Mount Lawley Pty Ltd v Western Australian Planning Commission

[2006] WASC 82

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   MOUNT LAWLEY PTY LTD -v- WESTERN AUSTRALIAN PLANNING COMMISSION [2006] WASC 82

CORAM:   TEMPLEMAN J

HEARD:   13-23 FEBRUARY, 27 FEBRUARY­29 MARCH, 3­4 APRIL 2006

DELIVERED          :   12 MAY 2006

FILE NO/S:   CIV 1550 of 1997

BETWEEN:   MOUNT LAWLEY PTY LTD

Applicant

AND

WESTERN AUSTRALIAN PLANNING COMMISSION
Respondent

Catchwords:

Town planning - Reservation and acquisition of land - Appropriate basis of valuation - Whether time between reservation and acquisition determinative of possible zoning - Utility of expert knowledge gained after date land acquired - Whether environmental significance precludes development potential - Extent of development potential - Whether landscape an integrated whole precluding development potential - Price payable by hypothetical purchaser - Whether premium for development potential - Whether interest payable

Legislation:

Environmental Planning and Assessment Act 1979 (NSW), s 116(1)
Environmental Protection (Swan Coastal Plain Wetlands) Regulations 1991 (WA)
Environmental Protection Act 1986 (WA), s 31(d)
Land Acquisition (Just Terms Compensation) Act 1991 (NSW), s 55, s 56, s 56(1), s 56(1)(a)
Metropolitan Region Town Planning Scheme Act 1959 (WA), s 34, s 36(2b)
Public Works Act 1912 (NSW), s 124
Supreme Court Act 1935 (WA), s 32

Wildlife Conservation Act 1950 (WA), s 14(2)(ba)

Result:

Value set at $4,000,000
Interest payable

Category:    A

Representation:

Counsel:

Applicant:     Mr W S Martin QC & Mr P L Harris

Respondent:     Mr K M Pettit SC & Ms L E Christian

Solicitors:

Applicant:     Ilberys

Respondent:     State Solicitor's Office

Case(s) referred to in judgment(s):

Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410

Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209

Broken Bay Peninsular Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 [1997] NSWLEC 165

D & C Dwight v Sydney Water Corporation Ltd [1995] NSWLEC 72

Davey v Minister of Agriculture (1979) (1) SA 466 (N)

F & J Cauchi v Blacktown City Council [1993] NSWLEC 183

Hillstead v The Queen [2005] WASCA 116

Housing Commission (NSW) v San Sebastian Pty Ltd (1978) 140 CLR 196

Kenny & Good Pty Ltd v MGCIA (1992) Ltd (1999) 199 CLR 413

Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705

Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494

Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273

Overton Investments Pty Ltd v The Department of Urban Affairs & Planning [1998] NSWLEC 67

Petar Rukavina v The Council of the City of Wagga Wagga [1993] NSWLEC 29

Pointe Gourde Quarrying & Transport Co Ltd v Sub‑Intendent of Crown Lands [1947] AC 565

Royal Sydney Golf Club v Federal Commissioner of Taxation (1957) 97 CLR 379

Scarfone v Blacktown City Council [2004] NSWLEC 114

Smith v Roads and Traffic Authority of New South Wales [2005] NSWLEC 438

Spencer v The Commonwealth of Australia (1907) 5 CLR 418

Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (2005) 141 LGERA 243

The Minister v Matford Nominees Pty Ltd [1973] 2 NSWLR 58

Tony Fidler as Trustee for Howship Holdings Pty Ltd v Port Stephens Council [1998] NSWLEC 193

Trandos v Western Australian Planning Commission (2001) 117 LGERA 243

Wilson v Liverpool City Council [1971] 1 All ER 628

Case(s) also cited:

15 Lorimer Street Pty Ltd v Secretary to the Department of Infrastructure (1997) 97 LGERA 239

Beard v Director of Housing [1961] Tas SR 141

Blacktown City Council v Lasseter, unreported; CA SCt of NSW, No 40147 of 1994; 5 December 1996

Brisbane City Council v The Crown (1978) 5 QLCR 202

Bunney v State of South Australia (2001) 112 LGERA 213

Cape Developments Pty Ltd v City of South Barwon [1982] VR 1011

Cienda Pty Ltd v South Australian Urban Land Trust (1988) 66 LGRA 360

Cieslinski v Minister for Works (1978) 20 SASR 55

CMB No 1 Pty Ltd v Cairns City Council [1999] 1 Qd R 1

Corrie v McDermott [1914] AC 1056

Curwen v James [1963] 1 WLR 748

De Ieso v Commissioner of Highways (1981) 27 SASR 248

Deputy Federal Commissioner of Taxation v Gold Estates of Australia (1903) Ltd (1934) 51 CLR 509

Edinburgh Pty Ltd v The Minister (1962) 8 LGRA 45

EJ Cooper & Son Pty Ltd v Baulkham Hills Shire Council (2003) 131 LGERA 226

Emerald Quarry Industries Pty Ltd v Commissioner of Highways (SA) (1979) 142 CLR 351

Fletcher Estates (Harlescott) Ltd v Secretary of State for the Environment [2000] 2 AC 307

FW Hughes Pty Ltd v Minister for Conservation (1950) 17 LGR (NSW) 275

Googong v The Commonwealth (1977) 13 ALR 449

Grampian Regional Council v Secretary of State for Scotland [1983] 1 WLR 1340

Gubbay v Minister for Education (1985) 56 LGRA 82

Logform Industries Pty Ltd v Chief Executive, Department of Lands (1994) 15 QLCR 141

March v City of Frankston [1969] VR 350

Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111

McKenna v Municipality of Burnie (1970) 22 LGRA 402

Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426

Minister of Environment v Petroccia (1982) 30 SASR 333

Morison v The Commonwealth (1971) 34 LGRA 273

Nardone v South Australian Land Commission (1978) 20 SASR 168

Nuland Developments Pty Ltd v Parramatta City Council (1978) 37 LGRA 258

Pamalco Pty Ltd v Minister Administering National Parks & Wildlife Act 1974 (No 3) (1991) 71 LGRA 441

Parramatta City Council v Valuer­General (1964) 10 LGRA 160

Port Stephens Shire Council v Tellamist Pty Ltd (2004) 135 LGERA 98

Queensland v Murphy (1990) 95 ALR 493

Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302

Richter v Chief Executive, Department of Natural Resources (1998) 19 QLCR 274

Roads & Traffic Authority of New South Wales v Perry (2001) 116 LGERA 244

Russellan Pty Ltd v Roads & Traffic Authority of New South Wales (1992) 75 LGRA 263

Turner v Minister of Public Instruction (1956) 95 CLR 245

Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2004) 134 LGERA 195

Wattle Park Pty Ltd v Commissioner of Highways (1973) 6 SASR 69

Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295

Wimpey Construction UK Ltd v The Minister (1983) 53 LGRA 75

TEMPLEMAN J:

Introduction

1. This is the retrial of an application brought pursuant to s 36(2b) of the Metropolitan Region Town Planning Scheme Act 1959 (WA) ("the Scheme Act"). The retrial is the result of an order made by the Full Court in Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273, on appeal from the decision of the trial Judge. I shall refer to those proceedings as "the Mount Lawley appeal".

2. In these proceedings, the Court is required to value some 309 hectares (ha) of land owned by the applicant, Mount Lawley Pty Ltd ("Mount Lawley") which land was originally zoned rural under the Metropolitan Region Scheme ("the Scheme"), but was reserved for Parks and Recreation on 16 October 1992 by amendment 879/33 to the Scheme.

3. On 14 December 1994, some 7.9 ha of the reserved land was re‑reserved for a Controlled Access Highway ("the CAH land") by amendment 950/33 to the Scheme. The Court is not required to value the CAH land separately. However, as will appear, the re‑reservation is a relevant matter.

4. The date on which the reserved Mount Lawley land is to be valued is 7 May 1996.  That is the date on which the Western Australian Planning Commission ("WAPC"), the respondent to these proceedings, elected to acquire the land in lieu of paying compensation to Mount Lawley for the injurious affection resulting from the reservations.

5. It is not necessary for present purposes to set out the circumstances in which Mount Lawley's claim for compensation was made and rejected by the WAPC.  Those matters are set out in the decision of the Full Court and need not be repeated here.

6. The proceedings have an unfortunate history.  Mount Lawley's application was tried in this Court over 68 sitting days in 2000.  The judgment was delivered on 13 December 2002.

7. The trial Judge valued the reserved Mount Lawley land at $2.9 million, far less than the value placed on it by Mount Lawley.

8. Mount Lawley appealed.  The appeal was heard in March 2004.  The Full Court delivered its judgment on 13 July 2004.  It set aside the decision of the trial Judge and ordered a retrial.  In so doing, the Full Court resolved a number of issues which were contested at the trial.  Other issues have been resolved subsequently between the parties.  The only remaining issue for the retrial is the value of the reserved Mount Lawley land.  Nevertheless, the retrial has extended over 35 sitting days, many of which have been taken up with evidence from a range of experts.

9. Some of the transcript of evidence given at the trial was tendered at the retrial.  Each separate section of transcript was given an exhibit number.  However, when referring in these reasons to evidence given at the trial, I have used the original transcript page numbers.

10. There were numerous objections to admissibility of evidence by both parties.  I have set out my rulings in an Appendix to these reasons.

11. At a directions hearing shortly before the retrial I was invited by Mount Lawley to view its land on the basis that it would assist me to "place into context" the evidence to be adduced.  The WAPC objected to that course.

12. I declined Mount Lawley's invitation and said that I would give my reasons later, which I now do.

13. Essentially there are three reasons.  First, it is common ground that the appearance of the land has changed considerably in the 10 years since the valuation date of 1996.  Its setting has changed also: the land is now adjacent to the newly developed suburb of Ellenbrook.

14. Secondly, it would only have been possible to gain a very superficial impression of a very large area of land in what would have been, at most, an attendance of a few hours.  And because the appearance of the land had changed, such an impression might well have been misleading.

15. Thirdly, since the valuation depends heavily on a comparison between the subject land and land in other locations which are more or less comparable, a view of only the subject land would have been of only limited utility.

16. Despite the complexity of the issues arising in the retrial, the pleadings are remarkably brief.  In essence, Mount Lawley contends that at all material times, the reserved land had substantial potential "to obtain suitable early rezoning" to permit it to be developed and used for urban purposes.

17. Against that, the WAPC contends that having regard to "the constraints imposed by planning considerations, statutory instruments and the environmental characteristics" of the reserved Mount Lawley land, the land was unsuitable for development and had no potential for that purpose.

18. Short particulars of the rival contentions are set out in the pleadings.  However, the pleadings do not disclose the issues which have arisen during the retrial.  I therefore set out an overview of the dispute for the purpose of identifying four major issues and thereby developing a structure for the reasons which follow.  In addition to the major issues, several sub‑issues have emerged.  I shall deal with them as they arise.

An overview

1. The Mount Lawley land comprises two parcels, known as lots 46 and 47 Maralla Road and Lexia Avenue, Ellenbrook, being portion of Swan Location 1 on Plan 3220, and being the whole of the land under Certificate of Title Volume 1493, Folios 271 and 272 respectively.  The total area of lots 46 and 47 is 320.9157 ha.

2. The land is situated in the City of Swan (known as the Shire of Swan until about 1999). At the material time it was subject to the Shire's Town Planning Scheme No 9 ("TPS 9") as well as to the Scheme.

3. The Mount Lawley land is located some 22 kilometres north of Perth on the plain which lies between the Darling Range and the Indian Ocean ("the Swan Coastal Plain").  The land is close to the northern extremity of an area identified in 1987 ‑ 1990 by the then State Planning Commission as one of the five "corridors" into which suburban Perth was planned to expand: the north‑east corridor.

4. The Mount Lawley land is bounded on the west by State forest and on the east by 745 ha of land which was owned by Sanwa Vines Pty Ltd ("Sanwa").  Sanwa had earlier developed a residential resort known as "The Vines" further to the east, albeit on land which retained a rural zoning.

5. Some 563 ha of land to the immediate south of the Mount Lawley land was owned by Homeswest.  The Homeswest land lay immediately to the west of 580 ha of land owned by Multiplex Constructions Pty Ltd ("Multiplex").

6. In the late 1980s, Homeswest and Sanwa joined together to form a company known as Ellenbrook Management Pty Ltd ("Ellenbrook Management") to promote the rezoning and subsequent development of their land as a new suburb to be known as Ellenbrook.  Although, from a planning perspective, it would have been open to include the Multiplex land in the Ellenbrook project, Multiplex did not wish to be involved.  Mount Lawley's position was more equivocal.  Having initially been a party to the joint venture, it withdrew subsequently although it was still regarded as a proponent.

7. Initially, the proposal also involved the rezoning of 159 ha of State forest in an area to the south of the Mount Lawley land in order to facilitate the proposed development.

8. The Ellenbrook proposal proceeded through to amendment 879/33 to the Scheme, which was gazetted on 16 October 1992.

9. That amendment not only effected the rezoning from rural to urban deferred of the land which was to become Ellenbrook, it also effected the reservation of 309 ha of the Mount Lawley land for Parks and Recreation.  The reason for the reservation was the protection and preservation of significant wetlands and associated vegetation.

10. Wetlands may be defined as areas that are permanently, seasonally or intermittently inundated or waterlogged.  They have always been a significant feature of the Swan Coastal Plain although, until about the 1960s, wetlands were regarded as undesirable swamps.  Many were drained and filled so as to be capable of use for urban or agricultural purposes.  However, more recently, a developing understanding of the environment has led to an increasing awareness of the importance of wetlands to flora and fauna.  For that reason, steps were taken to identify and preserve wetlands in ways to which I shall refer in more detail below.

11. The wetlands on the Mount Lawley land were part of a group which extended to the Sanwa land and were known generally as the Lexia wetlands.

12. Amendment 879/33 to the Scheme reflects the tension which then existed between the Department of Planning and Urban Development ("DPUD") which was advising the Minister for Planning, and the Environmental Protection Authority ("EPA") which was advising the Minister for the Environment. The tension arose, on the one hand, from the desire of the Minister for Planning to ensure that sufficiently large areas of land were made available for urban expansion at a time when Perth's population was increasing rapidly and there was an acute shortage of land: and on the other hand, the desire of the Minister for the Environment to preserve land which had significant environmental characteristics. The tension is emphasized by the fact that the Mount Lawley land, while possessing those environmental characteristics, was largely capable of supporting urban development, subject to draining and filling. Indeed, one of the pro‑development planners in the DPUD described the Mount Lawley land as "superb urban land".

13. The reserved Mount Lawley land is to be valued pursuant to s 36(2b) of the Scheme Act which provides that the value:

    "shall be determined without regard to any increase or decrease, if any, in value attributable wholly or in part to the Scheme."

    In the Mount Lawley appeal, the Full Court held that "the Scheme" for present purposes is constituted by amendment 879/33: in other words, the reservation of the substantial part of the Mount Lawley land and the rezoning of the much larger area of land which was to become Ellenbrook, from rural to urban deferred.

14. The Full Court held also that s 36(2b) of the Scheme Act is the statutory embodiment of the principles stated in Pointe GourdeQuarrying & Transport Co Ltd v Sub‑Intendent of Crown Lands [1947] AC 565 ("Pointe Gourde") and Housing Commission (NSW) v San Sebastian Pty Ltd (1978) 140 CLR 196 ("San Sebastian").  Put shortly, these principles ensure that an acquiring authority can neither take advantage of, nor be prejudiced by, changes in value of the subject land brought about by the relevant scheme.  And the scheme for these purposes includes steps leading to its implementation which have the effect of depressing or elevating that value.

15. As I have noted above, immediately before the reservation, the Mount Lawley land was zoned rural under both the Scheme and TPS 9.

16. In the Mount Lawley appeal, the Full Court held that the reserved land should be valued:

    "… by reference to the hypothetical vendor and purchaser perfectly acquainted with the land and all of its characteristics, including those which render it suitable for development and, as well, those which militate in favour of reservation."

    The Full Court went on to say that it would be necessary to take into account all the scientific and technical evidence relating to the reserved Mount Lawley land that was relevant to the valuation issue:

    "… in determining what, if any, premium the hypothetical purchaser would be prepared to pay, over and above the Rural value, in order to reflect the development potential." (29 WAR 273 at [162])

17. Later, the Full Court said:

    "The skill of the valuer lies in assessing (in this case) the market value of the reserved Mount Lawley land, had it been offered for sale on 7 May 1996.  That value would reflect the highest and best use to which the land could be put, consistent with its zoning … in carrying out the valuation the valuer will take into account any potential the land may have for a higher and better use than permitted by the current zoning.  In so doing the valuer should exercise an independent judgment about the likely perception of such matters in the relevant market." [184] ‑ [185]

18. Mount Lawley accepts that where an acquisition follows shortly after a reservation, the above approach is appropriate.  However, Mount Lawley contends that where, as here, there is a long interval between reservation and acquisition, the valuation should be approached by enquiring what the zoning would have been at the date of acquisition, had there been no reservation.  In this case, Mount Lawley contends that given the urgent need to plan for the expansion of the Perth Metropolitan Region in the early 1990s, its land would have been rezoned urban by May 1996 and should be valued on that basis.

19. In support of this proposition, Mount Lawley relies on a line of authority in the Land and Environment Court of New South Wales. However, the WAPC contends that those authorities have no application here, being based on statutory provisions different in effect from s 36(2b) of the Scheme Act.

20. The first major issue, therefore, is the identification of the appropriate valuation basis.

21. On whatever basis the value of the Mount Lawley land is assessed, it is the "market value" which must be determined.  As the Full Court said in the Mount Lawley appeal, at [281], that is a convenient way of referring to the value to be determined by applying the principle derived from the decision of the High Court in Spencer v The Commonwealth of Australia (1907) 5 CLR 418. There, Griffith CJ held (at 432) that the value would be the price which would be paid by a man desiring to buy the land, to a vendor willing to sell for a fair price but not desirous to sell. Isaacs J added that the hypothetical purchaser should be prudent: and that both parties must be regarded as being "perfectly acquainted with the land, and, cognisant of all circumstances which might affect its value, either advantageously or prejudicially …" (at 440 – 441).

1. The extent of the knowledge of the hypothetical vendor and purchaser is a matter which requires careful attention in this case.  That is because much detailed knowledge about the environmental characteristics of the Mount Lawley land has emerged as a result of studies carried out since 1996: and in particular, for the purposes of this litigation.

2. The question therefore arises whether the hypothetical parties are to be fixed with knowledge only of what was known in 1996, or of facts which might have been known then, if appropriate investigations had been made sooner.

3. That is the second major issue.

4. The third major issue is the extent of any development potential of the reserved Mount Lawley land, having regard to planning and environmental considerations.  Mount Lawley contends that although a relatively small area of wetlands could not be developed, the majority of the land would be suitable for urban development.

5. The WAPC contends, however, that the environmental characteristics of the reserved Mount Lawley land were such that development would not be permitted; and that the hypothetical prudent purchaser who was perfectly acquainted with the land, would have paid no premium over the rural value.

6. The resolution of this issue will require an assessment of the considerable body of expert evidence relating to the environmental characteristics of the Mount Lawley land and their significance.

7. This will lead to the fourth issue: the value of the Mount Lawley land.

8. Against that background, I turn to consider the first of the issues identified above.

Issue 1: On what basis should the land be valued?

1. The reserved Mount Lawley land must be valued in accordance with s 36(2b) of the Scheme Act. This requires the value to be determined without regard to any increase or decrease in value attributable wholly or in part to the Scheme.

2. The WAPC emphasises that s 36(2b) does not require or authorise the Scheme itself to be ignored: only the effect on value of the Scheme.

3. This construction leads to the submission that if the Scheme is not to be ignored, it is not permissible to inquire what the zoning of the relevant land might have been, had there been no Scheme. Hence the further submission that the Full Court was correct to direct that the value of the reserved Mount Lawley land should be determined by assessing the loss of potential resulting from the Scheme.

4. There is nothing novel in that approach.  It reflects the judgment in Royal Sydney Golf Club v Federal Commissioner of Taxation (1957) 97 CLR 379, in which Kitto J was required to determine the value of land in the context of an appeal against a land tax assessment. The land was subject to "restrictions on its use and enjoyment".

5. His Honour held that:

   "The proper course is to inquire first what was the value of the land on the footing that there was no possibility of its ever being turned to other than recreational purposes, and then how much extra should be allowed for such chance as there was of securing permission for residential use at some future time."

6. This approach to valuation should cause no difficulty if "the Scheme" can be identified precisely.  However, that is not always the case.

7. In the Mount Lawley appeal, at [67] the Full Court referred to the decision of the English Court of Appeal in Wilson v Liverpool City Council [1971] 1 All ER 628. There, Lord Denning MR (at 634) referred to a scheme as being "a progressive thing" which therefore has a progressive effect on values. Widgery LJ (at 635) observed that the word "scheme" should not be regarded "as if it had some magic of its own". His Lordship held that:

   "The purpose of the so‑called Pointe Gourde rule is to prevent the acquisition of the land being at a price which is inflated by the very project or scheme which gives rise to the acquisition."

8. These considerations led the Full Court to say, at [71]:

   "It is important to note that it is effects on value of the Scheme, including the steps taken towards it as it evolves, that are to be disregarded. What is a step can be a matter of some nicety…"

9. The leading case on the identification of steps in a scheme is San Sebastian. There, Jacobs J, with whom the other members of the Court agreed, held, at 200:

   "… where there is a direct relationship between the restriction on land use and the proposed [scheme] the effect on value of the zoning or restriction ought to be ignored."

   This is the approach reflected in s 36(2b) of the Scheme Act.

10. Jacobs J went on to note that there were many situations where there was no clear relationship between zoning (ie the restriction on land use) and the proposed scheme.  His Honour gave an example involving the following assumptions:

    1.there is land on the outskirts of an existing settlement;

    2.the planning authority, being concerned to designate land uses in a scheme, zones the subject land as public open space;

    3.the land is then resumed for a public reserve, thereby entitling the owner to compensation.

11. His Honour went on to say that in determining whether compensation should be paid to the owner at the depreciated value of public open space, or at some other value, it would be necessary to know whether there was any connection between the zoning as public open space and the reservation:

    "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." (my emphasis)

12. The reference to s 124 is to that section of the Public Works Act 1912 (NSW) which provided that compensation for land acquired compulsorily should be assessed without regard to any alteration in value of the land arising from the establishment of any public works upon or for which the land was resumed (see 140 CLR at 205).

13. Section 124 was therefore similar in its effect to s 36(2b) of the Scheme Act. And yet, Jacobs J identified circumstances in which it would be appropriate not only to ignore the effect on value of a zoning, but also, the zoning itself: that is, when the zoning was a step in the subsequent resumption. An example of such circumstances would be the zoning of land for public purposes for no other reason than to create a park.

14. Section 124 of the Public Works Act was replaced by s 116(1) of the Environmental Planning and Assessment Act 1979 (NSW), which also seems to have been regarded as embodying the Pointe Gourde and San Sebastian principles.  It was in the following terms:

    "Where land reserved by an environmental planning instrument … or proposed to be reserved … or resumed or appropriated, the value of the land shall be determined as if it had not been so reserved or proposed to be reserved". (my emphasis)

15. In other words, the value was to be determined not without regard to the effect on value of (for example) a reservation, but without regard to the reservation itself.

16. That provision was replaced by s 56(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ("the Just Terms Act") which required compensation for compulsory acquisition to reflect the market value, defined in terms which disregarded:

    "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."

17. Section 56(1)(a) therefore restored the valuation basis applicable under s 124 of the Public Works Act: a basis on which (as in s 36(2b) of the Scheme Act) the effect on value of the Scheme was ignored.

18. In Smith v Roads and Traffic Authority of New South Wales [2005] NSWLEC 438 ("Smith"), McClellan J was required to assess the amount of compensation payable to a land owner whose land was acquired compulsorily by the Roads and Traffic Authority. The relevant statutory provisions were s 55 and s 56 of the Just Terms Act.

19. At [63] of his reasons, McClellan J set out his understanding of the "traditional approach" to the application of the relevant principles.  This involved the following steps:

    "1Identify the zoning of the land at the date of acquisition.

    2Determine whether that zoning was imposed or retained in order to facilitate the implementation of the public purpose for which the land was acquired.

    3If the answer to question 2 is yes, that zoning is notionally set aside, and the potential of the land and ultimately its market value is assessed by determining how the land would have been zoned, at the date of acquisition, but for the proposal to carry out the public purpose." (my emphasis)

20. McClellan J referred to a number of decisions in support of that approach.  They were: Petar Rukavina v The Council of the City of Wagga Wagga [1993] NSWLEC 29; F & J Cauchi v Blacktown City Council [1993] NSWLEC 183; D & C Dwight v Sydney Water Corporation Ltd [1995] NSWLEC 72; Broken Bay Peninsular Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 [1997] NSWLEC 165 ("the Broken Bay case"); Overton Investments Pty Ltd v The Department of Urban Affairs & Planning [1998] NSWLEC 67; Tony Fidler as Trustee for Howship Holdings Pty Ltd v Port Stephens Council [1998] NSWLEC 193 ("the Nelson Bay case") and Scarfone v Blacktown City Council [2004] NSWLEC 114.

21. Leading counsel for Mount Lawley referred to each of those decisions in the course of his submissions.  It is not necessary for present purposes to refer to them in detail.  It is sufficient to note that they support the proposition set out by McClellan J.  However, it may be noted also that in Petar Rukavina (supra), Pearlman J approached the valuation exercise on the basis that the Just Terms Act had not changed the law applicable under the Environmental Planning and Assessment Act "in any material respect".

22. In F & J Cauchi (supra), another decision of Pearlman J, her Honour proceeded on the agreed basis that the subject land would have been rezoned by the relevant date.

23. Further, in the Broken Bay case, Cowdroy AJ held (at 31) that s 56(1) of the Just Terms Act "embodies the same concept" as appeared in the equivalent provision of the Environmental Planning and Assessment Act, and:

    "Accordingly it is legitimate for the Court, in assessing value, to ignore not only the compulsory acquisition of the land … but other steps taken by the respondent for this ultimate purpose.  Accordingly, the principle established … in San Sebastian, is enshrined in s 56(1) of the [Just Terms] Act."

24. However, this was a case in which it was held that:

    "… the land would have been available for residential development had it not been for the continued and sustained interest successfully maintained to ensure that the land was brought into public ownership." [84]

25. Leading counsel for Mount Lawley submitted that the approach of McClellan J, set out above, should be taken in the present case.  That is the basis for Mount Lawley's contention that its reserved land would have been zoned urban by 7 May 1996 and should be valued accordingly.

26. Counsel submitted further, that this approach had been taken in Trandos v Western Australian Planning Commission (2001) 117 LGERA 243 ("Trandos").

27. Counsel referred to a passage in the judgment of Anderson J (with whom Wheeler J and Einfeld AJ agreed), to the effect that the trial Judge had to decide:

    "whether, but for the reservation, the most advantageous use of this land having regard to proper planning principles, was one of the alternative uses proposed by the appellant or some other use." (at [74])

28. I do not accept that this is the same as asking what the zoning would have been, but for the reservation: it is a question directed to the highest and best use. This was stated expressly by Anderson J at [69].

29. In any event, it is to be noted that the approach urged by Mount Lawley is to be followed "if the answer to question 2 is yes".  In other words (as is clear from San Sebastian), it is necessary to ask that question in order to determine the basis for the valuation.

30. It is not clear from McClellan J's statement of the "traditional approach", how the Court is to proceed if the answer to the question is "no", and the zoning was (for example) imposed to ensure that the planning process recognised some feature or characteristic of the land.  However, it could not then be appropriate to ask how the land would have been zoned, "but for the proposal to carry out the public purpose".  That is because there would not have been a rezoning in those circumstances.

31. The failure of the trial Judge to ask the relevant question in Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (2005) 141 LGERA 243 ("Walker"), led the Court of Appeal to order a retrial.

32. The land the subject of Walker, which was located on the Sydney Harbour foreshore, had been used for industrial purposes for many years.  In 1989, the then owner, Caltex, applied to have the land rezoned so as to permit residential development.  The local authority consistently opposed any such rezoning.  It maintained the industrial zoning, with the apparent intention that any change of use should result in most of the land becoming public open space.

33. Although the State Government did resume the land for that purpose in 2002, this represented a change in its position.  The Government had intervened in 1992 and 1995 to support the use of a significant part of the land for residential development.

34. The trial Judge rejected the proposition that the subject land should be valued on the basis of its existing zoning with such allowance as might be appropriate for the prospects of a rezoning for residential purposes. Instead, his Honour treated the land as if it had been rezoned, on the basis that the failure to do so was a matter to be "disregarded": [69].

35. Basten JA (with whom Beazley JA and Stein AJA agreed) held that the assumption of rezoning made by the trial Judge:

    "… could only be justified if the refusal of the council to rezone was itself part of the proposal to acquire the land for the public purpose for which it was acquired or a step in the carrying out of that public purpose.  As a matter of principle, the approach adopted did not ask that question and is wrong". (at [81])

36. At [60] Basten JA held that:

    "as a matter of principle, [the trial Judge] could not disregard the maintenance of the industrial/waterfront zoning … until the proposal for the relevant public purpose for which the land was resumed became known, if that planning decision was made for proper purposes, regardless of whether the land would ever be resumed.  There is no factual finding that that was not the case: it was a relevant matter to be considered and was not considered."

37. Then, at [63]:

    "Land may have a characteristic which diminishes its value, or constrains an increase in value.  The value of the land, with all its inherent characteristics, will depend on its physical location, whether there are surrounding developments and a host of other considerations, including social preferences and environmental factors."

38. His Honour then gave an example:

    "One may take, by way of example, an hypothetical block of land on the outskirts of an expanding city.  The land in question is low‑lying, but is surrounded by higher ground.  All the land is available for residential development, but the higher ground is developed first because it is seen as more attractive to potential purchasers.  The low‑lying ground is then identified as part of a flood plain and is found to be subject to inundation after heavy rain.  The local council rezones the land to prohibit residential development.  The land is capable of commercial development so long as it is drained and the level is raised.  A development application is required to be accompanied by an environmental impact statement.  Preparation of that statement identifies that portion of the flood plain as having special conservation significance.  Accordingly, the council imposes constraints which prevent any significant development and brings the area to the attention of the State authority responsible for environmental protection.  The limitations imposed by the council drastically reduce the potential uses of the land and hence its market value.  Because of the conservation significance of the site, it is later resumed by the State authority for the public purpose of environmental protection.

    In this example, whether or not the restrictions on development imposed by the council have a remote or a close connection with the ultimate resumption, the diminution in the commercial value of the land flows from an inherent characteristic which had the potential to have that effect before any resumption was proposed.  It was not the proposed resumption which lowered the value of the land, but the inherent characteristic.

    It is, of course, true to say that land will only be resumed in circumstances where it suits the needs of the acquiring authority.  Thus, in Perry's case, the precise route of the upgraded highway no doubt depended upon the physical characteristics of the land in different corridors.  The difference is that the public purpose in that case existed without reference to those characteristics.  In the hypothetical case, it was the characteristic of the land which gave rise to the particular public purpose."

39. The example illustrates the WAPC's position in the present case.  It contends that the reservation of the bulk of the Mount Lawley land flowed from the inherent characteristics of the land, and not from a desire on the part of the WAPC to enlarge the regional park system.  Or, to paraphrase Jacobs J in San Sebastian, there was no relevant relationship between the reservation and the public purpose achieved by the acquisition of the reserved Mount Lawley land.

40. In Walker, Basten JA noted that his approach was consistent with that adopted by the High Court in Queensland (sic The Crown) v Murphy (1990) 64 ALJR 593 ("Murphy").

41. In Murphy, land zoned rural, which was resumed for the purposes of an environmental park, was the site of "a world renowned turtle rookery".

42. An application was made to the local council to rezone the land for residential use.  The application was refused on grounds which included the detrimental effect of the development on the turtle rookery which "should be preserved for scientific research and the educational value …".

43. The owner of the land applied to the Land Court of Queensland for compensation.  He was successful: the Court assessed compensation on the basis of a notional residential rezoning.  However, this decision was reversed on appeal.  The Land Appeal Court held that:

    "a prudent purchaser would not add anything over and above the land's homesite value in expectation of a more liberal approach to re‑zoning or subdivision at some future date"

    see 64 ALJR at 594.

44. The decision of the Land Appeal Court was reversed by the Full Court of the Supreme Court of Queensland.

45. On appeal to the High Court, the San Sebastian principle was stated (at 595) in the following way in the joint judgment of Mason CJ and Brennan, Deane, Gaudron and McHugh JJ:

    "The principle applies in cases where there is a direct relationship between the planning restriction and the scheme of which resumption is a feature and extends to cases where there is merely an indirect relationship, provided that the planning restriction can properly be regarded as a step in the process of resumption". (my emphasis)

1. The Court went on to hold that:

   "Of course, a characteristic or attribute of the land which affects its value must be taken into account in the assessment of compensation even if the planning restriction which is a step in the process of resumption is dependent upon or directed to that characteristic or attribute.  The Land Appeal Court considered that the existence of the turtle rookery adjacent to the land was an attribute of the land which affected its value to the extent that the existence of the rookery itself militated against the rezoning.  Contrary to the view of the majority of the Full Court that there was an 'open question' on this point, the Land Appeal Court did consider whether the local authority would have refused the rezoning of the land, quite apart from the resumption and the scheme for the protection of the turtles."

2. In Smith, McClellan J was of the view that "considerable care" would be necessary when applying the decision in Murphy. His Honour said, at [111]:

   "There will be many parcels of land with inherent characteristics which make them suitable for some public purpose as well as for many private purposes.  However, in some cases, of which Murphy is an example, the inherent characteristics of the land have the consequence that in the ordinary course the land would not have been given a zoning which permitted private development.  Irrespective of whether the land was to be brought into public ownership required by the public the fact that it adjoined the rookery had the effect that it would not be allowed to develop.

   However, if the reason which limits the potential of the land is the intention to bring the land into public ownership and use it for a public purpose (the 'scheme') the development potential of the site must be assessed without consideration of any influence from that scheme.  Accordingly, if the land in Murphy was desired by the resuming authority for no other purpose but to allow public access to view the rookery and the land played no part in the maintenance of the eco‑system which included the rookery, and its development would not have adversely affected the rookery, its value would have to be assessed without consideration of the presence of the rookery."

3. McClellan J then referred to the example given by Basten JA in Walker, which I have set out above.  At [113] his Honour said:

   "Provided the circumstances are that the land has been zoned to prohibit residential development because it is inherently unsuitable for residential development, which I assume is the circumstance his Honour has in mind, the example reflects the approach in San Sebastian.  The lack of suitability may derive from its potential to flood or its high conservation value or a combination of both.  However, if the constraints have been imposed, as his Honour suggests they may have been, not because the land is inherently unsuitable for residential development but, because of its conservation value, and the council believes that the land should be denied its urban potential and brought into public ownership different considerations arise.  In those circumstances it would be argued that the 'scheme' consists of the desire to preserve the land for the purpose of environmental protection.  Any zoning or reservation designed to further that purpose would accordingly have to be disregarded and the land valued having regard to its development potential, albeit as flood liable land requiring significant civil works before it could be used for residential purposes."

4. In the present case, leading counsel for the WAPC submitted that McClellan J was drawing an untenable distinction between, on the one hand, land having conservation value by which its development potential is constricted; and on the other hand, land having conservation value, and the council constricting its potential by bringing it into public ownership (TS 6833).

5. That criticism would, I think, be valid if McClellan J had in mind the same degree of conservation value in each case.  However, I take his Honour to be referring, in the first case to land which is inherently unsuitable for development; and in the second case, to land which is suitable for development despite having some conservation value.  On that basis, I respectfully agree that the distinction is valid.

6. The point is illustrated by the decision in the Broken Bay case.  As I have noted, Cowdroy AJ valued the subject land on the basis that it would have been available for residential development, but for pressure (brought by the National Trust and local conservation groups) to have it brought into public ownership.  The land was situated "in an area of spectacular scenic beauty" adjacent to a National Park.  It had commanding views and was covered with dense natural vegetation.

7. Cowdroy AJ determined the amount of compensation on the basis that the highest and best use of the land was as "an en globo parcel … to which it attached subdivisional rights for residential purposes".  His Honour held that:

   "In the assessment of such compensation, consideration must be given to environmental considerations, as well as the likely costs of development …".

8. The Broken Bay case may be contrasted with the Nelson Bay case, also a decision of Cowdroy AJ.  There, his Honour was again concerned with land in a commanding position, covered with natural vegetation: it was a major landmark, overlooking Nelson Bay.

9. It was submitted to Cowdroy AJ that the facts were identical to the Broken Bay case.  However, his Honour held that there was a significant distinction.  In the Broken Bay case, the evidence:

   "disclosed that the relevant council had actively considered a subdivision of the resumed land of the density contended for prior to its public purpose zoning, and but for agitation to bring the land into public ownership, would probably have approached the zoning of the land for residential purposes."

10. However, his Honour held that a residential subdivision would never have been approved in the Nelson Bay case because of the strategic position of the land, and the need to ensure its preservation.  His Honour said:

    "The irreparable damage caused to such significant landmarks could never be redressed by any restrictions, or conditions, since necessary clearing of natural vegetation for the purposes of roadway and residential construction would permanently alter the character of the landscape.  The proposed subdivision on such a confined area in such a prominent location could not be countenanced by any responsible authority." [49]

11. Cowdroy AJ went on to say that the fact that the public purpose of the compulsory acquisition was to be ignored "does not automatically entitle the landowner to compensation for a use that would never have been permitted". The owner bore the onus of demonstrating that, but for the public purpose and its related zoning, the subject land would have been zoned differently [50].

12. Viewed objectively, there may be circumstances such as those of the Nelson Bay, or Murphy cases in which the subject land has no development potential because of its unique characteristics.

13. At the other end of the spectrum, there may be land which is ideally suited for development but which is acquired for a public purpose, thereby destroying a potential which would otherwise have been realised.

14. Between those extremes, there may be cases in which land suitable for development from a planning perspective is acquired for public purposes because it also has (for example) some environmental attribute which warrants its conservation.

15. For the reasons set out above, in cases in the Murphy or Nelson Bay category, it cannot be appropriate to value the land on the basis of a zoning which would never have been permitted.  In the second category of cases, it is appropriate to consider what the zoning would have been, but for the acquisition.

16. In both cases, however, the objective is to establish the development potential of the subject land, and to value it accordingly.  That is an approach which must be valid in any circumstances: and particularly in cases between the two extremes outlined above.

17. However, none of the authorities to which I have referred support Mount Lawley's contention that the approach to valuation should be governed by the length of time which has elapsed between a reservation and the subsequent acquisition.  I can see no basis in principle, for such an approach, and I do not accept that contention to be valid.

18. In the present case, I think the question as to the correct approach may well be academic.  Even if (as Mount Lawley contends) its reserved land should be valued on the basis that it would have been rezoned urban by 7 May 1996, that alone will not determine its value.  The hypothetical purchaser would still want to be satisfied that the reserved land could be developed.  And that (it is agreed between the parties) would require "a formal environmental assessment" (exhibit 4025).

19. It follows, that even if the land is to be regarded as having some urban zoning, the environmental characteristics of the land are likely to be the crucial factors in the determination of its value.  It is therefore necessary to consider these characteristics, in the context of the events leading to amendment 879/33.

Events leading to amendment 879/33

1. The starting point from which to consider the planning of the Perth Metropolitan Region is the Stephenson‑Hepburn plan of 1955, prepared by Professor Gordon Stephenson and Mr Alistair Hepburn, the then Town Planning Commissioner.

2. The plan was conceptual in nature. It had no statutory effect although (on the recommendation of the authors) it formed the basis for the Metropolitan Region Scheme pursuant to the Scheme Act.

3. The Mount Lawley land was not identified in the Stephenson‑Hepburn plan.  However, it is common ground that the land was in an area designated as general rural.  The extract from the plan which is in evidence (exhibit 2104) appears to show the wetlands on the Mount Lawley land, albeit described as "swamps".  Conservation was not a significant issue in those days.

4. Following the enactment of the Scheme Act in 1959, the Metropolitan Region Scheme was gazetted on 1 November 1963. The Scheme, as amended subsequently, is given statutory force by Part III of the Scheme Act. And by s 34 of that Act, no local authority planning scheme is to be made unless it is "in accordance with and consistent with the Scheme".

5. In the Scheme as it was in 1963, the Mount Lawley land was zoned Rural (exhibit 2105).

6. In 1970, the Metropolitan Region Planning Authority, which had been established by the Scheme Act, produced a Corridor Plan for the expansion of Perth over the next 20 years. The object of the plan, as appears from the Planning Bulletin of February 1971, was "to counter urban sprawl", by directing urban expansion "along strong communication routes forming fingers of development between which large areas of countryside are maintained for non‑urban uses" (exhibit 2105).

7. The plan, which was conceptual in nature, proposed four corridors.  They were to the north‑west, east, south‑east, and south‑west of Perth.  Although it is not possible to identify the precise location of the Mount Lawley land, there can be no doubt that it lies in an area proposed for non‑urban use, midway between the north‑western and eastern corridors (exhibit 2106).

8. On 19 June 1974, the Shire of Swan Town Planning Scheme No 1 was gazetted.  The Mount Lawley land was zoned as "general rural" (exhibit 2107).  It remained within that zone in TPS 9, gazetted on 9 December 1985 (exhibit 2109).

9. In October 1987, the Review Group to the State Planning Commission published a review of the Corridor Plan in a report entitled "Planning for the Future of the Perth Metropolitan Region" (exhibit 2231).  The report forecast a need for a further 171,000 dwellings by 2001 and a further 194,000 dwellings by 2021, to house the rapidly expanding population.  Several measures were proposed in the preferred strategy.  These included the identification of ten new areas considered suitable for future urban development.  Two areas, to the east and west of the Swan Valley Policy area respectively, have come to be known as the north‑east corridor.  However, the western side of that corridor did not extend as far north as the Mount Lawley land.

10. Again, the plan showing the preferred strategy was conceptual: it did not identify cadastral boundaries.  However, the Mount Lawley land appears to be included in an area proposed for a Metropolitan Park System (exhibit 2110).

11. The report (exhibit 2231) referred to the Perth Coastal Plain as being "a delicately balanced environment", in which the coastal wetlands system was "under the greatest pressure from both use and development".  It was said that their protection "should continue to be a high priority in a revised strategy" (page 7).

12. The reference to the wetlands included the northern banksia woodlands system stretching from near Whiteman Park, to south of the Moore River, with links to the coast and the linear wetlands chain.  The Mount Lawley land falls within this system.

13. The report drew attention also to the increasing importance of groundwater resources: and in particular, the Gnangara Mound.  Although this was said to be "substantially contained beneath crown land", it extends below the Mount Lawley land.

14. The report noted that "the identification and rezoning of rural land for urban purposes will increase land values and provide unearned increments to some landowners". However, the report also sounded a note of caution, pointing out that not all the land so identified would be needed in the foreseeable future. Landowners or developers were warned not to anticipate any outcome until public consultations and amendments to the Scheme had been completed.

15. The references to wetlands in the corridor plan review were derived from a much more comprehensive assessment in Working Paper 17 which preceded the review but which was published in conjunction with it.

16. Working Paper 17 was entitled "The Metropolitan Parks System" (exhibit 2221).  Its purpose was said to be "to explain the thinking behind the recommendations for the Metropolitan Open Space System".

17. The Working Paper classified natural resources into a number of categories, including bushland and wetlands.  As to wetlands, it was noted that:

    "… only in latter years has the real value of certain natural features been recognised, and hence their subsequent incorporation into regional parks has occurred.  Wetlands are perhaps the best example.  Historically most were considered worthless as landscapes, having social value mainly as sites for market gardens around their peripheral margins.  Their ecologies, reverred [sic] by pre‑european Aboriginal society, were neither understood nor appreciated by the colonial community at large except in a purely utilitarian sense.  This has quite recently changed.  Wetlands today are a principal focus of community concern with the region's environment.  Hence, from alienated tenure following first settlement, many wetland environments are now being incorporated into new reserves and being acquired back into public ownership.  Major portions of Lake Joondalup and the East Cockburn wetland chain for example, have only been reserved in the MRS and acquired by governments in the last two decades."

18. Later in the Working Paper, there was a description of the wetlands and an explanation of their importance:

    "The wetlands of the coastal plain are surface expressions of the groundwater table.  They are numerous, varied in physical character and changeable in size and occurrence.  Size varies from the largest such as Lake Joondabup at over 1km width or Lake Joondalup at +3kms in length, to the smallest swamps which sprinkle portions of the region in large numbers.  Some are permanent with open water to 2m depth but most are shallow and lose their standing waters each summer as the water table drops and massive summer surface evaporation rates (3 metres per year) take their toll.  Some 67% of 15,700 hectares of all wetlands on the Swan Coastal Plain are lost each summer in this way.

    The wetlands are important because they are biologically the most productive environments of the plain.  They are therefore a significant part of the region's ecology.  They feature a diversity of vegetation in their waters, along their margins and on adjacent drier ground.  Their function as waterfowl habitats and summer refuges for inland and migratory birds is recognised internationally.

    The occurance [sic] of wetlands reflects the changing land form.  Many occur in chains running parallel to the coast in association with the different dune systems.  Hence wetlands of one type or another are found throughout the coastal plain, and as such represent an important opportunity for landscape interest and wildlife value."

19. And later again:

    "In the last 10 years the wetlands have gained great conservation interest.  Although it is estimated that between 60 to 80 percent of the original stock of wetlands have disappeared, there still remains a large wetland resource.  Wetlands located within the urban area have mostly been substantially modified, and inevitably so.  Retention of wetlands in unchanged, natural condition requires almost total isolation from all surrounding land use.  Even then regional changes in groundwater quality over the wide area can still influence the character and condition of a wetland.

    The greatest risk to the overall capacity of the wetland system is that it will diminish due to excessive lowering of the water table.  This could result from continued, unchecked pumping of water from the aquifer, particularly from private bores.

    Another concern is that individual decisions will continue to be made to drain, fill in or clear the associated vegetation of small and ephemeral wetlands, especially those in rural locations.  It is easy to compromise and attach little importance to the loss of any one wetland.  But over a long period the cumulative effect may lead to a serious depletion of the total stock.  The varied wildlife dependent on them, particularly waterfowl, will consequently diminish also."

20. The Working Paper referred also to the geological setting of the Swan Coastal Plain:

    "The coastal plain has been the focus for the majority of urban development in the region.

    The plain is comprised of sedimentary rocks culminating in a geologically very recent series of dune systems running parallel to the coastline.  These form the dominant but variable landscape character of the plain (Figure 2).

    Nearest the coast are the most recent Quindalup and Spearwood Dune Systems.  These are relatively fertile and exhibit the steepest terrain and most interesting topography of the plain.  Midway occurs a broad band of Bassendean Sands.  These are extremely infertile, higher in elevation (up to 60m AHD) and feature an open landscape with wide horizons."

21. The Mount Lawley land is situated on the infertile Bassendean Sands.  However, the Working Paper noted the importance of the northern banksia woodlands on the Bassendean Sands.

22. Reference was made also to the importance of groundwater in the Swan Coastal Plain, and in particular, the superficial or unconfined aquifer mentioned above: the Gnangara Mound:

    "The larger Gnangara Mound to the north has a north south ridge rising to 70 metres AHD, a total volume of 65,000 million cubic metres and volume of stored water estimated at 13,000 million cubic metres.  The southern, smaller Jandakot Mound has an elevation of 25 to 30 metres only and a storage capacity estimated at 5000 million cubic metres.

    These two water bodies are not only principal sources of water for the urban population, but are essential components of the region's ecology.  The vegetation and animals of the region are directly dependent upon the groundwater.  They are also a dominant feature of the water balance of the region.  Without their existence the coastal plain would be barely habitable.

    Seepage from the aquifers supplies water into the few surface water courses that exist, and where the water table is exposed at the ground surface there occur the distinctive swamps and lakes of the plain."

1. James Philip Singleton was a co‑author of the Working Paper (although it bears only his name) and a member of the Corridor Review team, on secondment from the State Planning Commission, where he was a Senior Planning Officer (exhibit 4031).  Mr Singleton gave evidence at the trial and the retrial.

2. Mr Singleton's evidence, all of which I accept, was that one purpose of the Working Paper was to explain succinctly how an "opportunity constraints analysis" was undertaken.  This involved, ultimately, the preparation of a "constraints map" on which environmental, social and engineering factors were combined, so that their composite effect on urban development could be assessed.  In this way, it would be possible to devise a planning strategy for the Metropolitan Region.

3. The working diagrams produced by Mr Singleton (exhibit 2883) indicated that the Mount Lawley land was in an area of largely medium and partly low constraint.  However, as Mr Singleton explained in his evidence, planning for the Metropolitan Region did not, at that stage, envisage the north‑east corridor as being as extensive as it became later.  For this reason, the Mount Lawley land did not "get heavily considered for a major growth area for urbanisation" in the 1987 study (TS 9083).

4. The Mount Lawley land was recognised in 1987 as having a high conservation value.  Mr Singleton said it was one of the few locations he visited for the purpose of the study; and that he did so "because it was such an unusual find … a superb piece of bush (Banksia Woodland)".  He referred to the high quality of the woodland, which had not been cleared previously; to the wetland features and to the topography.  This featured a series of dunal ridgelines which partially enclosed the site and hence provided additional landscape interest and a degree of natural protection.

5. For these reasons, the Mount Lawley land "was deliberately excluded from consideration as a possible location for future urban development".  Indeed, Mr Singleton prepared a plan which showed the Mount Lawley land (and some land to the east containing wetlands) as an accretion to the land already in public ownership, thereby extending the Metropolitan Park System to that extent.  He accepted that the inclusion of the Mount Lawley land was not essential solely for the purposes of linking areas of parkland (TS 9078).  Further, Mr Singleton contemplated that the Mount Lawley land would be subject to restricted development if in private ownership, or that it would be acquired for public purposes by negotiation, or compulsorily (TS 9080).

6. In my view, Mr Singleton was well qualified to express the opinions referred to above.  His first degree in geography (1973) included subjects relating to environmental science.  His Master's degree had a component of environmental planning and involved a thesis on urban wetlands.  He is the author of a chapter entitled "Environmental Planning for the Swan Coastal Plain" in a 1992 work "Regional Planning in WA", and he has practised as an environmental geographer and regional planner since 1974, this work involving planning and environmental studies.

7. Mount Lawley objected to the whole of Mr Singleton's evidence, on the basis that it relates only to steps taken as part of the process of reservation of its land and was therefore irrelevant.  This reflects Mount Lawley's contention that "the Scheme" commenced in 1987, and that everything thereafter led to the reservation in 1992 and should be disregarded on the Pointe Gourde principle.

8. It is common ground that 1987 is the appropriate starting point for the identification of the "the Scheme" in s 36(2b) of the Scheme Act: but for different reasons. The WAPC contends that the conservation significance of the Mount Lawley land was recognised in 1987: and that the steps taken then and subsequently to reserve it simply gave effect to its characteristics. The reservation was not driven by a desire to acquire the Mount Lawley land. It is therefore submitted that this is not a step which falls within the San Sebastian principle.

9. The WAPC contends further that, insofar as the identification of the north‑east corridor increased the value of the Mount Lawley land by creating a potential for development, it was a step in that part of the Scheme of amendment 879/33 which involved a rezoning of rural land to urban deferred.

10. The WAPC submits that the step should be ignored because the process resulted from the desire to create an urban corridor.

11. For reasons which appear below, I accept the submissions of the WAPC.  I therefore consider that Mr Singleton's evidence is relevant, because it explains the reason for earmarking the Mount Lawley land.  The evidence is therefore admissible.

12. Another assessment of the Mount Lawley land was made by Ronald Edward Sokolowski, in August 1989.  Mr Sokolowski was then a Senior Technical Officer with the Department of Conservation and Land Management ("CALM") and the personal assistant to Dr David Coates, a senior research scientist with CALM.

13. In 1989, Mr Sokolowski, who gave evidence by telephone at the retrial, worked in the department of CALM which was concerned with threatened species of flora.  For a reason he was unable to recall (but which he believed to have been for the purpose of a general appraisal for conservation and protection and as a possible nature reserve) Mr Sokolowski visited the Mount Lawley land on 22 August 1989 (TS 8207).

14. In a report he prepared on that day, Mr Sokolowski set out his preliminary assessment of the conservation value of the land (exhibit 2095).  He referred to its "rich floristic diversity".  He referred also to "the very large areas of natural wetlands which occur throughout this block".  There were "valuable ecosystems which currently display no environmental damage and must, therefore, be very valuable habitat zones".

15. Mr Sokolowski recommended that the "commendable" floristic diversity and richness made the land worthy of protection and proper management.

16. As Mr Sokolowski explained in his evidence, his view was that the land should be acquired and managed by a State instrumentality such as CALM (TS 8211).  However, he emphasised that his was only a preliminary assessment (TS 8212).  He accepted also that banksia woodlands are a fairly common feature of the Swan Coastal Plain, and that there was nothing unusual or extraordinary about these banksia woodlands, other than their general health.  They represented the area generally (TS 8208).

17. I accept all of Mr Sokolowski's evidence.

18. The next step in the planning process was the release of a Draft Urban Expansion Policy Statement in May 1990 (exhibit 2232).  The Statement was proposed in a DPUD report and contained a foreword signed by David Hatt.  Mr Hatt, who gave evidence at the retrial, was then the Chief Executive Officer of the DPUD.

19. The Draft Policy Statement referred to the receipt of some 1200 submissions from the public, and a wide range of detailed comments from various agencies, authorities and other organisations.  Those submissions were considered, and the previous proposals re‑assessed.  The Draft Policy Statement was produced so as to provide further opportunity for comment.  It was expected that the Urban Expansion Policy Statement and the Metropolitan Strategic Plan would be published subsequently.

20. The Draft Policy Statement referred to the need to accommodate the rapidly increasing population in the Perth Metropolitan Region, which was said to be one of Australia's fastest growing regions.  There were, however, factors in the coastal plain which constrained urban development.  These included the need to protect the Gnangara Mound and "significant environmental areas, including wetland areas".

21. There was a reference to "the semblance of a north‑east corridor" in the preferred strategy of 1987.  The proposal was to provide for continued growth with an emphasis on a number of areas including an enlarged and extended north‑east corridor, extending between Midland and Upper Swan on both sides of the Swan Valley.

22. Two categories of potential new urban land were identified in the Draft Policy Statement: A and B.  Category A included some 19,800 ha, considered to be most suited to development within the next 30 years.  Of that, some 6,320 ha were located in the extended north‑east corridor: in West Swan, Beechboro and Middle Swan.  A further 1,700 ha in that corridor were in category B; land suitable for urban development in most respects, but which was subject to "identified major constraints".  These included "environmental issues".

23. Category A was divided into A1 and A2.  Category A1 areas represented extensions to existing development fronts and were therefore to be the principal sources of new housing in the next 5 – 10 years.

24. Category A2 areas were regarded as having medium to long term potential, having regard to short term constraints which would need to be overcome.

25. It appears from the sketch maps in the Draft Policy Statement that no urban development was proposed in areas located above the Gnangara Mound.

26. Although the plan showing the location of category A and B land was on a relatively small scale and did not identify cadastral boundaries, it seems that the Mount Lawley land was not included in those categories, but was in an area still designated as rural (exhibit 2115).

27. The publication of the Draft Policy Statement prompted a response from Mount Lawley.  In a letter dated 31 July 1990, a director of the company wrote to the DPUD complaining that its land had been omitted from any urban category, "despite its suitability for that purpose".  It was said that detailed surveys had shown that there were only 70 ha of wetland in the total area of 320 ha: a little over 20 per cent.  The balance was "high, dry banksia covered sand hills which are perfectly suited to urban development".  Mount Lawley asked that its land be included in one of the urban categories (exhibit 2116).

28. By this stage, the Ellenbrook proposal was already on foot.  The proponents, Ellenbrook Management and Mount Lawley, had retained Feilman Planning Consultants ("Feilmans") to assist them.

29. In July 1990, Feilmans made a submission to DPUD in response to the Draft Urban Expansion Policy Statement.  Feilmans forecast a considerable shortage of housing land and pointed to a number of possible impediments to the development of virtually all of the areas identified in the Draft Policy Statement.  Further, they doubted whether many additional potential sites would be identified, "given the serious environmental constraints on the coastal plain".

30. Feilmans noted that although much of the proposed Ellenbrook area had been included in category A, the Mount Lawley land had not, "presumably … because of the presence of some areas of wetland".  They recommended the inclusion of the Mount Lawley land and an area of State forest.

31. As I understand it, the proposal for inclusion of an area of State forest was to permit that land to be exchanged for wetlands on the Mount Lawley land, which would not be suitable for urbanisation.

32. There is no evidence of any response from DPUD to the submissions made by Mount Lawley and Feilmans.  However, the final planning policy statement, known as Metroplan, published by the State Government in December 1990 (exhibit 2233), did not include the Mount Lawley land in the proposed urban expansion areas.  The relevant plan, figure 3, appears to have the same configuration in the north‑east corridor as the equivalent plan in the Draft Policy Statement which prompted the complaint from Mount Lawley and Feilmans.

33. Metroplan referred to "the most significant" new growth area being in the north‑east corridor.  Reference was also made to areas which had been "earmarked for long‑term protection because of their water resource and environmental significance".  These included the Gnangara Mound and "natural wetlands".  However, Metroplan referred specifically to the proposal for the development of Ellenbrook, as a "major new urban settlement which will house up to 70,000 people".  As I have noted above, this did not appear to include the Mount Lawley land: see figure 3.  Further, although only in concept form, figure 9, which showed the proposed open space for the region, appeared to include the Mount Lawley land as an additional open space area: cf figure 3.  In par 8.4, it was stated that:

    "METROPLAN supports additions and exclusions to the Region's National Parks as indicated in conceptual form in Figure 9."

34. Although Metroplan was said to provide "the broad framework for future development in the Metropolitan region", new or revised structural plans were to be prepared for the five sub‑regions, including the north‑east corridor.

35. In March 1991, there was a discussion between representatives of Mount Lawley and the Minister for Planning.  The discussion is the subject of a letter dated 25 March from Mount Lawley to the Minister, in which "the proposed land exchange" was said to be a transaction which would facilitate the entry of Mount Lawley into the joint venture with Homeswest and Sanwa for the development of the area (exhibit 578).

36. In July 1991, Feilmans, acting on behalf of Ellenbrook, submitted a draft document entitled "Ellenbrook Public Environmental Review Report" (exhibit 873) to the Environmental Protection Authority ("EPA").

37. Feilmans pointed out that Mount Lawley was not involved in Ellenbrook Management.  However, Feilmans included the Mount Lawley land (and the Multiplex land) in the ambit of the draft report, because:

    "Sound planning practice requires that the land be considered comprehensively at the structure planning level and hence should be rezoned as one parcel." (page 7)

38. As the Full Court held, at [79], the EPA had no authority to require that a Public Environmental Review ("PER") be conducted.  However, the draft report is significant, in my view, because it recognised the conservation significance of 400 ha of the site.  The following passage (page 4) is relevant:

    "A detailed analysis of the wetlands was conducted to establish the nature of the vegetation. It was found that the vegetation associations and assemblages, while not being particularly significant in themselves, have considerable conservation value because of the small number of remaining wetlands on the Coastal Plain. The management issues involved in retaining all or some of the wetland area have been assessed and the conclusion reached that the best approach will be to preserve an area of approximately 100ha by reservation under the Metropolitan Region Scheme. This is the portion of the total wetland area which exhibits the greatest diversity of characteristics and is best suited to long term management. The total area which embraces the wetlands exceeds 400ha and it has been concluded, following discussions with Officers from CALM that resources would not be available to effectively manage such a large area. Without adequate management the area would quickly deteriorate due to feral animal and weed intrusion."

39. The total area "which embraces the wetlands", included areas of vegetation which were the subject of further consideration in the draft report.  In particular, the banksia woodlands were said to vary considerably in both physiognomy and species composition "but there are no assemblages of species which are recognised as being particularly unusual" (page 31).  And later:

    "The value of the Ellenbrook area lies purely in the fact that most of the (flora) habitats on the Swan Coastal Plain are destroyed or heavily degraded." (page 32)

40. Feilmans' draft report did not satisfy the EPA.  At a meeting of officers from the EPA, the Water Authority, the DPUD and CALM on 2 August 1991, the EPA representatives expressed their concerns about a number of matters including the protection and management of existing wetland areas (exhibit 284).

41. The EPA's concerns were directed more specifically to the Mount Lawley land at a further meeting on 26 August 1991, where Robert Allan Douglas Sippe of the EPA referred to the management of the Mount Lawley land, "which contains environmentally sensitive wetland", and to the reluctance of CALM to use State forest land for urban purposes (exhibit 285).

42. The concerns had not been resolved when, in September 1991, Eugene Ferraro, a Senior Planning Officer with DPUD, produced a file note in which he discussed the current issues relating to Ellenbrook and set out four options available to the State Planning Commission.

43. Mr Ferraro did not give evidence at the retrial, but his file note became an exhibit (exhibit 1219).  Under the heading "Regional Open Space", Mr Ferraro wrote:

    "One of the major landholdings (Mt Lawley) is affected by a wetland system which is considered to be of high environmental significance.  The PER will recommend that the most important lake should be protected via a Regional Open Space Reservation.  The amendment as submitted reflects the preservation requirements and proposes to rezone approximately 80 ha of land to Parks and Recreation.

    This action will require the Commission to either purchase the land or pay compensation for injurious affection.  The Commission has four options regarding this land.

    1.Proceed with the amendment as submitted and commence negotiations to purchase the land affected.

    2.Proceed with a modified amendment which proposes to reserve only the land required for the reservation, with the balance remaining Rural, thus ensuring lower "next best use" value.

    3.Delete the whole of the Mt Lawley landholding from the amendment.

    4.Include the whole of the Mt Lawley landholding within the Urban Deferred zone."

44. It is submitted for Mount Lawley that this document is entirely inconsistent with the proposition that the condition of the Mount Lawley land was such that it could never be rezoned urban.  Rather, it is submitted, the document shows that "the ultimate outcome was always to be a trade off between conservation and cost".

45. Having regard to the circumstances in which the document was prepared (and given that it reflects the views of an officer, not the WAPC itself) I do not accept that submission.

46. The most important circumstance, I find, was that the environmental significance of the Mount Lawley land had not then been investigated fully.  Secondly, the view of the executive government at the time, was that there was a serious shortage of land suitable for residential development and a need to expedite development in accordance with the Corridor Plan.  It is therefore understandable that an officer in the DPUD would wish to expedite the Ellenbrook proposal.  This explains Mr Ferraro's conclusion, which was in the following terms:

    "It is considered that the issues mentioned above are not significant [sic] to warrant the amendment being delayed.  The EPA issue can be addressed via a modification to the recommendation suggested.  A decision can be made on the proposed zoning or reservation of the Mt Lawley landholding based on financial considerations, given that his [sic] land is not necessary to be included within the amendment to make the Ellenbrook project viable."

47. A further indication of the DPUD's position is given by a brochure it published in October 1991, entitled "The North‑East Corridor, Planning Issues and Growth Options" (exhibit 2238).  The brochure was designed to elicit public response to two possible development options for the north‑east corridor: a linear and a cellular option.  This was part of the process leading to the preparation of a structure plan.

48. The brochure contained drawings showing the two options in conceptual form.  Although cadastral boundaries are not shown, it seems clear that in both options, something under half the area of the Mount Lawley land would become urban, with the remainder being designated as "rural, conservation and open space" (exhibit 2134.01 and 2134.02).

49. It is equally clear, however, that the possible urban areas are different in each case: and that neither reflects the proposed reservation then under consideration.  Further, it was stated in the brochure that when planning the north‑east corridor, "it will be important to make sure that the whole range of environmental factors is taken into account and important landscape and environmental features are preserved".

1. His Honour also had regard to the fact that the conduct of the Authority had not been such "as would have instilled complete confidence into those having the carriage of the claimant's case".  In particular, there were "the strange discrepancies between the statutory offer and the open offer, on the one hand, and the value supported by the testimony of the Authority's valuer, on the other."

2. In all those circumstances, the Authority was ordered to pay three‑quarters of the claimant's costs of and incidental to the reference on "the First scale".  As I understand it, this is a scale appropriate to the trial process.

3. Mount Lawley then refers to the judgment of Talbot J in the Land and Environment Court of New South Wales in Pastrello v Roads and Traffic Authority of New South Wales (2000) 110 LGERA 223. In that case, the applicants sought compensation following compulsory acquisition of part of their land. The Authority had offered $230,000 by way of compensation. This was made up of $53,400 for the value of the land and $176,253 being the applicants' costs and expenses and the value of work which they had carried out on the land.

4. The Court ultimately accepted that the value of the land was $53,400.  However, the applicants were awarded a greater amount than they had been offered in negotiations to compensate them for the disturbance to their business resulting from the acquisition and works associated with it.  Talbot J said:

   "In one sense the applicants were totally unsuccessful on one aspect of this issue because the Court rejected the evidence of their expert witnesses and preferred the opinion of the respondent's experts who contended there would be no impact upon the viability of the existing business.

   Nevertheless, it must be noted immediately that the applicants would not have been successful in recovering $53,400, representing the market value of the land if they had not persisted with the referral to the Court.

   Furthermore, the applicants were successful in recovering disturbance items totalling $131,135.50 over and above those items in respect of which agreement had been reached either before the commencement of the proceedings or during the course of the proceedings."  (at 224)

5. A little later in his judgment, Talbot J said:

   "For the respondent to now turn around and say that the applicants should not have any order for costs in relation to the market value issue on the basis that they could have accepted the pre‑acquisition offer is fatuous in circumstances where the offer was not maintained after acquisition and never raised by the respondent as a basis for compensation during the course of the hearing.

   The issue of the value of the land taken and the effect on adjoining land was clearly one upon which the parties differed.  In the result, the applicants were successful in recovering compensation under this heading which they would not have otherwise recovered.  The Court's task is to assess the amount of compensation payable in a lump sum."  (at 225)

   His Honour went on to refer to instances in which the Court had been prepared to make special costs orders in the exercise of its discretion.  His Honour said that in Maloney v Cowra Shire Council [2000] NSWLEC 107 and Nevitoro Investments Pty Ltd v Hawkesbury City Council [2000] NSWLEC 151, there had been clearly defined and separate issues upon which the respective applicants had failed totally. His Honour said that this was not such a case. His Honour continued:

   "It has been said many times that the compulsory acquisition of land from an unwilling owner is a serious interference with that person's entitlement to quiet enjoyment and generally wide discretion to do with their own land as they see fit.  It is a power of the State which is exercised for the public benefit.  Very seldom does the resumption work to the benefit of the dispossessed owner.  There needs to be a strong justification for awarding costs against an applicant where the effect of making that order is to erode the benefit of the just compensation recovered as a consequence of the Court's determination.  It is only in special cases that the Court will deprive the owner of the full benefit of the compensation which is determined as fair and just in the circumstances of the case."

   His Honour went on to note that an order for costs against the applicants would have had a significant impact on the ultimate amount they recovered.  Further, his Honour held that the applicants were entitled to investigate the impact that the acquisition had on the market value of their land and to put forward "cogent arguments for compensation".  The arguments presented by the applicants' experts and by the applicants themselves were not frivolous "and fell within the contemplation of the relevant legislation".  His Honour therefore concluded that there should not be a special order for costs.  The Authority was ordered to pay the applicants' costs of the proceedings, including the application for costs.

6. The passage set out above from the judgment of Talbot J was adopted by Hill AJ in Downie v Sorell Council [2005] 141 LGERA 304 at [112], a decision of the Full Court of the Supreme Court of Tasmania in a compensation case. Talbot J accepted submissions that generally, the approach to the question of costs in such matters should include a consideration by the Court of the following matters:

   "(1)Costs should be awarded to the claimant if the award of compensation is significantly higher than the amount offered by the authority.

   (2)The determination of compensation is not ordinary litigation and arises out of a unilateral decision by the acquiring authority to compulsorily acquire the claimant's land.

   (3)Costs are compensatory, not punitive.

   (4)The extent to which an award of costs to the acquiring authority will erode the full benefit of the compensation awarded.  (His Honour then referred to the passage from the judgment of Talbot J in Pastrello (supra) at [17].)

   (5)The extent to which the claim was frivolous or excessive as compared to the amount awarded."

7. His Honour went on to note that the trial Judge in the case under appeal had found that the claim was not frivolous.

8. A similar approach was taken by Blow J in State of Tasmania v Effingham Pty Ltd (No 2) [2006] TASSC 32. His Honour had been a member of the Court in Downie v Sorell Council (supra).

9. As appears from the judgment of Blow J, s 60 of the Land Acquisition Act 1993 (Tas) is a provision in almost identical terms to s 36 of the Land Acquisition Act 1969 (SA) to which Wells J referred in Brewarrana (supra) and which I have set out above.

10. In exercising his discretion in Effingham's case (supra), Blow J noted that the compensation awarded to the respondent was only $3500 more than had been offered by the Crown.  However, it was "tens of thousands of dollars less than the respondent was seeking".  His Honour was therefore of the view that the Crown should be regarded as having had a greater victory than the respondent.  However, his Honour regarded it as very significant that it had been necessary for the respondent to take the case to a hearing in order to obtain the amount of compensation determined to be appropriate.

11. Blow J also took into account that the respondent's compensation would be eroded significantly if it was ordered to pay costs or if it did not recover its costs in full.  His Honour referred to Pastrello's case (supra) and Downie v Sorell Council (supra).

12. Blow J noted that the respondent had relied on an expert whose opinions he had rejected.  His Honour said:

    "I concluded that they were unrealistic, and inconsistent with common sense. He made absolutely ridiculous assertions …" (at [13]).

13. Further, the respondent had failed on an important issue in the case.  His Honour said that but for the respondent's reliance on the discredited experts and its failure on the particular issue, he would have ordered the applicant to pay all the respondent's costs.  However, in the circumstances, his Honour ordered that the applicant pay 85 per cent of the respondent's costs.

14. In my view, two points emerge clearly from the authorities on which Mount Lawley relies.  First, is the fact that they are all compensation cases.  Mount Lawley contends that the present case should be approached in a similar way, because although its land has not been acquired compulsorily, it has been effectively sterilised by the reservation.

15. In the Mount Lawley appeal, the Full Court gave detailed consideration to Mount Lawley's contention that the WAPC's election to acquire the reserved land under s 36(2)(a) of the Scheme Act should be regarded as a compulsory acquisition. Had that contention been accepted, Mount Lawley would have been entitled to be compensated for the kind of expenditure, including rates, land tax, metropolitan region improvement tax, and the cost of insurance, fire prevention and maintenance to which it would have recovered on a compulsory acquisition.

16. The Full Court did not accept Mount Lawley's contention. The Court held that the election to acquire is not equivalent to a compulsory acquisition and the election is not binding on Mount Lawley ((2004) 29 WAR 273 at [263]).

17. In my view, it does not follow from this conclusion that in exercising the costs discretion in a valuation case, the Court should ignore that the proceedings have arisen out of a reservation.  In some cases, a reservation might not have a great impact on the landowner.  An owner who resides on the land affected by the reservation or who derives his income from it, may continue to do so.  The owner has the comfort of knowing that in due course, when convenient to him, he can sell the land to the State at a fair price, to be determined in the market at that time, without regard to the reservation.  However, when the reserved land is owned by a developer, the situation might be different.  Once the reservation is in place, the developer's plans, whether they be short or long term, are inevitably frustrated.  In those circumstances, there might be no point in the developer retaining the land: he might want to sell and move on.

18. In Cerini v The Minister for Transport [2001] WASC 309, Parker J at [21] said:

    "I do accept that there is a public interest in enabling those who have been the subject of compulsory acquisition to secure their due entitlement to compensation.  In a proper case it would be appropriate, no doubt, to reflect this as the circumstances justified in awarding costs in the action.  I accept it to be a relevant consideration …"

19. Again, this observation was made in the context of a compensation case.  However, I accept it to be a relevant consideration when considering the costs in a valuation case, that the litigation has arisen from the imposition of a reservation on the subject land.  I accept further, for the reasons given above, that this is a consideration which might carry more weight in the exercise of the discretion, if the landowner is a developer.

20. The second point to emerge from the authorities referred to above, is that there is no overriding principle in a compensation case (or in a valuation case) that the amount of compensation (or value) determined by the Court should not be eroded by denying the applicant his costs or requiring him to pay the costs of the relevant authority.  In the end, whether or not there are statutory provisions relating to the exercise of the costs discretion in such cases, it is always necessary to have regard to the particular circumstances.  It cannot be said that only in an exceptional case should an applicant be deprived of his costs, or required to pay the costs of the relevant authority.

Mount Lawley's second argument

1. Mount Lawley contends that further, and in any event, there are particular circumstances in the present case which support orders for costs in its favour.

2. Mount Lawley contends that it should have the costs of the trial because the position it took there, was vindicated by the determination in the re‑trial that the reserved land had some development potential.  This was disputed by the WAPC at the trial.

3. Further, Mount Lawley points to the fact that the value of $4 million determined at the re‑trial was greater than the highest valuation put forward by the WAPC at the trial, namely $2.3 million.

4. In saying that the highest value put forward by the WAPC was $2.3 million, Mount Lawley does not overlook the fact that the WAPC put valuations of $5.25 million to $5.77 million based on a special rural subdivision known as the Burrell Plan.  However, although Mount Lawley attacked the Burrell Plan, the plan was rejected by the WAPC itself at the conclusion of the trial.

5. Mount Lawley then refers to the fact that although the WAPC had argued that no interest was payable on the value of the reserved land to be determined by the Court, the trial Judge did award interest (and was upheld by the Full Court in so doing): and the interest amounted to some $1.6 million by the time the trial Judge delivered his judgment.

6. Finally, in relation to the trial, Mount Lawley relies on the fact that the Full Court held that it was not possible to do justice between the parties "without a proper trial of the complex issues relating to the suitability of the Mount Lawley land for urbanisation and its environmental significance" (29 WAR 273 at [232]).

7. Mount Lawley contends that if it is not awarded the very significant costs involved in litigating those complex issues at the trial, the result will be a material erosion of "the compensation recovered", when those costs were thrown away through no fault of Mount Lawley.

8. Mount Lawley relies on similar arguments in relation to the costs of the re‑trial.  Although Mount Lawley acknowledges that it succeeded on the basis of a $4 million valuation proffered by the WAPC, it submits that the valuation reflects an acceptance of an alternative submission made in closing, that the Court could determine the value "by assessing the risk which the parties to a hypothetical transaction would attach to the prospects of the land being rezoned at some date after 7 May 1996".

9. Mount Lawley observes that such an approach is apparently reflected at [641] of my reasons.  That is so: the Full Court directed that the valuation be carried out on this basis.

The award of costs in the present case

1. In exercising the costs discretion in this case, the starting point must be O 66 r 1(1) of the Rules of the Supreme Court, to which I have referred above.  This requires me to consider whether it can be said that there is a "successful party" in the proceedings.  That was the approach of Wells J in Minister for the Environment v Florence (supra) on which Mount Lawley relies.  It will be recalled that Wells J was of the opinion that at least in the preliminary stages of reasoning, it would be appropriate to ask:

   "Who, on the whole, has been the most successful?"

2. The principle contained in O 66 r 1(1) is encapsulated in the proposition that costs usually follow the event. However, in applications made pursuant to s 36(2b) of the Scheme Act, the Court is required only to determine a value. The concept of the "event" does not involve any consideration of liability.

3. An owner will apply to the Court to determine the value of his land under s 36(2b) only if he is unable to reach agreement as to the price to be paid, under s 36(2a).

4. Valuation is not an exact science. Therefore, if the price sought by the owner is not significantly greater than that offered by the WAPC, it is likely that a compromise will be reached. Generally speaking, therefore, litigation under s 36(2b) is necessary only when the views of the opposing valuers are widely divergent.

5. It is well settled that the Court does not itself carry out valuations.  Again, speaking generally, the Court decides the value on the basis of the expert valuation evidence adduced by one of the parties, in preference to that adduced by the other.

6. It follows, that the outcome of the litigation will be the determination of a value which is, or is close to, that advanced by one of the parties.  It will therefore be clear whether the owner or the WAPC has been the successful party.

7. Adopting that approach in the present case, there can be no doubt that the WAPC has succeeded.  That is because I accepted the evidence of one of its valuers at $4 million and did not accept the evidence of Mount Lawley's valuers at between $11 million and $15.5 million.

8. That, of course, was the outcome of the re‑trial.  However, I consider that costs should be awarded on the basis that the trial and the re‑trial were part of a single valuation exercise.  Indeed, much of the evidence given at the trial was adopted or repeated for the purposes of the re‑trial.

9. I can see no basis for regarding either party as having been successful at the trial, given that the decision of the trial Judge was set aside by the Full Court.  Nor do I accept that Mount Lawley should be regarded as the successful party at the re‑trial, on the basis that it demonstrated that the reserved land had some urban potential, when that had been denied consistently by the WAPC.

10. The overriding issue in the litigation was (and could only be) the value of the reserved Mount Lawley land.  A finding that the land had some development potential is, therefore, a factor to be taken into account in the valuation process.  In other words, that finding is reflected in the value.  It cannot form a basis for gauging overall success in the proceedings.

11. In fact, the valuation which I accepted and which included a premium for development potential, was that put forward by the WAPC.  Had it not done so, there would have been no evidence on which Mount Lawley could have discharged the onus of proving that the development potential of the reserved land had any value.  Although the Court is required to determine value, it can only do so on the basis of the evidence adduced by the parties: the Court does not conduct an enquiry.

12. I therefore see no reason to depart from the usual principle that costs should follow the event.  Not only was the WAPC the successful party (on the basis of the approach outlined above) but Mount Lawley's approach to the litigation was, in my view, fatally flawed.

13. That is because Mount Lawley did not follow the direction given by the Full Court.  This required a determination of the premium (if any) a hypothetical purchaser, perfectly acquainted with the reserved land and all of its characteristics, would have been prepared to pay, over and above the rural value, in order to reflect any development potential the land would have had, but for the reservation.

14. However, Mount Lawley persisted in advancing a case that, but for the reservation, the reserved land would have been re‑zoned urban or urban deferred, and should be valued on that basis. For that reason, I considered the valuation reports prepared by Mount Lawley's valuers, to be inadmissible: see [2006] WASC 82 at [656].

15. In my view, it follows that even if a developer, such as Mount Lawley, should be regarded, in a valuation case, as effectively seeking compensation, and even if there is a principle that his "compensation" should not be eroded by an award of costs, the circumstances of this case are such as to justify a departure from that principle.  To paraphrase Wells J in Brewarrana, Mount Lawley was awarded a great deal less than it was claiming, and it prolonged the hearing by seeking to prove that the land would have been re‑zoned, but for the reservation.  I accept that Mount Lawley relied on the evidence of highly qualified experts, who expressed bona fide opinions.  However, the evidence did not justify Mount Lawley's extreme position.

16. I therefore conclude that Mount Lawley should pay the WAPC's costs of the trial and the re‑trial.

The WAPC's Calderbank offer of June 2005

1. On the view I have taken, it is not necessary to consider the significance of a Calderbank offer made by the WAPC in June 2005, which Mount Lawley did not accept.  However, in case I am wrong in my primary view, I will set out briefly, my opinion about that offer.

1. On 29 June 2005, an Assistant State Counsel wrote on behalf of the WAPC to Mount Lawley's solicitors.  The letter, which was expressed to be "without prejudice save as to costs", contained an offer to Mount Lawley to settle the action on the following terms:

   "1.The Respondent pay the Applicant the sum of $6.8 million for the land reserved for parks and recreation.

   2.The Respondent pay the Applicant interest on the sum of $6.8 million at prevailing Supreme Court rates to the date of settlement (approximately $3.9 million to date).

   3.The Respondent pay 80% of the Applicant's costs of the original trial to be taxed, if not agreed."

2. A letter containing an offer to settle proceedings and written without prejudice except as to costs, is admissible for the purpose of exercising the costs discretion. This is so, even though the offeror could have protected his position by making an offer pursuant to O 24A of the Rules of the Supreme Court, but did not do so:  Dobb v Hacket (1993) 10 WAR 532 at 539 ‑ 540; Den Hoedt v Barwick [2006] WASCA 196 at [112].

3. I was informed by leading counsel for the WAPC that his client usually prefers to protect its position by Calderbank offers, rather than by offers under O 24A.

4. O 24Ar 10(5) provides:

   "Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim up to and including the day the offer was made, taxed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for his costs in respect of the claim thereafter, taxed on a party and party basis."

5. Where this rule applies, an owner who has been unsuccessful will be required to pay the WAPC's costs incurred after the date of the offer he refused, on a party and party basis.  However, the WAPC will be required to pay the costs incurred by the owner down to the date of the offer.  This might include costs incurred unreasonably by the owner, which it would be inappropriate for the WAPC to pay: for example, if the owner's expert evidence has been wholly discredited in the proceedings.

6. The disadvantage from the offeror's perspective of using a Calderbank offer rather than an offer under O 24A, is that the Court's discretion as to costs cannot be fettered by the fact that a favourable Calderbank offer has been rejected.  Although the circumstances in which the offer was made and rejected will be relevant to the exercise of the costs discretion, the principle that costs follow the event will be applied, unless the plaintiff acted unreasonably in rejecting the offer:  NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77 at 98.

7. Where a Calderbank offer is rejected, but proves to have been more favourable to the offeree than the result of the trial, the offeror will usually seek his costs on an indemnity (or solicitor and client) basis from the date on which the offer was made.  That is not the case here: the WAPC does not seek indemnity costs: TS 8561.

8. Although the effect of the rule may be ameliorated by an order of the Court, its effect, presumptively at least, is to remove the discretion as to costs.

9. In the present case, the explanation for Mount Lawley's non‑acceptance of the WAPC's Calderbank offer of 29 June 2005 was given by Martin Copley, a director and the principal of Mount Lawley, in an affidavit sworn on 10 July 2006.

10. Mr Copley's reasons may be summarised as follows:

    1.The offer was silent as to the costs of the re‑trial incurred at the date of the offer.

    2.The amount of the offer did not reflect valuations obtained by Mount Lawley, which had been disclosed to the WAPC before the date of the offer.  These were valuations which ranged from some $11 million to $15.5 million.

    3.Mr Copley had available to him valuations obtained by the WAPC giving values of $14.6 ‑ $15.6 million.

    4.Mr Copley believed, on the advice provided by Senior Counsel and Mount Lawley's solicitors, that the valuations were reasonable and achievable.

    5.The amendment to the town planning scheme as advertised originally, proposed reservation of only 90 hectares of the subject land for parks and recreation.  On this basis, Mr Copley believed that a significant part of the land could be seen as capable of development.

    6.There was a lack of certainty about the legal costs.  That lack of certainty had two components.  The first was the difficulty in estimating costs incurred by Mount Lawley to that date.  Secondly, Mr Copley was unsure of the basis for the suggestion that 80 per cent of Mount Lawley's taxed costs were to be paid by the WAPC.

    In relation to the last point, Mr Copley said:

    "I did not know what would happen when the costs were taxed.  I was concerned that the Respondent would allege at the taxation that various items on the bill of costs should be reduced on the basis that it was unreasonable to have incurred that expense, either in part or in full.  If that occurred, and then there was a further discount of 20% on the total bill (being the discount proposed in the purported Calderbank) then effectively the costs would be subject to a 'double discount'.  I also did not think that scale costs would adequately cover the Applicant's costs, particularly in the absence of any special costs orders."

11. As a result, Mr Copley said that when he considered the Calderbank offer, he was unable to make "a carefully considered comparison between the offer made and the ultimate relief I was seeking".

12. The judgment whether a Calderbank offeree acted reasonably in rejecting the offer must be made in hindsight.  In making that judgment, it is not to the point that the offeree believed, when the offer was made, that he would better it at trial.  It is irrelevant whether the offeree reaches his decision unaided or on the basis of legal or other expert advice.

13. Thus, the fact that Mount Lawley had the valuations referred to above has no bearing on the question of reasonableness.  This is so, in my view, even though two of the valuations had been produced by the WAPC: those valuations were clearly based on an acceptance of Mount Lawley's position.

14. In short, although Mr Copley believed on reasonable grounds that Mount Lawley's contention as to value would be upheld at trial, in hindsight, Mount Lawley's position has been shown to have been unreasonable.

15. There is a principle that an offeree does not unreasonably reject a Calderbank offer if there is some reasonable doubt about its value:  Duncan & Weller Pty Ltd v Mendelson [1989] VR 386 at 401; Grbavac v Hart [1997] 1 VR 154 at 155.

16. In this context, I do not think Mount Lawley can rely on the fact that it had difficulty in estimating its costs of the trial and the preparation of the re‑trial down to that date.  The Calderbank offer was expressed to be open for acceptance for a period of 28 days.  I should have thought that that would have been a more than sufficient period in which to obtain the relevant information.  In any event, the information is entirely within Mount Lawley's knowledge.

17. Mr Copley was not cross‑examined on his affidavit.  His statement that he was unsure of the basis for the suggestion that 80 per cent of the taxed costs of the trial were offered may therefore be accepted.  However, I do not think it necessary for a Calderbank offeror to explain the basis on which his offer is made.  The offeree needs only to know what the offer is worth.  In making that assessment, the offeree must do the best he can to estimate the likely outcome of the taxation of costs.

18. The fact that the WAPC's offer was silent as to the costs of the re‑trial, needed no explanation.  Clearly, the WAPC was not offering to pay those costs.

19. I therefore conclude that Mount Lawley acted unreasonably in declining to accept the WAPC's Calderbank offer of 29 June 2005.  The result is, that if (contrary to my view) Mount Lawley should be regarded as the successful party at trial, I would have ordered it to pay the WAPC's costs incurred after the date of the offer.

A without prejudice offer made in 1996

1. The WAPC seeks to rely on an offer it made in December 1996, to purchase the reserved Mount Lawley land (and the additional land reserved for a Controlled Access Highway) for $5.47 million.  The offer was set out in a letter written without prejudice.

2. The WAPC submits that the offer should be taken into account in relation to the question of costs because it demonstrates that Mount Lawley acted unreasonably in seeking to have the value of its land determined by the Court and demonstrates that Mount Lawley was not obliged to litigate in order to obtain a fair price for its land.

3. Mount Lawley contends that the offer having been made "without prejudice" it is privileged.  Against that, the WAPC contends that the privilege was waived.

4. I accept that negotiations properly characterised as "without prejudice" are inadmissible on questions of costs: see generally, "Cross on Evidence", 7th Australian ed, [25360].  Only Calderbank offers - offers made without prejudice except as to costs - can be used in that context.

5. In the trial leading counsel for Mount Lawley adduced evidence about the offer from an officer of the WAPC in the course of cross‑examination.  The evidence was given without objection by leading counsel for the WAPC.

6. Leading counsel for Mount Lawley used the evidence as the basis for the submission that:

   "If [the offer] constitutes a responsible decision by a minister and a department of government entrusted with the administration of public funds as fiduciaries for the community as a whole, then in our respectful submission it is an unequivocal concession that the highest and best use of the land was always more than rural and that being the case, the gateway is open to an urban assessment."  (TS 6422)

7. In this case, it cannot be said, I think, that leading counsel for the WAPC failed to object to the admission of the evidence through inadvertence.  Counsel said of that evidence:

   "I'm not suggesting that it's not irrelevant in the sense that it is a factor that can be taken into account in assessing the evidence in this hearing, but it is the evidence in this hearing that your Honour relies upon in order to determine the market value, whether or not the respondent has made an error or whatever or decided for whatever commercial reason to offer more."  (TS 6082)

8. However, having regard to the purpose for which the evidence was adduced, and the basis on which leading counsel for the WAPC submitted it should be used, I consider that privilege was waived only for that limited purpose:  see Allison Pty Ltd v Lumley General Insurance Ltd [2005] WASC 37 at [47], and the authorities there cited.

9. However, I consider that the WAPC would be entitled to rely on the evidence to rebut an assertion by Mount Lawley that it had been obliged to litigate in order to achieve a fair price for the reserved land:  Mann v Carnell (1999) 201 CLR 1 at [100] to [109]. The privilege would be waived because it would be unfair to the WAPC to permit Mount Lawley to assert that it was compelled to litigate, when material which would otherwise be privileged contained a complete answer to that proposition.

10. That is not the end of the matter.  In my view, accepting that the privilege was waived, it does not follow that the offer made in December 1996 should have the same consequences as if it were a Calderbank offer.  Plainly, it was not an offer in this category: it was not expressed to have been written "without prejudice as to costs".  In other words, there was nothing in the offer which alerted Mount Lawley to the risk that it might be used in this context, even if privilege was waived.

11. Further, as noted above, the offer was made in respect not only of the reserved Mount Lawley land, the value of which was in issue in the proceedings.  The offer was made in respect of an additional 7.9 hectares of land reserved for the Controlled Access Highway.  This parcel has never been valued.

12. Finally, it could not be said that Mount Lawley acted unreasonably in refusing the offer.  That is because it was made before the WAPC's valuations had been provided to Mount Lawley.  Mount Lawley was therefore in no position to assess the value of the offer:  GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55, at [34] and Rolls Royce Industrial Power (Pacific) Ltd v James Hardie and Coy Pty Ltd (2001) 53 NSWLR 626 at [95].

13. In these circumstances, if I am wrong in my primary view, I am not persuaded that the offer made by the WAPC in December 1996 should be taken into account in determining the question of costs.