Hammock Investments Pty Ltd v Valuer General of New South Wales - [2024] NSWLEC 1673

Land and Environment Court

New South Wales

Medium Neutral Citation: Hammock Investments Pty Ltd v Valuer General of New South Wales [2024] NSWLEC 1673
Hearing dates: 1, 2, 3, 4, 5 July and 28 August 2024
Date of orders: 24 October 2024
Decision date: 24 October 2024
Jurisdiction: Class 3
Before: Peatman AC
Decision:
The Court orders that in Proceedings nos 2023/291800 and 2023/291801:
(1) The appeals are upheld.
(2) The Valuer-General’s decision dated 18 July 2021 disallowing the Applicant’s objection to the Valuer-General’s valuation of Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the valuing year 2021 is revoked.
(3) The Valuer-General’s decision dated 18 July 2021 only allowing in part the Applicant’s objection to the Valuer-General’s valuation of Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the valuing year 2022 is revoked.
(4) The value of the land being Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the Land Valuation Year 2021 is $810,000.
(5) The value of the land of Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the Land Valuation Year 2022 is $810,000.

Catchwords:
VALUATION OF LAND – appeal against valuations by Valuer-General – s 6A of Valuation of Land Act 1916 (NSW) – determination of land value – upzoning timing - constraints

Legislation Cited:
Environmental Planning and Assessment Act 1979, s 9.1
Land and Environment Court Act 1979, ss 19, 39
Valuation of Land Act 1916, ss 6A, 29, 37, 40
Byron Local Environmental Plan 2014, cll 2.1, 2.2, 4.2A, 5.21, 5.22, 6.8

Cases Cited:
Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410
Arcus Shopfitters Pty Ltd v Western Australian Planning Commissioner [2002] WASC 174; (2002) 125 LGERA 180
Attard v Transport for NSW (2014) 205 LGERA 396; [2014] NSWLEC 44
Barkat v Roads and Maritime Services [2019] NSWCA 240
Bone v Wallalong Investments [2012] NSWSC 137
Buhach v Transport for New South Wales [2022] NSWLEC 148
Chircop v Transport for NSW [2014] NSWLEC 63
Coundrelis v Roads and Traffic Authority of (NSW) [2008] NSWLEC 72
DBW Reynolds Pty Ltd as trustee for the DBW Reynolds Family Trust v Public Transport Authority [2023] WASC 165
De Ieso v Commissioner of Highways (1981) 47 LGRA 412; (1981) 27 SASR 248
Everest Project Developments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 and Another (2010) 177 LGERA 43; [2010] NSWLEC 88
Gajapatiraju v Revenue Divisional OfficeVizagapatam (1939) AC 302
Graham Trilby Pty Ltd v Valuer General [2009] NSWLEC 1087
Graham Trilby Pty Ltd v Valuer-General [2008] NSWLEC 217
Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68
Housing Commissioner (NSW) v Falconer [1981] 1 NSWLR 547
Jameson v Rail Corporation (NSW) [2014] NSWLEC 83
Kelliher v Commissioner for Main Roads (No 2) [2015] WASC 478
Kenny & Good Pty Ltd v MGICA (1992) Ltd 199 CLR 413; [1999] HCA 25
Kogarah Town Centre Pty Ltd v Valuer General (No 3) [2014] NSWLEC 1124
Leichhardt Council v Roads & Traffic Authority (NSW) (2006) 149 LGERA 439; [2006] NSWCA 353
Limina Holdings Pty Ltd ITF Galileo Superannuation Fund v Valuer General of New South Wales [2019] NSWLEC 110
Marroun v Roads and Maritime Services [2012] NSWLEC 199
McBride v MidCoast Council [2021] NSWLEC 100
McKay v Commissioner of Main Roads (No 7) [2011] WASC 233
New South Wales Cremation Company Pty Ltd v Valuer-General [2016] NSWLEC 135
Norwest City Pty Ltd ATF Norwest City v Valuer General [2018] NSWLEC 50
Olefines Pty Ltd v Valuer-General of New South Wales (2018) 228 LGERA 407; [2018] NSWLEC 18
Panori Pty Ltd atf Sleiman Property Trust v Valuer General [2023] NSWLEC 116
Park v Allied Mortgage Corporation Ltd (Federal Court of Australia, 5 July 1995, unrep)
Parramatta City Council v Valuer-General and Another (1965) 10 LGRA 160
Perisher Blue Pty Ltd as Trustee for the Snow Trust v Valuer General (NSW) [2023] NSWLEC 41
Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151
Riverbank Pty Ltd v Commonwealth (1974) 48 AJLR 483
Royal Sydney Golf Club v Commissioner of Taxation (Cth) (1957) 97 CLR 379; [1957] HCA 31
Sales and Ors v Transport for NSW (No 2) [2021] NSWLEC 96
Secretary to the Department of Economic Development, Jobs, Transport & Resources v Manor Lakes (Werribee) Pty Ltd (2017) 224 LGERA 195; [2017] VSCA 114
Spicer v Valuer-General (1963) 10 LGRA 319
Tenstat Pty Limited v Valuer General, Woolworths Limited v Valuer General [2012] NSWLEC 1361
Trandos v Western Australian Planning Commission [2001] WASCA 346; (2001) 117 LGERA 256 [73]
Trust Company of Australia Ltd v Valuer-General (2007) 154 LGERA 437; [2007] NSWCA 181
Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7
Vilro Pty Ltd v Roads and Traffic Authority (NSW) (2010) 179 LGERA 47; [2010] NSWLEC 234
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5
Warwick Farm Central Pty Ltd v Valuer General [2024] NSWLEC 25
Willis v Roads and Maritime Services(NSW) [2015] NSWLEC 165
Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47

Texts Cited:
Byron Shire Coastal Hazards Assessment Update 2013
Byron Shire Development Control Plan 2014
Byron Shire Residential Strategy 2020
Byron Shire Residential Strategy 2041
Floodplain Development Manual 2005
North Coast Regional Plan 2036

Category: Principal judgment
Parties: Hammock Investments Pty Ltd ACN 003 240 551 (Applicant)
Valuer General of New South Wales (Respondent)
Representation:
Counsel:
H El-Hage SC, with T Poisel (Applicant)
R White (Respondent)
Solicitors:
Otto Martiens Lawyers (Applicant)
Crown Solicitor’s Office of NSW (Respondent)

File Number(s): 2023/291800 and 2023/291801
Publication restriction: No

Judgment

COMMISSIONER: Hammock Investments Pty Ltd (Applicant) as registered proprietor of Lot 350 in Deposited Plan 755695 located at Lot 350 Ewingsdale Road Byron Bay (Land) has appealed the land valuations by the Valuer-General of New South Wales (Respondent) pursuant to s 37(1) of the Valuation of Land Act 1916 (VL Act) for the base dates 1 July 2021 and 1 July 2022.
Pursuant to s 6A of the VL Act, the Respondent determined the land value of the Land in the following amounts:

1 July 2021 $5,910,000; and

1 July 2022 $6,000,000 (Having upheld the Applicant’s objection and reducing the Land Value from $8,300,000). [1]
1. Ex A Court Book (CB), Tab 4 pp 105-106.

The Applicant contends that the Land value for the relevant periods should be:

1 July 2021 $760,000; and

1 July 2022 $760,000.

On 12 January 2023, the Applicant received two land tax assessment notices containing land values for the Land in the amount of $5,910,000 for the base date of 1 July 2021 (2021 Valuation Year) and $8,300,000 for the base date of 1 July 2022 (2022 Valuation Year). [2] On 1 March 2023 the Applicant appealed both land values. [3]
2. Ex A CB, Tab 1 pp 36-39 and Tab 4 pp 71-74.
3. Ex A CB, Tab 1 pp 40-43 and Tab 4 pp 75-104.
By two letters dated 18 July 2023, the Respondent disallowed the Applicant’s objection in respect of the 2021 Valuation Year confirming the land value of $5,910,000, but the Respondent allowed the Applicant’s objection in respect of the 2022 Valuation Year amending the land value to $6,000,000. [4]
4. Ex 4 CB Tab 1 pp 44-45 and Tab 4 pp 105-106.
Any person to whom a notice of valuation was given (relevantly in this case, the owner of the site) has the right to make a written objection to that valuation. In these instances, the notices of valuation were contained in land tax assessments. This right is contained in s 29(3A) of the VL Act. It is the making of an objection to the valuation pursuant to this provision that commences the statutory chain that can result in this Court acting as a judicial valuer to determine what should be the final outcome of such an objection. [5]
5. Kogarah Town Centre Pty Ltd v Valuer General (No 3) [2014] NSWLEC 1124 at [53] (Kogarah).
These proceedings fall within Class 3 of the Court’s jurisdiction pursuant to s 19 of the Land and Environment Court Act 1979 (LEC Act).
The Applicant appealed against the land values pursuant to s 37(1) of the VL Act on 13 September 2023 as follows:

Proceedings No 2023/291800 for the 2021 Valuation Year; and

Proceedings No 2023/291801 for the 2022 Valuation Year.

On 20 June 2024 the Court ordered that Proceedings No 2023/291800 be heard concurrently with Proceedings No 2023/291801, and that evidence in one set of proceedings where relevant be evidence in the other proceedings.
The Land has an area of 15.17ha and is located on the corner of Ewingsdale Road and Kendall Street, Byron Bay, which is a short distance from Belongil Beach and approximately 1km to the west of the Byron Bay town centre. The Land is located in the Byron Bay Local Government Area. The Byron Bay solar train extends along the northern boundary. The Land is situated below the level of Kendall Street and extends west through predominantly grassed, slightly undulating flats, then vegetated land extending to Belongil Creek which forms the western boundary. The Land is vacant. [6]
6. Ex 4 CB Tab 2 p 48.
Surrounding development comprises of residential and tourist development to the north (on the opposite side of Kendall Street), mixed residential and tourist development to the east, including R3 Medium Density zoned land, and predominantly residential development to the south-east. Byron Bay Discovery Tourist Park is located to the west on the opposite side of Belongil Creek. Land to the south, on the opposite side of Ewingsdale Road is predominantly vegetated. A Woolworths Service Station exists to the south-east on the south eastern corner of Ewingsdale Road and Kendall Street. [7]
7. Ibid.
There are no services connected to the Land, however, Byron Shire Council (Council) have advised that a water main extends along the near side of Kendall Street and a sewer rising main extends along the eastern side of Kendall Street. Overhead power lines extend along Ewingsdale Road frontage and along the eastern side of Kendall Street. [8]
8. Ibid.
Byron Local Environmental Plan 2014 (BLEP 2014) applies to the Land, and pursuant to cll 2.1 and 2.2, and the Land Zoning Map, the land:

In the 2021 Valuation year was zoned:

RU2 Rural Landscape;

Part E3 Environmental Management; and

Part E3 Environmental Conservation.

In the 2022 Valuation year was zoned:

Zone RU2 Rural Landscape;

Zone C2 Environmental Conservation; and

Zone C3 Environmental Management.

Ex B: Evidence Book, Tab 2, p 62 (Figure 8 in Mr Svikis’s Report: Land Use zones in BLEP 2014 for 2022 Valuation Year (source: NSW Planning Portal)

Issues

The key issues for determination are:

Has the Applicant discharged its onus of proving its case that the Land Value for 2021 and/or 2022 is too high?

In particular:

What price a hypothetical willing seller could obtain for the Land as at the 2021 and 2022 Valuation Years? Or, put another way, ‘What is the most profitable potential use of the Land?’.

What price would a hypothetical buyer pay for the Land as at the 2021 and 2022 Valuation Years?

If part of the Land (meaning Area 10 adjacent to Kendall Street) had a real prospect of being rezoned for residential development within ten years, is the secondary deferred direct comparison approach appropriate and, if so, what sales and adjustments are appropriate as at the relevant dates for the 2021 and 2022 Valuation Years?

Legislation and the law

Valuation of Land Act 1916

6A Land Value

(1)     The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.
(2)     Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that—
(a)  the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and
(b)  such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used,
but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made.

…

40 Powers of Land and Environment Court on appeal

(1) On an appeal, the Land and Environment Court may do any one or more of the following—
(a)  confirm or revoke the decision to which the appeal relates,
(b)  make a decision in place of the decision to which the appeal relates,
(c)  remit the matter to the Valuer-General for determination in accordance with the Court’s finding or decision.

(2) On an appeal, the appellant has the onus of proving the appellant’s case.

Pursuant to s 40(2) of the VL Act, the Applicant bears the onus of proving its case. This is said to mean that the Applicant must establish that the issued land value is too high. [9]
9. Warwick Farm Central Pty Ltd v Valuer General [2024] NSWLEC 25 (Warwick Farm) at [31] per Pritchard J; Perisher Blue Pty Ltd as Trustee for the Snow Trust v Valuer General (NSW) [2023] NSWLEC 41 (Perisher) at [76], [86] per Duggan J; Panori Pty Ltd atf Sleiman Property Trust v Valuer General [2023] NSWLEC 116 at [119] per Duggan J; Olefines Pty Ltd v Valuer-General of New South Wales (2018) 228 LGERA 407; [2018] NSWLEC 18 at [151]-[152] per Molesworth AJ; Norwest City Pty Ltd ATF Norwest City v Valuer General [2018] NSWLEC 50 (Norwest) at [6] per Moore J.
The Court acts as a judicial valuer. [10]
10. Warwick Farm at [3], [37]; Norwest at [136]; Kogarah at [53], [71].
If I, as judicial valuer, determine that the relevant land has a land value of less than the amount determined by the Valuer-General, this onus will be discharged. If the Applicant does not discharge its onus, the appeal must be dismissed and the issued Land Value for 2021 and 2021 stands. [11]
11. Kogarah at [77] per Moore SC and Brown C.
The Court is not confined to accepting the case of one party or the other party and may use the evidence adduced in the proceedings or draw on the experience of the Court to make its own assessment. [12]
12. Warwick Farm at [37]; Barkat v Roads and Maritime Services [2019] NSWCA 240 (Barkat) at [19] per Emmett AJA (with Leeming JA and Simpson AJA agreeing); Leichhardt Council v Roads & Traffic Authority (NSW) (2006) 149 LGERA 439; [2006] NSWCA 353 (Leichhardt) at [83] per Spigelman CJ (29th Bryson and Basten AJA and Campbell J agreeing).
In the absence of available market evidence, the Court must use its best endeavours in light of the evidence and its experience, and make the best guess. [13]
13. Barkat at [21]; Jameson v Rail Corporation (NSW) [2014] NSWLEC 83 at [65] per Pain J.
The task under s 6A of the VL Act is to determine the land value of the fee simple in its unimproved state by assuming improvements (other than land improvements) have not been made. In the present case, the Land has no improvements.
Section 6A(1) also requires the postulation of a notional sale which is assumed to take place in a market and the seller would conclude the sale for the highest price it could obtain in that market. [14]
14. Trust Company of Australia Ltd v Valuer-General (2007) 154 LGERA 437; [2007] NSWCA 181 at [32] per Campbell JA (with Beazley and Ipp JJA agreeing); Spicer v Valuer-General (1963) 10 LGRA 319.
For the purposes of that notional sale, value is determined by[15] :

Forming an opinion as to what a willing purchaser will pay and a not unwilling vendor will receive for the property. In determining that value, there must be attributed to the parties a knowledge of all matters that affect its value;

Supposing both the seller and the purchaser to be perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property; and

Assuming an efficient market in which buyers and sellers have access to all currently available information that affects the property.
15. Kenny & Good Pty Ltd v MGICA (1992) Ltd 199 CLR 413; [1999] HCA 25 (Kenny & Good) at [49]-[51] per McHugh J.

The value of the land is to be determined on the basis of the highest and best use of the land. [16]
16. Barkat at [20]; Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7 at p 283.
There is no explicit recognition in the VL Act of the highest and best use of the land concept, but the Australian Property Institute considers it to be “the use of the property that maximizes its potential which is physically possible, legally permissible, and financially feasible”. [17]
17. Limina Holdings Pty Ltd ITF Galileo Superannuation Fund v Valuer General of New South Wales [2019] NSWLEC 110 (Limina) at [91] per Sheahan J.
The Court should approach the task by determining what was the ‘most profitable potential use’ of the land[18] having regard to planning and all other relevant factors affecting its present and future potential. [19]
18. Barkat at [20]; Vilro Pty Ltd v Roads and Traffic Authority (NSW) (2010) 179 LGERA 47; [2010] NSWLEC 234 at [17] per Pain J.
19. Willis v Roads and Maritime Services (NSW) [2015] NSWLEC 165 at [24]; Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 at [415] per Jacobs J.
The value of the land is determined by ascertaining what a willing purchaser would pay and what a not unwilling vendor would receive for the property. [20]
20. Kenny & Good at [49]; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 at [276]; Coundrelis v Roads and Traffic Authority of (NSW) [2008] NSWLEC 72 (Coundrelis) at [9] per Biscoe J.
The parties to the hypothetical sale are assumed to be “fully informed” and to make “all proper enquiries”. [21]
21. Barkat at [20]; Everest Project Developments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 and another (2010) 177 LGERA 43; [2010] NSWLEC 88 at [58] per Sheahan J (Everest).
The land must be valued at the relevant date in its existing condition with all its potentialities as potentialities. [22]
22. Barkat at [20]; Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at [175]-[176]; (1991) 73 LGRA 47 at [65-66] citing Gajapatiraju v Revenue Divisional Office Vizagapatam (1939) AC 302 at [313] and Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7 at [268]-[289]; Royal Sydney Golf Club v Commissioner of Taxation (Cth) (1957) 97 CLR 379; [1957] HCA 31; Coundrelis at [9].

In considering the potentialities of the relevant land, the valuer may take into account not only the present use to which the land is applied but any more beneficial use to which it may reasonably be applied. [23] This exercise is underpinned by concepts of feasibility, realism, practicality and reasonableness reviewed in the context of all the ‘circumstances’ of the land. [24] However, consideration must only be given to ‘realistic options’[25] , and remote and speculative possibilities are to be disregarded. [26]
23. Park v Allied Mortgage Corporation Ltd (Federal Court of Australia 5 July 1995, (unrep) at p 32 per Hill J.
24. Limina at [113].
25. Limina at [116].
26. DBW Reynolds Pty Ltd as trustee for the DBW Reynolds Family Trust v Public Transport Authority [2023] WASC 165 at [71(x)] per Martin J.

Any future beneficial use must be assessed as follows:

The onus is on:

“the person or authority seeking to establish a value based upon some different use from that which is authorised by the restrictions the burden of showing the practicability or reasonableness of the land being devoted to some such use: and needless to say, this extends to showing the probability of some relaxation or variation of the scheme and the means by which that is likely to be achieved” (Parramatta City Council v Valuer-General and Another (1965) 10 LGRA 160, Else-Mitchell J at 168-169).

In Kelliher v Commissioner for Main Roads (No 2) [2015] WASC 478 (Kelliher) Pritchard J held at [105] that the concept of highest and best use requires that the valuation take into account the potential of the land to be used for that more profitable use (after necessary planning approval); and at [106] in the context of a question about the prospects, at the date of valuation, of future planning permission being given for a particular (more profitable) use, it is well established that the question is to be approached objectively, by reference to orderly and proper planning, not subjectively by reference to the likelihood of particular decision-makers approving the contemplated future use: McKay v Commissioner of Main Roads (No 7) [2011] WASC 233 at [307] (Beech J), citing Trandos v Western Australian Planning Commission (2001) 117 LGERA 256; [2001] WASCA 346 at [73] (Anderson J, Wheeler J & Einfeld AJ agreeing); see also De Ieso v Commissioner of Highways (1981) 47 LGRA 412; (1981) 27 SASR 248 at [253] (Wells J).

In Secretary to the Department of Economic Development, Jobs, Transport & Resources v Manor Lakes (Werribee) Pty Ltd (2017) 224 LGERA 195; [2017] VSCA 114, the Victorian Court of Appeal observed at [40] that:

“In the event that the potential requires the implementation under a planning scheme of regulatory change or the construction of public services such as a main sewer, urban water supply or road link, it will be necessary for the valuer to take into account the risks and contingencies affecting the realisation of the potential which gives the land its market value.”

In Limina, Sheahan J held that the ‘real world’ complications with the site overwhelmed the Valuer-General’s opinion and hypothesis in that case. [27]
27. Limina at [116].

It is well established that, if comparable sales are available, the direct comparison of sales evidence approach is the conventional method of valuation. [28]
28. Sales and Ors v Transport for NSW (No 2) [2021] NSWLEC 96 at [191] per Robson J; New South Wales Cremation Company Pty Ltd v Valuer-General [2016] NSWLEC 135 at [84] per Robson J; Tenstat Pty Limited v Valuer General, Woolworths Limited v Valuer General [2012] NSWLEC 1361 (Tenstat) at [35] per Parker AC; Marroun v Roads and Maritime Services [2012] NSWLEC 199 at [196]; Graham Trilby Pty Ltd v Valuer General [2009] NSWLEC 1087 (Trilby) at [41] per Parker AC; Graham Trilby Pty Ltd v Valuer-General [2008] NSWLEC 217 at [27] per Jagot J; Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151 at 156; Riverbank Pty Ltd v Commonwealth (1974) 48 AJLR 483 at [484].

In using the comparable sales method, the valuer must explain which of the sales is the most important comparable sale and why, and what adjustments have been made to reach a conclusion about the value of the relevant land. The direct comparison method may involve four steps:

First, accumulation of a pool of potentially comparable sales.

Secondly, analysis to convert them to a common basis of measurement such as a unitary rate (for example, per m²) improved or unimproved (through allowance for existence or absence of improvements).

Thirdly, adjustment to reflect identified differences between them and the subject property (eg size, location, use, and date). Too much adjustment may make it unsafe to use a sale.

Fourthly, application of the adjusted unitary rates of the potentially comparable sales to the subject property in order to determine its value. This may involve attributing differing weight to the different comparable sales according to their degree of comparability (for example, direct, indirect or limited). [29]

Whether a sale is sufficiently comparable is a question of fact and degree and, although some adjustment is always necessary, too much adjustment will render it unsafe to use. [30]

In the absence of directly comparable sales, the methodology to be applied was explained by Justice Biscoe in Attard v Transport for NSW (2014) 205 LGERA 396; [2014] NSWLEC 44 that where there are no sales which are directly comparable, a ‘top down’ or ‘bottom up’ methodology is commonly used. [31]

That said, it is not satisfactory for a valuer who values land using the comparable sales method to list a number of comparable sales, each one suggesting a different value for the subject land and each of which requires some adjustment, and then simply to state an opinion about the value of the subject land: Arcus Shopfitters Pty Ltd v Western Australian Planning Commissioner [2002] WASC 174; (2002) 125 LGERA 180, at [78].
29. Arcus Shopfitters Pty Ltd v Western Australian Planning Commissioner [2002] WASC 174; (2002) 125 LGERA 180 at [78] per Pullin J; Bone v Wallalong Investments [2012] NSWSC 137 at [32], [33] per Dougall J.
30. Chircop v Transport for NSW [2014] NSWLEC 63 at [35] per Biscoe J; Tenstat at [48]; Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68 at [25] per Biscoe J; Trilby at [36].
31. Cited with approval in Buhach v Transport for New South Wales [2022] NSWLEC 148 at [135] per Pepper J.

Expert Evidence

On 1 July 2024 I inspected the Land, and various comparable sales, accompanied by the legal teams for both parties, together with the following experts:

Expert Discipline	Applicant	Respondent
Town Planning	Stephen Connelly	Mike Svikis
Hydrology	Damion Cavanagh	Dr Daniel Martens
Valuation	Grant Jackson	Robert Houlden

Hydrology

The hydrology experts, Damion Cavanagh and Dr Daniel Martens, participated in a joint conference and prepared a Joint Expert Report filed on 14 May 2024 (JER Hydrology). In the JER Hydrology the experts agreed:

The majority of the Land is affected by the 1% AEP flood with around 0.58ha above the 1% AEP flood, and 0.33ha above the PMF. [32]

For any residential development, the Land would need to be filled to mitigate the flood constraint on the Land. [33]

An area of approximately 2.5-3ha of land is likely capable of being filled within the eastern portion of the Land to support residential development without causing material off-site food impacts – however, the precise area and configuration of that area would need to be determined in a detailed flood study forming part of a planning proposal. It is understood that Dr Martens shows a concept fill pad area larger than 3ha in his individual report. [34] Mr Cavanagh considers that around 2.5ha of the Land is outside Byron Shire Council’s demarcated “No development” areas in the Belongil Creek Floodplain Risk Management Plan dated 9 March 2015. [35] Both experts indicate that their respective concepts are subject to the carrying out of a flood study. [36]

It would be prudent to set the floor levels for residential development land to the PMF because it is close to the 2100 year 1% AEP level, and would enable residents to shelter in place during a flood emergency.

A detailed flood study would be required to support any planning proposal and it would need to address matters raised in the Ministerial Directions under s 9.1 of the Environmental Planning and Assessment Act 1979 (EPA Act). [37]
32. Ex B Evidence Book Tab 6 p 251.
33. Ibid.
34. Ex B Evidence Book Tab 5 pp 247-248.
35. Ex B Evidence Book Tab 6 p 251.
36. Ex B Evidence Book Tab 5 p 213 and Tab 6 p 251.
37. Ex B Evidence Book Tab 6 pp 252-253.

Relevantly, the expert hydrologists agreed that part of the Land may be capable of filling for the purpose of residential development, subject to a detailed flood study. Until such a study is undertaken there is no guarantee that any of the Land may be filled for residential development without adverse flooding impacts on adjoining land.

Town Planning

The town planning experts, Stephen Connelly and Mike Svikis, conferred and produced a Joint Expert Report filed on 14 May 20224 (JER Town Planning) in which they agreed, inter alia:

The Land has no dwelling entitlement pursuant to cl 4.2A of BLEP 2014. [38]
38. Ex B Evidence Book Tab 3 p 111.

For the 2021 Valuation Year, the Land is zoned part RU2 Rural Landscape (approximately 9.2ha), part E3 Environmental Management and Part E2 Environmental Conservation (together approximately 6ha) under BLEP 2014. [39]
39. Ibid.

For the 2022 Valuation Year, the Land is zoned part RU2 Rural Landscape (approximately 9.2ha), part C3 Environmental Management and part C2 Environmental Conservation (together approximately 6ha) under BLEP 2014. [40] Although there was a change in zone names, the zone boundaries on the Land did not alter. However, “local distribution premises” became prohibited in the C2 and C3 zones, and “artisan food and drink industries” became permitted with consent in the RU2 zone (subject to cl 6.8 of BLEP 2014).
40. Ibid.

The Land is mapped as within the Coastal Use Area and the Coastal Environmental Area, and is mapped as partly within a Coastal Wetland and partly being affected by a Coastal Wetland 100m buffer. [41] As a consequence, certain planning provisions may be triggered depending on the form of development proposed.
41. Ex B Evidence Book Tab 3 p 112.

Most of the Land is within the flood planning area and, therefore, a development application would trigger cll 5.21 and 5.22 of BLEP 2014, and the flood related controls in the Byron Shire Development Control Plan 2014 (BDCP 2014). [42]
42. Ex B Evidence Book Tab 3 p 114.

The Land is affected by bushfire hazard with mainly Vegetation Category 3 on its eastern portion and Vegetation Category 1 and Vegetation Buffer on its western and southern portions. [43]
43. Ibid.

For the 2021 and 2022 Valuation Years, part of the Land generally in the southern and western portions are mapped as having biodiversity values. In their individual reports, the town planning experts acknowledged that a Biodiversity Development Assessment Report (BDAR) may be required for the development of the Land. [44]
44. Ex B Evidence Book Tab 1 p 5 at par [2.2.5]; Tab 2 p 56 at par [2.3.3], p 57 at par [2.3.4].

The Land is mapped as being affected by acid sulfate soils with most of the Land mapped as Class 3 with the western portion mapped as Class 1 or Class 2. [45]
45. Ex B Evidence Book Tab 3 p 115.

The Land is affected in its north-east corner by coastal hazards in the long term (2100 maximum scenario) pursuant to Byron Shire Coastal Hazards Assessment Update 2013. [46]
46. Ibid.

Part of the Land may be contaminated because it is within 200m of an abandoned cattle tick dip site and part of the eastern portion has been filled with material of an unknown origin and without approval. [47] If contamination issues are identified, any significant development involving human occupation of the Land would require a contamination assessment and possibly a remediation action plan. [48]

In December 2020, the Council adopted the Byron Shire Residential Strategy (2020 Strategy) which identified the eastern portion of the Land as Investigation Area 10 (Area 10) comprising approximately 1ha for potential residential development (subject to a rezoning/planning proposal process). [49] In his individual evidence Mr Connelly has expressed the view that the Department of Planning and Environment (DPE) refused to endorse the 2020 Strategy and, as a consequence, it has no strategic planning weight in terms of providing guidance to landowners and the development community. [50] Mr Svikis says that, to pass the strategic merit assessment for a planning proposal, “the land would need to be identified in a Council and State endorsed local strategy. I would not formally commence the planning proposal until this has occurred”. [51] The planners agreed that any rezoning/planning proposal process would require a strategic merit assessment and a site-specific merit assessment that could not commence until the 2020 Strategy is endorsed by the DPE. [52] If so endorsed, the site-specific merit tests is a “bundle of work” including a comprehensive flood assessment. [53]

If additional flood modelling (that is approved by Council) showed that parts of the Land could be filled without negative impacts on neighbouring land, a range of land uses could be undertaken and the rezoning of Area 10 could move forward (subject to Council’s approval). [54] No such modelling existed as at the relevant dates for the 2021 and 2022 Valuation Years.

The presence of biodiversity values on the southern and western portions of the Land may make those portions suitable for a biodiversity stewardship site. [55]

A horse riding school with horse agistment and gear storage requires fencing and farm buildings for horse gear storage, which could be carried out on the eastern half of the Land without filling or earthworks. [56] Horse agistment is permitted without consent and a riding school is permitted with consent. [57]
47. Ex B Evidence Book Tab 3 p 116.
48. Ibid.
49. Ex B Evidence Book Tab 3 p 113.
50. Ex B Evidence Book Tab 1 p 15 at par [2.5.4].
51. Ex B Evidence Book Tab 2 p 71 at par [2.9.1].
52. Ex B Evidence Book Tab 3 p 117.
53. Ibid.
54. Ex B Evidence Book Tab 3 p 116.
55. Ex B Evidence Book Tab 3 p 117.
56. Ibid.
57. Ibid.

In relation to the possibility of rezoning the Land, the town planning experts agreed that Area 10 has the following strengths/advantages (which were identified in the 2020 Strategy itself): [58]
58. Ibid.

Adjacent existing residential area;

Good proximity to existing employment areas;

On existing public transport route;

Flat and cleared site;

Links with the on-road cycle land on Ewingsdale Road.

The town planning experts disagreed on the following:

Potential and likelihood of the rezoning of Area 10 for residential development;

What role the intersection at Kendall Street and Ewingsdale Road would have on restricting development on the Land;

In respect of uses on the Land that require a limited area of fill, the experts agreed that approximately 3,500m² of Area 10 that has been subject to historical filling provides a flood free core that may facilitate some development (subject to geotechnical and contamination checks, and, possibly, additional fill). [59]

The town planning experts agreed that land uses like a plant nursery and garden centre with a mix of ground level customer parking, propagation and display areas, with a sales building may be plausible subject to the use being quite minor in scale and not triggering the need for a traffic assessment. [60] The town planning experts did not agree on what other uses may be appropriate.
59. Ex B Evidence Book Tab 3 p 121.
60. Ibid.

Byron Shire Residential Strategy 2020

However, in relation to the possible rezoning of Area 10, the town planning experts have opposing views, and hence their expert opinion underpinned the relevant valuer’s approach to the valuation exercise. The view that a willing purchaser in a hypothetical sale would take into account the proximity of the rezoning of Area 10 is a central question in these proceedings. However, I accept the advice given by Mr Connelly to the hypothetical purchaser for the reasons set out below, except in relation to applying a premium:

Mr Connolly opined that for the potential purchaser to seriously contemplate the plausibility of a future residential rezoning at the 2021 and 2022 Valuation Year, they would require: first, certification of Council’s 2020 Strategy by the State Government to identify Area 10 for future residential development; and secondly, a flood study confirming the suitability of Area 10 for filling without adverse impacts on adjoining properties that was approved by Council. [61] Having achieved the first and second requirement, the potential purchaser would need to conduct research necessary to support a rezoning application (such as an ecological assessment – perhaps a BDAR, Aboriginal cultural heritage assessment, and acid sulfate soil assessment together with coastal environmental processes and natural coastal processes. The potential purchaser should review the financial feasibility of Area 10 development with regard to:
61. Ex B Evidence Book Tab 3 p 118.

The relatively low lot yield of 25 lots;

Civil engineering costs to import significant fill, etc; and

Council’s requirement to dedicate to it free of cost 20% of the developed lots for affordable housing.

Subsequently, the potential purchaser would need to lodge a Planning Proposal, which may well raise traffic issues. Finally, a development application would need to be lodged and approved. [62]

Mr Svikis for the Respondent considered that Area 10 was in a unique position during 2021 and 2022 as the only greenfield site identified as a potential residential area in the Council’s adopted 2020 Strategy. Area 10 has access to residential infrastructure, sealed road frontage and adjoins a residential zone. [63] The Council described Area 10 as having significant strengths and listed the indicative timing for the development as “[s]hort-medium term”. [64] Mr Svikis said that the rezoning issues raised by Mr Connelly would have minimal or no likelihood of affecting development of Area 10, and that the failure of the State Government to endorse the Council adopted strategy did not result in the Council abandoning the strategy or removing Area 10 from the Strategy. [65] A hypothetical purchaser could use an agreed due diligence period to undertake a flood impact assessment. Mr Svikis’ evidence was that, as at the 2021 and 2022 Valuation Years, Area 10 had a real prospect of being rezoned for residential purposes in five to ten years. [66]
62. Ex B Evidence Book Tab 3 pp 118-119.
63. Ex B Evidence Book Tab 3 p 119.
64. Ibid.
65. Ibid.
66. Ex B Evidence Book Tab 3 p 120.

I find that as at the 2021 and 2022 Valuation Years, the reliance on Area 10 being rezoned in the foreseeable future to be uncertain the following reasons:

The planning document applicable on 17 August 2021 and 17 August 2022 was the North Coast Regional Plan 2036 (NCRP 2036) published in March 2017. The NCRP 2036 included a map that identified the Byron LGA Urban Growth Areas and Investigation Areas. The Land is not included in either of these areas; therefore, it is not regarded as an urban growth or investigation area. [67]
67. Ex B Evidence Book Tab 3 p 113.

Area 10 was identified as an investigation area within the 2020 Strategy, which was adopted by Byron Shire Council in December 2020. For Area 10, Council identified preferred zones of R2 Low Density Residential and/or R3 Medium Density Residential. [68]
68. Ex 4 CB Tab 2 pp 48-49.

Absent the 2020 Strategy being endorsed by the NSW State Government, there was simply no prospect of any residential development being undertaken, and therefore taken into account, in the 2021 or 2022 Land Valuation Years. It could not be said that endorsement of the 2020 Strategy by DPE was imminent.

Ex B: Evidence Book Tab 2 p 67: Byron Shire Residential Strategy, December 2020 – extract from Map 4.

Mr Svikis agreed:

That he would advise a hypothetical purchaser to refrain from lodging a formal rezoning application until and if an endorsement of the 2020 Strategy were received from the DPE. [69]
69. Tcpt p 42 (37).

There were no departmental guidelines outlining the process for obtaining DPE’s endorsement of the 2020 Strategy; [70]
70. Tcpt p 41 (29-32).

The February 2022 floods caused authorities like councils and the State to reconsider development on floodplains.

He had not considered a number of publicly available documents relating to the 2020 Strategy (Ex D), and he conceded that the documents would have been available to the hypothetical purchaser in the 2022 Valuation Year:

Firstly, Council’s agenda of ordinary (planning) meeting on 9 June 2022 (Ex D), in which it was stated, inter alia:

Page 44: Department concerns (March 2021): “In the DPE’s initial review of the strategy, concern was expressed as to the reasonableness of the approach on housing supply capacity, impediments, and relationship to regional housing targets in the NCRP. The impediments encompassing:
determination of investigation Area 10, Byron Bay as a potential housing area prior to completion of a coastal hazard management study in progress.”

Pages 44-45: Council staff response (April – June 2021): “After this initial response by staff:
the Biodiversity Conservation Division advised Council on 10 May 2021 of a preference to remove this Area 10 from the strategy until the coastal hazard assessment work had been completed.” (emphasis added)

Page 45: Residential Strategy Peer Review (mid to late 2021): “Leading from this, as DPE concerns were not readily resolved, was a peer review of the strategy by Locale consultants. At the same time the DPE paused work on the AHCS and the STRA reduced day cap planning proposals based on their connection with the strategy.
Option 1 requiring Council to make changes to the adopted strategy to:
revisit the staging/sequencing of the ‘investigation areas’ to better reflect known constraints.
clearly identify that Areas 8, 9 and 10 need to be further investigated and may not be able to be rezoned due to constraints and/or inconsistencies with current state and regional planning frameworks, and that further work with State agencies will be required to determine the suitability of these lands for rezoning and the submission of planning proposals.”

Based on the Agenda document in Ex D, Mr Svikis accepted that:

DPE had ‘significant concerns’ about Area 10, so much so that it informed the Council Area 10 may not be able to be rezoned;
The 2020 Strategy had to be revised;
DPE’s concerns and recommendations were available as at 9 June 2022;
DPE had concerns regarding coastal hazards and requested removal of Area 10 pending assessment;
As at 10 May 2021, DPE’s Biodiversity Division had a preference for Area 10 to be removed pending assessment; and
Even after revision of the 2020 Strategy, further investigations would be required, i.e. DPE would refer the 2020 Strategy to other State Government agencies, and one would not know the referrals or concerns of those agencies until identified in a public document. It would be possible for new issues to be raised. [71]
71. Tcpt pp 41-51.

Secondly, the letter dated 24 December 2021 from the Group Deputy Secretary of DPE to the General Manager of the Council (part of Ex D), in which it was stated inter alia:

“Byron Shire Residential Strategy
The final peer review report for Council’s Residential Strategy was completed on 15 November 2021 by Locale Consulting. Although Locale presented a number of options for progressing Council’s Residential Strategy, Option 1 was identified as the preferred for progressing Council’s Residential Strategy.
…
As such, the PDU endorses Option 1, which identifies the following recommended changes to the Residential Strategy:
revisit the staging/sequencing of the ‘investigation areas’ to better reflect known constraints.
address the outstanding concerns of DPIE’s Northern Region team, which were outside the scope of the peer review: …clearly identify that Areas 8, 9 and 10 need to be further investigated and may not be able to be rezoned due to constraints and/or inconsistencies with current state and regional planning frameworks, and that further work with State agencies will be required to determine the suitability of these lands for rezoning and the submission of planning proposals.”

Based on the letter of 24 December 2021, Mr Svikis accepted that:

The Planning Delivery Unit (PDU) endorsed Option 1;
Recommendations were made to change the 2020 Strategy;
Area 10 may not be able to be rezoned due to constraints and inconsistencies with the current State and regional planning frameworks; and
“State planning framework” included Ministerial directions issued under s 9.1 of the EPA Act.

Thirdly, the Peer Review dated November 2021 by Locale Consulting (part of Ex D), in which it was stated:

“At this higher level in the planning process, the identification of ‘investigation areas’ that have developed capacity is required to be theoretical. In the case of the Byron Residential Strategy, this includes exclusion of known impediments such as HEV vegetation, high hazard flood lands etc, and consideration of theoretical impediments which have been listed in the Residential Strategy such as hydrological issues, topographical constrains etc.” (p 6)
…
“3.1 Opportunities for the Residential Strategy
As a result of the peer review the following opportunities for the Residential Strategy have been identified:
…
The Residential Strategy contains small, somewhat constrained ‘investigation areas’ due partly to the balancing of the known and variable housing considerations that exist in the LGA

3.2 Options to move forward with the Residential Strategy
Option 1
Council makes the following changes to the Residential Strategy as the related planning proposals progress:
Revisit the staging/sequencing of the ‘investigation areas’ to better reflect the known constraints (including regionally significant farmland), including ‘greenfield’ and ‘infill’ options (noting ‘infill’ development is encouraged in the NCRP and already envisaged to make up 20% of the dwelling target in the Residential Strategy). This would enable the retention of all ‘investigations area’ until more detailed planning has occurred.” (p 13)

Fourthly, Council’s minutes of ordinary (planning) meeting on 9 June 2022 (part of Ex D), in which it was stated (on p 12):

“Resolved that council:
…
Supports, subject to funds being allocated, the adopted Residential Strategy being updated as per the peer review report Option 1 (Attachment 2 – E2022/27777) and clarified by the Department of Planning and Environment correspondence (Attachment 1 – E2022/40467).”

Mr Svikis did not agree that the content of the four documents referred to above were contrary to his opinion that there was a real prospect of Area 10 being rezoned, because DPE did not strike out Area 10, and that as it supported a planning proposal for affordable housing which included Area 10, this signified support by DPE. Mr Connolly disagreed because of the language used by DPE which indicated that there were serious problems with Area 10’s inclusion because of its inconsistency with the State and regional frameworks and that two primary constraints applied to the Land. [72]
72. Tcpt p 51 (11-15).

Further, DPE would consider the Ministerial Directions under s 9.1(3) of the EPA Act when deciding to endorse the 2020 Strategy. In relation to the Minister’s local planning directions made under s 9.1(2) of the EPA Act, as in force on 1 March 2022 (Ex E), Mr Svikis accepted that DPE would consider the directions when deciding whether to endorse the 2020 Strategy (DPE correspondence in Mr Svikis’ report [73] ). Relevantly, Local Direction 4.1 relates to flooding and applies to planning proposals on flood prone land. Local Direction 4.1(2) provided the following prohibition (on p 28):
73. Ex B Evidence Tab 2 p 106.

“(2) A planning proposal must not rezone land within the flood planning area from Recreation, Rural, special Purpose or Conservation Zones to a Residential, Business, Industrial or Special Purpose Zones.”

Although the above provision was in force on 1 March 2022 for the 2022 Valuation Year, the same prohibition was contained in Direction 4.3(5) of the previous version of the Ministerial directions which applied as at 1 July 2021 (Ex L).
Mr Svikis accepted that this direction is a prohibition on a rezoning of land from rural to residential unless the inconsistency was justified. Mr Svikis relied upon the words below the heading “Consistency” on p 29 of Ex E as follows:

“A planning proposal may be inconsistent with this direction only if the planning proposal authority can satisfy the Planning Secretary (or their nominee) that:
(a)   the planning proposal is in accordance with a floodplain risk management study or plan adopted by the relevant council in accordance with the principles and guidelines of the Floodplain Development Manual 2005, or
(b)   where there is no council adopted floodplain risk management study or plan, the planning proposal is consistent with the flood study adopted by the council prepared in accordance with the principles of the Floodplain Development Manual 2005, or
(c)   the planning proposal is supported by a flood and risk impact assessment accepted by the relevant planning authority and is prepared in accordance with the principles of the Floodplain Manual 2005 and consistent with the relevant planning authorities’ requirements, or
(d)   the provisions of the planning proposal that are inconsistent are of minor significance as determined by the relevant planning authority.”

In respect of par [36(7)(a)] above, Mr Svikis did not know if there was such a study at the relevant dates and had not checked. In any event there would need to be a report confirming that the proposed rezoning was in accordance with any such study. On the evidence available, no such report existed as at the relevant dates. In respect of par [36(7)(b)-(d)] above, Mr Svikis accepted that there would need to be a report to the satisfaction of Council and the DPE, and that at the relevant dates no such report existed.
I note that the “Consistency” justifications were more limited as at 1 July 2021 because the previous version of the Ministerial directions only contained two criteria (Ex L).
Until the further work required by pars [36(7)(a),(b),(c)and/or(d)] above is undertaken, Mr Svikis conceded that he could not advise on whether any of the criteria could be met such than an inconsistency with the prohibition contained in Direction 4.1(2) could be justified. Mr Svikis accepted that the owner of the Land would face a dilemma because Area 10 could not be rezoned to residential. Despite this, Mr Svikis continued to maintain that the rezoning of Area 10 had a real prospect of success at the relevant dates.
Mr Svikis was taken to Direction 4.2 of Ex E, and in particular 4.2(3) which provides:

“(3) A planning proposal must not rezone land which would enable increased development or more intensive land-use on land within a coastal wetlands and littoral rainforests area identified by chapter 2 of the State Environmental Planning Policy (Resilience and Hazards) 2021.”
Mr Svikis accepted the proposition that Direction 4.2(3) operates as a prohibition in isolation, and the limited means to justify a departure is as set out in the ‘Consistency’ provisions. The ‘Consistency’ justifications were the same as at 1 July 2021 because the previous version of the Ministerial directions contained the same criteria (Ex L).

The documents in Ex D reveal that DPE had significant concerns including Area 10 in the 2020 Strategy. It follows that as 1 July 2022, the hypothetical purchaser would have been aware of DPE’s significant concerns and would not have, acting prudently, formed the view that rezoning had ‘a real prospect’.
The planning experts are in disagreement as to whether the hypothetical purchaser would make enquiries with Council prior to purchasing the Land, seeking information about prior development applications, or requests for rezoning. Mr Connolly would take this course of action, Mr Svikis said he would not, but he did say in cross examination: “I don't think the history of any site is irrelevant in the context of a due diligence report” [74] .
74. Tcpt p 123 (3-4).
In Ex C, and Appendix B to Mr Connelly’s Expert Report, [75] the Applicant demonstrates that it had made various attempts to rezone the Land since 1989, and even as late as 2020 Council removed Area 10 from its draft Strategy between June to December 2020, but included it again in December 2020 when it adopted the Strategy. Mr Svikis said he had not seen that information but did not have any reason to doubt its accuracy. Mr Svikis said in relation thereto:
75. Ex B Tab 1 pp 28-29.

“It demonstrates the ‑ the strategy can change. It can change by resolution of council, it can change by a range of matters, and that's what that ‑ if that was all true, it shows that it can change by resolution of council for sure”. [76]

76. Tcpt p 140 (8-11).

And further:

“Even after it’s adopted and endorsed, a future council can go back and revisit a strategy, yes.” [77]

77. Tcpt p 150 (15-16).

if Area 10 had been taken out of the Strategy for that period, it was important to know, and would be something that would need to be disclosed to the hypothetical parties. [78]
78. Tcpt p 139 (16-26).

Planning Proposal

Mr Connelly set out the steps for a Planning Proposal, being the second step in the process for rezoning Area 10 for residential development (on the assumption that DPE had endorsed the 2020 Strategy which included Area 10):

Stage 1: Pre-lodgement scoping study.

Stage 2: Planning proposal.

Stage 3: Gateway determination.

Stage 4: After the gateway.

Stage 5: Public exhibition and assessment

Stage 6: Finalisation.

Mr Svikis gave evidence that there would need to be assessment undertaken in a range of disciplines for Stage 2: flooding, biodiversity/ecology, coastal erosion, coastal hazards, acid sulfate soils, bushfire, cultural heritage, contamination, traffic, and engineering (to assess the capacity of existing services).

Actions of a town planner preparing due diligence advice

On 3 July 2024 Mr Svikis, in cross examination:

Agreed that a due diligence report on the Site would involve him obtaining what documents he could from Council’s file relevant to the Site. [79]
79. Tcpt p 122 (6-48).

Was taken to Ex C, Tab 3, letter dated 17 April 2003 to Council from Mr Rob Van Iersel, who Mr Svikis agreed that Mr Van Iersel was an experienced town planner, and said: “Yes highly regarded”. [80] And further:
80. Tcpt p 124 (11-19).

Agreed that the owners had been working with Council since 1989 (34 years) in order to rezone the Site? [81]
81. Tcpt p 124 (39-42).

Agreed that there is a reference to numerous studies being undertaken by consultants for Council. [82]
82. Tcpt p 124 (49-50); p 125 (2).

Agreed that despite these studies the Council is no closer to a successful rezoning of the Site than it was in 1989. [83]
83. Tcpt p 125 (4-7).

Acknowledged the conclusion by Mr Van Iersel in Ex C Tab 3 p 6:

“Unfortunately based on the above, it is my view that the subject site has virtually no development potential…”
“Even in the case that such flood analysis does occur, that its findings are favourable in respect of the development of the Walkers Paddock site I am of the view the Council is extremely unlikely to support any development of the site whatsoever.”
And that this information from an experienced planner would have caused him some alarm. [84]
84. Tcpt p 125 (24-50).

Was taken to Ex C, Tab 4 p 7 letter from Council to the Applicant, advising that:

Council resolved on 4 August 2016 to exhibit a Preliminary Draft Residential Strategy for public comment;

The Strategy will set a clear vision and policy framework for the Shire’s urban residential lands.

“Your property or part of Lot 350 DP 755695 Ewingsdale Road Byron Bay, has been identified as having potential for new residential development”.
And Mr Svikis agreed that Council itself was contemplating the potential rezoning of the Site, acknowledging that was 8 years ago now, and previous to that date the owner had attempted [85] for 14 years to rezone the Site.

Mr Svikis was then taken to Ex C Tab 14, pp 73-74, being the letter from Planners North to Council 11 October 2019 writing a submission in support of Area 10 and suggesting an expansion of Area 10 from 1ha to 2.2ha. [86] .

Mr Svikis was then taken to Ex C Tab 16, pp 82-84 Byron Shire Council letter to Planners North dated 15 June 2020, advising that the additional land requested by the Applicant to be included in the draft Strategy would not be included, and referenced a report to be presented to Council for its decision on 18 June 2020. [87] Mr Svikis was then taken to Ex C Tab 18, pp 97-104: Attachment ‘1’, Planning Meeting Report – June 2020, Draft Residential Strategy, Community engagement and assessment of Landowner requests for the inclusion of land as an investigation Area. Mr Svikis agreed he had read pp 103-104, particularly the table at the bottom of p 103, and the table on p 104 of which identified the site constraints including: cattle dip sites buffer, flood prone, and land subject to coastal hazards identified in an environmental planning instrument. The report concluded with the recommendation:

“That the proponent be advised that part of Lot 350 DP 755695 is excluded from further consideration as part of the investigation areas under the Residential Strategy due to inconsistency with the NCRP Settlement Guidelines.”

85. Tcpt p 126 (10-50); p 127 (1-44).

86. Tcpt p 128 (40-50); pp 129-130 (1-32).

87. Tcpt p 130 (40-50); p 132 (1-24).

The planning experts disagreed as to what Attachment ‘1’ meant: Mr Connelly considered it totally removed Area 10 from the draft Strategy which included the 1ha area as well as the proposed expanded 2.2ha area. Mr Svikis considered that Attachment ‘1’ meant that Area 10 remained in contention to be included in the draft Strategy, but that the expanded 2.2ha area as put forward by the Applicant was removed from consideration – see Ex C, Tab 18 p 103. [88] Whether Mr Connolly’s interpretation is correct or Mr Svikis’ is correct, Mr Svikis said in cross examination:

“El-Hage: Put aside possibility for clerical error, and assume that you have at hand the information that Mr Connelly has indicated he has, or had at hand. So make that assumption.

Witness Svikis: Yes.

El-Hage: What I’m suggesting to you is that out of professional obligation, you would bring this information to the attention of the hypothetical purchaser or vendor because it demonstrates the fragility of the strategy itself, doesn’t it?

Witness Svikis: It demonstrates the – the strategy can change. It can change by resolution of council, it can change by a range of matters, and that’s what that – if that was all true, it shows that it can change by resolution of council for sure.

El-Hage: And it’s always liable to the prospect of change. You accept that?

Witness Svikis: Even after it’s adopted and endorsed, a future council can go back and revisit a strategy, yes.”

88. Tcpt p 130 (25-50); pp 131-139; pp140 (1-18).

On 28 August 2024 the Applicant sought to tender Exs M [89] and N [90] , and the Respondent objected to both documents as they were dated July 2024. Exhibit N replaced the 2020 Strategy, being the Byron Shire Residential Strategy 2041 (2041 Strategy) endorsed by the Department of Planning Housing & Infrastructure. The 2041 Strategy excluded Area 10 (known as Area 17 in the 2041 Strategy) “until completion of Council’s Coastal Hazard Study to enable an informed decision about the impact of the 100-year coastal hazard line on this site”. [91] The Applicant relied upon the information in Exs M and N as confirming the foresight of Mr Connelly in relation to the 2020 Strategy, and further relied upon:

Housing Commissioner (NSW) v Falconer [1981] 1 NSWLR 547 at 557-558 as observed by Hope JA and Glass JA similarly at 563 (Falconer). Recently Pepper J held that events after the date of acquisition (or valuation) may be relevant to confirm the reasonableness and correctness of evidence of the foresight that the hypothetical parties would have had at the date of acquisition (or valuation) when considering the highest and best use of the land: Buhach v Transport for New South Wales [2022] NSWLEC 148 at [127].

The Respondent objected to the tender of Exs M and N relying upon par [575] in Falconer – that;

“Such persons will be taken to know what an appropriately informed person would know on that date. …[I]t follows that such persons (and the Court, as determining what they would have done) cannot be seen as knowing more…In that regard, therefore, evidence of what subsequently has occurred in relation such matters may not ordinarily be referred to…”

Mr White submitted: “The Court and the parties at the time can only be assessing the potential as to what was known at that time and…. [c]ould not possibly have been known, A, that there would be a different strategy but, B, that it would be removed from that strategy”. [92] Mr White referred to par [138] in McBride v MidCoast Council [2021] NSWLEC 100, a decision of Robson J. This was a case where a REF was prepared after the date of compulsory acquisition and relates to a different development. Justice Robson gave the relevant REF little weight. However, in this matter the 2041 Strategy is still referring to Area 10 (now called Area 17) and the letter from the Department (Ex M) specifically advised the reason why Area 17 has been excluded at this time, pending completion of Council’s Coastal Hazards Study. I admitted Exs M and N on the basis of hindsight that they support the foresight of Mr Connelly in giving his advice.
89. Ex M Letter Department of Planning Housing & Infrastructure to General Manager Byron Shire Council dated 24 June 2024.
90. Extract of Byron Shire Council Residential Strategy 2041 dated July 24.
91. Ex M [4].
92. Tcpt p 420 [47-50]; p 421 [1-44].

In evidence the town planners then addressed the preparation of a planning proposal for the Site, and the various reports, investigations necessary to support such a proposal. Mr White then put the following questions to Mr Svikis:

“White: ….Looking at these stages, of what relevance is it that it’s an agreed position as I understand it by you and by Mr Connelly that in order to get a planning proposal stage 1, it would be necessary in the context of this site for the site to have been identified in a residential development strategy which is endorsed by the department?

Mr Svikis: So my position is in advising a client that without being in an adopted and endorsed residential strategy, are 10 would fail the strategic merit test, and you would be advised at pre-lodgement that it is either too early if that process was still ongoing, or if it had been rejected, you’d be advised you’re wasting your money. So if area 10 ends up not being in a strategy, my advice to the client would be don’t commence the planning proposal process because you will fail the strategic merit test. And if it hadn’t been endorsed, I would say, “I think you should wait”. That would be my advice to a client.

White: Okay, and Mr Connelly?

Witness Connelly: Ditto.”

History of the Applicant’s ownership of the Land

To understand the submissions of both parties, it is necessary to review the history of the Applicant’s ownership of the Site since 1989. The history is set out in:

Ex B: Evidence Book, Tab 1 pp 28-29 (Appendix B to Mr Connelly’s Expert Report); and

Ex C Tender Bundle, which was a joint tender, and contained correspondence between the Applicant and Council.

In summary, the Applicant has owned the Land since 1989, and between 1989 and 2020 the Applicant made numerous attempts to have the Land partially rezoned for residential use. The applications by the Applicant included numerous expert reports relevant to convincing Council to rezone part of the Land for residential use. The Applicant was successful in having the Area 10 finally included in the 2020 Strategy, but the Strategy was not endorsed by DPE, and the DPE excluded Area 10 in the successor to the Strategy being the 2041 Strategy (Exs M and N).

Advice to be given to a hypothetical purchaser

In relation to the Valuation Year 2021, the advice to a hypothetical purchaser would be:

The majority of the Land is zoned RU2 Rural Landscape, and the remainder partly Zone C2 Environmental Conservation, and C3 Environmental Management pursuant to BLEP 2014.

The Land contains approximately 1ha of land identified in Council’s 2020 Strategy as Area 10 proposed to be rezoned to R2 Residential Low Density or R3 Residential Medium Density.

Absent endorsement of the inclusion of Area 10 by the DPE in the 2020 Strategy, the assumption that Area 10 could be rezoned for housing within 10 years is uncertain.

In order to obtain endorsement by the DPE, it would be necessary to address the DPE’s concerns regarding Coastal Hazards (Ex D p 44), and also perhaps compliance with the Floodplain Development Manual 2005.

In order to build housing in Area 10, it would be necessary to prepare a planning proposal, which would need to comply with the Ministerial directions in accordance with s 9.1 of the EPA Act, and relevantly with Local Direction 4.1(2) and 4.1(3) for the relevant years (Exs E and L). Subject to endorsement by DPE of the planning proposal, then a development application which includes reports on flooding, filling, contamination, bushfire risk, coastal hazard risk, and traffic, to Council’s satisfaction.

Area 10, or a similar area may be rezoned to residential in the future but the timeline for the rezoning is unknown.

The current owner has attempted several times between 1989 and 2020 to get an area similar to Area 10 rezoned to residential, but to date has been unsuccessful.

In relation to the Valuation Year 2022, the advice to a hypothetical purchaser would be:

Subparagraphs (1) - (7) in par [43] above, and;

It is unlikely DPE will endorse the 2020 Strategy until the Council completes a Coastal Hazard Study to enable an informed decision about the impact of the 100-year coastal hazard line on Area 10 (Ex D DPE letter dated 24 December 2021 pp 1-2 and Mr Connolly’s foresight advice). [93]

DPE’s endorsement may occur once Council has completed its Coastal Hazards Study to its satisfaction, and DPE is able to make an informed decision to endorse a Council strategy to include Area 10.

Area 10, or a similar area, may be rezoned to residential in the future, but the time line for the rezoning at this stage is unknown.
93. Ex M: Letter Department of Planning, Housing and Infrastructure to Byron Shire Council 17 June 2024; Ex N: Extract from Byron Shire Residential Strategy 2041; Falconer [343]-[344].

The Respondent has valued the Land at $5,910,000 for the 2021 Valuation Year, and $6,000,000 for the 2022 Valuation Year. A hypothetical purchaser considering a contract for sale in the sum of $5.9m or $6m would make the enquiries as set out by Mr Connolly. From a practical point of view, a willing purchaser of land for a consideration of $760,000 may not be willing to go to the same expense making enquiries prior to contract, as would a willing purchaser for a consideration of $6m.
In opening submissions Mr White said in relation to the assumptions to be adopted in valuing the Land pursuant to s 6A of the VL Act, and dealing with the second assumption to be made in the valuation exercise:

“White: The second is that the actual ownership of the land is irrelevant. You have to assume a hypothetical sale between two notional parties so you would attach in my submission and I’ll address you on this in due course, but you would attach some caution to the history of the land and to the difficulties that it’s alleged that the current owners in the real world have had in rezoning the land.”[94]

“White: …..If there is some use of the property that is more beneficial than its present use it is assumed for the purposes of s6A that a potential purchaser in the market would include at least one who was prepared to pay more for the land by reason of the land being able to be used in that more beneficial way….” [95]

94. Trust Company of Australia Ltd v Valuer-General (2007) 154 LGERA 437; [2007] NSWCA 181 at [32].

95. Tcpt p 23 [32-50]; p 24 [4-8].

In closing submissions, Mr White changed his client’s position as follows:

“….Under 6A we have to assume a sale takes place on each of the valuation dates and there are two parties to the transaction each of which under Spencer are assumed to be perfectly acquainted with the possibilities of the site. The appellant has focused entirely on the hypothetical purchaser in its case. But we say that there is no way having regard to the evidence and the evidence which has been put forward by Hammock Investments to the local planning authority as to the merits of this site for residential and to the fact that it was included within the strategy.

There is no way in the real world that the hypothetical vendor would be letting go of this site at this notional sale for anything other than a price which reflected a residential potential. Now that’s really the position of the Valuer-General. The Valuer-General has always accepted and Mr Houlden has accepted throughout his evidence…..that there are considerable risks with the site ultimately being rezoned and that was Mr Svikis’ position as well……The fundamental hurdle that the appellant has in this case is that their case ….assumes no redevelopment potential at all would be the basis of the transaction, and we say that just flies in the face of reality. It flies in the face of the real world consideration that Justice Sheehan said in the Lumina case have to be taken into consideration in assessing the potentialities of the land.” [96]

96. Tcpt p 446 [12-34].

Notwithstanding the Respondent’s closing submissions, I adopt the Trust Company test that s 6A(1) requires the postulation of a notional sale which is assumed to take place in a market, and the seller would conclude the sale for the highest price it could obtain in that market. I also determine the value in the notional sale by adopting the tests set out in Kenny & Good by McHugh J at pars [49]-[51]. No doubt the market will be entirely different once Area 10 (or now Area 17) is in a Council strategy that is endorsed by the DPE. That is not the market as at the 2021 and 2022 Valuation Years.
It is clear from the documents referred to above in pars [41-42] that the Applicant spent a considerable amount of time and money in attempting to get the Site rezoned from 1989 to 2020, and that the Council spent considerable time and money particularly since 2016 to get the Site rezoned. The advice by Mr Connelly to a hypothetical purchaser was to wait – the DPE would be unlikely to endorse the 2020 Strategy. This advice was shown to be foresight by the letter from DPIE to Council in Ex 8 when DPIE had not endorsed the 2020 Strategy, but endorsed the 2041 Strategy having removed Area 17 for further investigation.
Prior to hearing the oral evidence of the town planning experts, the Valuers, Mr G Jackson for the Applicant and Mr R Houlden for the Valuer-General, prepared their joint report dated 30 June 2024 (Ex B, Tab 9) (JER Valuation). In their JER valuation, the valuers agreed:

The Site has existing formed road access with approximately 140m frontage to Kendall Street and approximately 757m frontage to Ewingsdale Road.

The Site is very well located, being approximately 170m from Belongil Beach, approximately 1k north-east from Byron town centre/retail area and in a gateway position on the urban fringe.

The site is situated adjacent to existing R3 Medium Density and R2 Low Density zoned land.

One hectare of the Land fronting Kendall Street, Area 10 is in the Byron Shire Residential Strategy 2020 for future housing. The Strategy was approved by Council but was not endorsed by DPE.

The Site has Belongil Creek frontage along the western boundary and the land is flood prone with development requiring filling of the land to be approved. [97]

The primary method of calculation is the direct comparison approach, and in the alternative, as a secondary approach, they have adopted a 10 year time horizon for the potential rezoning of Area 10.

Agreed on the use of the sale at Lot 220 Skinners Shoot Road, but disagreed on its comparison to the Land. [98] They also disagreed on the remainder of the sales evidence. [99]

Disagreed on the interpretation of the hydrology evidence and the town planning evidence. [100]
97. Ex B Evidence Book: Tab 9 pp 4-5 (of the JER Valuation not the whole of Ex B).
98. Ex B, EB, Tab 9 at [73].
99. Ex B, EB, Tab 9 at [74].
100. Ex B, EB, Tab 9 at [42-44] (regarding filling of the land, [45-55] (regarding town planning) and [63-66] (regarding traffic issues).

I prefer the evidence of Mr Jackson for the reasons set out above, being the advice a hypothetical vendor and purchaser would receive from their expert advisors, and having regard to Mr Jackson’s written and oral evidence. However, I adjust Mr Jackson’s evidence by including an amount for a possible future beneficial use.
Mr Jackson’s opinion is that:

The highest and best use of the Land is its present use as a grazing paddock with some limited potential for environmental offset. [101]
101. Ex B, EB, Tab 7 276 at [51]; Valuation JER at [35].

The direct comparison approach is appropriate to determine the land values for the 2021 and 2022 Valuation Years on a per hectare basis[102] and relies on the following comparable sales:[103]
102. Ex B, EB, Tab 7 278 at [56].
103. Ex B, EB, Tab 7 280-281 at [60].

Sale 1: Lot 220 Skinners Shoot Road, Byron Bay; area 12.95ha, zoned C2 analysed to $46,255/ha on a sale date of February 2024.

Sale 2: 392 Woodburn Evans Road, Doonbah, area 12.80ha, zoned C3 & RU1, analysed to $42,969/ha on a sale date of November 2020.

Sale 3: 389 Middle Pocket Road, Middle Pocket, area 12.14ha, zoned C2 & RU2 analysed to $49,423/ha on a sale date of August 2022.

Sale 4: 2 Clothiers Creek Road, Bogangar, area 7.279ha, zoned Deferred Matter, RU2 & R2, analysed to $44,374/ha on a sale date of February 2021.

Sale 5: 95 Skinners Shoot Road, Byron Bay, area 10.21ha, zoned C2, analysed to $48,972/ha on a sale date of March 2024.

Rationale:

“[61]   The sales evidence of conservation/environmental land reflects a consistent range of analysis on a per hectare basis. It is evident from the sales evidence that the location of conservation land has little bearing on the price paid with land in close proximity to the Byron Bay township reflecting a similar analysis to conservation land situated in more remote locations.
[62]   It is also evident that the size of the land holding has little significance in the analysis per hectare. The sale evidence comprises land holdings ranging from 1214 hectares to 72.79 hectares with there being no discernible difference in the analysis per hectare because of land size.
[63]    The time period in which the sale occurred also has little bearing on the price achieved. I have considered sales spanning the period of November 2020 to February 2024. The price achieved per hectare throughout this period, including both base dates of valuation, reflects no discernible difference.
[64]   The sales evidence together with the asking price of a conservation property in close proximity of the subject property reflects an analysis of $42,969 to $49,423 per hectare.” [104]
104. Ex B, EB, Tab 7 p 282.

Mr Jackson’s primary sales were Sale 1, 220 Skinner Shoot Road Byron Bay and Sale 4, 20 Clothiers Road Bogangar. After considering his 5 sales, taking Sale 1 and Sale 4 as his most comparable (Sale 1 zoned C2 and Sales 4 zoned Deferred Matter RU2 and R2) he reaches an adjusted position for the Land on the basis as a grazing property with some environmental potential of $50,000/ha.

The market evidence derives a range of $42,969 to $49,423 per hectare, and a rate of $50,000 is adopted by Mr Jackson – resulting in a land value of $760,000 (15.17ha x $50,000/ha).

Mr Jackson was cross examined on his use of 220 Skinners Shoot Road as a comparable sale for grazing when it only has environmental offset value. His response was that he had spoken to the purchaser, and the purchaser had acquired the land for its biodiversity value to use as an offset to another development by the purchaser. Mr Houlden had earlier pressed use of the subject Land for horse riding, and gave evidence of 5 grazing horses would bring in $1,600pw leading to an annual income of $83,200. Mr Jackson responded that the actual value of the environmental land at 220 Skinners Shoot Road had a higher actual value than the value attributable to a horse riding use which is a recreational use at best, and unlikely to be commercial.

Much of the Respondent’s cross examination of Mr Jackson was aimed at him adopting the assumption that Area 10 is capable of rezoning in the foreseeable future. However, in Ex B, Tab 7, Mr Jackson also considered the alternative highest and best use of the Land for residential, with the residue being grazing and environmental land, and relied upon the following sales:

56B Bangalow Road, Byron Bay.

2 Clothiers Creek Road, Bogangar.

Using those sales and after adjustments, Mr Jackson derived a residential value of $3,400/ha (using 56B Bangalow Road) and $2,654,273/ha (using 2 Clothiers Creek Road) for Area 10. After allowing for risk, holding costs and filling costs, he determined that the land values were less than if the Land was valued entirely for grazing and environmental. [105] Mr Jackson then concluded that the potential for rezoning of Area 10 was not the highest and best use of the Land. [106]
105. Ex B EB Tab 7 pp 289-290.
106. Ex B EB Tab 7 p 290 for Mr Jackson’s analysis using Area 10 future residential development with remainder conservation land.

Mr Houlden’s opinion is that (Ex B Tab 8, pp 334-335 at [82]-[83] and Tab 9, p 6 at [36]):

Mr Houlden’s highest and best use of the Land:

Part residential (Area 10 1ha),

Part for a function centre, nursery or artisan food and drink industry (ie area zoned RU2 1.75ha),

Part horse riding school agistment or environmental/conservation uses (Remaining Portion).

In other words, Mr Houlden has undertaken a piecemeal approach to the valuation exercise in which parts of the Land are segregated for different land uses; he has notionally subdivided the Land despite having no subdivision potential under the current zoning (lot size 40ha whereas the subject land is 15.17ha). No studies have been presented in relation to the financial feasibility of the proposed uses in the RU2 zone.

Mr Houlden adopted the direct comparison approach to determine the land values for the Land, as follows:

For the RU2 Portion (1.75ha) Mr Houlden relies on a single sale (Lot 25 William Flick Lane, Ewingsdale) to, after adjustment, derive a rate of $200/m² to determine a land value of $3,500,000 for that portion. [107]
107. Ex B EB Tab 8 pp 345-347 at [145-152] and p 360 at [202].

For the Area 10 portion, Mr Houlden adds a 20% premium to the rate for the RU2 portion to derive a rate of $240/m² to determine a land value of $2,400,000 for that portion. [108]
108. Ex B EB Tab 8 p 360 at [203].

For the Remaining Portion, he relies on a single sale (220 Skinners Shoot Road, Byron Bay) to, after adjustment, derive a rate of $62,000/ha which equals a land value of $700,040 for that portion. [109]
109. Ex B EB Tab 8 p 360 at [204-205].

Total: $6,600,040.

Mr Houlden relied upon advice from Mr Svikis as to what possible development could occur on 3,500m² being a mound of fill deposited without permission on the Land. The 3,500m² mound is flood free. The suggested uses for that land ranged from a plant nursery and garden centre, a function centre, to an artisan food and drink industry. The Land is zoned RU2 and is 15.17ha in area. To develop a small, or any part, of the land when there is no right of subdivision (the minimum lot size is 40ha), and no financial feasibility of any of the proposed uses has been prepared, makes these uses simply suggestions not to be seriously contemplated at this stage. Although the planners agreed that the mound could be used for a plant nursery and garden centre, these comments also apply to that proposed use.

As a secondary approach to the valuation of Area 10 land only, Mr Houlden adopted the deferred value direct comparison method where the potential englobo end value is derived on unit site sales, and sales of other development land, and he defers the result value with an appropriate level of risk incorporated in the calculation. This is a top down approach to the valuation exercise. The sales relied upon by Mr Houlden are:

Sale 3: 62 Shirley Street, Byron Bay – in proximity to the subject Land and zoned R2 Low Density Residential, with an area of 1,012,m² and a minimum lot size of 600m².

Sale 4: 50 Shirley Street, Byron Bay – in proximity to the subject Land and zoned R2 Low Density Residential, with an area of 1,012m²and a minimum lot size of 600m².

Sale 7: 56B Bangalow Road, Byron Bay – approximately 750m south-east of Byron town centre, and zoned Deferred Matter approximately C2 Environmental Conservation 2.8ha, C3 Environmental Management 1,400m²and remainder R2 Low Density Residential. Minimum lot size, Deferred Matter 40ha, and R2 600m².

Sale 8: 29 Shirley St, Byron Bay and 2 Milton Street, Byron Bay – in proximity to the subject Land and zoned predominantly R3 Medium Density Residential and Deferred Matter – 7(F2) Urban Coastal Lands. It has a site area of 5,913m² with a minimum lot size of 4,000m² for the R3 zone.

Mr Houlden explained his approach to utilising the check method as follows:

“……due to the unique nature of the subject land, and lack of directly comparable sales evidence, I consider it necessary to consider the land value on a secondary approach where the potential englobo end value is derived based on unit site sales, and sales of other development land, and then defer the resultant value with an appropriate level of risk incorporated in the calculation.
Again as noted, I considered it reasonable to adopt this approach on the basis that the hypothetical purchaser of the subject land would be a developer for land banking purposes and it is a similar exercise that would be undertaken when contemplating purchase of the subject land. I also note that Area 10 has prospects of rezoning for residential purposes within a reasonable timeframe as advised by the planning experts.”

During the hearing it became clear that there were no directly comparable sales, as no sale had the same existing zoning as the subject Land, i.e. for the 2021 Valuation Year RU2, E2 and E3, and for the 2022 Valuation Year RU2, C1 and C2. Further the Valuer General’s case relies upon the ‘certainty’ of Area 10 being upzoned to from RU2 to R2 or R3 within a 10 year timeframe.
Notwithstanding the evidence presented by the Applicant, and in particular Ex D: Documents available on Council’s files, some being available prior to the 2021 Valuation Year and the remainder being available prior to the 2022 Land Valuation Year, and Exs M (Department of Planning Housing and Infrastructure Letter to Council 21 June 2024 and N, (extract of 2041 Strategy); neither Mr Svikis nor Mr Houlden changed their position from their written reports to acknowledge the facts set out in Ex D, which was later confirmed in hindsight by the evidence in Exs M and N. Mr Svikis said that he had not read the documents in Ex D prior to preparing his Report in Chief (Ex B, Tab 8) and the JER Valuation (Ex B, Tab 9), but nevertheless maintained his opinion as set out in those written reports [110] .
110. Tcpt p 71 [9-13].
Mr Houlden acknowledged in cross examination that he had listened to the oral town planning evidence, including in relation to Ex D, but nevertheless maintained his opinion as set out in his Report in Chief (Ex B, Tab 2) and the JER Valuation (Ex B, Tab 3) [111] .
111. Tcpt p 175 [28-43].
I set out below part of the Transcript to demonstrate Mr Houlden’s underlying view which is the key to his valuation report:

“EL-HAGE: Now I'm the hypothetical purchaser. I'm standing outside the subject land. I have this idea I want to bring the Stone Brewery concept over to this land.

WITNESS HOULDEN: Yes.

EL-HAGE: Surely I would think about, aside from its location, the constraints, the assessments that I would have to undertake.

WITNESS HOULDEN: Correct.

EL-HAGE: The planning risks, the cost of all that.

WITNESS HOULDEN: Correct.

EL-HAGE: Then I would factor in what they're achieving as a return, what it cost them to set it up, and compare that to what it would cost me to set it up here, assuming that I can get past all those environmental and planning risks. That's the approach that I would take, right?

WITNESS HOULDEN: And if I’m going to do that, I would look at it and say:

"If I want to set that up in that location, I'm going to have to pay $1,800 a square metre for a 5,000 square metre site, or $1,900 a square metre." Okay? Our subject site we can - we need to say "We've got a lot of risks here but we've got a great location. If I can make this work, yes. I'm not going to pay $1,800 a square metre because I need to factor in risk. Okay?"

And there are other uses that might be permissible on that site. Therefore I need to discount it substantially. Now I'm, I'm saying $1,800 - we've discounted it substantially from $1,800 to $200 a square metre. I haven't done the top-down approach like that. I've simply built up from the, from the, from the bottom end and said "Well, here's a site out at Ewingsdale that's in an inferior location. It's got more limited uses. Yeah, we've got some constraints on our land. But the upside is enormous."

EL-HAGE: You have not adjusted 1,800 to 200 in your report.

WITNESS HOULDEN: No, I haven't. It's cause I, cause I haven't done that comparison. What I have done is I've used the site that I've got available that I think is more comparison and I've adjusted it up.

EL-HAGE: I just had understood your earlier evidence to say that you - this is what you would do.

WITNESS HOULDEN: It's something that I would consider as a purchaser. I'd say - well, what I said was this is something that a purchaser might do. They might look at this land and go "I liked it, I like the idea of this use in this location because it is between Byron town centre." And you know how people walk to that - they walk to that industrial estate as path - so there's a pathway that's on the opposite side of the road that people walk past the subject site to get to the industrial estate to go to those type of uses.

EL-HAGE: Your bottom line is because of the location of the site, all these other risks, commercial viability--

WITNESS HOULDEN: No.

EL-HAGE: --they fall away?

WITNESS HOULDEN: No, they don't.

EL-HAGE: That's your position.

WITNESS HOULDEN: No, it's not. It is a factor that they would have regard to - is that this site is so well located the uses - Byron is a very entrepreneurial - it's an eclectic market. And there are uses in that that I wouldn't even know that people come up with and they go "Here's an idea. I'm going to make it work." And they do. That's the nature of Byron Bay.

EL-HAGE: And your position is that the hypothetical buyer would come to the land on 1 July of both valuation years and buy the land on the basis that he or she will be able to build the childcare centre, the indoor recreational facility, the respite centre, the veterinary hospital, and so on, and achieve positive returns from them.

WITNESS HOULDEN: What I'm saying is he will recognise that there are potential uses and he will go "This site is so - is such a great site" - and down the road, by the way. I know we've - I know you've assumed to set aside the, the R1s, the residential component. But down the road we got a $30 million sale for a 5,000 square metre site. Okay? It doesn’t have some of the uses - some of the constraints that we've got. But if we can pick this site up, this is a once in a lifetime site. If we can pick this up for $6 million, we'll run with it every day of the week.

And we'll wear the risk because you know what? This could be a $50 million - it could be a $40 million site. We don't know. But the upside is so huge that this site has - the, the high net worth individuals that operate in the Byron market would pick that up without a, without a doubt. Based on my local knowledge that I've developed over the last - since 1998 in working in that area. And you cannot discount returns that people achieve on - you - Mr Jackson said that the use of a horse - and a, a horse centre is not viable. It happens in various locations around Byron. It's just that he doesn’t know because he's not local.

……

EL-HAGE: Of course. I don't mean to interrupt you.

WITNESS HOULDEN: If you have ten horses at $160 a week, that's $1,600 a week. Okay? That, that would require approximately 5 hectares of land. So there's your holding income that you can do a, a very low use which Mr Svikis has said you can do without council consent. You can do those type of uses on the site while you're doing all your other things, while you're putting your planting together, while you're investigating the, the contamination.

Part of the contamination raised which is relating to the, to the, to the dip site that's on the other side of the railway line - there's a swimming pool there and two houses next to it.

EL-HAGE: Do you tell the commissioner that where there is disagreement between you and Mr Jackson on a particular topic, that she should prefer your view because of the fact that you have more local knowledge than he does?

WITNESS HOULDEN: I'm saying that my, my selection of my evidence is actually - is, is better as well. Because to compare - if we're, if we're working off the proposition of valuing the subject site based on a - an entirely vegetated site which is located southwest of Byron Bay on Skinners Shoot Road and we're saying they're the same, well I think it's pretty obvious that it's not true.”

Tcpt p 264 [23-50]; p 265 [1-50].

I do not accept Mr Houlden’s comparable sales analysed on the basis that Area 10 will be upzoned to residential. I find that Mr Houlden’s methodology is not appropriate in applying the test in Limina at pars [113] and [116], i.e. when applying a more beneficial use than the existing use, the exercise is underpinned by concepts of feasibility, realism, practicality and reasonableness reviewed in the context of all the circumstances of the land. And consideration must only be given to realistic options, and remote and speculative possibilities are to be disregarded.
The Court, exercising its Class 3 jurisdiction, is not obliged to act only on the basis of evidence adduced by expert valuers who appear as witnesses. As judicial valuer, the Court is entitled to reject the whole of the expert evidence and, drawing on the experience of the Court, do as best as it can to identify an appropriate level of discount or an appropriate quantum of adjustment to the comparable sales (Leichhardt).
As at the 2021 and 2022 Valuation Years I accept the evidence of Mr Jackson in relation to his analysis of comparable sales to determine the underlying capital value of the land in each year to be $760,000. The only sale that Mr Houlden relies on to derive a rate of $200/m² is Lot 25 William Flick Lane. Mr Jackson did not rely upon this sale because the sale site has a different zoning, is not impacted by conservation or environmental land, has an existing development consent for a nursery and yoga studio, is not flood prone so does not require any filling, and has existing established road infrastructure and ready access. [112]
112. Ex B EB Tab 9 p 19 at [111-112].
However, applying the reasoning in Limina, that the ‘use of the property that maximises it potential, which is physically possible, legally practicable and financially feasible”, and Leichhardt at [83], I consider the value at both 2021 and 2022 Valuation Years subject to a premium being paid for the location and possible beneficial potential of the eastern end of the Land adjacent to Kendall Street and the railway line (Everest at [58]). I apply the premium to 2.5ha being the area of land the Applicant’s expert hydrologist has estimated would be available for residential subject to filling, and meeting all other necessary constraints on the Land. My reason for giving a premium are:

Since 2020 Council has supported a rezoning of part of the subject Land (Area 10 approximately 1ha) to zone R2 Low Density Residential and/or R3 Medium Density Residential in its Strategy.

As at the 2021 and 2022 Valuation Years the DPE had failed to endorse Council’s Strategy, and it had indicated its concerns to be in relation to coastal hazard, biodiversity and flooding.

The concerns of the DPE were confirmed in its letter to the Council 17 June 2024 (Ex M) when enclosing the Council’s endorsed 2041 Strategy (Barkat at [21]). But that is not the end of the matter.

The letter from the Department (Ex N) stated, inter alia:

“ * proposed investigation Area 17 at Ewingsdale Road, Byron Bay, as this area is reliant on the completion of Council’s Coastal Hazard Study to enable an informed decision about the impact of the 100-year coastal hazard line on this site.”
Area 17 in the 2041 Strategy is Area 10 in the unendorsed 2020 Strategy.

When Council adopted the 2020 Strategy, it indicated that Area 10 was the only greenfield site within the 2020 Strategy. This demonstrates how rare greenfield sites are within close proximity to Belongil Beach and the Byron Bay town centre which, even with the constraints on this Land, are possibly available for upzoning to residential.

I accept that there is a possible “upside” to development on the subject Land subject to Council’s completing a satisfactory Coastal Hazard Study, bearing in mind that the eastern boundary of the subject Land is the railway line which is on elevated land, and the concern is if the rockwall along Belongil Creek is removed (part of Belongil Creek forms the northern boundary to the Land):

In 1988 Byron Shire Council adopted coastal erosion hazard mapping, and the Land is identified in the BDCP 2014, Chapter E5.4.1: Development and servicing of land affected by predicted coastal hazards. This mapping indicates that the land is affected by coastal erosion at its eastern and northern edges. [113]
113. Ex B EB Tab 2 p 59 (Mr Svikis’ report in chief).

Council’s Coastline Hazards Assessment Updated BMT WBM 2013 reveals that modelling found that if Belongil rock protection was removed, the Land would be slightly affected in its north-east corner by coastal hazards in the 2100 maximum scenario. This scenario is based on the concept of planned retreat where property and infrastructure east of the subject land are not protected when coastal hazards approach. [114]
114. Ex B EB Tab 2 p 60 (Mr Svikis’ report in chief).

There is a likelihood that once the Coastal Hazards Study has been carried out by Council that Council will continue to support a rezoning of part of the Land near Kendall Street and/or the railway line which may be able to be filled for residential development. The fact that Council is extremely short of greenfield sites proximate to the Byron Bay town centre and Belongil Beach supports this conclusion.

This conclusion is further supported by applying the test in Kelliher that in the context of a question about the prospects, at the date of valuation, of future planning permission being given for a particular (more profitable) use, it is well established that the question is to be approached objectively, by reference to orderly and proper planning and not subjectively [116].

There are no truly or genuinely comparable sales to the subject Land for the purpose of determining a premium.

Having regard to all of the evidence in this case, and doing the best I can, I determine that a premium of 40% would be reasonable.

Therefore, pursuant to s 40(1)(a) and (b) of the VL Act, and s 39(2) of the LEC Act, I will revoke the Valuer-General’s determination of value, and determine that the land value for the relevant periods are:

Land Value for valuation date 1 July 2021 $785,000 (being area of land 15.17ha x $50,000/ha = $758,500 plus a 40% premium on 2.5ha = $50,000 making at total of $808,500 rounded to $810,000).

Land Value for valuation date 1 July 2021 $785,000 (being area of land 15.17ha x $50,000/ha = $758500 plus a 40% premium on 2.5ha = $50,000 making at total of $808,500 rounded to $810,000).

Having determined land values for each of the 2021 and 2022 Land Valuation Years to be below the values ascertained by the Valuer-General the Applicant has discharged the onus under s 40(2) of the VL Act as the Land value for the 2021 and 2022 Valuation Years is less than the amount determined by the Valuer-General (Perisher at [86] and Kogarah). Accordingly, it is appropriate that a decision is made in place of the decision to which the appeal related.
The appeals are upheld, and pursuant to s 40(1)(a) and (b) of the VL Act, the Court revokes the decisions of the Valuer-General and makes a decision in place the decisions of the Valuer-General as set out below.

Orders:

The Court orders that in Proceedings nos 2023/291800 and 2023/291801:

The appeals are upheld.

The Valuer-General’s decision dated 18 July 2021 disallowing the Applicant’s objection to the Valuer-General’s valuation of Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the valuing year 2021 is revoked.

The Valuer-General’s decision dated 18 July 2021 only allowing in part the Applicant’s objection to the Valuer-General’s valuation of Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the valuing year 2022 is revoked.

The value of the land being Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the Land Valuation Year 2021 is $810,000.

The value of the land of Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the Land Valuation Year 2022 is $810,000.

M Peatman

Acting Commissioner of the Court

**********

Endnotes

Decision last updated: 24 October 2024

Medium Neutral Citation:	Hammock Investments Pty Ltd v Valuer General of New South Wales [2024] NSWLEC 1673
Hearing dates:	1, 2, 3, 4, 5 July and 28 August 2024
Date of orders:	24 October 2024
Decision date:	24 October 2024
Jurisdiction:	Class 3
Before:	Peatman AC
Decision:	The Court orders that in Proceedings nos 2023/291800 and 2023/291801: (1) The appeals are upheld. (2) The Valuer-General’s decision dated 18 July 2021 disallowing the Applicant’s objection to the Valuer-General’s valuation of Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the valuing year 2021 is revoked. (3) The Valuer-General’s decision dated 18 July 2021 only allowing in part the Applicant’s objection to the Valuer-General’s valuation of Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the valuing year 2022 is revoked. (4) The value of the land being Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the Land Valuation Year 2021 is $810,000. (5) The value of the land of Lot 350 in Deposited Plan 755695 known as Lot 350 Ewingsdale Road Byron Bay for the Land Valuation Year 2022 is $810,000.
Catchwords:	VALUATION OF LAND – appeal against valuations by Valuer-General – s 6A of Valuation of Land Act 1916 (NSW) – determination of land value – upzoning timing - constraints
Legislation Cited:	Environmental Planning and Assessment Act 1979, s 9.1 Land and Environment Court Act 1979, ss 19, 39 Valuation of Land Act 1916, ss 6A, 29, 37, 40 Byron Local Environmental Plan 2014, cll 2.1, 2.2, 4.2A, 5.21, 5.22, 6.8
Cases Cited:	Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 Arcus Shopfitters Pty Ltd v Western Australian Planning Commissioner [2002] WASC 174; (2002) 125 LGERA 180 Attard v Transport for NSW (2014) 205 LGERA 396; [2014] NSWLEC 44 Barkat v Roads and Maritime Services [2019] NSWCA 240 Bone v Wallalong Investments [2012] NSWSC 137 Buhach v Transport for New South Wales [2022] NSWLEC 148 Chircop v Transport for NSW [2014] NSWLEC 63 Coundrelis v Roads and Traffic Authority of (NSW) [2008] NSWLEC 72 DBW Reynolds Pty Ltd as trustee for the DBW Reynolds Family Trust v Public Transport Authority [2023] WASC 165 De Ieso v Commissioner of Highways (1981) 47 LGRA 412; (1981) 27 SASR 248 Everest Project Developments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 and Another (2010) 177 LGERA 43; [2010] NSWLEC 88 Gajapatiraju v Revenue Divisional OfficeVizagapatam (1939) AC 302 Graham Trilby Pty Ltd v Valuer General [2009] NSWLEC 1087 Graham Trilby Pty Ltd v Valuer-General [2008] NSWLEC 217 Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68 Housing Commissioner (NSW) v Falconer [1981] 1 NSWLR 547 Jameson v Rail Corporation (NSW) [2014] NSWLEC 83 Kelliher v Commissioner for Main Roads (No 2) [2015] WASC 478 Kenny & Good Pty Ltd v MGICA (1992) Ltd 199 CLR 413; [1999] HCA 25 Kogarah Town Centre Pty Ltd v Valuer General (No 3) [2014] NSWLEC 1124 Leichhardt Council v Roads & Traffic Authority (NSW) (2006) 149 LGERA 439; [2006] NSWCA 353 Limina Holdings Pty Ltd ITF Galileo Superannuation Fund v Valuer General of New South Wales [2019] NSWLEC 110 Marroun v Roads and Maritime Services [2012] NSWLEC 199 McBride v MidCoast Council [2021] NSWLEC 100 McKay v Commissioner of Main Roads (No 7) [2011] WASC 233 New South Wales Cremation Company Pty Ltd v Valuer-General [2016] NSWLEC 135 Norwest City Pty Ltd ATF Norwest City v Valuer General [2018] NSWLEC 50 Olefines Pty Ltd v Valuer-General of New South Wales (2018) 228 LGERA 407; [2018] NSWLEC 18 Panori Pty Ltd atf Sleiman Property Trust v Valuer General [2023] NSWLEC 116 Park v Allied Mortgage Corporation Ltd (Federal Court of Australia, 5 July 1995, unrep) Parramatta City Council v Valuer-General and Another (1965) 10 LGRA 160 Perisher Blue Pty Ltd as Trustee for the Snow Trust v Valuer General (NSW) [2023] NSWLEC 41 Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151 Riverbank Pty Ltd v Commonwealth (1974) 48 AJLR 483 Royal Sydney Golf Club v Commissioner of Taxation (Cth) (1957) 97 CLR 379; [1957] HCA 31 Sales and Ors v Transport for NSW (No 2) [2021] NSWLEC 96 Secretary to the Department of Economic Development, Jobs, Transport & Resources v Manor Lakes (Werribee) Pty Ltd (2017) 224 LGERA 195; [2017] VSCA 114 Spicer v Valuer-General (1963) 10 LGRA 319 Tenstat Pty Limited v Valuer General, Woolworths Limited v Valuer General [2012] NSWLEC 1361 Trandos v Western Australian Planning Commission [2001] WASCA 346; (2001) 117 LGERA 256 [73] Trust Company of Australia Ltd v Valuer-General (2007) 154 LGERA 437; [2007] NSWCA 181 Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7 Vilro Pty Ltd v Roads and Traffic Authority (NSW) (2010) 179 LGERA 47; [2010] NSWLEC 234 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 Warwick Farm Central Pty Ltd v Valuer General [2024] NSWLEC 25 Willis v Roads and Maritime Services(NSW) [2015] NSWLEC 165 Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47
Texts Cited:	Byron Shire Coastal Hazards Assessment Update 2013 Byron Shire Development Control Plan 2014 Byron Shire Residential Strategy 2020 Byron Shire Residential Strategy 2041 Floodplain Development Manual 2005 North Coast Regional Plan 2036
Category:	Principal judgment
Parties:	Hammock Investments Pty Ltd ACN 003 240 551 (Applicant) Valuer General of New South Wales (Respondent)
Representation:	Counsel: H El-Hage SC, with T Poisel (Applicant) R White (Respondent) Solicitors: Otto Martiens Lawyers (Applicant) Crown Solicitor’s Office of NSW (Respondent)
File Number(s):	2023/291800 and 2023/291801
Publication restriction:	No