsibility to construct the lots the obligation must be carried out in a reasonable time frame, the only impact is on quantum.

Steven Denshire can step in

63. Overall if none of the above arguments are accepted, Warwick or Steven Denshire could enter the land and construct the lots which would trigger the call option expiry date of 30 days later.

RMS submissions

64. The RMS submitted that because Mr Taylor as grantee is responsible for implementing the subdivision under the P&C Option and can choose when to do so as no time frame is specified there is no benefit to Steven Denshire conferred by the P&C Option. The terms of cl 1A are clear. The obligation to develop the subdivision is placed on Mr Taylor as he can choose the time frame and can wait for market conditions to improve.

Construing “grantee” and “grantor” in cl 1A

65. The cases on contractual interpretation establish that if the contractual words in question are clear and fairly susceptible to one meaning only, the Court must give effect to that interpretation. For example, in Metcalf v Permanent Building Society (in liq) (1993) 10 WAR 145 the Supreme Court of Western Australia held that, although the result might appear capricious or unreasonable, the function of the Court is to give effect to the clear words of an agreement, even if the parties may have intended a different meaning.

66. The High Court also expressed the view in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24 at 352 per Mason J (Stephen and Wilson JJ agreeing) that, unless the language is ambiguous in the sense of being susceptible of more than one meaning, evidence of the surrounding circumstances is not admissible to contradict that meaning. There is no ambiguity, absurdity or inconsistency in the use of the word “Grantee” in cl 1A of the P&C Option. This is not a matter of construction, it is simply a matter of reading the plain words as they are written.

67. Steven Denshire's submissions suggest that the context of the other provisions of the P&C Option supports a reading of “Grantee” in cl 1A as “Grantor”. This ignores provisions such as cl 9.3, which requires the grantee to maintain public risk insurance of $10 million for any one claim and workers compensation insurance cover. Construing cl 1A to mean that the grantor would carry out the subdivision works is inconsistent with the grantee's obligation in cl 9.3 to maintain insurance for the construction site.

Reasonable time?

68. The Court would not imply a reasonable time obligation because the right to construct the lots in the grantee's own time is a key right afforded to the grantee by virtue of cl 1A. The inclusion of any implied term regarding timing would interfere with the grantee's rights under that provision. The case law relied on by Steven Denshire concerns circumstances where essentially “mechanical” (for example, procedural or administrative), albeit sometimes important, contractual obligations have been subject to an implied term of completion within a reasonable time. Those are not analogous to the present case in which Steven Denshire is arguing that the Court should stipulate a time for completing a major subdivision construction project.

Steven Denshire can step in

69. Steven Denshire's submissions do not make it clear when he could exercise a right to step in and do the work. The RMS assumes that Steven Denshire would argue that the grantor could do so either at any time or if the grantee did not carry out those works within “a reasonable time”.

Finding on construction of P&C Option

70. Steven Denshire’s counsel submitted that the Court should construe the P&C Option in a certain way. He does not seek an order for rectification of the P&C Option which is an action that would presumably be necessary in the Supreme Court if Warwick Denshire as a party sought to enforce it.

71. I am construing the P&C Option in the absence of submissions from Mr Taylor, one of the parties to that agreement. The scheme of the P&C Option if “grantee” remains in the second sentence of cl 1A is financially onerous on Mr Taylor even if he could decide to implement the agreement at a time of his choosing as RMS submitted. He would be responsible for paying the option fee, the cost of developing and registering the subdivision and also buying the lots he built, effectively paying twice.

72. In Australian Broadcasting Commission v Australasian Performing Right Association Ltd Gibbs J held at 109 that where there are two competing constructions available a contract must be construed to avoid a “capricious, unreasonable, inconvenient or unjust” result. In Codelfa Mason J held at 352:

[W]hen the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.

73. The word “grantee” has a clear meaning in cl 1A but when read in the context of the whole P&C Option the consequence is absurd. I accept Steven Denshire’s submissions in this regard.

74. I agree with Steven Denshire that it would be absurd to expect a person in Mr Taylor’s position to pay for the civil engineering works (worth $1.9 million according to Mr Philpott) and then pay full price for the finished subdivision lots. I adopt the reasoning of Steven Denshire on this issue and reject the argument of RMS to the contrary. Thus, the obligation to construct the lots and register the subdivision lay with Warwick Denshire.

75. In relation to whether a reasonable time should be inferred I note that cl 1B of the P&C Option already states that the grantor is to register the plan of subdivision in a timely manner. The inference of completion in a reasonable time can be drawn for the reason given by Steven Denshire’s counsel. As RMS submitted it is not possible to determine what is reasonable, and Steven Denshire has not sought to do so. Reasonableness might depend on prevailing and future property market conditions, the grantee's ability to construct and other unknown variables. I am not able to imply a time frame for the subdivision development obligation.

76. Further, the only evidence on time frame in these proceedings (which is provided by RMS’ quantity surveying expert Mr Philpott) estimates that it would take Warwick Denshire approximately four and a half years’ worth of labour to complete the project. Steven Denshire has not commented on whether this time frame would be reasonable.

77. Given my conclusion on the reading of “grantee” in cl 1A I do not need to determine whether Steven Denshire presumably through his father could step in to build the subdivision and so trigger the call option.

Does the P&C Option give rise to special value under s 57?

78. The question whether the arrangements under the P&C Option as construed in accordance with the previous section, namely that Warwick Denshire as grantor must construct the subdivision and register the plan causing the call on Mr Taylor to sell the lots, satisfies the definition of special value in s 57 for Steven Denshire must be determined.

Steven Denshire’s submissions

79. Steven Denshire’s counsel referred to Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209; [1999] HCA 64 at [292]-[293] per Callinan J identifying that special value arose in circumstances where there was a conjunction of some special factor relating to the land and a capacity of the owner exclusively or almost exclusively to exploit it for economic advantage. In Roads and Traffic Authority v Hurstville City Council (2001) 113 LGERA 223; [2001] NSWCA 11 at [40] Mason P (Sheller and Powell JJA agreeing) referred to Boland v Yates at [293] where Callinan J referred approvingly to the Australian Law Reform Commission definition of special value as “that additional economic advantage which the owner obtains, by reason of his ownership... which is not reflected in the market value”. The statutory language of s 57 is wide referring to any advantage additional to market value which is incidental to an applicant’s use of the land.

80. The advantage was the benefit to Steven Denshire of the lots being sold to Mr Taylor under the P&C Option following the carrying out of the subdivision. While it is true that the P&C Option was not entered into by Steven Denshire that fact does not prevent s 57 from being engaged. That is because Warwick Denshire was bound to act in his son’s best interests as his attorney which of course is consonant with their familial relationship. It follows that Warwick Denshire would not have let the put option expire (in the event that Mr Taylor did not exercise the call option), when exercising the put option would have been to Steven Denshire’s advantage. The gain to Steven Denshire in the event that lots were sold pursuant to the P&C Option falls within the term “any advantage” in s 57.

79. The requirement in s 57 is that special value be “in addition to market value”. The P&C Option does not run with the land thus it cannot be taken into account in determining market value. A prospective purchaser would not be able to take advantage of the P&C Option and would accord no value to it. The circumstances of this case are in contrast to Boland v Yates, where – in respect of land upon which markets were proposed to be built – the conclusion was reached that the proposed development would be available to any purchaser, and so formed part of the market value.

80. As for the requirement in s 57 that the “advantage” be “incidental” to Steven Denshire’s use of the land, the financial advantage arises by reason of an agreement to sell the lots the subject of the P&C Option, upon the construction of lots on the land. This financial advantage is incidental to Steven Denshire’s use of the land.

81. The conclusion that s 57 is engaged is consonant with Callinan J’s reasoning in Boland v Yates at [292]-[293]. In particular, the financial advantage here is one “relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it”. No one other than Steven Denshire receives a financial benefit from the P&C Option. Similarly, the financial advantage is one that “has an economic significance to the owner”. This is not a case where Steven Denshire is claiming that “special value” is engaged because of sentiment or long attachment, see Bronzel v State Planning Authority (1979) 21 SASR 513 at 525 referred to in Roads and Traffic Authority v Hurstville City Council at [46].

RMS’ submissions

84. No special value to Steven Denshire as defined in s 57 arises. Value to owner is no longer a relevant concept in claims for compensation under the Just Terms Act, see Roads and Traffic Authority v Hurstville City Council. Remoteness of disturbance should also apply to special value, see Boland v Yates at [295] and Beckers v Road and Traffic Authority of New South Wales [2006] NSWLEC 717 at [45] quoting Bronzel at 524.

85. Firstly, the land has no special attributes which make it particularly amenable to residential subdivision as the authorities require. Secondly, the special value does not arise from Steven Denshire’s use of the land – the land was leased and used for storage at the date of acquisition. This is not the use of land for which a claim of special value is made. At its highest the use by Steven Denshire was as a passive investment similar to Speter v Roads and Maritime Services [2016] NSWLEC 128 at [91] considering s 59(1)(f). Steven Denshire was overseas at the acquisition date and not using the land directly for anything related to his special value claim. Thirdly, Steven Denshire had no unique capacity to exploit the land’s special features. Steven Denshire did not have expertise or experience in constructing residential subdivision. Any person could develop the land for residential subdivision.

Finding on special value

86. Steven Denshire submitted that his claim for special value falls within the definition in s 57 as the benefits to him under the P&C Option are in addition to market value. It is necessary to construe ss 54(1), 55(b) and 57. Firstly, “to the person” refers to the person entitled to compensation which in this case is Steven, not Warwick, Denshire. Secondly, the “financial value of any advantage” must be to the person entitled to compensation, namely Steven Denshire. Thirdly, that value and that advantage must be in addition to market value. Fourthly, the advantage must be incidental to the person’s use of the land at the date of acquisition.

87. The P&C Option states that the grantor has the right on behalf of the registered owner of the property to sell the lots. Steven Denshire’s name appears as vendor in the copy of the contract for the sale of land attached to the P&C Option in the second schedule. “Contract” is defined in cl 1.1 as a contract for the sale and purchase of a lot on the terms set out in the contract referred to in the second schedule. The P&C Option requires Warwick Denshire and Mr Taylor to agree a form of contract that they are required to adopt in the event that a sale of one or more of the lots to a purchaser is procured by Mr Taylor and accepted by Warwick Denshire. Steven Denshire’s counsel submitted that as Steven Denshire was the recipient of sale proceeds as recognised in the contract that is the financial advantage to Steven Denshire under the P&C Option. Steven Denshire has no legal rights or obligations under the P&C Option and he is not a party to it.

88. The essence of the claim for special value is that Warwick Denshire will act in Steven Denshire’s best interests as his father and attorney and will not let the P&C Option expire. That was submitted to satisfy the requirement in s 57 of any financial advantage.

In addition to market value

89. Fundamental to a successful claim for special value is that the advantage must be additional to market value. Development consent for a residential subdivision was granted in relation to the parent parcel in 2004. The residue land can be subdivided under a modified development consent which the town planners agree is able to be obtained under s 96 of the EPA Act. At the date of acquisition the valuers agreed that use of the land as a rural lifestyle property was a more valuable use than subdivision. Nevertheless, the ability to subdivide land is inherently part of market value.

90. Steven Denshire’s claim does not rely on any attribute of the land. There is nothing “special” about the acquired or residue land. It remains capable of subdivision after acquisition assuming that market conditions are favourable regardless of who is the owner.

91. Boland v Yates a professional negligence claim concerning valuation advice was considering s 124 of the Public Works Act 1912 which did not refer to special value. The special value the subject of the professional negligence claim was recognised as arising at common law. Callinan J considered special value extensively and the following paragraphs from his Honour’s judgment are often referred to on this topic:

[292] I group these two topics together because although they are separate they are related concepts. The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it. None of the examples given by the Full Federal Court are true examples of special value. There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a racetrack on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use (See for example s 79C of the Environmental Planning and Assessment Act 1979 (NSW)). Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no one else.

[293]   The Australian Law Reform Commission report Lands Acquisition and Compensation, with some slight adaptations goes some way towards correctly defining special value as “that additional economic advantage which the owner obtains, by reasons of his ownership ... and which is not reflected in the market value” (Australian Law Reform Commission, Lands Acquisition and Compensation, Report No 14, (1980), par 239). The example which I have given answers this description. What Handley JA in the Court of Appeal regarded as special value in this case does not.

92. In Mir BrosUnit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWCA 314 the size of the land was rejected as the basis for a special value claim under the Just Terms Act because that was part of its market value. The observations of Spigelman CJ (Handley and Tobias JJA agreeing) in Mir Bros at [84] and [85] are pertinent:

84   …The land was vacant industrial land. The allegedly special position related only to the size of the land. Size is a matter that does affect the market value of the land. Where there is no difference between the value of the land in general, and its value to the owner, there is no special value: Turner v Minister for Public Construction (1956) 95 CLR 245. That principle is now enshrined in the statutory definition of “special value”…

85   In Service Design Pty Limited v Commissioner of Highways (No 2) (1986) 59 LG RA 176 Matheson J held that the potential of land for subdivision is not a matter capable of attracting special value in the hands of the resumed owner, as the potential for subdivisions is one of the inherent characteristics of the land. Similarly, the potential development, or the potential for development of the then holding (which is said to be the special business of the Appellant), is an inherent characteristic of the land. The value created by that potential is included within the market value. The Appellant is not the only developer/investor in the fictional market exchange under s 56(i).

93. As Boland v Yates at [292] and Mir Bros emphasise special value generally derives from a special feature of land for a particular owner. In this case the financial advantage to Steven Denshire arises from his father’s ability to undertake subdivision construction and registration in a commercial arrangement with someone like Mr Taylor. That advantage is not related to any special quality of the land. The ability to achieve sales of individual lots in a subdivision development is an inherent characteristic of such land and the value created by that potential is necessarily included in the market value assuming that is the highest and best use of the land. In this case the town planners agreed the highest and best use of the land was for residential subdivision. The valuers considered sales evidence based on that use, principally a 33 lot subdivision approved on the adjacent property and another large subdivision close by in Townsend, to conclude that the market at the date of acquisition was not strong because supply exceeded demand. The valuation of the land on the basis of a rural lifestyle property was therefore adopted by the valuers as being the more valuable use at the date of acquisition.

94. Steven Denshire’s counsel submitted that a hypothetical purchaser on the date of acquisition “would not be able to take advantage of the P&C Option and would accord no value to it”. This is not strictly true. Immediately before the compulsory acquisition took place the essence of the P&C Option is an agreement between Warwick Denshire and a person willing to purchase the available lots at fixed prices (Mr Taylor). An inherent feature of the market for subdivision of development land is the desire of the owner to secure sales (whether by pre-sale or in the ordinary course) of the lots and realise a development profit. The existence of Mr Taylor at a particular time signifies one available purchaser. The market value for finished lots in this situation takes account of all purchasers in the market and knowledge of them.

No relevant use of land at date of acquisition

95. The P&C Option only commences if:

1. Mr Taylor had found a purchaser or purchasers for one or more lots at not less than the prices and on the terms nominated in the schedule to the P&C Option;

2. the subdivision works had been completed to the satisfaction of the local council or a certifier, and a subdivision plan had been registered;

3. the put option or call option was exercised by written notice from Mr Taylor to Warwick Denshire or from Warwick Denshire to Mr Taylor; and

4. Mr Taylor had paid the consideration of $10,000 required under the P&C Option.

96. As noted in pars 75-76 there is no specific time frame in which the P&C Option is to be effected.

97. There was no use of the land relating to the alleged financial advantage namely residential subdivision taking place at the date of acquisition as s 57 requires. The Land was partially let to a tenant under a lease. Steven Denshire would have been a trespasser on the Land because the tenant would have had exclusive possession of a key part of it. The terms of the lease are summarised in par 27 above. The lease related to Lots 23 and 24 in the proposed subdivision, which fronted Jubilee Street and would have obstructed vehicular access to the remainder of the subdivision while the lease continued up to the date of acquisition. The permitted use of those lots and the timber building on it was for storage purposes only. There is no evidence that at any time during the lease term and up to compulsory acquisition of the acquired land any significant work took place on the subdivision land.

98. Steven Denshire may well argue in response to the finding in the previous paragraph that no relevant subdivision use occurred at the date of acquisition because the P&C Option had already been frustrated by the acquisition. Without determining that issue at this point in the judgment, Warwick Denshire entered into the P&C Option in March 2013 and was contacted about possible acquisition of part of the Land by an RMS representative shortly afterwards in May 2013. At this point he placed the subdivision on hold. While he does not state this in his affidavits I infer this means that he terminated the P&C Option. He did not proceed with any subdivision works. I do not have the benefit of evidence from Mr Taylor as to his understanding of this unilateral action of Warwick Denshire. The consequence of that decision is that the use of the land by Steven Denshire at the date of acquisition is as I have described in the previous paragraph.

99. I find that any alleged financial advantage was not incidental to Steven Denshire’s use of the land on the date of acquisition.

Whose financial advantage

100. As RMS submitted, reflecting case law, Steven Denshire had no unique capacity to exploit the land. At the date of acquisition Steven Denshire possessed no enforceable contractual right, benefit or advantage or any right to obtain any such right, benefit or financial advantage from the P&C Option. His advantage derived from his father acting in such a way that the P&C Option would be given effect. While I accept that any advantage in s 57 is a broad term I consider that these circumstances suggest that advantage is too remote.

101. In all these circumstances no financial advantage within the meaning of s 57 to Steven Denshire existed at the date of acquisition.

Extent of loss not properly quantified

102. There are further difficulties with this claim. The substantial claim for all the anticipated profit from the P&C Option or alternatively after the deduction of $800,000 in construction and registration costs assumes that the agreement would be completely executed in some unspecified but reasonable time frame. Steven Denshire’s counsel quantified the special value claim in closing submissions based on the assumption that the gross realisation of the subdivision development would equal the total of the sale prices of the lots in the P&C Option. Section 54(1) of the Just Terms Act provides that the amount of compensation to which a person is entitled under Pt 3 of the Act is such amount as, having regard to all relevant matters under Pt 3, will justly compensate the person for the acquisition of the land. In determining the amount of compensation to which a person is entitled regard must be had to the matters listed in s 55 (as assessed in accordance with Pt 3, Div 4).

103. As RMS submitted relying on Mr Lunney’s evidence there is risk in whether such an arrangement would reach fruition with all the benefits claimed by Steven Denshire. As Mr Lunney identified in his supplementary report and in cross-examination there is an objective risk that such an agreement would not reach fruition where it is not being carried out by a large development company with a proven track record particularly given the lack of evidence of capacity of Warwick Denshire to undertake the works for the amount of $800,000. That sum is less than half the amount that Mr Philpott assessed as the cost of development of $1.9 million.

Extent of loss of financial advantage

104. Assuming there was a loss of financial advantage how much financial advantage has been lost? As RMS submitted, relying on the advice of the town planners, the residue land can be subdivided into 20-24 lots. They agreed that a s 96 modification application for the existing development consent can be made to enable a modified subdivision plan to be approved. This suggests that the modification must be substantially the same as the existing consent. The residue land can be exploited in a similar way as in the “before” scenario. This leads to my next conclusion.

105. I accept RMS’ submission that the special value claimed is in the nature of an impermissible “double dip” of compensation because:

1. the $3,115,000 figure represents the full amount payable under the P&C Option for the entirety of both the acquired land and residue land after that land is developed (without the lots excluded from the P&C Option). The $1,181,896 figure (the alternative calculation suggested by Steven Denshire’s counsel assuming Mr Philpott’s costs are preferred) represents the maximum amount payable under the P&C Option for the entirety of both the acquired land and residue land (without the excluded lots) after that land is developed, less the cost of carrying out the subdivision development (depending on whether Warwick Denshire's or Mr Philpott's costing is preferred);

2. no deduction has been made for the value of the developed residue land, the value of which is intrinsically included in Steven Denshire’s figures. Essentially, he would be paid the purchase price for lots in a fully developed subdivision, while retaining the land on which those lots would hypothetically be developed so that he can develop them in actuality and sell them over time at market prices; and

3. there is no appropriate evidence from Steven Denshire on how the developed residue value of the land should be calculated for the purpose of off-setting the double dip contained in the starting figure.

Was P&C Option frustrated by acquisition?

106. I have found that no relevant use was occurring on the land at the date of acquisition because no steps had been taken to implement the P&C Option. The question of whether the P&C Option was frustrated does not strictly arise in view of that finding. In the interests of fairness to Steven Denshire his argument that the P&C Option was frustrated by the acquisition and that is the reason no such use was occurring at the date of acquisition will be considered. While Steven Denshire’s counsel submitted that the absence of Mr Taylor’s evidence did not matter for construction purposes I am not sure that is the case in relation to considering whether the P&C Option was frustrated.

Steven Denshire’s submissions

107. The option was frustrated by the acquisition relying on Codelfa at 357. The financial advantage to Steven Denshire was lost as a result. Significant portions of Lots 8-13 were affected by the acquisition. There was no mechanism in the P&C Option for adjusting the price of the proposed lots once parcels were acquired. Nor does it contemplate selling only some of the lots if there is a compulsory acquisition.

108. Whether the development consent could have been amended is not to the point. Even if it could have been, the revised development would self-evidently be a different development from that contemplated by the P&C Option – the sizes, shapes and prices of the lots listed in the First Schedule would inevitably be different.

RMS’ submissions

109. The P&C Option was not frustrated by the acquisition. It contemplated the acquisition, as can be seen from cl 19 of the special conditions in the contract for the sale of land attached to the P&C Option which deals with the potential relocation of the Pacific Highway. It was common knowledge according to Warwick Denshire that the Pacific Highway was to be upgraded and the Land adjoins the highway. It is axiomatic that part of the Land would be acquired for the relocation. Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 confirms that a contract is not frustrated unless the event relied upon as frustrating was unforeseen, unexpected or uncontemplated by the parties.

110. Requiring Mr Taylor to purchase lots after acquisition would not require him to purchase something radically different from the P&C Option. The expert planners agreed the residue land was capable of yielding 20-24 lots which is achievable through a s 96 modification application, meaning the variation is substantially the same as the original. Warwick Denshire said up to 60 lots would be possible in his oral evidence. Disappointment of expectations is not synonymous with frustration. The purpose of a contract is not frustrated merely because the benefits which a party expected to obtain was not realised in full, Scanlon’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169; [1943] HCA 43.

Finding on frustration

111. In Codelfa Mason J (Stephen and Wilson JJ agreeing) stated at 357:

... I agree with Stephen J's acceptance of the approach adopted by Lord Reid and Lord Radcliffe in Davis Contractors. Lord Reid said that the task of the court is to determine “on the true construction of the terms which are in the contract read in light of the nature of the contract and of the relevant surrounding circumstances”, “whether the contract which they did make is … wide enough to apply to the new situation: if it is not, then it is at an end". Later he described frustration as "the termination of the contract by operation of law on the emergence of a fundamentally different situation”.

Lord Radcliffe said:

… frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract…It was not this that I promised to do.

His Lordship, noting that special importance attaches to an unexpected event,

observed “There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for”.

112. Applying this authority to the particular circumstances here is problematic as I have no evidence from Mr Taylor as to whether he considered the P&C Option could not be given effect. According to Warwick Denshire’s evidence he acted unilaterally in 2013 to place the subdivision on hold. That makes a finding as a matter of fact assessed at the date of acquisition of whether frustration resulted from the acquisition difficult to determine. It is not self-evident that it was frustrated for the reasons given by RMS. That Mr Taylor identified frustration of the P&C Option in his claim for compensation is not useful in the absence of any evidence from him. As already stated it is not necessary that I finally determine this issue but my preliminary view is that Stephen Denshire has not established that the acquisition did frustrate the P&C Option.

Whether development agreement between Warwick Denshire and Steven Denshire

113. The affidavit of Warwick Denshire dated 3 August 2017 is relied on by Steven Denshire to establish that he and Warwick Denshire entered into a legally binding agreement that Warwick Denshire would construct and register the subdivision on the parent parcel for $800,000. Mr Philpott’s evidence is that the construction work would be in the order of $1.9 million. Warwick Denshire had apparently told the valuers or certainly Mr Dempsey that he could do the work for $800,000 as they refer to this in the joint valuers report. He also refers to this in his first affidavit, see par 20 above. The first time evidence of an agreement described as a “fixed price lump sum contract” was adduced was in the last affidavit sworn by Warwick Denshire a week before the hearing commenced on 10 August 2017. Unsurprisingly the lateness and nature of this evidence caused RMS to challenge the existence of the agreement as a legally enforceable contract in cross-examination of Warwick and Steven Denshire. I have not set out this cross-examination in this judgment.

114. The principal relevance of the agreement if it existed as a legal obligation on Warwick Denshire seems to be to enable the claim for loss of financial advantage arising under the P&C Option to take into account construction costs of $800,000 rather than $1.9 million on the basis of Mr Philpott’s evidence. As I have already concluded that no basis for a special value claim based on the P&C Option arises, whether the agreement exists as Steven Denshire argued does not need to be determined.

115. As RMS submitted, given the relationship between Steven Denshire and Warwick Denshire, it remains open to them to implement a similar arrangement now.

Conclusion

116. Steven Denshire’s claim for special value is unsuccessful. The parties are to advise the Court of appropriate orders in light of the agreed amount of market value and disturbance within an agreed time frame.

                                                                                              **********

Addendum made on 30 January 2018

117. In accordance with the terms of paragraph 116 and the directions in my judgment of 18 December 2017 the parties provided me with their agreed proposed orders. Accordingly I make orders in chambers as follows:

1. Compensation is determined in the sum of $92,416.43 comprising:

   • market value under section 55(a): $70,000; and

   • disturbance under section 55(d): $22,416.43.

2. The respondent is to pay the applicant’s costs up until 14 August 2017.

3. The parties are to bear their own costs on and from 14 August 2017.

4. Exhibits may be returned.

Amendments

30 January 2018 - cover sheet - missing final orders

30 January 2018 - 30/1/18 Addendum - final orders.

Decision last updated: 30 January 2018