Linda Harvey v Burwood Council

[1998] NSWLEC 98

Land and Environment Court

of New South Wales

CITATION:	Linda Harvey v. Burwood Council [1998] NSWLEC 98
PARTIES:	APPLICANT Linda Harvey RESPONDENT Burwood Council
FILE NUMBER(S):	30684 of 1991
CORAM:	Talbot J
KEY ISSUES:	:-
LEGISLATION CITED:	Public Works Act 1912 Environmental Planning and Assessment Act 1979 Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act William Chalmers v The Minister (Rath J 9 February 1978 25 The Valuer 228 at 230
CASES CITED:	Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196 apply.
DATES OF HEARING:	27 - 30/04/98, 01/05/98
DATE OF JUDGMENT:	05/11/1998
LEGAL REPRESENTATIVES:	APPLICANT Mr G De Souza (Agent) RESPONDENT Mr G George (Barrister) Forbes Smith & Co Solicitors

JUDGMENT:

By notice of resumption published in NSW Government Gazette on 17 February 1989, the respondent, Burwood Council, resumed Lot 11 Section 2 in DP 555 comprising twenty seven and a half perches (696.7 m2), known as 33 Russell Street, Strathfield for the purpose of providing, controlling and managing a public park in accordance with the reservation of the land for Open Space (Recreation) as authorised by s 348(1) of the Local Government Act 1919.

At the date of resumption the land was zoned "Open Space (Recreation) 1(a)" under the provisions of the Burwood planning scheme which was proclaimed on 6 April 1979.

The land surrounding the subject property to the north and the east is in the "Residential 2(c1)" zone, whereas the land adjoining to the west is a council park and at the date of resumption was zoned "Open Space (Recreation) 1(a)".

These class 3 proceedings have been commenced to determine the amount of compensation payable to the applicant as the dispossessed owner.

The land has a frontage of 15.24 metres to Russell Street and a depth of 45.72 metres.

A single storey detached brick cottage with outbuildings was erected on the land at the date of resumption.

On 7 May 1993 Bignold J made a determination of compensation in favour of the applicant. On 3 April 1995 the Court of Appeal allowed an appeal by the respondent council against the determination of Bignold J (CA 40269/93). The Court of Appeal set aside the judgment of this Court and ordered that the proceedings be returned to the Court for rehearing.

The Court has heard the matter de novo and now makes its determination based upon the evidence and submissions presented at the rehearing before me.

At the commencement of the hearing on 27 April 1998 leave was granted for the applicant's case to be conducted on her behalf by her husband, Mr G De Souza, acting as her agent. Mr De Souza is not a legal practitioner.

Although the council argued in the Court of Appeal that Bignold J had erred in law on several grounds, the Court of Appeal, in allowing the appeal, appears only to have addressed one ground which related to the conduct of the trial. I propose to proceed to determine the amount of compensation without relying upon the reasons published by Bignold J.

Town Planning

There is no issue between the parties that the zoning at the date of resumption for the purposes of assessing compensation should be set aside as a step in the resumption process. Both parties have assumed that the appropriate zoning for the purpose of assessing compensation is Residential 2(c1).

Section 116 of the Environmental Planning and Assessment Act 1979 (the EPA Act) was repealed by the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act). However, because the resumption took place prior to the commencement of the Just Terms Act, s 124 of the Public Works Act (as amended by s 536C of the Local Government Act 1919) continues to apply and, with it, s 116 of the EPA Act. Whether or not s 116 has effect, the principles enunciated by the High Court in Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196 apply.

The only expert town planning evidence presented to the Court was by Wayne Boyle, who is employed as a consultant to the respondent council.

In Mr Boyle's opinion, the four most reasonably viable options in terms of highest and best use of the land permissible in the Residential 2(c1) zone in order of what he termed "economic preference" are:-

1. Two storey residential flat development containing four two bedroom dwellings and ground level parking;

2. Dual occupancy development;

3. Open space; and

4. Professional consulting rooms.

Ultimately Mr Boyle concluded that the best option was four two bedroom units on the basis that there was no opportunity for amalgamation with any adjoining site. He conceded that a density of six two bedroom units could have been achieved if an adjoining site had been available to a hypothetical developer purchaser. Mr Boyle considered that the existing development on the eastern side of the subject land precluded the opportunity for amalgamation with that adjoining property. Although he did not ignore the presence of the existing park to the west, he did not consider that it offered any opportunity for redevelopment in conjunction with the subject land. He regarded the park as a restriction on the opportunity to develop the subject land other than in isolation and then only after paying respect to the amenity of the park. However, the applicant's valuer, Mr Ron Aitken, considers the highest and best use of the land as at the date of resumption to be residential development for a block of six two bedroom uni

ts for the purpose of the valuation assessment.

He assessed the potential development for the site on two bases. Firstly, he considered development of the site in isolation and also as a site which could be amalgamated with an adjoining parcel of land. In the latter case, he thought it possible that a yield of more than the equivalent of six two bedroom flats might be obtained. In particular, he relied upon an approval by the respondent council for six medium flats on a site with an area of 706m2 at 2 and 2A Morwick Street, Strathfield, which is in close proximity to the subject property within the 2(c1) zone. It is submitted that the approval was forthcoming notwithstanding departures from the Residential Flat Code requirements. The approval to the two storey residential flat development at 2 and 2A Morwick Street was not granted until 8 November 1994, more than five years after the resumption.

Valuation Evidence

Neither the council's valuer, Mr Hubbard, nor the applicant's valuer, Mr Aitken, cavilled with the well established rule to prevent any alteration of the value of the land by the operation of any part of the machinery of the statutory scheme which gave rise to the resumption. However, where they differed in principle was that Mr Hubbard was not prepared to consider the adjoining land vested in council for the purposes of the park as being regarded as suitable for any purpose except a park, whereas Mr Aitken asserted that the adjoining land should also be regarded as being within the 2(c1) zone, with potential for amalgamation with the subject site. The authorities establish that the value of the land is to be assessed at the value the land would have had if the park, for which it is resumed, had never been contemplated (William Chalmers v The Minister (Rath J 9 February 1978 25 The Valuer 228 at 230).

It is appropriate, therefore, subject to evidentiary considerations, to disregard the change in zoning of the subject land and the adjoining land which forms part of the scheme. If the applicant can demonstrate that the alteration in value is a consequence not only of the change in zoning of the subject land, but also of the change in zoning of the adjoining land, the Court may determine the value of the subject land at the date of resumption as if the adjoining land was also in the 2(c1) zone. The factual dilemma for the Court is whether it may go further and infer that the adjoining land, forming the park or any part of it, would have been available for amalgamation with the subject site. As I have already said the land to the east of the subject land is fully developed with medium density housing and the same applies to the land across the northern boundary of the land. The Court is not able to assume that development on the land now forming part of the park would not already have been fully developed at t

he date of resumption any more than it is entitled to infer that the only improvements would have consisted of a single dwelling and its appurtenances, or that it was vacant.

Although Mr Hubbard proceeded on the incorrect premise that council's ownership of the adjoining property is independent of the resumption process for the acquisition of the subject property, it does not necessarily follow that the Court can assume that property had the potential for amalgamation with the subject site for the purpose of assessing compensation. Equally, it must be said that the potential for amalgamation with an adjoining property for unit development cannot be entirely discarded. The evidence of Mr Aitken is that the subject street was originally established as a residential flat locality in the late 1950's, well before the proposed scheme to establish a park was contemplated by the council. He says the original draft planning maps were prepared in the early to mid 1970's and the final draft was gazetted on 6 April 1979 but dated December 1988. The council's Residential Flat Code was adopted in February 1974.

The Court has been told that 41 Russell Street, Strathfield was resumed by the council on 10 June 1988 for the purposes of the park. There is no evidence of when council acquired the residue of the park, formerly known as Nos 35, 37 and 39 Russell Street. Unfortunately the Court has not been provided with any evidence regarding the nature of the improvements on Nos 35 - 39 Russell Street. There is no basis for the Court to determine that there was a potential for the subject land to be developed in conjunction with other land, assuming that none of the land was required for the purposes of the park.

I will therefore proceed to determine the compensation payable on the basis that the subject site at the date of resumption had a potential for development of medium density housing as a single site.

Mr Aitken attempted to demonstrate that a prudent purchaser developer would have expected to achieve a development comprising six two bedroom units by reference to the density achieved on other sites within the same zone and locality. He claims the most comparable to the subject land is a site at 8 Lyons Street, Strathfield which had the same area and boundary dimensions. A development for six townhouses comprising two levels over a semi basement car park for ten cars was approved on 26 March 1996. Notwithstanding the absence of any change to the zoning criteria in the meantime, an approval more than seven years after the date of resumption provides very little insight into the considerations the hypothetical purchaser would have taken into account at the relevant time. Further reliance is placed upon an approval for development at 13-15 Russell Street, Strathfield, which comprised an area of 554m2, in January 1994. This was a three level development, including a basement level, and comprised two three bedroo

m and two two bedroom units. The achievement of that level of development may have encouraged a prudent purchaser of the subject site to expect a higher yield on the subject site, but again the time differential is a relevant factor. The six two bedroom plus parking development which was approved for 2 and 2A Morwick Street, Strathfield in November 1994 is also for a site that might be treated in terms of development potential as having the same characteristics as the subject site. The development application was approved under delegated authority, exercising discretion under SEPP 1 in respect of a deficiency in landscaped area. The time factor again makes the relevance of this approval marginal, if any.

A property purchased at 29-29A Russell Street, Strathfield in June 1988 was subsequently developed by the addition of two two bedroom flats to an existing semi-detached building to provide a total of four two bedroom dwellings. Although this development site provides some indication of the potential to provide four two bedroom dwellings on a site approximately the size of the subject land, it is a sale complicated by the obvious value of the existing buildings which were retained.

Even though it may have been theoretically possible to have some expectation that a development comprising six two bedroom units might have been achieved at the date of resumption, the likelihood is that a prudent purchaser would not have paid any significant premium for this potential. There is no evidence of any contemporary approval that would have given support to any expectation. The obvious need to rely on a successful objection pursuant to SEPP 1 only heightened the risk.

The Court is of the opinion therefore that the prudent potential purchaser would have regarded the site as having a definite potential for the development of a two storey four two bedroom unit building with parking.

Mr Aitken places a high level of reliance on a transaction which was concluded on 10 June 1988 between the vendor and the council in respect of the property 41 Russell Street, Strathfield. This property was acquired after negotiation under threat of resumption for the purposes of the park. After making adjustments for the eight months before the resumption, when the transaction took place, and during which there was a significant rise in the market and also for an alleged lack of potential to develop the site in isolation, Mr Aitken derived a range for an adjusted value for each two bedroom flat site indicated by that sale of between $102,00 and $120,000. The Court is not prepared to rely on this transaction given that the area of the site is less than half the subject land and that it was not concluded in the open market between parties who fit the description of a willing buyer and a willing seller in an arm's length transaction.

A number of sales which took place in the middle part of 1988 were identified by both parties. The evidence is that the market moved significantly upwards during 1988 and 1989. Some statistical evidence was produced in an attempt to measure the extent of the market movement between mid 1988 and February 1989. The exercise is complicated and, in the Court's opinion, unreliable. It is also appropriate to rely on these sales unless no comparable sales are otherwise available.

Two sales were identified in February 1989. The property 44A Waimea Street, Burwood was sold on 15 February1989 for $185,000 with a potential development for two/three two bedroom units allowing 116m2 per unit. Mr Aitken placed no credence on this sale, although Mr Hubbard relied on it to show $665 per square metre or $77,000 per two bedroom unit site. The sale is not directly comparable because it is in the residential 2(c2) zone, the land area is only 278.2m2 and it is located in Burwood, adjacent to the main shopping centre and railway station. Mr Hubbard made no allowances for location, time and the superior density permitted in the zone. The Court has not been greatly assisted by this sale because of its distinguishing features.

The other sale in close proximity to the resumption date was a property 34 Park Avenue, Burwood on 18 February 1989. The land area was 670.5m2 and the zoning was the same as that applicable to the subject site. It was purchased by a developer who, at the time, was in the process of purchasing adjoining properties for unit development. Mr Hubbard considered the location to be far superior to the subject because it overlooked Burwood Park and is within walking distance to Burwood's Westfield Shopping Centre and Railway Station. Nevertheless, the Court observes that it is located in a busy traffic environment and that, in many respects, Russell Street has advantages of being a quieter area with the benefit of a superior address in Strathfield. According to Mr Hubbard, this sale shows $746 per square metre or $86,000 per unit site. The Court however agrees with Mr Aitken that some adjustment should be made in favour of the resumed property having regard to its superior location. The risk factors are comparable an

d no adjustment should be made for time. Mr Aitken suggested that the vendor was faced with pressure from two powerful next door neighbours and the prospect that the adjoining land would be developed, presumably leaving the property in isolation. The proof of this factor has not been established to a sufficient extent to persuade the Court to make any substantial adjustment in this respect. A drainage easement runs through the middle of 34 Park Avenue, and it has an irregular shape. The evidence is not clear as to whether it also had a frontage to Victoria Street. It is unlikely that the developer purchaser made any real allowance for the existence of the drainage easement, having regard to his intention to develop the adjoining land in conjunction with 34 Park Avenue. The Court adopts this sale but does not propose to make any adjustment, other than to recognise the superior location of the subject site and the remote prospect that a development of six two bedroom units might have been achieved. With an adju

stment which the Court considers to be appropriate, 34 Park Avenue reflects a market value for the subject site of $110,000 for each two bedroom unit site, which results in a derived value of $440,000.

The above derived value of $440,000 compares to the estimated value determined by Mr Hubbard on the basis that the subject land could have the potential, if amalgamated, for six two bedroom units at $462,000. This estimate is based upon an analysis of three sales upon which he relied, namely 44 Wentworth Road, Burwood; 44A Waimea Street, Burwood; and 34 Park Avenue, Burwood. He actually analysed 44A Waimea Street and 34 Park Avenue on a different basis to that undertaken by the Court. Mr Aitken had regard to 44 Wentworth Road as part of the sale of a larger site (2,169m2) with development approval in June 1989. Very little assistance is provided by that sale.

The property 44 Wentworth Road had been sold earlier in November 1988. It had a development potential of 5.5 two bedroom units. This showed $58,000 for each two bedroom unit site. Accepting that the market was improved at a significant rate between November 1988 and February 1989, and that the subject site is superior, this sale, at best, only reflects a market value of about $80,000 for each unit site achievable on the subject land. Apart from the remote possibility of achieving a six two bedroom development, it is clear that a developer purchaser would have allowed a discount for the higher density. Although the exercise undertaken by Mr Hubbard is not sufficiently convincing for the Court to adopt it, nevertheless his indication of the value of the site with a potential for six two bedroom units provides some corroboration to the value derived by the Court.

After allowing the dispossessed owner the benefit of any doubt, the Court determines that the market value of 33 Russell Street, Strathfield on 17 February 1989 was $450,000.

In addition the applicant is entitled to reimbursement for stamp duty and legal expenses incurred on the purchase of a property of equivalent value, together with statutory interest payable in accordance with s 126A of the Public Works Act 1912.

Prima facie the applicant is entitled to an order for payment of her costs and valuation fees associated with the resumption and these proceedings. Having regard to the tortured history of the litigation, it is appropriate for the question of costs to be reserved.

Compensation is to be paid within one month in accordance with s 126 of the Public Works Act which continues to apply pursuant to Sch 3 - Savings and Transitional and Other Provisions (Part 2) to the Land Acquisition (Just Terms Compensation) Act 1991.

Orders

The Court makes the following orders:

1. The market value of 33 Russell Street, Strathfield at the date of resumption on 17 February 1989 is determined at $450,000.

2. The applicant is entitled to be paid compensation for legal costs and stamp duty payable on the acquisition of a replacement property for a purchase price of $450,000.

3. The applicant is entitled to payment of interest calculated on the total amount of compensation determined pursuant to Orders 1 and 2 in accordance with s 126A of the Public Works Act 1912.

4. Costs reserved.

5. The exhibits may be returned.

6. Any application for an order for costs is set down before the Registrar on 19 May 1998 at 9.00am.