Edgar Allan Planning Pty Limited v Woollahra Municipal Council

[2006] NSWLEC 681

Land and Environment Court

of New South Wales

CITATION:	Schwartz v Wollondilly Shire Council, Bjorkland v Wollondilly Shire Council [2006] NSWLEC 681
PARTIES:	APPLICANTS Laelie Patricia Schwartz Bo Anders Bjorkland and Judith May Bjorklund RESPONDENT Wollondilly Shire Council
FILE NUMBER(S):	30006 of 2005, 30007 of 2005
CORAM:	Pain J
KEY ISSUES:	Compulsory Acquisition of Land :- factors relevant to hypothetical purchaser - application of "before and after" method of valuation - development constraints - consideration of severance and injurious affection
LEGISLATION CITED:	Darling Harbour Authority Act 1984 s12C Development Control Plan 27 Picton Commercial Area Land Acquisition (Just Terms) Act 1991 s55, s56, s58 Public Works Act 1912 s124 Roads Act 1993 Wollondilly Local Environmental Plan 1991
CASES CITED:	Bautovich v The Minister administering the Environmental Planning and Assessment Act 1979 [2004] NSWLEC 389; Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 ; Gosford Shire Council v Green (1980) 48 LGRA 201; Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2004] NSWLEC 315
DATES OF HEARING:	23/05/2006 24/05/2006 25/05/2006 26/05/2006 28/08/2006
DATE OF JUDGMENT:	11/10/2006
LEGAL REPRESENTATIVES:	APPLICANTS Mr J Robson SC SOLICITOR Marina Voncina RESPONDENT Mr I Hemmings SOLICITOR Marsdens

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Pain J

10 November 2006

30006 of 2005 Laelie Patricia Schwartz v Wollondilly Shire Council

30007 of 2005 Bo Anders Bjorklund and Judith May Bjorklund v Wollondilly Shire Council

JUDGMENT

1 Her Honour: These are two Class 3 appeals under the Land Acquisition (Just Terms) Act 1991 (“the Just Terms Act”) concerning the compulsory acquisition of part of land in Argyle Street Picton on 6 August 2004. The respective Applicants’ blocks are on adjoining lots and the issues in each matter are virtually identical so that the two matters were heard together. The effect of the acquisition is that the largely vacant middle sections of the Applicants’ lands have been acquired which results in two separate parcels of land remaining, one fronting Argyle Street and one at the rear of the acquired land, within one title. I went on a view of the subject sites and the surrounding area.

2 The acquisition is for the purpose of the Roads Act 1993. The land has been acquired for construction of an extension to Waltons Lane between Cliffe Street and Menangle Street, West Picton.

3 The two sites front Argyle Street in the main commercial area of Picton, opposite a new Coles supermarket development. The land is in the 3(a) Business Zone under the Wollondilly Local Environmental Plan 1991 (“Wollondilly LEP”). The sites are surrounded by single and double storey shops and offices. Existing development on the Schwartz land is a single storey masonry and weatherboard building fronting Argyle Street. This is used a real estate office, retail shop and two residential flats. A metal shed partially straddled the acquired land but has now been demolished and the rest of the very deep block is vacant. The parties have agreed that compensation of $11,000 is payable for the shed. On the Bjorklund property the existing improvements at the date of acquisition are retail weatherboard premises fronting Argyle Street, used by a restaurant and hairdresser with side vehicular access.

4 The rear section of both areas of land is undeveloped. Most of the rear of the land (about 25 per cent) is flood affected being identified as low hazard floodway in the Picton Local Flood Policy. The rear boundary is affected by an existing 3.05m wide drainage easement.

5 In proceedings 05/30007 (Bjorklund) compensation is claimed for the market value of $87,000, loss of value of the residue land owned by the Applicant of $88,000 and disturbance of $11,000. The market value and disturbance are agreed.

6 In proceedings 05/30006 (Schwartz) the amount claimed for market value is $74,000, loss of value of the residue land due to severance of $81,000. Disturbance of $36,500 is claimed but this is not agreed. The Council argued that no compensation is payable beyond what the Applicants have already received because the construction of the laneway for which the Applicants’ lands were acquired will enhance the value of the Applicants’ residue lands.

7 The areas of acquired land and residue land are shown in the following table.

TOTAL AREA	ARGYLE	LANE (acquired land)	REAR
Bjorklund 89-91 Argyle St	2003.8m2	994.2m2	288.9m2	720.7m2
Schwartz 85-87 Argyle St	2054.6m2	1071m2	295.9m2	687.7m2


General Principles of valuation

8 Section 55 of the Just Terms Act relevantly provides:

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

…

(c) any loss attributable to severance,

(d) any loss attributable to disturbance,

…

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

9 Section 56(1) of the Just Terms Act provides:

In this Act:

"market value" of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):
(a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and
(b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and
(c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.

10 Section 58 of the Just Terms Act provides:

loss attributable to severance of land means the amount of any reduction in the market value of any other land of the person entitled to compensation which is caused by that other land being severed from other land of that person.

11 Section 55(c), severance, and s 55(f), increase or decrease in value of residue land, are each matters to be taken into account for the purposes of the assessment of compensation. To the extent there is a decrease in value (s 55(f)) or loss due to severance (s 55(c)) that amount is added to the market value to arrive at the amount of compensation. To the extent there is an increase (or betterment) as a result of the carrying out of the public purpose (s 55(f)) that amount is set off against market value so as to arrive at the amount of compensation.

12 A number of town planning instruments were relevant to the case.

Picton Flood Policy adopted May 2000
Aims and objectives

13 The primary objective of the Picton Local Flood Policy is to reduce the impact of flooding and flood liability on individual land owners and occupiers and to reduce private and public losses resulting from flooding. To achieve this the Policy outlines its aims as follows:

(a) to alert the community to the extent and hazard of flood liable land in Picton;

(b) to inform the community of Council’s policy in relation to the development and use of flood liable land in Picton;

(c) to define a designated flood for the Town of Picton;

(d) to encourage development and construction which is compatible with flood hazard;

(e) to reduce the risk and implications of flooding to existing areas in Picton;

(f) to inform the community of flood warning and evacuation procedures;

(g) to ensure, whenever possible, that buildings and services required for evacuation and emergency needs are sited 1 metre above the 1% flood level; and

(h) to reduce social disruption and damage caused by floodwaters, by the promotion of flood awareness in the community and the provision of advice on the most appropriate means to flood-proof existing properties in flood affected areas.

14 This policy categorised land in the Picton town centre according to its flood hazard. The front sections of the Applicants’ properties on Argyle Street where the existing buildings are located are defined as low hazard flood fringe. The policy states such land is subject to only shallow inundation and development is unlikely to alter flow paths.

15 The rear of the land is categorised as low hazard floodway. The policy states that low hazard floodways contain flow paths where a significant volume of water flows during floods. In considering applications for development in these areas Council requires that the development be designed to maintain the operation of these flow paths. The policy states:

(i) New development may be permitted provided adequate information is provided to Council by a competent engineer indicating that the proposed development will be unlikely to significantly increase the 5% AEP and 1% AEP flood levels or peak flood flow velocities on adjacent properties and that the proposed building can withstand the likely conditions experienced during the Designated Flood without suffering significant damage.

(ii) Any portion of a building or structure subject to inundation should be constructed of flood compatible (flood damage resistant) materials.

(iii) In the Residential 2(a) zone the floor level of any development shall be erected at least 0.5m above the Designated Flood level and Council shall require the submission of a surveyor’s certificate on forming up of the structure certifying that the level of the floor is not less than the required floor level.

(iv) In the Commercial 3(a) and Special Uses 5(a) zones the same conditions as in 7.2(b)(i) to (iii) High Hazard Flood Fringe shall apply.

(v) Minor extensions may be permitted without raising floor levels, provided Council is satisfied that the cumulative effect of such extensions is not significant.

(vi) Filling will only be permitted if compensatory works such as excavated floodways, are provided to ensure that there is no adverse effect on flood levels.

(vii) Fencing must comply with Council’s guidelines for the erection of fencing.

16 Regarding subdivision, cl 7.5 of the Flood Policy states:

In general, subdivision of land within the extent of the Designated Flood is not favoured by Council because of the likelihood of increasing the future potential for flood damage. However, subdivision of land which is classified Flood Fringe may be permitted provided the applicant satisfies Council that the proposed subdivision:

(a) Fully complies with all relevant provisions of this Policy; and;
(b) Contains permanent, maintenance-free and fail-safe provisions for evacuation such as continuously rising roads linking with high ground.
(c) Does not incorporate proposals for high-risk land uses such as hospitals, nursing homes or aged accommodation.

Subdivision of land in floodways will not be permitted.

In approving any subdivision in accordance with this clause, Council may impose restrictions on the design of the subdivision and/or the nature of occupancy permitted so that the objectives of the Clause will be met in the future.

Wollondilly LEP 1991

17 The objectives of the 3(a) Business zone under s 10 of the LEP are:

(a) to focus and consolidate retail and business development in accessible locations; and
(b) to promote the amenity and efficiency of business commercial centres; and
(c) to ensure that there is adequate provision for car parking facilities in the vicinity of commercial centres.
Section 2 of the LEP states the general aims and objectives of the plan as includes:
…
(d) to conserve the environmental heritage of the Shire of Wollondilly
(e) to integrate heritage conservation into the planning and development control measures
(f) to provide for public involvement in the matters relating to the conservation of the Shire of Wollondilly’s environmental heritage
(g) to ensure that new development is undertaken in a manner that is sympathetic to and does not detract from the significance of heritage items and their settings, as well as the streetscapes and landscapes of Picton and Thirlmere and the distinctive character that they impart to the Shire of Wollondilly.
…

DCP 27 Picton Commercial Area (updated March 2000)

18 DCP 27 was in force at the date of acquisition and continues in force. The Plan objectives at s 2(i) are;

that the aesthetic appearance, scale, height and design of commercial buildings is compatible and harmonious with existing development especially in relation to the historic and ‘main street’ character of Picton.

Map 1 of the DCP identifies the rear portion of both sites as proposed public car parking area/laneway.

19 Section 4.5 states that side setbacks will be assessed on their merits however the Council generally prefers adjoining commercial buildings to be attached to each other.

20 Section 4.4 of the DCP requires that:

all commercial developments are to be harmonious in terms of their size, scale and bulk with surrounding properties and the general area in which they are located.

History of laneway proposal

21 One issue in these cases is what information a prudent hypothetical purchaser would have been likely to be aware of in relation to the Council’s intention for the construction of a laneway as at the date of acquisition. The evidence on which the Council relied follows.

22 The recommendations of the Wollondilly Commercial Centre Study were adopted by the Council in 1991, which resolved:

To undertake a detailed commercial centre study of Picton and Tahmoor to look at the rationalisation of the car parking as well as possible improvements for the streetscape and urban design considerations.

23 In 1995 the Picton Commercial Centres Study was prepared and adopted by the Council at its meeting of 11 December 2000. One of the recommendations adopted by the Council was:

6. That Council complete a detailed traffic study of the Picton commercial centre which specifically considers the following issues:

· the construction of an access road from Cliff Street to the south western car park also servicing the north western carpark;

· the timing of construction of the north western carpark;

· the closure of the current Westpac access land to traffic and the use of this laneway to provide pedestrian access from the north western car park to Argyle Street.

24 The Picton Town Centre Traffic Study was then prepared by Gabites Porter (NZ) Ltd in August 2001. This dealt in part with proposals for how to remove traffic from a key intersection at Argyle and Menangle Streets. These included providing a laneway linking Menangle Street west and Cliffe Street along the western boundary of the Applicants’ properties. On 8 October 2001 the Council resolved to endorse the recommendations contained within the Gabites Porter Report.

25 There was a confidential meeting of the Council on 13 May 2002, not therefore open to the public, which dealt with the “acquisition of laneway as an integral component to overall car parking matters…”. The report prepared for this meeting concluded that:

Stage 1 of this strategy should comprise acquisition of land and construction of the laneway through the two allotments immediately to the south of Cliffe Street…

It referred to entering into negotiation with affected land holders.

26 A confidential report by Russell Olsen Urban Designers was commissioned by the Council and provided in May 2002. The report proposed a laneway connecting Cliffe Street and Menangle Street and showed an integrated commercial development across five properties on the rear sections of land on the western (rear) side of the laneway. Following consideration of that report, a report of the Council’s Director of Corporate and Community Services was tabled at the Council meeting on 9 December 2002 which referred for the first time to the construction of the laneway and also made reference to tree planting and streetscape improvements, stating:

Within the northwestern precinct there is a need to ensure land is efficiently utilised and that the pedestrian and vehicular movements are considered on a precinct wide basis. To facilitate this objective Russel Olsen Urban Projects, a firm with specific urban design expertise was engaged by Council to provide advice with regard to the roadway location and the orientation of buildings adjoining this roadway.

Following consideration of this advice the siting of the roadway was moved in an easterly direction to enable utilisation of the rear of those allotments fronting Argyle Street. This siting of the roadway as agreed by Council on 13 May 2002 will promote a more vibrant commercial precinct, which will benefit both landholders and shoppers alike.

The position of the roadway will also provide for long term vehicular access from Cliffe Street through to the northwestern car park and Walton Lane. The roadway would be constructed as a combined traffic and pedestrian thoroughfare with particular attention to tree planting and other streetscape improvements to create a positive addition to the Picton Town Centre.

27 The Council then commenced the process of acquiring the land needed for the laneway and these acquisitions took place on 6 August 2003 negotiations with the owners of the land having commenced in April 2003. The affidavit of Mr Royce White, Council planner, dated 23 May 2006 attached the 2003/2004 budget of the development works program of the Council. This was the first development works program which included the cost of construction of the proposed laneway on the subject properties. There was a budget allocation for $350,000 for this, termed the “north-west carpark”. The Council’s s 94 Plan (2000) makes no allowances for the provision of the actual cost of constructing the laneway.

28 The Council argued that a prudent hypothetical purchaser would have been aware that the Council intended to build a 14.5m laneway complete with pedestrian pathway on one side, with kerbing guttering and lighting to better manage traffic and parking, and also to commercially “activate” the rear lane area, meaning that commercial development could occur on the blocks facing the new laneway with access to that laneway on both sides.

29 The Applicants disputed that knowledge of the Council’s objective of commercial “activation” in acquiring the Applicants’ lands to create a laneway would have been known to a prudent hypothetical purchaser.

Town planning experts

30 Mr Paul Hume gave evidence for the Council and Mr Falson for both Applicants. While different reports were prepared for each matter the issues raised are common to both matters and I deal with them together.

(a) Heritage issues

31 The planners agreed that the existing buildings on the sites and the adjoining lots are not identified as items of environmental heritage under Schedule 1 of Wollondilly LEP 1991. Nor are the buildings identified as potential heritage items by the Wollondilly Heritage Study inventory 1991 compiled by JRC Planning Services. A review of that inventory was referred to on the Council’s website at the date of acquisition.

32 On the basis of the Council’s letter dated 9 May 2005 (sent after date of acquisition) to one of the Applicants, Mrs Schwartz, the review process referred to above may include an assessment of the heritage significance of the main buildings on the Schwartz land. I allowed the letter into evidence despite it being dated after the date of acquisition on the basis that it reflected the Council’s view at the date of acquisition if the mooted review took place. In the present circumstances it could not be said that a “Schedule 1” listing of the buildings is certain and imminent, however it is reasonable to assume that it will be considered for listing within this review. On the basis that the main buildings on the Applicants’ lands were, theoretically of heritage significance, this would be unlikely to preclude development of the subject site on the western (rear) side of the proposed laneway on heritage grounds. With respect to the remainder of the land on the eastern (front) side of the proposed laneway, the planners did not consider that any form of further development would be totally precluded on heritage grounds.

33 The planners disagreed on whether any potential heritage significance would restrict redevelopment of the lands. Mr Falson considered that pre-acquisition, Council’s LEP 1991 and DCP 27 clearly indicate that the area generally is of heritage significance and that any proposed development of the front of the sites would need to account for heritage considerations such as a general assessment of existing and desired streetscape character. It is clear from the LEP and DCP provisions that future development would need to be harmonious in size and scale with surrounding properties. Development of the subject sites whilst not being precluded would need to account for symmetry of existing scale that includes height and separation of buildings. Mr Hume considered heritage values would not impede development.

(b) Carparking and Access

34 The rear portions of the site are identified for “proposed public car parking area/laneway” in DCP 27 Picton Commercial Area. The planners agreed the DCP was unclear as to whether the carparking was separate from or able to be integrated with development of the respective lots.

35 Mr Falson considered that public parking applies to parking available for use by the general public on Council owned land, and private parking is that provided ancillary to commercial development on private land. Further, a development approval was granted on nearby land that included private parking on site but not on land identified on Map 1. Mr Falson considered there is no requirement in a pre-acquisition scenario to provide parking only on the area identified in Map 1 of the DCP. The only access to the car parking available pre-acquisition is via Argyle Street.

36 Mr Hume considered the purpose of the public parking area on DCP 27 Map 1 as it applies to the subject site and adjoining land, was to provide “customer” parking servicing commercial development in a manner contiguous with the proposed laneway under DCP 27 and other “public” parking areas on adjoining sites, in order to provide one contiguous parking area. This is not to say that private parking, such as staff or resident parking, should be restricted to that area. Relying on vehicular access from Argyle Street, public car parking as nominated by Map 1 to DCP 27 would require the provision of an access corridor in the order of 50m in length.

(c) Extent of commercial development

37 The planners disagreed on the extent of commercial development which would be assumed by a prudent hypothetical purchaser to be able to be undertaken on the properties. Mr Falson considered main street frontages more desirable for commercial activity than rear laneway frontage behind a main commercial area, however the land to the rear of the existing building (in the section acquired by the Council) is desirable for commercial activity given its proximity and potential for access to Argyle Street.

38 In a pre-acquisition scenario the lands that are less subject to flooding and closer to Argyle Street would be more attractive for commercial development. Part of those more desirable lands have been resumed for the proposed laneway.

39 Mr Falson considered that DCP 27 would be assumed by a hypothetical purchaser to apply.

40 Mr Hume, for the Council, maintained his view that the most likely pre-acquisition development scenario would be commercial development limited by the degree of public street exposure to Argyle Street. Development of the mid and rear sections of the block would need an access laneway 5m – 6m wide and consequently sterilise that section of the Argyle Street frontage. This opinion is based on his knowledge of the historical development of commercial land in the Picton commercial area.

41 In his evidence Mr Hume adopted the Council’s argument it would be public knowledge that the acquisition of the Applicants’ lands for the laneway had two purposes, traffic management and the need to link the laneway with the Walter Street car park, and also to activate the commercial area along the laneway. He further assumed the Russell Olsen concept plan for the laneway would be available to a prudent purchaser. This would mean a purchaser would be aware that the Council was considering two way traffic flow with parking on one side and a pedestrian footpath. In the post-acquisition scenario, Mr Hume considered that the provision of two additional street frontages via the proposed laneway and the potential freeing up of additional frontage to Argyle Street would be highly beneficial to the potential commercial development of the site. In his opinion, these opportunities would more than compensate for the loss of commercially zoned land consumed by the proposed laneway. The proposed laneway frontages are considered by him to be higher value commercial land than land lacking street frontage.

(d) Flood impacts

42 The extent of flood impacts on the commercial development potential of the rear block, which is identified low hazard floodway under the Picton Flood Policy, is disputed. Mr Falson considers the rear land is better suited to parking in accordance with DCP 27. The higher, more valuable, lands in the middle sections were resumed for the proposed laneway. Mr Hume, on the contrary, considered commercial development was not precluded in the rear section, under the Picton Flood Policy.

43 I note that on the view I was shown a development in the main commercial area on Argyle Street which is in the same flood category as the rear land in issue which land has been elevated to take the potential for flooding into account.

Valuation evidence

44 The valuer for the Bjorklunds was Mr Terry Large, and Mr Dobrow was the valuer for Mrs Schwartz. The valuer for the Council was Mr Neskovski in both matters. It must be assumed for the purposes of the valuation exercise that the sites are assessed for their development potential. The valuers generally adopted the views of the planner engaged by their “side”. Accordingly Mr Large adopted the views of Mr Falson, and Mr Neskovski adopted the views of Mr Hume. Mr Dobrow also obtained town planning advice elsewhere which was similar to that of Mr Falson.

45 All the valuers have applied values to three different sections (albeit of differing areas), divided between the more valuable Argyle Street frontage land, the middle section, part of which was acquired, and the rear land which is the most flood affected.

46 The valuers for the Applicants applied the before and after approach as the appropriate approach. Mr Dobrow and Mr Large determined an amount of compensation applying the before and after method, relying on comparable sales to arrive at different rates per square metre for the front, mid and rear sections. They then identified the amount they calculated for market value of the acquired land, and the balance remaining they considered to be loss due to severance under s 55(c) (Mr Dobrow) or injurious affection under s 55(f) (Mr Large).

47 Mr Neskovski adopted a slightly different approach which was more piecemeal. He valued two sections at the front and rear on the basis of comparable sales before and after acquisition at different rates per square metre. He separately calculated the market value of the acquired land.

Section 55(a) market value agreed

48 The valuers generally agreed on the market value of the acquired land under s 55(a) for their clients’ respective properties. For the Bjorklund claim Mr Large and Mr Neskovski agreed $87,000. For the Schwartz claim there is a small difference between the valuers. Mr Dobrow considers $74,000 and Mr Neskovski considers $89,000 is the appropriate value. That suggests, as was clear from the oral and written evidence of the valuers, that there is little disagreement about the application of the comparable sales in arriving at the valuers’ respective rates per square metre. It is not necessary that I consider these sales in any detail as a result. There was also not a great deal of disagreement between the valuers about the applicable rates for the front, mid and rear sections applied in the before situation.

Section 55(c) severance, section 55(f) injurious affection
Bjorklund

49 The Bjorklund claim is in part based on s 55(f), that there is injurious affection to the remaining land as a consequence of the carrying out, or the proposal to carry out, the public purpose. There are a number of factors which Mr Large considered a prudent hypothetical purchaser would take into account in the after situation which suggest this.

50 The severing of the land does not provide new title to the rear lot but divides the existing lot into two parts. Developable, less flood prone land was acquired. There is the loss of a single large developable lot. The owner will have to apply for subdivision consent with attendant fees if separate lots are to be obtained. DCP 27 has not been extinguished or amended in relation to requiring the rear land for carparking and would still be considered relevant by a prudent hypothetical purchaser. He also considered that there was loss to the value of the residue parcel due to the poor market demand for commercial development in Picton.

51 How readily the existing buildings could be redeveloped given their age and potential heritage significance is also in issue. The buildings are not heritage listed but a prudent hypothetical purchaser viewing the Council’s website would find out there was a review of the list of heritage items planned.

52 Mr Large adopted Mr Dobrow’s concerns in relation to greater security risks resulting from rear laneway access, loss of privacy, amenity, and the fact the rear land is more flood affected.

Schwartz

53 The Schwartz claim is in part based on loss due to severance under s 55(c). In the after situation Mr Dobrow considers the rear section of land is less valuable to a prudent hypothetical purchaser because it is severed from the valuable front block, it will be a greater security risk as it opens up access to the rear land, has limited development potential due to 75 per cent being categorised as low hazard floodway, and the less flood affected land has been resumed for the laneway.

54 Further, there is the risk of not gaining consent from the Council for development on the rear lot given the provisions of the Council’s flood policy. Due to flood evacuation requirements, the potential to gain development consent to subdivide the rear land is reduced.

55 In oral evidence on 26 May 2006, Mr Dobrow raised seven points for consideration which he also referred to in his reports. These were:

1. Mr Dobrow considered that the floodway resulted in additional risk that a prospective purchaser would have to allow for when making a development application on the subject land. The need to provide for the safe evacuation of people from the rear residue lot would make the granting of development approval highly unlikely, although not impossible. In order for development of the rear land to occur, the Council would require the relative level (“RL”) of the laneway to be above the one percent annual exceedance probability (“AEP”) to allow for the proper flood evacuation of people and vehicles. This would increase the cost of development, because of the requirement to fill the land, making the cost potentially prohibitive for any prospective developer. If the laneway is to be built at the existing ground level, Mr Dobrow considered that the prospect of developing the rear land in isolation without the ability to properly address flood evacuation issues is remote.

2. Mr Neskovski gave insufficient attention to the prospect of obtaining the cooperation of adjoining land-owners regarding access to the land.

3. The commercial decision making process has to be taken into account in that a prospective purchaser would have regard to the fact that there are leases in place which would preclude development.

4. Mr Neskovski has given insufficient regard to when the laneway would be completed. This would weigh in the mind of a potential purchaser. Mr Dobrow argued that the amount a purchaser is prepared to pay is affected by uncertainty in what they are acquiring.

5. Mr Hume has applied the Russell Olsen plan in error. This plan has a different front and rear land area, a different access route and a different floodway line to that which the Court is currently considering before it. Mr Neskovski has deferred to Mr Hume and therefore continued this error.

6. Disagreement with Mr Neskovski over level of current demand for commercial property which Mr Dobrow considers is poor in the area.

7. There is a flexibility issue on the site, in that a potential purchaser would be forced to develop a further building envelope or footprint in a much smaller and constrained area.

Joint approach

56 While there is general agreement between Mr Dobrow and Mr Large in relation to the factors to consider in the after value resulting in a diminution in value of the residue land, they adopt different areas in the three sections of the land in the calculation of the value of the lands before and after acquisition. I was assisted in understanding the figures in this judgment by reference to a diagrammatic representation of the valuers’ evidence provided by counsel for Applicants, which I have marked MFI 1. While I have sought to set out in narrative form what in depicted in MFI 1 I should indicate that while the representation of areas of land and the different rates applied to them by the valuers appear correct the total value figures were in some cases incorrect. I have included in the judgment correct figures derived from the simple arithmetic calculations applying those base figures.

57 Mr Large divided the Bjorklunds’ land into three equal sections of 668m2 each, valued at $375/m2 (front), $300/m2 (mid) and $150/m2 (rear) in the before and $375/m2 (same), $200/m2 for 379m2 (taking out resumed land area) and $75/m2 in the after. The total before is $551,100 and after is $376,400 resulting in $174,700 as the overall reduction in value of the Bjorklunds’ land after acquisition.

58 Mr Dobrow divided the Schwartz land into three different areas as front 1,000m2, midsection 541m2, and rear 513.73m2. These he valued at $350/m2, $250/m2 and $200/m2 in the before situation. In the after situation the front was valued at $350/m2 (same), midsection partly $250/m2 and partly $150/m2 (total 173.97m2 as resumed land area removed), $75/m2 for the rear land. The total before is $587,996 and after $432,375 a total of $155,621 as the overall reduction in value for the Schwartz land after acquisition.

Council on valuation

59 The Council’s valuer, Mr Neskovski, disagreed with the Applicants’ valuers that there is injurious affection or loss due to severance caused to the remainder of the land as a result of the acquisition of part of the Applicants’ lands. Mr Neskovski considered the residue lands would increase in value (betterment) as a result of the public purpose being carried out. The Council is constructing a public laneway between Cliffe Street and Menangle Street west approximately 14.5m wide which will provide for two way traffic flow with parking on one side of the laneway without pedestrian footpaths.

60 In relation to the after scenario Mr Neskovski, relying on Mr Hume, planner, noted that the lands are zoned Business 3(a) and are developable despite their flood categorisation under the Flood Policy. There is no impediment to development by virtue of part of the land being categorised as low hazard floodway. DCP 27 is considered to have little application. Part of the Council’s purposes in carrying out the acquisition includes commercial “activation” of the rear section. He therefore considered that the construction of Waltons Lane across the Applicants’ land would enable the two rear blocks to become commercially “activated” so that these would be more valuable in the after scenario. There would be additional street frontage on both sides of the proposed laneway. In addition there would be betterment to the Argyle Street frontage because this could be fully utilised. His general view of the Picton commercial area is that the shopping precinct would remain reasonably strong due to its relatively good sized population base.

Bjorklund

61 Mr Neskovski in the before scenario assessed the value of the land without the acquired land included. He assessed separately the market value of the acquired land. He valued the front block facing Argyle Street on the basis that a six metre wide access laneway is needed (305.58m2) which he valued at $200/m2, totalling $61,116. The balance (688.62m2) he valued at $375/m2, totalling $258,233. The rear section he valued in two parts, the drainage reserve of 62.6/m2 at $150 totalling $9,390 and the balance of 658m2 at $200/m2, totalling $131,600. The total before value is $460,339. The total after value is $551,830. This is made up of $397,680 (994.2m2 x $400) for the front section and $154,150 for the rear section (62.6m2 x $150 (drainage) plus 658m2 x $220) and excludes the residue land. The after value exceeds the before value by $91,491.

62 When this amount is deducted from the market value of the acquired land that he calculated ($87,000) the total compensation is negative (-$4491). When the agreed disturbance of $11,000 is added the total amount of compensation payable is $6509. The Council has already paid $14,000 but will not press for repayment of any overpayment if I find in its favour.

Schwartz

63 A similar analysis of the before and after values excluding the acquired land was also undertaken for the Schwartz land. The before value totals $481,432.50 made up of $347,023.50 front section (305.58m2 x $200), $61,116 for access handle plus (762.42m2 x $375) $285,907.50, plus the rear section $134,409 (62.82m2 x $150) $9,393 (drainage easement) plus (625.08m2 x $200) $125,016.

64 The after value is $575,311 consisting of front section $428,400 (1071m2 x $400) plus rear section of $146,911 (62.62m2 x $150) $9,393 plus 625.08m2 x $220). The after value exceeds the before value by $125,000.

65 That amount exceeds the market value of the acquired land he calculated at $89,000. If disturbance of $15,000 (yet to be agreed as the Applicant claims $36,000) the total compensation is less than the $19,000 already paid by the Council but the Council will not press for repayment of any overpayment if I find in its favour.

Council’s submissions

66 The Council argued that a prudent hypothetical purchaser would be aware of the following having made inquiries:

(i) As at March 2003 “the car park, roadway and pedestrian access adjacent to the Shell Service Station is a project that will be progressing over the next twelve months or so.”

(ii) On 9 April 2003 Council’s solicitors commenced negotiations with the owners of land for the acquisition.

(iii) By 20 October 2003 Council was advised by the Department of Local Government that, if the land needed to be compulsorily acquired, the Minister’s decision making process would be “quicker” if the land was acquired for the purposes of the Roads Act.

(iv) A budget allocation for the car park and laneway was made in 2003/2004.

(v) The negotiations to acquire by agreement were continuing as at 19 July 2004. Similarly, in order to avoid delaying the carrying out of the works by Council if agreement could not be reached, the necessary process for compulsory acquisition was continuing.

67 The Council argued the laneway was to assist in traffic management for the Picton commercial area and also to provide commercial opportunities for the rear sections of commercially zoned land which would front the 14.5m wide laneway for which the Applicants’ lands were acquired.

68 In relation to severance under s 55(c), that loss has arguably been quantified by the agreement on market value for the acquired portion. The most significant component of the loss argued by Mr Large and Mr Dobrow is the removal of the most developable parcel of land but that is taken into account in the assessment of market value of the acquired portion. All that remains for assessment is the value of the residue land.

69 The issue is whether there is a loss or decrease in the value of the residue land because of the severance of that land into two sections for the purpose of constructing a laneway. The Council argued that the reasons given for the decrease by the Applicants’ valuer were circumstances which existed before and after the acquisition and cannot therefore be said to result from the severance of the land. Subdivision costs are the same in the before and after situation. Flood evacuation issues and development costs are the same for the rear land in the before and after situations. The planners agreed that the Picton Local Flood Policy does not preclude development of the rear land.

70 The demand for redevelopment has been taken into account in the market value of the acquired land which includes an allowance for market demand. The fact there are vacancies in the commercial area in Picton is common in the before and after situations.

71 While security concerns were raised by Mr Dobrow and adopted by Mr Large there is no market evidence to demonstrate this, common sense suggests otherwise given that there would now be pedestrian access as the area in unfenced and open at the rear, and the proposed laneway is likely to be lit at night, or at least the situation is the same in the before and after situation.

Applicants’ arguments on valuation

72 The key difference between the values of the residue land relates to the different valuers’ opinions about facts that would be known to the prudent hypothetical purchaser. The land has been severed but no subdivision has taken place so that the owners have two separate parcels of land on one title. The Applicants argued that the Council is creating a laneway to effect traffic improvements to the Menangle/Argyle intersection. There is no evidence available to a prudent hypothetical purchaser suggesting the aim of the laneway project was also to commercially “activate” the lands with the provision of a substantial laneway.

73 The Applicants’ valuers argued that at the date of acquisition a prudent hypothetical purchaser would be aware that there was a depressed commercial market in Picton, given the number of vacant shops. Mr Dobrow (and Mr Large) argued that the “highest and best use” in a planning sense does not equate to what would be considered achievable in a market situation. The valuers’ reasoning for concluding that injurious affection or loss due to severance results from the acquisition are set out at par 50-52 for Mr Large, and par 53-55 for Mr Dobrow.

Finding

74 The before and after approach to valuation generally incorporates the market value, loss due to severance and any injurious affection; Just Terms Act s55(a), (c) and (f). The value of the original land before acquisition, as if the event causing enhancement or depreciation had not occurred, is calculated, and the value of the remaining land after acquisition is determined as if the event causing the depreciation had been carried out. The latter value is subtracted from the former. My understanding is that usually if the before and after method is used there is no separate calculation of market value although in this case there were such calculations made by all the valuers.

75 Mr Neskovski’s more piecemeal approach, adopts aspects of the before and after approach. He did not value the whole of the lands in the before scenario and compare those values to the value of the residue lands in the after scenario, as he took out the acquired land in his before and after analysis. He argued that the market value for the acquired lands which he considered separately, took into account those lands’ complete value for the purpose of this exercise. He considered the value of the residue lands in the before and after scenario and compared this to the market value to determine if there was betterment. Mr Large and Mr Dobrow assessed the value of the whole of the land in the before and the residue land in the after. They also calculated separately the market value of the acquired land. I do not consider there is much difference in the outcome of these respective approaches in this case given that all the valuers have separately calculated market value.

76 As already indicated the valuers adopted different areas for the front, mid and rear sections. There was no particular argument put forward to support any one of the different approaches to the areas above another. I consider that generally Mr Neskovski’s areas are the most straightforward to apply and I will broadly adopt his approach to the areas of land considered but as will become clear I do not intend to adopt all his valuation figures.

The prudent hypothetical purchaser on the after value

77 The valuers broadly agreed on the before value of the two properties, but disagreed in relation to the after scenario. I must therefore consider what a prudent hypothetical purchaser would be likely to consider in that context.

78 In terms of what a prudent hypothetical purchaser would be likely to be informed about at the date of acquisition, and what advice they might receive, the Court must consider what inquiries a reasonably informed hypothetical purchaser would make. The Court’s role is to decide how the hypothetical purchaser acting prudently after obtaining the advice of relevant experts, would have assessed the potential for development and hence the amount he or she would be prepared to pay for that potential. In Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2004] NSWLEC 315, Talbot J considered how the mind of a prudent hypothetical purchaser should be assessed, and stated at [119] that:

Having regard to the whole of the evidence, particularly the expert evidence of architects and town planners, it is highly probable that the hypothetical purchaser would have received conflicting advice about the potential yield, in terms of residential units, that could be achieved from the site. It is unlikely, however, that the same purchaser would have had the benefit of the far-ranging and wide scope of advice and competing argument of the type that has been made available to the Court through the presentation of evidence by a plethora of experts and voluminous submissions by counsel. Nevertheless, the purchaser would, in my view, have had the benefit of over-arching assessments of the potential for the site that would have identified the range of possibilities and the associated degree of risk. It is necessary, therefore, that the Court balance the evidence made available to it by having regard to the practical context of the willing but not anxious purchaser dealing with a vendor of the same mind.

79 In Bautovich v The Minister administering the Environmental Planning and Assessment Act 1979 [2004] NSWLEC 389, Talbot J again considered this issue, stating at [63] that:

Repeating what I said in Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2004] NSWLEC 315, unreported, the Court’s role is not to determine what would have been approved, but rather to decide how the hypothetical purchaser acting prudently after obtaining the advice of relevant experts familiar with and experienced in developments of residential subdivisions, would have assessed the potential for the development of the subject land.

80 The Council planning documents readily available to a prudent hypothetical purchaser are the LEP and DCP 27, which continues in force, and the Picton Local Flood Policy. It is likely a purchaser would obtain a s 149 certificate and look at the current s 94 contributions plan in force.

Commercial “activation” – would Council’s intentions be known?

81 DCP 27 (see par 18-20) specifies that the rear of both Applicants’ lands is intended for use as car parking which the planners’ evidence agreed was for public carparking, although it could be linked to commercial development of the whole site. Depending on how the carpark area was developed it may or may not require access along the whole of the block from Argyle Street, as Mr Hume stated. The DCP is the instrument in force at the date of acquisition.

82 At the date of acquisition there was no formal Council policy in any Council planning document publicly available identifying its approach to development along the proposed laneway. The matters the Council particularly relied on to argue that a prudent hypothetical purchaser would be well aware of what the Council intended for the rear laneway at the date of acquisition are set out at par 66.

83 A history of matters before the Council leading up to the acquisition is set out at par 22-28. This suggests the identification of the need for the laneway was the result of a traffic study prepared by Gabites Porter in 2001. The Director of Services reported to Council in its business paper dated 9 December 2002 about the intended laneway (see par 26) and referred to the traffic management aspects and that a pedestrian thoroughfare with have trees and streetscape improvements were contemplated. This is the only publicly available statement of the Council’s intentions. There is a budget allocation in the Council’s budget for 2003/2004 for the “north-west carpark” project. There is no reference to the project in the relevant s 94 contributions plan.

84 The Council discussion in May 2002 and the Russell Olsen plan on which Mr Hume and consequently Mr Neskovski relied, were confidential. Mr Hume assumed the plan would be publicly available. The Russell Olsen plan has not been directly implemented because the acquisitions were to provide for a wider laneway further to the east than the laneway depicted on the Russell Olsen plan. These cannot be assumed to have been available to an inquiring purchaser at the Council at the relevant time, but it does seem likely that a purchaser reviewing these minutes would make further inquiries. When asked in cross-examination what his further advice to a purchaser would have been at the date of acquisition, Mr Falson stated that he would have said that the Russell Olsen plan was conceptual, that the timing of the construction of the laneway was unknown and that balanced against that future potential was the loss of developable land in the centre of the respective blocks, which I consider likely to be the approach taken by a prudent hypothetical purchaser.

85 A purchaser would be aware that the Council was considering extending Walton Lane through the Applicants’ properties but not details of the proposal or the timeframe for its completion. A purchaser would be mindful that DCP 27 was in force. The full extent of the development potential would be unknown and matters such as whether developer contributions would be required in the future also unknown. It follows that I do not accept Mr Hume’s and consequently Mr Neskovski’s assumptions about the likely development potential of the rear lands being obvious to a prudent hypothetical purchaser.

Impact of flood policy

86 The objectives of the Flood Policy are set out above in par 13. Of particular relevance is the intention to encourage development and construction that is compatible with flood hazard and the provision of adequate evacuation and emergency access to flood affected land. The rear residue lands are low hazard floodway and while developable would be subject to constraints. The factors the Council would require for any development in this area are set out in par 16 and include the use of flood damage resistant materials, a minimum floor level heigh,t and engineering advice about the flood impacts of the development. A prudent hypothetical purchaser is likely to consider that while development is feasible there would be some constraints on development of the rear section. The acquired land on the other hand is less flood affected, more readily developable and therefore more valuable.

87 In terms of any evacuation route required by the Council under the Flood Policy, I agree with Mr Hume that the construction of the laneway would provide a safe evacuation route for the western portion of the site via the proposed laneway and Cliffe Street in lieu of Argyle Street. I do not agree with Mr Falson or Mr Dobrow that the application of the Flood Policy means all evacuation routes must be via Argyle Street.

Heritage/streetscape

88 In relation to heritage matters, Mr Falson, planner, suggested that the LEP provisions relating to heritage items, while not directly applicable because the existing buildings are not heritage listed, were likely to be considered in any development application for the lands but I agree with Mr Hume that those provisions (cls 30 to 35) would not apply. As Mr Hume stated the s 149(2) and (5) certificates at the date of acquisition would not have indicated buildings of any heritage significance nor did the Wollondilly Heritage Study in 1991 indicate any heritage significance of the existing buildings. Further the Picton Town Centre concept plan adopted by the Council after 2000 does not refer to any suggested heritage significance of the buildings. The likelihood of a heritage review as referred to on the Council website, even informed by the letter of May 2005 which I allowed into evidence, goes no higher than establishing that the existing buildings would be included in such a review. A potential heritage listing under the LEP is not a consideration which a prudent hypothetical purchaser would be concerned about.

89 The DCP also identifies that its objectives are to ensure that commercial buildings are compatible with the “main street” character of Picton, s 2(i) and states that commercial buildings must be harmonious with the scale and size of surrounding properties. While there is no basis for the hypothetical purchaser to assume that existing buildings on the Applicants’ lands are likely to be heritage listed as at the date of acquisition, I agree with Mr Falson that a purchaser would consider there would be likely to be some limits on the type of development able to be undertaken on the land in terms of size and scale but any such impediment I do not consider substantial. I also note that DCP 27 states that commercial development should be adjoining, suggesting it would be preferable if the whole of the Argyle Street frontage was developed.

90 In the after scenario the Applicants’ valuers assume that there is limited scope for development of the Argyle Street frontage because of the older buildings now on the lands, and the probability that the Council would want to preserve these due to their heritage and/or streetscape significance, but I do not consider that a prudent hypothetical purchaser would consider that to be a substantial impediment to redevelopment.

Market demand at date of acquisition

91 Both Applicants’ valuers have argued that market demand for commercial development at the date of acquisition was poor so that while the highest and best use identified by Mr Hume by reference to the planning instruments and other documents such as the Russell Olsen plan (which was confidential in any event) was two storey commercial development along the laneway, there was no such demand for this development at the date of the acquisition. Both Mr Large and Mr Dobrow argued that a purchaser would be reluctant to demolish the existing buildings and rebuild because a substantial income stream would be lost for a lengthy period with no guarantee of commercial success in the market as at August 2002. The Council countered in its argument that if the market demand was poor that situation is the same in the before and after situation, in other words, it is not a factor that ought be taken separately into account. Further, the determination of market value on the basis of comparable sales was undertaken by all the valuers and Mr Large conceded in cross-examination that comparable sales include comparable market conditions.

92 The Applicants’ valuers adopt the same figure of $375/m2 in both the before and after scenarios for the front section. It is therefore unclear to me why this argument is relevant apart from being a reason why I should not adopt Mr Neskovski’s higher figure of $400/m2 in the after scenario. Given that generally market demand is a matter taken into account in relation to comparable sales and given the figures applied by the valuers I do not consider this is a relevant consideration.

Argyle Street frontage

93 In the before scenario both Mr Dobrow and Mr Large value the whole of the front section at the same rate per square metre. In the before scenario Mr Neskovski has valued the front section of the land on the basis that part of the land, a six metre wide strip totalling 305.58m2 running along one entire side of his front section up to the acquired land, is needed for an access way to enable access at the rear of that front section for development. This is an area of 305.58m2. In the after scenario, Mr Neskovski assumes the whole of the Argyle Street frontage is available for development and is more valuable because the front section now has double frontage to Argyle Street and at the rear to the new laneway.

94 I agree in part with Mr Neskovski’s approach to access to Argyle Street in the before and after scenarios. In order to develop the rear of the land in the before scenario some access will be needed. A six metre wide laneway is not required by the Council’s requirements for access from Argyle Street and the length of any proposed laneway will depend on the nature of the development. I will value a smaller area of 200m2 for access in the before scenario.

One title, two lots

95 A further factor which in my view would decrease the value of the rear lands in the eyes of a hypothetical purchaser in the after situation is the fact that after acquisition the land would be two separate lots divided by a public laneway but on one title. A hypothetical purchaser would take into account the possible cost and difficulty in obtaining subdivision consent. Clause 7.5 of the Flood Policy suggests that subdivision of floodway land is prohibited although it is not prohibited under the LEP. In order to determine if subdivision should be allowed a hydrological study is likely to be required by the Council.

Security

96 I do not consider there are likely to be greater security concerns in the after situation compared to the before given there is currently pedestrian access available to the rear of the Applicants’ properties.

97 In conclusion, in relation to the rear lands in the after scenario the development constraints due to the flood liable nature of the lands and the impediment to subdivision means these lands would be considered less valuable in the after scenario. Given that the Council’s commercial “activation” objective would not be sufficiently known so as to be relied on by a prudent hypothetical purchaser, I do not consider that a hypothetical purchaser would pay an amount on the basis that the laneway would definitely proceed in a certain timeframe to enable rapid commercial development of these lands.

98 The Council’s arguments set out at par 69 that subdivision costs and constraints on development of the rear lots due to flooding were the same in the before and after scenarios are not correct because the configuration of the Applicants’ lands has changed as a result of the laneway to be built through the middle. Accordingly these are factors which would be relevant to a prudent hypothetical purchaser, as I have noted.

99 In relation to the front sections of the lands in the after scenario, I agree that there is now potential for development across the whole of the Argyle Street frontage given that access is available from the rear lane. It follows that a separate access handle does not need to be valued as it was in the before scenario.

Before values

100 The figures applied by the valuers in the before approach are generally similar, with the front sections valued at $350/m2 (Dobrow), $375/m2 (Large and Neskovski). On Mr Neskovski’s approach there are only the front sections to consider in the comparison. I will adopt $375/m2 for most of this section in the before scenario. I will separately value at $200 an area of 200m2 for access.

101 In relation to the rear lands Mr Neskovski adopts a lower rate of $150/m2 for the small section of the rear section of the land which is subject to a drainage easement and applies an amount of $200/m2 for the balance. Mr Large applies $150/m2 in Bjorklund and Mr Dobrow $200/m2 in Schwartz for the rear sections of the respective lands. I consider I should apply $200/m2 to the whole of the rear section.

After values

102 A major area of difference is the value of the rear sections in the after scenario with the Applicants’ valuers valuing these areas at $75/m2 and Mr Neskovski valuing the land outside the drainage easement at $220/m2. As I have not agreed with all Mr Neskovski’s assumptions to justify that higher amount for the rear land I will adopt $75/m2. In relation to the front section I agree with Mr Neskovski that that becomes potentially more valuable as there is now redevelopment potential across the whole of the Argyle Street frontage and at the rear due to the laneway being constructed. I consider the front sections should be valued at $400/m2. It is necessary to apply these figures to the respective Applicants’ lands.

Bjorklund

103 The market value of the acquired land is agreed at $87,000. Applying Mr Neskovski’s areas the amount for the before value of the residue land is as follows:

(i) front section 794.62m2 x $375 = $297,982.50

access 200m2 x $200 = $40,000

(ii) rear section 720.7m2 x $200 = $144,140

Total $482,122.50

104 The after value is:

(i) front section 994.2m2 x $400 = $397,680

(ii) rear section 720.7m2 x $75 = 54,052.50

Total $451,732.50

Since this shows a reduction in the value of the residue land of $30,390 this should be added to market value of $87,000 to give compensation of $117,390.

Schwartz

105 I will adopt Mr Neskovski’s market value of $89,000. The value of the residue lands in the before scenario is:

(i) front section 870m2 x $375 = $326,250

access 200m2 x $200 = $40,000

(ii) rear section 687.7m2 x $200 = $137,540

Total $503,790

106 The value of the residue land in the after scenario is:

(i) front section 1,071m2 x $400 = $428,400

(ii) rear section 687.7m2 x $75 = $51,577.50

Total $479,977.50

The loss in value of the residue lands is $23,812.50 which should be added to the market value of $89,000 to give a total figure of $112,812.50.

107 It is agreed that I should add the amount of $11,000 for the shed on Mrs Schwartz’s acquired land onto the amount of compensation payable. The amount of compensation payable is therefore $123,812.50.

Claim for loss of trees (special value)

108 Mr Dobrow considered that there were two significant trees located in the rear yard of the property which are protected by the Council’s Tree Preservation Policy and which would be removed upon construction of the laneway. His view is that these trees add substantial amenity to the property both for the lessee’s enjoyment of the property and add value to the leasing marketability of the property. He allowed $2000 for the loss of these trees under s 55(b) of the Just Terms Act: special value. Section 57 of the Just Terms Act defines “special value” as:

…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.

109 Mr Neskovski argued that there should be no amount for loss of trees allowed under s 55(b) because the site is not residential but commercial and therefore, in any redevelopment, the trees would be removed.

110 Generally if the before and after method is applied matters related to special value to the owner of the proposal should be taken into account in that context. In the case of Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 Callinan J gave a description of “special value” in the context of compensation under s12C of the Darling Harbour Authority Act 1984, where a claim was to be dealt with as if it were under s124 of the Public Works Act 1912, stating at 654:

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. … 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.

111 While concerned with an earlier legislative regime than the Just Terms Act this is applicable here. I do not consider this part of the Schwarz claim should be upheld as the requirement that the trees have a financial value to the Applicants over and above market value has not been satisfied.

Severance versus injurious affection

112 Section 55(a) and (f) are not identical. Loss due to severance under s 55(c) relates to loss caused to residue land being severed from the acquired land. Section 55(f) is directed to land which adjoins or is severed from the acquired land and which increases or decreases in value as a result of the proposal to carry out the public purpose. As the application of the before and after method as I have applied it results in a reduction in value of the residue lands, I do not consider it is material whether compensation is awarded under one section or the other.

Disturbance

113 Disturbance is claimed for legal and valuation fees pursuant to s 59(a) and (b) of the Just Terms Act. Sections 59(a) and (b) of the Just Terms Act provide:

loss attributable to disturbance of land means any of the following:
(a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land,

(b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land


Bjorklund

114 Disturbance in relation to the Bjorklund claim is agreed at $11,000.

Schwartz

115 Mrs Schwartz is claiming $36,000 for disturbance which includes valuation fees which were agreed by the Council and approximately $26,000 for legal costs. The Council disputes the claim for legal costs. The Council has offered $15,000 in total for disturbance pursuant to s 59(a) and (b).

116 The affidavit of Ms Voncino, sworn 26 May 2006, the solicitor acting for Mrs Schwartz in these proceedings, attaches invoices from the solicitor’s firm previously instructed in the matter which total over $36,000. These are claimed as the legal costs incurred in relation to the acquisition as provided for under s 59(a) separate from any legal costs connected with these proceedings.

117 The Council argued that legal costs must be reasonably incurred under s 59(a). This level of costs is not reasonable. Mrs Schwatrz says that is what she has paid and they were reasonably incurred.

118 The amount of legal costs charged appears excessive although I appreciate that Mrs Schwartz is in the position of having already incurred those costs. Apart from providing an affidavit with the relevant itemised accounts of the previous solicitor’s firm attached there was no other supporting information or argument put to justify these amounts. It was basically left to the Court to peruse the accounts and determine the matter. Having done so I consider an amount of $15,000 for legal costs is reasonable. A number of the costs appear to be attributable to the commencement of these proceedings rather than related to the compulsory acquisition process to which s 59(a) is directed.

119 My understanding is that there was no dispute about the amount of valuation fees claimed but this precise amount requires clarification from the parties. I will not issue final orders until that clarification has been provided. I require the parties in the Schwartz matter to file final orders in accordance with this judgment within 14 days which include the agreed amount of the valuation fees in that matter.

120 As I can finalise the Bjorklund claim today, I make the following orders. The Court determines the amount of compensation in proceedings 30007 of 2005 pursuant to s 55 of the Just Terms Act is as follows:

1. The Applicants are awarded $117,390 for market value and $11,000, as agreed, for disturbance.

2. Costs are reserved.

3. Exhibits may be returned.