George v Essential Energy

[2011] NSWLEC 1368

Land and Environment Court

New South Wales

Medium Neutral Citation:

George and anor v Essential Energy [2011] NSWLEC 1368

Hearing dates:

20,21 September 2011

Decision date:

09 December 2011

Jurisdiction:

Class 3

Before:

Brown ASC and Miller AC

Decision:

1. Pursuant to s66 (2) of the Land Acquisition (Just Terms Compensation) Act 1991 the Court determines the objection to the amount of compensation offered by the respondent in the sum of $183,817 made up as follows:

Section 55 (a)- $33,817.00.

Section 55 (f) - $150,000.00.

2. The Court notes the agreed disturbance compensation under s 55(d) of $12,964.20.

3. The exhibits are returned.

Catchwords:

COMPENSATION: easement for transmission line over existing sugar cane farm

Legislation Cited:

Land Acquisition (Just Terms Compensation) Act 1991

Cases Cited:

Arrow v Electricity Commission of New South Wales 87LGERA 363
Spencer v The Commonwealth of Australia 5 CLR 418

Category:

Principal judgment

Parties:

Barry Charles George and Valerie Dawn George (Applicants)

Essential Energy (formerly known as Country Energy) (Respondent)

Representation:

Counsel
Mr M McCall, barrister (Applicant)

Mr I Hemmings, barrister (Respondent)
Solicitors
Hosie & Partners (Applicant)

Norton Rose Australia (Respondent)

File Number(s):

30209 of 2011

Judgment

1. COMMISSIONERS : Mr Barry Charles George and Ms Valerie Dawn George (the applicants) are the registered owners of the following properties (the Land):

• Lots 55 in DP 751392 (17.81 ha),
• Lot 56 in DP 751392 (19.02 ha),
• Lot 57 in DP 81512 (19.00 ha),
• Lot 525 in DP 1118832 (35.39 ha),
• Lot 1 and 2 in DP 1122744 (15.99 ha), and
• Lot 1 in DP 1116963 (7.95 ha).

1. The Land is located at South Arm Road, Woodford Island near McLean on the north coast of New South Wales. The lots have a combined area of 115.16 ha and are used primarily for sugar cane growing, as is other land in the locality. The applicants reside in a dwelling house located on Lot 57. A dwelling house is located on Lot 55 and is currently leased. The applicant's son and his family currently occupy the dwelling house located on Lot 525. Farm sheds adjoin the dwellings on Lots 57 and 525. There is no residential building entitlement for lot 56. A number of cane haulage roads traverse the Land to provide internal access between the different lots. Some drainage channels also exist on the Land to facilitate the disposal of surface water. The Land is level but rises to a high point on Lot 525 where the dwelling is located.

1. On 17 December 2010, Essential Energy compulsorily acquired easements over Lots 55, 56 and 525 for the construction of the new Koolkhan - McLean 66 kv Power Line. The easement is described as:

Easement for overhead powerlines 30 wide affecting Lots 55 and 56 in DP 751392 and Lot 525 in DP 1118832 shown as "Proposed Easement for Transmission Line 30 wide " in DP 1139979

1. The area affected by the easement is 2.8252 ha, made up of 1.1862 ha for Lots 55, 0.6958 ha for Lot 56 and 0.9432 ha for Lot 525 (the easement land). The details of the easements are recorded in DP 1139979 (see Attachment 1) and the terms of the easement are described, in part, as:

.... on the terms set out in Part A of Memorandum No AA 26009 registered at Land and Property Management Authority

1. A total of 13 poles are to be erected, within the easement land. These poles will be visible from most parts of the Land. The poles are around 21 m in height and support three wires attached near the top of the poles, two on one side and one on the other. In two locations, where there is a marked change of direction, a separate support bollard is provided and attached to the pole by cable.

1. The applicants seek orders for compensation pursuant to s 66(2) of the Land Acquisition (Just Terms Compensation) Act 1991 (the Act). Section 66 states:

66 Objection against amount of compensation offered

(1) A person who has claimed compensation under this Part may, within 90 days after receiving a compensation notice, lodge with the Land and Environment Court an objection to the amount of compensation offered by the authority of the State.

(2) If any such objection is duly lodged, the Land and Environment Court is to hear and dispose of the person's claim for compensation.

(3) A person who does not lodge an objection within the 90-day period and who is taken to have accepted the offer of compensation under section 45 may nevertheless lodge an objection under this section, but the Land and Environment Court is not to hear and dispose of the person's claim for compensation unless satisfied that there is good cause for the person's failure to lodge the objection within that period.

(4) If the Land and Environment Court decides that the amount of compensation payable (without the addition of interest) does not exceed by more than 10% the amount of compensation offered by the authority of the State, the Court may cancel or reduce the amount of interest that has accrued under this Act in respect of the compensation since the institution of the proceedings .

1. The definition of "land" is set out in s 4(1) and states:

Land includes any interest in land

1. Section 55 addresses the relevant matters in determining compensation and states:

55 Relevant matters to be considered in determining amount of compensation

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

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

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

(c) any loss attributable to severance,

(d) any loss attributable to disturbance,

(e) solatium,

(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.

1. For the purposes of cl 55(a), the meaning of market value in cl 56 states:

56 Market value

(1) In this Act:

market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):

(a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, 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.

(2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition.

1. The parties agreed that the relevant matters are limited to s 55(a), (d) and (f).

1. At the hearing, the parties agreed on s 55(d) disturbance compensation of $12,964.20, based on valuation fees of $2946.24 and legal costs of $10,000. The Court notes this agreement. The compensation under s 55(a) and (f) remained in dispute.

The applicants' claim

Section 55(a) market value $ 65, 994

Section 55(f) decrease in value of adjoining land $480,177

Section 55(d) disturbance: $ 12,964.20

Total compensation claimed: $559,135.20

The respondent's offer

Section 55(a) market value $ 24,639

Section 55(f) decrease in value of adjoining land $140,000

Section 55(d) disturbance: $12,964.20

Total compensation offered: $177,603.20

Valuation evidence

1. Mr Neale Frogley and Mr Kent Wood, Registered Valuers, provided evidence for the applicants and respondent respectively. Mr Frogley relies on his Valuation Report dated 9 January 2009 however provides two Supplementary Reports to provide more recent additional sales evidence to support the conclusions in his 2009 report.

1. The valuers agree that the market value of the Land, excluding all improvements, at the date of acquisition, but unaffected by that acquisition was:

• Lot 55 - $498,000 ($28,000 per ha)
• Lots 56 and 57 - $760,400 ($20,000 per ha), and
• Lot 525 - $707,800 ($20,000 per ha).

1. Notwithstanding agreement in respect of market value of the Land, the valuers do not agree on the highest and best use of the Land and to what extent the subject land, following the acquisition, can be used. The differing professional opinions affects their valuation approach and conclusions.

Highest and best use of the Land

The evidence

1. Mr Frogley maintains that the Land is well suited to sugar cane farming or as a riverside rural lifestyle property but adopts the latter use for valuation purposes. On that basis Mr Frogley submitted evidence concerning sales analysis and comparisons between rural lifestyle properties affected and not affected by transmission line easements.

1. Mr Frogley provided sales evidence to support his contention that the highest and best use of the site is for a "lifestyle property". These properties were inspected by the Court and were located at:

• 196 North Arm Drive, Chatsworth,
• 252 Old Ferry Road, Ashby, and
• 114 North Arm Drive, Chatsworth.

1. Mr Wood maintains that the highest and best use of the Land is in accordance with its current use, namely, sugar cane farming.

Findings

1. We are satisfied that the highest and best use of the Land is for cane growing for a number of reasons.

1. First, the Land is within the 1(A) Rural (Agricultural Protection) Zone under Maclean Local Environmental Plan 2001 (LEP 2001). LEP 2001 was gazetted on 11 May 2001 and as such pre-dates the acquisition of the easement. Clause 2 provides Aims, objectives etc where cl 2(c ) relevantly states:

2 Aims, objectives etc

The aims of this plan are:

(a) .

(b) .

(c) to restrict subdivision in rural zones and limit additional dwelling entitlements in Zones Nos 1 (a) (the Rural (Agricultural Protection) Zone) and 1 (b) (the Rural (General Rural Land) Zone), and

1. Clause 31 provides aims and objectives for the 1(A) Rural (Agricultural Protection) Zone . These are:

1 Aim of zone

The primary aims of this zone are to protect, reserve and encourage the use of land in this zone for agriculture and uses compatible with agriculture.

2 Objectives of zone

The particular objectives of this zone are:

(a) to conserve the productive potential of prime crop or pasture land, and

(b) to provide for new forms of agricultural development, and changing patterns of existing agricultural development, and

(c) to ensure that commercial farming is not affected adversely by incompatible uses which impair its long term sustainability, and

(d) to avoid degradation and alienation of prime agricultural land, and

(e) to enable rural tourism, which does not adversely affect the productive potential of the land, and

(f) to exclude urban development on all prime crop or pasture land, and

(g) to restrict the subdivision of prime crop or pasture land, and

(h) to encourage conservation in farming practices, and

(i) to control the clearing of vegetation and encourage the retention of vegetation.

1. There can be little doubt that the principal purpose of the 1(A) Rural (Agricultural Protection) Zone is to maintain and encourage the use of land within this zone for agricultural use.

1. Secondly, cl 32 provides requirements for subdivision within the 1(A) Rural (Agricultural Protection) Zone. Clause 32(2) provides that the minimum area for subdivision is 50 ha for agriculture (cl 32(2)(a)) and 40 ha for sugarcane farming (cl 32(2)(c)). Further considerations on whether to grant consent to subdivision contained are within cl 32(4) and relevantly include:

(a) the area and quality of each proposed allotment and its potential agricultural productivity,

(b) the likely effects (both economic and otherwise) that the proposed subdivision will have on agricultural industries in the locality and the resources employed by or in connection with those industries,

(c) the likely effects (both economic and otherwise) that the proposed subdivision will have on the use and development of other land and resources in the locality,

(d) whether there are any reasonable alternatives to the proposed subdivision in the circumstances,

(e) the effect of the existence of, or the erection of, a dwelling,

(f) the cumulative effect of similar proposals if consent is granted for allotments that comply with subclause (2),

(g) the likelihood of each proposed allotment remaining available for efficient agricultural use,

(h) any relevant matter established by a development control plan that applies to the land,

(i) the availability of access and the provision of services to each proposed allotment.

1. Thirdly, and in any case, the use of the Land for "lifestyle housing" is unlikely because:

• there is no evidence of existing sugar cane farms in the vicinity of the property being sold for "lifestyle housing",
• the Land is subject to partial flood inundation,
• the sales relied on by Mr Frogley at 196 North Arm Drive, Chatsworth, 252 Old Ferry Road, Ashby, and 114 North Arm Drive, Chatsworth do not support, in our opinion, the proposition that the Land is likely to be more desirable for "lifestyle housing" than sugar cane farming.
• the proximity to and the views of South Arm of the Clarence River is a positive aspect for "lifestyle housing". However, this is not a sufficient reason to suggest that parts of the Land are more suitable for this use given that none of the lots have direct access to the river being located on the opposite side of South Arm Road,
• only three of the lots within the Land have a dwelling entitlement,
• it would fragment a viable and operational cane farming operation, and
• that the economies of scale for the existing cane farming operation would be diminished or lost.

The extent to which the subject land can be used

Frogley evidence

1. Mr Frogley concludes that the subject land is valueless for agriculture under the terms of the easement as sugar cane or like crops are not permitted to be grown on the land within the easement. Similarly, the erection of a building or structure within the easement is not permitted. Mr Frogley maintains that the value of the subject land should be discounted by 100%.

1. Mr Frogley calculates the loss in market value for the subject land pursuant to s 55(a) to be:

• Lot 55 - 1.1862 ha @ 28,000 per ha = $33,214,
• Lots 56 - 0.6958 ha @ $20,000 per ha = $13,916, and
• Lot 525 - 0.9432 ha @ $20,000 per ha = $18,864.

1. Total compensation claimed is $65,994.

Wood evidence

1. Mr Wood adopts the "piecemeal" method of assessing the decrease in the market value of the easement land consequent upon the acquisition.

1. First, for land within 5 m of a pole, being land on which sugar cane is not to be grown, i.e., an area of 100 sq m (as compared to 53 sq m required by the respondent), Mr Wood allows a discount of 100%. The 5 m distance was confirmed on the view by Mr George as providing a buffer around the poles enabling cane growing to be continued without inconvenience or risk to the pole, machinery or people.

1. Second, for land within the easement land, but outside the 100 sq m buffer area, except as noted immediately hereunder, a 50% discount should be applied.

1. Thirdly, in respect of the easement land where it partially traverses drainage channels and cane haulage roads; a 30% discount should be applied. Mr Wood notes that the route of the easement was determined in consultation with the applicants to specifically minimise the impact on cane growing operation and utilise existing areas where cane is not grown because of the drainage channels and cane haulage roads.

1. On this basis, Mr Wood provides the following calculations for his assessment of the decrease in the market value of the easement land pursuant to s 55(a):

• Lot 55

3 poles within the easement area (100 sq m exclusion area around each pole):

300 sq m @ $28,000 per ha = $840

11,562 sq m @ $28,000 per ha x 0.3 = $9,712

Total: 11,862 sq m $10,552

• Lot 56/57

2 poles within the easement area (100 sq m exclusion area around each pole):

200 sq m @ $20,000 per ha = $400

6,758 sq m @ $20,000 per ha x 0.3 = $4055

Total: 6,758 sq m $4,455

• Lot 525

2 poles within the easement area (100 sq m exclusion area around each pole):

200 sq m @ $20,000 per ha = $400

9,232 sq m @ $20,000 per ha x 0.5 = $9,232

Total: 9,432 sq m $9,632

Findings

1. We do not accept that the easement land should be regarded as valueless for agriculture under the terms of the easement. Clause 4.4 of the Terms of Easement for Overhead Powerlines for the Land, relevantly state:

4. The landowner agrees that it will not

.

.

.

4.4 plant or allow to grow vegetation other than low or horizontal growing grasses within the easement site without written permission of Country Energy and in accordance with such conditions as Country Energy may reasonably impose.

1. If read in its entirety, cl 4.4 does not suggest that the land within the easement cannot be used for growing of sugar cane. The clause provides the opportunity for growing of sugar cane, with the written permission of Essential Energy. A prospective purchaser (at the time of the acquisition of the easement) must be assumed to be perfectly acquainted with the subject land, and cognisant of all circumstances that might affect its value, either advantageously or prejudicially ( Spencer v . The Commonwealth of Australia 5 CLR 418 at [441]).

1. Clause 4.4 provides the opportunity for the start of the inquiry that could, and in our opinion would, be undertaken by a prospective purchaser given the to be assumed characteristics of a prospective purchaser as set out in Spencer. In our view, such an inquiry would lead a prospective purchaser to conclude that there is every likelihood that sugar cane could be grown in at least part of the easement based on

• observations, in the general area, where cane can be seen growing within existing easements,
• the existence of "Cane growers terms", which pre-date the acquisition of the easement, and allow cane production within Essential Energy easements but subject to some restrictions. The "Cane growers terms" are the result of consultation between the sugar cane industry and Country Energy as Essential Energy was then known. They were formulated to ensure that the creation of any easements do not unnecessarily restrict cane production. The requirements, in part, include a 10 m minimum conductor clearance above ground level, compared to the usual clearance over open rural land of 7.3 m. We note that the proposed transmission line provides for a 10 m clearance on the Land.
• The existence of the Country Energy document entitled Living with Electricity Easements - What all residents should know , which we also understand pre-dates the acquisition of the easement. This document is a general-purpose document that does not specifically relate to cane growing but allows vegetation to be grown within an easement and higher that stated in the Terms of Easement for Overhead Powerlines for the Land. Under that heading of "What can I do on the easements?"; the document relevantly states:

You can plant trees, shrubs and plants clear of vehicle access

MAXIMUM GROWTH OF 3 METRES

You can operate mobile plant and equipment such as cranes

MAXIMUM WORKING HEIGHT OF 4 METRES

1. Confirmation that sugar cane could be grown in at least part of the easement was provided at the hearing from the inquiry made by the applicants solicitors to Country Energy on 20 January 2011 indicating the existence and acceptance of the "Cane grower terms". While the offer to include the "Cane grower terms" was ultimately declined on the terms suggested by Country Energy, the correspondence confirms the ability to grow sugar cane in the easement, subject to the "Cane grower terms" (that were in operation prior to the easement acquisition date) even accepting that the inquiry post-dates the easement acquisition date.

1. Further confirmation that sugar cane could be grown in at least part of the easement land was provided at the hearing from the correspondence from Essential Energy on 21 September 2011 confirming that it will amend the terms of the easement on the Land to include the "cane grower terms". Accordingly, we conclude that a prospective purchaser would confidently assume that "Cane grower terms" would be available, at the acquisition date, enabling cane growing operations to continue within the easement land except the exclusion area around each pole.

1. Notwithstanding our conclusion that, with the benefit of the "cane grower terms", sugar cane can be grown on the easement land (excepting the area of 100 m surrounding each pole) compensation must be allowed for the bundle of rights acquired by the respondent, under the terms of easement and as can be amended by incorporation of the " cane grower terms".

1. The bundle of rights acquired by Essential Energy include the right to install poles and overhead equipment, excavate the site to install that overhead equipment and use same for the transmission of "electricity, signals, fluids or gases" (clauses 1.1, 1.2 and 1.3), enter upon the easement land "using the most practical route (with or without vehicles, plant, equipment and materials) at all reasonable times" except in an emergency "and remain there for any reasonable time" (clause 1.4). Essential Energy can install "at its own gates, locks, roads, tracks, bridges and other means of access on the lot burdened" (clause 1.5). Clause 1.6 entitles Essential Energy, under certain circumstances, to trim or remove any vegetation from the lot burdened while cl 1.7 enables removal of any unauthorised encroachments within the easement. However, and significantly, cl 2.0 requires that Essential Energy "will take all reasonable precautions to minimise disturbance to the lot burdened and will restore the lot burdened as nearly as practicable to its original condition". The landowner is prohibited from placing any services or structure within the easement land, altering the surface of same, plant only "horizontal growing grasses" without consent (except as provided in the cane growers terms) and to restrict access to Essential Energy (clause 4).

1. We accept that the acquisition represents a blot on the title of the Land. The applicants are restricted in using the easement land as they wish while access rights acquired by Essential Energy, which can be exercised at any time, represent a loss of privacy and introduces a security risk hitherto not encountered. To ensure security of the Land and the easement land it will be necessary to check any vehicles or persons on the easement to ensure that they are authorised representatives of Essential Energy. This could be an inconvenient but necessary time consuming exercise. Problems could forseeably occur when Essential Energy exercise their rights of access during times when cane growing operations are being undertaken.

1. The assessment of loss in market value of the easement land is, in the circumstances of this matter, difficult and ultimately one of professional opinion ( Bignold J in Arrow v Electricity Commission of New South Wales 87LGERA 363 referring at [369] to the judgment of Hardie J in Brancatisano v The Minister (1967) 16 LGRA at [367]]).

1. We note that Mr Wood has differentiated as to the loss in value between those parts of the easement land affected (lots 55, 56 and 57) and not affected by roads and drainage lines (lot 525). The consequences of loss of freehold title, loss of privacy and security risk are equally applicable to all of the easement land and for that reason we consider that all parts should be treated equally. We are of the opinion that loss in market value of 50% is appropriate and reasonable to all parts of the subject land outside of the exclusion area around each pole.

1. Compensation is increased, under this particular heading, (refer to Mr Wood's calculations supra) in respect of lot 55 from $9,712 to $16,187 and for lots 56/57 from $4,055 to $6,758 increasing the total loss in value of these lots, respectively, from $10,552 to $17,027 and from $4,455 to $7,158. To these revised figures must be added the loss in value calculated by Mr Wood in respect of lot 525 of $9,632 making a total loss in value of $33,817.

The injurious affect on adjoining land of the applicants - s 55(f)

1. Both Mr Frogley and Mr Wood acknowledge that there is a "visual blight" caused by the presence of the poles and transmission line when observed from the existing dwellings on each lot and a claim for injurious affection is warranted. Mr Frogley discounts the value of the residential improvements by 20% while Mr Wood uses discounts ranging from 20% to 30%, with the specific amount dependant on the distance of the improvements from the transmission line. We agree that a claim for injurious affection is warranted and adopt the method of ascertaining the loss by reference to the value of the residential improvements and the distance from the transmission line. As total value assigned to the residential improvements by Mr Wood exceed those of Mr Frogley we have adopted Mr Wood's values. The quantum of discount is again a question of professional opinion.

1. Mr Wood's calculations and reasons are as follows:

• Lot 55 - $150,000 with a 20% discount with the dwelling some 400 m from the transmission line and barely visible,
• Lot 56/57 - $200,000 with a 25% discount with the dwelling some 200 m from the transmission line, and
• Lot 525 - $200,000 with a 30% discount with the dwelling some 140 m from the transmission line.

1. Mr Wood calculates compensation as:

• Lot 55 = $30,000,
• Lots 56/57 = $50,000, and
• Lot 525 = $60,000.
• Total = $140,000

1. We accept Mr Wood's calculations in respect of lots 55 and 525 but consider that a 30% discount is applicable to the residential improvements constructed on lots 56/57 having regard to the proximity of the easement and the view of the poles from the residence particularly on the opposite side of South Arm Road. Loss of value is increased by $10,000 to become $60,000. Total compensation pursuant to s 55 (f) is $150,000.

Orders

The Orders of the Court are:

1. Pursuant to s66 (2) of the Land Acquisition (Just Terms Compensation) Act 1991 the objection to the amount of compensation is determined at $183,817 and made up as follows:

Section 55 (a) $33,817.00.

Section 55 (f) $150,000.00.

2. The Court notes the agreed disturbance compensation under s 55(d) of $12,964.20.

3. The exhibits are returned.

____________

G T Brown

Acting Senior Commissioner

_____________

E Craig Miller

Acting Commissioner of the Court

Decision last updated: 22 December 2011