JL & MM Muir Properties Pty Limited v Roads and Traffic Authority of New South Wales

[2006] NSWLEC 508

Land and Environment Court

of New South Wales

CITATION:	JL & MM Muir Properties Pty Limited v Roads and Traffic Authority of New South Wales [2006] NSWLEC 508
PARTIES:	APPLICANT JL & MM Muir Properties Pty Limited RESPONDENT Roads and Traffic Authority of New South Wales
FILE NUMBER(S):	30222 of 2003
CORAM:	Talbot J
KEY ISSUES:	Compulsory Acquisition of Land :- injurious affection - determination of appropriate discount for risk using before and after method.
LEGISLATION CITED:	Environmental Planning and Assessment Act 1979 Land Acquisition (Just Terms Compensation) Act 1991
CASES CITED:	JL & MM Muir Properties Pty Ltd v RTA [2004] NSWLEC 621; RTA v Muir Properties Pty Ltd [2005] NSWCA 460
DATES OF HEARING:	04/07/2006, 05/07/2006, 06/07/2006
DATE OF JUDGMENT:	08/17/2006
LEGAL REPRESENTATIVES:	APPLICANT Mr J J Webster SC with Mr A M Pickles (barrister) SOLICITORS Abbott Tout RESPONDENT Mr R P Lancaster (barrister) SOLICITORS Clayton Utz

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Talbot J

17 August 2006

30222 of 2003 JL & M M Muir Properties Pty Limited v Roads & Traffic Authority of New South Wales

JUDGMENT

1 Talbot J: The applicant has objected to the amount of compensation offered by the respondent in respect of the acquisition of certain lands fronting Windsor Road near Kellyville. Justice Bignold determined the compensation payable in the sum of $7,985,850.00 made up as follows:

1. Market value of acquired land: $4,985,850.00

2. Decrease in value of retained land: $3,000,000.00

2 The total area of land acquired was 2.94 ha. The resumed land was acquired for the purposes of improvements to Windsor Road and the provision of a transitway.

3 Following the acquisition the remaining lands of the applicant effectively comprise 2 sections in 4 parcels as follows:

· Parcel A: zoned Residential 2(a4) with an area

of 4.847 ha.

· Parcel B: zoned Special Business 3(b) and Open

Space 6(a) with a total area of 6.177 ha.

· Parcel C: (part of parcel B) zoned Special Business

3(b) with an area of 4 ha.

· Parcel D: (part of parcel B) zoned Open Space 6(a)

with an area of 2.177 ha.

4 The respondent appealed the decision of Bignold J (JL & MM Muir Properties Pty Ltd V RTA [2004] NSWLEC 621) in respect of the award of compensation for injurious affection to Parcel C. The applicants cross-appealed the decision of Justice Bignold not to award compensation for injurious affection in respect of Parcel D. Neither party seeks to disturb the assessment of the market value of the resumed land at $4,985,850.00. There is no claim for injurious affection in respect of Parcel A.

5 Justice Tobias, who delivered judgment in the Court of Appeal with which the other judges agreed (RTA v Muir Properties Pty Ltd [2005] NSWCA 460), found that the approach taken by Bignold J to the relevant discounting exercise to take account of the element of risk of direct access from Windsor Road to Parcel C was contrary to proper valuation principle.

6 Tobias JA explained at [79] that:

What was to be discounted for the risk of not obtaining consent to a commercial development of Parcel C that enjoyed direct access from Windsor Road, was not the differential between the "before" and "after" value of that land without that risk but the "before" value itself. There was no risk associated with the "after" value in that his Honour had found as a matter of fact that direct access from the transitway to Parcel C would be absolutely denied. But that was not the case, as he found, with respect to the "before" situation with the consequence that the discount for risk had to be applied only to the "before" value.

7 At [82] Justice Tobias suggested an alternative approach to discounting the “before” value would have been for Bignold J to determine that a prudent hypothetical purchaser of Parcel C would have reduced the purchase price he or she otherwise would have paid for that land in the ”before” exercise by the whole or part of what he or she estimated it would cost to provide alternative access other than from Windsor Road.

8 The issue in respect of the relevant discounting exercise has been remitted to this Court for further consideration. The matter has been listed by the Chief Judge before me in the absence of Bignold J, who is on extended leave. I am directed by the Court of Appeal reasons to determine an appropriate discount rate which a prudent hypothetical purchaser would have applied to the “no risk” purchase price he or she otherwise would have paid for Parcel C in the “before” valuation exercise by reference to the evidence of town planning expert witnesses Mr Anthony Rowan and Mr Malcolm Drummond, depending on which of their opinions, with or without qualifications or variation, I accept.

9 Mr Rowan is the town planning consultant retained by the respondent and Mr Drummond is the consultant planner retained by the applicant company.

10 The formal question remitted for determination is as follows:

The respondent’s claim for compensation for injurious affection under s 55(f) of the Land Acquisition (Just Terms Compensation) Act 1991 with respect to the whole of the 6.177 hectares retained by it after the acquisition by the appellant of Lot 2 in DP 1043755 and Lots 18, 19, 26 and 27 in DP 1031575… in accordance with these reasons for judgment.

11 The area of 6.177 ha is the whole of Parcel B comprising Parcel C adjoining Windsor Road within the Special Business 3(b) zone, and Parcel D comprising 2.177 ha to the north of the Special Business land in the Open Space 6(a) zone. It is claimed that Parcel D sustained a decrease in value by reason of the proposal for the improvement of Windsor Road. That decrease is reflected in the value of the land for any inchoate claim for compensation against the Council as a consequence of the Open Space zoning.

12 On 9 March 2006 I adopted the following joint statement by the parties of undisturbed relevant findings by Bignold J:

1. The public purpose for which the compulsorily acquired lands were acquired under the Roads Act 1993 were for:

(i) the widening and upgrade of Windsor Road; and

(ii) the provision of a transit way.

2. The transit way purpose involves a denial of access between the transit way and the Applicant’s retained lands [Bignold J at [38]; NSWCA at [10]-[11]].
3. The zoning of the acquired and residue land at the date of the acquisition was as follows:
(i) the northern section of acquired land (1.598 ha) was zoned Special Uses 5(b) (Existing and Proposed Roads) and the adjoining residue land (4.847 ha) was zoned Residential 2(a4) (together referred to by NSWCA as Parcel A);
(ii) the southern section of acquired land (2,829 m 2) was zoned Special Business 3(b) and the adjoining residue land (6.177 ha) (Parcel B) was zoned part Special Business 3(b) (as to 4 ha adjoining Windsor Road) (Parcel C) and part Open Space 6(a) (as to 2.177 ha to the north of the Special Business land) (Parcel D).
[Bignold J at [2], [47]; NSWCA at [3] [4]]
4. The zoning assumptions to be made for the purposes of determining the market value of the compulsorily acquired land are as follows:

(i) The northern section is to be valued on the basis of the assumed zoning of Residential 2(a4); and

(ii) The southern section is to be valued on the based on [sic] the actual zoning of Special Business 3(b) [Bignold J at [67]].
5. The market value of the compulsorily acquired land is as follows:

(i) the northern section is $3,995,000; and

(ii) the southern section is $990,850 ($350 per m2).

The total market value (s55(a)) of the compulsory acquired land is $4,985,850 [Bignold J at [68]-[69]; NSWCA at [7]-[8]].

7. Before acquisition there was a possibility of direct access from Parcel C to Windsor Road pursuant to cl 44(3) of the LEP [Bignold J at [98]; NSWCA at [68]]. However, there was a risk that consent would not have been obtained for direct access [Bignold J at [120]; NSWCA at [77]].

Background

13 In order to understand the effect of the evidence of Mr Rowan and Mr Drummond it is necessary to have regard to and examine the historical documents relating to the evolutionary planning process undertaken by various authorities in respect of the development and improvement of Windsor Road and the town planning history as it applied to the subject land.

14 When Sydney Regional Environmental Plan No. 18 – Public Transport Corridors (“SREP18”) was made in 1989, a possible route for a public transport corridor was delineated from Hoxton Park to Baulkham Hills via the Parramatta City Centre, including the section of Windsor Road up to Barina Downs Road.

15 A submission made on 12 June 1990 pursuant to s 64 of the Environmental Planning and Assessment Act 1979 (“EP&A Act”) by Baulkham Hills Shire Council in respect of the Kellyville/Rouse Hill draft LEP refers to a Special Uses 5(a) Zone. Under the draft plan a corridor is proposed which may in the future be utilised for public transport purposes. The submission states that there are a number of significant issues remaining unresolved including a commitment by the State Government to acquisition of the corridor and its utilisation.

16 The alignment of the proposed public transport corridor extended northward from Barina Downs Road to the northern side of an existing intersection of Poole Road with Windsor Road and thereafter diverting cross-country to the eastern side of Windsor Road for about 2.3 kilometres to enter the proposed Mungerie Park Centre, near its southeast corner. Although the NSW Department of Transport in principle supported the structure and mode of the proposed public transport system the draft LEP for the Parklea Release Area exhibited in 1990 did not show the transport corridor extending for the full length.

17 Baulkham Hills LEP 1991 (“LEP 1991”) was gazetted on 1 March 1991. Baulkham Hills LEP 1991 (Amendment No. 1), gazetted 28 June 1991, shows an area incorporating Windsor Road in zone 5(d). Although some widening of Windsor Road is contemplated by the LEP map it is not readily apparent that sufficient land was to be set aside to accommodate a transitway for public transport. Clause 11A was inserted by Amendment No. 1 as follows:

11A. (1) This clause applies to land to which Baulkham Hills Local Environmental Plan 1991 (Amendment No. 1) applies.
(2) The Council is not to grant consent to the carrying out of development of any land to which this clause applies unless the Council is satisfied that arrangements satisfactory to the Roads and Traffic Authority have been made for the making of appropriate payments towards the provision of classified roads to service that land.
(amendment 28.06.91).

18 At all relevant times since 1985 State Environmental Planning Policy No. 11 – Traffic Generating Developments (“SEPP 11”) provided in cl 5 that any provision in an environmental planning instrument requiring a consent authority to take into consideration any representations of the [Department of Main Roads] was of no force or effect. Clause 5 did not apply to cl 11A(2) in its amended form from 1991. Clause 5 has no application to payments.

19 On 31 October 1996 the Department of Transport notified Baulkham Hills Shire Council that it was keen for the corridor to be maintained if it could be guaranteed that the corridor is likely to be developed in conjunction with the first stage of the development of the Mungerie Park South Regional Centre. Subject to a review to be undertaken by the Department of Transport, the Department of Urban Affairs and Planning (“DUAP”) supported that view and confirmed that no significant changes to the proposed routes shown in a draft Amendment No. 52 to LEP 1991 should be made.

20 However, by 16 September 1997 DUAP had decided to recommend that the public transport corridor should be deferred. In the s 69 report accompanying draft Amendment No. 52 it recommended deferral until issues in relation to the development of the Mungerie Park Town Centre were resolved.

21 On 14 October 1997 the Department advised the Council that a recent planning study into the development strategy for the Mungerie Park Town Centre undertaken on behalf of the Department indicated that the corridor alignment proposed in the draft LEP was inadequate in a number of respects.

22 The map published in the Government Gazette on 17 October 1997 for the purposes of Amendment No. 52 shows two proposed public transport corridors running from north to south across Windsor Road in the general direction of Mungerie Park. By the same amendment the area to be used for road widening (by inclusion in the 5(b) zone) along the frontage to the subject land was, except to a small extent, removed. A new cl 11(2) was inserted forbidding a person to carry out development unless arrangements satisfactory to the Roads and Traffic Authority for classified roads have been made. Clause 11(2) contradicts clause 5 in SEPP 11.

23 A report prepared by the Department of Transport, “Action for Transport 2010 a Plan of the Proposed Rapid Bus Only Transitway,” showed the route from Parramatta to Mungerie Park along Old Windsor Road. This route was confirmed by a draft of Development Control Plan 200 – Kellyville/Rouse Hill Release Area (“DCP 200”) prepared in February 1998.

24 On 17 March 1999 at a meeting between representatives of the Baulkham Hills Shire Council, the RTA, the Department of Transport and DUAP in regard to Mungerie Park it was noted that no decision had yet been made in relation to foreshadowed measures for a public transport corridor on Windsor Road. A further draft of DCP 200 in June 1999 noted that access would be denied along the frontage of the subject property. The earlier proposed public transport corridors were deleted at that time and there was an indication that Windsor Road would be widened.

25 On 14 December 1999 Baulkham Hills Shire Council adopted draft DCP 200 with, inter alia, the following amendment:

The access denial notation with respect to 3(b) zoned land adjacent to the Old Windsor/Windsor Road intersection be deleted and Section 3.4.14 be inserted in the DCP (written instrument) to clarify the issue of vehicular access to arterial and sub-arterial roads.

26 DCP 200 listed amongst its Road Planning objectives the following:

Long Term

The intersection or treatment to Windsor and Old Windsor Road to incorporate either local access or service road to facilitate the orderly development of commercially zoned lands north of Whiteheart Bridge.

27 According to the applicant, the above objective is relevant as there is no alternative access provided to land along the road alignment of the subject property. Thus, there could be access to Windsor Road itself by either local access or service road. Moreover as the Court of Appeal noted (at [24]) Amendment No. 1 inserted cl 11A in the LEP and (at [27]) in all probability at the same time added cl 44 as follows:

Access to a classified road-Urban
44. (1) This clause applies to all land within Zone No. 2(a), 2(a1), 2(a2), 2(a3), 2(b), 2(c), 2(d), 3(a), 3(b), 4(b) or 10 (a).
(2) A person must not carry out development on land to which this clause applies, being land that adjoins a classified road, unless vehicular access to and from the land is made by way of another road (not being a classified road).
(3) However, if the proposed development could be carried out on the land concerned but for subclause (2), the Council may, for the purposes of the proposed development, allow permanent vehicular access to and from a classified road, if in the opinion of council, alternative access to the site of the proposed development is neither practical nor provided by another road (or a proposed road identified in a development control plan).

28 Subsequently the RTA advised Muir by letter dated 6 June 2001 that:

With respect to DCP 200 continued access to the arterial and sub arterial network is permitted until such time as alternative access is available. The property access plans developed to date by the RTA provide for this.

29 By Amendment No. 57 published in the Government Gazette on 7 December 2001 clause 11 of LEP 1991 was amended so that it did not apply to the subject land.

30 The compulsory acquisition took place on 13 December 2002 pursuant to a notice published in the NSW Government Gazette.

31 The applicant’s case is that before acquisition there was a risk that access could not be provided directly from Windsor Road to the subject land whereas the respondent says there was no real chance of direct access being obtained.

32 The applicant’s contention is based upon the opinion of Mr Drummond that the provisions of DCP 200 were consistent with cl 44 of the LEP and that he would have advised the prospective purchaser of the subject land that access was available from Windsor Road to the 3(b) Special Business zoned land. On the other hand Mr Rowan construed the relevant provisions of SREP 19, LEP 1991 and the supporting DCPs as fully appreciating the principle of “access denied” and that on these bases such an option would not be supported by either the RTA, the Department of Transport, The Department of Planning or the Council. Mr Rowan cites “access denied” as a well establish principle for arterial roads under Sydney Regional Environmental Plan No. 19 – Rouse Hill Development Area (“SREP 19”) and in the RTA’s submission to draft LEP 1991 in 1990. However, Mr Drummond disagrees considering “access restriction” is a more appropriate term for the RTA practice relating to arterial roads.

33 In summary Mr Drummond’s position is that up until 1999, when there was a change in the location of the Public Transport Corridor from the SREP 18 Corridor position to the use of the Windsor Road/Old Windsor Road route the 3(b) land was not affected by any controlled access provision and had the ability to be developed in accordance with its zoning. If he had been asked to advise a hypothetical purchaser as at the date of acquisition and had been required to ignore all the steps taken since 1999 to provide a Transit Corridor along Windsor Road, he would have advised that purchaser he would have anticipated access for development directly from Muir’s 3(b) land to the Windsor Road frontage.

34 Mr Rowan on the other hand relied upon the concurrence requirements under cl 11(2) so that the Council was not able to grant development consent irrespective of the provisions of cl 44 of LEP 1991. In his opinion the Muir land would not have been able to achieve direct access to Windsor Road as that did not form part of the strategy for the release area and would have the potential to compromise the Major Public Transport Corridor under SREP 19. Mr Rowan says that, without the upgrading in Windsor Road, phasing the development on the Muir land would have been considered premature, detrimental to the wider road network and possibly constraining upon future transport opportunities anticipated under SREP 19. Mr Rowan also expressed an opinion that when the proposed transitway is constructed a proposed service road will provide similar access to the undeveloped Muir land as was enjoyed prior to the acquisition.

35 Mr Drummond confirmed in cross-examination and in answer to questions from Bignold J, that before the resumption he was confident that the land owner would have obtained consent for development of the subject land as the authorities would have regarded job creation as “certainly equally as important as any traffic corridor”. At the conclusion of cross-examination on 13 November 2003 Mr Drummond was asked to assume there was no absolute bar to direct access after acquisition so that there was no material difference between the before and after situation to the problems that needed to be overcome before development of the 3(b) land could take place. His answer to the question put to him was equivocal. At that point he admitted (when the challenge was put to him by Justice Bignold), he was not quite as confident as he had been before. However, that is ultimately irrelevant as the finding by Bignold J at [103] shows:

…it is the decisive and final effect of the declaration under the Roads Act of the transitway proposal with a denial of access between it and the Applicant’s retained commercially zoned lands (rather than the more debatable effect (and operation) of the relevant planning provisions) that causes a decrease in the value of the Applicant’s retained commercially zoned lands by virtue of the absence of a means of access necessary and appropriate to support the type of commercial development that may be carried out conformably to that zoning under the LEP.

36 It has to be accepted that Bignold J and the Court of Appeal proceeded on the basis that following acquisition access would not be available from Windsor Road.

37 That leaves for debate an assessment of any discount to be applied to the agreed value of $350 per m2 as it applied to the southern portion of the land on the basis that this could be used for Special Business 3(b) purposes. In order to make that assessment the basis for the agreement by the valuers that $350 per m2 was the appropriate value of the land needs to be properly understood.

38 The alternative use of the land for residential purposes attaches an underpinning value of $250 per m2 to Parcel C after the resumption. Any discount that reduces the value for the land on the basis of a 3(b) use below that figure would therefore be unrealistic.

The Valuers

39 Bignold J adopted the rate of $350 per m2 for the southern section of the compulsory acquired land in the Special Business 3(b) zone. In doing so he recognised the agreement of the valuers Mr Wood and Mr Large that the 2,831 m2 had a value of $990,850.00 at the date of acquisition.

40 Bignold also found at [98] that before the acquisition there was a possibility of direct access from Parcel C to Windsor Road pursuant to cl 44(3) of the LEP. He nevertheless recognised there was a risk that consent would not have been obtained for direct access at [120]. The latter was recognised by Tobias JA at [77].

41 The applicant and the respondent construed the agreement by the valuers in respect of the rate of $350 per m2 in different ways.

42 Mr Lancaster, for the respondent relies upon the following statement made by Tobias JA at [58]:

I mention the appellant's submissions to this Court on this issue at this point because at [106] and following, his Honour went on to consider what he referred to as "the factual basis" for the respondent's claim for compensation for injurious affection. In this context, the respective valuers for the parties, Mr Large for the respondent and Mr Wood for the appellant, ultimately agreed that the Special Business 3(b) zoned land (Parcel C) should be valued at $350 per m² upon the basis that direct access was available to that land from Windsor Road and $250 per m² for the Residential 2(a4) zoned land (Parcel A), a difference of $100 per m².

43 It is evident that Tobias JA accepted that to be the case when he also made the observation at [79] already set out above at [6]. Therefore according to Mr Lancaster, the “before” value of Parcel C is an amount that is determined by starting with $350 per m² and discounting that value to reflect the risk of not obtaining consent to a commercial development of Parcel C that enjoyed direct access from Windsor Road.

44 On the other hand, the applicant’s contention by Mr Webster SC is that the figure agreed between Mr Large and Mr Wood as to the value of the 3(b) land was not a figure arrived at on the basis that there was “no risk” of obtaining consent for access to Windsor Road. He says the figure of $350 per m² was on the basis of considering the evidence of Mr Rowan and Mr Drummond. That is, the valuers had already determined what the degree of risk was to a hypothetical purchaser based on the conflicting evidence of the planners and reached an agreed figure of $350 per m² accordingly.

45 Mr Large prepared his valuation report on the basis that before acquisition the land had Windsor Road frontage expectation from the benefit of the operation of cl 44 of the LEP and cl 54 of DCP 200 so that the expectation was that access would not be restricted unless a practical alternative existed.

46 Mr Wood in his original valuation attributed $350 per m² to the Special Business 3(b) land on the basis that he accepted the evidence of Mr Rowan that neither the provisions of DCP 200 or Rouse Hill Regional Centre Development Control Plan 201 (“DCP 201”) anticipated direct access to Windsor Road and that options depending upon compliance with clauses 11(2) and 44 of the LEP were very restricted. He further concurred with the conclusion drawn by Mr Rowan that a claim for decrease in value under s 55(f) of the Land Acquisition (Just Terms Compensation) Act 1991 (“Just Terms Act”) could not be substantiated thereby recognising no change in the position regarding access and that:

The ultimate orderly and economic development of the Muir land is contingent upon the upgrading and widening of Windsor Road and the planning control relating to the Rouse Hill Development Area.

47 It is from those respective positions that the valuers ultimately negotiated the agreement to value the Business 3(b) land at $350 per m². The evidence before me and before Bignold J confirmed by an examination of the transcript of the oral evidence establishes that both valuers took account of a risk for obtaining direct access from Windsor Road before they reached their agreement. Bignold J and the Court of Appeal adopted the agreement.

48 I accept that Tobias JA at [58] and [79] assumed that a critical factor in distinguishing the “before” and “after” situation was that following acquisition direct access will be denied. However, an examination of the evidence from the two valuers confirms that as a matter of fact they both were aware of, took account of, and based their agreement upon the advice given by Mr Rowan and Mr Drummond that there would be a risk associated with obtaining direct access to Windsor Road even before the resumption occurred. That leads me to the inevitable conclusion that there should be no discount of the $350 per m² in the “before” situation as both valuers had already taken the risks associated with access to Windsor Road into account. Any further discount would be to further devalue the land in conflict with the clear evidence of the valuers, adopted by Bignold J and the Court of Appeal. The language used by Tobias JA is descriptive of a general concept and does not amount to a definitive finding of fact that the availability of direct access was absolute and necessarily without risk.

49 I therefore find that the rate of discount “to be applied” to the agreed value of $350 per m² for the Special Business 3(b) land in the before situation is nil. Such a result is consistent with the value agreed and accepted by Bignold J in respect of the acquired land. It is difficult to see how there could be any real discrepancy between the two outcomes.

50 The Court of Appeal suggested two alternative approaches to determining an “after” value for the 3(b) land:

(1) Apply a discount (not necessarily the 25% applied by Bignold J) to the agreed “before” valuation figure of $350 per m².
(2) Reduce the purchase price the prudent purchaser otherwise would have paid for the land in the “before” exercise by the whole or part of what he or she estimated it would cost to provide alternative access other than from Windsor Road.

51 Mr Large identified three alternatives in his Supplementary Statement of Evidence dated 5 May 2004 as follows:

1) Reduction in value of “3(b) Special Business” to a lesser use, possibly “Residential 2(a4)”.
2) Provision of suitable alternative access via Feeder Road from Windsor Road/Old Windsor Road intersection; and
3) Provision of a suitable bridge linking Mungerie Park Town Centre to the subject property .

52 Under the second and third alternatives Mr Large used his professional judgement to apply a discount of between 30% and 40% thereby reducing the value of the 3(b) land to at least $245 per m² and possibly $210 per m². The second alternative was roundly rejected by Mr Coady for the reasons explained by Bignold J at [113].

53 Mr Wood’s response to Mr Large’s opinion is reported at [110] by Bignold J. The effect of Mr Wood’s evidence is that:

…accounting for the alleged diminution in access to and from the subject property when compared with the comparable sales, $300 per square metre is a reasonable rate to be applied.

54 At [82] of the Court of Appeal’s judgment and [122] of Bignold J’s judgment there is reference to a rough costing, by Mr Large, of providing alternative acceptable access to enable the commercial land to be developed. The cost of a possible bridge and associated work for provision of the third alternative was estimated by Mr Large at between $2,275,000.00 and $3,000,000.00. The estimate was made in the absence of critical factors including the following:

· Agreement from Sydney Water, the owner of relevant land.

· Agreement from Lend Lease, the owner of relevant land.

· No provision of a bridge in the DCP.

· The assessment of risk of achieving the goal.

55 The preferred opinion offered by Mr Large after reading the reports of the traffic engineers, including the joint report is that the hypothetical purchaser would have discounted the potential from Special Business 3(b) to Residential 2(a4) thereby applying a value equivalent to $250 per m².

56 Taking the evidence of the traffic engineers and the valuers it is possible to stand in the shoes of the hypothetical purchaser and the theoretical vendor and appreciate that the vendor would be emphasising the remaining prospect of achieving commercial development in accordance with a 3(b) zoning, whereas the purchaser would be conscious that the assured best prospects were for medium density residential development.

57 Mr Wood would have provided advice in the range of $300 per m² whereas Mr Large would have supported a figure of only $250 per m². A purchaser may have paid a small premium over the medium density residential value to recognise the limited commercial development opportunity or other mixed use consisting of medium density residential and apartment buildings contemplated by Mr Wood so that the hypothetical parties to the transaction would in my opinion have reached a position of equipoise at $260 m² in the “after” situation.

58 That is at the lower end of the range between $250 and $300 because in my view the chances of achieving a viable commercial outcome were low.

59 The determination of injurious affection for the purposes of s 55(f) of the Just Terms Act in respect of the Special Business zoned land has a flow-on effect for the assessment of injurious affection caused to land in Parcel D within the Open Space 6(a) zone.

60 Tobias JA at [117] found that the basis of the relevant inchoate claim for injurious affection in respect of the Open Space zoned land as a consequence of the resumption was the entitlement of the respondent to have the market value of Parcel D determined upon the assumption that the rezoning was to be disregarded. He summed up at [120]:

Accordingly, I can see no reason in principle as to why Parcel D should not have sustained a decrease in its value by reason of the proposal for the transitway where that decrease is reflected in the value of that land for the purpose of any inchoate claim for compensation against the Council. In my opinion there is a clear nexus between the acquisition of the resumed land for the purpose of the transitway and the consequential denial of access from Windsor Road to Parcel C, and its effect upon the value of Parcels C and D to the extent to which each is to be valued in accordance with the fact (Parcel C), or on the assumption (Parcel D), that it is zoned Special Business 3(b).

61 The claim for compensation for injurious affection to Parcel D, which Bignold J rejected, has been remitted to this Court for determination as a consequence of Bignold J failing to give any reasons for rejecting this aspect of the applicant’s claim.

62 It is agreed between the valuers that the value of the Open Space 6(a) land would be the same as the 3(b) land but for a discount to account for the inchoate nature of the claim. The Open Space land could only be regarded as supporting an assumed Special Business 3(b) potential while ever there was a prospect of obtaining access from Windsor Road through the 3(b) land. After the resumption for the purpose of a transitway the potential for the underlying or assumed use of the Open Space land was limited by the denial of access from Windsor Road.

63 Mr Large adopts the same value for the 6(a) land as the 3(b) land whereas Mr Wood accepted the same value but for an undisclosed discount. I agree with Mr Lancaster that neither valuer addressed the value of the inchoate claim and the effect of the acquisition and denial of access from Windsor Road in satisfactory terms. The evidence is sketchy and insufficient in that respect.

64 The relevant planning position was explained by Mr Drummond as follows:

This Open Space 6(a) strip within parcel B (about 2.12 ha.) was originally zoned Special Business 3(b) in L.E.P. 1991. In 1997 Council required high land above the flood prone land (trunk drainage land acquired and owned by Sydney Water) to support a Golf Course or Sporting Field Complex. In 1997, without consulting with Muir they rezoned by amendment to L.E.P. 1991 this land from Special Business 3(b) to Open Space 6(a). Council acknowledged that the land would be acquired at 3(b) zone value. In 1998/99 I attended several meetings at Baulkham Hills Shire Council on behalf of Muir. At these meetings it was proposed by Sharon Fingland Council Planner and Brian Binning (Planning N.S.W.) that the land be rezoned back from Open Space 6(a) to Special Business 3(b). Council had recognised the acquisition costs of this land. Muir agree to the rezoning. The rezoning has not occurred. Recently I was asked to attend a meeting at Council with many Council officers regarding the Sports Complex proposal and Muir’s 6(a) land within parcel B . Council officers acknowledged that their allocated funds for the Sports Complex did not extend to cover acquisition of Muir’s 6(a) land however they would reconsider the lands future and advise. To date I have not received any decision as to the lands future.
Irrespective of the current indecision of the Council as to this part of the Muir land, it has to be considered, for purposes of acquisition, as land with Special Business 3(b) zone, which is the agreed basis for Council’s acquisition.

65 Mr Lancaster submits that in the absence of any evidence of a “trigger” in the form of a works programme or hardship the last paragraph of Mr Drummond’s evidence is “patently not correct”.

66 Mr Lancaster’s submission contrasts with the argument put by Mr Webster that as the Open Space was at the date of acquisition about to be rezoned back to Special Business 3(b) there should be no discount for acquisition delays because a developer would buy the land to redevelop it as 3(b) land rather than to acquire Open Space land on the basis there would be a claim for compensation. Mr Webster’s submission appears to be based on a view expressed by Mr Large in answer to questions in cross-examination put by Mr Lancaster. However the evidence of Mr Large is equivocal on this point. He acknowledged to Bignold J that the rezoning question at the date of acquisition was “under a cloud”. He also agreed with Mr Lancaster that the question whether or not council will “make that acquisition” is a matter of pure speculation at this stage.

67 Mr Wood in cross-examination recognised that although the land was zoned 6(a) at the date of acquisition an hypothetical purchaser would assess the price to be paid on the basis it was zoned Open Space 6(a) with a claim for compensation “but discount it because of the contingencies involved in getting compensation from council”. The proposed discount that Mr Wood might have applied in the “before” was never quantified and he was never given the opportunity to estimate or quantify an applicable discount in the “after” situation. Mr Large did not acknowledge a discount at all but instead maintained the position taken by him in the abovementioned extract from his written opinion evidence namely that the 6(a) land “has to be considered for purposes of acquisition as land with Special Business 3(b) zoning”.

68 In the light of the evidence in respect of the value of the Open Space 6(a) land and the nature of the inchoate claim the respondent claims that the compensation for that land could not rise higher than the figure reached after a discount applied to the value of $350 per m2 in two respects, namely:

(1) The problem with access is the “before” situation – that is already resolved by my earlier finding that the valuers took that element into account in determining the agreed figure of $350 per m2.

(2) The contingency of the inchoate claim and a profit allowance.

69 There is no evidence in respect of (2). I am not satisfied anymore than Tobias JA appeared to be that there is any reason in principle as to why Parcel D should not have sustained a decrease in its value by reason of the proposal for the transitway. I accept the evidence of both valuers that the value to be attributed to the Open Space land in Parcel D is based upon the value of 3(b) land. However I agree with Mr Wood that the 3(b) value cannot be applied directly as Mr Large insists and that there should be a discount or risk factor for the contingencies of obtaining that compensation from council in due course. The rate of the discount is clearly a relevant factor for calculating the amount of injurious affection to the Open Space land as it will skew the application of the reduction in value for the actual 3(b) land determined separately earlier in this judgment at $90 per m2. There is no evidence that allows me to determine that discount factor. The Court of Appeal judgment demonstrates that I am required to justify the discount rate by giving reasons. That is a task that is not open to me. In the circumstances the applicant has failed to prove its claim for injurious affection on the land in Parcel D zoned Open Space 6(a).

70 However a claim for injurious affection in respect of the Special Business 3(b) land comprising 4 ha has been substantiated and I allow it at the rate of $90 per m2 or $3,600.00.00 for the total of 4 ha.

71 Both parties should be given an opportunity to make submissions in relation to an appropriate discount to be applied to the value of 3(b) land for the purpose of determining the extent of the inchoate claim for compensation in the “before” and “after” situation as it applies to the 6(a) land. If necessary the written submissions can be supported by short written statements of evidence. The parties are directed to file and serve further submissions and evidence within 14 days of this judgement and reply within 10 days after that.

72 The exhibits will be retained. Costs are reserved.