E.M. Power v Department of Education

[1989] NSWLEC 232

Land and Environment Court

of New South Wales

CITATION:	E.M. Power v. Department Of Education [1989] NSWLEC 232
PARTIES:	APPLICANT E.M. Power RESPONDENT Department of Education
FILE NUMBER(S):	30334 of 1988
CORAM:	Hemmings J
KEY ISSUES:	:-
LEGISLATION CITED:	Environmental Planning and Assessment Act
CASES CITED:	Hieronymus and Anor v. Minister for Education, Land & Environment Court, 29th June, 1989 (unreported).; Bergman v. Holroyd City Council, Land & Environment Court, 6th July 1988 ; Spencer v. Commonwealth of Australia (1907) 5 CLR 418; Royal Sydney Golf Club v. Federal Commissioner of Taxation (1957) 2 LGRA 203, at 216; Leichhardt Municipal Council v. Seatainer Terminals Pty Ltd 48 LGRA 409, at 436
DATES OF HEARING:
DATE OF JUDGMENT:	08/29/1989
LEGAL REPRESENTATIVES:	APPLICANT S.B. Austin J.A. Ayling Taperell Rutledge, Gosford. RESPONDENT J.A. Ayling State Crown Solicitor

JUDGMENT:

HIS HONOUR: E.M. Power was the registered proprietor of two parcels of land in Berkeley Road, Berkeley Vale within the Shire of Wyong. The whole of the land comprised 20.2ha, i.e. 10.7ha on the southern side of Berkeley Road, and 9.5ha on the northern side. By notice in the Government Gazette of 19th April, 1984 the Minister for Education resumed an allotment described as Lot 1 in D.P. 701342, and having an area of 3.327ha, from the land on the northern side of Berkeley Road then comprising Lots 49, 51 and 52. The parties cannot agree on the amount of compensation, and application is made to this Court to determine the dispute.

The said Lot 1 is a subdivision only for the purpose of the resumption. It does not affect Lot 51 which is located on the corner of Berkeley Road and Wyong Road, but comprises almost the whole of Lot 49, which has a frontage to Berkeley Road, and the rear portion of Lot 52. Lot 52 has a frontage to Wyong Road.

Compensation is assessed by valuer Bruce A. Shaw on behalf of the applicant in the sum of $1,476,000 as "commercial" land, and $1,092,000 as "residential" land. The respondent does not value the land on the same basis, and valuer Mr G. McMonigal assesses compensation in the sum of $54,000, and Mr L.J. Watters of the Valuer General's Department in the sum of $55,000.

The substantial difference between the assessments of compensation is a direct consequence of the application of the principles in Housing Commission of N.S.W. v. San Sebastian Pty Ltd ((1978) 37 LGRA 214), and the adoption of a different development potential of the land at the date of resumption.

All of the land in the existing holding of the applicant was vacant at the date of resumption. The land is generally of a low lying nature, with the exception of the south-western corner which rises slightly to the road and the adjoining land. Slopes within the lower areas of the sites are generally in the order of 2% rising to approximately 10% in the south-western corner. All but the south-western corner of the resumed land is identified as being within the 1:100 year flood level, as is a great deal of land being developed for residential purposes in the general area.

At the date of resumption the lands of the applicant were zoned part Rural 1(b) Highway Protection and part Rural 1(c) Agriculture, pursuant to the provisions of Interim Development Order No.58 ("IDO 58"), Shire of Wyong, 18th February, 1977. The Rural 1(b) Highway Protection zoning affected a 90m strip of the land parallel to Wyong Road, and the Rural 1(c) zoning applied to the remainder. The resumed land was wholly zoned Rural 1(c) Agriculture. It is common ground that IDO 58 was notified to implement the recommendations of Rural Lands Study 1975, and the Rural 1(c) zone was imposed as a "holding zone" |CF2.|PSI"in order to protect them from any premature development that would prejudice the Plan"|CF1.|PSO. The minimum allotment size for subdivision was 40ha, except for subdivisions |CF2.|PSI"providing land for use by the Crown"|CF1.|PSO. New dwelling houses were only permitted on condition that the allotment on which the dwelling house was to be situated was amalgamated with all adjoining allotments owned

by the same person as at the appointed day under IDO 58.

Educational establishments were permissible with the consent of the Council within the said Rural 1(c) zoning. The said Deposited Plan was registered, apparently, without the knowledge or consent of the owner and was for the purpose only of the resumption. The excised lot has an unusual shape and is obviously for the purpose only of creating an allotment for amalgamation with adjoining lots owned by the resuming authority.

The applicant's claim for a commercial or residential potential on the subject land is based upon the provisions of the Draft Berkeley Vale West Local Structure Plan. That Plan proposed a re-zoning of the applicant's land to part Residential, a road, and a District Retail Centre. The applicant says that had the Education Department not intervened in the planning process the land would have been re-zoned for such purposes at the date of resumption. On the other hand, the respondent gives no significant weight to such proposals, which it says is pointed up by the fact that land having urban potential was released in Local Environmental Plan No.13 on 12th June, 1981, and the subject land was excluded therefrom. The respondent claims that the subject land was excluded for the following reasons:

a) the Residential zoning was part of an unsatisfactory isolated pocket of proposed residential land which had servicing problems,

b) the District Centre zoning was eliminated because of substantial drainage and flooding problems, and the planning and development of more appropriate retail centres in other parts of the Shire.

Mr D.H.C. Kettle, a consultant town planner, was the Chief Town Planner to the City of Gosford between August 1984 and July 1987. Between 1978 and 1984 he held the position of Regional Manager for the Central Coast Sub-region of the Department of Environment and Planning, and its predecessor the Planning and Environment Commission. He gave a detailed history of planning decisions affecting the subject land from 1968 to the date of resumption. In his opinion, the holdings of the applicant on the northern side of Berkeley Road had been clearly designated as a commercial centre from the time of the exhibition of the Gosford Wyong Structure Plan in 1975, until the exhibition of the Draft Local Structure Plan. Alternative proposals were considered and following public exhibition a radial corridor structure plan was adopted by the Minister for Planning and Environment on 17th November, 1977. Land in the vicinity of Berkeley Road and The Entrance Road was shown as District Centre, with low density residential lands

to the west and to the north.

Wyong Council exhibited the Draft Local Structure Plan for Berkeley Vale West between 28th May and 25th June, 1980. The subject lands were shown as a commercial centre, which Mr Kettle says was generally in accordance with the proposal included in the Gosford Wyong Structure Plan. The Department of Environment and Planning advised the Council that the release of land for urban purposes should occur principally in the areas which were zoned Residential 1(c).

In Mr Kettle's opinion, because of major district centres established at Bateau Bay and a proposed centre at Tuggerah, it would have been open to the Council at date of resumption to form the view that a district centre could not be supported at Berkeley Vale. In his opinion, the alternate zoning of the land would have been Residential 2(e), consistent with that of similar lands nearby.

Mr M.W. Swift was employed by Wyong Council as development planner, senior planner and senior strategic planner at the relevant time, and is now a town planning consultant. In his opinion, as at 10th December, 1980 when the Council determined objections to the exhibited scheme, the amount of retail facilities provided or proposed in the Wyong Shire was substantially different from that which existed at the date of resumption. There had been minor expansion of the existing neighbourhood centres in Berkeley Vale. The Chittaway Shopping Centre comprising supermarket, shops, tavern and service station had been formally approved, the Tuggerah District Centre site had been re-zoned, and the Bay Village District Shopping Centre at Bateau Bay had been re-zoned and approved, and construction had commenced. In his opinion also, the residential zoning of part of the land and the adjoining land was inappropriate because it was isolated and had services problems. In his opinion, the Berkeley Vale High School proposal and

associated resumption did not play a |CF2.|PSI"discernible role"|CF1.|PSO in the planning process. Mr Swift conceded, however, that apart from the comments in the Council's determination of objections in December, 1980 and apparent consensus with Council officers, there has never been a Council decision to depart from the plan for a shopping centre on the subject land. To the best of his knowledge, the subject land is still shown as a shopping centre in any resolutions of the Council.

Mr Swift said that the residue land, if the physical problems were overcome, retains a commercial potential. However, on the basis of drainage problems and good town planning principles, in his opinion the residue parcel could be best categorised as a rural home site only, and does not have any foreseeable potential for a higher use. In his opinion, the effect of the resumption was to reduce the value of the original holding from that of a "rural home site with minor potential" to a "rural home site". I found Mr Swift's assessment of the potential for the subject land unsupported by the evidence and unconvincing.

The site of a new Berkeley Vale public school was planned by the Council in conjunction with the Department of Education. The Department of Education recommended to the Council in 1978 that, as there was no urgency for the site, |CF2.|PSI"it may be appropriate to defer purchase action until the Council has prepared an interim development plan showing the school site as selected"|CF1.|PSO. The Council agreed that the selection of a specific site would be best left until detailed plans of the area had been prepared, and by 1980 the Department of Education had settled on two possible sites. The preferred site was the northern site then owned by a company known as Mandible Pty Ltd. The Council showed the proposed zoning in the exhibited Structure Plan for the Mandible land as "Special Uses School". In March, 1980 the Department gave consideration to a site of 9ha fronting a road capable of supporting buses. As early as 1978 the Department of Education recognised that:|CF2.|PSI

"... the land encompassed by Lots 49, 51 and 52 is generally very flat and ideally suited for a shopping complex and recreation area. On the other hand, the area nominated for a school site is elevated, cleared, and with no apparent impediments."|CF1.|PSO

Pressure was placed upon Wyong Council by Government to investigate the release of new areas for urban development, and Berkeley Vale West was one of the areas nominated. A decision was taken to give priority to the Berkeley Vale West area and was the subject of a report called the Berkeley Vale West Urban Release Area. A need to provide commercial and community precincts with a range of facilities to cater for the existing and future population was considered in some detail in that report, and it was noted that a detailed analysis of drainage problems would need to be undertaken prior to finalising any proposal. However, the principle of the re-zoning was that schools, shops, possibly a tavern and community buildings would be located around the perimeter of a large open space area which would act as a stormwater retention basin in times of heavy rain. The retention basin would be developed for playing fields and possibly car parking associated with the shopping area. The need for the shopping centre on the s

ubject land was under review by the Planning and Environment Commission as part of the retail hierarchy for the sub-region. The report stated:|CF2.|PSI

"The phasing of the proposed centre at Berkeley Road, Wyong Road, would be subject to detailed assessment of demand and will depend upon timing of development of floor space within the existing zoned area. In addition, the proposed new centre could not be commenced until engineering works had been carried out, specifically sewerage and stormwater drainage. The cost of carrying out these works will affect the feasibility of the centre and therefore, to a large extent, govern the timing of its development."|CF1.|PSO

The Department of Education advised the Council in a letter received on 10th March, 1980 that after a feasibility study and discussion with Council officers the Mandible site was preferred to the site incorporating the subject land. On 8th May, 1980 the Planning and Environment Commission advised the Council that it approved the exhibition of the Structure Plan of the proposed urban release areas. With respect to the Berkeley Vale West area, it required as a condition:|CF2.|PSI

"The delineation of the shopping centre as a neighbourhood centre."|CF1.|PSO

The Draft Berkeley Vale West Local Structure Plan was exhibited by the Council during May and June of 1980.

By letter of 22nd July, 1980 the Department of Education advised the Council that the acquisition of a site capable of accommodating both primary and secondary students was an immediate need.

On 10th December, 1980 the Council gave consideration to the objections to the exhibited Structure Plan. It agreed with the representations of the State Pollution Control Commission, and noted that proposals for urban development including the commercial centre did not appear to create any environmental problems which could not be overcome with good planning and adequate controls.

With respect to objections by the Education Department, it was noted that |CF2.|PSI"the Department has verbally advised that a new combined primary school will be need to be operational by 1982-83."|CF1.|PSO The Council adopted the report that:|CF2.|PSI

"The Department has discussed the siting of the new school with Council officers on several occasions and has verbally advised that a site on Berkeley Road was now preferred. This is agreed to in principle, subject to further discussion with the Department regarding actual site boundaries, access and servicing."|CF1.|PSO

On 9th January, 1981 the Lands Inspection Officer of the Department of Education reported that the Mandible site was then regarded as not feasible and should be abandoned. The selection of an alternative site was discussed with the Council's planning department, and it was resolved to reconsider the original proposal which applied to the subject land. It was apparently discussed:|CF2.|PSI

"... that the Wyong Council be advised at an early date of the land required for school purposes and ask that it be shown in the Draft Plan currently being drafted".|CF1.|PSO

By letter of 16th April, 1981 the Department of Education asked the Council |CF2.|PSI"if you will take all necessary action to have the land zoned 'Special Uses - Schools'."|CF1.|PSO At its meeting of 13th May, 1981 the Council adopted a recommendation to raise no objection to the proposed school site. The report noted that whilst schools were permissible in the 1(c) zone, the Department would prefer the land to be incorporated in a special uses zone. It was stated that this would be considered in stage two of the Berkeley Vale West Release Area.

On 12th June, 1981, Local Environmental Plan No.13 was notified. This Plan zoned for residential purposes many areas shown proposed for that purpose in the Draft Local Structure Plan. However, it had a number of significant omissions, i.e. the land shown proposed residential, and which was later nominated by the Education Department as the preferred school site, was eliminated from the land released for residential purposes. Neither the subject land nor a Chittaway site was therein zoned for commercial purposes as proposed in the Draft Local Structure Plan.

There can be no doubt that flooding occurs in the Berkeley Vale area and that a substantial part of the subject land is subject to inundation in the 1:100 year storm. Detailed evidence of the drainage and flooding problems was given by Mr R.B. Spry, a civil engineer. Mr Spry is employed by the consultants to the Wyong Shire Council and has, over a number of years, advised the Council on preferred strategies for overcoming existing and future drainage problems with the urbanisation of the Berkeley Vale area. He acknowledges that had the subject land been zoned for commercial or other urban purposes at the date of resumption, a detailed drainage study would have been required by the Council. The developer would also have been required to carry out site filling and drainage works at his own cost, and would very likely have to make a contribution towards the cost of the overall trunk drainage system. However, generally speaking he was of the opinion that the drainage problems would not deter the development of th

e land for commercial or other urban purposes, and notwithstanding some doubts as to the precise level of inundation in the 1:100 year flood, that there was little difference between the subject land as a development site and land generally being developed in the area. The respondent did not call a civil engineer to support a report on the flooding and drainage issues.

Mr Shaw adopted a "before and after" exercise in the assessment of compensation on both a commercial and residential basis. On legal advice, he assumed that because of the intervention of the resuming authority in the normal planning process, the subject site must be valued on the basis of its being actually zoned at that time for commercial purposes. In the "before" exercise he gained most assistance from the sale of land in Goobarabah Avenue, Gorokan on 19th June, 1985 for the price of $2,500,000. That was the sale of an area of 7.14ha which had been zoned specifically for that purpose. In Mr Shaw's opinion there was no detectable difference in commercial values between 1985 and the date of resumption, and he made no allowance for time. The sites at Gorokan and Berkeley Vale are both on the western side of Tuggerah Lakes and some distance back from the water's edge. In his opinion both sites adjoined closely settled residential areas along the edges of the lake, but the catchment area of Gorokan was larger

than the area that would have been available to the subject site. Mr Shaw made a number of adjustments to the calculated rate per hectare paid for that land and deduced a rate of $170,000 per hectare. He applied that figure to the whole of the applicant's land north of Berkeley Road before resumption and calculated a value of $1,600,000.

In the "after" exercise, Mr Shaw assumed that the residue had lost its potential for commercial development. He therefore assigned a value derived from the sale of an adjoining parcel, Lot 54, which has a frontage to Wyong Road. That land was zoned Rural 1(c) and sold for $70,000 on 17th June, 1985 with a dwelling house thereon. He deduced a land value of $15,000 per hectare. Assigning $20,000 per hectare for the 6.2ha residue, he calculated a value of $124,000. The difference is $1,476,000, and that is his assessment of compensation on a commercial basis.

However, if, contrary to his instructions, the land was not to be assumed to have been actually re-zoned but still had a proposed commercial centre zoning, he would value the land in the sum of $650,000. This estimate is also based on a "before and after" exercise assuming the above value of the land at $1,476,000 in four years. That sum was deferred for four years at 15%, i.e. $915,000, taken by Mr Shaw as $900,000. In the "after" exercise, he considered the residue would have a lower potential for re-zoning to commercial as a consequence of the loss of the high land. He therefore deferred it six years at 20%, i.e. $250,000. The difference of $650,000 is his assessment of compensation on a potential commercial basis.

Mr Shaw's assessment of compensation as residential in the "before" exercise relied mainly on the sale of Lot 1 Wyong Road, Berkeley Vale, which is almost opposite the subject land and sold for $415,000 on 21st March, 1986. That land had an area of 4.65ha, of which about 3.5ha is zoned Residential 2(e), and the remainder 6(c). The whole of the land is also below the 8m contour line and subject to flooding in the 1:100 year storm. Access to that land was restricted by a deep drain and would be likely to be developed through an adjoining property. That adjoining property is being developed for a substantial retirement village. In Mr Shaw's opinion the subject land was superior to Lot 1, being on a corner with unrestricted access and some of it being higher than the 8m contour. From the sale of Lot 1 he assumed a rate of $128,000 per hectare for the subject land. The calculation in the "before" exercise, therefore, was 9.5ha at $128,000, i.e. $1,216,000. In the "after" exercise he assumed again the value of $124

,000 for the residue land and thereby deduced a difference of $1,092,000, which he assigned as compensation on a residential basis.

Mr McMonigal's valuation exercise was not referred to by the respondent in submissions. That valuation was incurably flawed as a consequence of its reliance upon Mr McMonigal's analysis of prices paid in settlements of remnants of land resumed for road widening purposes. He acted in such settlements and had assigned the agreed price. The exercise was more unusual because, in effect, he analysed his former valuation and then assigned deduced rates to the subject land. I found his basis of valuation singularly unhelpful.

Mr Watters is the Senior Valuer in the Gosford office of the Valuer General's Department and for the purpose of preparing his report had relied upon Mr McMonigal for advice on development potential and land values in the Wyong area. It was upon his recommendation that Mr McMonigal was engaged to provide an additional valuation.

Mr Watters was aware of the involvement of the Education Department in the planning process for the subject land and the precinct, but after discussion with Council officers concluded that the exclusion of the subject site from the re-zoning for residential purposes or as a commercial centre in L.E.P.13 was because the Council |CF2.|PSI"needed more detailed studies, not only for a hydrology report, but also for availability and provision of services and their funding, etc."|CF1.|PSO In his opinion, the representations of the Education Department had no effect upon the planning process. He said the Draft Local Structure Plan was only a "concept plan" and I infer from his evidence that he did not believe that the marketplace would be substantially affected, if at all, by such plan. He drew a distinction between that Draft Local Structure Plan and a draft local environmental plan. In any event, in his opinion, even if the land had been re-zoned in L.E.P.13, |CF2.|PSI"the development of the land would have been a

non-viable proposition because of the physical and servicing costs and problems"|CF1.|PSO. In his opinion, the resumption of Lot 1 has not deprived the balance of the land from any commercial potential it may have had as a consequence of the Draft Local Structure Plan.

Mr Watters also adopted a "before and after" method. He assumed that the highest and best use of the 9.53ha comprising Lots 49, 51 and 52 was |CF2.|PSI"as one acreage home site containing some inherent retention value"|CF1.|PSO. For that reason, he assigned a value of $135,000 for the 9.53ha before resumption. In the "after" valuation he considered that only the residue retained its "building right" for a dwelling house, and also retained its doubtful potential for commercial use, both subject to flood studies. In his opinion, the residue had a value of $80,000, the difference was $55,000, and therefore he accepted that as the value of the subject land.

The sales analysis by Mr Watters and the assignment of value therefrom was, to say the least, most confusing. In chief he asserted that he derived a value of the land in the "before" exercise, "without potential", in the sum of $100,000, and for potential he added a further $35,000. As part of that exercise, Mr Watters relied upon two sales of land zoned 1(c), i.e. a sale of 5.8ha in Pollock Avenue, Wyong for $70,000, and one of 8.86ha in Jenson Road, Tuggerawong. Unfortunately, apart from the zoning, these sites bear little similarity to the subject land either in location, topography or use, and I find them of little assistance, if any. Mr Watters also purported to rely upon a number of sales of land in Glenning Road, Berkeley Vale. The application of those sales to the subject land is obscure. Each of these sales is situated south of Berkeley Road, and would be clearly purchased only for the purpose of rural home sites. They were located in an elevated attractive area and, in my opinion, would appeal to an

entirely different market from that for any part of the subject land. Not only is the zoning and topography different, but any redevelopment potential in accordance with the Draft Local Structure Plan, if implemented, must await the substantial upgrading of drainage and other works in the area south of Berkeley Road. In my opinion, little assistance, if any, can be obtained from these sales.

I have serious doubts as to whether Mr Watters originally carried out an exercise to deduce a rural home site valuation and then add a figure for potential. Such exercise was inconsistent with his written report. I am persuaded that he sought to reinforce his valuation by that exercise when he realised that he would be confronted with his failure to make an allowance for potential derived from the provisions of the Draft Local Structure Plan. Later in his evidence, Mr Watters conceded that the sum of $135,000 was derived directly from the deduced rate per hectare of a sale of land for a school site. This was a sale of 13.33ha to the Roman Catholic Church of land described as Lot 9 Gavelock Road, Tuggerah. The land had an older style weatherboard cottage thereon, fronted a tar sealed road, had all services and adjoined a developing industrial area. The land is in the Tuggerah West Urban Release Study Area, and had the same zoning as the subject land, but no similar potential for urban use. It was physically su

perior and there was a very small portion subject to flooding. It was purchased as a school site and was within walking distance of the Tuggerah Station. It appears clear to me that Mr Watters regarded the acquisition for the school site as directly comparable. Notwithstanding that Mr Watters said that he did not attempt to assign what he called a "school" value, he merely assigned the value deduced from this sale, without adjustment, to the subject land. In my opinion, in doing so he relied upon a sale of land with little comparability, and gave absolutely no cognizance to the effect upon value of the zoning of the subject land as proposed residential and commercial in the Draft Structure Plan.

I am of the opinion that the whole basis of Mr Watters' valuation is erroneous and unacceptable. To regard the applicant's land of 9.5ha, which was mostly flat land with drainage problems, at the intersection of two busy roads, and completely surrounded by land proposed for urban development, as a rural home site is unsustainable. In any event, by the way in which he carried out a "before and after" exercise, building rights remained with the residue and the subject land of 3.327ha was assumed not even to have any such potential. The "before and after" exercise in many cases is an acceptable and useful method to ascertain compensation for the compulsory acquisition of a part of land, particularly if questions of severance or disturbance arise. However, its usefulness often depends upon the potential and marketability of the land as a separate allotment. In the circumstances of this case, its application is obviously inappropriate; cf. Hieronymus and Anor v. Minister for Education, Land & Environment Court, 29

th June, 1989 (unreported).

The only commercial sale referred to by Mr Watters in his report was a sale to Masoba Pty Ltd for the sum of $285,000 on 12th October, 1983 for Lot 5 Wyong Road, Chittaway. That land had an area of 1.6ha and was zoned 3(c) Neighbourhood Business at the date of sale. It was level land with all services and a tar sealed road frontage with kerb and guttering. That site was ready for immediate development with a liquor license, with no further expenses for Council contribution and services, and sold for only $285,000. Taking into account the major shopping centres at Bateau Bay and Westfields at Tuggerah, in his opinion the commercial development of the subject land would not have been feasible.

Even assuming the correctness of Mr Shaw's assumption that the land be zoned at date of resumption as commercial, I have considerable reservations as to the comparability of the Gorokan sale, or his analysis thereof. Mr Shaw made a number of adjustments to the sale price of that land. The first was $50,000 to allow for the difference in size, and $85,000 for larger catchment and greater competition. He allowed $55,000 for the difference in the topography and $10,000 for ground works. The adjustments total $180,000, and the estimated unit value of the subject land is therefore, in his opinion, $170,000. Mr Shaw then assigned that rate to all of the 9.5ha of the land before acquisition.

There are inevitable problems in attempting to assign a rate deduced from the price paid on the sale of zoned land with a development consent for specific commercial development, to that of non-urban land with merely a potential for unspecified but similar development. The price is likely to reflect the value of matters that do not apply to both properties, i.e. the benefit of such zoning and development consent, which usually gives certainty to the nature and scale of the highest and best use of land, and avoids delay in its implementation; cf. Bergman v. Holroyd City Council, Land & Environment Court, 6th July 1988 (unreported). Mr Shaw has otherwise attempted to take into account most relevant differences between the two parcels, but unfortunately the inescapable conclusion is that his adjustments are arbitrary and, except for his expert opinion, not supportable by evidence. The same criticism must be made with respect to the adjustments and assumptions in his alternative commercial valuation. Notwithstand

ing his considerable experience, I find both commercial exercises unreliable and unconvincing.

In any event, I am satisfied that the first valuation is on an incorrect premise. At the date of resumption the land was not zoned, nor proposed to be zoned, for a public purpose. S.116 of the Environmental Planning and Assessment Act, 1979, whilst referred to in evidence, has no relevance to this acquisition. However, I am completely satisfied on the evidence that the Education Department interfered in the normal planning process in relation to the subject land. The effect, if any, upon the value of the land of steps taken by the Education Department which have a nexus with an intention to acquire must be ignored in the assessment of compensation; San Sebastian (supra). I am satisfied that the exclusion of at least part of the land from L.E.P.13 for residential purposes had a direct nexus with the Education Department's intention to acquire. However, I am unpersuaded that there was any intention or real likelihood that L.E.P.13 would include any land zoned for commercial purposes. I do not draw any inference

s from the absence of commercial land in LEP 13 because I do not think that to make such provision was its function. It effected an early re-zoning of land for residential and open space purposes. I note that not only the subject land, but also the Chittaway land, which was also shown as proposed commercial in the Draft Local Structure Plan, was not included in that L.E.P. I also think that it is abundantly clear that, as expressed in the Berkeley Vale West Urban Release Area Study, the phasing of a commercial centre on the land was subject to further detailed assessment of demand and the design of engineering works.

However, in my opinion, had the Education Department not interfered in the planning process, part of the subject land would have remained in all draft proposals as "Proposed Commercial". I am also unpersuaded that flooding and drainage problems had the significance claimed by the respondent. Large areas of land have been re-zoned for residential development in L.E.P.13,

notwithstanding being "flood prone" in the 1:100 year flood and so indicated on a Council flood map. I am satisfied that even if part of the subject land had not been proposed for commercial development, or a school site, it would have been proposed for residential development. It is even highly likely that in fact part of the land would have actually been zoned residential in L.E.P.13. I am not persuaded that the sale of the resumed land, including part proposed to be zoned for commercial purposes, would necessarily inhibit the development of the balance of the vendor's land for a retail centre. The most likely form of retail development proposed at date of resumption would be as a neighbourhood shopping centre, but not defined by area or precise nature until the said studies had been finalised.

In my opinion, the appropriate method of assessment of the value of the subject land is the "selling" approach. It was similar in size to Lot 49 and marketable as a separate lot. The loss to the dispossessed owner is the sum which a prudent purchaser would be prepared to pay to the vendor for the land at the date of resumption after a hypothetical process of voluntary bargaining. For that purpose, each party must be assumed to be cognizant of all relevant circumstances which might affect the value of the land; see Spencer v. Commonwealth of Australia (1907) 5 CLR 418. It is necessary to determine the sum which, if possible, will put the dispossessed owner in the same position after resumption as before.

I have no doubt in the process of voluntary bargaining for the acquisition of the land, had not the resuming authority intervened in the planning process, both vendor and purchaser would have taken into account that the land was in a "holding" rural zone, but at that time proposed to be zoned for a road and for residential and commercial use. Unfortunately, whilst during the hearing I foreshadowed the possibility of such a finding, there was a paucity of evidence called to determine value on that basis.

The respondent correctly concedes that the Education Department may be regarded as one of the potential purchasers of the subject land. In this matter, the Education Department prior to resumption declined to acquire land which it had originally selected and had zoned in a draft structure plan as proposed "Special Uses - School". Instead, it elected to enter the marketplace and acquire other land on which a school was a permissible purpose, but which was shown in the same exhibited structure plan as, inter alia, "Proposed Residential" and "Proposed Commercial Centre". In my opinion, notwithstanding its powers of compulsory acquisition, where a statutory authority enters the marketplace to buy land for a public purpose permissible in the relevant zone, it must be assumed to compete with all other buyers and be expected to pay a market price which takes into account its full potential; cf. Tatmar Pastoral Company Pty Ltd v. Housing Commission of N.S.W. Land & Environment Court, 17th March, 1982 (unreported).

Mr Watters was aware of the acquisitions for the school by the Education Department of land in Berkeley Road adjoining the subject land. He disregarded those sales because they were to a body with the power of resumption. The Education Department purchased Portion 47, which had an area of about 0.8ha, for $75,000, and Lot 48 of about 3ha for $165,000. Those parcels adjoined Lot 49 and had been shown in the same proposed residential zone in the Draft Local Structure Plan, but were also eliminated from L.E.P.13. It is conceded by the respondent that the prices paid in such sales do not reflect any potential arising from the Draft Local Structure Plan, and were sold merely as a rural home site. These can be compared to Lot 54 Wyong Road, which was non-urban land with a frontage to Wyong Road, and sold for $70,000 with a dwelling house thereon. That land could be used for residential purposes, notwithstanding that it was low lying, and it also had absolutely no potential for any higher urban use.

I am conscious of the care that must be taken in dealing with sales to public authorities with powers of compulsory acquisition. If properly analysed, in my opinion, they may be used; cf. Tatmar (supra). I am satisfied that a prudent purchaser would take into account prices paid by the Education Department for the adjoining lands. At the date of sale to the Education Department, Lot 48 was an area of land similar in size to the resumed land and somewhat superior topographically, and included a substantial brick dwelling. Nevertheless, it is indicative of the price that the Education Department was prepared to pay in the open market for comparable land, notwithstanding that the dwelling would have to be demolished to make way for development permitted in the rural zone.

Whilst the whole of the subject land was not actually zoned for residential purposes, I am satisfied that the vendor would have given consideration to the prices realised in the locality on the sale of flood prone land actually zoned residential. Each valuer analysed the Cabac sale, Lot 1 Wyong Road. Its comparability was rejected by Mr Watters. It was similar flood-prone land, and mostly zoned for residential purposes as at the date of sale. In his opinion, the sale was speculative and the price unreliable for the reason that no deposit was paid and there was a 100% mortgage payable to the vendor. Mr Watters analysed that sale at the rate of approximately $89,000 per hectare. I prefer his analysis to Mr Shaw's $128,000 because it is in line with sales of similarly zoned land in Berkeley Road, i.e. Lot 2 with limited road frontage sold for approximately $50,000 per hectare, and Lot 46 at approximately $89,000 per hectare. Notwithstanding Mr Watters' criticisms, I am satisfied that the price paid for Lot 1 Wyo

ng Road represents market value.

In my opinion, the price paid for Lot 48 Berkeley Road represents the lowest possible value of the resumed land as non-urban land in the immediate locality, but without urban potential. Lot 47 was vacant and sold at a significantly higher rate. I consider a purchaser of the subject land would be prepared to pay a substantial premium above the $55,000 per hectare paid for Lot 48 in order to reflect such potential.

Notwithstanding the intervention by the Education Department, market forces would still have had an impact on the planning process affecting the subject land. By the date of resumption, other centres were planned or established and there was some doubt as to the scale of the proposed neighbourhood shopping centre, the area of land needed and the likely timing of its release. In such circumstances, land with such uncertain potential must have a lower value than that of the land actually zoned Neighbourhood Business at Chittaway. There is no sales evidence of land with an identical potential for development. After taking into account all relevant considerations, the adjustments, if any, which should be made to the sales evidence are a matter of judgment and, owing to the paucity of evidence, will be |CF2.|PSI"necessarily a matter of guesswork"|CF1.|PSO; see Kitto J. Royal Sydney Golf Club v. Federal Commissioner of Taxation (1957) 2 LGRA 203, at 216; see also Leichhardt Municipal Council v. Seatainer Terminals

Pty Ltd 48 LGRA 409, at 436. As the alternative potential for the subject land was residential, I consider that a prudent purchaser would pay at least a price which reflects that potential. In all of the circumstances, the value of the subject land at date of resumption is best compared to the rate of $89,000 per hectare paid for Lot 1 Wyong Road. Doing the best I can, I believe that the parties in the hypothetical sale would come together at a figure of $300,000 for the subject land at date of resumption.

The orders of the Court are:

1. Compensation assessed at three hundred thousand dollars ($300,000.00).

2. Exhibits may be released.

3. Respondent to pay the costs of the applicant.