Kudrynski v Orange City Council

[2023] NSWLEC 9

Land and Environment Court

New South Wales

Medium Neutral Citation:

Kudrynski v Orange City Council [2023] NSWLEC 9

Hearing dates:

14, 15 and 16 March 2022

Date of orders:

17 February 2023

Decision date:

17 February 2023

Jurisdiction:

Class 3

Before:

Pepper J

Decision:

See orders at [76].

Catchwords:

COMPULSORY ACQUISITION: flood prone vacant land acquired by the council for the public purpose of stormwater harvesting project – land constrained by easements and affected by traffic noise – highest and best use of the land is for rural-residential development – limited comparable sales evidence – adoption of hypothetical development approach –application of statutory disregard – claim that stormwater harvesting project either unfeasible or illegal irrelevant to proceedings – limited weight placed on valuation evidence of applicant because it was decades old and because no adjustments were made to comparable sales – no other valuation evidence provided by applicant – no town planning evidence relied upon by applicant – Court relied upon the town planning and valuation evidence provided by the respondent to calculate the compensation payable for the acquisition of the land.

Legislation Cited:

Land Acquisition (Just Terms Compensation) Act 1992, ss 4, 55, 56, 59, 66

Land and Environment Court Act 1979, ss 20, 38

Land and Environment Court Rules 2007, r 7.7

Orange Local Environmental Plan 2011, cll 4.1, 4.6, 7.2

Uniform Civil Procedure Rules 2005, Pt 31, Sch 7

Cases Cited:

Marroun v Roads and Maritime Services [2012] NSWLEC 199

UTSG Pty Ltd v Sydney Metro (No 6) [2020] NSWLEC 63

Category:

Principal judgment

Parties:

Alexandra Kudrynski (First Applicant)
Julius Kudrynski (Second Applicant)
Orange City Council (Respondent)

Representation:

Counsel:
J Kudrynski (as agent for First and Second Applicant)
N Eastman with A Richards (Respondent)
Solicitors:
N/A (Applicant)
Marsdens Law Group (Respondent)

File Number(s):

2020/330687

Publication restriction:

Nil

JUDGMENT

Kudrynski Seeks Compensation for the Compulsory Acquisition of Her Land

1. On 11 September 2020 by notice published in the NSW Government Gazette, Orange City Council (“the Council”) compulsorily acquired a parcel of vacant land at 280-284 Phillip Street, Orange (“the land”). The land was acquired for the purpose of a council project, namely, the Blackmans Swamp Creek Stormwater Harvesting Project (“the stormwater harvesting project”).

2. At the time the land was compulsorily acquired it was owned by Alexandra (also known as “Alicia”) Kudrynski. As part of the compulsory acquisition the Council had endeavoured to reach agreement with Kudrynski to purchase the land. The negotiations were unsuccessful thereby resulting in the Council carrying out the compulsory acquisition and engaging the compensation provisions of the Land Acquisition (Just Terms Compensation) Act 1992 (“the Just Terms Act”).

3. On 14 October 2020 the Valuer-General determined that the compensation payable to Kudrynski was $450,000. This was based on a market value for the acquired land, with no additional compensation for any disturbance pursuant to s 59(1) of the Just Terms Act.

4. Kudrynski considered that the compensation which had been determined by the Valuer-General for the acquisition of her land was insufficient for her dispossession. As a consequence, she exercised her right pursuant to s 66 of the Just Terms Act to apply to the Court to determine the amount of compensation to which she is entitled, by commencing proceedings in Class 3 of the Court's jurisdiction on 20 November 2020.

5. The claim advanced by Kudrynski is that the market value of the acquired land is $160 million and that she is entitled to compensation of this amount. The reasoning advanced in support of this claim was set out in a letter written to her solicitor by her husband, Julius Kudrynski, which was attached to the Class 3 application. The letter was in the following terms:

Compensation claim made by Julius and Alicia Kudrynski

Good evening Clive, I just want you to look over this proposed letter that I want to send to the valuer concerning our property and its imminent resumption. When I last spoke to Mark he seemed to be concerned with the bona fides of the parties involved. I would like to 1st point out to him that I have a valuation of some $560,000 for this property some eight years ago and in the intervening eight years all other land has tripled and quadrupled in Orange. Mine has gone down by almost half. Orange City Council was given by the state government $5 million grant towards this project and when I asked for any relevant information they gave me very little and it is on this information that I make my claim for compensation but I have no doubt that once this matter goes before the court and documents are subpoenaed that my claim will substantially increase. For land that is available to them for water harvesting they seem to be using about 10 to 20% of it. On the calculations they have about the average rainfall of about 950 mm per year they will be able to harvest 50 ML of stormwater but the capability of this land must be at least 300 ML so per year they will harvest 950*50*6 and divide that by 25= 11,400 ML of water and at today's price of $3000 per megalitre all well over $30 million. Add to this eastern side of the creek is above water level on a hillside and therefore will leave 3 ha of land to be developed as residential. The only expense required would be for council to complete council road from Amaroo Crescent. This would be prime land and the only land that would have a frontage draw wetland so the going rate of development land in Orange would not be an unreasonable figure and that is $3 million per hectare or a total of some $9 million. Assuming council will recoup their money in five years this would value the land at about $160 million. Yours faithfully Julius Kudrynski.

When we received our first valuation of $300,000 I was told to contact and did contact Nick Redmond. He was not prepared to move away from this value and this leaves me with no alternative but to appeal this matter. I have not been able to receive any valuation that considers the use for which this land Council claim it will be used for; the harvesting of water. This is the reason why I did not submit to the valuer general the two valuation reports that I have. It Thus the valuation that I seek will be dependent on what reports that council received and hold from other sources as to the potential of the water harvesting of this land. I could not see where I could make a claim under, "attach the right documents"; a schedule of losses attributable to disturbance under section S 59 (a) of the Just Terms Act and a schedule of disturbance loss heads of claim which may arise under a 59 (f) and therefore present it, 'all lay evidence.) Regards Julius and Alicia Kudrynski

Summary of the Hearing

6. Kudrynski appointed her husband, Julius Kudrynski, to act as her agent pursuant to r 7.7 of the Land and Environment Court Rules 2007. On 11 June 2021, Moore J granted him leave to act as Kudrynski's agent for the purpose of the proceedings. Leave was presumably required and granted on the basis that, notwithstanding that Julius Kudrynski is the second applicant named in the Class 3 application, he does not hold a proprietary interest in the land and, therefore, has no entitlement to compensation for its compulsory acquisition. The Council subsequently told the Court that Julius Kudrynski had been named as an applicant in error, but there has been no formal application made to amend his status as a party.

7. Accordingly, Julius Kudrynski, who has no legal or valuation qualifications or expertise, represented Kudrynski during the course of the three day hearing.

8. In short, he submitted that the land should be valued having regard to the amount and value of the water that the Council would be able to harvest from the land for the stormwater harvesting project.

9. By contrast, the Council submitted that a claim based upon a valuation calculated having regard to the beneficial effect of the Council’s proposed stormwater harvesting project was misconceived, because s 56(1)(a) of the Just Terms Act expressly excluded any increase in the value of the land resulting from the carrying out of the public purpose, the public purpose being the stormwater harvesting project. Accordingly, the market value of the land as at 11 September 2020, the date of the acquisition, must be calculated exclusively on the basis of its R5 zoning under the Orange Local Environmental Plan 2011 (“LEP”) and its permitted uses at that time, which resulted in compensation payable in the sum of $560,000.

10. No claim for, or evidence of, disturbance was received by the Council or the Court.

11. As a matter of completeness, two further issues arose that should be addressed from the outset. First, at several junctures during the hearing Julius Kudrynski complained that there had been no site visit to the land. No order for a site visit was made upon the allocation of the proceedings to me and no request was made by any party. Rather, it appears that prior to the matter having been vacated by Moore J in October 2021, it was envisaged that the hearing would occur in Orange with an inspection of the land. However, upon the relisting of the matter to set a new hearing date, it was Julius Kudrynski who requested that the hearing occur by AVL in email communications to the Court and the respondent in late January and early February 2022 on the basis that “I am not capable of leaving home”. The request was granted. It was for this reason that the hearing occurred virtually, the corollary of which was that no site inspection took place, especially as aerial photographs and contour diagrams were available for the land and the other sites that needed to be considered for valuation purposes. So much so was conceded by Julius Kudrynski in oral submissions (T150:09-151:31).

12. Second, Julius Kudrynski complained on several occasions that his preparation for the hearing had been “sprung on” him (T111:45) and that his preparation had therefore somehow been “truncated” (T157:01) by the vacation of the hearing in October 2021 by Moore J. Julius Kudrynski laboured under the misapprehension that the case had been “cancelled because Moore J decided that he was not going to hear it” (T157:10-11). This is not correct; the hearing was vacated at the request of Julius Kudrynski on 8 October 2021 due to his ill health. The proceedings before me was set down on 12 October 2021 at a mention at which Julius Kudrynski was present. That is, five months prior to this hearing commencing. As stated above, on 17 February 2022 Julius Kudrynski wrote to the Court requesting that the hearing proceed by AVL “in the upcoming trial of 13, 14 and 15 of March and the arrangements that were made on 12 October 21.” There have been no applications to vacate the matter listed before me, including on 3 March 2022, when Julius Kudrynski was present and when further orders were made for the hearing of the matter. I do not accept that on that date Julius Kudrynski genuinely believed that that was “just a practical joke” (T196:12-197:42) that the hearing would commence on 13 March 2022.

13. In my view, there has been ample time for Kudrynski to prepare for a hearing that he knew was commencing on that day and he has not been prejudiced by the timing of the listing of the proceeding before me.

The Land

14. The land is located on the north eastern outskirts of the city of Orange, immediately to the south of the city's Northern Distributor Road. The land is roughly wedge shaped, with the wedge oriented so that its point is towards the east. It has an area of 7.606 ha. It has two street frontages: approximately 38m to the made portion of Phillip Street at the western end of its northern boundary; and approximately 190m to Jilba Street along its entire western boundary. An aerial photograph showing the site and its boundaries is reproduced below:

15. The land was vacant as at the date of acquisition. It is predominantly open grassland with the Blackmans Swamp Creek (“the Creek”) flowing in a generally south to north direction at approximately halfway from the Jilba Street frontage to the eastern end of the land. An electricity transmission line easement runs through the land generally following the line of Creek on its western bank.

16. There is some tree and bush cover that is able to be seen on aerial photos of the site but otherwise there are few trees on the land.

17. The land slopes gently from its Jilba Street frontage (231 m) at its west toward Blackmans Swamp Creek (“the creek’), and similarly, from its eastern (but higher) end towards the creek. Its southern boundary is 502 m.

18. The land is affected by a sewer easement and, as stated above, an easement for the purpose of electricity transmission lines.

19. Low density single detached housing adjoins the land to the west, southwest and northwest and along the southern side of the eastern half of the land. A public reserve extending west from the Creek to Jilba St, adjoins the western half of the land to the south. The northwest corner of the land joined by a public reserve to the north with balance of the northeast boundary adjoined by the Northern Distributor Rd.

20. The land is located 2 km northeast of the Orange CBD.

Statutory Framework Governing the Claim for Compensation

The Just Terms Act

21. As stated above, the provision of the Just Terms Act entitling compensation for the Council's compulsory acquisition of the land and Kudrynski’s right to have that compensation determined by this Court is s 66 of that Act. That provision relevantly provides that:

66   Objection against amount of compensation offered

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

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

22. The Just Terms Act provides a framework which permits bodies which are defined as being authorities of the State to compulsorily acquire land for the purposes of carrying out projects considered by that authority to be of public benefit. The Council is an “authority of the State” for this purpose by virtue of the definition of this term contained in s 4(c) of the Just Terms Act:

authority of the State means—

…

(c)   a council, a county council or a joint organisation within the meaning of the Local Government Act 1993…

23. Section 55 of the Just Terms Act provides the basis upon which a dispossessed landowner may be entitled to compensation:

55   Relevant matters to be considered in determining amount of compensation

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

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

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

(c)   any loss attributable to severance,

(d)   any loss attributable to disturbance,

(e)   the disadvantage resulting from relocation,

(f)   any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

24. Market value is dealt with in s 56(1) of the Just Terms Act in the following terms:

56   Market value

(1)   In this Act—

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

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

(b)   any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and

(c)   any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.

25. Finally, s 59(1) of the Act sets out the limited range of matters for which additional compensation may be awarded for disturbance:

59   Loss attributable to disturbance

(1)   In this Act—

loss attributable to disturbance of land means any of the following—

(a)   legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land,

(b)   valuation fees of a qualified valuer reasonably incurred by those persons in connection with the compulsory acquisition of the land (but not fees calculated by reference to the value, as assessed by the valuer, of the land),

(c)   financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs),

(d)   stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired),

(e)   financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage),

(f)   any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.

(2)   Subject to the regulations, a reference in this section to a qualified valuer is a reference to a person who—

(a)   has membership of the Australian Valuers Institute (other than associate or student membership), or

(b)   has membership of the Australian Property Institute (other than student or provisional membership), acquired in connection with his or her occupation as a valuer, or

(c)   has membership of the Royal Institution of Chartered Surveyors as a chartered valuer, or

(d)   is of a class prescribed by the regulations.

The LEP

26. The land is zoned R5 Large Lot Residential pursuant to the LEP. Relevant for present purposes, the erection of “dwelling houses” and construction of “Environmental protection works” (which is how the Stormwater Harvesting Project is characterised) are both uses permitted within the zone with development consent, as provided by the land use table to the LEP:

2   Permitted without consent

Environmental protection works; Home-based child care; Home occupations

3   Permitted with consent

Animal boarding or training establishments; Bed and breakfast accommodation; Boarding houses; Building identification signs; Business identification signs; Centre-based child care facilities; Community facilities; Crematoria; Dwelling houses; Environmental facilities; Exhibition homes; Extensive agriculture; Home businesses; Home industries; Information and education facilities; Kiosks; Neighbourhood shops; Oyster aquaculture; Places of public worship; Pond-based aquaculture; Recreation areas; Recreation facilities (indoor); Recreation facilities (outdoor); Respite day care centres; Roads; Tank-based aquaculture; Veterinary hospitals; Water supply systems

27. Two further provisions of the LEP are potentially relevant. The first is cl 4.1, which sets the minimum allotment size for subdivision of land (including within the R5 zone):

4.1   Minimum subdivision lot size

(1)   The objectives of this clause are as follows—

(a)   to ensure that new subdivisions reflect existing lot sizes and patterns in the surrounding locality,

(b)   to ensure that lot sizes have a practical and efficient layout to meet intended use,

(c)   to ensure that lot sizes do not undermine the land’s capability to support rural development,

(d)   to prevent the fragmentation of rural lands,

(e)   to provide for a range of lot sizes reflecting the ability of services available to the area,

(f)   to encourage subdivision designs that promote a high level of pedestrian and cyclist connectivity and accommodate public transport vehicles.

(2)   This clause applies to a subdivision of any land shown on the Lot Size Map that requires development consent and that is carried out after the commencement of this Plan.

(3)   The size of any lot resulting from a subdivision of land to which this clause applies is not to be less than the minimum size shown on the Lot Size Map in relation to that land. …

28. The relevant sheet of the Minimum Lot Size Map to the LEP as at the date of the compulsory acquisition prescribes a minimum allotment size for the land to be 2 ha. This is designed to ensure that there is adequate land area available for onsite sewerage treatment and disposal. There had been no change to this minimum allotment size as at the date of the hearing. Provision was, however, made to allow allotments of less than 2 ha provided that average lot size in any subdivision was at least 2 ha.

29. The LEP does not prescribe a maximum building height or maximum floor space ratio for the land.

30. The land is mapped by the Council as being substantially flood prone. The relevant extract from the Council’s Flood Planning Map FLD_0007 (taken from the maps incorporated into the LEP) appears below:

31. Flood Planning Map commenced on 24 February 2012, and has not been amended. The area of the land to the west of the blue marked flood planning area on Flood Planning Map appears to be approximately 3.6 ha, or 20% of the land, predominantly to the west of the Creek. It is subject to the flood planning provisions of cl 7.2 of the LEP.

32. Clause 7.2 of the LEP requires the flood impacts and risks to be considered, with any development to be compatible with flood hazard and to not significantly affect flood behaviour on any other land:

7.2   Flood planning

(1)   The objectives of this clause are as follows—

(a)   to minimise the flood risk to life and property associated with the use of land,

(b)   to allow development on land that is compatible with the land’s flood hazard, taking into account projected changes as a result of climate change,

(c)   to avoid significant adverse impacts on flood behaviour and the environment.

(2)   This clause applies to—

(a)   land identified as “Flood planning area” on the Flood Planning Map, and

(b)   other land at or below the flood planning level.

(3)   Development consent must not be granted to development on land to which this clause applies unless the consent authority is satisfied that the development—

(a)   is compatible with the flood hazard of the land, and

(b)   is not likely to significantly adversely affect flood behaviour resulting in detrimental increases in the potential flood affectation of other development or properties, and

(c)   incorporates appropriate measures to manage risk to life from flood, and

(d)   is not likely to significantly adversely affect the environment or cause avoidable erosion, siltation, destruction of riparian vegetation or a reduction in the stability of river banks or watercourses, and

(e)   is not likely to result in unsustainable social and economic costs to the community as a consequence of flooding.

…

(5)   In this clause—

flood planning level means the level of a 1:100 ARI (average recurrent interval) flood event plus 0.5 metre freeboard.

The DCP

33. Any possible hypothetical development on the land as at the date of its acquisition must be considered by also having regard to relevant elements of the Orange Development Control Plan 2004 (“the DCP”).

34. Part 6 of the DCP provides certain development controls for development in rural areas including the R5 zone. Relevantly, a minimum front building setback of 4.5 m applies to urban residential development in new estates, however, there is no prescribed minimum front setback for dwellings in the R5 zone.

35. In 2018, the land was mapped as flood affected by the Blackmans Swamp Creek and Ploughmans Creek Flood Planning Study (“the Flood Planning Study”).

36. It is also to be noted that a series of marked up aerial photos extracted from the Flood Planning Study have now been incorporated into Chapter 4A of the DCP. Sheet 4 of the Flood Planning Study is an aerial photograph depicting the land and the extent of the potential flooding for the land:

The Town Planning Evidence

37. Kudrynski did not rely on any expert town planning evidence.

38. The Council relied upon expert town planning evidence from Nick Juradowitch contained in a report dated July 2021.

39. According to Juradowitch, under the R5 zone the highest and best use of the land, ignoring the public purpose, is for a rural residential subdivision.

40. However, Juradowitch identified a number of site development constraints which, in my opinion, materially affect the assessment of the development potential of the land. These are:

1. flooding: the land is affected by flooding from the creek extending north through the centre of the land. A flood study conducted by Lyall and Associates in 2019 identified that 54% of the land (or 41,344 m²) was impacted by a 1:100 year flood level. The peak maximum flood level extends across the whole of the western portion of the land and along the eastern side of the creek;

2. easements: there is an easement for a transmission line 30.5 m wide through the middle of the land from south to north. There is also an adjoining 1.2 m wide easement to the west for sewerage;

3. topography: the areas to the west of the creek is low lying and poorly drained and would require fill to provide dwelling sites. The filling would require the provision of compensatory flood storage elsewhere on the land. The creek is a significant development constraint in terms of vehicle access to the eastern portion of the land;

4. riparian corridor: a landscaped riparian corridor of at least 20 to 30 m wide along the creek would have to be included in any development of the land;

5. traffic noise: the northern boundary of the land would be impacted by traffic noise, especially along the portion adjoining the Northern Distributor Rd. This may require noise attenuation or masonry fencing along the northern boundary; and

6. asbestos: the land is classified as having a medium risk for naturally occurring asbestos. If asbestos was found it would be necessary to prepare a site specific asbestos management plan which would generally require its removal, relocation, and/or the burying of the asbestos.

41. Having regard to the zoning of the land and the constraints referred to above, Juradowitch opines that although the land has an area that is 5% less than the minimum area that would allow a four lot rural-residential subdivision (8 ha), it is likely that Kudrynski would be granted consent for a four lot subdivision if a request pursuant to cl 4.6 of the LEP was made as an exception to the development standard. This is because the land is located 2 km from the Orange CBD, is adjoined by urban residential development on two sides, and can be connected to a reticulated water and sewage service.

42. In his view, a four lot subdivision would involve the area west of the creek being divided into two 2.5 ha allotments and the area to the east of the creek subdivided into two 1.3 ha lots. A bridge over the creek would have to be constructed along with a driveway extension with access to Jilba St, or alternatively, an existing allotment in Amaroo Cres would have to be purchased to provide driveway access to Ameroo Cres for the two eastern lots.

43. Any subdivision would, however, be attended by development costs associated with the connection of services, vehicle access, land filling and developer contributions. These costs would determine whether a three or four lot rural-residential subdivision would be preferred.

44. In relation to the potential for the land to be used for water harvesting, Juradowitch observed that:

50.   The landowner has flagged potential for the land to be used for water harvesting, with water sold to the Council to supplement the existing town water supply. Water supply systems are a permissible land use in the $5 Zone. However, in assessing the value of the land it is necessary to set aside the public purpose – namely stormwater drainage harvesting for the purpose of water supply. This may mean that it may not be possible to consider water harvesting as a potential use of the land for assessing development potential and land value pursuant to the Just Terms legislation.

51.   In the event it is determined that it is possible to consider the potential use of the site for stormwater harvesting, it is clearly evident the subject land is suitable for this purpose, as it adjoins a watercourse that carries stormwater flows from the urban area of Orange and harvested water can be discharged to the Council’s water storage for subsequent distribution into the reticulated urban water supply of orange.

52.   Council’s stormwater harvesting project does not appear to be designed as a profit-making venture. The costs of the scheme have been met in part by grants and the balance of establishment costs and subsequent running costs would be covered from water charges to consumers. This may make it difficult to assess land value based on return on capital if no profits are earned.

53.   Orange’s stormwater harvesting project is an innovative scheme and I am advised that to date there are no similar schemes, at least in NSW, if not Australia. Accordingly, it is not possible to identify directly comparative land parcels that have been purchased for stormwater harvesting. In this case it might be possible to identify other land parcels in Orange with similar characteristics to the subject land that would make them suitable for urban stormwater harvesting. Identification of sales of such land could then be used to assess the value of the subject land as a potential site for stormwater harvesting, to determine if this potential use is the highest and best use of the subject land, compared to other permitted uses.

45. Juradowitch consequently concluded that:

84.   Absent the public purpose, the minimum development potential of the subject land was for construction of a single dwelling house. The R5 Zone also allows a range of other uses, such as schools, places of public worship, animal boarding establishments, childcare centres and veterinary hospitals, which could be established on the site, in addition to a dwelling house.

46. Juradowitch was cross-examined by Julius Kudrynski. Much of the cross-examination comprised questions that Juradowitch, as a town planner, was not qualified to answer (because he had, as he stated, no expertise in valuation, engineering or hydrology), in an attempt to establish that the stormwater harvesting project proposed by the Council was not feasible. The evidence was also not relevant to the issues that the Court was required to determine in assessing compensation for the acquisition of the land.

47. Otherwise, the questioning revealed that:

1. Juradowitch took into account the floodplain in his evidence (T14:20-21);

2. flood prone land was not as valuable as flood free land (T20:39-40);

3. the easements for the transmission lines and sewerage were a constraint on the land for the purpose of any development (T22:07-12);

4. with the excavation for, and construction of, the lake and wetland (as part of the public purpose), the only other potential use of the land would be as parkland recreation space (T27:17-28);

5. living alongside a distributor road, such as the Northern Distributor, was considered to be really detrimental but could be achieved if there is a couple of hundred meters by way of buffer (T27:34-39). The noise could be attenuated with barriers (T28:25-29);

6. it was extremely difficult to get approval to develop land that was subject to 1:100 year flooding and the Council would be unlikely to rezone it to R2 low density residential (T28:32-35). It may, however, be possible to get the eastern portion of the land rezoned to R2 because it was not flood prone for the purpose of residential lots (T31:24-25). Likewise, the land along Jilba St (T31:31-33), where up to ten houses could be accommodated (T31:43);

7. if the eastern portion of the land was rezoned to R2, Juradowitch estimated that he could get 30 standard suburban residential lots on the land rather one large lot permissible on the current zoning (T34:29-31); and

8. a road and bridge could be constructed from Jilba St, but the road would need to be constructed to accommodate a 1:100 year flood (T30:21-24). Alternatively, a developer could negotiate to purchase a vacant block to build the required road access (T35:28-32). Juradowitch was not aware of any road reserve that could serve this purpose (T35:37-43).

The Valuation Evidence

Kudrynski’s Evidence

48. Kudrynski initially sought to rely upon two reports:

1. first, a valuation report by registered valuer Mark Hyslop, dated 10 June 2020 (“the Hyslop report”); and

2. second, a report entitled Comparative Analysis Summary 280-284 Phillip Street, Orange NSW 2800 by Nigel Strutt from PRD nationwide, dated 23 October 2012 (“the Strutt report”).

49. The Hyslop report was later withdrawn by Kudrynski. This occurred despite repeated warnings from the Court that if he took this course of action he would have no valuation evidence by a registered valuer before the Court (T96:34-97:08).

50. The Strutt report was admitted into evidence as a matter of fairness to Kudrynski notwithstanding that the report was not authored by a registered valuer, was prepared in 2012 (that is, eight years prior to the acquisition of the land) and generally did not accord with the provisions contained in Pt 31 and Sch 7 of the Uniform Civil Procedure Rules 2005 (“UCPR”). In so permitting, the Court was mindful of the content of s 38 of the Land and Environment Court Act 1979 (“the LEC Act”) and the fact that Kudrynski was not legally represented.

51. The author of the Strutt report was not required for cross-examination by the Council.

52. For the reasons explained earlier, the Strutt report was accorded very limited weight. In addition to the deficiencies identified above, no adjustments have been made to the sales, which is a fundamental requirement of any evidence based upon the application of a comparable sales analysis (Marroun v Roads and Maritime Services [2012] NSWLEC 199 at [196]- [208]).

53. In any event, the valuation arrived at for the land contained in the Strutt report was $540,000 to $560,000, which does not assist Kudrynski in light of the Council’s calculation of the compensation payable to her, namely, $560,000.

54. Kudrynski also relied upon the oral evidence of Timothy Waddell, the Chief Executive Officer at the Council, whom Kudrynski had subpoenaed to give evidence.

55. Waddell was not, as he repeatedly emphasised, an engineer, and therefore, could not answer many of the questions posed to him by Julius Kudrynski about the stormwater harvesting project.

56. Relevantly, Waddell stated that:

1. no grant monies received by the State government for the supply of water infrastructure were permitted to be used to acquire the land (T44:10-15, 50:34-51:35 and 65:35-50);

2. the stormwater harvesting scheme was one of many such schemes that the Council had initiated (T58:05-38);

3. the land did not have inherent value for housing because it “is a flood area” (T63:30-31);

4. the land was acquired on the basis that “the bulk of” it was needed for the stormwater harvesting project, whether for access, the harvesting basin itself, or other associated harvesting functions (T66:11-15). The Council had no plans to use the land for any other purpose (T66:42-43); and

5. the stormwater that the Council had, as at the date of the hearing, harvested from the land was minimal insofar as it originated from the Blackmans catchment harvested under a different stormwater harvesting scheme (T79:17-36).

57. After Waddell had been excused, on the second day of the hearing an application was made by Kudrynski to recall him in order to question him to the effect that the resumption of land “should never have taken place in the first place” (T83:20), a proposition based specifically upon “the pump readings in the pump in the pump room” (T92:47-93:16). The application for Wardell to be recalled to give oral evidence on this topic was refused and instead a question was posed to Waddell in writing. His response of “I don’t know” was communicated by way of written instructions to the Council’s legal representative, which was subsequently admitted into evidence without objection (T95:25).

The Council’s Evidence

58. The Council relied upon the expert valuation report of Geoff McGuirk, dated 11 August 2021 (“McGuirk report”). In the McGuirk report McGuirk considered two bases for the assessment of the market value of the acquired land:

1. first, by way of the comparison of sales of land with similar zoning that presented an opportunity for rural-residential subdivision as well as the sale of subdivided rural-residential allotments, with a focus on lots that were subject to constraints such as flooding; and

2. second, a hypothetical development exercise having regard to the town planning advice that the highest and best use of the land was for rural-residential subdivision, testing a range of scenarios to determine whether or not there was a residual value higher than the value determined by the comparable sales methodology.

59. The Council accepted that the higher of either value would be the price agreed to between the parties to the hypothetical s 56 sale.

60. In relation to the first valuation basis, McGuirk noted that there was limited sales evidence of land suitable for multiple lot subdivisions comprising 2 ha allotments. He analysed 10 sales, the most comparable of which, in his opinion, was at 10 Narambla Dr, Clifton Grove on 22 May 2020. Before adjustments it derived a rate of $11.82 per m². After appropriate adjustments the sale derived a rate of $6.00 per m². The sale was considered superior on a direct comparison basis having regard to multiple street frontages, no flood affectation, no easements, no proximity to public housing (his analysis disclosed that the closer the proximity to public housing the greater the discount in the value of the land) and no land locked area. This resulted in a market value for the land of $456,360.

61. In respect of the second valuation basis, McGuirk undertook a series of two, three and four lot hypothetical subdivisions for the purpose of obtaining a residual value of the land.

62. He further opined that the costs of purchasing property off Amaroo Cres would be the most cost-effective approach of gaining access to the eastern portion of the land. The alternative option of building a bridge would require access from Jilba St to be above the flood level and have to be sufficiently elevated in order to not impede flood flow from the Council owned land onto the land. In addition, construction would be complicated by the need to extend across the easements. Put simply, it would be very expensive.

63. Therefore, assuming the purchase of a single lot in Amaroo Cres, McGuirk adopted a position which assumed a planning proposal approved within three years from the date of purchase/acquisition, with the developer incurring holding charges and interest on both the parent allotment and the purchased dwelling until consent was granted. He allowed a further period of 12 months to finalise approvals and to allow civil work to be completed in all scenarios. Finally, he allowed what he considered to be an appropriate cost for obtaining all necessary reports for the Council and the cost of the subdivision.

59. For planning proposals that assumed an R5 zoning with a combination of 8,000 m² and 4,000 m² allotments and an option of 7,000 m² rural-residential and 4,000 m² residential allotments, McGuirk allowed a 40% profit and risk factor.

60. McGuirk summarised his analysis as follows:

15.1   Hypothetical Development Summary

As previously noted, all options have been subject to an Estate Master hypothetical subdivision exercise. The highest and best use is represented by the highest residual land value after having regard to anticipated income from lot sales as well as development costs, timelines, and holding charges. A summary of the results of the hypothetical subdivision are set out in the table below. The highest and best use is represented by Option 3 which is highlighted in bold. A more detailed breakdown of the approach to subdivision costs, income and timelines of Option 3 is provided.

Development Scenario	Block Yield	Adopted Profit & Risk Factor	Development Period	Residual Land Value
Option 1 3 lot rural residential subdivision off Jilba St	3	15	15 months	$535,000
Option 2 3 lot rural residential subdivision with Amaroo Cr Acess	3	15	15 months	$405,000
Option 3 4 lot rural residential subdivision off Jilba St	4	17.5	15 months	$560,000
Option 4 4 lot rural residential subdivision with Amaroo Cr Access	4	17.5	15 months	$505,000
Option 5 2 Year Delayed Rezoning 6 x 8,000 m2 and 5 x 4,000 m2 rural residential lots	11	30	51 months	$375,000
Option 6 5 Year Delayed Rezoning 6 x 8,000 m2 and 5 x 4,000 m2 rural residential lots	11	30	87 months	$345,000
Option 7 2 Year Delayed Rezoning 6 x 8,000 m2 rural residential lots and \ 30 x 700 m2 lots	36	30	51 months	$480,000
Option 8 5 Year Delayed Rezoning 6 x 8,000 m2 rural residential lots and \ 30 x 700 m2 lots	36	30	87 months	$435,000

66. Accordingly, it was his view that based on the hypothetical maximum of a four lot subdivision, the land had a residual value of $560,000. Therefore this was the highest and best use of the land.

67. McGuirk was cross-examined by Kudrynski. He gave the following oral evidence:

1. his valuation was based on the value of land as at the date of the acquisition (T123:23) and disregarded the public purpose, that is, the stormwater harvesting project (T99:49-100:03 and 106:21-27);

2. it also took into account the sewerage and electricity lines and the fact that Jilba St was a partially bitumen sealed road located adjacent to the land (T100:22-25);

3. buying a property in Amaroo Cres was the least expensive method of gaining access to the eastern side of the land (T101:10-14). It was for this reason that he did not calculate the cost of constructing a bridge (T105:28-39);

4. an existing spare block of land in Amaroo Cres had not been set aside by the Council but was owned by the State government (T101:33-35);

5. in respect of the possibility of a 30 block subdivision, McGuirk opined that (T104:37-105:08 and at 137:14-33):

Q.   So, there is no provision in the costing for a 30 block subdivision off Amaroo Place?

A.   I did do - one of my hypothetical development did seek to mirror the costs of doing a subdivision, but obviously when you're doing those style of subdivisions you have a lot of extra costs and there's a lot of extra risk because in this case the land is not zoned for a residential subdivision and there's no indication that council would favourably look upon it until such time as a re - new LEP was undertaken, which is some years in future.

Q.   So, that offer really is not on the table?

A.   It's on the table in - to the point whereby a potential purchaser of the land, wanting to carry out a future subdivision, would bear all the risk and the interest, interest that they incur on buying the property for a number of years until such time as they can make application to the council and council goes through its rezoning processes and even then they would not be assured of council's position in respect of the rezoning. So it's a high risk venture.

HER HONOUR

Q.   Mr McGuirk, is your evidence then to the Court that, to use Mr Kudrynski's words, it's not an option that's really on the table now?

A.   For a developer, no.

…

Q.   So, having made all these considerations and calculations, you don’t have a rough value of the land of that 30 blocks of land?

A.   Well, the highest and best use that I have of the land was generated by considering a four rural residential subdivision. That approach to value meant that somebody purchasing the property could come into council, could come into ownership. They could go to council and seek a minor variation of the minimum lot size. The current land size makes the land suitable for three lots. However, Mr Juradowitch argues that because of the proximity of your land area to eight hectares, that there would be reason to consider a four lot subdivision as suitable and that would, the reasons for that would be the proximity to the, to the centre of town.

So, he considers that on the basis that your land is close to an established residential area, that council would support a variation to the subdivision standard, to allow a four lot subdivision. Now a four lot subdivision for rural residential purposes with each block having frontage to Jilba Street, would incur minimum risk and minimum subdivision costs. Therefore, you would be able to get approval for the subdivision, carry out the works, get the, get the subdivision registered and the land sold in the quickest time and that generates the best level of value.

…

6. the floodplain was considered in his valuation insofar as it limited the development potential of each of the subdivided allotments and that the Council would require that any future houses or rural-residential dwellings constructed on the land to be built clear of the floodplain area (T106:09-15). Furthermore, flood affected land had the effect of decreasing, not increasing, its value (T107:18-36, 108:39-109:01 and 123:48-124:08);

7. 54% of the land was flood affected by a 1:100 year flood level (T109:06-07);

8. Kudrynski required a water licence to extract water from the land (T112:50-113:01). There was no development approval or licence to extract water from the creek at the time that he valued the land. The fact that the creek bisected the land did not mean that the land attracted a premium value (T146:49-147:10);

9. in terms of the analysed comparative sales, he tried to rely upon sales of land which had levels of affectation similar to the land (T115:25-33);

10. the land was neither comparable to sale 8 (at Kirkwood Place) nor the sales in Clifton Grove, none of which were in close proximity to a public housing estate (T118:18-39);

11. proximity to a public housing estate had a tendency to depress property value: “it’s the lower end of the market for residential properties” (T132:47-133:03);

12. the overall outlook of any subdivided lots was not, contrary to Julius Kudrynski’s belief, “favourable” or “very favourable”, but “quite average”, especially given that the northern aspect of the land overlooked the Northern Distributor Rd and an industrial estate (T121:37-122:21); and

13. in respect of the sale at 3 Emily Place, McGuirk was of the opinion that the sale was of superior quality to the land (T133:42-134:14):

A.   Okay on completion of subdivision I would point the closest on completion sale would be 3 Emily Place, Orange. Now that is close to yours, it is physically close to public housing estates, but it is surrounded by contemporary residential dwellings. It's part of a subdivision which was completed approximately five to six years ago and it is an attractive, highly set corner allotment. It does look over the Northern Distributor Road, but it is of, has good surrounding development and good appeal and I would consider it, on balance, to be slightly superior to that which would be envisaged to have been available at the date of valuation, if your land hadn’t already been subdivided into single allotments.

Q.   So, we wouldn’t be getting anywhere near 860,000?

A.   No, well you can see Mr Kudrynski one of the sales, I think it was sale 11, I’ll just go back and check. Sale ten at 30 Tarawell Crescent, was for what we call englobo residential land. That is, land which is suitable for subdivision and in addition to being already zoned for such purpose, that particular parcel was settled after subdivision had been approved by the council. So, the sale price reflected there was no risk to the developer. He knew exactly how many blocks he would get out of it and he did not have to wait a number of years for the subdivision to be considered for the rezoning application to be considered. So that was materially better than your land at the date of valuation and that analysed to a rate of 20,833 per approved block with the emphasis on approved.

Submissions of the Parties

Kudrynski’s Submissions

68. Kudrynski’s submissions may be summarised as follows:

1. first, the Council pumped water from the area without permission and for which he had received no compensation in respect of the water harvested from the land;

2. second, the land could be divided into 30 allotments;

3. third, provision had been made in the Council’s valuation for a $4 million dollar bridge to access the land, which ignored the fact that a road already existed for this purpose;

4. fourth, that it was “common knowledge” that the value of the land was $160 million (T153:18) having regard to the water to be harvested from the land.

5. fifth, the value of the land ought not be based upon the evidence of the Valuer-General “as nowhere in the proceedings we agreed to use that valuer” (T160:01-04);

6. sixth, McGuirk had valued his land based on sales that were not comparable by reason of their distance from the land and the fact that they did not have the capacity to store water on them. Moreover, the land had a favourable outlook over the wetland and the traffic noise would be minimal because the truck bypass was on flat ground;

7. seventh, the council could rezone the land, subdivide it and sell it for a profit;

8. eighth, because of the sloping contour of some of the land (it was located on a hillside), it could not be used for stormwater harvesting, or at the very least, not all of it could be used for this purpose;

9. nineth, the grant money from the State to the Council (approximately $5 million in two tranches, according to Waddell) for the stormwater harvesting project was either used to acquire the land or ought to have been used to acquire the land (this submission was not clear);

10. tenth, the valuation of the land should be conducted as if the land were a mine (presumably because water was being ‘mined’ from it);

11. eleventh, as the water recedes and during times of drought, the stormwater harvesting project will fail because no stormwater can be recovered; and

12. twelfth, the stormwater project was illegal, and therefore, the acquisition was illegal.

13. The Market Value of the Land is $560,000

69. Having regard to the evidence and submissions of the parties, I accept the market value ascribed to the land as calculated by the Council’s valuer, namely, $560,000, and not $160 million as claimed by Kudrynski.

70. My reasons for rejecting Julius Kudrynski’s submissions are as follows:

1. first, as explained to Julius Kudrynski, the Court cannot have regard to the public purpose, that is, the reason why the land was acquired, namely, for the purpose of harvesting stormwater. The value of any stormwater harvest or to be harvested from the land must be ignored by the Court in assessing the market value of the land. Similarly, because the Court must ignore the public purpose, the feasibility of the stormwater harvesting project is not a matter that I can take into consideration in determining the compensation payable.

2. second, in any event, as Waddell stated in his oral evidence, the water coming onto the land did not comprise only rain or water from the creek on the land. It also included water emanating from upstream washing across the land. In other words, as Julius Kudrynski acknowledged, it was not all of Kudrynski’s water that would be harvested (T154:01-03);

3. third, as at the date of the acquisition, no water was being harvested or pumped from Kudrynski land. The stormwater harvesting projects in existence at that time were not located on the land;

4. fourth, there was no, or no cogent, evidence before the Court to support a valuation of the land of $160 million (T154:50-155:10);

5. fifth, the Court did not have regard to the $450,000 valuation by the Valuer-General. Rather, the value arrived at by the Court is based upon the evidence adduced by the parties, in particular the PRD report, the Juradowitch report and the McGuirk report, and the cross-examination of the latter two witnesses and Waddell. Importantly, McGuirk did not base his valuation of the land on the Valuer-General’s determination;

6. sixth, for the reasons explained by McGuirk, which I accept, the land could not, particularly for reasons relating to zoning and the fact that the land was flood affected, be subdivided into 30 lots. Even if the land were able to be rezoned to accommodate a subdivision of that size, this would not occur in the foreseeable future;

7. seventh, nowhere was a $4 million dollar bridge proposed in any valuation calculation. On the contrary, access to Jilba St by way of a property purchased by the developer was part of the consideration highest and best use of the land as proposed by McGuirk;

8. eighth, McGuirk did not accept that the land had a favourable outlook for the reasons that he gave, which I accept;

9. nineth, the land was constrained by sewerage and electricity easements, traffic noise requiring attenuation, and its proximity to public housing. It was also flood affected. These constraints had the effect of depressing the value of the land, especially compared to the other sales that McGuirk analysed;

10. tenth, there was no evidence before the Court that the land had been acquired for anything other than the stated public purpose of stormwater harvesting in order to, as Waddell gave evidence of, drought-proof Orange. There was no evidence that the Council acquired the land to subdivide and sell it for a profit. Waddell’s evidence was to the contrary. Likewise, there was no evidence that the harvested water would be sold by the Council. Again, Waddell’s evidence was to the contrary;

11. eleventh, there was no evidence before the Court that the stormwater harvesting project was not technically possible or was unfeasible by reason on the topography of the land or otherwise. In any event, this was not a relevant consideration in determining the amount of compensation to be paid for the acquired land;

12. twelfth, Waddell’s evidence was emphatic, namely, that no part of the grant money from the State for the stormwater harvesting project could be used to acquire land;

13. thirteenth, the land was not zoned for mining purposes and could not be valued as such;

14. fourteenth, from a valuation perspective, as both McGuirk and Juradowitch indicated, there was no example that they could locate within Australia of where a private individual was harvesting stormwater and selling it to a local government entity such as the Council; and

15. fifteenth, as explained to Julius Kudrynski at the pre-trial directions on 3 March 2022, Class 3 of the Court’s jurisdiction to hear and determine claims for compensation does not extend to the judicial review of administrative decision made under the Just Terms Act (see s 20(2) of the LEC Act).

71. Furthermore, only limited weight (if any) can be placed on the Strutt report given that:

1. as noted above, it did not comply with the requirements for expert reports stipulated in Pt 31 and Sch 7 of the UCPR;

2. the sales evidence contained in it was almost 10 years old; and

3. no adjustments had been made to the sales relied upon.

72. This may be contrasted with the McGuirk report, which suffered from none of these fundamental deficiencies and which provided a sound and rational basis for the valuation figure that he arrived at. I found McGuirk to be a reliable witness.

73. Having provided no basis whatsoever for the claim that the land is worth $160 million, and having provided no other credible evidence or reason as to its asserted value, the Court has relied upon the evidence of Juradowitch and McGuirk to find that the value of compensation payable to Kudrynski for the compulsory acquisition of her land is $560,000.

74. Because no evidence of any disturbance or any other head of compensation was presented to the Court by Kudrynski, nothing more can be awarded to her.

Costs

75. The issue of costs was not argued before me, but having regard to the principles and authorities set out in UTSG Pty Ltd v Sydney Metro (No 6) [2020] NSWLEC 63 (at [403]-[407]), there is no basis not to order the Council to pay Kudrynski’s legal costs, if any, have been incurred given her legally unrepresented status.

Orders

76. The formal orders of the Court are therefore that:

1. the compensation payable to Kudrynski under the Just Terms Act for the acquired interest in the land at 280-284 Phillip St, Orange is $560,000;

2. the Council is to pay Kudrynski’s legal costs, if any, as agreed or assessed; and

3. the exhibits are to be returned.

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Decision last updated: 17 February 2023