Kajag Pty Ltd v Head, Transport for Victoria
[2023] VSC 392
•7 July 2023
IN THE SUPREME COURT OF VICTORIA Not Restricted AT MELBOURNE
COMMON LAW DIVISION
VALUATION, COMPENSATION AND PLANNING LIST
S ECI 2021 00902
KAJAG PTY LTD (ACN 062 687 263) Applicant v HEAD, TRANSPORT FOR VICTORIA Respondent
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JUDGE:
Richards J
WHERE HELD:
Melbourne
DATE OF HEARING:
3–5, 12–13, 17–20 October 2022, 2 February 2023
DATE OF JUDGMENT:
7 July 2023
CASE MAY BE CITED AS:
Kajag Pty Ltd v Head, Transport for Victoria
MEDIUM NEUTRAL CITATION:
[2023] VSC 392
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LAND VALUATION AND COMPENSATION — Part of applicant’s land reserved for a public purpose for the Outer Metropolitan Ring/E6 Transport Corridor — Applicant claimed compensation for financial loss on sale of land ‘as the natural, direct and reasonable consequence’ of land being reserved for a public purpose under Planning and Environment Act 1987 (Vic), Pt 5 — Dispute as to future zoning and development potential of land absent the reservation — Whether parts of land would have been required for waterways and flood protection absent the reservation — Dispute as to rate per hectare to be adopted in assessment of land value and compensation — Significance of strategic planning history and expert planning evidence – Development potential of land would have been for future urban industrial purposes absent the reservation — Terms contract — Whether loss to be compensated assessed by comparing contract prices for the sale of the property entered into on contract date, or the market value of the property as at the date of sale — Planning and Environment Act 1987 (Vic) Pt 5, ss 98, 99, 104, 106 — Land Acquisition and Compensation Act 1985 (Vic) Pt 4 — Brompton Lodge Pty Ltd v Head, Transport for Victoria [2021] VSCA 302.
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APPEARANCES:
Counsel Solicitors For the Applicant Mr P Connor KC with
Mr P ChiappiGadens Lawyers For the Respondent Mr S Goubran KC with
Ms C DermodyRussell Kennedy TABLE OF CONTENTS
GLOSSARY................................................................................................... 1
Introduction.................................................................................................. 3
Summary of conclusions................................................................... 4
Compensation for ‘loss on sale’ under Pt 5 of the Planning Act.......... 8
The Property............................................................................................... 11
Approach to evidence............................................................................... 17
Strategic planning history........................................................................ 19
Questions 1, 2 and 3 — Highest and best use........................................ 61
Expert planning evidence............................................................... 62
Joint expert statement...................................................................... 71
Concurrent evidence........................................................................ 79
Consideration................................................................................... 82
Conclusion on highest and best use.............................................. 91
Questions 4 and 5 — Waterways............................................................ 92
Expert hydrological evidence......................................................... 93
Joint expert statement.................................................................... 102
Concurrent evidence...................................................................... 105
Consideration................................................................................. 108
Conclusion on waterways............................................................. 110
Questions 6, 7, 8 and 9 — Valuation..................................................... 111
Expert valuation evidence............................................................ 111
Joint expert statement.................................................................... 114
Concurrent evidence...................................................................... 115
Conclusion on valuation............................................................... 123
Questions 10, 11, 12, 13 and 14 — Assessment of Compensation.... 125
Principles on which compensation is to be based..................... 125
Approach to assessment of financial loss................................... 127
Kajag’s submissions....................................................................... 128
Authority’s submissions............................................................... 130
Consideration................................................................................. 132
Conclusion on assessment of compensation.............................. 136
DISPOSITION.......................................................................................... 138
GLOSSARY
Term
Definition
Authority
The respondent, Head, Transport for Victoria
BIFT
Beveridge Interstate Freight Terminal, also referred to as the Donnybrook/Beveridge Interstate Freight Terminal or the Beveridge Intermodal Freight Terminal
Compensation Act
Land Acquisition and Compensation Act 1986 (Vic)
DSS
Drainage Services Scheme or Development Services Scheme, a drainage plan prepared by Melbourne Water
DSS Principles
‘Principles for Creating Development Services Schemes’ in the Principles for Provision of Waterway and Drainage Services for Urban Growth, Melbourne Water, June 2007
Growth Corridor Plans
Growth Corridor Plans: Managing Melbourne’s Growth, Growth Areas Authority, June 2012
Kajag
The applicant, Kajag Pty Ltd
Kalkallo Creek DSS
Kalkallo Creek Drainage Services Scheme or Development Services Scheme, Melbourne Water, April 2017
Melbourne 2030
Melbourne 2030: Planning for Sustainable Growth, Victorian Government, October 2002
Melbourne @ 5 Million
Melbourne 2030: A Planning Update – Melbourne @ 5 Million, Victorian Government, December 2008
Non-OMR DSS
The Drainage Services Scheme that would have been developed by Melbourne Water if not for the OMR
North Growth Corridor Plan
'North Growth Corridor Plan', Chapter 5 of Growth Corridor Plans: Managing Melbourne’s Growth, Growth Areas Authority, June 2012
OMR
Outer Metropolitan Ring/E6 Transport Corridor, often also referred to as the OMRTC
Plan Melbourne 2014
Plan Melbourne Metropolitan Planning Strategy, Victorian Government, May 2014
Plan Melbourne 2017-2050
Plan Melbourne 2017-2050, Victorian Government, March 2017
Planning Act
Planning and Environment Act 1987 (Vic)
Planning Assessment Report
Outer Metropolitan Ring/E6 Transport Corridor Planning Assessment Report, published in Delivering Melbourne’s Newest Sustainable Communities, Victorian Government, June 2009
Property
180 Gunns Gully Road, Beveridge, often also referred to as the Subject Land
PSP
Precinct Structure Plan, which identifies the arrangement of key land uses in a precinct
Relevant Date
24 September 2019, the date on which the Property was sold
Scheme
Application of the Public Acquisition Overlay – Schedule 7 to the Mitchell Planning Scheme reserving land for the OMR through Amendment VC68
Subject Land
The Property at 180 Gunns Gully Road, Beveridge
Victorian Transport Plan
Complementary report to Melbourne @ 5 Million, Victorian Government (Department of Transport), December 2008
HER HONOUR:
Introduction
1 In 2004, Kajag Pty Ltd purchased and became the registered proprietor of a 72.52 hectare block of farm land at 180 Gunns Gully Road, Beveridge, north of Melbourne. When Kajag acquired the Property,[1] it was in a rural area that formed part of the Sunbury Green Wedge, outside Melbourne’s urban growth boundary. Kajag ran cattle on the Property, in keeping with its location in the Rural/Farming Zone. Within five years, with the rapid growth of metropolitan Melbourne’s population, the Property was part of a larger area to the north of Melbourne that was being considered for future urban growth.
[1]The Property is often also referred to as the Subject Land.
2 On 6 August 2010, Amendment VC68 amended the Mitchell Planning Scheme to apply the Public Acquisition Overlay to identify and reserve land for the Outer Metropolitan Ring/E6 Transport Corridor (OMR). The area of land reserved for the OMR bisects the Property, and sets aside about 10 hectares of the Property for future acquisition and development as a transport corridor. Amendment VC68 also designated most of the Property, and much of the surrounding area, as Urban Growth Zone.
3 Kajag entered into a contract for the sale of the Property on 27 September 2016, for an agreed price of $10,250,000. It was a terms contract, with settlement ultimately taking place on 24 September 2019.
4 In this proceeding, Kajag claims compensation under ss 98(1)(a) and 106 of the Planning and Environment Act 1987 (Vic) (Planning Act) for ‘financial loss suffered as the natural, direct and reasonable consequence’ of its land being reserved for a public purpose. The responsible authority, Head, Transport for Victoria (the Authority), accepts that the sale price was reduced because part of the Property had been reserved for the OMR.
5 However, the parties are in dispute about the amount of Kajag’s loss. Kajag claims to be entitled to compensation in the order of $30,000,000 on the basis that, but for the reservation of its land for the OMR, the highest and best use of the whole Property would have been for future urban residential development. The Authority’s position is that the future urban use of the Property would have been industrial, and that Kajag’s financial loss is closer to $2,000,000.
Summary of conclusions
6 The questions for determination, and a summary of my conclusions in relation to each question, are as follows.
Highest and best use
(1) In the absence of Public Acquisition Overlay Amendment Schedule 7 for the Outer Metropolitan Ring/E6 Transport Corridor (the Scheme), what would have been:
(a) the zoning and planning controls applying to the Property; and
(b) its development potential,
as at 24 September 2019 (the Relevant Date)?
In the absence of the Scheme, the Property would have been zoned as it is today — part Farming Zone, part Urban Growth Zone, and part Urban Flood Zone.[2] The development potential of the Property at the Relevant Date would have been for future urban industrial purposes.
[2]Described more fully at [18] below.
(2) Having regard to the answers to Question 1, what would have been the highest and best use of the Property as at the Relevant Date in the absence of the Scheme?
In the absence of the Scheme, the highest and best use of the Property as at the Relevant Date would have been to be held for future development for industrial purposes.
(3) Are the answers to Questions 1 and 2 different as at 27 September 2016 (the date of entry to the contract of sale)?
No.
Waterways
(4) In the absence of the Scheme, what areas of the Property would have been required for waterways and flood protection? What area would have been available for development?
In the absence of the Scheme, no part of the Property would have been required for waterways and flood protection. The whole area would have been available for development.
(5) In the absence of the Scheme, how likely is it that the southern part of the Property that remains in the Farming Zone would have been required for the Kalkallo Creek Retarding Basin?
There is no real likelihood that any of the southern part of the Property would have been required for the Kalkallo Creek Retarding Basin, in the absence of the Scheme.
Valuation
(6) On the basis that the highest and best use of the Property unaffected by the Scheme is for industrial purposes, what is the appropriate rate per hectare to be adopted for assessing the value of the Property:
(a) as at 27 September 2016; and
(b) as at the Relevant Date?
The appropriate rate per hectare to be adopted for assessing the value of the Property unaffected by the Scheme is:
(a) as at 27 September 2016, $200,000 per hectare; and
(b) as at the Relevant Date, $325,000 per hectare.
(7) What is the appropriate rate per hectare to be adopted for assessing the value of the part of the Property affected by the Scheme that is designated for future industrial development:
(a) as at 27 September 2016; and
(b) as at the Relevant Date?
The appropriate rate per hectare to be adopted for assessing the value of the Property affected by the Scheme that is designated for future industrial development is:
(a) as at 27 September 2016, $200,000 per hectare; and
(b) as at the Relevant Date, $325,000 per hectare.
(8) What is the appropriate rate per hectare to be adopted for assessing the value of the part of the Property affected by the Scheme that is designated for future residential development:
(a) as at 27 September 2016; and
(b) as at the Relevant Date?
The appropriate rate per hectare to be adopted for assessing the value of the Property affected by the Scheme that is designated for future residential development is:
(a) as at 27 September 2016, either $147,884 per hectare, with an allowance of $50,000 for the OMR reservation, or $148,951 per hectare, with an allowance of $20,000 for the OMR reservation; and
(b) as at the Relevant Date, $275,000 per hectare.
(9) For the purposes of determining the maximum amount of compensation payable under s 104 of the Planning Act:
(a) What was the value of the Property as at the Relevant Date?
(b) What value would the Property have had at the Relevant Date in the absence of the Scheme?
(c) What is the difference between those two values?
(a) The value of the Property as at the Relevant Date was $17,570,750, comprising:
Land Portion
Ha
$/Ha
Value
Future industrial
30.20
$325,000
$9,815,000
Future residential
28.13
$275,000
$7,735,750
OMR reservation
10.09
$20,000
Waterways/drainage
4.10
$Nil
TOTAL
72.52
$17,570,750
(b) In the absence of the Scheme, as at the Relevant Date the Property would have had a value of $23,570,000, being 72.52 hectares at $325,000 per hectare.
(c) The difference between those two amounts is $5,999,250.
Assessment of compensation
(10) In determining the compensation payable to the claimant, should regard be had to the general principles in s 41 and the matters affecting compensation in s 43 of the Land Acquisition and Compensation Act 1986? If not, should regard be had to the Pointe Gourde principle or any other common law principle relevant to the assessment of compensation under ss 98 and 106 of the Planning Act?
Unnecessary to answer.
(11) Should the claimant’s financial loss to be compensated under ss 98 and 106 of the Planning Act be assessed by comparing:
(a) contract prices for the sale of the Property entered into on 27 September 2016; or
(b) the market value of the Property as at the Relevant Date,
in the before and after scenarios?
Kajag’s financial loss to be compensated under ss 98 and 106 of the Planning Act is to be assessed by comparing contract prices for the sale of the Property entered into on 27 September 2016 in the before and after scenarios.
(12) Having regard to the answers to Questions 1 to 11, what is the financial loss suffered by the claimant as the natural, direct and reasonable consequence of the Property being reserved by the Scheme?
On 27 September 2016, Kajag entered into a terms contact to sell the Property for $10,250,000. In the absence of the Scheme, the value of the Property as at that date would have been $14,505,000, which would likely have been the sale price if Kajag had sold the Property on the same date and on the same terms. Allowing for an interest component of $110,000, Kajag’s financial loss on the sale of the Property as the natural, direct and reasonable consequence of the Property being reserved by the Scheme was $4,365,000.
(13) What is the maximum amount of compensation payable under s 104 of the Planning Act?
The maximum amount of compensation payable under s 104 of the Planning Act is $5,999,250.
(14) Is the claimant’s loss more than the maximum amount of compensation payable under s 104?
No.
7 These are my reasons for those conclusions.
Compensation for ‘loss on sale’ under Pt 5 of the Planning Act
8 Part 5 of the Planning Act establishes a scheme for compensating owners and occupiers of land affected by ‘planning blight’ — a term used to describe the effect of the land being reserved for a public purpose. There are two broad categories of planning blight. The first concerns restrictions on the use that may be made of the land because it has been earmarked for future public use. The second is a reduction in the land’s value due to the reservation, which crystallises on the sale of the land as a ‘loss on sale’. This case is concerned with the second category.
9 Section 98 of the Planning Act confers a right to claim compensation for planning blight in certain circumstances. When the Property was sold, s 98 was in the following terms:[3]
[3]Section 98 was amended by s 9 of the Planning and Environment Amendment Act 2021 (Vic) on 7 July 2021, after Kajag had referred the dispute that is the subject of this proceeding to the Court. The amendments clarify the entitlement to compensation under s 98. In this case there is no dispute that Kajag is entitled to compensation; the dispute concerns the amount of its entitlement.
Right to compensation
(1) The owner or occupier of any land may claim compensation from the planning authority for financial loss suffered as the natural, direct and reasonable consequence of—
(a) the land being reserved for a public purpose under a planning scheme; or
(b) the land being shown as reserved for a public purpose in a proposed amendment to a planning scheme of which notice has been published in the Government Gazette under section 19; or
(c) a declaration of the Minister under section 113 that the land is proposed to be reserved for a public purpose; or
(d) access to the land being restricted by the closure of a road by a planning scheme.
(2) The owner or occupier of any land may claim compensation from a responsible authority for financial loss suffered as the natural, direct and reasonable consequence of a refusal by the responsible authority to grant a permit to use or develop the land on the ground that the land is or will be needed for a public purpose.
10 Kajag claims compensation for a loss on sale under s 98(1)(a). The right to claim compensation was triggered, under s 99(b) of the Planning Act, ‘on the sale of the land concerned under section 106’. In Plunkett v Roads Corporation,[4] I held that, for the purposes of s 99(b), the ‘sale of the land’ occurs on completion of the contract of sale. In this case, Kajag became entitled to compensation on 24 September 2019, at settlement of the contract for the sale of the Property.
[4](2019) 239 LGERA 156.
11 Section 106 of the Planning act provides:
Loss on sale
(1) The owner of land may claim compensation under section 98 after the sale of the land if—
(a) the owner of the land sold it at a lower price than the owner might reasonably have expected to get if the land or part of the land had not been reserved or proposed to be reserved; and
(b) before selling the land, the owner gave the relevant authority not less than 60 days notice in writing of the owner's intention to sell the land.
(2) The owner is not required to give notice under subsection (1)(b) if—
(a) the owner and the relevant authority have agreed that the owner does not have to give notice; or
(b) before or after the sale, the Minister exempts the owner from giving notice on the ground that the requirement to give notice would cause hardship to the owner.
(3) In this section relevant authority means—
(a) the Minister, public authority or municipal council designated in the planning scheme as the acquiring authority for the purposes of this Act in respect of the land; or
(b) if there is no acquiring authority, the planning authority.
12 The maximum amount of compensation that may be recovered under s 98 is governed by s 104, which provides:
Maximum amount of compensation payable
The compensation payable for financial loss under section 98 must not exceed the difference between—
(a) the value of the land at the date on which the liability to pay compensation first arose; and
(b) the value that the land would have had at the date if the land had not been affected by any circumstance set out in section 98(1) or (2) or 107.
13 Section 105 of the Planning Act applies Pts 10 and 11, and s 37 of the Land Acquisition and Compensation Act 1986 (Vic) (Compensation Act) to the determination of a claim for compensation under Pt 5 of the Planning Act, with any necessary changes. Section 37 of the Compensation Act provides for a person to make a claim for compensation, and prescribes a two year limitation period.[5] Part 10 of the Compensation Act provides for the determination of disputes, with ancillary provisions to the Act as a whole contained in Pt 11.
[5]Land Acquisition and Compensation Act 1986 (Vic) , s 37(2).
The Property
14 The Property at 180 Gunns Gully Road, Beveridge is on the southern edge of the Mitchell Shire, about 34 kilometres north of the Melbourne central business district, and two kilometres to the west of the Hume Freeway. Figure 1 shows the location of the Property relative to metropolitan Melbourne. Figure 2 is a smaller scale map showing the location of the Property relative to the Hume Freeway, while Figure 3 is an aerial photograph showing the Property within the surrounding landscape.
Figure 1: Location map from Melways Online, Report of Marcus Geoffrey Willison dated 28 September 2020, 11.
Figure 2: Location map from street-directory.com.au, Report of Les Brown dated 19 May 2020, 6.
Figure 3: Aerial photograph of Property and surrounds, Report of Robert Milner dated December 2019, 9.
15 Two waterways run through the Property, into the Kalkallo Creek Retarding Basin immediately to its south, as shown on Figure 4. They are tributaries of Kalkallo Creek, but do not follow its natural course; they are drainage lines, constructed to drain the land for agricultural use. The waterway that runs from the northern boundary of the Property to its south-western corner is referred to as Kalkallo Creek, while the waterway that cross the south-eastern corner of the Property is referred to as Mandalay Creek.
Figure 4: Waterways map, Report of Robert Campbell Swan dated 24 August 2021, 5.
16 The Property is described in Certificate of Title Volume 9748 Folio 557 as Lot 2 on Plan of Subdivision 207052T, shown in Figure 5. The frontage to Gunns Gully Road is 435 metres wide, and the depth of the Property is 1,664.9 metres. There are two 6.04 metre wide drainage easements at the southern end of the Property. The eastern easement transects the south-eastern corner of the Property, where Mandalay Creek crosses that corner. The western easement extends 267.41 metres to the north-east from the western boundary, roughly along the course of Kalkallo Creek.
Figure 5: Lot 2 on Plan of Subdivision 207052T, Report of Robert Milner dated December 2019, 6.
17 The cadastral context of the Property is shown in Figure 6.
Figure 6: Location map from services.land.vic.gov.au, Report of Robert Milner dated December 2019, 5.
18 Since Amendment VC68 took effect in August 2010, the Mitchell Planning Scheme has applied three different zones to the Property:
(a) the southern third is zoned Farming Zone;
(b) a strip in the north-eastern corner about 200 metre wide and 700 metres long is zoned Urban Floodway Zone; and
(c) the balance of the Property is zoned Urban Growth Zone.
The zoning is as shown in Figure 7:
Figure 7: Zoning at the Relevant Date, Report of Sophie Millicent Jordan dated 3 February 2022, 35.
19 Amendment VC68 also applied the Public Acquisition Overlay to the Property, as part of the reservation of land required for the OMR. As can be seen from Figure 8, the Public Acquisition Overlay roughly bisects the Property.
Figure 8: Overlays at the Relevant Date, Report of Sophie Millicent Jordan dated 3 February 2022, 38.
Approach to evidence
20 The central issue in dispute is the amount of financial loss suffered by Kajag as the natural, direct and reasonable consequence of its land being reserved for the OMR. That requires me to make findings of fact as to what would have been the highest and best use of the Property in the absence of the reservation, and what areas of the land would have been required for waterways and flood protection.
21 The fact-finding exercise is a hypothetical one that has been described as ‘both radical and uncertain’.[6] It involves peeling back the planning history and re‑imagining the strategic planning decisions that would have affected the Property in the absence of the OMR reservation.[7] The exercise is informed by two categories of evidence: evidence of the relevant planning history, and expert evidence.
[6]Rigby v Secretary to the Department of Sustainability and Environment [2012] VSC 427, [193].
[7]Rigby, [193].
22 The relevant planning history can be determined from a series of strategic planning documents that set out Victorian government policy for the growth of metropolitan Melbourne, in particular in the northern corridor. From at least 2010, the planned construction of the OMR has been an integral part of this policy, and has influenced its development. For that reason, the strategic planning documents need to be treated with some care. They may still be of indirect assistance in my fact-finding, because:[8]
(a) They may contain factual material which is relevant to the underlying land use planning of the area. In particular, such documentation may assist in the identification of inherent characteristics of the land and its context.
(b) They may demonstrate by analogy a probable conclusion to a particular developmental or planning issue affecting the claimant’s land despite the context in which they were formulated.
(c) They may be expressed in terms which permit relevant strategic planning principles to be identified despite the framework in which they were formulated.
[8]McCann v Roads Corporation [2011] VSC 96, [46].
23 In addition, the strategic planning documents provide the background to and the basis for a good deal of the expert opinion evidence relied on by the parties, and a framework within which to evaluate that evidence. Ultimately, my findings must be based on expert opinion evidence, rather than by forming my own inexpert opinion from the relevant planning history.
24 Both parties engaged experts in the areas of town planning, hydrology, valuation, land economics, traffic engineering, services, and ecology. Within their respective disciplines, the experts expressed opinions about matters affecting the value of the Property in the ‘before’ scenario, in the absence of the Scheme, and in the ‘after’ scenario, with the Scheme in place.
25 The experts in each discipline participated in a joint conference and prepared a joint report. Four groups of experts gave evidence concurrently at trial:
(a) the four town planning experts, in relation to the development potential of the Property, and its highest and best use, in the absence of the Scheme;
(b) the two hydrologists, about what parts of the Property would have been required for waterways and flood protection both in the absence of the Scheme, and with the Scheme in place;
(c) the three valuers, in relation to their respective valuations of the Property in the before and after scenarios; and
(d) the two land economists, concerning the supply of and demand for industrial land in the northern growth corridor.
26 The joint reports of the traffic engineers, services experts, and ecologists identified no real disagreement relevant to the questions for determination. Their individual and joint reports were tendered by agreement.
27 It is necessary to resolve the critical differences of opinion between the planning experts, the hydrologists, and the valuers, and so I examine their opinions in detail in this judgment. There is no need to consider the evidence of the land economists ecologists, services experts, and traffic engineers in the same detail. Their evidence was helpful in some respects, and I refer to it where it is relevant to a question for determination.
28 In cases such as this one, neither party bears a legal onus of proof. I must make findings of fact on the basis of all the evidence, in particular the expert evidence, on the balance of probabilities.[9]
[9]Crowe v Head, Transport for Victoria [2021] VSC 180, [13]–[14].
29 In the next section of the judgment, I set out the relevant strategic planning history.
Strategic planning history
30 The development of relevant strategic planning history concerning the Property and the OMR can be charted through the following policy documents, over the course of roughly 17 years:
(a) Melbourne 2030: Planning for Sustainable Growth, published by the Victorian Government in 2002;
(b) A Plan for Melbourne’s Growth Areas, published in 2005;
(c) Hume Growth Area: Towards Melbourne 2030 Final Report, published in July 2005;
(d) Melbourne 2030: A Planning Update – Melbourne @ 5 Million, published by the Victorian Government in December 2008;
(e) the Victorian Transport Plan, which was also released in December 2008, to complement Melbourne @ 5 Million;
(f) Delivering Melbourne’s Newest Sustainable Communities, comprised of a series of documents released by the Victorian Government in June 2009;
(g) Growth Corridor Plans: Managing Melbourne’s Growth, published by the Growth Areas Authority in 2012;
(h) The Plan Melbourne Metropolitan Planning Strategy (Plan Melbourne 2014), published by the Victorian Government in 2014;
(i) Plan Melbourne 2017-2050, a revised metropolitan planning strategy published by the Victorian Government in 2017 following its review of Plan Melbourne; and
(j) The various precinct structure plans (PSPs) for the separate precincts in the vicinity of the Property, and the surrounding precincts in the growth corridor.
31 Relevantly, some of the above policy documents were implemented through planning scheme amendments affecting the Property. These need not be considered in detail, beyond the following summaries:
(a) Amendment C48, which introduced the Farming and Rural Conservation zones to the Mitchell Planning Scheme in 2007, with the Property being rezoned in the Farming Conservation Zone;
(b) Amendment VC41, which incorporated Growth Area Framework Plans from A Plan for Melbourne’s Growth Areas to Victorian planning schemes in 2006 and introduced long-term strategic planning directions for Melbourne’s five growth areas, including Hume;
(c) Amendment VC68, which implemented a number of strategic policy changes arising from Melbourne @ 5 Million and the Victorian Transport Plan in 2010, resulting in the northern part of the Property being rezoned into the Urban Growth Zone.
Strategic direction for the Mitchell Planning Scheme as at 24 September 2019 was also provided by the State Planning Policy Framework and the Local Planning Policy Framework.
2002 — Melbourne 2030: Planning for Sustainable Growth
33 Melbourne 2030 was released as a ’30-year plan to manage growth and change across metropolitan Melbourne and the surrounding region’,[10] a key initiative of which was the adoption of an urban growth boundary for Melbourne.[11] An interim growth boundary was put in place, with immediate effect on planning decisions. A process was put in place to determine the permanent boundary, following public consultation. The policy was to include enough land for development within the urban growth boundary to provide for metropolitan Melbourne’s needs in the foreseeable future, with any future variation of the boundary to be infrequent and only where a need was demonstrated in the designated growth areas. Melbourne 2030 forecast that the focus of growth would have to shift from the south-east to the north and west of Melbourne.
[10]Victorian Government, Department of Infrastructure, Melbourne 2030: Planning for Sustainable Growth (October 2002), 1.
[11]Melbourne 2030, 2 (Direction 2, Policy 2.1).
34 The Property was outside the interim urban growth boundary, as shown in Figure 9. Hume, to the south of the Property, was one of five designated growth areas identified in Melbourne 2030.
Figure 9: Managing Urban Growth map from Melbourne 2030, Report of Sophie Millicent Jordan dated 3 February 2022, 10.
2005 — A Plan for Melbourne’s Growth Areas
35 The next significant policy document is A Plan for Melbourne’s Growth Areas, which was said by the Minister for Planning to involve a new and more strategic approach to development in Melbourne’s growth areas. The plan amended the urban growth boundary and proposed a new Growth Areas Authority to co-ordinate growth area planning, in partnership with local councils, the community, developers and infrastructure providers. It envisaged that the Growth Areas Authority would develop a Growth Area Framework Plan to guide the form, direction and sequence of urban development within each growth area. These Growth Area Framework Plans were to be developed in 2006 for inclusion in planning schemes,[12] and were to be the basis for detailed precinct structure planning for development areas.[13]
[12]The Growth Area Framework Plans were incorporated into the State Planning Policy Framework through Amendment VC41 in 2006.
[13]Victorian Government, Department of Sustainability and Environment, A Plan for Melbourne’s Growth Areas (2005), 15.
36 The development of the Growth Area Framework Plans was informed by the work of five Smart Growth Committees, which were appointed by the Victorian Government in 2003 to oversee the review of the existing Growth Area Framework Plans. The work of the Smart Growth Committees directly informed the Government’s decisions about the Growth Area Framework Plans and changes to the urban growth boundary, and the Government adopted most of their recommendations in relation to the Growth Area Framework Plans.[14]
[14]A Plan for Melbourne’s Growth Areas, 20.
2005 — Hume Growth Area: Towards Melbourne 2030 Final Report
37 The next policy document is a July 2005 report published by the Hume Committee for Smart Growth, titled Hume Growth Area: Towards Melbourne 2030 Final Report.
38 The primary study area for planning for the Hume Growth Area covered the northern part of the City of Hume, extending to Hume’s boundary with the Shire of Mitchell to the north, together with the western fringe of the City of Whittlesea. The Property was just outside this primary study area, but within the broad study area considered by the Committee, as shown in Figure 10. It will be recalled that the Property is on the northern side of the boundary between Hume and Mitchell.
Figure 10: Primary Study Area of Hume Committee for Smart Growth, Hume Committee for Smart Growth, Hume Growth Area: Towards Melbourne 2030 Final Report dated July 2005, 3.
39 The report started with a statement of the planning context, relevantly:[15]
[15]Hume Committee for Smart Growth, Hume Growth Area: Towards Melbourne 2030 Final Report (July 2005), 4–5.
Hume City is one of the fastest growing municipalities in Victoria. Its land use pattern is complex, comprising residential development, major industrial areas, commercial centres and substantial tracts of rural land. Melbourne Airport, a key State and national asset, lies within Hume City, in close proximity to the Growth Area. The Hume Highway, which traverses the City, is one of the most important transport corridors in Australia, providing a gateway to strategic economic locations including Melbourne Airport and the Port of Melbourne, via the Western Ring Road and Citylink. The Melbourne-Sydney rail line, which carries both passengers and freight, runs parallel to the highway.
More than one third of employed residents of Hume work within the City. Most workers depend on private cars to access their workplaces and as a result, car ownership rates per household are very high in most areas.
Approximately 57,000 jobs are located in Hume City, provided by more than 10,000 businesses. Major industry sectors represented include automotive manufacturing, air and road freight, logistics/distribution, engineering, paper manufacturing, printing, steel, plastics, food processing, electronics and communication. Campbellfield and Somerton have been identified as industrial areas of State significance (State Planning Policy Framework 2004).
The ratio between population and jobs is particularly strong in the Hume Growth Area (equivalent to the Craigieburn SLA, for the purposes of this discussion). Thirty-one per cent of Hume City's jobs are located in the area and there are almost as many jobs as there are residents in the workforce. This reflects the strength of the manufacturing and transport sectors in this part of the municipality. In its earlier settlement history, the area played a more significant role as an industrial location than as a focus for new residential development.
The Hume City corridor is part of Victoria's most important freight route for inter-state and intra-state freight movements and accounts for over one third of all freight by tonnage to or from Melbourne. Cartage of bulk freight, such as grain, is dominated by rail but non-bulk freight, including containers, is predominantly carried by road. The growth area has a very strong export profile, mainly in automotive, aviation and freight-related activities. The major rail/road freight interchange at Somerton demonstrates the changing focus of freight activity within the corridor.
In addition to the inter-state rail connection, the area is served by a V-Line commuter rail service to Seymour, which stops at Craigieburn and Donnybrook. The Government is extending the electrification of the rail line to Craigieburn, with new stations to be developed at Roxburgh Park (Somerton), Patullos and Craigieburn.
…
Between 1996 and 1999, the Hume Growth Area - including the suburbs of Greenvale, Roxburgh Park and Craigieburn - yielded approximately 19 per cent of the residential lots produced in Melbourne's growth areas.
Commercial and community services in the north eastern area of Hume City also service populations in the southern parts of the Shire of Mitchell and the western areas of City of Whittlesea.
The Hume Highway is one of the major gateways to Melbourne, providing views to the Central Business District from the fringe of the metropolitan area.
…
40 Chapter 3 of the report set out the Committee’s growth projections for Hume. In relation to population and housing, the Committee noted the rapid expansion of the area’s population over the past 10 years, and government projections that the population of Hume City would grow from almost 146,000 in 2004 to over 186,000 in 2031 — an increase of 40,000 people. On that basis, the Committee considered that provision should be made for 1,200 hectares of land for residential development beyond the Urban Growth Boundary.
41 In relation to industrial, business and retail uses, the Committee observed:[16]
In a metropolitan context, the Hume City corridor has historically performed an employment role, with a focus on manufacturing and more recently on freight and logistics. It has a strategic role for Melbourne as a whole because of its gateway position and the location of major road, rail and industrial land infrastructure within it.
The existing major industrial areas of the Hume City, including Campbellfield and Somerton have been identified in the State Planning Policy Framework (SPPF) as being of State significance. The SPPF provides that planning authorities should protect the quantum of large areas of industrial land of State significance to ensure availability of land for major industrial development, particularly for industries and storage facilities that require significant threshold distances from sensitive uses. These objectives are also applicable to planning for new industrial development in the growth area.
[16]Towards Melbourne 2030, 18–19.
42 After outlining other projections concerning economic development and employment growth, the Committee identified several implications for growth area planning:[17]
• Land use/physical planning for the industrial future of the growth area needs to build on the current north-south Hume Highway and rail corridor for major industrial and logistics uses. This well-serviced linear industrial strip is a major asset to Hume City, Melbourne, Victoria and Australia.
• Limited opportunities exist for major industrial expansion around Melbourne and this needs to be taken into account when determining the relative priority of industrial/employment uses over other forms of urban development, such as housing and retail operations.
• There is a need to target new activities that respond to the competitive advantages of the area and contribute to broadening the local economy. These activities include business services, higher order retailing, education and health opportunities. Many of them can be attracted and facilitated by a diverse and well-structured activity centre network. This, however, needs to be supported by public sector investment.
[17]Towards Melbourne 2030, 20.
43 In relation to land for industry, the Committee noted that the Hume Highway and railway corridor is of national significance for transport, industry and storage‑related activities. The Committee described the characteristics of Hume’s existing industrial landscape, and referred to economic modelling that suggested a demand of up to 1,480 hectares of additional industrial employment land by 2031, implying a need for an additional 1,020 hectares to be identified for industrial employment land outside the Urban Growth Boundary. The Committee then identified the implications for growth area planning:[18]
• Identification and servicing of new land for industrial expansion and employment growth in Hume City is very important, due to the long lead-times for planning major industrial investments and the highly competitive and 'footloose' nature of industrial development.
• There is a need to identify large tracts of industrial/employment land to accommodate demand by freight related and other large scale businesses. Flat land, of which there are extensive areas in the north of the Hume growth corridor, is particularly attractive to these types of businesses and should be safeguarded from other development through statutory planning controls within the Hume Planning Scheme. Access to major road and rail infrastructure is also important.
• High job density manufacturing and service industries should be encouraged to locate in areas with good access to established communities and in or near activity centres accessible by public transport. This will enable the labour force to have better access to jobs and public transport, as well as providing businesses with a more readily available pool of workers from within the growth area and from the wider metropolitan area.
• A conservative approach suggests allocating land to allow for the upper range of the forecasts, to ensure adequate provision of land for industrial use.
• The protection of the sand and stone resources following detailed assessment, may reduce the amount of developable land for industry.
[18]Towards Melbourne 2030, 22.
44 Chapter 6 of the report concerned future growth directions. After identifying opportunities for consolidation within the Urban Growth Boundary, the Committee evaluated three potential sectors for development outside the Urban Growth Boundary — West, North, and North-East. Of particular interest here is the North sector, which lies either side of Donnybrook Road to the west of the Hume Freeway, and is immediately to the south of the Property:[19]
Residential development in the North sector would effectively produce a new residential district on the other side of the inter-urban break. Residents would be isolated from the rest of Hume City and, particularly in the initial stages of development, would need to make relatively long journeys to access employment and district and regional level social infrastructure facilities and services. The viability of a full mixed-use major activity centre to service this population might also be questionable. Hume City Council is concerned that catering for the needs of the new communities might draw expenditure away from provision of facilities in which there are deficits in the existing urban area.
The area east of Mickleham Road is relatively unconstrained, with the exception of areas of high-value native vegetation near Mt Ridley Road and along Kalkallo Creek. The land west of Mickleham Road is generally unsuitable for development, due to erosion and salinity risk, ecological significance and extractive industry operations. The northern part of the sector is constrained by the Kalkallo retarding basin and flood issues along the Kalkallo Creek corridor. The eastern edge along the Hume Freeway corridor has relatively low landscape values, so it may be more difficult to create high-amenity residential areas.
Residential development in the North (west of the Hume Freeway) may involve greater travel distances to access fixed metropolitan rail public transport than for the West sector. There are, however, existing V-Line services that currently stop at Donnybrook Station that could be expanded or improved to provide for anticipated passenger loadings. This could also be supplemented with bus services from Donnybrook to Craigieburn Railway Station.
The North sector contains large tracts of almost flat land, the majority of which is held in large parcels. It is therefore highly suitable for development for industry and freight/logistics operations (‘super sheds’) that require very large sites. It has excellent access to the Hume Highway/Freeway and relatively good access for rail freight.
Provision of utility services will be more expensive in the North sector than in the West, as provision of a new branch sewer and pump station will be required. Water supply infrastructure would also need to be augmented.
[19]Towards Melbourne 2030, 57, 59–60.
45 The Committee then outlined its preferred direction for growth. It considered that new outward residential development should extend to the west of the existing urban area. It discounted residential growth in the North and North-East sectors, which it considered would create an isolated community, unconnected to the existing urban area, with consequent problems for provision of infrastructure and services. It noted the alternative view of the Department of Infrastructure, that the northern opportunities for future residential growth should be preserved until metropolitan wide decisions were made. In relation to industrial and employment growth, the Committee said:[20]
The preferred direction for industrial and employment growth is generally to the north of the present urban area. This maximises use of the significant advantages of existing major infrastructure corridor and builds on and continues the employment/industrial uses located to the south.
Since the extent of industrial land required in the long term is still uncertain, the Committee proposes that both sides of the Hume Freeway be preserved for long term ‘future employment’. [Department of Infrastructure] however, is of the view that it is premature to specify this land as “future employment” and that it should be retained as future “urban investigation area” to maintain residential opportunities (See arguments above).
Market demand analysis will be needed to provide a basis for structure planning to determine the appropriate time to include that land within the Urban Growth Boundary and the staging of land release, to ensure that land is developed at appropriate densities and can be serviced effectively and efficiently.
[20]Towards Melbourne 2030, 62.
46 Relevantly here, the Committee considered that land generally west of the Hume Freeway — i.e. the North sector — has ‘strong advantages for particular types of industrial and freight/logistics operations that require large sites and flat land and has relatively few environmental or other constraints’.[21]
[21]Towards Melbourne 2030, 63.
47 Chapter 7 was headed ‘Responding to Growth’, commencing with the following summary of directions for growth:[22]
Residential growth to 2030 is recommended to be accommodated in urban consolidation pockets within the Urban Growth Boundary and in the West sector generally adjacent to the current Urban Growth Boundary.
Employment and industrial development will be accommodated initially in the area between the railway and the Hume Freeway, north of Craigieburn. Part of this area is already within the Urban Growth Boundary. Longer term growth outside the capacity of this area will be accommodated to the north and areas on both sides of the Hume Freeway should be flagged for ‘future employment’.
[22]Towards Melbourne 2030, 67.
48 The Committee specifically noted the need for planning to preserve the State and national significance of the Hume transport corridor for industrial and freight/logistics uses.[23] It suggested that ‘all the potential growth pockets in the North and North-East sectors should be protected for future industrial use’.[24] It also noted that a detailed assessment of the demand for future industrial land would have to be undertaken.
[23]Towards Melbourne 2030, 78.
[24]Towards Melbourne 2030, 79.
2008 — Melbourne 2030: A Planning Update — Melbourne @ 5 Million
49 The Victorian Government released Melbourne 2030: A Planning Update – Melbourne @ 5 Million in December 2008, refining some of the key directions set by Melbourne 2030. By that time, it was apparent that Melbourne’s population was growing faster than had been predicted in Melbourne 2030, and was likely to reach five million before 2030.
50 Melbourne @ 5 Million introduced the concept of an ‘employment corridor’ — a corridor that contains and links a number of locations with a large concentration of jobs. It envisaged that these employment corridors would:[25]
– provide for substantial increases in employment, housing, education and other opportunities along each corridor and better link them through improved transport connectivity;
– link the growing outer areas to a greater choice of jobs, services and goods in the corridors; and
– provide transport networks that allow circumferential, in addition to radial, movements.
Three employment corridors were to be given priority attention. Relevantly, the first of these was the Hume-Mitchell employment corridor, linking Avalon Airport, Werribee, Melton, Melbourne Airport and Donnybrook.
[25]Victorian Government, Melbourne 2030: A Planning Update – Melbourne @ 5 Million (December 2008), 13.
51 Melbourne @ 5 Million also planned for higher growth in the existing designated growth areas, with the focus of future growth shifting from the south-east to the north and west of Melbourne. Rapid population growth necessitated a review of the Urban Growth Boundary to ensure a sufficient supply of new land. The report identified four investigation areas to be considered for inclusion within the growth areas, including the Hume-Mitchell-Whittlesea growth area to the north. Relevantly:[26]
In Hume, a major focus of investigation will be on areas in northern Hume and southern Mitchell Shire to take advantage of the existing road and rail corridors and major opportunities for new employment and freight/logistics functions.
[26]Melbourne @ 5 Million, 19.
52 The Melbourne North investigation area is shown in Figure 11 below. It extended well past the north of the Property.
Figure 11: Melbourne North Investigation Area, Melbourne @ 5 Million, Melbourne 2030: a planning update dated December 2008, 21.
2008 — Victorian Transport Plan
53 Melbourne @ 5 Million was prepared in consultation with the Department of Transport, which released the complementary Victorian Transport Plan in December 2008. The Victorian Transport Plan embraced the use of employment corridors as a planning approach, ‘to locate more employment closer to where people live, with more types of jobs, and to support industry to access more potential skilled workers’.[27] It proposed to target future transport investment to key employment corridors. These included the employment corridor linking Avalon Airport, Werribee, Melton, Melbourne Airport, and Donnybrook, which lay along the future route of the Outer Metropolitan Ring Transport Corridor.
[27]Victorian Government, Victorian Transport Plan (December 2008), 42.
54 The Outer Metropolitan Ring Transport Corridor was one of several long term transport projects that were identified in the Victorian Transport Plan:[28]
The biggest of the planned projects is the 70 kilometre Outer Metropolitan Ring Transport Corridor which is intended to link Werribee, Melton, Tullamarine and Craigieburn/Mickleham.
The aim of the Outer Metropolitan Ring is to provide a high speed transport link for freight and people that:
• Serves key international transport hubs, for example, Melbourne and Avalon Airports, Port of Geelong, other intermodal freight hubs and freight and other service economy areas
• Serves key interstate and major regional destinations
• Better links residential and employment growth areas to the north and west of Melbourne, such as, Werribee, Melton and Mickleham
• Provides for the development of employment corridors in Avalon, Werribee, Melton and Donnybrook.
[28]Victorian Transport Plan, 105.
55 The possible future route of the Outer Metropolitan Ring Transport Corridor was shown in a map that is reproduced in Figure 12 below.
Figure 12: North East Link, Peninsula Link and Alternative to West Gate, Victorian Government, Victorian Transport Plan dated 2008, 97.
56 Another key initiative of the Victorian Transport Plan was the planned relocation of domestic interstate freight handling from South Dynon to the Donnybrook/Beveridge area, close to the Hume Highway and on the existing rail line. Development of a new interstate rail terminal to the north of Melbourne would serve the industrial areas in the north, east and west by road, as well as reducing truck and train movements around the Port of Melbourne. The Victorian Transport Plan envisaged that the Donnybrook/Beveridge Interstate Freight Terminal (BIFT) would be the principal intermodal freight hub between Melbourne and Sydney,[29] and would have access to both broad gauge and standard gauge rail to facilitate an increase in interstate and intrastate freight movements by rail.
[29]The BIFT is also referred to as the Beveridge Interstate Freight Terminal, or the Beveridge Intermodal Freight Terminal.
2009 — Delivering Melbourne’s Newest Sustainable Communities
57 In June 2009, the Victorian Government released a series of documents titled Delivering Melbourne’s Newest Sustainable Communities, seeking comment and feedback on matters including the proposed alignment of the OMR, and proposed changes to Melbourne’s Urban Growth Boundary.
58 One of these documents, the Outer Metropolitan Ring/E6 Transport Corridor Planning Assessment Report, recommended a route for the OMR as shown in Figure 13 below.
Figure 13: Outer Metropolitan Ring/E6 Transport Corridor Recommended Option, VicRoads, Delivering Melbourne’s Newest Sustainable Communities dated June 2009, 46.
59 The Planning Assessment Report assessed four different route options through the Hume Corridor – Option A followed the route of the transmission line, Option B followed Donnybrook Road, Option C was a route in the general area of Gunns Gully Road, and Option D was along Mt Ridley Road. Option C was preferred because it ‘would provide a freeway corridor to support potential future urban growth and provide a bypass of the proposed industrial area for regional traffic, thus avoiding significant impact upon it’, and would not have unduly significant environmental impacts.[30] Options A, B and D were all to the south of Option C, and were not supported for reasons that included impacts on future business/industrial development. The indicative location of the northern OMR is shown in Figure 14 below.
Figure 14: Indicative Northern OMR and Arterials, VicRoads, Delivering Melbourne’s Newest Sustainable Communities dated June 2009, 145.
[30]Victorian Government, Delivering Melbourne’s Newest Sustainable Communities: Outer Metropolitan Ring/E6 Transport Corridor Planning Assessment Report (June 2009), 117.
60 In the vicinity of the Property, the Planning Assessment Report proposed the following detail for the OMR:[31]
[31]Planning Assessment Report, 54–5.
Mickleham Road would pass over the OMR.
There would be a full diamond interchange at Donnybrook Road with an overpass of the OMR.
East of the OMR, a new access road would be constructed north from Donnybrook Road to provide access to properties severed by the OMR.
The E14 would be a new arterial route from the south to the proposed new development areas to the west of the existing community of Beveridge and south of Wallan. The E14 would have a full diamond interchange with the OMR.
Gunns Gully Road is currently constructed as a local road from the existing Hume Freeway to approximately 3 km west. Part of Gunns Gully Road is currently unmade. It is proposed that Gunns Gully Road would be constructed through to Old Sydney Road. West of the OMR, there would be a minor realignment of Gunns Gully Road from the existing road reservation to provide a satisfactory gradient through to Old Sydney Road.
The OMR — Hume Freeway interchange would provide for all traffic movements between the two freeways. The OMR would pass under the existing Hume Freeway. There would be two levels of interchange ramps above the existing Hume Freeway.
Immediately east of the proposed interchange, the east bound carriageway would climb at a 3% grade to allow the OMR Railway lines to leave the transport corridor. The railway line would climb at its maximum grade of 1% to enable it to pass over the Melbourne — Sydney Railway line. The railway line would then turn northwards to join onto the Melbourne-Sydney rail line. This proposed railway line may require further realignment depending on the requirements at the proposed Donnybrook/Beveridge Interstate Rail Freight Terminal.
New access roads are proposed to run adjacent to the Hume Freeway from Kalkallo through the OMR interchange area to the Hume Freeway interchange at Beveridge. These access roads would provide a direct arterial link from the proposed business/industrial areas south of the OMR to the northern area.
The proposal includes a rail connection from the OMR from the west to the Melbourne-Sydney Railway line to the north.
It was proposed that Gunns Gully Road would become a four lane divided road, that would cross over the OMR.
61 Separately, the Report for Public Consultation: Urban Growth Boundary Review proposed expanding the Urban Growth Boundary, including further north into Mitchell Shire. The proposed expansion in the Hume-Mitchell-Whittlesea area is shown in Figure 15 below. The proposed new Urban Growth Boundary extended north of the Property.
Figure 15: Melbourne North Investigation Area (Hume-Mitchell-Whittlesea), VicRoads, Delivering Melbourne’s Newest Sustainable Communities dated June 2009, 58.
62 Submissions received for the North Investigation Area raised land use and development planning issues that would be further considered and refined through the preparation of a Growth Area Framework Plan and PSPs. The report noted that planning for development in the North Investigation Area would need to address a number of issues, including the ‘major shaping effect’ of significant transport projects including the OMR and the proposed BIFT.[32] It proposed that the Urban Growth Boundary be located as follows:[33]
> The Old Sydney Road is recommended as the western boundary, generally north of Gunns Gully Road;
> Land south of Gunns Gully Road and west of the proposed Outer Metropolitan Ring / E6 Transport Corridor has been placed outside the proposed Urban Growth Boundary because of the inter-relationships between its landscape values, narrow dimensions and proximity to the Outer Metropolitan Ring Transport Corridor;
> The northern edge of the Urban Growth Boundary generally follows the edge of the Investigation Area to support catchments for future public transport and other community services. A suitable landscape buffer along this interface is provided to maintain the integrity of Wallan Township. The details of this need to be developed by the Victorian Government in conjunction with Mitchell Shire;
[32]Victorian Government, Delivering Melbourne’s Newest Sustainable Communities: Report for Public Consultation: Urban Growth Boundary Review (June 2009), 64.
[33]Urban Growth Boundary Review, 69.
63 Another discussion paper in the series on employment (Employment Discussion Paper) was intended to inform judgments as to how much land to set aside for business activity within the growth areas, to then inform the location of the Urban Growth Boundary and the allocation of land at the Growth Area Framework Planning stage. Part 2 set out the general aims to be borne in mind:[34]
[34]Victorian Government, Delivering Melbourne’s Newest Sustainable Communities: Discussion Paper: Employment (June 2009), 8–9 (Employment Discussion Paper).
Planning for business activity within the revised Urban Growth Boundary should be viewed in the context of Government objectives to promote economic growth, foster environmentally sustainable development and reduce spatial disadvantage. It also needs to provide flexibility to meet the [unforeseen] future needs of the economy.
Victoria’s economic growth
Maintaining a competitive environment for investment and encouraging economic development is a central goal of the Victorian government. Planning for Melbourne, including the growth areas, needs to ensure that the elements contributing to Victoria’s competitiveness are maintained as the city develops. There is also a need to recognise the requirements and location preferences of key business sectors when planning for growth area development.
Stimulating business activity and investment in outer areas
There is an identified need in Melbourne @ 5 million to provide jobs and services within and closer to outer metropolitan areas to deliver a more robust and sustainable city structure which addresses the interrelationship between transport and land use management and to reduce spatial disadvantage. In response Melbourne @ 5 million proposes to deliver a multi-centre ‘polycentric’ city which will have the following characteristics:
• Several large centres with employment as a key focus rather than one dominant Central Business District
• Employment corridors with multiple opportunities along selected high capacity public transport corridors
• Targeted redevelopment to increase housing and employment in established areas close to where people reside, [particularly] where the tram network can support this level of change
• New sustainable communities that provide jobs and housing in growth areas in the north and west, recognising the diminishing settlement options in the south-east.
In order to promote jobs growth it is important to influence job location and recognise that jobs are an outcome of business activity and private sector investment. To address and influence the distribution of jobs across Melbourne, the State Government, in collaboration with local councils must work to create the preconditions for investment and business activity.
…
Creating sustainable communities
New areas need to be comprehensively planned for sustainable communities that offer high quality, frequent and safe local and regional public transport, and a range of local activities – living, working and recreational. The clustering of complementary facilities and activities in growth areas, will provide access and opportunities for sharing of business resources, and stronger support for local economic activity.
Access to employment
Melbourne @ 5 million and the Victorian Transport Plan seek to bring jobs closer to residents and part of this approach is about improving access to employment, particularly choice in travel modes.
64 In relation to the Growth Area Framework Planning process, the Employment Discussion Paper emphasised the need to understand the types of business activity that would occur, as well as the settlement patterns and associated land requirements. It envisaged that the spatial structure of future growth areas would include links to central activity districts and employment corridors, as well as employment precincts and neighbourhood activity centres. Employment precincts were described as ‘large flexible multi-use areas, within growth areas, that provide for a large number of employment opportunities as part of an urban fabric that incorporates residential, cultural, recreational and civic uses and are located adjacent to high capacity public transport corridors’.[35] The paper also noted the need for large land allocations within growth areas, with access to high quality transport infrastructure, for industrial and logistics activities.
[35]Employment Discussion Paper, 21.
65 The Employment Discussion Paper then set out a series of principles to inform the location of the different components of the spatial structure of future growth areas. The location of employment precincts would need to satisfy the following spatial principles:[36]
[36]Employment Discussion Paper, 23.
• Access to high capacity public transport
• Access to high quality to the major road network
• Avoid or minimise land use conflict between industry and sensitive land uses.
• Inclusion of an Activity Centre within the precinct itself
• A large contiguous allocation of land
Similar principles were identified for the location of industrial and logistics land:[37]
• Access to the major road and rail network
• Access to major freight and logistics centres
• Large contiguous allocations of land.
[37]Employment Discussion Paper, 25.
2012 — Growth Corridor Plans: Managing Melbourne’s Growth
66 Growth Corridor Plans was a critical strategic planning document published by the Growth Areas Authority in June 2012, which set the overarching strategic planning framework for each of Melbourne’s growth areas and provided the basis for future precinct structure planning. It began with a statement of the common principles that had underpinned the development of all four growth corridor plans:[38]
[38]Victorian Government, Growth Corridor Plans: Managing Melbourne’s Growth (June 2012), 11.
Principle 1: Create diverse and vibrant new urban communities
Principle 2: Integrate transport and land use planning
Principle 3: Plan for local employment creation
Principle 4: Create Growth Corridors with high amenity and character
Principle 5: Protect biodiversity, waterways and cultural heritage values
Principle 6: Create integrated open space networks
Principle 7: Plan for environmental sustainability
Principle 8: Stage development to ensure the efficient and orderly provision of infrastructure and services
67 Chapter 3 of the document elaborated upon each of these principles. The detail of Principle 3 — Plan for local employment creation — included the following statement in relation to industrial land supply:[39]
[39]Growth Corridor Plans, 23–25.
The availability of stocks of competitively priced land for manufacturing and logistics uses has been a significant source of competitive advantage for Melbourne in the past. Ensuring that this competitive advantage is protected in the future is an important planning outcome to achieve in Melbourne's Growth Corridors. The Growth Corridor Plans provide sufficient industrial land for up to the next 40 years.
Safeguarding strategically located industrial land over the entire lifetime of the Growth Corridor Plans is critical because the opportunity to 'retro-fit' industrial precincts into any Corridor is not possible once sensitive land uses (e.g. residential) are allowed to establish.
Melbourne currently has sufficient land to meet the needs of large-scale industrial development for the next 25 years. However, planning for additional industrial areas must occur well before the existing land supply nears its end. The Growth Corridor Plans currently allow for 10-15 years of additional broad hectare industrial land in addition to the existing supply.
…
The reduction in availability of large vacant sites and the increasing value of industrial land in established suburbs, together with the continuing displacement of industrial uses in inner and middle suburbs by residential redevelopment, means that Growth Corridors are likely to increasingly be Melbourne’s primary source of land for manufacturing and logistics uses.
Outer urban industrial precincts will also help to cater for currently unforeseen demand associated with changing economic structures and the possibility of higher metropolitan population growth.
The Growth Corridor Plans propose extensions to a number of existing industrial nodes, and the creation of new nodes in key locations on metropolitan transport networks.
The industrial areas identified in the Growth Corridor Plans are generally large (i.e. over 200ha). Such large precincts provide opportunities for co-location of companies serving similar sectors/markets, as well as providing opportunities for industries that have large land use buffer requirements to find suitable sites.
The distribution of industrial precincts between the Growth Corridors has been based upon an assessment of market preferences and the level of existing industrial land stocks. Relatively more industrial land has been identified in the West and, to a lesser extent, the North Growth Corridors as these areas provide better access to the interstate freight network and to Melbourne's ports and airports.
Around half of the additional industrial land supply is located in Melbourne’s west, either as an extension to the existing industrial node at Laverton or along the OMR and freeway network. Much of this will be linked to the proposed Western Interstate Freight Terminal at Truganina.
Additional industrial land supply is also identified in Melbourne’s north, either along the Hume Fwy or as an adjunct to the proposed potential Beveridge Interstate Freight Terminal and OMR/E6 road reservation, providing for longer term road and rail freight distribution.
Comparatively less industrial land is identified to be added in the South-East Growth Corridor, due largely to the fact that this Corridor already has a significant longer term supply of industrial land in Dandenong, Officer and Pakenham South, as well as port-related industrial development opportunities at the Port of Hastings.
…
In areas set aside for industrial purposes, PSPs are expected to deliver land predominantly for industrial uses with some allowance for a range of ancillary supporting services. Job density of 15-20 per gross hectare should be achieved.
68 The criteria adopted by the Growth Areas Authority for locating major industrial precincts were also set out:[40]
> good access to the Principal Freight Network (PFN) and via the network to ports, airports and intermodal freight terminals;
> the availability of sufficient unfragmented land holdings to enable the development, over time, of clusters of related businesses;
> relatively flat land with good access to services and infrastructure so as to enable economic subdivision and building development; and
> the ability to provide adequate buffers from residential and other sensitive land uses to enable planning and EPA guidelines for residual air and noise emissions to be met.
[40]Growth Corridor Plans, 24.
69 Chapter 5 contained the North Growth Corridor Plan, and commenced with the map shown below at Figure 16. The land bounded by Gunns Gully Road, the Hume Freeway, and the OMR reservation — inclusive of the southern half of the Property — was designated for industrial use. The land to north of the OMR reservation and the west of the Hume Freeway, incorporating the northern half of the Property, was designated for residential use.
Figure 16: North Growth Corridor Plan, Growth Areas Authority, Growth Corridor Plans dated June 2012, composite of 58–59.
70 The context for the development of the North Growth Corridor Plan was described as follows:[41]
[41]Growth Corridor Plans, 60.
Melbourne’s north is undergoing substantial transformation, with a widening socio-economic mix, and a diversifying economy. The region plays an international and interstate gateway role in terms of the Melbourne Airport, Hume Freeway and the Melbourne-Sydney-Brisbane rail line. Whilst it has maintained its nationally significant role in advanced manufacturing and logistics, it is also developing new strengths in the knowledge economy.
The area covered by the Growth Corridor Plans will eventually accommodate a population of 260,000 or more people and has the capacity to provide for at least 83,000 jobs. The majority of new industrial land for the northern metropolitan region will be located within the North Growth Corridor.
The North Growth Corridor has good accessibility to the CBD and other major employment precincts. It features excellent road, rail, freight and public transport infrastructure, most notably Melbourne Airport and other significant logistics hubs.
Broadmeadows Central Activities Area will continue to evolve and act as a major anchor for the region to support the emerging growth in the Northern Corridor.
In the longer term, the Outer Metropolitan Ring/E6 road reservation (OMR/E6) and the Beveridge Interstate Freight Terminal (BIFT) will reinforce the economic functioning of this corridor, and it will also benefit from ongoing upgrades to roads and public transport over time.
Ensuring that the North Growth Corridor is an attractive location for a wide range of businesses, and a wide diversity of households are key challenges.
The North Growth Corridor Plan seeks to meet these challenges by:
> preserving and enhancing the natural features of the Growth Corridor, including the significant landscape and biodiversity values. New communities will benefit from an integrated open space network that provides a distinctive character and amenity, and existing biodiversity values will be preserved and enhanced;
> providing an enhanced public transport network comprising new rail stations along the Sydney-Melbourne rail line supported by a series of high capacity public transport services which will connect substantial parts of the corridor to higher order town centres and to stations along the heavy rail corridor;
> extending the northern region's public transport and arterial road networks into the Growth Corridor so that future residents and workers will enjoy a similar level of accessibility to those living and working in established parts of the north;
> creating new town centres and employment areas that contribute to the ongoing diversification and growth of the northern region’s economy. New Town Centres will be planned to complement the significant role of the Broadmeadows [Central Activities Area] for Melbourne’s north. These town centres have been located on the public transport networks to maximise accessibility; and
> providing for a variety of housing choices that can meet the needs of the new communities not only on initial development but also as the community matures and changes over time.
71 The North Community Concept Plan in Figure 17below shows the planned residential communities, which were said to be ‘defined by the city shaping elements such as the OMR, the Hume Freeway, the Sydney-Melbourne rail line’, as well as the landscape and areas of special environmental significance. [42]
Figure 17: North Community Concept Plan, Growth Areas Authority, Growth Corridor Plans dated June 2012, 66.
[42]Growth Corridor Plans, 66.
72 The North Employment Concept Plan is shown in Figure 18. The purple area marked ‘2’ includes the southern half of the Property, and the purple area marked ‘1’ is the land earmarked for the BIFT.
Figure 18: North Employment Concept Plan, Growth Areas Authority, Growth Corridor Plans dated June 2012, 70.
73 The provision made for employment precincts in the North Growth Corridor Plan was described as follows:[43]
[43]Growth Corridor Plans, 70–71.
The North Growth Corridor Plan makes provision for:
> 2,810 (gross) hectares of industrial land;
> A possible 320 (gross) hectares of business land (the exact amount is dependent upon the outcomes of land uses to be determined following further investigation); and
> Around 120 (gross) hectares of additional land could also be provided, for a range of local industrial and commercial activities across residential PSPs. These will be identified as required through the PSP process.
Beveridge Interstate Freight Terminal
The Beveridge Interstate Freight Terminal (BIFT) is a longer term freight, logistics and related industry concept. Planning for this facility is in the very early stages. The site represents the ideal location for the facility based on its location alongside the Melbourne-Sydney-Brisbane rail line, Hume Freeway and proposed OMR. Almost 1,010 (gross) hectares of land east of the Melbourne-Sydney rail line and north of the E6 reservation is identified for the proposed intermodal freight terminal and associated freight and logistics based industrial area. Further investigations will determine the exact area required for the core terminal requirements, with the remainder of the Precinct designated for industrial and freight related uses.
Mickleham
The existing Craigieburn industrial corridor will be extended up to the Outer Metropolitan Ring Transport Corridor, alongside the Hume Freeway. This will provide an additional 310 (gross) hectares of industrial land with excellent access to the freight network in addition to 60 (gross) hectares of business land which is identified to provide a more appropriate interface with the proposed Kalkallo retarding basin. This is in addition to 600 (gross) hectares of industrial land and 80 (gross) hectares of Business use south of the Kalkallo Retarding Basin.
Wollert
215 (gross) hectares of land for industrial uses is identified alongside the proposed E6 road reservation for general industrial uses. This provides an opportunity to buffer the existing Hanson quarry /landfill site at Wollert with appropriate uses whilst providing both local and regional employment opportunities. This area is expected to provide for more local service business uses, as well as freight based industry.
Donnybrook Road
100 (gross) hectares of land for industrial uses is identified to the south of Donnybrook Road. Donnybrook Road will be designed primarily to carry freight, and will have good access onto the Hume Freeway and the E6 road reservation.
74 The Growth Areas Authority’s development of the Growth Corridor Plans was informed by a number of technical reports, including the following three assessments of the need for industrial land in Melbourne’s growth areas:[44]
(a) A study into the take up of industrial land and future land requirements in Melbourne, prepared by Jones Lang LaSalle in July 2010;
(b) Growth Corridor Plans, Activity Centre and Employment Planning, Final Interim Report, an interim report prepared by Essential Economics in August 2010 and finalised in November 2011; and
(c) Industrial Land in Melbourne, An analysis of the use, zone, distribution and consumption of industrial land, prepared by Spatial Economics in October 2010.
[44]Growth Areas Authority, Planning For Employment and Industry in Melbourne’s Growth Areas (October 2011), 2.
75 The three reports had different scopes and used different methodologies, and provided a range of estimates of industrial land requirements in the growth areas.
(a) Jones Lang LaSalle estimated that an additional 3,378 hectares of industrial land could be needed to satisfy projected demand in between 2010 and 2030, with 90% of that need located in Melbourne’s west and north.[45]
(b) Essential Economics estimated the total land requirement for dedicated employment precincts in the Hume-Mitchell-Whittlesea area to be 1,320 to 1,485 hectares under a low growth scenario, and 2,100 to 2,365 hectares under a high growth scenario.[46]
(c) Spatial Economics estimated that to achieve an additional 15 years supply of industrial land in the north region, 1,620 gross hectares of land would be required.[47]
[45]Jones Lang LaSalle, A study into the take up of industrial land and future land requirements in Melbourne, July 2010, Executive Summary.
[46]Essential Economics, Growth Corridor Plans, Activity Centre and Employment Planning, Final Interim Report, August 2010, xviii–xix.
[47]Spatial Economics, Industrial Land in Melbourne, An analysis of the use, zone, distribution and consumption of industrial land, October 2010, 7.
76 The Growth Areas Authority synthesised the conclusions reached in these three reports in a separate document titled Planning for Employment and Industry in Melbourne’s Growth Areas, dated October 2011. It concluded that an additional 1,745 hectares should be allocated for industrial land in the north growth corridor.[48]
[48]Planning for Employment and Industry in Melbourne’s Growth Areas, 4.
2014 — Plan Melbourne Metropolitan Planning Strategy
77 Plan Melbourne 2014 was first released by the Victorian Government in May 2014. It sought to ‘integrate long-term land-use, infrastructure and transport planning to meet the population, housing and employment needs of the future’, with a vision that involved:[49]
• Protecting the suburbs
• Developing in defined areas near services and infrastructure
• Creating a clearer and simpler planning system with improved decision making
• Rebalancing growth between Melbourne and regional Victoria
• Identifying an investment and infrastructure pipeline.
[49]Victorian Government, Department of Transport, Planning and Local Infrastructure, Plan Melbourne Metropolitan Planning Strategy (May 2014), 2 (Plan Melbourne 2014).
78 Plan Melbourne 2014 built on previous planning for growth, including the existing growth corridors, although it used some different terminology, such as ‘subregion’, ‘national employment cluster’ and ‘state significant industrial precinct’. Each subregion, including the northern subregion, was anchored by a national employment cluster. The strategic direction for these clusters was:[50]
To improve access to a diversity of employment opportunities, including knowledge jobs in six designated precincts in metropolitan Melbourne.
To improve the growth of business activity (and therefore jobs) of national significance.
To improve the ability of businesses to leverage off their export and innovation potential to grow jobs in other industry sectors. They are mixed-use centres and, with the exception of Dandenong South, will include residential, retail and commercial development.
[50]Plan Melbourne 2014, 30.
79 The strategic direction for state-significant industrial precincts was:[51]
To ensure there is sufficient strategically located land available for major industrial development linked to the principal freight network and transport gateways. They will be protected from inappropriate development to allow continual growth in freight, logistics and manufacturing investment.
Much of the north growth corridor was identified as either an existing or a future state-significant industrial precinct, as shown on the map in Figure 19 below. Plan Melbourne 2014 foreshadowed an opportunity in the northern subregion for ‘a national employment cluster to emerge in the northern end of the growth corridor’.[52]
Figure 19: Metropolitan Melbourne Structure Plan, Department of Transport, Planning and Local Infrastructure, Plan Melbourne dated May 2014, 28.
[51]Plan Melbourne 2014, 30.
[52]Plan Melbourne 2014, 28.
80 Plan Melbourne 2014 set out a number of directions with supporting initiatives.[53] Relevantly:
[53]Plan Melbourne 2014, 18–9, 199–204.
(a) Direction 1.1 was to define a new city structure to deliver an integrated land use and transport strategy for Melbourne’s changing economy, including by updating the State Planning Policy Framework to recognise the spatial impact of an integrated economic triangle connecting various subregions on Melbourne’s key infrastructure projects and associated land uses;[54]
[54]Plan Melbourne 2014, 33.
(b) Direction 1.2 was to strengthen the competitiveness of Melbourne’s employment land. It involved three initiatives: planning for industrial land in the right locations across Melbourne’s five subregions to support investment and employment; maintaining the competitiveness of employment land in Melbourne’s growth areas; and planning for commercial land and activity centre needs;[55]
[55]Plan Melbourne 2014, 34–5.
(c) Direction 1.5 was to plan for jobs closer to where people live, including by facilitating the development of national employment clusters; [56]
[56]Plan Melbourne 2014, 41–8.
(d) Direction 2.1 was to understand and plan for expected housing needs; [57]
(e) Direction 2.2 was to reduce the cost of living by increasing housing supply near services and public transport;[58]
(f) Direction 3.5 was to improve the efficiency of freight networks while protecting urban amenity;[59] and
(g) Direction 3.6 was to increase the capacity of ports, interstate rail terminals and airports and improve landside transport access to these gateways, including by planning for the proposed BIFT.[60]
[57]Plan Melbourne 2014, 67–9.
[58]Plan Melbourne 2014, 73–5.
[59]Plan Melbourne 2014, 103–6.
[60]Plan Melbourne 2014, 107–9.
2019 — Plan Melbourne 2017-2050
81 In 2017, the Victorian Government reviewed Plan Melbourne 2014, and published a revised metropolitan planning strategy titled Plan Melbourne 2017-2050.[61] Plan Melbourne 2017-2050 was structured around seven outcomes, each with related directions and policies. The seven outcomes were:[62]
[61]Victorian Government, Department of Environment, Land, Water and Planning, Plan Melbourne 2017-2050: Metropolitan Planning Strategy (March 2017).
[62]Plan Melbourne 2017-2050, iii.
1 Melbourne is a productive city that attracts investment, supports innovation and creates jobs
2 Melbourne provides housing choice in locations close to jobs and services
3 Melbourne has an integrated transport system that connects people to jobs and services and goods to market
4 Melbourne is a distinctive and liveable city with quality design and amenity
5 Melbourne is a city of inclusive, vibrant and healthy neighbourhoods
6 Melbourne is a sustainable and resilient city
7 Regional Victoria is productive, sustainable and supports jobs and economic growth
82 In relation to the first outcome, four directions were identified:[63]
1.1Create a city structure that strengthens Melbourne’s competitiveness for jobs and investment
1.2Improve access to jobs across Melbourne and closer to where people live
1.3Create development opportunities at urban renewal precincts across Melbourne
1.4Support the productive use of land and resources in Melbourne’s non-urban areas
[63]Plan Melbourne 2017-2050, 12.
83 Direction 1.1 emphasised the importance of the availability of commercial and industrial land:[64]
To remain prosperous Melbourne must remain attractive to investment.
That means ensuring well-priced commercial and industrial land is available in locations that support and strengthen key growth industries. In the longer term, Melbourne’s northern and western regions will need to create job opportunities—particularly for high-value, knowledge based jobs—to support expected population growth.
That means understanding the scale of employment growth and land-use requirements across the city; ensuring business locations are investment-ready and productive, with capacity to grow; and making smart investments in infrastructure projects that accelerate local investment and job creation for suburban and outer areas and stimulate economic growth.
[64]Plan Melbourne 2017-2050, 24.
84 This was reinforced by Policy 1.1.6:[65]
[65]Plan Melbourne 2017-2050, 35.
Policy 1.1.6
Plan for industrial land in the right locations to support employment and investment opportunities
Melbourne currently has almost 26,000 hectares of land zoned for industrial purposes. Of this, more than 7,000 hectares are vacant, with approximately 4,660 hectares of vacant land located within state-significant industrial precincts. In addition, 6,275 hectares of unzoned land has been identified through growth corridor plans and previous strategic plans. Over the past five years, demand for new industrial land has averaged around 205 hectares a year, with demand driven by freight, logistics and manufacturing.
Melbourne’s major industrial areas have become more attractive through recent investments in Victoria’s transport network and hubs. Unlike many other cities, Melbourne is well positioned to absorb additional growth near major transport gateways and freight terminals.
Ensuring there is enough industrial land available for development near transport gateways—particularly in outer-suburban areas—will be critical if Melbourne is to remain globally competitive and attract new investments and jobs.
State-significant industrial precincts will be protected from incompatible land uses to allow for their future growth. Future industrial land will need to be identified in strategic locations to ensure there is sufficient land available for major industrial development linked to the Principal Freight Network and transport gateways and networks.
85 As at 24 September 2019, the State Planning Policy Framework in both the Mitchell and Hume Planning Schemes contained planning policies that broadly reflected Plan Melbourne 2017-20.
Precinct Structure Planning
86 Within the North Growth Corridor are a number of separate precincts, each of which must undergo a precinct structure planning process before development can proceed. A PSP identifies the arrangement of key land uses in the precinct, and the planning process involves a review of the zones and overlays applied to land within the precinct. Once finalised, a PSP is incorporated into the relevant planning scheme by way of an amendment.
87 The precincts in the vicinity of the Property are shown in Figure 20. The northern part of the Property is in the Beveridge South West precinct, while the southern part is in the Merrifield North precinct.
Figure 20: Plan of Precincts in North Growth Corridors adjacent to the site, Report of Michael Barlow dated 15 September 2021, [79].
88 The PSP for Merrifield Central was approved relatively early, in March 2008.[66] Amendment C092 to the Hume Planning Scheme rezoned the entire precinct as a Comprehensive Development Zone, and incorporated the Merrifield Comprehensive Development Plan as Schedule 2 to the zone. The plan provided for the development of the site as an integrated, contemporary employment node.
[66]Amendment C092 to the Hume Planning Scheme, 6 March 2008.
89 PSPs were approved for Merrifield West[67] and for Lockerbie[68] in June 2012, at around the same time that the Growth Areas Authority published the North Growth Corridor Plan.
[67]Amendment C162 to the Hume Planning Scheme, 27 June 2012; Subsequently amended by Amendment C221.
[68]Amendment C161 to the Hume Planning Scheme, 28 June 2012.
90 In 2021, the Victorian Planning Authority[69] started a ‘pre-commencement’ assessment of the Merrifield North PSP, with a view to formally commencing the process in the second part of 2022.
[69]The successor to the Growth Areas Authority.
91 The preparation of the Beveridge South West PSP is not currently scheduled for commencement.
Questions 1, 2 and 3 — Highest and best use
92 In order to assess the compensation payable to Kajag for its loss on the sale of the Property, I must determine what the highest and best use of the Property would have been had part of it not been reserved for the OMR. The concept of highest and best use is implicit in the assessment of the market value of any land, with both vendor and purchaser taken to be aware of all circumstances that might affect the use that may be made of the land.[70] In ISPT Pty Ltd v Melbourne City Council, the Court of Appeal approved the following explanation of the concept:[71]
Highest and best use represents the most profitable potential use to which land can be put having regard to both planning and like controls and the circumstances of the land. It is to be distinguished from the present use of land; although the present use might also be the highest and best use. When land is sold, the market values the land at its highest and best use: as buyers will not be constrained to continue the existing use; and the seller will seek to achieve the highest price for the land. This is why highest and best use is relevant in assessing value, whether improved value or site value.
[70]ISPT Pty Ltd v Melbourne City Council (2008) 20 VR 447, [37]–[38] (ISPT).
[71]ISPT, [41], approving ISPT Pty Ltd v Melbourne City Council (Land Valuation) [2007] VCAT 652, [62].
93 The highest and best use of land is flexible and may change over time. In the case of land with future development potential, the highest and best use may be to ‘bank’ the land with a view to future development.[72]
[72]ISPT, [43].
Expert planning evidence
94 In this case, the highest and best use of the land depends on its development potential, in the absence of the OMR reservation. On this question, each party called expert evidence from two town planning experts. Kajag tendered reports prepared by Robert Milner and Michael Barlow, and the Authority relied on the opinions of Sophie Jordan and David Crowder, set out in their respective reports.
Robert Milner
95 Mr Milner holds a Diploma in Town and Country Planning with First Class Honours from Liverpool Polytechnic. He has worked as a strategic and statutory planner for more than 40 years, with experience working for local government and in private practice. Over the last 20 years he has provided expert evidence in a range of matters, including compulsory acquisition disputes involving roads. At the time he was engaged by Kajag, Mr Milner was a principal at David Lock Associates, which subsequently changed its business name to Kinetica Studio Pty Ltd.
96 Mr Milner prepared a strategic planning assessment dated December 2019, and a supplementary report dated 4 October 2021.[73] In his opinion, the highest and best use of the Property at 24 September 2019 was the future development for industrial and employment purposes of any land not required for drainage works.
[73]Supplementary report of Robert Milner dated 4 October 2021 (Second Milner report).
97 In the absence of the OMR, Mr Milner considered that there would have been less demand for industrial land and a significant reconsideration of the location and quantity of land set aside for industrial purposes. In this ‘before’ scenario, he concluded that the highest and best use of that land would have been to set it aside primarily for residential purposes. Mr Milner summarised his reasons for that conclusion as follows:[74]
[74]Second Milner report, 6.
• The longer-term strategic accessibility of the location to the Calder, Western and Princes Freeways and the industrial, warehouse and logistics precincts that are proximate to those roads would have been notably poorer,
• Rail based options for movement would have been poorer,
• the structure and patterns of land use in the northern growth corridor would have been different,
• The demand for industrial land would have been less,
• The Site would not have had frontage or exposure to the arterial transport or freight network.
• The Site would have formed part of vast area suitable for residential use and development extending from Gunns Gully Road towards Wallan,
• The Site would have remained separated from industrial estates to the south.
Michael Barlow
98 Mr Barlow holds a Diploma of Applied Science (Town Planning) from the Royal Melbourne Institute of Technology. He has worked as a town planner for over 40 years, including 35 years as a consultant planner. Over the last 25 years he has specialised in strategic planning, with a particular focus on major road projects and the interaction between land use and transport planning. He is currently a director of Urbis Pty Ltd.
99 Mr Barlow prepared a strategic planning report for Kajag dated 15 September 2021.[75] His opinion was that the creation and location of the OMR/E6 transport corridor was highly influential in the designation of the Merrifield North precinct for future industrial purposes. He considered that industrial use of the southern part of the Property would have been unlikely in the absence of the OMR, for the following reasons:[76]
‒The lack of the OMR/E6 corridor would remove the physical and access attributes that make the MNE precinct and part of the subject land attractive for industrial use.
‒The total future supply of industrial land in the north would last well beyond 2050 when the original estimates of land supply were prepared by the GAA.
‒The significant supply of industrial land in the north would mean that only the most attractive land areas that would facilitate industrial development would be considered for industrial purposes.
‒The location of industrial land use would likely remain south of the Kalkallo Retarding Basin and the Conservation reserve. These physical constraints would act as a logical barrier for further industrial development and provide sufficient buffers for future sensitive uses north which includes the subject land.
[75]Report of Michael Barlow dated 15 September 2021 (Barlow report).
[76]Barlow report, [138].
100 Even if an employment precinct was to be provided on the northern side of Gunns Gully Road, Mr Barlow was of the view that it would not have extended as far west as the Property. The most likely boundary of the precinct would have been the eastern course of Kalkallo Creek, as shown in Figure 21 below.
Figure 21: Size of alternative employment precinct in the absence of the OMR, Report of Michael Barlow dated 15 September 2021, [127].
101 Mr Barlow considered that, in the absence of the OMR reservation, the Property would most likely have been used for residential purposes.
Sophie Jordan
102 Ms Jordan holds a Bachelor of Planning and Design with Honours from the University of Melbourne. She has worked as a qualified urban planner since 1997 in both local government and private practice. From 2012, she was the director of her own urban planning practice, Sophie Jordan Consulting Pty Ltd, which she recently merged with Contour Consultants. Over that time she has had experience with a broad range of statutory and strategic planning projects, and has given expert evidence in many forums. For the last few years her practice has had a heavy focus on matters of land compensation related to road and rail projects.
103 Ms Jordan prepared a report dated 3 February 2022.[77] Having regard to the criteria for the preferred location of industrial land identified in the Jones Lang Lasalle study,[78] and the strategic considerations identified for the North Growth Corridor, Ms Jordan concluded that, in the absence of the OMR, the preferred development outcome for the Property would have been for business or industrial purposes. In Ms Jordan’s view, the designation of the Property for that purpose in the North Growth Corridor Plan would still have been a strategically sound land use activity in the absence of the OMR, ‘contributing to the long term supply of suitable land for the accommodation of a range of businesses, particularly associated with freight and logistics’.[79] She reached this conclusion based on the Property’s accessibility to current and planned networks, together with the following key locational attributes:[80]
§Proximity to key transport corridor, being the Hume Freeway, that is critical to the movement of freight and supporting the ongoing growth of industrial land and allied business development along its north/south alignment. It is noted that the Hume Freeway has been appropriately identified as forming part of the Principal Freight Network as part of the North Growth Corridor Plan and a State Significant Road Corridor as part of Plan Melbourne 2017-2050.
§Proximity to a potential major inland freight terminal to the north east (BIFT). It is acknowledged that this potential freight terminal was yet to be resolved through the preparation of a business case, but was a feature of the strategic planning for the northern corridor, intended to support freight and logistics industries that utilise the Hume Freeway as the primary transport network to interstate locations.
§An interface with the planned and developing precinct to the south of Gunns Gully Road, which has been identified for industrial and business activity and forming part of the future State-Significant Industrial Precinct. The ‘clustering’ of business/industrial related activity that would occur in this area will only further advance the potential to deliver a range of industrial and employment generating businesses and have been identified independent of the OMRTC.
§A growing community across the northern corridor that is expected to provide a significant proportion of the future workforce in the industrial sector.
§Generally flat topography, that is well suited to industrial and other business activity.
§An interface with Gunns Gully Road, nominated to be upgraded to an arterial road and with an interchange with the Hume Freeway to be provided. This road will extend further to the east into the planned Lockerbie community, increasing the accessibility to/from the Property.
[77]Report of Sophie Jordan dated 3 February 2022 (Jordan report).
[78]See [74]–[75] above.
[79]Jordan report, [172].
[80]Jordan report, [173].
104 Ms Jordan acknowledged that the Property would also have been suitable for residential development in the absence of the OMR. However, she considered its position and locational advantages would more likely have supported its use as part of the industrial and business activity of the corridor in a manner that would be of regional benefit.
David Crowder
105 Mr Crowder holds a Bachelor of Town and Regional Planning with Honours from the University of Melbourne. He has 35 years’ experience as a town planner, starting in local government in growth areas, and since 2000 in a private consultancy. He described himself as primarily a statutory planner who has also been involved in panels and compensation matters. He is currently a director of Ratio Consultants Pty Ltd.
106 Mr Crowder prepared a report dated 25 September 2020,[81] and a letter of addendum dated 17 February 2022.[82]
[81]Report of David Crowder dated 25 September 2020 (Crowder report).
[82]Letter of addendum to report of David Crowder dated 17 February 2022 (Crowder addendum).
107 In Mr Crowder’s opinion, in the absence of the OMR, an industrial/employment precinct would likely have extended along the western side of the Hume Freeway corridor, to the north and south of Gunns Gully Road. His reasons for that opinion were:[83]
― The original justification for the extension of the [Urban Growth Boundary] along the northern growth corridor was for employment/industry (freight/logistics). This was to be the ‘major focus’ of investigations before the OMR was mooted (principally Melbourne @ 5 Million 2008, but also preceding advisory studies/plans/strategies).
― The land along this part of the corridor is highly suitable for employment / industrial uses given its proximity and convenient access to the Hume Freeway (a major freight route and freeway nominated as being part of the ‘Principal Freight Network’ connecting with the eastern seaboard), and proximity to the Melbourne-Sydney rail line and planned Donnybrook/Beveridge Interstate Freight Terminal.
― Its flat topography; size/dimension; limited ownership/land fragmentation; limited nearby sensitive land uses; proximity to other employment areas along this corridor (and the ability to link with these), and proximity to emerging markets and work forces.
[83]Crowder report, [5.1.7] (footnotes omitted).
108 As to the western boundary of the industrial/employment precinct, Mr Crowder’s initial position was that the main arm of Kalkallo Creek, which runs roughly diagonally through the Property, would probably have formed the boundary between an industrial/employment precinct to the east and a residential precinct to the west and north. In his first report, he identified the future north-south E14 transport corridor as an alternative western boundary to the industrial/employment precinct.[84]
[84]Crowder report, [5.1.4]–[5.1.6].
109 This meant that, initially, Mr Crowder was of the view that, in the absence of the OMR, it was likely that the Property would have been developed partly for industrial/employment purposes, partly for drainage/recreational purposes, and partly for residential purposes.[85]
[85]Crowder report, [5.1.4].
110 Subsequently, Mr Crowder was provided with a number of expert reports obtained by both the Authority and Kajag. These reports included Ms Jordan’s report, but not the reports of Mr Milner or Mr Barlow. Having reviewed those reports, Mr Crowder expressed in his letter of addendum his general agreement with Ms Jordan’s opinion that ‘the preferred development outcome for the broader Hume corridor in this locale would have been for business or industrial purposes’.[86] Unlike Ms Jordan, he concluded in his September 2020 report that part of the site would likely have been developed for residential purposes, based on his assessment of the likely eastern boundary of the industrial precinct. However, he then re-evaluated that assessment in light of the additional technical reports, and now considered that ‘in the before scenario it is likely the preferred development outcome of the Property would have been for business or industrial purposes’.[87]
[86]Crowder addendum, 4.
[87]Crowder addendum, 6.
111 Mr Crowder explained why he had changed his opinion as to the likely western boundary of the industrial precinct:[88]
[88]Crowder addendum, 10.
With regard to the latter, the expert drainage and traffic evidence:
- Reaffirmed my understanding that current drainage lines could be realigned and reengineered to maximise the efficient development of the land while addressing the substantial drainage challenges in this locale.
-Highlighted that, without the OMR/E6, it would have been preferable to relocate the most westerly north-south arterial road … further east, and proximate to the subject site.
Moving ‘Route 1’ further east, as opined by Mr O’Brien,[89] significantly increases its suitability as a defensible western boundary for a future industrial/employment precinct in this locale.
Further, to achieve more efficient development outcomes, there may have been merit in combining this arterial road with a realigned drainage line, and supplementing this with a major linear open space network. In addition to maximising the efficient future development of the land, this combination would have created an even more substantial and defensible boundary between industrial/employment land uses (on its east side) and residential uses (on its western side).
To illustrate this, I have prepared a ‘mud-map’ showing how this might look … While it is a very basic plan, it illustrates how I believe this locale/corridor would likely have developed in the absence of the OMR/E6, and with the benefit of expert drainage and traffic advice.
To be clear, I believe the more easterly north-south arterial road (‘Route 1’) would now be the most appropriate western boundary for a future industrial/business precinct in this locale whether it is supplemented with drainage and/or open space networks [or] not.
[89]A reference to Andrew O’Brien, a traffic engineer who provided a report at the request of the Authority.
112 Figure 22 below is Mr Crowder’s mud map.
Figure 22: Basic mud map, Addendum to the Report of David Crowder, 17 February 2022, 11.
Joint expert statement
113 The four planning experts held a joint conference on 8 March 2022. They produced a joint statement following that conference, which set out the matters on which the planners agreed, and identified points of disagreement.
114 The planners agreed on a number of key factual matters as at the Relevant Date, and in the absence of the Scheme. In particular:
(a) The Property would have been zoned for a future urban role within the urban growth boundary.
(b) A range of agricultural activities would have been supported to continue or to establish prior to the approval of a PSP and development of the Property for a future urban role.
(c) It is likely there would have been some reluctance about the establishment of a range of discretionary uses in the Urban Growth Zone (Part A) unless it could be demonstrated that their establishment would not adversely compromise the orderly planning of the area for a future urban role.
(d) The Property would have been able to be used and developed for urban purposes after a PSP had been prepared and approved, although some land may need to be set aside for drainage or other ecological or utility purposes, which may have constrained development.
(e) It is unlikely that the Merrifield North Employment PSP would have been approved prior to 2020, even in the absence of the Scheme.
(f) The boundaries of the PSP surrounding the Property could have been different with individual properties not being split between two PSPs.
(g) The BIFT as shown in the North Growth Corridor Plan would proceed and play an important role within the corridor, servicing the freight and logistics sector. The location of the BIFT as shown in the Plan would be the most logical and appropriate location for a facility of this type and size.
(h) Gunns Gully Road would have been identified for an upgrade to an arterial road with an interchange at the Hume Freeway, and the extension of Gunns Gully Road to the east of the Freeway would have been necessary and appropriate.
(i) Donovans Lane would have been identified for an upgrade to an arterial road with an interchange at the Hume Freeway, and the extension of Donovans Lane to the west of the Freeway would have been necessary and appropriate.
(j) An arterial road network — including the north and south roads, together with the extension of Donovans Lane — would have been necessary to service the precinct north of Gunns Gully Road. This precinct contained by the future arterial road network would also have been serviced by a high capacity public transport network.
(k) The land north of Gunns Gully Road was physically and topographically suitable for use for industrial or residential purposes, but flat topography is essential for large scale industrial development.
(l) The Property has drainage constraints that require further investigation. It is likely that a drainage scheme will need to be implemented, which may reduce the net developable area.
(m) The Property has ecological values present that require further investigation to determine their impact on the net developable area, including that a vegetation management plan may be required.
115 In addition to these key factual matters, the planners also agreed on a number of additional matters:
(a) The northern corridor of metropolitan Melbourne currently supports and will continue to support State significant industrial activity. This activity is focused on the freight and logistics sector to a significant degree, and draws on access to interstate freight networks and the ports. This was a focus of the North Corridor Growth Plan and Plan Melbourne.
(b) In the absence of the Scheme, industrial activity would continue to be of State significance within the northern corridor. Existing road and rail network would provide primary access to routes of movement, with the new or upgraded arterial road network providing secondary routes of movement.
(c) The Scheme would have provided enhanced metropolitan accessibility between the Property and the western region of metropolitan Melbourne, which would have added to the attraction to the northern corridor more broadly for industrial and employment activity.
(d) In the absence of the Scheme, demand for industrial and employment generating activity would still have necessitated a long term supply of land within the northern corridor.
116 The planners then identified a number of matters on which their opinions diverged, as at the Relevant Date and in the absence of the Scheme, and provided reasons for their divergence.
117 In relation to the extent to which demand for a range of industrial and employment generating activities may influence the required supply of suitable land and its distribution across the northern corridor, the planners agreed that a land economist would be the most appropriate expert. However, they discussed three key planning matters related to demand and supply of industrial and employment generating land:
(a) the potential role of the BIFT within the corridor;
(b) the distribution of suitable land to accommodate industrial and employment generating activity across the northern corridor having regard to the BIFT and existing road network; and
(c) the potential for any industrial or employment activity north of Gunns Gully Road and west of the Hume Freeway.
118 Mr Crowder and Ms Jordan provided their joint response to these three matters, supporting their contention that, in the absence of the Scheme, the Property would most likely have been developed for industrial or employment purposes:
oAccept the OMRTC has been a relevant factor in the strategic planning of the northern growth corridor, which influenced the configuration and potentially the nature of planned land uses / development for this corridor.
oHowever, do not accept that, in the absence of the OMRTC, the land (including the Site) would not have been developed for industrial / employment purposes and could not have been alternatively planned / developed in an integrated and compatible manner.
oBefore the Scheme of Acquisition, the Hume Highway / Freeway corridor was recognised as a strategic corridor of State and national significance for freight and passenger services, and formed part of the Principal Freight Network. This corridor provided a major interstate link for the movement of freight. These strategic qualities made land proximate the corridor highly suitable for industrial and employment development, and specifically for the important freight and logistics industries.
oBefore the Scheme of Acquisition, and partly due to the suitability of land along the Hume Highway / Freeway corridor for the freight and logistics industries, there was a strategic directive and subsequent trend for urban land (existing or proposed) along the northern corridor to be preserved for future industrial and freight uses.
oFirst principles / sound planning dictates that, even if the absence of OMRTC, the Site would likely have been zoned and developed for industrial / employment purposes given its inherent suitability for this purpose, and the pattern of land use extending along the Hume Highway / Freeway corridor as land was progressively included in the [Urban Growth Boundary] and developed for urban purposes.
oThe ‘major focus’ (in ‘Melbourne @ 5 Million’, and preceding studies / documents) for investigating a potential expansion of the [Urban Growth Boundary] in 2008 in the ‘Hume-Mitchell-Whittlesea Growth Area’ (specifically the northern Hume and southern Mitchell Shire areas, which includes the Site) was to take advantage of the existing road and rail corridors and major opportunities for new employment and freight/logistics functions. This was based on the area’s proximity to existing road and rail transport corridors (principally the Hume freeway and railway line) which connected Melbourne with the eastern seaboard.
oMelbourne @ 5 Million reference to ‘employment corridors’ and the realisation of major opportunities for new employment and freight functions in the Northern Growth corridor were based on the significant existing road and rail corridors that service this area of metropolitan Melbourne, together with potential for improved transport connectivity over time.
oThe VTP identifies the OMRTC and extension of the E6 transport corridor as being long-term and subject to further review and funding. Ultimately, it was a future transport network that may not have been considered sufficiently advanced to be explicitly referenced in Melbourne @ 5 Million.
oThe separation of this precinct (including the Site) from the existing industrial areas to the south by the Kalkallo retarding basin/conservation reserve, and indeed the land to the east of the retarding basin (south of Gunns Gully Road and west of the Hume Freeway) was not an impediment to the expanded industrial area along the Hume corridor in the NGCP. The areas would be linked by a proposed major road (nominated as an ‘arterial road’; ‘PPTN’ and ‘High Capacity Public Transport’, being the proposed Aitken Street extension or E14), noting this did not prevent the designation of the Site for industrial purposes in the NGCP.
oWhilst the OMRTC would have comprised a strong boundary between industrial and residential uses, it is not the only way to achieve appropriate separation of land uses. There are various alternatives methods / treatments that can be applied, including roads, reserves, public open space networks, natural features, zoning / land use restrictions and / or attenuation structures.
oWith respect to the likely configuration of a future industrial/employment precinct in the locale, strategic planning could have come up with alternative substantial and defensible boundaries for the precinct. More specifically:
§North — Donovans Lane extension (6 lane arterial road).
§East — Hume Freeway.
§South — Kalkallo retarding basin / reserve.
§West — arterial road nominated on the NGCP (west of the OMRTC shown on the NGCP), but located further east as agreed by the traffic engineering experts. This would be a suitable western boundary with or without combined drainage lines and linear open space corridors, which could potentially adjoin the road alignment. This future north / south road, and / or the western alignment of Kalkallo Creek (when combined with linear public open space, abutting roads and appropriate transition zone provisions) would have been a more likely western boundary than the E14 (Aitken Street extension) located further to the east, taking advantage of the road infrastructure and proposed high capacity public transport networks.
oA future industrial precinct, such as that described above, would still be highly suitable for industrial and employment generating uses in the absence of the OMRTC given:
§Its proximity to the Hume Freeway that is part of the PFN and connects with the eastern seaboard.
§Its likely ability to have convenient access to the Hume Freeway via Donovans Lane and Gunns Gully Road.
§Its general suitability for various large-scale industries (including freight and logistics) that need (inter alia) main road exposure, main road access, large site areas, and flat topography.
§Its lack of sensitive abuttals, subject to the ecological significance and drainage considerations that will require further investigation.
§Its proximity to a growing workforce and catchment areas.
§Its proximity to, and future connectivity with, existing and proposed industrial / employment areas to the south, together with the BIFT proposed to the north east and the existing Merrifield Central Employment Area to the south.
oThe approximate size of an alternative industrial/employment precinct (including the Site) as described above and under either western boundary scenario, would likely be larger than the industrial precinct created by the OMRTC (including the Site). However, in the absence of OMRTC it is likely the BIFT would have been smaller and there would be additional demand for land that has the above locational / contextual attributes. It is also acknowledged that the size of the industrial precinct created by the OMRTC and nominated in the NGCP was substantially a product of the road alignment.
oLand supply in outer metropolitan areas is a finite and valuable resource, and residential land is always a higher order use than industrial. Industrial / employment land in growth areas like this is of increased strategic importance and should be strongly protected. Its provision cannot be reverse engineered and it does benefit from direct access to key transport networks.
oA precautionary and long-term approach should therefore be adopted for the designation and protection of land that is suitable for industrial / employment purposes. It is noted that a 40 year supply of industrial land is recommended in relevant strategic reports, whereas 15 years supply is typically required for residential land.
oIt follows that, in the absence of the Scheme, it is likely the site would have been developed entirely for industrial / employment purposes (with or without a potential requirement for some land to be dedicated for drainage or ecological purposes).
oIt is acknowledged that the potential expansion of the Kalkallo Retarding Basin north of Gunns Gully Road, in alignment with the Farming Zone that applied at the relevant date, is a matter that must still be investigated. This is likely to occur at the time the PSP is prepared in the future.
oIn response to matters not raised in expert evidence statements, but discussed at the compulsory conference:
§The WIFT is proposed to be located within the western growth corridor and will service the State significant industrial precinct in the western region of Melbourne. It is likely the WIFT could proceed independent of the OMRTC and the development of the BIFT.
§There is no evidence to suggest the absence of the OMRTC would limit the size or function of the WIFT being developed within the western growth corridor, or that any impacts on the WIFT and its final location as a consequence of there being no OMRTC would have any direct consequential / flow-on impacts to the future size or function of the BIFT.
§However, in the absence of the OMRTC and the accessibility for freight movement this may provide through the northern corridor, a reduction to the size of a future BIFT (irrespective of what happens to the WIFT) is a possible outcome. In this situation, displaced demand for industrial / employment generating activity is likely to be accommodated within the northern corridor, including on the west side of the Hume Freeway incorporating the Site, as described earlier.
§Land on the eastern side of the Hume Freeway, outside the BIFT precinct, is unlikely to be suitable to accommodate all of the displaced demand flowing from a reduced BIFT owing to (Inter alia) existing natural and topographical constraints.
119 In support of their contention that the Property would more likely have been developed for residential use, Mr Milner and Mr Barlow noted the following:
oThe supply of employment land on the west side of the Hume Freeway and north of Gunns Gully Road with the OMRTC in place was approximately 250 hectares (gross and including UFZ area). This land, plus the employment land associated with the Merrifield Central Precinct and the BIFT was considered sufficient to provide for the required future employment needs created by the Northern Corridor expansion through to 2050.
oThe strategic planning documents that accompanied the introduction of the OMRTC clearly identify the importance of the OMRTC and associated transport infrastructure in the designation of the locality as a long-term logistics and employment area.
oThis includes the strategy Melbourne @ 5million which recognised the creation of the employment corridor from Avalon Airport to Donnybrook as a key priority along with the utilisation of existing road and rail corridors as opportunities for new employment and freight/logistics functions.
oIn the absence of the OMRTC and associated transport infrastructure including the rail link to the west of metropolitan Melbourne the demand for employment land at the location bounded by the Hume Freeway, Gunns Gully Road and the OMR reservation would likely be less than if the OMRTC was in place. It is noted that the OMRTC (if constructed) would significantly enhance the attractiveness of the location for employment purposes as it would provide high accessibility links to the employment and population areas to the west and southwest (the employment corridor identified in Melbourne @ 5 Million). Given the reduced lack of attractiveness of the location for industrial purposes it is considered the land would be used for residential purposes in the absence of the OMRTC.[90]
[90]The underlined words were added by Mr Barlow and Mr Milner at trial, in the course of adopting their opinions expressed in the joint report. Transcript, 12 October 2022, 314:2–12 (Barlow), 315:12–316:6 (Milner).
oThe BIFT (located to the east side of the Melbourne Sydney rail corridor) would remain the same size given the strategic advantage of the confluence of access to the rail and the Hume Freeway. The BIFT location has several key attributes including:
§Its immediate abuttal to the Melbourne Sydney rail corridor and proximity to the Hume Freeway which are key parts of the PFN.
§The BIFT Precinct will have direct access to the Hume Freeway via Wallan Whittlesea Road and Beveridge Road.
§Its general suitability for various large-scale industries (including freight and logistics) that need (inter alia) main road exposure, main road access, large site areas, and flat topography.
§Its lack of sensitive abuttals, with the rail corridor providing a subject to the ecological significance and drainage considerations that will require further investigation.
§Its proximity to a growing workforce and catchment areas.
oFurther the BIFT can be established without reliance on the OMRTC — that is the BIFT would likely become the key intermodal transport terminal serving metropolitan Melbourne in the absence of the OMRTC.
oThe removal of the OMRTC would not give rise to an expansion of the employment land in the vicinity of the subject land given the land does not have the same accessibility attributes as the BIFT precinct. The reduced accessibility with the loss of the OMRTC further diminishes the attractiveness of the subject land and immediate locality for employment purposes.
oIn the event that some of the land west of the Hume Freeway and north of Gunns Gully Road were to be used for employment land, it is considered that the employment land would be located adjacent to the Hume Freeway with its western extent defined by the eastern alignment of the E14 north-south connection and the Kalkallo Creek east alignment. The northern boundary of the industrial land would be defined by Donovans Lane west of the Hume Freeway. It is estimated that this area would comprise approximately 250 - 265 hectares (gross not allowing for road widenings).[91]
oThe logical outcome would be for the site to be fully utilised (as opposed to partly with the OMRTC in place) for residential purposes consistent with the immediately abutting land to the north, north-east and west.
[91]The underlined words were added by Mr Barlow and Mr Milner at trial, in the course of adopting their opinions expressed in the joint report. Transcript, 12 October 2022, 311:14–313:22 (Barlow), 315:12–316:6 (Milner).
Concurrent evidence
120 The planning experts gave evidence at trial concurrently, over three days. Each of them adopted their own report, and the opinions they had expressed in the joint statement.
121 In their oral evidence, the planning experts addressed an agreed series of questions, as follows:
1. In the absence of the Scheme, what zoning and planning controls would have applied to the Subject Land as at the Relevant Date?
2. In the absence of the Scheme, is it likely that strategic and structure planning processes would have designated the future urban use of the Subject Land as at the Relevant Date?
3. In the absence of the Scheme, what would have been the potential role of the Beveridge Interstate Freight Terminal within the northern corridor, and what influence would it have had on the future urban use of the Subject Land?
4. In the absence of the Scheme, what would have been the relevance of the Hume Highway/Freeway corridor to the future urban use of the Subject Land?
5. What features or qualities of the Subject Land would have made it suitable for employment/industrial use in the absence of the Scheme? How, if at all, does the existence of the Scheme alter those features?
6. What features or qualities of the Subject Land would have made it suitable for residential use in the absence of the Scheme? How, if at all, does the existence of the Scheme alter those features?
7. In the absence of the Scheme, what would have been the potential for industrial or employment activity north of Gunns Gully Road and west of the Hume Freeway?
8. In the absence of the Scheme, what impact would the proximity of the Kalkallo Creek Retarding Basin have had on the development potential of the Subject Land – in particular on the southern part of the Subject Land that remains in the Farming Zone?
9. In the absence of the Scheme, and having regard to the answers to Questions 1 to 8, what would have been the development potential of the Subject Land as at the Relevant Date?
10. In answering Questions 1 to 9, what aspects of the land economics expert evidence are relevant? In particular, are your answers affected by whether the supply of industrial land is 31 years in the Northern SSIP or up to 50 years in the Northern Region?
122 Each expert gave their answer to each of these questions in turn, and each was then asked to respond to the answers given by the other experts. There was an opportunity for cross-examination and re-examination in relation to each question, and generally.
123 Some additional areas of agreement emerged from the concurrent evidence:
(a) The planners were agreed that, in the absence of the Scheme, the zoning of the Property in 2016 and at the Relevant Date in 2019 would likely have been the same as it is today — that is, part Farming Zone, part Urban Growth Zone, and part Urban Flood Zone.
(b) They also agreed that in the absence of the Scheme it was likely that strategic and structure planning processes would have designated the future urban use of the Property by the Relevant Date. However, precinct structure planning would probably not have been completed, or even commenced, by that time.
(c) The BIFT would have been planned in the same location in the absence of the Scheme. Even without the east-west connectivity provided by the OMR corridor, the choice of location was strongly influenced by the Hume Freeway and the existing rail corridor.
(d) The Hume Freeway is one of the most important transport and freight corridors in Victoria and Australia, and a gateway to strategic economic locations in Melbourne, with or without the OMR.
(e) The imposition of the Scheme meant that the Merrifield North area — bounded by the Hume Freeway, Gunns Gully Road, and the OMR reservation, which includes the southern part of the Property — became highly suitable for industrial use.
(f) The opinions of the respective hydrologists, ecologists, traffic engineers and services experts did not indicate which future urban use of the Property would have been more likely in the absence of the Scheme. The identified drainage and ecological constraints would not have impeded either residential or industrial development, and both uses could have been supported by services and the road network.
(g) In relation to question 8, the planners were all of the view that the southern part of the Property that remains in the Farming Zone would ultimately have been available for urban development in the absence of the Scheme. None of them considered that land to the north of Gunns Gully Road would have been required for the Kalkallo Creek Retarding Basin.
Consideration
124 Having given long and careful consideration to the evidence of the four planning experts, I have concluded that, in the absence of the Scheme, it is most likely that the Property would have been designated for future industrial use by the Relevant Date. I preferred the opinions of Ms Jordan and Mr Crowder to those of Mr Milner and Mr Barlow, for a number of reasons.
125 First, and most significantly, I considered that Ms Jordan’s report and evidence best undertook the ‘radical and uncertain’ task of peeling back the planning history and re-imagining the strategic planning decisions that would have affected the Property in the absence of the Scheme.[92] It is apparent from my survey of the strategic planning history that the critical decisions were made in 2012, when the then Growth Areas Authority settled on the strategic land use plans for each of Melbourne’s growth corridors, and published the North Growth Corridor Plan. It was at this time that the future urban use of the Property and the surrounding area north of Gunns Gully Road was set. Of the four planning experts, Ms Jordan alone isolated the criteria that informed the Growth Areas Authority in developing the North Growth Corridor Plan, and re-imagined how those criteria would have been applied in the absence of the OMR. This was evident at [168] to [173] of Ms Jordan’s report, the reasoning of Ms Jordan and Mr Crowder set out in the joint statement,[93] and in Ms Jordan’s evidence at trial in response to question 5,[94] all of which I found to be compelling.
[92]Rigby, [193]; cited at [21] above.
[93]See [118] above.
[94]Transcript, 13 October 2022, 483:14–492:10.
126 Neither Mr Milner nor Mr Barlow took this approach. Both of them appeared to me to reason backwards from the undoubted impact that the Scheme has had on decisions about the future urban use of land in the Merrifield North precinct. That is, they compared the before with the after — starting with the proposition that the OMR reservation made the area highly suitable for future industrial use, and then identifying why it would have been less suitable for industrial use in the absence of the OMR. This approach is apparent in section 4.0 of Mr Milner’s second report,[95] and [119] to [121] of Mr Barlow’s report.
[95]Second Milner report, 5–6.
127 In addition, in Mr Milner’s oral evidence he undertook an assessment of the Property’s suitability for residential and industrial development by reference to ten criteria:
(a) strategic location and advantage;
(b) topography;
(c) demand and supply for the land use in question;
(d) compatibility and conflict associated with the land use;
(e) synergy with neighbouring precincts;
(f) ability to be serviced;
(g) size of the land and ability to assemble land;
(h) integration of environmental features;
(i) defendable or long-term boundary; and
(j) regional accessibility.
While this approach would have been useful for a planning panel or planning authority considering the question afresh today, it did not add to my understanding of how the Growth Areas Authority would have approached the task in 2012, had the Scheme not been in place.
128 Further, Ms Jordan and Mr Crowder both captured the emphasis that the Growth Areas Authority placed on identifying and safeguarding strategically located industrial land in growth corridors, and the need to set aside large areas of land suitable for that purpose. My review of Growth Corridor Plans, and the reports that informed it, confirmed the significance of this consideration in the development of the North Growth Corridor Plan. Mr Milner and Mr Barlow both downplayed this consideration in their reports and evidence.
129 Second, I was not persuaded by Mr Barlow and Mr Milner’s reasoning that the area north of Gunns Gully Road would be less suitable for industrial use in the absence of the Scheme because there would be an abundant supply of industrial land nearby in the vicinity of the BIFT. In Mr Barlow’s view, development of the BIFT was likely to precede development of the Merrifield North precinct. I could not discern a factual basis for that view.
130 The proposed BIFT is a major infrastructure project that cannot be delivered without substantial funding. As at 2012, no business case had been prepared and no funding had been committed for the project. It was described in Growth Corridor Plans as ‘a longer term freight, logistics and related industry concept’, for which planning was ‘in the very early stages’.[96] At the time of the trial, precinct structure planning for the Northern Freight precinct had not been scheduled, and the funding and timeline for the development of the BIFT was similarly uncertain.
[96]Growth Corridor Plans, 70.
131 Given those uncertainties, I could not accept that the prospect of the BIFT would have precluded land north of Gunns Gully Road being earmarked for industrial development, in the absence of the Scheme. This is underscored by the fact that the nearby Merrifield Central Employment Precinct has been developed independently of the BIFT.
132 Third, and relatedly, I was not convinced by Mr Milner and Mr Barlow’s reasoning based on the likely demand for industrial land in the North Growth Corridor. Both experts assumed that there would be reduced demand for industrial land in the absence of the Scheme. I could not find a basis for that assumption in the report of Rhys Quick, the land economist called by Kajag, which was relied on by both Mr Milner and Mr Barlow.
133 In his report, Mr Quick opined that, as at June 2019, there was ‘a large existing and future supply of industrial land relative to anticipated demand levels across the Northern Region, with up to five decades of supply designated, substantially greater than the requirements identified for industrial land set out in the Growth Corridor Plans’.[97] He also considered that the OMR designation may have increased demand in recent years. However, he expressed no opinion about how much industrial land would have been set aside in the North Growth Corridor Plan in the absence of the OMR.
[97]Report of Rhys Quick dated 2 September 2021, [70] (Quick report).
134 Mr Quick and the land economist called by the Authority, Justin Ganly, were at odds about the effect of the OMR on the level of demand for industrial land within the vicinity of the Property (as distinct from the North Growth Corridor as a whole). Mr Quick considered that, absent the OMR, the demand for industrial land in the vicinity of the Property would be less,[98] while Mr Ganly considered it would be the same.[99]
[98]Quick report, [74]–[79] and Table 3; Joint statement of land economic experts dated 21 February 2022, [77]–[78].
[99]Report of Justin Ganly dated 17 December 2021, [127]–[147]; Joint statement of land economic experts dated 21 February 2022, [79]–[81].
135 To the extent that it is necessary to resolve this difference of opinion, I prefer Mr Ganly’s opinion to Mr Quick’s. The main reason for this preference is that, like Ms Jordan, Mr Ganly paid much closer attention to the factors that actually influenced the Growth Areas Authority in developing the North Growth Corridor Plan. Much of the land economists’ evidence was directed to questions that I do not need to determine, such as supply and demand of industrial land within the northern growth corridor generally, and whether demand for industrial land in the vicinity of the Property justifies the area set aside. I am not concerned with whether the Growth Areas Authority should have set aside more or less land for industrial development, but what it would have done if the OMR had not been in contemplation.
136 As noted, three separate background reports informed the Growth Areas Authority’s allowance of 1,745 hectares of industrial land in the North Growth Corridor Plan.[100] Neither land economist directly expressed an opinion as to what allowance the Growth Areas Authority would have made for industrial land absent the OMR. However, in the course of their concurrent evidence they discussed the influence that the OMR had on the background reports concerning future demand for industrial land. Mr Quick pointed out that the OMR was a known project at that time and was listed in the Jones Lang Lasalle report and the Essential Economics report as a matter that had affected the shift in demand to the north, and said in his view the OMR had influenced their assessment of demand.[101] In response, Mr Ganly pointed out that the proposed OMR was referred to only once in each report, as an unfunded, long-term future project. He said that it had no impact on the Jones Lang Lasalle assessment, and was identified in the Essential Economics report as a matter that might require a ‘substantially larger’ amount of employment land than indicated in the analysis, of 2,500 hectares or more.[102] Having reviewed those background reports for myself, I cannot see that the future existence of the OMR had an appreciable impact on the Growth Areas Authority’s determination that 1,745 hectares should be set aside for future industrial use in the North Growth Corridor.
[100]See [74]–[76] above.
[101]Transcript, 4 October 2022, 202:10–203:23 (Quick).
[102]Transcript, 4 October 2022, 205:14–207:16 (Ganly).
137 I do not accept that there would have been reduced demand for industrial land across the North Growth Corridor in the absence of the Scheme, as both Mr Milner and Mr Barlow assumed. It follows that questions of demand and supply would not have precluded an area north of Gunns Gully Road being designated for future industrial use, and would not necessarily have limited the dimensions of that area.
138 However, I readily accept that the location and distribution of industrial land across the North Growth Corridor may have been different without the planned OMR transport corridor. It is plain that the proposed route of the OMR influenced the location and shape of the land near Beveridge and Wollert designated as industrial in the North Growth Corridor Plan.[103] Without the constraint of the OMR reservation, it is likely that different areas would have been set aside for future industrial use. Nonetheless, Ms Jordan and Mr Crowder made a persuasive case that the Property would have been included in an area designated for industrial development, by reference to the criteria used by the Growth Areas Authority to identify suitable industrial land.
[103]See the areas marked 2 and 3 on the North Employment Concept Plan which is Figure 18 at [72] above.
139 Fourth, I considered that Mr Milner and Mr Barlow significantly understated the accessibility of the Property for future industrial use without the OMR. For example, Mr Barlow’s reasons for concluding that the Property would not have been designated for industrial purposes in the absence of the OMR included a lesser ability to access the major regional freight network and the lack of a direct connection to the Hume Freeway via an interchange at Gunns Gully Road.[104] Mr Milner also referred to poorer longer-term strategic accessibility to the Calder, Western and Princes Freeways and a lack of frontage or exposure to the arterial transport or freight network.[105] Neither was consistent with the opinions of the traffic engineers Henry Turnbull and Andrew O’Brien, or the matters agreed between the planners.
[104]Barlow report, [119], first three dot points.
[105]Second Milner report, 5–6 section 4.0.
140 The traffic engineers agreed,[106] and the planning experts accepted,[107] that absent the Scheme there would have been substantial upgrades to the arterial road network. This would have involved the extension of Gunns Gully Road to the east of the freeway, and Donovans Lane to its west, providing access to the northern end of the Property. Both Gunns Gully Road and Donovans Lane would have had interchanges with the Hume Freeway. The traffic engineers also agreed that the arterial road network would have included two north-south roads crossing Gunns Gully Road on the western side of the freeway, one to the east and one to the west of the Property, although they did not agree about the likely location of these roads.[108] They further agreed that an east-west connector would extend through the Property, about midway between Gunns Gully Road and the western extension of Donovans Lane.[109] Figure 23 below is an indication of what the arterial road network around the Property might have looked like in the absence of the Scheme.[110]
Figure 23: Suggested connector network for industrial zoning of the grid, Report of Andrew O’Brien dated 14 December 2021, 20.
[106]Joint statement of traffic engineering experts dated 21 February 2022, [10], [18].
[107]See [114](h)–(j) above.
[108]Joint statement of traffic engineering experts, [5].
[109]Joint statement of traffic engineering experts, [21].
[110]See also Figure 18 in Report of Henry Turnbull dated 17 September 2021, 20.
141 In addition, while all four planners agreed that the Hume Freeway was already a transport and freight corridor of prime importance, Mr Milner made much of the fact that the Property is two kilometres to the west of the Hume.[111] In my view, he overstated the significance of this distance. I accept the opinion of Mr Crowder that this distance does not make the Property inappropriate for industrial development — as he said, the difference between one and two kilometres is ‘probably one traffic light’.[112]
[111]Transcript, 12 October 2022, 425:28–426:6, 430:22–431:3, 13 October 2022, 471:31–472:11 (Milner).
[112]Transcript, 13 October 2022, 591:14.
142 This downplaying of the Property’s accessibility undermined the ultimate opinions reached by both Mr Milner and Mr Barlow about the likely future urban use of the Property in the absence of the Scheme.
143 Fifth, I was convinced by Mr Crowder’s analysis of the reasonable and defensible boundaries of the industrial area, absent the northern and western boundaries provided by the Scheme.
144 To recapitulate, if an area north of Gunns Gully Road and west of the Hume Freeway would have been designated for industrial development in the absence of the Scheme, its northern and western boundaries would have to be something other than the OMR. Mr Barlow and Mr Crowder addressed this question in their reports.
145 Mr Barlow posited an alternative industrial area of approximately 250 hectares, bounded by Gunns Gully Road to the south, the Hume Freeway to the east, the extension of Donovans Road to the north, and the eastern course of Kalkallo Creek to the west.[113] He reasoned that this would take advantage of access to the Hume Freeway. He also considered the size of the area was equivalent to the area identified with the OMR in place, and that there was insufficient demand for more industrial land in that locale.
[113]See Figure 21 at [100] above.
146 Mr Crowder envisaged a larger area of about 450 hectares, on the basis that the entire area was highly suitable for industrial development. The southern, eastern and northern boundaries of the area were the same as those identified by Mr Barlow. In relation to the western boundary, Mr Crowder noted the evidence of the hydrology experts that the existing drainage lines could be realigned and re-engineered to maximise the efficient development of the land. He also noted Mr O’Brien’s opinion about the location of the most westerly north-south arterial road (Route 1 in Figure 23 at [140] above). Locating that road further east, as Mr O’Brien considered most likely, would increase its suitability as a defensible western boundary for a future industrial precinct. An even more substantial and defensible boundary would be achieved by combining the arterial road with a realigned drainage line, supplemented by linear open space. On that basis, Mr Crowder considered that Route 1 would have been the most appropriate western boundary.[114]
[114]See Figure 22 at [112] above.
147 Mr Barlow’s reasoning about the likely dimensions of the industrial precinct was based on two shaky premises. The first was that, in the absence of the Scheme, there was insufficient demand for industrial land in the vicinity of the Property to set aside an area larger than the 250 hectares. For the reasons discussed at [132] to [138] above, I do not accept that premise. The second was that land to the west of his alternative industrial precinct would be too far away from the Hume Freeway.[115]
[115]See [139]–[142] above.
148 By contrast, Mr Crowder’s analysis appeared to me to be soundly based, and informed by opinions of the traffic and hydrology experts. He did not make the error of comparing the before with the after, and his re-imagining of the boundaries of the industrial precinct was not constrained by the size of the Merrifield North precinct. His primary consideration was that the larger area was highly suitable for future industrial use and, without the OMR in prospect, would likely have been designated for that purpose. Mr Crowder and Ms Jordan’s opinion to that effect reflects the criteria used by the Growth Areas Authority to identify suitable industrial land, and its concern to safeguard strategically located industrial land in developing its Growth Corridor Plans.
Conclusion on highest and best use
149 In conclusion on the question of highest and best use, I accept the opinions of Ms Jordan and Mr Crowder that, in the absence of the Scheme, the Property would likely have been zoned and developed for industrial purposes. I do not accept the opinions of Mr Milner and Mr Barlow that the logical outcome would have been for the Property to be fully utilised for residential purposes.
150 Based on the opinions of Ms Jordan and Mr Crowder, the answers to the first three questions for determination are as follows.
(1) In the absence of the Scheme, what would have been:
(a) the zoning and planning controls applying to the Property; and
(b) its development potential,
as at the Relevant Date?
In the absence of the Scheme, the Property would have been zoned as it is today — part Farming Zone, part Urban Growth Zone, and part Urban Flood Zone.[116] The development potential of the Property as at the Relevant Date would have been for future urban industrial purposes.
[116]See [18] above.
(2) Having regard to the answers to Question 1, what would have been the highest and best use of the Property as at the Relevant Date in the absence of the Scheme?
In the absence of the Scheme, the highest and best use of the Property as at the Relevant Date would have been to be held for future development for industrial purposes.
(3) Are the answers to Questions 1 and 2 different as at 27 September 2016 (the date of entry to the contract of sale)?
No.
Questions 4 and 5 — Waterways
151 The next set of questions concern whether, in the absence of the Scheme, any part of the Property would have been required for waterways and flood protection, and so would not have been available for development. These questions arise because of the two waterways on the property — Kalkallo Creek and Mandalay Creek. As noted at [15] above, both waterways are artificially constructed drainage lines that do not follow the natural course of Kalkallo Creek. The proximity of the Kalkallo Creek Retarding Basin on the southern side of Gunns Gully Road is also a consideration.
152 Melbourne Water developed the Kalkallo Creek Drainage Services Scheme (Kalkallo Creek DSS), which provides the expected drainage strategy for the catchments in the vicinity of the Property, and takes into account the proposed route of the OMR. It contemplates that Kalkallo Creek will be diverted at a point north of the Property, into a waterway to the west of the Property’s western boundary. It also provides for the diversion of the waterway that becomes Mandalay Creek, along the OMR reservation. As a result, 4.1 hectares of otherwise developable land will be required for waterways when the Property is ultimately developed — 2.4 hectares along the OMR reservation, and 1.7 hectares along Gunns Gully Road.[117] Figure 24 below is an excerpt from the Kalkallo Creek DSS, showing the area around the Property (marked 70).
Figure 24: Kalkallo Creek DSS, Report of Robert Swan dated 24 August 2021, 11.
[117]Mr Swan and Dr McCowan initially agreed that 3.2 hectares would be required for the northern waterway and 1.7 hectares for the southern waterway, a total of 4.9 hectares: Joint statement of hydrology experts dated 21 February 2022, 4. At trial, Mr Swan and Mr Salmi agreed that only 2.4 hectares would be required for the northern waterway, with a corridor 45 metres rather than 60 metres wide: Transcript, 18 October 2022, 883:1–885:28. This reduced the total area required for waterways to 4.1 hectares.
153 What is in dispute is the area of land that would have been required for waterways on the Property had the Scheme not been in place.
Expert hydrological evidence
154 On this issue, each party called a hydrologist. Kajag relied on the opinion of Robert Swan. The Authority initially intended to call Dr Andrew McCowan of Water Technology Pty Ltd, who prepared a report dated 9 November 2021 and two memoranda dated 26 November and 21 December 2021. Unfortunately, Dr McCowan was unwell during the trial and was unable to give evidence. In his place, his colleague Bertrand Salmi gave expert hydrological evidence for the Authority.
Robert Swan
155 Mr Swan holds a Bachelor of Engineering and a Diploma of Project Management. He has over 20 years of experience working in the areas of hydrology and hydraulics, flood analysis, water quality and environmental assessment for both private clients and Melbourne Water. Mr Swan began his career with Melbourne Water in 2000, where his work involved applying and assessing drainage scheme works. In 2003, he moved into consulting work for Lawson & Treloar and later became a technical lead at Cardno. His work there included developing regional drainage strategies around Victoria. He is currently a principal engineer at Hydrology and Risk Consulting Pty Ltd.
156 Mr Swan prepared a report dated 24 August 2021,[118] which assessed the relevant drainage and stormwater considerations for the Property and the extent to which the Property could support residential development if the OMR reservation had not been applied. He proposed a drainage strategy for the area around the Property that diverted Kalkallo Creek back to its original drainage line, and provided drainage through constructed channels inside drainage reserves. Mr Swan’s proposed drainage strategy is shown at Figure 25 below.
Figure 25: Indicative Catchment Drainage Layout, Kalkallo Creek without OMR, Report of Robert Swan dated 24 August 2021, 13.
[118]Report of Robert Swan dated 24 August 2021 (Swan report).
157 On the basis of his drainage strategy, Mr Swan considered that there was no constraint on the Property with regard to drainage, and that the entire site would have been suitable for residential subdivision.
158 Mr Swan acknowledged that there are other potential drainage schemes that could be adopted for Kalkallo Creek that would provide similar outcomes to his proposed drainage strategy. He identified two alternate options:
(a) Alternate Option 1 (shown in Figure 26 below) would involve diverting upstream Kalkallo Creek flows, in the same way that is proposed in the Kalkallo Creek DSS. This option would not constrain development on the Property, which would remain suitable for any type of development.
(b) Alternate Option 2 (shown in Figure 27 below) would involve additional piped drainage from areas west of the Property, rather than realigning the existing Kalkallo Creek. The channel alignment would follow the western boundary of the site. Under this option also, the Property would be suitable for any type of development.
Figure 26: Alternate Option 1, Report of Robert Swan dated 24 August 2021, 15.
Figure 27: Alternate Option 2, Report of Robert Swan dated 24 August 2021, 16.
159 Mr Swan summarised his findings as follows:[119]
[119]Swan report, 18.
Based on my assessment, it is my opinion that:
·There is no requirement for additional flood storage on the subject land upstream of Gunns Gully Road.
·The Kalkallo Creek DSS does not require any additional floodplain storage or water quality works on or near the subject land, upstream of Gunns Gully Road.
·I have developed a drainage strategy for the catchment that is consistent with the recommendations of the Craigie Report. This strategy, which is broadly compatible with the Kalkallo Creek DSS does not require any works on the subject land and is shown in [Figure 24]. This drainage scheme could have been implemented had the Outer Metropolitan Ring Road not occurred.
·Based on the drainage strategy developed for the site, the subject land is unconstrained with respect to residential development if PAO7 had not been applied.
·The use of the subject land for residential purposes is compatible with the proposed drainage works in the vicinity of the land.
·There are alternative drainage strategies that could have been adopted for the area. In my opinion, none of these strategies would have been incompatible with the development of the land for residential use.
Bertrand Salmi
160 Mr Salmi holds a Bachelor of Environmental Sciences from the University of Edinburgh and a Master of Water Resource Engineering Management from Heriot Watt University, both in Scotland. He has more than 15 years of experience specialising in water resource management, environmental impact assessments, water sensitive urban design, and hydrology and floor risk assessments. Mr Salmi is a principal water scientist at Water Technology and has been employed there since 2016. He described his work as being focused on urban development, flood impact assessment and the development of stormwater management strategy.
161 As noted, Mr Salmi gave evidence at trial as the Authority’s hydrology expert in the absence of Dr McCowan. Mr Salmi had assisted Dr McCowan with the preparation of his report, memoranda, and expert witness statement in this proceeding. He had also participated in the joint conference of hydrology experts with Mr Swan and Dr McCowan on 2 February 2022, and co-authored the joint statement prepared following the conference. Mr Salmi prepared a witness statement dated 14 October 2022, in which he adopted some of the opinions expressed in Dr McCowan’s report and memoranda. In relation to the critical question of the extent of the Property that would be required for drainage purposes in the absence of the Scheme, Mr Salmi’s opinion differed from Dr McCowan’s in some respects. Mr Salmi set out that opinion and his reasoning in his witness statement.
162 In Mr Salmi’s opinion, the reaches of Kalkallo Creek and Mandalay Creek that traverse the Property are not natural waterways. Rather, they are constructed waterways, having been artificially formed and channelised to improve drainage and reduce flooding in the catchment. As a result, he considered that the corridors for these waterways, or their replacements, should be determined by reference to section 8 of Melbourne Water’s Waterway Corridors: Guidelines for Greenfield Development Areas within the Port Phillip and Westernport Region.[120]
[120]Melbourne Water, Waterway Corridors: Guidelines for Greenfield Development Areas within the Port Phillip and Westernport Region (October 2013), 15–17.
163 In the ‘before’ situation — absent the Scheme — Mr Salmi considered that Kalkallo Creek would be realigned to follow the existing depression that runs the full length of the Property from the northern boundary to the southern boundary. Mandalay Creek would follow its existing course. The drainage corridors that Mr Salmi considered likely in the absence of the Scheme are shown in Figure 28 below.
Figure 28: Drainage Requirements on the Subject Land in the ‘Before’ Scenario, Expert Witness Statement of Bertrand Salmi dated 14 October 2022, 8.
164 Mr Salmi calculated the extent of the Property that would be required for drainage purposes in the absence of the Scheme on the basis that the realigned Kalkallo Creek and Mandalay Creek would both require a minimum 45 metre wide corridor. On his calculations, a minimum of 9.2 hectares would be required for drainage — 7.5 hectares for Kalkallo Creek and 1.7 hectares for Mandalay Creek.
Joint expert statement
165 The hydrology experts held a joint conference on 2 February 2022. Following the conference, they produced a joint report dated 21 February 2022. They identified some existing drainage and flooding issues on the Property. These included that the two waterways that pass through the Property consist of man-made excavated drainage channels with limited flow capacity, which would be expected to flood following a significant rainfall event. In addition, they noted that the culverts for Mandalay Creek at Gunns Gully Road are only adequate to convey relatively minor flows, and would be expected to result in flooding of the southern part of the Property following a relatively moderate rainfall event.
166 In the absence of the OMR, the hydrologists agreed that in order to develop the Property it would be necessary to maintain the conveyance of the flows from both Kalkallo Creek and Mandalay Creek, either through or around the Property. They also agreed that Melbourne Water would have developed a non-OMR Development Services Scheme (non-OMR DSS) to provide guidance on the assets required to provide drainage, flood protection and water quality treatment for development throughout the Kalkallo Creek region.
167 In relation to the non-OMR DSS, it was agreed that open channels within a broader waterway channel would probably be used to convey drainage flows from Kalkallo Creek and Mandalay Creek, in accordance with Melbourne Water’s Healthy Waterways Strategy.[121] Ultimately, no flow retardation or water quality treatment assets would be required within the Property; these functions would likely be provided by retarding basins and wetlands yet to be constructed within the Kalkallo Creek Retarding Basin to the south of Gunns Gully Road.
[121]Melbourne Water, Healthy Waterways Strategy 2018 (December 2018).
168 As to the alignment of the waterway corridors, the hydrologists agreed:[122]
·There is a range of possible options for conveying the flows from Kalkallo Creek and Mandalay Creek through or around the Subject Land:
– One option would be to develop the waterway corridors along the existing waterway alignments, as proposed in AMC’s Expert Report. This option would require two 45m wide waterway corridors through the Subject Land, which would take up a total of 8.7 ha of otherwise developable land.
– [Mr Swan] proposed some alternative alignments in his Expert Report. One of these involved diverting both Kalkallo Creek and Mandalay Creek around the Subject Land. This option would result in no reduction in the area of developable land.
·It is not possible to determine precisely what alignments Melbourne Water would have selected for Kalkallo Creek and Mandalay Creek, or whether the selected waterway alignments would pass through or around the Subject Land.
·If both Kalkallo Creek and Mandalay Creek were to be diverted around the Subject Land in the DSS, then any development would be required to maintain the flows from these waterways through the Subject Land until such time as the new DSS waterways were constructed on the adjoining properties.
·The land would be suitable for residential or industrial subdivision, subject to the constraints of the adopted DSS and the overall planning scheme.
[122]Joint statement of hydrology experts, 2–3.
169 While they agreed that it was not possible to determine the precise alignment that Melbourne Water would have chosen for the waterways in the absence of the OMR, each of the hydrologists reached a different opinion about the most likely alignment.
170 Mr Swan’s position was:[123]
RCS[124] has further reviewed the various proposed drainage strategies for the Kalkallo Creek Catchment, especially that by Craigie, as this was completed prior to the OMR. Both the Craigie and Melbourne Water’s Kalkallo Creek DSS include consolidation of upstream creeks into fewer drainage channels and crossings.
In the absence of the OMR, flows from catchments east of Mandalay Creek are directed to the south east corner of 165 Gunns Gully Road (immediately east of the Subject Land). The land contours indicate that Mandalay Creek could also be directed to this location.
When considering a drainage scheme design, cost is a significant issue. Any reduction in total channel length will reduce the overall cost of the scheme. Additionally it is often useful to provide a drainage channel through a single property.
By reducing the number of adjacent channels that replace what are essentially minor farm drains, the total cost of the scheme is reduced. It is also relevant that this consolidation will also reduce the number of road crossings of Gunns Gully Road, further reducing the cost of the scheme for no change in performance.
All of the previously developed drainage schemes for the area have provided for some consolidation of drainage channels; Craigie by diverting Kalkallo Creek to Mandalay Creek, and Melbourne Water, diverting Kalkallo Creek to the west. RCS sees no reason why that would not have occurred for a drainage scheme design assuming the OMR was not present.
Overall, RCS is of the opinion that there is no certainty that any land would have been required for drainage under a non-OMR DSS. At most, there would have been only a single waterway corridor through the land, either Mandalay Creek or Kalkallo Creek. As such, the maximum land take is no more than 10 hectares and is likely less.
[123]Joint statement of hydrology experts, 3–4.
[124]Mr Swan was referred to in the joint statement as RCS.
171 Dr McCowan’s position was:[125]
[125]Joint statement of hydrology experts, 3.
AMC[126] has revisited Melbourne Water’s “Waterway Corridors – Guidelines for greenfield development areas within the Port Phillip and Westernport Region” (Guidelines) and notes that they state:
“The best boundary for a (drainage) scheme is the natural drainage topography of the sub-catchment itself.”
As such, AMC is of the opinion that any realignment of Kalkallo Creek in the non-OMR DSS is likely to follow the natural depression that runs the full length of the Subject Land from the northern boundary to the southern boundary.
Additionally, as an existing “third order” stream, the width of the waterway corridor is likely to be required to be 60m. This realigned Kalkallo Creek would take up 10.0 ha of otherwise developable land.
Similarly, by following the natural contours of the land, Mandalay Creek would still be expected to pass across the southeast corner of the Subject Land. It would then be expected to join the realigned Kalkallo Creek just upstream of Gunns Gully Road. As a “second order” stream, the waterway corridor would be required to be 45m as determined in my Expert Report, and would take up 2.0 ha of otherwise developable land.
Having Kalkallo Creek and Mandalay Creek combine just upstream of Gunns Gully Road would have the added advantage that only one major bank of culverts would be required to convey both waterways under an upgraded Gunns Gully Road.
Overall, AMC is of the opinion that, although it cannot be stated definitively, it is likely that the waterway corridor requirements of a non-OMR DSS would have required the use of 12.0 ha of otherwise developable land.
[126]Dr McCowan was referred to in the joint statement as AMC.
172 Mr Salmi adopted the joint statement with some qualifications. One of those qualifications concerned the probable alignment of the waterways in the absence of the OMR. While Dr McCowan’s report followed the existing alignment of Kalkallo Creek through the Property, Mr Salmi considered that it would be realigned to follow the existing depression that runs the full length of the Property from north to south. This was because it is a constructed waterway, not a natural waterway.
Concurrent evidence
173 Mr Swan and Mr Salmi gave evidence at trial concurrently. Mr Swan adopted his report and the joint statement of hydrology experts. Mr Salmi adopted Dr McCowan’s report and memoranda and the joint statement, with some qualifications — most significantly, in relation to the likely alignment of Kalkallo Creek in the absence of the OMR. Their oral evidence focussed on three questions:
1. In the absence of the Scheme, what would Melbourne Water’s Kalkallo Creek Development Services Scheme have been in relation to water flows from Kalkallo Creek and Mandalay Creek? In particular, would those water flows be conveyed through or around the Subject Land?
2. In the absence of the Scheme, what areas of the Subject Land would have been required for waterways and flood protection? What area would have been available for development?
3. In the absence of the Scheme, how likely is it that the southern part of the Subject Land that remains in the Farming Zone would have been required for the Kalkallo Creek Retarding Basin?
174 In relation to question 3, Mr Swan and Mr Salmi agreed that, in all likelihood, the southern part of the Property would not have been required for the Kalkallo Creek Retarding Basin. The answer to the other two questions turned on the most likely alignment of Kalkallo Creek and Mandalay Creek, if the Property were to be developed in a world without the OMR.
175 Mr Swan explained his opinion that both waterways would probably be diverted around the Property, by reference to three matters:
(a) The first was Melbourne Water’s Principles for Provision of Waterway and Drainage Services for Urban Growth, published in June 2007. Principle 4 of the ‘Principles for Creating Development Services Schemes’ (DSS Principles) is ‘Schemes should propose infrastructure to service development that is optimal in terms of cost and performance’.[127] Mr Swan explained that the cost of implementing a DSS is funded jointly by the properties within the catchment, and so cost is an important consideration. He found it a useful principle when — as here — there are numerous ways to drain land that would all be effective, but have different costs. In his view, consolidation of waterways would be optimal in terms of cost and performance. He said it would be far cheaper to build one or two waterway corridors than to build four, and it would also allow consolidation of culverts at Gunns Gully Road.
(b) Second, Mr Swan considered the background studies on the Kalkallo Creek catchment prepared by Neil Craigie and others in 2009 and 2010 (Craigie studies).[128] In these studies, Mr Craigie expressed a preference for redirecting Kalkallo Creek back to its original drainage line along Mandalay Creek. Mr Swan worked from that preference in developing his scheme.
(c) The third matter was the Kalkallo Creek DSS that Melbourne Water had adopted, taking into account the OMR reservation. Mr Swan pointed out that a choice had been made to divert Kalkallo Creek at a point north of the Property into a western branch of Kalkallo Creek that runs through a neighbouring site.
[127]Melbourne Water, Principles for Provision of Waterway and Drainage Services for Urban Growth (June 2007), 8.
[128]Neil M Craigie et al, Beveridge Williams & Co Pty Ltd, Delivering Melbourne’s Newest Sustainable Communities: Background Technical Report 3: Drainage (June 2009) (2009 Craigie study) and Neil M Craigie, Kalkallo Creek Catchment Strategic Drainage Proposals: A Discussion Paper (18 October 2010) (2010 Craigie study).
176 Mr Salmi agreed with Mr Swan that there was some flexibility about the alignment, but he believed that the preferred alignment would be through the Property, with the topography of the land. He explained his reasons for that belief as follows:
(a) Melbourne Water’s DSS Principles, its Constructed Waterway Design Manual,[129] and its Healthy Waterways Strategy, supported maintaining existing waterways.
[129]Melbourne Water, Constructed Waterway Design Manual (December 2019).
(b) Mr Salmi’s preference for retaining Mandalay Creek was also influenced by plain grassy wetland habitat around the dam at the southern end of the Property.
(c) He also interpreted the current Kalkallo Creek DSS as placing more importance on Kalkallo Creek than Mandalay Creek. This was because soft engineering improvement is proposed for Kalkallo Creek (but not Mandalay Creek) to the north of the Property, and also due to some remnant meanders on Kalkallo Creek at the northern end of the Property.
(d) Mr Salmi referred to the North Integrated Open Space Concept Plan in Growth Corridor Plans, and a green line indicating a trail along the current alignment of Kalkallo Creek.
(e) In the absence of the OMR he considered that there would be less benefit in consolidating the waterways, because there would be no need to create a single culvert under the OMR.
(f) Mr Salmi also considered that diverting the waterway completely around the Property would add a level of complexity to its development, because it would be necessary to obtain permission from neighbouring landowners for drainage works to be conducted on their properties. If that permission was not given, the waterways would have to remain within the Property.
177 Mr Salmi and Mr Swan responded to each other’s opinion, and were cross-examined and re-examined.
Consideration
178 The questions related to waterways and flood protection require me to make findings about the likely treatment of Kalkallo Creek and Mandalay Creek, were the Property to be developed for future urban use in the absence of the Scheme. On this issue my findings must also be based on the expert opinion evidence. While both hydrology experts put forward feasible drainage schemes for the Property, I prefer Mr Swan’s opinion to that of Mr Salmi, for a number of reasons.
179 First, Mr Swan’s proposed drainage strategy was developed by reference to catchment wide considerations beyond the boundaries of the Property, as Melbourne Water would have done in developing an alternate Kalkallo Creek DSS. Mr Salmi, on the other hand, was more focused on the features of the Property and its waterways than on the broader picture. For example, Mr Salmi argued that diverting the waterways around the Property would not be preferred because it would add complexity to its development, in particular if the Property was developed before neighbouring properties. While Melbourne Water would have to take into account the view of the owner of the Property in designing the DSS,[130] ultimately it is concerned with achieving a scheme that is both optimal in terms of cost and performance and equitable between developable lots in the catchment. Of the two approaches, Mr Swan’s appeared to me to be most consistent with the DSS Principles, including Principle 3 — ‘Schemes will be planned to service all developable lots’, and Principle 4 — ‘Schemes should propose infrastructure to service development that is optimal in terms of cost and performance’.
[130]DSS Principle 13 — ‘A robust consultation process will govern the creation of development services schemes’, in Principles for Provision of Waterway and Drainage Services for Urban Growth, 11.
180 Second, I considered that Mr Swan had the more cogent rationale for his proposed drainage strategy. He reimagined how Melbourne Water would have designed the Kalkallo Creek DSS if the OMR reservation was not in place, by reference to principles and inputs that would likely have guided its decisions, in particular the DSS Principles and the two Craigie studies.
181 The justification for Mr Salmi’s drainage strategy was less persuasive. For example, the primary reason why he considered Kalkallo Creek would have be aligned through the Property was that Melbourne Water’s approach is to maintain existing waterways. This appeared to me both to oversimplify the DSS Principles and the considerations set out in Waterway Corridors, and to overstate the value that Melbourne Water was likely to place on the constructed waterways that now run through the Property. As another example, I was unpersuaded by Mr Salmi’s reliance on the Open Space Concept Plan in Growth Corridor Plans, which I did not consider likely to have guided Melbourne Water in its development of a non-OMR DSS.
182 Third, and relatedly, I was not satisfied that there are in fact any remnant meanders of Kalkallo Creek on the Property. Mr Salmi relied on Dr McCowan’s view that there are remnant meanders of Kalkallo Creek in the northern part of the Property, as a reason why Kalkallo Creek would not have been diverted around the Property in the absence of the OMR. In his report dated 9 November 2021, Dr McCowan identified ‘irregularities in the contours adjacent to the northern section of Kalkallo Creek [which] appear to be associated with remnant meanders of the original alignment of Kalkallo Creek’.[131] Mr Swan disputed the existence of any remnant meander on the Property. He noted that the land has been heavily modified by farming, and there was no vegetation associated with remnant meanders.
[131]Report of Dr Andrew McCowan dated 9 November 2021, 17.
183 It appears that Dr McCowan identified these possible meanders from aerial photographs, without having inspected that part of the waterway for himself. I understand that both Dr McCowan and Mr Salmi were only able to inspect the Property from the southern boundary on Gunns Gully Road. On the other hand, Dr Timothy Wills, the ecologist engaged by the Authority, did conduct a field assessment on 16 November 2021, and reported that ‘[w]ithin the Property, the waterbody is highly modified and appears to have been historically channelised’.[132] In addition, both of the Craigie studies clearly identified that Kalkallo Creek had been diverted from its natural course and channelised to improved farm drainage from upstream of the Property’s northern boundary.[133]
[132]Report of Dr Timothy Wills dated 22 December 2021, [3.4.2.1].
[133]2009 Craigie study, 30; 2010 Craigie study, 9, Figure 4.
184 Fourth, Mr Swan’s proposed drainage strategy is likely to be the more cost-effective of the two, because it involves fewer waterway corridors and requires fewer culverts to convey water under Gunns Gully Road. While Mr Swan’s opinion was not supported by costings, I accept that it would probably cost less to build one or two waterway corridors than it would to build three or four, and that rationalising the culverts crossing Gunns Gully Road would also be more economical.
Conclusion on waterways
185 Based on the opinion of Mr Swan, the answers to the two questions concerning waterways are:
(4) In the absence of the Scheme, what areas of the Property would have been required for waterways and flood protection? What area would have been available for development?
In the absence of the Scheme, no part of the Property would have been required for waterways and flood protection. The whole area would have been available for development.
(5) In the absence of the Scheme, how likely is it that the southern part of the Property that remains in the Farming Zone would have been required for the Kalkallo Creek Retarding Basin?
There is no real likelihood that any of the southern part of the Property would have been required for the Kalkallo Creek Retarding Basin, in the absence of the Scheme.
Questions 6, 7, 8 and 9 — Valuation
186 Based on my findings in relation to highest and best use and waterways, I approach the valuation evidence on the basis that:
(a) the total area of the Property is 72.52 hectares, of which 10.09 hectares is affected by the Scheme, and 4.1 hectares of otherwise developable land will be required for waterways and drainage;[134]
(b) with the Scheme in place, 30.20 hectares of the Property are designated for future residential development, and 28.13 hectares are designated for future development for industrial use; and
(c) in the absence of the Scheme, the highest and best use of the entire Property would have been to be held for future development for industrial purposes, and no part of the Property would have been required for waterways and drainage.
[134]The figure of 4.9 hectares agreed by the hydrology experts in their joint statement was reduced to 4.1 hectares at trial, on the basis that 2.4 hectares (rather than 3.2 hectares) will be required for the northern waterway.
Expert valuation evidence
187 On the questions of the appropriate rate per hectare to be adopted for assessing the value of the Property, both parties called expert valuation evidence.
188 Kajag relied on the evidence of Michael Leech of m3property Australia Pty Ltd. It had initially intended to call Les Brown of m3property, who had prepared valuation reports dated 19 May 2020 and 3 May 2022 and participated in the joint conference in June 2022. Mr Brown was taking long service leave at the time of the trial and was not available to give evidence. Mr Leech had assisted Mr Brown in preparing the reports and had attended the joint conference, and was able to adopt the opinions and findings of Mr Brown in his reports and the joint statement.
189 The Authority relied on the opinions of Marcus Willison and Nicholas Haines, set out in their respective reports.
190 Both parties obtained opinions from their valuation experts in relation to the possible scenarios concerning the highest and best use of the land, before and after it was affected by the Scheme, at both the Relevant Date and when the contract of sale was entered into in September 2016. Their respective positions on the appropriate per hectare rate are summarised in the table below.
Leech
Willison
Haines
2016 – before
Industrial $200,000
Industrial $200,000
Industrial $200,000
Residential $550,000
Residential $500,000
Residential $270,000
2016 – after
Industrial $200,000
Industrial $200,000
Industrial $200,000
Residential $164,000
Residential $154,526
Residential $155,000
2019 – before
Industrial $250,000
Industrial $250,000
Industrial $325,000
Residential $650,000
Residential $575,000
Residential $375,000
2019 – after
Industrial $250,000
Industrial $250,000
Industrial $325,000
Residential $350,000
Residential $275,000
Residential $200,000
Michael Leech
191 Mr Leech holds a Bachelor of Applied Science (Property and Valuation) from the Royal Melbourne Institute of Technology, and is a certified practising valuer. He has worked as a valuer since 2013, and has valued numerous properties throughout metropolitan Melbourne and regional Victoria, including in the North Growth Corridor. Mr Leech commenced employment with m3property Australia in 2016, and has been a director since 2019.
192 As mentioned, Mr Leech contributed to and adopted as his evidence Mr Brown’s expert valuation reports dated 19 May 2020 and 3 May 2022. He also prepared an addendum to the report dated 15 August 2022, addressing supplementary instructions provided by Kajag, and two further addendums dated 17 October 2022.
Marcus Willison
193 Mr Willison holds an Associate Diploma in Valuations and has been a qualified valuer since 1989, with experience advising both government and private sector clients in valuations for compensation assessments throughout Victoria. He is currently a partner at Ernst & Young, working in Real Estate Advisory Services, and is a Fellow of the Australian Property Institute.
194 Mr Willison prepared and adopted:
(a) valuation reports dated 28 September 2020 and 16 October 2020;
(b) an addendum letter containing a revised assessment dated 3 December 2020;
(c) a valuation report dated 17 May 2022;
(d) an addendum letter dated 22 August 2022 confirming that his opinion was unchanged by Mr Leech’s addendum to his report dated 15 August 2022; and
(e) an addendum letter dated 11 October 2022 in response to further queries by the Authority.
Nicholas Haines
195 Mr Haines has been practising as a qualified valuer since 2009 and holds a Bachelor of Business (Property) from the Royal Melbourne Institute of Technology. He practises in various fields in valuation, specialising in compulsory acquisition matters. He is currently a director at Matheson Stephen Valuations, where he has been employed since 2001.
196 Mr Haines prepared and adopted:
(a) valuation reports dated 14 September 2020 and 19 October 2020;
(b) an addendum letter dated 4 December 2020 containing a revised assessment;
(c) a valuation report dated 13 May 2022;
(d) an addendum letter dated 24 August 2022 confirming that Mr Leech’s addendum dated 15 August 2022 did not alter his previously expressed opinions; and
(e) an addendum letter dated 10 October 2022.
Joint expert statement
197 The valuation experts held joint conferences on 30 May 2022, 6 June 2022, and 9 June 2022. They produced a joint statement following the final conference, which directly set out and compared the valuers’ assessments of the value of the property under each potential scenario and assessment date.
198 The introduction to the valuers’ joint statement identified the areas of difference between them, as follows:
As there was different planning advice in the Unaffected scenario between the parties (i.e. Industrial / Employment or Residential), the Valuers have assessed compensation under both scenarios.
The Valuers generally agree that the main area of difference within the respective valuations is the value ascribed to the residential land component in both the ‘unaffected’ and ‘affected/after’ situations, as at both the Contract Date and the Settlement Date, depending on the instructed scenarios.
The Valuers agree that a point of difference in their assessments is the interpretation of the areas required for drainage (as identified by the hydrology experts) and whether these areas would be ‘reimbursable’ or ‘non-reimbursable’.
As this is an area outside of the Valuers’ expertise, to assist the Court, it was agreed between the Valuers that a matrix of Valuation scenarios based on alternate assumptions was an appropriate way to reconcile these differences.
199 This was a helpful approach, and one that ensured that I would have valuation evidence for all possible scenarios. It was the basis for the summary table set out at [190] above. However, the complete matrix of valuation scenarios is less useful now that the areas of difference arising from the planning advice and the hydrology experts have been resolved. I can now move straight to the opinions given by each of the valuers during their evidence at trial.
Concurrent evidence
200 The valuers gave their evidence concurrently, over the final two days of evidence at trial. After adopting their respective reports and their opinions expressed in the joint statement of valuation experts, each valuer was asked to outline his position in response to four pairs of questions:
Before scenario
1. If the highest and best use of the land is for residential purposes, what is the appropriate rate per hectare to be adopted for assessing:
a. the value of the Subject Land for future urban development as at 27 September 2016;
b. the value of the Subject Land as at the Relevant Date;
c. the value (if any) for land required for waterways / drainage as at 27 September 2016;
d. the value (if any) for land required for waterways / drainage as at the Relevant Date?
2. In determining the appropriate rate per hectare for land set aside for residential purposes as at both 27 September 2016 and the Relevant Date, what sales evidence is considered to be most relevant and why?
3. If the highest and best use of the land is for industrial purposes, what is the appropriate rate per hectare to be adopted for assessing:
a. the value of the Subject Land for future urban development as at 27 September 2016;
b. the value of the Subject Land as at the Relevant Date;
c. the value (if any) for land required for waterways / drainage as at 27 September 2016;
d. the value (if any) for land required for waterways / drainage as at the Relevant Date?
4. In determining the appropriate rate per hectare for land set aside for industrial purposes as at both 27 September 2016 and the Relevant Date, what sales evidence is considered to be most relevant and why?
5. If the highest and best use of the land is for urban development for uses to be determined by future strategic and structure planning processes, what is the appropriate rate per hectare to be adopted for assessing:
a. the value of the Subject Land for future urban development as at 27 September 2016;
b. the value of the Subject Land as at the Relevant Date;
c. the value (if any) for land required for waterways / drainage as at 27 September 2016;
d. the value (if any) for land required for waterways / drainage as at the Relevant Date?
6. In determining the appropriate rate per hectare for land set aside for future urban development as at both 27 September 2016 and the Relevant Date, what sales evidence is considered to be most relevant and why?
After scenario
7. What is the appropriate per hectare rate to be adopted for assessing:
a. the value of that part of the Subject Land to be used for future employment / industrial purposes as at 27 September 2016;
b. the value of that part of the Subject Land to be used for future residential purposes as at 27 September 2016;
c. the value of that part of the Subject Land to be used for future employment / industrial purposes as at the Relevant Date;
d. the value of that part of the Subject Land to be used for future residential purposes as at the Relevant Date;
e. the value (if any) for land required for waterways / drainage as at 27 September 2016;
f. the value (if any) for land required for waterways / drainage as at the Relevant Date;
g. the “carcass” value of the land reserved by PAO7 as at 27 September 2016; and
h. the “carcass” value of the land reserved by PAO7 as at the Relevant Date?
8. In determining the appropriate rate per hectare for land set aside for both industrial purposes and residential purposes as at both 27 September 2016 and the Relevant Date, what sales evidence is considered to be most relevant and why?
201 In light of my findings about the highest and best use of the Property in the absence of the Scheme, it is unnecessary to canvass the valuers’ answers to questions 1 and 2, and 5 and 6.
202 After they had given their evidence at trial, the three valuers prepared an ‘Alternate Valuation Position of Parties’. This was a most helpful document, which drew together the valuers’ opinions in relation to each of the possible scenarios that were open on the evidence. Scenario 3 corresponds with my findings in relation to waterways — that is, in the absence of the Scheme, no part of the Property would have been required for waterways or drainage, and with the Scheme in place 4.1 hectares will be required for that purpose.
Before scenario — industrial
203 If, as I have found, the highest and best use of the Property in the absence of the Scheme would have been to be held for future industrial development, all three valuers agreed that as at 27 September 2016 the value of the Property would have been $200,000 per hectare. However, there was some divergence between them as to the rate per hectare as at the Relevant Date in September 2019. Mr Leech and Mr Willison both adopted a rate of $250,000 per hectare, while Mr Haines adopted a rate of $325,000.
204 The sales relied upon by the three valuers were summarised in Kajag’s closing submissions as follows:
Property Date of sale Relied on by Cash rate/ha 135 Gunns Gully Road, Mickleham
12 ha
Dec 2016 Leech
Willison
Haines
$144,000 50 Gunns Gully Road, Beveridge
73 ha
Dec 2017 Willison $224,000 35 Gunns Gully Road, Mickleham
12 ha
June 2018 Leech
Willison
Haines
$273,000 45 Donnybrook Road, Mickleham
67 ha
April 2019 Leech
Willison
Haines
$414,000
205 As the Authority submitted, the difference between Mr Haines and the other two valuers was that Mr Haines took a more ‘bullish’ view of the industrial utility of the Property, because it has a 400 metre frontage to Gunns Gully Road. By contrast, the frontage of the properties at 35 and 135 Gunns Gully Road was about 100 metres in each case.
206 Kajag argued that I should not accept Mr Haines’ assessment because it was inconsistent with an opinion he had expressed in relation to 50 Gunns Gully Road, in a report prepared for a compensation proceeding brought by its former owner. In a report dated 4 August 2020, Mr Haines assessed that property at $275,000 per hectare as at July 2019. Mr Haines accepted that 50 Gunns Gully Road is superior to the Property, because it is a corner site with direct exposure to the Hume Freeway and has a much longer frontage along Gunns Gully Road. On that basis, Kajag queried why he now considered that the Property would have been worth $325,000 per hectare. Mr Haines explained that the two years between his preparation of the reports for 50 Gunns Gully Road and the Property had given him greater confidence in the robustness of the market for industrial land in that area. It was for that reason that he had taken a more optimistic view of land values when valuing the Property. I accept that explanation.
207 I consider that I should accept Mr Haines’ opinion on this question. All three valuations are sound and defensible opinions, based on largely the same sales evidence, and it would have been open to me to accept any one of them. I prefer Mr Haines’ opinion to that of Mr Leech and Mr Willison because of its effect on the statutory cap on compensation under in s 104 of the Planning Act. Section 104 limits the amount of compensation that may be recovered under s 98 to the difference between the value of the Property as at the Relevant Date, and the value it would have had if it had not been affected by the Scheme. On Mr Leech’s valuations, the compensation payable to Kajag would be no more than $365,000. By contrast, the maximum compensation payable under Mr Haines’ valuations is up to $8,110,000.[135] In those circumstances, the proper approach is to lean in the claimant’s favour, and accept the more favourable rate of $325,000 per hectare.[136]
After scenario — industrial
[135]‘Scenario 3: Future Industrial Uses in ‘Unaffected’ Situation - Assessment 2: Market Value, as at 24th September 2019, pursuant to s.104 of the Planning and Environment Act 1987’, Alternate Valuation Position, 13. On Mr Willison’s valuations, the maximum compensation payable would be $2,980,000.
[136]Rigby, [28]–[29], citing Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Ltd (1947) 74 CLR 358, 373–4 (Dixon J) and McBaron v Roads and Traffic Authority of New South Wales (1995) 87 LGERA 238, 244–5.
208 All three valuers considered that the Property’s value for industrial use was not affected by the Scheme. They agreed that the appropriate per hectare rate as at 27 September 2016 was $200,000. They adopted the same per hectare rates as at the Relevant Date in the after scenario that they adopted in the before scenario — that is, Mr Leech and Mr Willison both adopted a rate of $250,000, while Mr Haines adopted a rate of $325,000. They relied on the same sales to justify their respective valuations.
209 For the reasons just given, I accept Mr Haines’ valuation of $325,000 per hectare.
After scenario — residential
210 All three valuers adopted a similar method for determining the value of the part of the Property that is designated for future residential development. They all accepted that the sale price of $10,250,000 represented market value for the Property for a terms sale in September 2016, and they all adopted a rate of $200,000 per hectare for the land that is to be used for industrial purposes. On that basis, Mr Leech calculated a rate of $164,000 per hectare for the future residential land, while Mr Haines and Mr Willison derived rates of $155,000 and $154,526 respectively.
211 The Alternate Valuation Position document contained slightly different rates, adjusted in light of the hydrologists’ agreement that only 4.1 hectares will be required for waterways and drainage when the Property is ultimately developed:
(a) Mr Leech adopted a rate of $157,194 per hectare;
(b) Mr Willison adopted a rate of $147,884 per hectare; and
(c) Mr Haines adopted a rate of $148,951 per hectare.
212 The differences between rates are explained by the different approach each valuer took to the value of the land reserved for the OMR and required for waterways. Mr Leech also made an allowance for offset obligations, in respect of habitat compensation obligations that will arise on development of the Property.[137] The differences were minor and all of the calculation methods were reasonably open. In fact there was no real difference between Mr Willison and Mr Haines, who both assessed the difference between the ‘unaffected’ and the ‘affected’ land value at the contract date to be $4,255,000. Mr Leech arrived at a lower figure of $3,675,000.
[137]Mr Brown and Mr Leech accepted the ecology experts’ quantification of the offset obligation at $577,751.
213 On this question, all other things being equal, I consider that I should adopt the valuation most favourable to Kajag.[138] I accept either Mr Willison’s adopted rate of $147,884 per hectare, or Mr Haines’ rate of $148,951 per hectare, with their respective allowances for the OMR reservation, and no allowance for the land required for waterways and drainage. In either case, the contract price in September 2016 was $4,255,000 less than it would have been in the absence of the Scheme.
[138]Rigby, [28]–[29].
214 The valuers agreed that the value of the residential land increased between September 2016 and the Relevant Date, although again they adopted different per hectare rates:
(a) Mr Leech adopted a rate of $350,000 per hectare;
(b) Mr Willison adopted a rate of $275,000 per hectare; and
(c) Mr Haines adopted a rate of $200,000 per hectare.
215 Each of the valuers reasoned from the per hectare rate they had adopted for residential land unaffected by the Scheme, based on the same evidence of comparable sales. On that question, Mr Leech and Mr Willison adopted similar per hectare rates of $650,000 and $575,000 respectively. Mr Haines adopted a lower rate of $375,000. All three valuers considered that the value of the Property for residential development had been adversely affected by the OMR reservation. As Mr Leech put it, that part of the Property ‘is essentially landlocked north of the proposed OMR’ and will rely on roads and infrastructure coming to it from other parcels of land to its north.[139]
[139]Transcript, 20 October 2022, 1181:31–1182:7 (Leech); see also 1183:23–31 (Haines) and 1184:13–17 (Willison).
216 In order to determine which rate to adopt for residential land in the ‘after’ scenario, it is necessary for me to determine which of the ‘before’ rates is preferable. Kajag’s primary case was that the land would have been developed for residential purposes in the absence of the Scheme, and so this issue received a great deal of attention during the trial, and was the subject of comprehensive written and oral submissions. Since I have found that the highest and best use of the land would have been for industrial purposes, the issue is now less important. In light of that reduced importance, I can state my reasons briefly.
217 Mr Haines’ valuation was significantly lower than the other two valuers. As I understood his evidence, his primary reason for adopting the lower per hectare rate was his more pessimistic assessment of development timing and sequencing, in circumstances where there is ‘no discernible movement’ in the Beveridge South West Precinct Structure Plan.[140]
[140]Transcript, 19 October 2022, 968:28–30 (Haines).
218 Mr Haines also discounted the relevance of the sales in mid-2018 of 160 and 260 Gunns Gully Road, Beveridge, on either side of the Property. This was due to his understanding that they were purchased by the same company that already owned ‘everything else in this precinct’ and so did not represent arms-length transactions.[141] By contrast, Mr Willison considered these two properties, both of which had a residential component, to be directly comparable with the Property.
[141]Transcript, 19 October 2022, 982:4–6 (Haines).
219 The evidence did not support Mr Haines’ understanding.[142] The limited evidence is that the companies that purchased 160 and 260 Gunns Gully Road are different entities from the company that purchased the Property and 490–570 Old Sydney Road, Beveridge. There is no evidence that they have common directors or shareholders. This means that Mr Haines discounted highly relevant sales evidence based on an incorrect premise. For that reason, I am unable to accept his valuation of the Property for residential use.
[142]As summarised in the Applicant’s Outline of Closing Submissions dated 16 December 2022, [7.52](e).
220 That leaves the per hectare rates of $650,000 and $575,000 adopted by Mr Leech and Mr Willison respectively. Of the two, I found Mr Willison’s valuation rationale to be more compelling. Mr Willison relied principally on the sales of neighbouring properties — 160 and 260 Gunns Gully Road, and also 290 Gunns Gully Road, and 490 and 570 Old Sydney Road. For properties that had a residential component on the northern side of the OMR reservation, Mr Willison apportioned the sale price between their residential and industrial components. I had no difficulty with his method.
221 On the other hand, I was unpersuaded by Mr Leech’s reason for disregarding these sales in the immediate area of the Property. He said that he had difficulty using them as comparable sales because it required a subjective ‘valuer’s judgment call’ to apportion rates between industrial and residential.[143] However, he had undertaken just that exercise in relation to a sale at 750 Craigieburn Road East, Craigieburn, a more distant property which he nevertheless considered to be a comparable sale.
[143]Transcript, 19 October 2022, 978:15-26 (Leech).
222 For those reasons, I accept Mr Willison’s valuation of the Property for residential use as at the Relevant Date, at $575,000 per hectare in the absence of the Scheme, and at $275,000 per hectare with the Scheme in place.
Conclusion on valuation
223 The questions concerning valuation are answered as follows:
(6) On the basis that the highest and best use of the Property unaffected by the Scheme is for industrial purposes, what is the appropriate rate per hectare to be adopted for assessing the value of the Property:
(a) as at 27 September 2016; and
(b) as at the Relevant Date?
The appropriate rate per hectare to be adopted for assessing the value of the Property unaffected by the Scheme is:
(a) as at 27 September 2016, $200,000 per hectare.
(b) as at the Relevant Date, $325,000 per hectare.
(7) What is the appropriate rate per hectare to be adopted for assessing the value of the part of the Property affected by the Scheme that is designated for future industrial development:
(a) as at 27 September 2016; and
(b) as at the Relevant Date?
The appropriate rate per hectare to be adopted for assessing the value of the Property affected by the Scheme that is designated for future industrial development is:
(a) as at 27 September 2016, $200,000 per hectare.
(b) as at the Relevant Date, $325,000 per hectare.
(8) What is the appropriate rate per hectare to be adopted for assessing the value of the part of the Property affected by the Scheme that is designated for future residential development:
(a) as at 27 September 2016; and
(b) as at the Relevant Date?
The appropriate rate per hectare to be adopted for assessing the value of the Property affected by the Scheme that is designated for future residential development is:
(a) as at 27 September 2016, either $147,884 per hectare, with an allowance of $50,000 for the OMR reservation, or $148,951 per hectare, with an allowance of $20,000 for the OMR reservation;
(b) as at the Relevant Date, $275,000 per hectare.
(9) For the purposes of determining the maximum amount of compensation payable under s 104 of the Planning Act:
(a) What was the value of the Property as at the Relevant Date?
(b) What value would the Property have had at the Relevant Date in the absence of the Scheme?
(c) What is the difference between those two values?
(a) The value of the Property as at the Relevant Date was $17,570,750, comprising:
Land Portion
Ha
$/Ha
Value
Future industrial
30.20
$325,000
$9,815,000
Future residential
28.13
$275,000
$7,735,750
OMR reservation
10.09
$20,000[144]
Waterways/drainage
4.10
$Nil
TOTAL
72.52
$17,570,750
[144]This was the allowance made by Mr Haines, which for this purpose is more favourable to Kajag.
(b) In the absence of the Scheme, as at the Relevant Date the Property would have had a value of $23,570,000, being 72.52 hectares at $325,000 per hectare.
(c) The difference between those two amounts is $5,999,250.
Questions 10, 11, 12, 13 and 14 — Assessment of Compensation
224 Before turning to the assessment of the compensation payable to Kajag for its loss on sale, there are two general questions about the proper approach to that assessment.
Principles on which compensation is to be based
225 The first of those questions was whether, in determining the compensation payable to Kajag, I should have regard to the general principles in s 41 and the matters affecting compensation in s 43 of the Compensation Act and, if not, whether the Pointe Gourde principle or any other common law principle is relevant to the assessment of compensation under ss 98 and 106 of the Planning Act.
226 Sections 98 and 106 of the Planning Act entitle an owner of land to compensation for financial loss suffered as the natural, direct and reasonable consequence of their land being reserved for a public purpose under a planning scheme, where the land was sold at a lower price than might reasonably have been expected if it had not been reserved. Section 105 of the Planning Act applies Pts 10 and 11 and s 37 of the Compensation Act, with any necessary changes, to the determination of compensation under Pt 5 of the Planning Act as if the claim were a claim under s 37 of the Compensation Act.
227 Within the Compensation Act, Pt 4 prescribes the principles for assessing the amount of compensation payable to a claimant whose interest in land has been acquired for a public purpose. Section 41 sets out general principles on which compensation is to be based including, in s 41(1), a list of matters that must be considered in assessing the amount of compensation payable. Section 43 provides for matters affecting compensation, including a list in s 43(1) of matters that must be disregarded in assessing compensation. There is a question whether those provisions are to be applied in assessing compensation for loss on sale under Pt 5 of the Planning Act, as they would apply to a claim under s 37 of the Compensation Act.
228 If those provisions do not apply, in particular ss 41 and 43, there is a further question whether the Pointe Gourde principle or any other common law principle should be applied. The essence of the Pointe Gourde principle is that any impact of the scheme of acquisition on the value of the land acquired is to be disregarded when assessing compensation for the acquisition.[145] Although the principle emerged in the United Kingdom, initially in relation to claims made under the Land Clauses Consolidation Act 1845 (UK), it has been applied in compulsory acquisition cases in Australia as a principle of the common law.[146] However, in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority,[147] the High Court distinguished between the common law and a body of case law developed in other jurisdictions about similar statutes. The Court cautioned against construing modern Australian legislation by reference to the latter ‘principles’, and affirmed that it is the terms of the legislation under which a claim is made that are determinative.[148]
[145]Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565, 572; Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196, 206; Queensland v Murphy (1990) 64 ALJR 593, 595; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259, [37]–[45] (Walker Corporation).
[146]See eg, Equity Trustees Executors & Agency Co Ltd v Melbourne & Metropolitan Board of Works [1994] 1 VR 534, 546 and Halwood Corporation (in liq) v Roads Corporation [2008] VSC 28, [87].
[147](2008) 233 CLR 259.
[148]Walker Corporation, [29]–[31], [47].
229 The Authority’s position was that s 105 of the Planning Act does not call into operation ss 41 and 43 of the Compensation Act in determining compensation payable under Pt 5 of the Planning Act. It referred to Mario Piraino Pty Ltd v Roads Corporation (No 2)[149] and Equity Trustees Executors & Agency Co Ltd v Melbourne & Metropolitan Board of Works,[150] in which Gobbo J held that the effect of s 105 of the Planning Act was to import only the procedural machinery of the Compensation Act, and not its substantive provisions. It also referred to several authorities in which observations have been made about the differences between compensation under Pt 5 of the Planning Act and compensation under Pt 4 of the Compensation Act.[151]
[149][1993] 1 VR 130, [137].
[150][1994] 1 VR 534, 546.
[151]Barilla v Roads Corporation (2017) 54 VR 198, [23]; Brompton Lodge Pty Ltd v Head, Transport for Victoria [2021] VSCA 302, [90]–[91]; Minister for Energy, Environment and Climate Change v Megson (2019) 58 VR 189, [94]–[95] (Emerton JA, Tate JA and Almond AJA agreeing).
230 As to the Pointe Gourde principle, the Authority acknowledged that it may be permissible to have regard to the principle in the terms described by the High Court in Walker Corporation, but not otherwise. It submitted that there was no need to refer to the principle in this case, which should be determined in accordance with the provisions of Pt 5 of the Planning Act.
231 Kajag also referred to existing authority about the effect of s 105 of the Planning Act, and submitted that, on reflection, this case might not be an appropriate vehicle to revisit the question. It did not urge the application of ss 41 and 43 of the Compensation Act or the Pointe Gourde principle in this case. It accepted that the critical assessment to be made was the amount of its financial loss suffered as a natural, direct and reasonable consequence of the Property being reserved for a public purpose.
232 Given that Kajag did not press this question, it is not necessary to answer it in this case.
Approach to assessment of financial loss
233 The next question is whether Kajag’s financial loss is to assessed by comparing contract prices for the sale of the Property entered into on 27 September 2016 in the before and after scenarios, or the unaffected and affected market value of the Property as at the Relevant Date. The Authority submitted that the former is the correct approach, while Kajag maintained that its loss is to be assessed by reference to the latter comparison.
Kajag’s submissions
234 Kajag contended that its loss is to be measured by reference to the price it would have obtained for the Property at the Relevant Date, had it not been reserved. It said that adopting the actual contract price for the assessment of loss might distort the assessment, due to the movement in land values since the contract price was set. Adopting the market value as at the Relevant Date would avoid that risk. It relied on three authorities to support that contention.
235 The first authority was Plunkett v Roads Corporation,[152] in which I held that the sale of land for the purposes of ss 99 and 106 of the Planning Act took place on completion of the contract of sale, and not when the contract was made. Kajag said that Plunkett set the time for assessment of compensation at the completion date.
[152](2019) 239 LGERA 156.
236 Next, Kajag referred to the Court of Appeal’s analysis of ss 98 and 99 of the Planning Act in Mason v Head, Transport for Victoria.[153] It relied in particular on the Court’s explanation that s 99 is not merely procedural, and provides for compensation for loss which is assessed at the time at which the right to compensation arises.[154]
[153](2021) 63 VR 175 (Mason).
[154]Mason, [43]–[44], [50].
237 Third, Kajag referred to the Court of Appeal’s judgment in Brompton Lodge Pty Ltd v Head, Transport for Victoria,[155] which it said stood for the following propositions:
[155][2021] VSCA 302 (Brompton Lodge).
(a) Section 104 of the Planning Act incidentally confirms that the value of compensation is to be assessed by reference to the value of the land at the date on which the liability to pay compensation first arises.[156]
[156]Referring to Brompton Lodge, [37].
(b) Compensation under Part 5 is payable only where the owner has suffered actual financial loss.[157] The compensation regime is concerned with the actual loss suffered by the owner of reserved land, not with an abstract or hypothetical loss.[158]
[157]Referring to Brompton Lodge, [92], [95].
[158]Referring to Brompton Lodge, [96].
(c) Section 106(1) calls for a comparison between an actual outcome and a hypothetical outcome that assumes that the land was sold in the same circumstances as the actual sale but unburdened by the reservation.[159]
[159]Referring to Brompton Lodge, [93].
(d) Section 106(1) does not simply provide a date for the assessment of loss; rather, the sale is of practical effect in quantifying the loss caused, and furnishes the measure of the owner’s gross loss.[160]
[160]Referring to Brompton Lodge, [94].
(e) In calling for a comparison of the actual price with the price that might have been achieved without the reservation, s 106(1) is to be contrasted with s 104 which compares the two hypotheticals: the land value on the day on which liability first arises and the value on that day had the land not been reserved. Section 104 does not create or contribute to the right to compensation, but rather sets an artificial ceiling on the amount of compensation.[161]
(f) Section 106(1), in combination with ss 98(1) and 99, requires compensable loss to be established by reference to the circumstances of the actual sale.[162]
[161]Referring to Brompton Lodge, [96].
[162]Referring to Brompton Lodge, [99].
238 Kajag said that the effect of these three authorities is that:
(a) The compensable loss is an actual loss and not one assessed by sole reference to hypothetical land values.
(b) The loss under ss 98 and 106(1) is to be assessed at the date of completion of the contract of sale.
(c) The loss is to be assessed by reference to the actual sale price and the price that would have been achieved in the same circumstances absent the reservation.
239 According to Kajag, s 104 of the Planning Act does more than merely establish the cap or maximum amount of compensation payable. It submitted that it is logical that the cap on compensation in s 104 should bear some resemblance to the actual compensation task. Despite the Court of Appeal’s description of s 104 as an ‘artificial ceiling’ on the amount of compensation payable, it is not an arbitrary or meaningless ceiling unrelated to the compensation assessment. Kajag argued that, in a moving market where a terms contract provides for settlement many years after a contract price is fixed, it is unlikely to have been the intention of the drafters of the legislation that the cap in s 104 would have no bearing on a compensation task that focuses on a contract price fixed many years before.
240 There was a suggestion in oral submissions that Kajag entered into a terms contract with a long settlement period as a consequence of the reservation over the Property. The only evidence to support that suggestion was the fact that a number of other properties in the area had also been sold on a terms basis.
Authority’s submissions
241 The Authority’s position was that Pt 5 of the Planning Act is concerned with the actual loss suffered by a claimant, not an abstract or hypothetical loss. It emphasised that Kajag is to be compensated for the financial loss it has in fact suffered as a consequence of the reservation, by reference to the actual contract of sale and the actual sale price. The Authority contrasted the measure of loss in ss 98(1) and 106(1) with the concept of value used in s 104 to determine the cap on compensation payable. It said that there is a fundamental difference between an assessment of loss under s 106, which is directed to the price that the owner might reasonably have been expected to get if part of the land was not reserved, and the value of the land to be determined under s 104.
242 In the Authority’s submission, Kajag’s loss is to be assessed consistently with the Court of Appeal’s judgment in Brompton Lodge[163] and Osborn J’s judgment in Halwood Corporation (in liq) v Roads Corporation.[164] It said that this requires a before and after assessment by reference to the contract of sale, with an accounting for the difference in payments that may be made during the terms of the contracts. It posited a four-stage process for assessing a claimant’s actual loss:
[163]Referring to Brompton Lodge, [92]–[99].
[164][2008] VSC 28, [118].
(a) First, identify the likely contract price, terms, and settlement date that would apply to a contract for the sale of the land in the unaffected scenario;
(b) Second, identify any payments that the owner/vendor would have received during the term of the contract and any interest that would have accrued on those payments between the hypothetical payment date and the actual completion date. Any interest that would have been received should be added to the hypothetical contract price. Further, if the hypothetical (unaffected) settlement date extends beyond the actual contract settlement date, identify the payments that the owner/vendor would have received and any interest that would have accrued on those payments between the actual settlement date and the hypothetical settlement date. The payment(s) that would have been received between the actual settlement date and the hypothetical settlement date, and any interest accrued, should be discounted from the hypothetical contract price.
(c) Third, calculate the affected contract price. To do this, the payments that the owner/vendor received between entry into the contract and completion (as set out in the contract itself) are identified and interest calculated on each payment between the date that the payment was received and the actual contract completion date. This interest is added to the affected contract price.
(d) Fourth, calculate the difference between the affected and unaffected contract prices.
243 The Authority also referred me to the valuers’ comparisons of the price under the contract of sale, and the price that would have been obtained under a comparable terms contract in the absence of the Scheme.
244 In response to Kajag’s reliance on Plunkett, the Authority argued that the decision was not about the assessment of loss, and did not answer the question of how it should be assessed. It said that the issue decided in Plunkett was when there was a ‘sale of the land’ for the purposes of ss 99 and 106 of the Planning Act.
Consideration
245 Kajag’s entitlement to compensation under s 98(1) of the Planning Act is for ‘financial loss suffered as the natural, direct and reasonable consequence’ of part of the Property being reserved for the OMR. In accordance with s 106(1), it became entitled to claim that compensation when it sold the Property at a lower price than it might reasonably have expected to get if part of the Property had not been reserved for the OMR— that is, when it suffered actual loss as a result of the reservation. The loss for which it is to be compensated is loss caused by the reservation; there must be ‘a very close and limited connection between the imposition or proposal of the reservation and the financial loss suffered’.[165]
[165]Halwood Corporation Ltd v Roads Corporation (1995) 89 LGERA 280, 303. See also Brompton Lodge, [98].
246 Kajag’s contention that its loss should be assessed by comparing the affected and unaffected market value of the Property as at the Relevant Date is untenable in light of the Court of Appeal’s reasoning and conclusions in Brompton Lodge.
247 In Brompton Lodge, the claimants owned land in Cranbourne South, part of which was reserved for the future upgrade of the Western Port Highway. They sold the land to a developer with whom they had an existing property development agreement, at the same time agreeing to end the property development agreement and to assign their compensation entitlement to the developer. The sale price was well below the market value of the land, but could not be disaggregated into its component parts. The claimants established that there had been a reduction in the value of their land at the relevant date due to the reservation. However, the trial judge found that they had not shown that they had sold the land at a lower price by reason of the reservation, and so there was no loss to be compensated.
248 On appeal, the claimants contended that their loss should not have been assessed by reference to the actual sale price, but by comparing the affected and unaffected market value of the land at the relevant date, based on hypothetical sales. The appeal was dismissed.
249 The Court of Appeal held that s 106(1) of the Planning Act, in combination with ss 98(1) and 99, ‘requires compensable loss to be established by reference to the circumstances of the actual sale’.[166] This is because:[167]
The principles of statutory construction require consideration of the ordinary and grammatical meaning of the words used, taking into account both context and legislative purpose. The words ‘sold it’ in s 106(1)(a) refer to a specific action by the owner and to a specific event; and the words ‘at a lower price’ refer to a specific outcome of that event. The reference to ‘price’ is to be compared to the use of the word ‘value’ elsewhere in pt 5. Based on the ordinary meaning of the words in s 106(1), the section calls for a comparison between an actual outcome and a hypothetical outcome that assumes the land was sold in the same circumstances as the actual sale but unburdened by the reservation.
While it is true, as the applicants submit, that s 106(1) requires entry into the hypothetical realm, the enquiry is nonetheless anchored by the sale and the price obtained for the land burdened by the reservation. It is not the case that s 106(1) simply provides a date for the assessment of loss and the vague and undemanding ‘precondition’ that there has been a sale for an amount that is less than might otherwise have been achieved absent the reservation. As Batt J said in Halwood Corporation Ltd v Roads Corporation, the sale under s 106 is ‘of practical effect in quantifying the loss caused’ and ‘furnishes the measure of the owner’s gross loss and satisfaction of the causal requirements of s 98(1)’.
…
[The] compensation regime in pt 5 of the PE Act is concerned with the actual loss suffered by the owner of reserved land, not with an abstract or hypothetical loss, or a loss likely to be suffered in the future if and when the reserved land is resumed. This is consistent with the words in s 106(1), ‘the owner sold it at a lower price’. In calling for a comparison of the ‘price’ achieved on sale with the price that might have been achieved without the reservation, s 106(1) is to be contrasted with s 104, which uses the term ‘value’. Section 104 calls for the comparison of two hypotheticals: the land value on the day on which the liability to pay compensation first arose and the value that the land would have had on that day had it not been affected by the reservation. However, s 104 does not create or contribute to creating the right to compensation; rather, it sets — as a matter of public policy — an artificial ceiling on the amount of compensation payable for losses caused by the reservation of land.
[166]Brompton Lodge, [99].
[167]Brompton Lodge, [93]–[94], [96] (footnotes omitted).
250 On that basis, the Court of Appeal found no error in the trial judge’s finding that the claimants had not established any loss suffered as the natural, direct and reasonable consequence of the reservation.
251 Kajag is not assisted by Plunkett, which did not concern the assessment of compensation. The issue in that case was whether the claimants’ entitlement to compensation for loss on sale under Pt 5 of the Planning Act arose when they entered into the contract for the sale of their land, or upon completion of the contract. In answering a separate question, I held that the ‘sale of the land’ for the purposes of ss 99 and 106 of the Planning Act took place upon completion of the contract of sale. I was not persuaded that the prospect of market movement between the contract date and the settlement, or the uncertainties inherent in a sale with a long settlement period, were absurd or anomalous consequences of that interpretation.[168] Indeed, I observed that an owner of land who agrees to a long settlement period must accept the uncertainty that comes with that bargain.[169]
[168]Plunkett, [67]–[68].
[169]Plunkett, [70].
252 That observation holds true in this case. Kajag agreed to sell the Property in September 2016, with a three year settlement period. Over those three years, there was a large increase in the value of the Property. No doubt, if Kajag had waited longer before agreeing to sell the Property, it could have sold it at a higher price. However, there is no evidence on which I can find that Kajag’s decision to sell in 2016, or its agreement to a three year settlement period, had anything to do with the OMR reservation. I cannot draw that inference from the limited evidence that other neighbouring landowners sold their land on similar terms. The sole director of Kajag, Amelie Gorski, made an affidavit about Kajag’s purchase and sale of the Property, which said nothing about why it had agreed to sell the Property when it did, or why it agreed to the terms provided in the contract of sale.
253 Kajag’s financial loss is to be assessed by comparing contract prices for the sale of the Property entered into on 27 September 2016 in the before and after scenarios. That said, I am not satisfied that I should adopt the four stage method of assessing compensation proposed by the Authority, either in this case or as a general rule. I think it preferable to rely on a valuer’s opinion, given that all three valuers undertook the required comparison.
Assessment of financial loss
254 On 27 September 2016, Kajag entered into a terms contact to sell the Property for $10,250,000. The valuers all accepted that the sale price represented market value. The sale of the Property was completed on the Relevant Date, at which time Kajag suffered the loss for which it is to be compensated.
255 In the absence of the Scheme, the highest and best use of the Property would have been to be held for future development for industrial purposes, and all 72.52 hectares of the Property would have been available for development. The unaffected value of the Property as at 27 September 2016 would have been $14,504,000 — 72.52 hectares at $200,000 per hectare. If Kajag had contracted to sell the Property at the same time and on the same terms in the absence of the Scheme, the likely contract price would have been $14,505,000 — as rounded up by Mr Haines and Mr Willison. The difference between the affected and the unaffected sale price is $4,255,000.[170]
[170]Mr Leech gave a lower figure of $3,675,000 in the Alternative Valuation Positions document. This may be due to the way he accounted for the $577,751 in offset obligations, although this should be neutral because the offset obligations apply in both the affected and the unaffected scenario. I have disregarded this figure given that Mr Leech arrived at the same affected and unaffected contract price in Scenario 3.
256 The valuers assessed the interest component to the financial loss claim to be $90,000 (Mr Haines), $110,000 (Mr Willison) and $78,000 (Mr Leech). The small differences between these amounts are matters of each valuer’s judgment. I will adopt Mr Willison’s assessment of the interest component, as the most favourable to Kajag.
257 On that basis, Kajag’s financial loss as the natural, direct and reasonable consequence of the Property being reserved by the Scheme was $4,365,000.
Statutory cap
258 For the purposes of s 104 of the Planning Act, the maximum compensation that is payable is $5,999,250 — being the difference between the unaffected and the affected value of the Property as at the Relevant Date.[171] The statutory cap is higher than Kajag’s financial loss on the sale of the Property.
[171]See [223] above.
Conclusion on assessment of compensation
259 My conclusions in relation to assessment of compensation are as follows:
(10) In determining the compensation payable to the claimant, should regard be had to the general principles in s 41 and the matters affecting compensation in s 43 of the Land Acquisition and Compensation Act 1986? If not, should regard be had to the Pointe Gourde principle or any other common law principle relevant to the assessment of compensation under ss 98 and 106 of the Planning Act?
Unnecessary to answer.
(11) Should the claimant’s financial loss to be compensated under ss 98 and 106 of the Planning Act be assessed by comparing:
(a) contract prices for the sale of the Property entered into on 27 September 2016; or
(b) the market value of the Property as at the Relevant Date,
in the before and after scenarios?
Kajag’s financial loss to be compensated under ss 98 and 106 of the Planning Act is to be assessed by comparing contract prices for the sale of the Property entered into on 27 September 2016 in the before and after scenarios.
(12) Having regard to the answers to Questions 1 to 11, what is the financial loss suffered by the claimant as the natural, direct and reasonable consequence of the Property being reserved by the Scheme?
On 27 September 2016, Kajag entered into a terms contact to sell the Property for $10,250,000. In the absence of the Scheme, the value of the Property as at that date would have been $14,505,000, which would likely have been the sale price if Kajag had sold the Property on the same date and on the same terms. Allowing for an interest component of $110,000, Kajag’s financial loss on the sale of the Property as the natural, direct and reasonable consequence of the Property being reserved by the Scheme was $4,365,000.
(13) What is the maximum amount of compensation payable under s 104 of the Planning Act?
The maximum amount of compensation payable under s 104 of the Planning Act is $5,999,250.
(14) Is the claimant’s loss more than the maximum amount of compensation payable under s 104?
No.
DISPOSITION
260 I will hear the parties about the form of the final orders, and in relation to interest and costs.
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