G. Suonaf Holdings Pty Ltd v Roads and Maritime Services

[2016] NSWLEC 116

Land and Environment Court

New South Wales

Medium Neutral Citation:	G. Suonaf Holdings Pty Ltd v Roads and Maritime Services [2016] NSWLEC 116
Hearing dates:	29, 30, 31 August and 1 September 2016
Date of orders:	01 September 2016
Decision date:	01 September 2016
Jurisdiction:	Class 3
Before:	Preston CJ
Decision:	(1)   The amount of compensation payable to the applicant for the acquisition of the land comprising Lot 1 in Deposited Plan 397912, known as 1 Tumbi Road, Tumbi Umbi, is $585,927.27.  (2)   The respondent is to pay the applicant's costs as agreed or assessed.
Catchwords:	COMPULSORY ACQUISITION – residential land – compensation payable – market value of land – comparable sales to be used – disturbance – legal costs and valuation fees established – other financial costs of purchasing replacement property not established
Legislation Cited:	Land Acquisition (Just Terms Compensation) Act 1991 s 59(1)
Cases Cited:	Bezzina Developers Pty Ltd v Leichhardt Municipal Council (2006) 146 LGERA 249; [2006] NSWLEC 175 Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259 Harvey v Crawley Development Corporation [1957] 1 QB 485 at 493 Sebastian Cannavo and Alfia Jennifer Busa v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570
Category:	Principal judgment
Parties:	G. Suonaf Holdings Pty Ltd (Applicant) Roads and Maritime Services (Respondent)
Representation:	Counsel: Ms F J Berglund (Applicant) Ms A C Hemmings (Respondent)     Solicitors: Duffy Law Group (Applicant) Allens Linklaters (Respondent)
File Number(s):	30796 of 2015/JL: 2016/00157436
Publication restriction:	No

Judgment

1. The applicant company, G. Suonaf Holdings Pty Ltd, owned land comprising Lot 1 in Deposited Plan 397912, known as 1 Tumbi Road, Tumbi Umbi (‘the acquired land’).

2. The acquired land had a land area of 1,606 square metres and an irregular L shape. It sloped to the rear. There was a residential cottage with two car ports on the acquired land.

3. The acquired land was located at the intersection of Tumbi Road and Wyong Road. A roundabout was at the intersection. Access to the acquired land was from Tumbi Road, very near to the roundabout. A median strip in Tumbi Road prevented southbound traffic on Tumbi Road from turning right to enter the acquired land and also prevented vehicles turning right onto Tumbi Road to exit the acquired land. Wyong Road and Tumbi Road are both busy roads. Tumbi Road has at least 20,000 vehicles per day and Wyong Road would be busier still.

4. Roads and Maritime Services (‘RMS’) compulsorily acquired the acquired land on 1 May 2015. The Valuer General assessed, and RMS offered to the applicant, compensation in the amount of $508,500, comprising $480,000 for the market value of the land and $28,500 for disturbance (being $5,000 for legal and valuation fees, $17,500 for stamp duty and $6,000 for the financial costs of purchasing another property). The applicant objected to the amount of compensation and instead claimed $1,500,000 for the market value of the land and $43,490 for disturbance (being $3,000 for legal fees, $3,000 for valuation fees, $31,490 for stamp duty for a replacement property and $6,000 for the financial costs of purchasing a replacement property).

5. The differences in the amounts of compensation for market value and disturbance were explicable but for different reasons.

6. The difference in the market value of the acquired land between the parties is attributable to the use of different sales of other land to derive the market value of the acquired land. The applicant's valuer, Mr Everson, relied on sales of land in East Gosford and Ettalong Beach that had been developed or had potential to be developed for medium density residential development to indicate a value for a 10 unit residential development (for seniors housing under State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004 (‘SEPP seniors living’)) on the acquired land. RMS' valuer, Mr Dempsey, relied on sales of low density residential land in the immediate vicinity of the acquired land in Tumbi Umbi to indicate a value for a two lot residential subdivision of the acquired land.

7. For the reasons I will shortly give, I find that the sales in East Gosford and Ettalong Beach relied on by Mr Everson are not comparable and do not provide any reliable indication of the market value of the acquired land. On the other hand, the sales in Tumbi Umbi relied on by Mr Dempsey are comparable and can be used to indicate the market value of the acquired land.

8. I will start with Mr Everson's sales. Three of the sales were of land in East Gosford (around 17 kilometres from the acquired land) and one sale was in Ettalong Beach (around 30 kilometres from the acquired land). Mr Everson considered he could rely on these sales, notwithstanding that they were in a different local government area to the acquired land (Gosford rather than Wyong), were located at considerable distances from the acquired land and had access to different amenities. Mr Everson was of the view that the Central Coast was one big market and that developers would look for potential residential development sites anywhere on the Central Coast.

9. All four lots were zoned R1 General Residential under Gosford Local Environmental Plan 2014 (‘Gosford LEP’). In this zone, various forms of medium and high density residential development were permissible with consent, including residential flat buildings, multi dwelling housing and seniors housing.

10. The first sale in East Gosford was at 32 Wells Street, East Gosford. The land sold on 1 April 2014 for $875,000. It had an area of 1,012 square metres. Originally, Mr Everson said it was a redevelopment site for five residential units, sold without development consent, and developed subsequently. However, on the site inspection as part of the hearing, it was evident that the five unit residential flat building on the site was an existing building that predated the sale. In these circumstances, Mr Everson accepted that the sale could not be relied on.

11. The second sale in East Gosford was at 53 York Street. It sold on 19 June 2015 for $1,500,000. It had an area of 1,568 square metres. The land had an older residential cottage that had been converted for use as a “health care clinic”. Mr Everson referred to this sale as he thought that the acquired land might also be able to be used for a health care centre. Mr Everson's reliance on this sale was misplaced for two reasons.

12. First, the use of the land at 53 York Street was properly characterised as a use for the purpose of a medical centre. It was not for the purpose of health consulting rooms as that use required use of one or more rooms within a dwelling house used by not more than three health care professionals at any one time. In this case, the whole of the cottage had been converted to a healthcare clinic. It was therefore a medical centre. Use for the purpose of a medical centre was, however, prohibited in the R1 General Residential zone in which the site was located. Nevertheless, as the use as a medical centre might have commenced before that prohibition took effect, the use might be an existing use that could be continued. The sale price of the land might therefore have reflected the benefit of the existing use for the purpose of a medical centre.

13. Second, the acquired land was in a different zone, R2 Low Density Residential under the different Wyong Local Environmental Plan 2013 (‘Wyong LEP’). In this R2 zone, a medical centre is a prohibited development. The existing dwelling house on the acquired land was used for the purpose of a dwelling house. There was no existing use for the purpose of a medical centre.

14. In these circumstances, the sale of 53 York Street, indicating a market value for land with an existing use of medical centre, cannot assist in assessing the market value of the acquired land with no existing use of a medical centre and no potential to be used for a medical centre. At the hearing, Mr Everson conceded that in these circumstances this sale could not be relied on.

15. The third sale in East Gosford was at 19 Melbourne Street. It sold on 23 April 2015 for $1,120,000. It had a land area of 1,246 square metres. Mr Everson noted that it was sold with an old dwelling for demolition as a residential unit development site without a development consent. Development consent was subsequently granted for two villas and three townhouses. At the time of the site inspection as part of the hearing, construction of the multi dwelling housing development had almost been completed.

16. Mr Everson considered that the site was good building land, generally level and regular in shape. The units being developed were fewer than he had assumed would be built on the acquired land (five units compared to ten units) but they were larger and of better quality than would be built on the acquired land. Mr Everson accepted that the site at 19 Melbourne Street was in a better location, in East Gosford, on a quieter street and closer to amenities than the acquired land. Mr Everson accepted in oral evidence at the hearing that he would need to make a 40% to 45% downward adjustment on this sale to derive a land value for the acquired land.

17. Mr Dempsey considered the sale of 19 Melbourne Street, East Gosford not to be comparable. First, the site was in the R1 General Residential zone under Gosford LEP. Use for the purpose of residential flat buildings, multi dwelling housing and seniors housing were all permissible with consent. Development consent was granted for multi dwelling housing, being two villas and three townhouses. In contrast, the acquired land was zoned R2 Low Density Residential under Wyong LEP. Development for the purposes of residential flat buildings, multi dwelling housing and seniors housing were all prohibited in that zone.

18. Second, the sale in East Gosford had a permissible floor space ratio (‘FSR’) of 0.7:1 in the R1 General Residential zone under Gosford LEP. In contrast, there is no permissible FSR applicable for the acquired land under Wyong LEP. The evidence of the town planners was that the highest achievable FSR on the acquired land was 0.5:1 on the basis that the acquired land could be developed for seniors housing under SEPP seniors living (which would make development for seniors housing permissible notwithstanding the prohibition in Wyong LEP). However, an FSR of 0.5:1 is an FSR below which the consent authority cannot use density as a reason for refusal of consent for seniors housing development under SEPP seniors living. It is, therefore, better considered as a maximum FSR that any seniors housing on the acquired land could be likely to achieve. This FSR is, of course, less than the permissible FSR for the sites in East Gosford, which adversely affects the development potential, yield and value of the acquired land.

19. Third, Mr Dempsey noted on the view as part of the hearing that the locality in which the site at 19 Melbourne Street is located has already been extensively developed for multi dwelling housing and residential flat buildings, evidencing market demand for medium and high density residential development in that locality. In contrast, the Tumbi Umbi locality in which the acquired land was located does not currently have multi dwelling housing, residential flat buildings or seniors housing. Land sold in the Tumbi Umbi locality has not been redeveloped for multi dwelling housing, residential flat buildings or seniors housing, but rather only subdivided into residential lots. No land in the Tumbi Umbi locality has been developed for seniors housing under SEPP seniors living.

20. Fourth, Mr Dempsey was of the opinion that the market in East Gosford is materially different to the market in Tumbi Umbi. The locations are remote from one another and have access to different amenities. Purchasers of residential land in Tumbi Umbi would not look to sales in East Gosford for an indication of market value or vice versa.

21. Fifth, Mr Dempsey noted that the location of the site at 19 Melbourne Street is superior to the acquired land, including its access to amenities. The site is on a quieter street, with easier and safer access, compared to the acquired land's location near the roundabout at the intersection of two very busy roads, Wyong Road and Tumbi Road, with difficult and restricted access only from Tumbi Road near the roundabout. The site at 19 Melbourne Street is level, regular in shape and readily able to be developed. The acquired land, in contrast, slopes to the rear, is irregular in shape and has more constraints on development.

22. I agree with Mr Dempsey. The sale at 19 Melbourne Street, East Gosford is not comparable and provides no reliable indication of the market value of the acquired land in Tumbi Umbi. The site is in a different zone under a different environmental planning instrument that permits medium and high density residential development, and is in an area in which medium and high density residential development has already taken place. The site is in a superior location in East Gosford and near amenities. It is located in a quieter street, with easier and safer access. The number and size of the adjustments that would need to be made to the sale in East Gosford are so great as to make any adjusted land value unreliable.

23. The fourth sale relied upon by Mr Everson was at 48 Broken Bay Road, Ettalong Beach. The land sold on 13 May 2014 for $1,200,000. It had a land area of 1,622 square metres. Mr Everson noted that it was good building land, generally level and cleared for redevelopment in 2005. It sold with a development consent for one large villa and six large townhouses. It is currently being developed in accordance with that development consent. Mr Everson considered the site was in a superior location to the acquired land. It is about 100 metres from Ettalong Beach and the units potentially could have water views.

24. Mr Everson accepted in oral evidence that he would need to make a downwards adjustment of at least 38% to 40% to derive a land value for the acquired land. This was without making an adjustment to account for units in a seniors housing development on the acquired land being smaller than the units at Ettalong Beach or for the restrictions on use of the units for seniors housing on the acquired land instead of the unrestricted residential use of the units at Ettalong Beach.

25. Mr Dempsey considered the site in Ettalong Beach was not comparable for the same reasons as he gave for the sale at East Gosford. First, the site was also in the R1 General Residential zone in which residential flat buildings, multi dwelling housing and seniors housing were permissible with consent. Second, the permissible FSR was 0.7:1. Third, the site was in a locality in which medium to high density residential development has already occurred, including opposite the site on Broken Bay Road.

26. Fourth, Mr Dempsey considered that the market in Ettalong Beach was materially different to the market in Tumbi Umbi. Purchasers of residential land in Tumbi Umbi would not look to sales in Ettalong Beach for an indication of market value or vice versa.

27. Fifth, the site in Ettalong Beach was in a superior location, close to the beach and the Ettalong Beach shops and resort. The site is on a quieter street, with easier and safer access. It is generally level, regular in shape and good building land.

28. I agree with Mr Dempsey. The site at 48 Broken Bay Road, Ettalong Beach is not comparable and provides no reliable indication of the market value of the acquired land in Tumbi Umbi. The site is in a different residential zone under a different environmental planning instrument that permits medium and high density residential development whilst the acquired land is in a zone in which medium and high density residential development is prohibited. The maximum FSR achievable for a seniors housing development under SEPP seniors living on the acquired land would likely be 0.5:1, which is less than the 0.7:1 permitted on the site at Ettalong Beach. The Ettalong Beach site is in a locality where medium and high density residential development has already taken place, in contrast to the acquired land where no multi dwelling housing, residential flat buildings or seniors housing has yet occurred. The site is in a superior location, close to Ettalong Beach and other amenities. It is located on a quiet street, with easier and safer access than the acquired land. It is a superior development site, being level, regular in shape and good building land, in contrast to the acquired land which is sloping, irregular in shape and is more constrained for development. The number and size of the adjustments that would need to be made to the sale at Ettalong Beach are so great as to make any adjusted land value unreliable.

29. I turn now to the sales of land at Tumbi Umbi relied on by Mr Dempsey. All but one of the sales were in the R2 Low Density Residential Zone under Wyong LEP. Multi dwelling housing, residential flat buildings and seniors housing are all prohibited in that zone. Seniors housing is only permissible under SEPP seniors living, which overrides Wyong LEP. None of the sales in the Tumbi Umbi locality reflect development for seniors housing under SEPP seniors living. One sale was of land in the R1 General Residential zone under Wyong LEP (which did permit multi dwelling housing, residential flat buildings and seniors housing), but it was of a single dwelling house.

30. The first sale was of a larger lot at 3 Tumbi Road, just up the road from the acquired land. It sold on 17 June 2014 for $619,000. It had a land area of 3,939 square metres. It had an existing dwelling. Development consent was subsequently obtained for a five lot subdivision, with the existing dwelling being retained on one of the lots. Mr Dempsey allowed $175,000 for the value of the existing dwelling.

31. The town planners, Mr Brown and Mr Rowan, agreed in their joint report that 3 Tumbi Road had greater development potential and was less constrained compared to the subject land for a number of reasons. It had a greater site area (3,939 square metres compared to 1,606 square metres). There was no restriction to right hand turning movements from the southbound carriageway of Tumbi Road. It had a drainage easement opportunity over neighbouring land. It was not a corner allotment, such that the minimum conventional lot size was 450 square metres (as opposed to a 700 square metre lot size being required for corner lots, as would be required on the subject land). Its side frontage enabled some of the dwellings on the residential lots created to achieve direct vehicular access to Tumbi Road whilst retaining the existing dwelling house. Nevertheless, Mr Dempsey did not adjust the sale price for these relative advantages of 3 Tumbi Road compared to the acquired land.

32. Mr Dempsey adjusted the sale price for the time of sale (some 10 months before the date of acquisition). He said that the market rose in that period by about 1% per month; hence he adjusted the sale price upwards by 10%.

33. Mr Dempsey therefore derived an adjusted land value per square metre of $124. Mr Dempsey noted that the site was subdivided into five lots with an average size of 788 square metres (3,939 square metres divided by five). Applying the adjusted land value of $124 per square metre to this average lot size yielded an englobo lot rate of around $98,000. Mr Dempsey accepted that this englobo lot rate, if applied to a two lot subdivision of the acquired land (which would yield $196,000 before deduction of development costs and profit and risk), would be too low. An important reason is that the site was around two and a half times larger than the acquired land. The rate per square metre of larger size lots will be less than smaller sized lots, although not in a linear fashion.

34. Mr Everson agreed that the adjusted land value of $196,000 for the acquired land would be too low. He considered the sale was "out of line" with other sales in the locality. He was unable to refer to any particular evidence as to why the sale was "out of line".

1. Mr Dempsey also used the sale at 3 Tumbi Road to set an upper bound value for the acquired land. The sale price of $619,000 for 3 Tumbi Road adjusted for time would be $680,900. Mr Dempsey said that the market value of the acquired land must be less than this value given that the land at 3 Tumbi Road is two and a half times the size of the acquired land, was a better building site and had greater development potential than the acquired land, as well as being in a better location removed from the intersection of Tumbi Road and Wyong Road.

2. The next sales along Tumbi Road were at 41 and 41A Tumbi Road. These lots were part of a larger lot that had been subdivided in two, 41 Tumbi Road retaining the existing dwelling house and 41A Tumbi Road being a vacant battle axe lot. The subsequent sale of 41 Tumbi Road was on 10 February 2015 for $410,000. It had a land area of 703.3 square metres. Mr Dempsey allowed $175,000 for the value of the existing dwelling. Although the site was considered to be in a better location, removed from the intersection and with better access, Mr Dempsey did not adjust the sale price for these advantages.

3. Mr Dempsey adjusted the sale price by 3% for the time difference of the sale. This yielded an adjusted land value per square metre of $344. Mr Dempsey applied this rate to derive a gross realisation of a 700 square metre lot on the acquired land if the acquired land were to be subdivided into two 700-800 square metre lots. A 700 metre square lot at $344 per square metre would yield $240,000. Mr Everson accepted that the sale showed a land value of $240,000 per lot for a two lot subdivision of the acquired land.

4. The lot at 41A Tumbi Road sold on 1 December 2014 for $230,000. The land area was 801.1 square metres, but around 120 square metres was for the access handle. Mr Dempsey made a 5% adjustment for the time of the sale. This yielded an adjusted land value per square metre of $301 and around $241,500 for the 801 square metre lot. Mr Everson accepted that the sale showed a land value of $241,500 per lot, for a two lot subdivision of the acquired land.

5. The next sale was on the eastern side of Tumbi Road, at 38 Tumbi Road. It sold on 6 December 2015, for $490,000. It had a land area of 710 square metres. There was an existing house, for which Mr Dempsey allowed $175,000. This gave a land value of $315,000. The sale was half a year later than the resumption date, but Mr Dempsey did not make a downwards adjustment for the rise in the market in that period. Mr Dempsey did, however, make a downwards adjustment of 20% for the superior location of the site, being on the eastern side of the road, elevated and with distant views to the lake. This yielded an adjusted land value of $355 per square metre, and $252,000 for the 710 square metre lot. This could be applied to a 700 square metre lot if the acquired land were to be subdivided into two 700-800 square metre lots.

6. Mr Everson accepted that the sale showed a land value of $315,000 per lot for a two lot subdivision of the acquired land before the necessary downwards adjustment of 20% to account for the superior location, aspect and amenity (which yields $252,000).

7. Mr Dempsey then referred to two sales in Wyong Road, down from the acquired land. The first was at 51 Wyong Road, which sold on 7 April 2015 for $390,000. It had a land area of 923.2 square metres. There was an existing dwelling house, which has subsequently been renovated. Mr Dempsey allowed $125,000 for the unrenovated dwelling house. A dual occupancy residence has subsequently been built at the rear of the lot.

8. Mr Dempsey used this sale to derive a market value for a 700-800 square metre lot if the acquired land were to be subdivided into two lots. Because a 700-800 square metre lot would have a higher per square metre value than a 923 square metre lot, Mr Dempsey made an upwards adjustment of 15% to reflect the fact that the lot was 923 square metres in size. This yielded an adjusted land value of $330 per square metre or around $230,000 for a 700 square metre lot. Mr Everson accepted that the sale showed a land value of $230,000 per lot for a two lot subdivision of the acquired land.

9. The second sale was at 52 Wyong Road, which sold on 2 December 2015 for $380,000. It had an area of 569.1 square metres. It had an existing dwelling house, for which Mr Dempsey allowed $175,000. This time, because of the smaller size of the lot, and therefore the higher rate per square metre, Mr Dempsey made a downwards adjustment of 10% to derive an adjusted land value for a 700-800 square metre lot on the acquired land. This yielded an adjusted land value of $324 per square metre or around $230,000 for a 700 square metre lot. Mr Everson accepted that the sale showed a land value of $230,000 per lot for a two lot subdivision of the acquired land.

10. At the hearing, Mr Dempsey added one further sale of 35 Eastern Road, Tumbi Umbi. This lot was located not far from the acquired land on Eastern Road, which turns off Tumbi Road. It was in a different zone, R1 General Residential under Wyong LEP, which permitted multi dwelling housing, residential flat buildings and seniors housing with development consent. The site sold on 8 March 2014 for $449,000. It had a land area of 1,113 square metres. There was an existing house in good condition, for which Mr Dempsey allowed $185,000. Mr Dempsey made a 14% upwards adjustment for the difference in time of the sale. He also made a 10% downwards adjustment for the superior location of the site compared to the acquired land. Mr Dempsey derived an adjusted land value of $247 per square metre or around $275,000 for the lot with an area of 1,113 square metres.

11. Mr Dempsey used this sale to illustrate that in the Tumbi Umbi locality, the market is not paying a premium for the potential to develop land for multi dwelling housing, residential flat buildings or seniors housing that is permitted by the R1 General Residential zoning, but instead is only paying on the basis of single dwelling houses.

12. Mr Dempsey used the adjusted land values he had derived from the sales along Tumbi Road and Wyong Road to assume a gross realisation of $240,000 for each of the two lots in a hypothetical two lot subdivision of the acquired land, resulting in a total of $480,000. He assumed a profit and risk margin of 25%, having regard to the busy location and poor amenity of the acquired land. This resulted in $384,000 before deduction of development cost. He said development costs would need to be less than $60,000 in order to create viability. Mr Dempsey therefore derived a land value of $325,000 ($384,000 less $59,000). To this land value, Mr Dempsey added the value of the dwelling house on the acquired land ($175,000) to yield a market value of $500,000.

13. At the hearing, however, Mr Dempsey said that he was prepared to accept the town planners’ advice that the development costs could be less, in the range of $30,000 to $40,000. Mr Dempsey adopted the figure of $40,000 for development costs, which yielded a land value of $344,000. To this land value would need to be added the $175,000 for the value of the dwelling house on the acquired land, which would give a market value of $519,000.

14. As I have noted, Mr Everson accepted in the joint report that various sales along Tumbi Road and Wyong Road showed the land values per lot that had been assessed by Mr Dempsey, which ranged between $230,000 to $252,000. Mr Everson said in oral evidence at the hearing that the range might be instead $245,000 to $265,000. Mr Everson considered that 25% for a profit and risk margin was excessive. The town planners’ evidence at the hearing was that approval of a two lot subdivision of the acquired land was highly likely. Mr Everson considered that 12% for a profit and risk margin would be a more reasonable figure if development consent for a two lot subdivision was highly likely. Mr Everson was also prepared to accept the town planners’ reduced estimate of development costs of $30,000 to $40,000. In oral evidence at the hearing, Mr Everson estimated that the value of the land might be around $440,000 to $450,000.

15. A figure in this range could be derived if one assumed a gross realisation of a two lot subdivision of the acquired land of around $500,000, being an average of $250,000 per lot, and 12% for a profit and risk margin, giving around $445,000. However, from this figure would need to be deducted, the development costs. If the lower estimate of $30,000 for development costs were to be used, the land value would be $415,000. Adding the value of the dwelling house of $175,000 would yield a market value of the acquired land of $590,000.

16. I consider that the sales in Tumbi Road (other than 3 Tumbi Road) and in Wyong Road justify an average land value of around $250,000 per lot for a two lot subdivision of the acquired land. A figure of $250,000 is supported by the adjusted land value derived from the sale of 38 Tumbi Road ($252,000). But it would also be supported by the other sales, if the lot size of each lot in a two lot subdivision were assumed to be larger than the 700 square metres assumed by Mr Dempsey and were closer to 800 square metres. The adjusted land values of $230,000 to $240,000 derived by Mr Dempsey assumed a 700 square metre lot. The acquired land has a land area of around 1,600 square metres, so if each lot in a two lot subdivision were to be the same size (around 800 square metres), the land value may be higher to reflect the larger area.

17. Mr Dempsey accepted in cross examination that the land value of a 900 square metre lot would be higher than that of a 700 square metre lot. It was put to him, and he accepted, that if a 700 square metre lot had a land value of $230,000, a 900 square metre lot would be worth around $30,000 more, namely $260,000. Hence, if the acquired land were to be subdivided into two lots, one of 700 square metres and the other of 900 square metres, the land value would be $240,000 for the 700 square metre lot (Mr Dempsey accepted the upper value of $240,000) and the 900 square metre lot would be $260,000, giving a total land value of $500,000.

18. I agree that a profit and risk margin of 25% is too high, especially in light of the town planners’ evidence at the hearing that it would be highly likely that development consent would be granted for a two lot subdivision of the acquired land, and that the development could be carried out for a moderate cost of around $30,000 to $40,000 and within a relatively short time frame of three to four months or three to six months, depending on the planner.

19. There are numerous examples of other land in the locality of the acquired land that has been subdivided into two lots and sold. Indeed, the sales in Tumbi Road and Wyong Road are some of these examples. It is true that the acquired land does have some constraints, particularly its frontage to two busy roads and its access near a roundabout, which may deter some purchasers or extend the time taken to sell the subdivided lots. But I do not consider that these factors justify a profit and risk margin as high as 25%. I consider that a more appropriate figure would be around 15%.

20. The development costs estimated by the town planners were in the range of $30,000 to $40,000. I consider it is appropriate to adopt the lower estimate of $30,000.

21. On these findings, assuming a gross realisation of the two lots of $500,000 and a profit and risk margin of 15% would result in a land value of $435,000 before deducting development costs of $30,000, to derive a land value of $405,000. To this, needs to be added $175,000 for the value of the dwelling house, giving a market value of $580,000. This figure is less than the adjusted market value for the sale of 3 Tumbi Road of $680,900, the figure Mr Dempsey said must be an upper bound value. I consider that a market value of $580,000 for the acquired land is consistent with an adjusted market value of $680,900 for the larger, more developable land at 3 Tumbi Road. I therefore assess the market value of the acquired land to be $580,000.

22. The other difference in compensation claimed concerned the amounts to be awarded for disturbance.

23. The applicant has provided an invoice for legal costs of $2,727.27 (excluding GST), which RMS has accepted. The applicant has provided invoices for valuation fees totalling $3,200, which RMS has also accepted. The applicant should therefore be awarded $5,927.27 for legal costs and valuation fees under section 59(1)(a) and (b) of the Land Acquisition (Just Terms Compensation) Act 1991.

24. The applicant also claimed other financial costs under s 59(1)(f), being stamp duty on the purchase of a replacement property and other financial costs of purchasing a replacement property. The applicant submitted that the acquired land was a residential property that had been tenanted, earning a rental of around $500 a week. The compulsory acquisition of the property had the consequence that the applicant could no longer receive rental income. In order to earn rental income in the future, the applicant submitted it would need to purchase a replacement residential property that could be let. The applicant claimed it should be compensated for the stamp duty and other financial costs of purchasing a replacement property for this purpose.

25. RMS submitted that, in the circumstances of this case, the applicant has not established any entitlement to financial costs under s 59(1)(f), including stamp duty or other financial costs of purchasing a replacement property. The applicant has not established any actual use of the land by the applicant; the applicant only rented the property and received rental income. The applicant has not established that it is in the business of acquiring and letting residential properties to earn rental income, or of acquiring land for the purpose of residential development or subdivision and then selling the developments for a profit. The applicant has not established that it purchased the acquired land as developable land or that it intended to develop any replacement property. The applicant also has not established that it has purchased or intends to purchase any replacement property.

26. RMS distinguished the applicant's circumstances from those considered in Harvey v Crawley Development Corporation [1957] 1 QB 485 at 493; Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259 at [4], [34]-[35]; Sebastian Cannavo and Alfia Jennifer Busa v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570 at [44]-[46] and Bezzina Developers Pty Ltd v Leichhardt Municipal Council (2006) 146 LGERA 249; [2006] NSWLEC 175 at [115]-[116].

27. I agree with RMS' submissions. The applicant has not established that it has incurred or might reasonably incur stamp duty or other financial costs in purchasing a replacement property or that such financial costs are related to the actual use of the acquired land and would be incurred as a direct and natural consequence of the acquisition. I therefore do not allow the claimed stamp duty or other financial costs of purchasing a replacement property.

28. I therefore determine the applicant's claim for compensation for the acquisition of the acquired land in the amount $585,927.27, being $580,000 for the market value of the land and $5,927.27 for disturbance.

29. As the applicant has obtained compensation in an amount greater than the amount offered in the notice of compensation and contended for by RMS, it should be awarded its costs of the proceedings.

30. The Court orders:

1. The amount of compensation payable to the applicant for the acquisition of the land comprising Lot 1 in Deposited Plan 397912, known as 1 Tumbi Road, Tumbi Umbi, is $585,927.27.

2. The respondent is to pay the applicant's costs as agreed or assessed.

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Decision last updated: 05 September 2016