Halloran and Sealark Pty Ltd v Shoalhaven City Council
[1999] NSWLEC 171
•28 July 1999
Land and Environment Court
of New South Wales
CITATION:
Halloran and Sealark Pty Ltd v Shoalhaven City Council [1999] NSWLEC 171
PARTIES
No 30033 of 1998
APPLICANT
HalloranRESPONDENT
Shoalhaven City CouncilNo 30034 of 1998
RESPONDENT
APPLICANT
Sealark Pty Ltd
Shoalhaven City Council
NUMBER:
30033 of 1998 and 30034 of 1998
CORAM:
Pearlman J
KEY ISSUES:
Compensation :- compulsory acquisition - valuation - highest and best use - betterment
LEGISLATION CITED:
Land Acquisition (Just Terms Compensation) Act 1991
DATES OF HEARING:
02/22/1999; 02/23/1999; 05/04/1999; 05/05/1999; 05/06/1999; 05/07/1999
DATE OF JUDGMENT DELIVERY:
07/28/1999
LEGAL REPRESENTATIVES:
APPLICANT
Mr J E Robson (Barrister)SOLICITORS
Blake Dawson WaldronRESPONDENT
SOLICITORS
Mr J J Webster (Barrister)
Morton & Harris
JUDGMENT:
Contents
Section Paragraph Number
Introduction 1 to 3
The acquired land and its surroundings 4 to 11
The issues 12 to 19
Market value 20 to 46
Betterment
- Why betterment is an issue 47 to 51
The planning history 52 to 61
The precise area available 62 to 70
Does s 55(f) apply? 71 to 73
The valuation of the Callala Bay extension 74 to 77
Orders 78
IN THE LAND AND
30033 of 1998 and 30034 of 1998
ENVIRONMENT COURT Pearlman J
OF NEW SOUTH WALES 28 July 1999
- No 30033 of 1998
- Applicant
- Respondent
- Applicant
- Respondent
Introduction
1. These proceedings involve claims for compensation for the compulsory acquisition of certain land.
2. By notice in the Government Gazette on 6 February 1998, the respondent, Shoalhaven City Council (“the council”), compulsorily acquired land near Nowra. The land was acquired by the council for the purpose of the construction and operation of a sewage treatment plant (“the STP”).
3. The land which was compulsorily acquired, comprising 146.1 hectares, was formerly held by two different proprietors, and two claims for compensation have been made which, by leave, were heard together. Mr Warrren Halloran was the owner of 144.427 hectares, and Sealark Pty Ltd was the owner of 1.673 hectares. Sealark Pty Ltd is a company ultimately owned and controlled by Mr Halloran.
The acquired land and its surroundings
4. The land which was compulsorily acquired is located on Coonemia Road, Pyree, about 14 kilometres from Nowra, and about seven kilometres from Callala Bay. Together with adjoining land, it had been used by Mr Halloran for many years for grazing purposes.
5. The acquisition was effected by the registration of DP 870441, which divided the original holding of the applicants into six allotments. The plan shows that Coonemia Road traverses the original holding in a north to south direction. Five of the six allotments are situated on the western side of Coonemia Road. One allotment (lot 2) is largely situated on the eastern side of that road, but part of it is on the western side, and part is on Culburra Road, which is an adjoining road.
6. For convenience, I shall refer to the land which was compulsorily acquired, being lot 1 in DP 870441, as “the acquired land”. I shall refer to the whole of the original holding of the applicants as “the Halloran land” and I shall refer to the remainder of the Halloran land after the excision of the acquired land as “the residue land”.
7. Most of the acquired land is presently zoned “Rural 1(a) (Rural ‘A’ Zone) under the Shoalhaven Local Environmental Plan 1985 (“LEP 1985”) but there is a small section in the north-western corner which is zoned Rural 1(g) (Rural ‘G’ zone). The residue land is zoned partly 1(a), but also partly 1(b) (Rural ‘B’ zone), and partly 1(g). The 1(a) and 1(b) zones permit agricultural use, and subdivision into 40 hectare allotments is permissible with council consent. The 1(g) zone applies to flood prone land.
8. That part of the Halloran land on the western side of Coomenia Road (which comprises lot 1, part of lot 2, and lots 3, 4, 5, and 6 in DP 870441) is largely cleared, although there is some timbered land, particularly along the frontage to Coonemia Road. Part of lot 3 is low lying.
9. That part of the Halloran land on the eastern side of Coonemia Road, (which comprises the majority of lot 2 in DP 870441) is timbered.
10. Lot 3 in DP 870441 is bisected by an irregularly-shaped lot known as lot 1 in DP 723978 and which is owned by Mr Halloran. The parties ultimately agreed that, for the purpose of the valuation exercise, lot 1 in DP 723978 should be regarded as being part of the Halloran land, and accordingly when I use the expression “the Halloran land” I include lot 1 in DP 723978.
11. I record that I had the benefit of a site inspection of the acquired land, the Halloran land, the land the subject of comparable sales which were relied upon by the valuers who gave evidence, and land owned by Mr Halloran at Callala Bay.
The issues
12. The acquired land was compulsorily resumed under the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 (“the Just Terms Act”). There is no issue that each of the applicants is an owner of an interest in the acquired land and is entitled to be paid compensation pursuant to and determined under the Just Terms Act.
13. The amount of compensation to which each applicant is entitled is to be determined under s 55 of the Just Terms Act, which provides as follows:
55 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;
(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.(e) solatium;
14. Having regard to s 55, the applicants each claim the market value of the acquired land on the date of its acquisition and reasonable legal costs and valuation fees by way of loss attributable to disturbance.
15. However, the council contends that, in determining the amount of compensation in this case, the provisions of s 55(f) are relevant; that is, that the value of other land held by the applicants which adjoins the acquired land will be increased by reason of the carrying out of the public purpose for which that land was acquired, namely, the construction of the STP. This aspect of determination of compensation has been referred to throughout the hearing as “betterment”.
16. Hence, the two issues about which the parties are in dispute are:
(ii) betterment.(i) the market value of the acquired land; and
17. The applicants’ case is that, jointly, they are entitled to a total amount of compensation of $1,030,000, and that betterment does not arise, that is, that the value of adjoining lands is not increased by the construction of the STP.
18. The council’s case is that the applicants are entitled to “nil” compensation, the market value of the acquired land (which the council claims is $655,000) being exceeded by the increase in value of the adjoining lands as a consequence of betterment.
19. I turn, then, to deal with each issue.
Market value
20. Section 56(1) of the Just Terms Act defines “market value” in the following terms:
‘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
(c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.(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
21. Valuation evidence for the applicants was given by Mr F K Egan of Egan National Valuers (NSW). For the council, valuation evidence was given by Mr J W Austin of Walsh & Monaghan (Nowra) Pty Ltd.
22. The valuers were in agreement that the valuation approach to be adopted was a “before” and “after” method. That method involves valuing the Halloran land before the compulsory acquisition and valuing the residue land after the acquired land has been excised. The difference between the two values represents the value of the acquired land.
23. The valuers were, however, in dispute as to the highest and best use of the Halloran land, including the acquired land. The phrase “highest and best use” refers to the necessity to value the acquired land for the best and highest and most profitable use to which it can be put so as to provide to the applicants the full monetary equivalent of the value of the acquired land ( Turner and Anor v Minister of Public Instruction (1956) 95 CLR 245 at 264; The Minister v Matford Nominees Pty Ltd (1973) 2 NSWLR 58 at 59).
24. Mr Egan considered that the highest and best use of the Halloran land was its subdivision and sale in 40 hectare lots, and accordingly he carried out a hypothetical subdivision analysis in the “before” and “after” situations in order to derive the value of the Halloran land and the residue land. Mr Austin, on the other hand, considered that the Halloran land should be treated in two parts for the purpose of determining its highest and best use. The highest and best use of that part of the Halloran land on the western side of Coonemia Road should be regarded, in Mr Austin’s opinion, as a rural holding, and accordingly should be valued on a broad hectare basis. That part of the Halloran land on the eastern side of Coonemia Road (being most of lot 2) has little or no value for agricultural purposes, and should be valued either as a single rural homesite or hobby farm or as a subdivision into 40 hectare lots for the same purpose.
25. Mr Austin’s reasons for adopting a broad hectare basis for valuing that part of the Halloran land on the western side of Coonemia Road were based on his experience as a local valuer in the area. He said that there were two different markets in the area. One market comprised buyers, such as local people, dairy farmers and others, who desire to utilise land for agricultural pursuits, and the other market comprises buyers seeking land for home sites or weekenders. In Mr Austin’s opinion, land of the former category is more sought after, and accordingly a use for rural purposes is the highest and best use for that part of the Halloran land. He derived support for his opinion from the fact that he could find no 40 hectare subdivision in the area since about 1994.
26. Mr Egan took into account the fact that subdivision of the Halloran land into 40 hectare lots is a use permissible with consent under LEP 1985, and accordingly he considered that the highest and best use of the Halloran land was a subdivision into 40 hectare rural home sites. Furthermore, as Mr Robson, appearing for the applicants, pointed out in his submission, a valuation upon a broad hectare basis requires an averaging of the per hectare value over the whole of the Halloran land, taking together the better land and the poorer land. In his submission, the acquired land represented the better part of the Halloran land, and the consequence of the averaging of the per hectare value is that the applicants would not receive the full monetary value of the acquired land.
27. I have concluded that Mr Austin’s approach is to be preferred. He has had more local experience than Mr Egan, and I accept his opinion that the most profitable use to which that part of the Halloran land on the western side of Coonemia Road could be put was for agricultural pursuits. I also accept, since there was no evidence to the contrary, that there have been no 40 hectare subdivisions in the general area since about 1994, and that fact supports Mr Austin’s approach.
28. The suggestion that the broad hectare approach should be rejected because it averages out the per hectare value of the Halloran land (mixing the better with the poorer) seems to me to miss the point. The point is to determine what use of the Halloran land will yield its full monetary potential. That a subdivision into 40 hectare lots might have the effect of maximising the “better” land as against the “poorer” land is simply a factor to consider in determining the highest and best use of the land. But there are other factors as well, such as the rural capability of the land (some of which Mr Austin considers to be class 3 under the Department of Agriculture’s classification and therefore suitable for agriculture). Those factors suggest that the full monetary potential of the Halloran land might be its sale for agricultural pursuits.
29. Mr Austin’s “before” and “after” valuation was as follows:
Broad Hectare Assessment
Valuation Before Acquisition
(a) Property on Western side of Coonemia Road comprising: Lot 1Deposited Plan 870441-146.10ha Lot 3Deposited Plan 870441-85.65ha Lot 4Deposited Plan 870441-63.84ha Lot 5Deposited Plan 870441-15.56ha Lot 6Deposited Plan 870441-0.93ha Lot 1Deposited Plan 723978-42.49ha Part Lot 2Deposited Plan 870441-10.70ha Lot 3Deposited Plan 536792-0.30ha Total Area-365.57ha (b) Property on Eastern side of Coonemia Road comprising Part Lot 2 Deposited Plan 870441-170.0ha Say 365.57ha @ $4,000=$1,462,280.00 170 ha @ $2,200.00=$ 374,000.00 $1,836,280.00 Added Value of Farm Business=$ 20,000.00 $1,856,280.00 Say$1.855 Million
Valuation after Acquisition
(a) Property on western side of Coonemia Road comprising Lot 3Deposited Plan 870441-85.65ha Lot 4Deposited Plan 870441-63.84ha Lot 5Deposited Plan 870441-15.56ha Lot 6Deposited Plan 870441-0.93ha Lot 1Deposited Plan 723978-42.49ha Part Lot 2Deposited Plan 870441-10.70ha Lot 3Deposited Plan 536792-0.30ha Total219.47ha (b) Property on Eastern side of Coonemia Road comprising Part Lot 2 Deposited Plan 870441-170.0ha Say 219.47ha @ $3650=$ 801,065.00 170.0ha @ $2,200.00=$ 374,000.00 $1,175,065.00 Added Value of Farm Business=$ 20,000.00 $1,195,065.00 Say$1.2 Million
Loss in Value - $655,000
30. A number of matters must be noted. First, Mr Austin considered that the value per hectare of the Halloran land on the eastern side of Coonemia Road would remain the same in the “before” and “after” situations, the compulsory acquisition of the acquired land making no difference to that value. Secondly, he made an adjustment to the value per hectare of the Halloran land on the western side of Coonemia in the “after” situation. This was done to take account of the impact of the STP and the irregular shape of the Halloran land after the excision of the acquired land. In his opinion, the existence of the STP would result in occasional smell and minor visual pollution, and would lead to some market resistance, having regard to the possibility of future rural subdivision. The irregular shape of the Halloran land (after the compulsory acquisition of the acquired land) would give rise to management problems for grazing purposes, especially as the acquired land is the more elevated section, invaluable during flood times.
31. Thirdly, the values which Mr Austin arrived at for each hectare in both the “before” and “after” situations are derived from his analysis of comparable sales, in respect of which he made adjustments for comparison purposes in relation to the size of the comparable lots, their agricultural potential, their proximity to Nowra, and their inferiority or superiority to the acquired land. In order to determine a value of $2,200 per hectare for that part of the Halloran land on the eastern side of Coonemia Road, he relied principally upon a sale in 1994 of land at Huskisson (his large rural holding sale 2), which yielded $2,456 per hectare. For the value of $4,000 per hectare for that part of the Halloran land on the western side of Coonemia Road, Mr Austin relied upon three sales, being land at Cambewarra (his large rural holding sale 3), yielding $6,300 per hectare, land at Yerriyong via Nowra (his large rural holding sale 4), which yielded $4,750 per hectare, and land at Falls Creek (his large rural holding sale 5), which yielded $2,732 per hectare.
32. I am fortified in my conclusion concerning the broad hectare approach when I examine the hypothetical subdivision valuation carried out by Mr Egan, and a similar exercise carried out by Mr Austin as a check valuation. I turn to Mr Egan’s valuation first.
33. Mr Egan relied upon a hypothetical subdivision plan for the “before” and “after” situations which was prepared by Mr P M Price, surveyor. The “before” plan showed 13 lots, of which four lots were situated on the eastern side of Coonemia Road. None of the lots was less than 40 hectares in area, although the lots on the eastern side of Coonemia Road were slightly larger than 40 hectares. Relying on sales which he regarded as comparable, Mr Egan estimated gross realisation values for each lot, applied a profit and risk factor of 35 per cent, and adjusted for estimated development expenses (for which he relied upon Mr Price’s estimates). He derived a final figure of $2,050,000.
34. The “after” plan of subdivision showed seven lots, all 40 hectares or a little more, except for lot 7 which contained an area of 139 hectares. In this exercise, Mr Austin allowed a profit and risk factor of 40 per cent, as well as the amount of $32,280 for a farm track which he said was required to gain access to elevated land at the rear of lot 7. He derived a final figure of $1,020,000.
35. Under the “before” and “after” method, this valuation exercise yielded a value of $1,030,000 for the acquired land.
36. Mr Austin carried out a hypothetical subdivision analysis for the purpose only of checking the validity of his broad hectare approach. Relying upon the subdivision plans which Mr Price had prepared, and relying to some extent upon Mr Price’s cost estimates but also those of Watkinson Apperley Pty Ltd, surveyors, Mr Austin derived a “before” value of $1,200,000 and an “after” value of $855,000, which yielded a value of $345,000 for the acquired land.
37. It can be seen at once that these two valuation exercises, which yielded values for the acquired land of $1,030,000 and $345,000 respectively, are significantly apart. That suggests in itself that the hypothetical subdivision approach is likely to be unreliable. However, I have carefully considered Mr Egan’s valuation in order to test whether my conclusion as to the proper valuation approach is correct. I put aside Mr Austin’s exercise, since it was done only for a check.
38. Mr Egan’s “before” valuation was subjected to criticism. The council’s contention was, first, that there were no comparable sales to support the gross realisations figures in relation to the four lots on the eastern side of Coonemia Road, which, as I have earlier described, are in timbered country, and, secondly, that the sales upon which he relied for the western side of Coonemia Road needed considerable adjustment to be comparable.
39. For the four lots on the eastern side of Coonemia Road, Mr Egan relied principally upon a 1992 sale of 48.4 hectares of land at Brundee, which yielded $5,990 per hectare (his sale 3). Mr Austin’s opinion was that the land the subject of that sale was not comparable to the land on the eastern side of Coonemia Road, because it was not timbered but instead the majority of it was good dairy country, although parts were affected by salt and part of it was swamp. He said in his oral evidence that the values ascribed by Mr Egan to the four lots were in his opinion in excess of market value. He compared the four lots to a sale of land at Tomerong (number 1 in his small sales schedule) which was formerly part of a pine forest, and sold in 1996 for $190,000 showing approximately $4,283 per hectare.
40. Mr Egan’s evidence was that, of the nine lots on the western side of Coonemia Road, lots 2 and 3 were the best, and he valued their gross realisation potential at $10,000 per hectare, yielding $400,000 for each one. For those figures he relied on a sale of land at Cambewarra (his sale 1) which yielded $6,303 per hectare, the later resale of the land at Brundee (his sale 4) which yielded $8,264 per hectare and another sale of land at Brundee (his sale 7) which yielded $10,923 per hectare. In relation to the Cambewarra sale, Mr Austin’s evidence was that it was purchased for a specific purpose (a horse stud) and that, although it was affected by a transmission line and a proposed service corridor, it was superior to the Halloran land. Mr Austin’s comments about the later resale of the Brundee land were that it was sold to an adjoining owner and should be discounted on that account, and that it was in any event not comparable to the Halloran land. As to the other sale of land at Brundee, Mr Austin agreed that it yielded approximately $10,000 per acre but thought that it represented the upper value for a rural home site because of its close proximity to Nowra and the fact that it is good cultivation land. It had a sale price of $325,000 (adjusted for improvements) and lots 2 and 3 could not, in Mr Austin’s opinion, be worth more than that figure.
41. In addition to these matters, other matters were raised which cast some doubt upon the reliability of Mr Egan’s valuation exercise. They were as follows:
(a) There was some doubt as to the best method of dealing with lots 4, 5 and 6 in DP 870441 in the “after” situation. Mr Egan relied on Mr Price’s plan, which incorporated all those three lots into one lot, lot 3, in order to deal with low-lying country and problems of access. But in a hypothetical subdivision plan which was prepared by Watkinson Apperley Pty Ltd for Mr Austin, those lots (lots 4, 5, and 6 in DP 870441) were shown as incorporated into two lots, lots 3 and 4, instead of one lot, and Mr Price’s oral evidence was that that was a possible scenario, if access was to be constructed;
(c) Mr Price annexed to his report the estimation of development costs upon which Mr Egan relied. He stated during cross-examination that an allowance should be made for council rates/land tax, as well as an allowance of between 5 per cent to 10 per cent for contingencies. Neither of these allowances were made in Mr Egan’s calculations.(b) Mr Webster, who appeared for the council, argued that Mr Egan’s inclusion of the amount of $32,280 as a hypothetical subdivision expense for a farm track was not permissible, because it was not a cost of subdivision but rather a financial cost which would be incurred by Mr Halloran after the excision of the acquired land in order to gain access to higher land, and that would properly be a financial cost claimable as a loss attributable to disturbance under s 59(f) of the Just Terms Act;
42. All these uncertainties with Mr Egan’s valuation have persuaded me that it is unreliable for the purpose of valuing the acquired land. I mean no disrespect to him when I say that, for he is an experienced valuer. But to adopt his approach has two difficulties which it seems to me are insurmountable. First, I would have to be convinced that the highest and best use of the Halloran land is as a 40 hectare subdivision, which, for the reasons I have earlier set out, I am unable to accept. Secondly, I would need to resolve the matters which I have set out in relation to Mr Egan’s valuation, and endeavour to make some adjustment to it. In my opinion, those matters are too uncertain for me to do so.
43. However, I have noted that the Valuer-General valued the acquired land at $702,000 (as disclosed in the respective valuations of the land owned by Mr Halloran and the land owned by Sealark Pty Ltd which are attached to the respective class 3 applications). I have also noted the valuation of the acquired land (a copy of which was tendered in evidence) which was carried out prior to its compulsory acquisition by Mr P J Howell, who is by profession a valuer and who is an employee and director of Realty Realizations Pty Ltd, a company controlled by Mr Halloran. Mr Howell determined the value of the acquired land at $750,000. Those matters have led me to consider whether any adjustment should be made to Mr Austin’s valuation of the acquired land at $655,000.
44. It seems to me that the value of that part of the land on the eastern side of Coonemia Road of $2,200 per hectare is justified by the sale of land at Huskisson upon which he relied. But I consider that some adjustment is required to the value of $4,000 per hectare in the “before” situation. I think, having considered Mr Austin’s report, his oral evidence and my site inspections, that the sale of the land at Cambewarra (his large rural holding sale 3) is the most comparable, after making adjustments for its superiority, its affectation by a transmission line and a proposed service corridor, and its smaller size. I have noted, in this respect, that Mr Egan also relied upon this sale. Doing the best I can, I consider that its value of $6,300 should be adjusted for the factors I have outlined to a value of $4,500. That is consistent, in my opinion, with the sale of the land at Yerriyong via Nowra (Mr Austin’s large rural holding sale 5) which yielded $4,750 per hectare. In relation to that sale, Mr Austin said in his oral evidence that he reduced the figure of $4,750 to $4,000 mainly because of its smaller size, which seems to me to err on the side of too large an adjustment.
45. Adopting a value of $4,500 per hectare but otherwise accepting the basis of his calculations (including his adjustment downwards by 8.75 per cent of the per hectare value of the land on the western side of Coonemia Road in the “after” situation), Mr Austin’s figures would be adjusted as follows:
“Before” valuation:
Add value of farm business $ 20,000
365.57 ha @ $4,500 = $1,645,065
170 ha @ $2,200 = $ 374,000
$2,019,065
Say $2.039 million
$2,039,065
“After” valuation:
Add value of farm business $ 20,000
219.47 ha @ $4,100 = $ 899,827
170 ha @ $2,200 = $ 374,000
$1,273,827
Say $1.3 million
$1,293,827
Loss in Value = $739,000
46. For these reasons and having regard to the adjustments I have made, I propose to adopt a value of $740,000 in respect of the acquired land.
Betterment
Why betterment is an issue
47. For convenience, I repeat that s 55 of the Just Terms Act provides that, in determining the amount of compensation, regard must be had to any increase in the value of any other land of the person entitled to compensation which adjoins the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the acquired land was acquired (s 55(f)).
48. Mr Halloran and Sealark Pty Ltd own land at Callala Bay, which is part of an area which I will call “the Callala Bay extension”. There is no issue that the Callala Bay extension is to be regarded, for the purpose of s 55(f), as adjoining land. Clause 16 of the Jervis Bay Regional Environmental Plan 1996 (“REP 1996”) provides that “Any new land releases for urban development should be located in the areas indicated on map 4” . Map 4 delineates “Opportunities for urban development” one of which is the Callala Bay extension. Under cl 11 of the REP, any proposal to develop the Callala Bay extension must provide for sewerage. The STP has the capacity to provide sewage disposal for the Callala Bay extension.
49. (It must be kept in mind that REP 1996 does not rezone the Callala Bay extension for residential development, nor does the mere construction of the STP effect such a rezoning. That can only be effected through the promulgation of a local environmental plan. What REP 1996 does is to identify the Callala Bay extension as “an urban opportunity” and I have used that expression throughout this judgment).
50. Because of the circumstances I have outlined, Mr Austin carried out a “before” and “after” valuation of the Callala Bay extension, and concluded that the overall betterment was $3,000,000 and that, consequently, the value of the acquired land is extinguished, and the compensation payable to the claimants is “nil”.
51. Before considering in detail Mr Austin’s betterment valuation and Mr Egan’s criticisms of it, there are two matters which need to be addressed. First, it is necessary to recount some of the history of planning proposals in relation to the Callala Bay extension in order to determine the extent to which a rezoning of that land for urban development is likely, and secondly, it is necessary to consider the question of precisely how much of the Callala Bay extension will in fact be so available if rezoning takes place.
The planning history
52. Evidence about this matter was given by Mr Howell, who has been employed by Realty Realizations Pty Ltd for about 25 years.
53. Evidence was also given by Mr E J Royston, who is the planning services manager for the council, and by Mr P A Mitchell, a consultant town planner, of ERM Mitchell McCotter Pty Ltd.
54. A massive number of documents were provided by Mr Howell to support his claim that rezoning of the Callala Bay extension is unlikely to occur. It is unnecessary to refer to them in any detail, and it will be sufficient to note the following chronology:
(a) During the 1980’s the National Parks and Wildlife Service (“NPWS”) had expressed an interest in the conservation and preservation of lands surrounding Jervis Bay, including the Callala Bay extension (the whole area being referred to as “the area of interest”);
(b) One of the options which the NPWS had put forward was a referencing of the area of interest under the National Parks and Wildlife Act 1974. However, in 1989, the referencing of the area of interest was disallowed by the Director of the NPWS on the basis of cost. In a letter to the Department of Planning which appears to have been written at some time in July 1989, the NPWS referred to “sympathetic zoning” as one of a number of measures to protect the natural values of the area of interest;
(c) In 1992, a discussion paper (“the 1992 discussion paper”) prepared by the Department of Planning and the council and entitled “Our Heritage Our Future” was released. In a section on p 47 entitled “Developing a Management Strategy”, the 1992 discussion paper identified three possible locations for “limited urban expansion when the need arises” . One of those included the Callala Bay extension, delineated on the attached map 18. The discussion paper went on to state that “[A] full environmental planning assessment will need to be undertaken in each location” ;
(d) In 1996 the REP to which I have previously referred was made;
(f) The Commission of Inquiry provoked a report by the NPWS in August 1997 (“the 1997 Regional Assessment”) entitled “A Regional Assessment of the Natural Heritage Values of the Proposed Culburra Urban Expansion Area and its Environs”. The 1997 Regional Assessment was conducted in order to assess the comprehensiveness, adequacy and representativeness of the proposed Jervis Bay National Park, but it considered the conservation values of a broader area, which included the Callala Bay extension. Its conclusion, on p 45, was that the protected area (within the Jervis Bay National Park) “generally encompasses a comprehensive, adequate and representative sample of the nature conservation values” in the area under assessment. The conclusion on p 45 relevantly went on to provide as follows:(e) In October 1996, a Commission of Inquiry was held in relation to the environmental aspects relevant to a development application in respect of land at Culburra owned by Mr Halloran;
There are, however, some exceptions where vegetation communities of regional conservation significance occur outside the protected area. These sites are situated on Map 12.
… A range of amelioration measures should also be considered in applying the protection recommended above, including … environmental protection zoning…”The vegetation communities considered to be of high regional conservation significance within the study area, and most in need of protection are 3.2 and 3.8. These should be protected through Local Government Planning instruments …
Map 12 shows an area within the Callala Bay extension as being of medium regional conservation significance.
(The figures 3.2 and 3.8 refer to vegetation communities, being “forest - woodland” and “shrubland - heathland” respectively).
(h) No urban strategy or local environmental study for the Callala Bay extension had been prepared as at the date of acquisition of the acquired land (nor has it yet been prepared).(g) In 1997, the government released the NSW Coastal Policy. One of its “key themes” on p 12 refers to “… the need for councils to prepare urban … strategies in order that the ecological carrying capacity of coastal areas can be considered prior to making decisions to allocate new land for urban … development” . The Coastal Policy notes on p 25 that a direction was issued under s 117 of the Environmental Planning and Assessment Act 1979 which requires local councils to take account of the Coastal Policy in the preparation of local environmental planning instruments. Such instruments are to be consistent with the Coastal Policy and local environmental studies must accompany rezoning applications for land within the coastal zone.
55. Mr Howell contended that this chronology and the various documents which he produced amounted to “an underlying scheme of acquisition of the Jervis Bay National Park in all its elements” , and that, having regard to these matters, a prudent but not over-anxious hypothetical purchaser would have grave doubts about whether any of the land in the Callala Bay extension would ever be rezoned so as to permit urban development. His opinion was that such a purchaser would conclude that the Callala Bay extension or at least a large part of it would be rezoned for environmental protection.
56. In cross-examining Mr Howell, Mr Webster sought to cast some doubt upon his opinion by reference to a conservation and development “vision” study carried out for Mr Howell by Mr P Annand in October 1997, and an economic report prepared under Mr Howell’s instructions by A T Cocks and Partners Pty Ltd. Mr Webster questioned Mr Howell about his instructions to both those consultants, suggesting that his instructions did not reflect his opinion that the Callala Bay extension would never be rezoned so as to permit urban development. But Mr Howell remained unshaken in his belief, and I accept his explanation that his instructions to those consultants was to provide strategic material to influence government decision-making (although apparently never used for that purpose).
57. Both Mr Royston and Mr Mitchell placed considerable emphasis on REP 1996 as indicating urban opportunity in the Callala Bay extension, Mr Royston explaining that the REP is a “whole of government approach” rather than the discrete approach of the NPWS. Furthermore, Mr Royston interpreted the 1997 Regional Assessment as having no effect upon the Callala Bay extension, since it recommended environmental protection zoning only in relation to areas of high (as distinct from medium) conservation significance. However, both experts acknowledged the need for further environmental study of the Callala Bay extension, and Mr Royston acknowledged that no such study has been done. Mr Royston estimated that four to five years would be a reasonable time to allow for such study to be completed.
58. Dr S J Ambrose is a senior ecologist with ERM Mitchell McCotter Pty Ltd, and he prepared that part of its report which dealt with the environmental significance of the Callala Bay extension.
59. In his report he indicated that the conservation value of the wetland and bushland areas within the Callala Bay extension was not uniform, but ranged from potentially high conservation value to low conservation value. In giving oral evidence, he said that the 1997 Regional Assessment was of a more broad scope, and that, to establish the full conservation value of the Callala Bay extension, individual components of the area would have to be considered. He said that the Callala Bay extension is a sensitive area, and detailed surveys would need to be undertaken before any development took place within it.
60. Taking into account all the matters which I have set out, I find that a hypothetical purchaser in possession of all the available documentation and information would be likely to conclude that:
(a) rezoning of the Callala Bay extension might never take place;
(b) the Callala Bay extension has not been identified as suitable only for zoning as environmental protection, but the NPWS is likely ultimately to hold that view;
(d) the identification of the Callala Bay extension in REP 1996 as an urban opportunity and the construction of the STP are simply steps in the rezoning process, and that the matters mentioned in par (b) and par (c) above are significant matters to take into account in assessing the likelihood of a rezoning for urban development.(c) the full conservation value and environmental significance of the Callala Bay extension has not yet been established, and further detailed studies are required (as a consequence of the requirement for an urban strategy and pursuant to the Coastal Policy);
61. I conclude that the hypothetical purchaser would consider that there was a considerable risk involved in relation to development of the Callala Bay extension, and would take that risk into account in the price he or she would be willing but not anxious to pay for that land. Furthermore, the hypothetical purchaser would take into account that, even if there was an eventual rezoning, it would be likely to be many years before the urban strategy and/or environmental studies had been done, certainly more than five years.
The precise area available
62. Evidence as to the area of the Callala Bay extension which could, on the face of it, be released for urban development was given by Mr Price, Mr Royston and Mr Mitchell. All three experts agreed that, in order to determine precisely how much of the Callala Bay extension should be regarded as an urban opportunity under REP 1996, some adjustment must be made to its total area in order to account for wetlands, buffer zones and other relevant matters.
63. Mr Royston prepared a map upon which he delineated a wetland and buffer area, and he noted the remaining area as being an urban opportunity having a total of 154 hectares. Mr Mitchell prepared a map upon which he noted four areas as being unavailable for urban development - areas of forest to be maintained, areas of non-viable forest vegetation, proposed areas of forest rehabilitation and an area requiring runoff control. He concluded that the area of urban opportunity was 159 hectares.
64. Considerable doubt about these estimates was raised by Mr Price’s evidence. His initial plan indicated that the total Callala Bay extension was 280 hectares. Of that, he delineated 131.5 hectares as wetland buffer and scenic buffer to roads, 48.5 hectares as heritage vegetation, 4.5 hectares as a drainage easement required through the adjacent national park, and 95.5 hectares as the remaining area available for an urban release opportunity. Without resiling from that estimate, Mr Price re-assessed Mr Royston’s plan, and estimated that, on that plan, the total area of urban opportunity was 148.8 hectares and not 159 hectares.
65. However, Mr Price’s evidence also raised another issue. The majority of the Callala Bay extension is owned by Mr Halloran personally, but 1.8 hectares is owned by Sealark Pty Ltd, and 33.3 hectares (comprising one part of 12.7 hectares and another part of 20.6 hectares) is owned by Exchanges Pty Ltd. It appears that, like Sealark Pty Ltd, Exchanges Pty Ltd is a company ultimately fully owned by Mr Halloran. The question then is whether the corporate veil should be lifted in relation to Exchanges Pty Ltd (since it is not a claimant for compensation); that is, whether or not the separate corporate entities should be ignored so that the area under the ownership of Exchanges Pty Ltd is to be included in that part of the Callala Bay extension which is an urban opportunity. If it was to be so included, the area of urban opportunity would be either 154 hectares (on Mr Royston’s estimate) or 148.8 hectares (on Mr Price’s adjustment of Mr Royston’s estimate). However Mr Price’s preferred calculation of 95.5 hectares appears to exclude the majority of the Exchanges Pty Ltd land.
66. I take note of the fact that Mr Price is a surveyor, and I think that his estimates should be given the greater weight. Furthermore, the evidence about the areas to be included as an urban opportunity took on an air of unreality, culminating in a set of plans and figures tendered on behalf of the council (ex 27) which contained numerous figures and handwritten adjustments. That exhibit was tendered at the close of the evidence, and it was not the subject of any evidence from any of the experts. On the other hand, Mr Price’s estimate of 95.5 hectares was certain, was based on his surveying expertise, and he did not resile from it despite endeavouring to make calculations on the plan prepared by Mr Royston. I accept, therefore, that Mr Price’s estimate is the correct one.
67. I do not consider that there is any justification for lifting the corporate veil, and including the land of Exchanges Pty Ltd in the assessment of the land available as an urban opportunity. There is English authority where the corporate veil has been lifted in a case of compulsory acquisition ( DHN Food Distributors Ltd and Ors v London Borough of Tower Hamlets (1976) 3 All ER 462) but that case was expressly not followed by Gobbo J in Mario Piraino Pty Ltd v Roads Corporation (No 2) (1993) 1 VR 130. However, more importantly, there is simply not enough evidence before the Court to justify such a step. Mr Howell’s evidence was that Exchanges Pty Ltd is part of a corporate group ultimately owned by Mr Halloran, but the precise relationship between Mr Halloran and the companies in the group was not the subject of evidence. This dearth of evidence also makes it impossible to find that there is a relationship between them which would constitute some sort of agency, as Mr Webster urged the Court to find.
68. Nor would I be prepared to include the land of Exchanges Pty Ltd in the valuation exercise, simply because lands owned by Mr Halloran and Sealark Pty Ltd have been considered together. Sealark Pty Ltd is a party to the proceedings, as a claimant for compensation, and, in any event, in both the Halloran land and the Callala Bay extension, its proportionate holding is small.
69. For all these reasons, I find that the land available as urban opportunity within the Callala Bay extension is 95.5 hectares.
70. That finding has an impact upon Mr Austin’s valuation of the Callala Bay extension. Mr Austin proceeded initially on the assumption that the total area was 330 hectares. He reviewed that assumption, and provided a further valuation based on 154 - 159 hectares. Further adjustment would need to be made if the area available was only 95.5 hectares.
Does s 55(f) apply?
71. Whatever the precise area of urban opportunity, it is clear that the whole of the Callala Bay extension is not so available, and hence the value of the Callala Bay extension as a whole cannot be affected by the construction of the STP.
72. Mr Robson submitted that, in those circumstances, the respondent, which bears the onus of establishing betterment, must fail in discharging that onus. He contended that, on its proper construction, s 55(f) requires regard to be had to the whole of the adjoining land, not part of it. For example, he said, s 55(f) could not apply if the value of a mere cricket pitch had been increased or decreased by reason of the carrying out of the public purpose for which land was acquired. Taken at its highest and without conceding the point, Mr Robson said that the evidence establishes only that the value of some part of the Callala Bay extension might be increased by reason of the STP.
73. I reject that submission. In my opinion, it is not borne out by the language of s 55(f). That subsection refers to “any other land” of the person entitled to compensation, and the only qualification is that the “other land” must be adjoining or severed from the acquired land. There is nothing in the language of s 55(f) which would justify a further qualification relating to the whole rather than part of the “other land ”. Nor can I discern any legislative intention from the purpose of the Just Terms Act which would justify such a construction. The purpose of the Just Terms Act is, as s 3 states, to guarantee that compensation will be not less than market value, and to ensure compensation “on just terms” for the owners of acquired land. That purpose suggests that a liberal construction is required. In some cases, the application of s 55(f) might result in a disadvantage to the person entitled to compensation; in other cases, it might result in an advantage. It will be no less just whether it results in an advantage or disadvantage. In this case, the possibility was (depending upon the proper valuation of the Callala Bay extension) that the application of s 55(f) might result in a detriment to the applicants, but that does not warrant a special construction of the subsection. To do so would, on the one hand, confuse the proper interpretation of the subsection with, on the other hand, its application to the particular facts, and that is not a basis for statutory interpretation. For these reasons, I consider that s 55(f) does apply to that part of the Callala Bay extension available as an urban opportunity. Whether, however, the construction of the STP will result in an increase in value of that part of the Callala Bay extension depends upon the valuation evidence.
The valuation of the Callala Bay extension
74. Mr Austin carried out a “before” and “after” valuation of the Callala Bay extension (on the basis of 154 - 159 hectares being available as an urban opportunity). He determined the “before” value as $2,301,000 and the “after” value as $3,445,457, yielding an increase in value, or betterment, of approximately $1,150,000. This figure, of course, exceeds the value of $655,000 which Mr Austin had determined for the acquired land, and hence Mr Austin concluded that the compensation to which the applicants were entitled for the acquired land was “nil”.
75. The first major difficulty with Mr Austin’s valuation is the area of land which he took into account. As I have said, I accept Mr Price’s evidence that the area of the Callala Bay extension available for an urban opportunity is approximately 95.5 hectares. Mr Egan prepared an adjustment of Mr Austin’s “after” valuation on the basis of 955 lots instead of 1540 lots, and, applying Mr Austin’s assessment of a deferral for five years at 15 per cent, derived an after value of $1,736,389. That “after” value is less than Mr Austin’s “before” value, and shows that no betterment occurs, that is, there is no increase in value of the Callala Bay extension presuming it is rezoned for urban development.
76. A further difficulty is the question of the risk that the Callala Bay extension might never be released for urban development. Mr Austin conceded in cross-examination that he had not allowed for that risk. A further uncertainty is whether a period of five years deferral is appropriate, having regard to the fact that any local environmental plan rezoning the Callala Bay extension must be preceded by the urban strategy and appropriate environmental study. Mr Austin allowed a period of five years only. Adjustments to take account of these risks would indicate that no betterment occurs.
77. I have concluded from these matters that there will be no increase in the value of the Callala Bay extension by reason of the construction of the STP and that, accordingly, no issue of betterment under s 55(f) arises.
Orders
78. In accordance with the foregoing, my orders are as follows:
(1) Compensation under the Land Acquisition (Just Terms Compensation) Act 1991 in respect of the compulsory acquisition of lot 1 in DP 870441 is determined in the amount of $740,000 together with an additional amount reflecting reasonable legal costs and valuation fees in terms of s 59(a) and s 59(b) of that Act.
(2) The amount of reasonable legal costs and valuation fees is determined in the amount agreed between the parties or, failing agreement, as determined by the Court following any further submissions.
(4) The exhibits may be returned.(3) T he amount of compensation is to be apportioned between Warren Halloran and Sealark Pty Ltd in the same proportion as the respective areas of lot 1 in DP 870441 which they owned prior to the compulsory acquisition bear to the total area of lot 1 in DP 870441.
1
3
1