Melwood Units Pty Ltd v Commissioner of Main Roads

[1978] HCA 28

HIGH COURT OF AUSTRALIA

Gibbs A.C.J., Stephen, Jacobs, Murphy and Aickin JJ.

HOUSING COMMISSION OF N.S.W. v. SAN SEBASTIAN PTY. LTD.

(1978) 140 CLR 196

25 July 1978

Resumption

Resumption—Land—Compensation—Assessment—Land resumed for public housing scheme—Value affected by purpose of resumption—Purpose reflected in land use zoning—Compensation required to be assessed without regard to alteration to value arising from establishment of public works upon or for &hich land resumed—Whether account to be taken of zoning—Whether to be disregarded in assessing compensation—Public Works Act, 1921 (N.S.W.), s. 124.

Decisions

July 25.
The following written judgments were delivered: -
GIBBS A.C.J. I have had the advantage of reading the reasons prepared by my brother Jacobs and am in agreement with them. (at p198)

STEPHEN J. I would, for the reasons stated by Jacobs J., vary the answer given to question (a) (ii) and otherwise dismiss this appeal. (at p198)

JACOBS J. This is an appeal by the Housing Commission of New South Wales against the decision of the New South Wales Court of Appeal on a case stated by the Land and Valuation Court (Waddell J.) pursuant to s. 17 of the Land and Valuation Court Act, (N.S.W.) 1921. The question for the latter Court was the amount of compensation payable to the respondent San Sebastian Pty. Ltd. pursuant to s. 124 of the Public Works Act, 1912 (N.S.W.) on the resumption of its lands in Woolloomooloo. The case stated was as follows:
"1. During the period December 1969 to August 1970 the plaintiff purchased land known as 22-36 Nicholson Street, Woolloomooloo. That land is hereinafter referred to as 'the resumed land'.
2. During the period May to July 1971 the plaintiff purchased adjoining land known as 4-10 and 16-18 Bourke Street. That land is hereinafter referred to as 'the other land'. 3. The plaintiff was induced to purchase both the resumed land and the other land by the provisions of a proposal for the redevelopment of Woolloomooloo prepared by the State Planning Authority at the request of the Sydney City Council known as the Woolloomooloo Redevelopment Study which was adopted by the Council and exhibited at the Town Hall in 1969. 4. At the time of purchase the resumed land was zoned county centre under the County of Cumberland Planning Scheme Ordinance except for a small portion which was reserved for 'county road'. 5. A subsidiary pamphlet to the Woolloomooloo Redevelopment Study was issued by the Sydney City Council entitled 'Development Control Proposals' which recommended density standards for the Woolloomooloo area. 6. In 1970 Sydney City Council began preparation of the City of Sydney Strategic Plan, 1971 which was adopted by the Council on 20th July 1971. 7. On 16th July 1971, the City of Sydney Planning Scheme was prescribed. The resumed land was zoned county centre under that scheme. The ordinance provides that in such a zone land may be used and buildings may be erected, with the consent of the Council, for any purpose other than 'caravan parks; extractive industries; gas holders; generating works; institutions; mines; offensive or hazardous industries, saw mills.' (See the table to cl. 23 of the said scheme.) 8. The strategic plan said in regard to the Woolloomooloo area including the resumed land: 'For the future economic well-being of the City as a whole, the valley of the 'Loo, excluding the Boulevarde frontages of the William Street precinct, should be re-established as much as possible in predominantly residential uses. Hotels, shops, restaurants, entertainment and office uses will line William Street. Offices and institutional uses may predominate between the Domain and the Eastern Distributor'. This proposal for predominantly residential uses arose quite independently of any proposal for public acquisition of land in the area for such uses. 9. On 16th December 1971, the Council adopted a development control and floor space ratio code for the City which stated among its polices: (a) 'Concentrate the highest density of commercial life in the Central Spine District between Circular Quay and Central Railway' (cl. 1 (2B)). (b) 'The Woolloomooloo precinct within which council will administer development control in the light of the Woolloomooloo study prepared in 1969 by the professional staff of the State Planning Authority of New South Wales' (cl. 8). (c) 'Exercise development control powers to encourage the preservation of selected groups of terrace houses in Paddington, Surry Hills and East Sydney and encourage mixed residential and commercial development in specified localities including Woolloomooloo, Kings Cross and Oxford Street Precincts' (Policy 9D). 10. In August 1972 the Commonwealth Parliamentary Standing Committee on Public Works recommended against redeveloping for the purpose of Commonwealth offices some five acres of land owned by the Commonwealth in the Woolloomooloo area. 11. After December 1972 negotiations commenced between the Federal Government, the New South Wales Government and the Sydney City Council concerning the redevelopment of the Woolloomooloo area for residential purposes which it was the policy of the Federal Government to bring about. These negotiations were apparently at officer level until December 1973 when there was a meeting between the Lord Mayor, the Australian Minister for Urban and Regional Development and the New South Wales Minister for Planning and Environment. At this meeting it was agreed that there existed an opportunity to review the existing situations and decisions which had arisen from the Woolloomooloo Redevelopment Study with a view to preparing a detailed action plan for the Woolloomooloo precinct. It was also agreed that the State and Australian Governments, being major land holders in Woolloomooloo, would also participate in the planning process in order that the resultant action plan would be implemented with agreement from all statutory authorities. During 1973 and 1974 work was carried out by the Council in consultation with the two Governments on an action plan for the Woolloomooloo precinct. 12. In early 1974 meetings were held with land-holders including Mr. Baker the managing director of the plaintiff company who might be affected by the resumption of their land so that government could explain the relevant proposals. 13. On 13th May 1974, three alternate proposed action plans for the Woolloomooloo area were placed on exhibition in order to obtain public comment. Under these plans the resumed land was, at the time of the meeting which Mr. Baker attended and subsequently during 1974, included in a proposed 'open space (maritime support facilities non-industrial)' zone lying to the north of Plunkett Street and intended to be an extension of the area of the Domain around to Garden Island. No action plan for Woolloomooloo was adopted by the Council but the work done on the proposed action plan was embodied in the interim development order referred to in par. 17 below. 14. There were further meetings at officer level during the year 1974 and at a meeting of the Lord Mayor and the Ministers on 1st November 1974, various decisions were made which embodied the following principles: 1. That selective acquisition in the Woolloomooloo Basin area was to be the means of implementing a housing scheme. 2. That other areas in Woolloomooloo would be residential with selected parts having a commercial content. 3. That the City Council would carry out the planning of the area, in consultation with the State and Australian Governments. 4. That an interim development order would be prepared, such order being the statutory means of implementation of the new proposals. 5. That the emphasis in Woolloomooloo was on residential development. 15. On 2nd December 1974, the Sydney City Council adopted the City of Sydney Strategic Plan, 1974-1977. In this plan it is stated: 'The three levels of Government have accepted the 1971 recommendation of the City of Sydney Strategic Plan, 1971 - "Woolloomooloo should be re-established as much as possible in predominantly residential uses"' (Policy 9, p. 43). 'Co-operative with relevant Government authorities to finance and develop new low-rent housing for people on low incomes, the aged and other groups with special needs, and seek priority for such projects in Woolloomooloo and Surry Hills'. (Policy 9D, p. 9). As to overall policy it is stated: 'Restrict the highest density to development to the Central Spine defined on the City Structure Diagram, between Circular Quay and Central Railway (bounded by Macquarie, Elizabeth and Chalmers Streets on the east and the Western Distributor, Kent and George Streets on the west) maximizing the use of public transport and walkways within the Spine, and conserving the surrounding precinct, for essential residential and service uses, including fringe parking spaces'. 16. On 25th June 1975, an agreement was signed between the Australian and New South Wales Governments in relation to the provision of financial assistance to the State for 'Urban Expansion and Redevelopment (Woolloomooloo).' The agreement which is expressed to be deemed to have operation from 1st July 1974, confirms the arrangements which had previously existed between the three levels of government in respect of the planning of the area and in particular that the defendant would be the constructing and managing authority for the area. Annexed to the agreement was a draft interim development order to be made by the State Government. Annexed hereto is a copy of the said agreement and draft interim development order (annexure 'A'). 17. By notification in the Government Gazette of 18th July 1975, the resumed land was resumed together with nearly all land in private ownership in the Woolloomooloo Basin north of the railway viaduct. At the date of resumption the only planning restrictions having statutory force or effect were those imposed by the City of Sydney Planning Scheme under which the resumed land was in a county centre zone. 18. By notification in the Government Gazette of 8th August 1975, the City of Sydney Planning Scheme was suspended in respect of land in the Woolloomooloo area and an interim development order (known as Interim Development Order No. 26) was made in the terms of the draft referred to above. Under this order the whole of the Woolloomooloo area is zoned for residential development except for the land having a frontage to William Street and land set aside for the Eastern Distributor. The resumed land was included within a residential (R1) zone which provided that development which may be carried out only with the consent of the Council includes 'commercial premises' and does not include 'a private hospital' which is prohibited. For practical purposes the only redevelopment potential of the resumed land under the said interim development order was 'residential'. The said order was still in force at the hearing of these proceedings. Annexed hereto is a true copy of the said interim development order (annexure 'B'). 19. Until mid-1973 development applications for the land in the Woolloomooloo Basin were considered on their merits by the City Council having regard to the City of Sydney Planning Scheme and the Woolloomooloo Redevelopment Study. After mid-1973 decisions on applications were mostly deferred pending the finalization of the proposed action plan. 20. On 12th January 1973, the plaintiff submitted a development application to the Council for approval to erect on the resumed land and the other land a surgical private hospital. The application was amended to reduce the size of the building by a plan submitted on 21st May 1973. 21. On 24th September the Council resolved to defer the application '(1) pending the outcome of a conference to be held between the Commonwealth Government, the State Planning Authority of New South Wales and the Council in respect of the future of the Woolloomooloo area, and (2) as approval of the application in its present form would be contrary to the aims and policies contained in Action Plan Priority 14A of the City of Sydney Strategic Plan and as the site is partly affected by road proposals in the Road Patterns Scheme for the Woolloomooloo area adopted by Council on 24th April 1972.' The plaintiffs appealed against the failure of the Council to give a decision on its application but by agreement between the parties the hearing of the appeal was adjourned from time to time to await clarification of the planning proposals of the Woolloomooloo area. 22. At the date of resumption the terms of the City of Sydney Planning Scheme and the Woolloomooloo Redevelopment Study would not, of themselves, have restricted some substantial redevelopment of the resumed land, although general planning considerations may have been against a hospital of the size proposed by the plaintiff. Had the Council considered the application having regard to the draft interim development order it would have been likely to refuse the application as not being for residential development. 23. The proposed zoning in the draft interim development order should be regarded as a step in the resumption process, that is, as a zoning for the works for which the resumed land has been resumed. The form of the draft interim development order was dictated by the inter-governmental contemplation that the defendant, as constructing and managing authority, would acquire the land to be developed for housing purposes. However, I found that the probability was that the resumed land, when resubjected to a prescribed scheme by a scheme varying the City of Sydney Planning Scheme, would be zoned in a manner similar to its proposed zoning under the draft interim development order. 24. I determined the compensation to which the plaintiff was entitled in the sum of $200,000, being the market value of the land at the date of resumption. In so determining the amount of compensation I accepted the evidence in that behalf which was given by the defendant's valuer, Mr. Moore. This evidence was to the effect that by reason of the planning restrictions and events referred to in pars. 3 to 16 (inclusive) above, and by reason also of certain other matters which are stated in par. 25 below, the market value of land in the Woolloomooloo Basin for redevelopment purposes at the date of resumption had been very considerably depressed and that therefore the market value of the land as at that date should be assessed upon the basis of its highest and best use, namely its existing use as let to residential and commercial tenants. Adopting the approach of capitalizing the rentals paid in respect of the resumed land Mr. Moore estimated the value thereof as being $186,000 which he rounded off at $200,000 to allow for the remote possibility that the plaintiff might have obtained approval for a private hospital. 25. Other factors upon which Mr. Moore relied as establishing that the resumed land had no potential for commercial office redevelopment since early to mid-1973 were: (a) the over supply of inner city office space; (b) the restrictions on overseas borrowing which were imposed in December 1972; (c) the rejection of the Commonwealth's proposed office complex in 1972; (d) the imposition of green bans by the Builders' Labourers' Federation in about February 1973. Mr. Moore also relied upon the failure of a number of developers in the area to implement development approvals which had been granted, certain sales or attempted sales, and the failure of the substantial office building known as Scandia House in Sir John Young Crescent, completed in mid-1973, to obtain by the date of the hearing either tenants or a purchaser." (at p203)

2. There then followed the questions of law asked on the case stated. I shall set them out together with the answers given in the New South Wales Court of Appeal:

"Question (a): Was I entitled to take into account, for any purpose relevant to the assessment of compensation: (i) The provisions of the agreement and the draft interim development order, or (ii) The various planning steps taken with a view to achieving predominantly residential use of the land in the Woolloomooloo area. Answer: (i) Yes, but only for the purpose of determining the extent to which they effected an alteration to the value of the resumed land. (ii) Yes, but in respect of any such planning step which was the act of the New South Wales Government or of the commission, or to which either was a party, and which was part of, or led to and was done in contemplation of, the decision to construct public housing which was the subject of the agreement of 25th June 1975, only for the purpose of determining the extent to which the step by itself or with other such steps, effected an alteration to the value of the resumed land. In respect of any other such planning step: Yes. (i) for the purpose of assessing value (ii) but insofar as it merely spread public knowledge of the proposed establishment then only for the purpose of determining the extent, if any, by which it effected an alteration in value. Question (b): Was I bound, as a matter of law, to assess the compensation to which the plaintiff is entitled upon the basis that the uses to which the resumed land might lawfully have been put at the date of resumption should be determined without any regard to the provisions of the said agreement and draft interim development order or to the various planning steps which were taken with a view to achieving predominantly residential use of the land in the Woolloomooloo area. Answer: See answers to question (a). "Question (c): Would I have been justified in law in concluding that the Local Government Appeals Tribunal, in determining the appeal from the Sydney City Council in respect of the development application submitted for redevelopment of the resumed land as a private surgical hospital, would not have been entitled to approve the application either immediately or after an intervening period sufficient to enable steps to be taken to resume the land if desired. Answer: No. Question (d): Was I justified in law in concluding that it would not have reflected a proper understanding of the importance of the agreement between the Commonwealth and the State referred to in par. 16 above (including the draft interim development order annexed thereto) if, on appeal from a refusal of the Sydney City Council in respect of the redevelopment of the resumed land for a private hospital, the Local Government Appeals Tribunal had granted an approval or indicated that it would do so, thus giving effect to the draft interim development order only by giving an opportunity for the land to be resumed. Answer: Having regard to the answers to questions (a) and (b), this question is not relevant. Question (e): Was I entitled, as a matter of law, to have regard to the provisions of the agreement and draft interim development order as a reason for rejecting the likelihood of development consent being given to the establishment of a private hospital on the resumed land. Answer: No. Question (f): Was I justified in law, when considering whether or not to have regard to the provisions of the draft interim development order, in having regard to the likelihood that the terms of the draft interim development order would not give rise to a claim for compensation for injurious affection in respect of the resumed land. Answer: No, except for the purpose of deciding whether an amount should be included in the assessment of compensation to offset the loss to the owners of any prospective claim for compensation for injurious affection. Question (g): Was I entitled in law to take into account a market value of the land which resulted from its affectation by the said agreement and draft interim development order.

Answer: No, except for the purpose of determining whether the agreement and draft interim development order effected any alteration in the value of the resumed land." (at p205)

3. In order to appreciate the significance of the answers to the questions given by the Court of Appeal it is necessary to go to s. 124 of the Public Works Act which, so far as is material, provides that the assessing tribunal shall assess the compensation according to what they find to have been the value of resumed lands at the time of publication of notification of the resumption without reference to any alteration in such value arising from the establishment of railway or other public works upon or for which such land was resumed. This provision states in statutory form a principle which had been developed in the cases independently of express statutory provision. See Pointe Gourde Quarrying and Transport Co. Ltd. v. Sub-Intendent of Crown Lands (1947) AC 565, at p 572 . (at p205)

4. A difficulty which arises in the application of this principle is that valuation is in the ordinary case based on market value and, if the proposed public purpose and the possibility or likelihood of resumption therefore has become known prior to the date of resumption, the market value at the time of resumption will probably reflect by way of increase or decrease the possibility or likelihood of resumption for that public purpose. Therefore that value cannot be accepted. Yet it is inevitably in most cases the starting point of the process of valuation. With the actual market value at the time of resumption as the starting point it is then necessary to determine whether that value has been depressed or elevated by the market's foreknowledge of the possible or likely public purpose and consequent resumption. It is therefore inevitable in such circumstances that the public purpose has to be taken into account in the process of valuation but it can be taken into account only for that purpose. It is hardly necessary to state that this difficulty explains the qualification which appears in the answers of the Court of Appeal to questions (a) (i) and (ii) and question (g). (at p206)

5. A greater difficulty in applying the principle of assessment which is enacted in s. 124 of the Public Works Act arises as a result of planning and land use legislation and the processes whereby statutory restrictions on land use are imposed. Restrictions on land use, so that, explicityly or practically, use is restricted to a use for a public purpose for which the land might be resumed, are commonly imposed as a result of consultation with or direction by the public authority concerned with the carrying out of the particular public purpose. In such a case where there is a direct relationship between the restriction on land use and the proposed establishment of the public works the effect on value of the zoning or restriction ought to be ignored. That was the position in Chapman v. The Minister (1966) 13 LGRA 1 . Unfortunately in that case the approach of the Land and Valuation Court and the form of the questions and the reasoning in the Court of Appeal (of which I was a member) tended to concentrate attention upon the provisions of the Local Government Act, 1919 (N.S.W.) regulating compensation for injurious affection of land as a result of planning schemes: s. 342AC. The result would not have been different by a direct application of the language of s. 124 of the Public Works Act. It may be convenient to approach the question of value through s. 342AC in some cases but the primary requirement, whether or not s. 342AC is appropriately applicable, is to have due regard to s. 124. (at p206)

6. There are, however, many situations where the relation between the zoning and the proposed public works is not as clear-cut as it was in Chapman v. The Minister (16). One can take an example away from the present case. Assume an area of land on the outskirts of existing settlement, and assume a planning authority concerned to designate land uses in a planning scheme. The land is designated open space. Thereafter it is resumed for the purpose of a public reserve. The fact that the land was zoned as open space may have depreciated its value. Does the resuming authority pay compensation at the depreciated value of open space or at some other value? The question cannot be correctly answered without knowing whether there was any connexion between the zoning as open space and the subsequent resumption. If the zoning was done with the intent or in anticipation that the land should be resumed for a purpose such as a public reserve or if the zoning was proposed or dictated by the resuming authority then s. 124 requires that the zoning be ignored. It is only a step in the process of subsequent resumption. But in other circumstances the resumption may be unconnected with the act of zoning. It may be that the resuming authority selects the land for resumption as a public reserve because it is zoned open space; if it does so it is doing no more than ensuring that it, as well as others, conforms to the planning scheme. In those circumstances there is no relevant relationship between the zoning and the public purpose. No public purpose, existing or anticipated, intended, or urged by the zoning authority, leads to the zoning; rather, the zoning leads to the public purpose and consequent resumption. (at p207)

7. There is added complexity when the planning scheme is only in course of preparation and the land is meanwhile subject to interim development control. Particularly in this situation the question may arise whether, irrespective of any public purpose existing or anticipated, the planning scheme would be likely to zone the lands in a way which in a general sense was related to the kind of purpose for which the land might be resumed. Thus a planning scheme may properly zone lands for open space and for the provision of facilities and amenities thought necessary for proper planning. At the stage of preparation of a planning scheme zoning for such purposes is a possibility which cannot be ignored. At the same time a particular designation in a proposed planning scheme which reflects an intended use for a public purpose must be ignored. (at p207)

8. That was the kind of situation with which this Court dealt in The Minister v. Stocks &Parkes Investments Pty. Ltd. (1972) 129 CLR 385 . The question was whether a site of 6 acres, part of an area of 231 acres subject to interim development control and held to be suitable and ready for residential development, should be valued upon the basis that it was subdivisible into residential allotments, or upon the basis that it was designated in proposed planning as a site for a school or upon some other basis. The evidence established that the school which was envisaged was a State primary school and that for some time prior to the resumption the Education Department had conducted investigations and decided that it required the land for a school site. This Court determined that it was necessary wholly to ignore any increase or decrease in value arising from the proposed establishment of that school on the subject site. At the same time it was made clear that the fact that the land was subject to interim development control was in the circumstances of that case relevant. The particular circumstances were that the land was part of a large area of land which was subject to interim development control and which, it could be readily seen, would only be allowed to be developed as a whole with proper provision for roads, open spaces and other amenities. Any development approvals would take account of the necessity of making all these provisions including the possible setting aside of a school site. It would therefore be incorrect to value the land as land all suitable for subdivision into residential allotments. Thus the proposal to establish the school on the particular site had to be ignored, but at the same time the possibility of the area or part of the area being designated open space or a school site had to be taken into account. The significant difference was between taking into account the fact that the site was proposed as a site for a State school and taking into account the possibility that in the ultimate planning the area or part of it might be designated open space or school site or some use other than subdivision into residential allotments. Certainly the Stocks &Parkes Case (1972) 129 CLR 385 did not hold that the purpose of acquisition had to be ignored but that nevertheless the land should be valued as a site which could because of the proposed zoning be used only for the purposes of a school. Such a view of the Stocks &Parkes Case is inconsistent with the following passage:
"Although, at the time of the acquisition of the subject land, there had been no formal change in its zoning and it was still subject to interim development control, the Council and the planning authority had approved the plan No. T.P. 172 which showed land in the situation of the subject land as a school site. For some time prior to the resumption of the land for the purposes of a school, the Education Department had conducted investigations and decided that it required the land as a school site. These facts could be ascertained by interested persons and would no doubt affect the price which the respondent might get for the land from a prospective purchaser. But in so far as any such alteration in value arose from the proposed establishment of the school on the land, it had, in accordance with s. 124 of the Public Works Act, 1912 (N.S.W.), to be disregarded. What that section required here was the assessment of the compensation to be paid for the taking of the land without regard to any alteration in its value because it was already known that the land was the site for a school. In so far as the designation of the school site on the plans of the respondent or in the provisions of the deed dated 29th March 1965, or in the draft planning scheme merely had the effect of spreading the knowledge that the land was to be a school site, s. 124 requires that any increase in value due to these matters should be disregarded." (at p209)

9. I take the words "a school site" where lastly used to refer to the site for a State school. The judgment continues: ". . . Furthermore, a reference in such plans, deed or planning scheme to the land as a school site, did not require that the land should be used for school purposes. Whether the land should be the site for a school depended upon the Education Department, regardless of what was shown in these plans and documents." (at p209)

10. Here again I take the reference to "school purposes" and to "a school" in the passage lastly quoted to refer to a State school. So read the passage is consistent with the statement (1972) 129 CLR, at p 393 that "evidence of the value of the land as a school site or as open space would be relevant although not, of course, decisive to the assessment of its value". There is then a consistency between the reasoning in the above-quoted passages and the following passage (1972) 129 CLR, at p 391 :

"At the date of the resumption, the land could not be used for the purpose of residence without the consent of the Council and there was no prospect of the Council giving such consent. Accordingly, if question (1) were to be answered it would have to be answered: No."

(Question (1) had asked whether the Court was obliged to determine compensation upon the assumption that the land could have been subdivided into residential allotments.) The particular words lastly quoted were used in stressing that the land should not be valued simply as if it were residential land. In the circumstances it was proper to take the proposed zoning of the land into account not because the site was intended for a public purpose but because the zoning was part of the overall planning of the area which did not envisage that the land would be used for residential subdivision. (at p210)

11. I return now to the present case. (at p210)

12. Waddell J. concluded that the so-called Stocks &Parkes Case (1972) 129 CLR 385 principle only applied if the zoning actual or intended would itself reflect the public purpose for which the land was resumed or a purpose for which compensation for injurious affection would be payable under s. 342AC of the Local Government Act. Although he was satisfied that the proposed zoning was a step in the resumption process, he made the further finding that the land when resubjected to a prescribed scheme would be zoned residential as it was under the interim development order. I repeat for convenience his findings of fact as they appear in par. 23 of the stated case:
"The proposed zoning in the draft interim development order should be regarded as a step in the resumption process, that is, as a zoning for the works for which the resumed land has been resumed. The form of the draft interim development order was dictated by the inter-governmental contemplation that the defendant, as constructing and managing authority, would acquire the land to be developed for housing purposes. However, I found that the probability was that the resumed land, when resubjected to a prescribed scheme by a scheme varying the City of Sydney Planning Scheme, would be zoned in a manner similar to its proposed zoning under the draft interim development order." (at p210)

13. He concluded that it was necessary to take the zoning under the interim development order into account. He stated:
". . . It seems to me that any principle favourable to the plaintiff which is to be regarded as stated by or deducible from the decision in the Stocks &Parkes Case must be regarded as limited to a draft zoning which, if it were in a prescribed scheme, would be capable of creating a claim for compensation for injurious affection. If there were no such limitation cases could arise in which, if the draft zoning were to be disregarded in assessing compensation for resumption, the effect would be to include in such compensation an amount which should be regarded as compensation for injurious affection which would not have been recoverable had the zoning been a provision of a prescribed scheme.
Thus, in the present case it is unlikely that, when the zoning of the area as residential is included in a variation of the City of Sydney Planning Scheme, that scheme will specify, for the purpose of s. 342AC (2) (h) that such a zoning be a zoning for a public purpose. The circumstances of this case are to be contrasted with those in Chapman's Case (1966) 13 LGRA 1 where it was held that upon the probabilities the zoning of the resumed land under a draft planning scheme as Electricity Commission would be corrected in the scheme as finally prescribed so as to ensure that it would be specified as a public purpose. Accordingly, in the present case, to disregard the zoning of the resumed land contained in the draft interim development order would be to include in the compensation for resumption an element of compensation for injurious affection, no right to which is likely ever to have arisen had the land not been resumed. To do so would be contrary to the general scheme of Pt XIIA of the Local Government Act relating to town planning which is that any depreciation in the value of land caused by or under the provisions of a town planning scheme should be borne by the owner unless there is a claim for compensation for injurious affection." (at p211)

14. With respect I do not think the principle established by the Stocks &Parkes Case can be limited in this way. The decision does not depend upon the availability of compensation for injurious affection under s. 342AC of the Local Government Act. Rather, attention was directed to s. 124 of the Public Works Act. (at p211)

15. In the present case the mere fact that the land was likely to be zoned residential in the City of Sydney Planning Scheme when ultimately varied was not of itself a determining factor. The important factor was what would have led up to such a variation of the Planning Scheme. If independently of the proposed resumption for the purpose of public housing the land was found likely in the varied scheme to have been zoned residential in terms of the interim development order, that would have been a most important finding affecting the value of the land for purposes of a private hospital. But that was not the finding. The first part of par. 23 is a finding otherwise. The last sentence of par. 23 is a finding related to his Honour's conclusion of law on the relevance of s. 342AC but it cannot be regarded as a finding that irrespective of proposed resumption for public housing the land would be zoned in the varied scheme in a manner similar to its proposed zoning under the draft interim development order. (at p211)

16. It seems to me that the finding of Waddell J. in par. 23 determines the issue substantially in favour of the respondent. The fact that the land would probably have been zoned in a manner similar to its proposed zoning under the draft interim development order would only be of significance if, contrary to the facts, that zoning would have been regarded as likely to occur independently of the proposed purpose of public housing and consequent resumption. Nevertheless it must be made clear that in so far as there was a possibility or likelihood of such a zoning independently of the purpose of public housing, that was a matter properly to be taken into account in accordance with the principle enunciated in the Stocks &Parkes Case (1972) 129 CLR 385 . (at p212)

17. The case is therefore a very particular one. A special purpose value was claimed, namely, the special value of the land to the owner as a site for a private hospital. It must be determined how a purchaser, aware of proposals for the redevelopment of Woolloomooloo, but taking no account of any proposal for resumption for purposes of public housing, would regard his chance of obtaining approval for the erection of a private hospital upon the site. Such a person would ordinarily take account of the draft interim development order. He would find that with the consent of the Council he could use the land for a wide variety of purposes, but not a private hospital. He would at the least assess the chances of obtaining the consent of the Council for one or another of these purposes, but ordinarily he would discount the possibility of use for purposes of a private hospital. However in the particular circumstances it would be wrong to assume that a purchaser would discard the possibility of consent being given to the use of the land for the purposes of a private hospital. It must be taken to have been established that the use for purposes of a private hospital was excluded from the uses to which the land might be put as a particular step in the resumption process. It is therefore necessary to ignore this restriction on use. To do otherwise would be to take into account the proposed public purpose and consequent resumption. (at p212)

18. Hope J.A. in the Court of Appeal, with whose reasons Reynolds J.A. expressed agreement, stated:
"A special problem arises in the present case because of the mixed history of planning proposals for the use of land in the Woolloomooloo Basin, and of other matters bearing on that use. This history included proposals and other matters indicating that development in the relevant part of Woolloomooloo would probably or possibly be limited to residential development in a general sense, but did not suggest any public housing works. In so far as any of these matters altered the value of the resumed land, s. 124 would not require that alteration to be disregarded. If there were matters not related to any contemplated public housing scheme which established that the probable zoning of the resumed land when resubjected to a prescribed planning scheme would be residential, that probability would be a matter falling within this class." (at p212)

19. With all of this I entirely agree. Hope J.A. continued:
"Some matters in the course of the history might have indicated the possibility or probability of the land being used for public housing, but were not the actions of the New South Wales Government or of the commission. Section 124 would not require any alteration in value resulting from these matters to be disregarded, unless that alteration resulted from the effect of a particular matter or series of matters in spreading public foreknowledge of a proposal or contemplation of the New South Wales Government or of the commission that the land be used for public housing." (at p213)

20. For reasons which he had earlier expressed Hope J.A. felt himself constrained by the decision in the Stocks &Parkes Case (1972) 129 CLR 385 to distinguish between proposals for public housing emanating from or indorsed by the New South Wales Government or the appellant and proposals for public housing emanating otherwise. I am not satisfied that this distinction should be drawn and I do not think that I am constrained by the Stocks &Parkes Case (1972) 129 CLR 385 to make that distinction. Section 124 refers to the establishment of public works. These words are in my opinion wide enough to cover the whole subject matter of the establishment of the particular public work - proposal or requirement by the relevant authority, intention of the planning authority by such a zoning to induce the establishment of the public work, even urging by outside bodies that the public work should be established. I have adverted to this question earlier in these reasons. I only add that it would no doubt ordinarily be found that the effect on value which is required to be disregarded will diminish the less specific and authoritative is the proposal to establish the public work. However, it does not appear to me that this matter needs to be determined in the circumstances of the present case. The proposal for public housing appears to have emanated from the appellant or those who could direct its course. (at p213)

21. Hope J.A. then said:
"Some of the matters described in the stated case indicated both the potential use of some land in the Woolloomooloo Basin for public housing, and the potential use of the rest, or most of the rest, of the land for general residential purposes. If any such matter was an act of the New South Wales Government or of the commission, or to which either was a party, and if the matter was found as a fact to be one of the acts leading to, and done in contemplation of, the making of the decision to proceed with the public housing scheme, occurring at a time and taking a form dictated by that circumstance, then any effect upon the value of the resumed land which the matter had should be disregarded. This is because if the public housing scheme had not been contemplated, the matter would not have occurred. If the matter was not an act of the New South Wales Government or of the commission, or one to which either was a party, then any consequential alteration to value should be disregarded only if it resulted from the effect of the act in spreading public knowledge of the proposal or contemplation in respect of public housing." (at p214)

22. In the circumstances of the present case it appears to me to be correct that there is no need to distinguish between a proposed use of the land in the Woolloomooloo Basin for public housing and the proposed zoning of the rest, or most of the rest, of the land for residential development. Before the resumption the value of all of the land proposed to be zoned residential would have been affected by the proposal to establish the public work until it was known what particular land was intended to be resumed. The Land and Valuation Court found that the proposed zoning in the draft interim development order was a step in the resumption process and that its form was dictated by the proposed public work and that was sufficient to bring all the land within the effect of the proposed establishment of the public work. (at p214)

23. It was submitted on behalf of the appellant that Hope J.A. in this passage was stating the law to be that where a zoning or proposed zoning of land has a double purpose - both the purpose of ensuring public housing and the general purpose of ensuring residential use - the latter purpose should be disregarded. I do not so read his words. I think that he was doing no more than expressing a conclusion on the fact, found in par. 23 of the stated case, that the proposed zoning was dictated by the proposed establishment of the public work. At the same time he recognized that other inchoate proposals for the zoning of the Woolloomooloo Basin as predominantly residential could properly be taken into account. (at p214)

24. I consider that the first paragraph of the answer to question (a) (ii) which was given in the Court of Appeal correctly states the legal conclusion applicable to the circumstances of this case and I would omit the second paragraph. I would order that the answer to question (a) (ii) be so varied but otherwise would dismiss the appeal. (at p214)

MURPHY J. I agree with Jacobs J. (at p214)

AICKIN J. I agree with the reasons for judgment of my brother Jacobs and have nothing to add. I would therefore vary the order in the manner referred to and otherwise dismiss the appeal. (at p215)

Orders

Order of the Supreme Court of New South Wales (Court of Appeal) varied by omitting from the answer given to Question (a) (ii) the words:
"In respect of any other such planning step Yes
(i) for the purpose of assessing value
(ii) but in so far as it merely spread public knowledge of the proposed establishment then only for the purpose of determining the extent, if any, by which it effected an alteration in value."

Appeal otherwise dismissed.

Appellant to pay respondents' costs.