Murdesk Investments Pty Ltd v Roads Corporation

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 5064 of 2003

MURDESK INVESTMENTS PTY LTD	Plaintiff
v
ROADS CORPORATION	Defendant

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JUDGE:	OSBORN J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	7-9, 13-16, 19-23, 26-30 JUNE 2006
DATE OF JUDGMENT:	5 OCTOBER 2006
CASE MAY BE CITED AS:	MURDESK INVESTMENTS PTY LTD v ROADS CORPORATION
MEDIUM NEUTRAL CITATION:	[2006] VSC 363

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Compensation for compulsory acquisition of part of land – Before and after value – Pointe Gourde principle – Hypothetical zoning – Hypothetical availability of services – Highest and best use – Comparable sales – Enhancement – Severance – Expert evidence – Land Acquisition and Compensation Act 1986, ss.40, 41, 43.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G. Garde QC with Mr C. Porter	Best Hooper
For the Defendant	Mr J. Delany SC with Mr P. Chiappi	Garland Hawthorn Brahe

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Propositions of Law........................................................................................................................... 3

Principal Conclusions as to Contentious Facts............................................................................ 8

Zoning.................................................................................................................................................. 9

Sewerage............................................................................................................................................ 25

The Valuation Evidence.................................................................................................................. 38

Mr Holland........................................................................................................................................ 39

Mr Wallace......................................................................................................................................... 41

Mr Brown........................................................................................................................................... 42

Mr Dudakov...................................................................................................................................... 42

Highest and Best Use....................................................................................................................... 50

Comparable Sales............................................................................................................................. 51

The Northpoint Sale........................................................................................................................ 54

Adjustment........................................................................................................................................ 57

Two Lots............................................................................................................................................. 58

Enhancement..................................................................................................................................... 58

Zoning and Sewerage...................................................................................................................... 61

Severance........................................................................................................................................... 65

The DDO 2 Planning Overlay....................................................................................................... 67

Conclusion......................................................................................................................................... 68

Appendix A....................................................................................................................................... 69

HIS HONOUR:

Introduction

On 1 February 2000 the claimant purchased a parcel of land of approximately 74 hectares in area situated on the southern side of Cooper Street, Epping at No. 335-413 ("the subject land").

The subject land was comprised in two lots, more particularly described as Lots 4 and 5 on Plan of Subdivision 8359, Parish of Wollert, and described in Certificate of Title volume 6821 folio 152. Both lots run alongside each other with frontages to Cooper Street.

The land was traversed by a Gas easement affecting 3.337 ha.

The broader area comprising the subject land was known as the Cooper Street development area or precinct. It had been so designated by the City of Whittlesea (“the Council”) as a matter of planning policy. Although the subject land was zoned for rural purposes there was an expectation that it would be rezoned to facilitate employment generating uses i.e. industrial or business uses.

In February 1998 a parcel of land at 300 Cooper Street on the northern side of Cooper Street and opposite the subject land ("the Scanlan land") had been substantially placed in an industrial zone by way of a site specific planning scheme amendment.

There was, however, some continuing uncertainty as to the future configuration of development in the area for two reasons. Firstly, there was uncertainty as to the alignment of the proposed Craigieburn Bypass, a freeway extension to the Hume Highway proposed to connect to the Western Ring Road. Secondly, there was uncertainty as to the capacity to provide sewerage infrastructure to development within the area.

The bypass was intended to run generally north south. In December 1999 a First Advisory Committee had recommended an option known as Option 5 some distance west of the subject land.

There was, however, continuing controversy over this alignment and through 2000 the bypass was understood to have the potential to take this alignment or alternatively to take a series of other alignments including one running within the western boundary of the subject land.

In mid 2000 a working party formulated a series of further possible freeway alignments and in August 2000 a Second Advisory Committee was appointed to consider the options. In December 2000 the Second Advisory Committee recommended Option Y which ran over the western portion of the subject land.

On 21 January 2001 the Premier of Victoria formally announced the bypass alignment as following a route which traversed the western portion of the subject land in a north south strip.

On 1 July 2001 approximately 43 hectares of the Scanlan land was sold into a joint venture ("Northpoint") for $9,734,139.

In September 2001 amendment C23 to the Whittlesea Planning Scheme was approved facilitating the acquisition of land for the proposed bypass by the imposition of a public acquisition overlay.

In October 2001 part of the Scanlan land was compulsorily acquired to facilitate a widening of Cooper Street in the vicinity of the subject land.

In December 2001 Yarra Valley Water (the local sewerage authority) made an offer to Northpoint for the provision of sewerage to its proposed development.

On 11 February 2002 ("the relevant date") Roads Corporation ("the authority") served a notice of acquisition with respect to that portion of the subject land required for the freeway.[1]
[1]Appendix A shows a plan of the subject land and the acquired portion.

As a result of such acquisition the claimant claims compensation in respect of the market value of the land, together with loss due to severance.

It also initially claimed costs associated with replacement of the land but that claim is not now pursued.

It further, however, claims loss attributable to disturbance and also claims a series of expenses and interest upon the compensation payable to it.

At the request of and with the consent of the parties, the Court has first heard the claim for loss of market value and severance. Such claim is logically distinct from the further claims and it was submitted that if it was resolved by the Court there was some prospect the balance of the claim might be capable of compromise.

In summary the acquisition had the following effect on the dimensions of the subject land:

Total land area	74.56 hectares
Freeway acquisition	16.48 hectares (22.1%)
Sliver of land west of the freeway	2.9415 hectares (3.94%)
Area unaffected by acquisition or severance as a sliver	55.1385 hectares
Portion of land affected by Design and Development Overlay ("the DDO 2 overlay") adjacent to and consequential on the freeway	18.2 hectares (24.4%)
Direct Cooper Street frontage prior to acquisition	699.4 metres
After acquisition	271.81 metres
Difference	427.59 metres

Propositions of Law

It is convenient first to set out critical elements in the statutory framework within which compensation falls to be assessed.

Section 40 of the Land Acquisition and Compensation Act 1986 ("the LAC Act") defines "market value" in relation to any interest in land on a particular date as meaning "the amount of money that would have been paid for that interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser;"

This provision reflects the test formulated by the High Court in Spencer's case[2] and articulated by Isaacs J[3]:

"To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property."

[2]Spencer v Commonwealth (1907) 5 CLR 418

[3]Above at 441

The test postulates a reasonably prudent purchaser. In Pastoral Finance Association Ltd v Minister[4] the Privy Council stated:

"Probably the most practical form in which the matter can be put is that [the claimants] were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it."

[4][1914] AC 1083 at 1088

Section 41(3) of the LAC Act provides:

"If less than the whole of the land in which a claimant's interest subsists is acquired or less than the whole of that interest is acquired, the market value of the acquired interest is the difference between the market value of the interest before the acquisition and the market value of the interest after the acquisition."

This sub-section requires the assessment of market value in the present case to be undertaken by way of a "before and after" analysis. A before and after analysis will embrace not only the loss of the value of the land acquired but also the effect of the acquisition upon the value of the balance. Loss attributable to severance as defined in the LAC Act is thus embraced by the before and after analysis (at least insofar as the notion of severance applies to the balance of the acquired land).

Further, as s.41(2) of the LAC Act reflects, market value is to be assessed by reference to the potential highest and best use available to the land as at the relevant date. Such an approach is necessary to reflect the full value of the land to the owner.[5]
[5]Turner (1956) 95 CLR 245 at 264; March v City of Frankston [1969] VR 350 at 356.

In applying this notion the potential highest and best use may itself be to hold the land for a potential future use. Thus, there is a distinction which may be drawn between land ripe for the subdivision and land having the potential for future subdivision.[6]
[6]Crompton v Commissioner of Highways (1973) 32 LGRA 8 at 25.

Section 43(1)(a) provides that in assessing compensation the following matters must be disregarded:

"any increase or decrease in the market value of the interest in land which is acquired arising from the carrying out, or the proposal to carry out, the purpose for which the interest was acquired;"

This provision reflects the Pointe Gourde principle. As Kirby P stated in Haig v The Minister Administering the National Parks and Wildlife Act 1974[7]:

"It is so named after Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565. According to the principle, which is one devised by the judges, in valuing land for resumption purposes, any increase in the land's value which is entirely due to the scheme underlying the acquisition is to be disregarded. The converse of the principle is also accepted. Any diminution in the value of land which is entirely due to the resumption scheme, or to any blight caused by a step in the resumption process, is to be disregarded in determining the value of the land: see Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196 at 214; … Thus, where it is found that there is a direct causal connection between a restriction on land use imposed by planning and land use legislation and the proposed establishment of the public works for which the land might be resumed, the extent of such restriction on the value of the land must be ignored. Behind this principle lies a search for a fair valuation and an insistence upon just procedures. If it were not upheld in the determination of the value of resumed land, it would be possible for a resuming authority to use its power or influence, in respect of such matters as zoning, to diminish the value of the land to be resumed, to its own advantage and to the disadvantage of the owner at valuation."[8]

[7]85 LGERA 143 at 149

[8]See also King v Minister for Planning and Housing [1993] 1 VR 159 at 183; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 315; Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (2005) 63 NSWLR 407; Broken Bay Peninsular Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 [1997] NSWLEC 165.

The application of the Pointe Gourde principle may give rise to the question whether land is to be deemed to be subject to planning controls which would have applied but for the proposal to carry out the public purpose giving rise to the acquisition.[9] As McLellan CJ stated in Smith v Roads and Traffic Authority of New South Wales:
[9]Smith v Roads and Traffic Authority of New South Wales, [2005] NSWLEC 438 and the cases there cited.

"In simple terms (it is possible to express the problem in more complex and possibly less helpful ways) the approach which has been traditionally adopted involves the following steps:
(1) identify the zoning of the land at the date of acquisition;
(2)determine whether that zoning was imposed or retained in order to facilitate the implementation of the public purpose for which the land was acquired.

If 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."[10]

[10]At [63].

The effects of the implementation of a public purpose may be direct or indirect. The market value of land may be affected by the impact of the implementation of the public purpose not only upon the acquired land itself but also upon the surrounding area.[11]
[11]Road Traffic Authority of New South Wales v Mosca [2006] NSWCA 159 and the cases there referred to at [50]-[54].

In the "after" assessment, the statute requires that the impact of the scheme be taken into account.[12]
[12]Section 41(e) and see the definition of "loss attributable to severance" in s.40.

The best evidence of market value will ordinarily be evidence of comparable sales either before or after the acquisition.[13]
[13]Coastal Estates v Bass Shire Council (1993) 2 VR 566 at 577-579; Vicgrain Assets Pty Ltd v Hindmarsh City Council [1999] VSC 47 at [62].

Where the land that has been acquired is part of a larger parcel the effect of severance may render it appropriate to undertake a hypothetical subdivision analysis to help establish the full extent of severance damage.[14]
[14]Coastal Estates v Bass Shire Council (1993) 2 VR 566 at 577-579.

A valuer like any other expert must reveal the factual and intellectual basis of an opinion. The general principle is that:

"In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of 'specialised knowledge'; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be 'wholly or substantially based on the witness's expert knowledge'; so far as the opinion is based on facts 'observed' by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on 'assumed' or 'accepted' facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of 'specialised knowledge' in which the witness is expert by reason of 'training, study or experience', and on which the opinion is 'wholly or substantially based', applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on 'a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise' (at [41])."[15]

[15]Makita (Australia) Pty Ltd v Sprowles [2001] 25 NSWLR 705 at 743-744, [85].

A valuer may express an opinion of value which is founded in part upon hearsay but he cannot give hearsay evidence of disputed facts which lie outside his own personal knowledge.[16]
[16]Wright v Sydney Municipal Council (1916) 16 SR NSW 348; English Exporters (London) Ltd v Eldonwall Ltd (1973) 1 All ER 726; Bromley v Housing Commission New South Wales (1985) 3 NSWLR 407.

Regard may be had to evidence of events subsequent to the acquisition as confirming or tending to confirm the foresight which the hypothetical purchaser would have had at the relevant date.[17]
[17]Housing Commission of New South Wales v Faulkiner [1981] 1 NSWLR 547 at 558 and 563; Minister for the Army v Parbury Henry & Co (1945) 70 CLR 459 at 514.

Other things being equal if there is a doubt as to the amount properly payable by way of compensation that doubt should be resolved in favour of the more liberal estimate.[18]
[18]Commissioner of Succession Duties SA v Executive Trustee and Agency Co of SA Ltd (1947) 74 CLR 358 at 374; Gregory v Federal Commissioner of Taxation (1971) 123 CLR 547 at 565.

Principal Conclusions as to Contentious Facts

The assessment of the contextual circumstances relevant to valuation in the present case has given rise to a series of contentious questions of fact. Different views on these underlying factors explain to a significant degree the positions of the parties. Before turning to the valuation evidence it is therefore appropriate to set out my principal conclusions as to contentious underlying facts (recognising of course that there remain other subsidiary questions of fact to be resolved). In my opinion critical elements of the underlying circumstances were as follows.

But for the implementation of the relevant public purpose the land would either have been rezoned or have been ripe for rezoning to facilitate employment generating uses ("employment uses") as at the relevant date.

Nevertheless the prudent purchaser would have apprehended a significant risk that difficulties with the supply of sewerage to the land would delay the commencement and/or progress of development of the land, and may constrain to some degree the range of potential uses.

By reason of this risk the land could not be regarded as ripe for subdivision but had demonstrable potential for future subdivision directed to the accommodation of employment uses and subject to the resolution of sewerage provision.

The value of the land was enhanced by the freeway proposal, which enhancement must be taken account of in the after situation.

The value of the surrounding area including the Scanlan land was enhanced by the freeway proposal, which enhancement must be disregarded in assessing the before value by reference to comparable sales within that area.

The effect of the acquisition was to reduce the after value of the land not only by reason of the loss of value of the land acquired but also by reason of the impact of severance upon the balance.

Zoning

Because of the extent of the evidence called with respect to town planning and sewerage issues it is convenient to deal with these matters first before turning to the valuation evidence (including that as to issues of enhancement and severance).

Town planning evidence was called from Mr Milner and Mr Mawson on behalf of the claimant and from Mr Whitney on behalf of the authority. Mr Milner and Mr Whitney gave evidence as experienced town planners as to the planning framework in which the case falls to be assessed. Mr Mawson gave evidence as to steps actually undertaken by Coomes Consultants (“Coomes”) to achieve a rezoning of the land.

There was little disagreement as to the relevant planning history of the area but there was some disagreement in hypothesising the likely before situation if the freeway proposal is disregarded.

Relevant elements of the underlying planning context are:

·The subject land formed part of the Epping urban growth area.
·It was at the time of acquisition zoned for rural purposes and such rezoning precluded its subdivision for urban development purposes.
·The subject land was within an area known as the Cooper Street development area designated by policy for rezoning to facilitate employment uses.
·The Scanlan land to the north had been substantially zoned for industrial purposes to attempt to kick start employment uses in the area.
·The resolution of the freeway alignment had been a controversial planning issue.

Both Mr Milner and Mr Whitney traced the strategic planning for the area through the 1990s and identified the significance of the Epping Bulge Position Statement of 1995 and the Cooper Street Precinct Strategy of 1996.

The first document which was prepared for the City of Whittlesea offered direct support for residential development in Epping North and industrial and employment generating uses in the Cooper Street area. It further gave priority to the allocation of infrastructure capacity to employment generating development.

The Cooper Street Precinct Strategy was prepared by consultants for both the Cities of Hume and Whittlesea. It was intended to establish a framework for the future planning and development of the Cooper Street area. It sought to provide a strategy for improving the attractiveness of Cooper Street as a location for industry and other employment generating uses. It recommended a land use and zoning pattern, and associated development controls including streetscape and urban design guidelines. It recommended a "gateway" treatment for Cooper Street.

It further recommended the future rezoning of the majority of the subject land to "C2-Corridor B". The purposes of this zone (which predated the new format planning scheme zones now in place) included:

"To designate land where future urban development has been deferred indefinitely and to encourage land use consistent with farming activities."

The strategy recommended that the area including the subject land be set aside for "future industrial (medium term)". The area so designated included the Scanlan land to the north which was rezoned for industrial purposes in 1998. The strategy also looked at the area on a precinct basis. The subject site formed part of a sub-precinct (A4) with an area of approximately 244 hectares identified as having potential for light industrial uses; office and commercial buildings.[19] Larger buildings were anticipated fronting Cooper Street.
[19]This precinct included the land known as the Haberfield/McKee land to the east and south of the subject site.

The strategy envisaged that the rezoning process would extend west from the existing urban development of Epping in conjunction with the logical extension of existing physical services.

The subject land was identified as falling within a proposed stage 2 zoning dependent on sewer capacity being made available. Part of the Haberfield/McKee land to the immediate east fell within stage 1.

In 1997/98 amendment L143 to the Whittlesea Planning Scheme was processed. This rezoned the majority of the Scanlan land lying to the north of the subject land on the other side of Cooper Street from General Farming B to Reserved General Industrial. The amendment occurred despite the adverse report of an independent panel with respect to it. Mr Whitney gave evidence and I accept that there was some force in some of the panel's reservations concerning what is commonly called a "spot rezoning". The panel was of the view the amendment would be premature prior to the resolution of the following matters:

·The draft Municipal Strategic Statement ("MSS") and new format planning scheme;
·The Victoria Planning Provisions (VPPs) and how they related to Whittlesea;
·A full drainage and floodway management scheme for the site and surrounding catchment area;
·A road network plan to service the whole of the Cooper Street employment area which took account of adjacent properties;
·A finalised option for the Hume freeway realignment ;
·A definitive strategy for the widening and duplication of Cooper Street;
·Development of options for use of land adjacent to and opposite the subject site for industrial purposes through the preparation of a local structure plan;
·A framework for approval of a development contributions plan for the Cooper Street proposed industrial area.

The panel considered that if the Council had waited a further six months in proceeding with the amendment a number of the outstanding issues could have been resolved or overcome.

The principal matters of concern were, however, ones of timing and sequencing not of doubt as to the strategic intention for the ultimate use of the land. Council supported the amendment (as it was entitled to do) and the Minister in turn accepted Council's position. Council's view was that the amendment would stimulate the implementation of its development strategy for the growth corridor.[20]
[20]The Council officer's report articulating the basis of its position expressly acknowledged sewerage constraints identified by the panel, a matter to which I shall return. It noted that Council had made a conscious decision not to rezone the whole Cooper Street precinct given among other things that zoning all the land industrial would require a solution to the long term servicing (sewerage) issue, which could not be determined at that stage.

Between 1998 and 1999 the Council prepared a new format planning scheme as all municipalities within Victoria were required to do. New format planning schemes were intended not only to adopt a more uniform approach to the way planning was implemented in Victoria, but also to better articulate the policy basis for planning controls and planning decisions. The new format planning scheme was approved in mid 1999 and included a MSS which clearly defined the intended role of Epping North as a future residential growth area and the role of the Cooper Street area as an employment generating industrial and business area.

In so doing it specifically recognised the provision of sewerage infrastructure as a strategic issue. Clause 21.06-7 stated:

"The key strategic issue in relation to infrastructure provision within the City of Whittlesea is sewer capacity. The Cooper Street precinct, Epping North and Mernda/Doreen … each require short and longer term servicing strategies to be prepared and implemented.
In the absence of extension of the North Western Trunk Sewer, the City will play a key role in the allocation of existing sewer capacity, in consultation with service providers, to allow development to commence in an integrated and cost effective manner. To ensure that longer term strategies are resolved Council will continue to plan for and define development potential within Cooper Street, Epping North and Mernda/Doreen. Council's 'Wastewater strategy' and 'Epping bulge (Epping North) position statement' will continue to provide policy direction and information for prospective developers and service providers however Council must play an important co-ordinating role between developers, service providers and other levels of government."

Council's strategies for achieving its objectives included:

"Pursue urban rezonings in Cooper Street and Epping North to raise the status of the area and to provide the impetus for servicing agencies to resolve outstanding servicing requirements."

The MSS also specifically identified the resolution of the Hume freeway alignment as a threshold issue requiring resolution before rezoning of the Cooper Street precinct.

At cl.21.06-2 under the heading "Managing Urban Growth" the objective stated was:

"To effectively manage urban growth in a manner that maximises beneficial relationships between compatible land uses and which avoids inappropriate incursions into non-urban or environmentally sensitive areas."

The strategies stated for achieving the objective included:

"Pursue urban zonings in Cooper Street and Epping North following resolution of the Hume freeway alignment." [My emphasis]

In turn other provisions of the MSS relating to employment and economic development specifically envisaged that the Council would:

·Implement the Cooper Street Precinct Strategy pending the finalisation of the alignment of the Hume freeway.
·Following definition of the Hume freeway alignment review the Cooper Street Precinct Strategy as required and pursue rezoning of land in accordance with the strategy.

These provisions are to be understood in the light of the conclusions of the independent panel which considered the new format scheme before its approval. The panel stated (Exhibit QA, p.36):

"Essentially the Panel is concerned that the impact of the freeway alignment between the ring road and the Hume freeway on the future planning and zoning of this area has been substantially underestimated. Depending on the alignment chosen, accessibility to various land parcels will be seriously affected; the land required for the connection and interchange with Cooper Street itself may be significant; it will affect arterial road planning in the precinct; it may have a significant effect on drainage; and it may change the location of Council's proposed 'gateway' in this location.
Having considered these issues and the relevant submissions, the Panel has formed the view that a two stage process is required.
In the short term (i.e. before the new planning scheme is adopted and approved), the Cooper Street Precinct Strategy should be reviewed for incorporation in the revised municipal strategic statement. The Special Use Zone should be used to identify sites for extractive industry … the Cooper Street development plan overlay should be removed. There should be a moratorium on further rezoning in this area, accepting that the Scanlan land has recently been zoned for industrial purposes which should accommodate any short term demands for industrial land.
This approach will provide a holding pattern pending resolution of the freeway alignment.
Once that alignment has been set, the Cooper Street Precinct Strategy should be reviewed obviously taking into account the implications of the chosen alignment. Based on that revision, appropriate zones, overlays and schedules can be introduced into the scheme by a further amendment process."

The history of the uncertainty affecting the freeway alignment is described by Mr Milner as follows:

"Between 1995 and 2002, whilst there was cumulative support generated by various pieces of strategic work, at the same time there was increasing doubt as to the location of the freeway alignment. In early 2000, there was still good reason to suggest that the review site would not be affected by the freeway alignment.
It took until the publication of the first Advisory Committee report in July 2000 for any public statements to be made or information to be revealed about the F2 freeway alignment. Prior to the Committee's recommendation no one could reasonably have foreseen that option 5 would have been recommended …, given the higher costs associated with this route. No one would have anticipated the appointment of a second Advisory Committee, that further options would be considered, or that the submissions made by environmentalists on the Cooper Street grasslands would have made such an impact. In retrospect, even the Council did not anticipate that option Y alignment would eventually be recommended by the second Committee, and adopted as the route of the freeway, thus affecting the review site directly. …
All in all, it took until February 2001 until the final alignment of the freeway was known. Urban development plans for the land in the municipality were thus hindered and yet an urban development plan and rezoning of land in Cooper Street was consistently delayed from 1997 until finalisation of the F2 alignment."

It follows that at the time the claimant purchased the subject land on 1 February 2000, the land was squarely designated for rezoning to facilitate employment uses but it confronted two problems which continued through the period leading up to the acquisition. These were firstly, the resolution of the freeway alignment and secondly, the resolution of sewerage infrastructure questions.

Mr Whitney usefully summarised the situation as follows:

"The overall policy context was quite clear in its intent. The policy context within which consideration may have been given to the use and development of land at the relevant date may be paraphrased as follows:
·Rurally zoned land should be used for rural purposes and its fragmentation prevented;
·The rezoning of the Cooper Street precinct area for employment uses would be pursued upon resolution of the route of the Craigieburn bypass;
·The rezoning and development of the area should occur in accordance with the reviewed Cooper Street Precinct Strategy;
·Provision of physical infrastructure should be provided in an efficient, equitable and timely manner;
·The management of growth should follow a strategic approach and not be compromised by incremental decision making;
·The future development of the area may require the imposition of development contributions and the application of Council's subdivision design policy."

He further stated:

"There were at the time of the preparation of the Cooper Street Precinct Strategy (November 2001) only two matters that impacted upon the timing of the rezoning. These were the resolution of the final alignment of the Craigieburn bypass, and the ability to provide sewerage to the large central portion of the precinct including the subject land."

Consistently with this view Mr Whitney also stated:

"Everything kicked off again when a final decision on the bypass had been made."

It is submitted on behalf of the claimant that but for the freeway scheme, the subject land could have been rezoned together with or shortly after that of Scanlan. The difficulty is that no attempt was made to rezone the land by the then owners and what may then or may not have been able to be achieved is speculative. What is clear, however, is that the claimant purchased rural land and in my view the critical question is what the claimant could have achieved but for the freeway proposal prior to the relevant date.

The claimant submits that but for uncertainty as to the freeway alignment it would have obtained a rezoning by the relevant date. That question falls to be considered in part by reference to the further planning history of the subject land.

Following the acquisition of the land the claimant retained Coomes to prepare a "vision statement" for its own land and the adjoining land to the east. It put forward a proposal for one of the sub-precincts previously identified in the Cooper Street Precinct Strategy.

The vision put forward was one for development which comprised residential use in the southern portion of the land as an extension of existing residential development to the south and east. Employment uses were envisaged in the northern portion of the land fronting Cooper Street. Mr Mawson had identified a natural depression traversing the land which on one view provided a logical reserve and boundary between the proposed uses. There was ongoing discussion between Council officers and both Mr Dickey of the claimant company and his consultants. Despite the acknowledgement by officers of some matters advanced on behalf of the claimant the proposal was not well received.

The vision statement reflected in part the land use identified in the contract of sale pursuant to which Murdesk purchased the subject land. The contract provided by special condition C:

"The purchaser will use its best endeavours, at its own expense, to obtain a planning rezoning of the property by the City of Whittlesea or other relevant planning authority from the current non-residential (rural) zoning to residential 1 zoning free of any planning overlay or other like planning qualifications as may, in the purchaser's opinion, reduce the financial outcomes of its proposed residential subdivision project so as to make it financially non-viable."

It further provided:

"In the event the purchaser determines in its absolute and unfettered discretion that, notwithstanding its best endeavours, there are factors present which indicate that VicRoads or the City of Whittlesea or available procedures external to them affecting their decision making are unlikely to result in the favourable entertainment of efforts by the purchaser to achieve either or both of the objects set forth in special conditions B and C or may result in a favourable entertainment of the said objects but with restriction/s that would have the effect or likely effect of making the proposed residential subdivision project financially non-viable, the purchaser may, at any time prior to the expiration of a date 15 months from the date hereof, give written notice to the vendors or their solicitors that it withdraws from this contract whereupon this contract shall be at an end null and void and all monies paid hereunder shall be refunded in full.

This contract is subject to and conditional upon:
… The planning rezoning referred to in special condition C; within 15 months of the date hereof. This special condition is a condition and is an essential term of the contract."

The payment of the full deposit of $500,000 was also conditional upon satisfaction of special conditions B and C "provided however that the purchaser shall have the right to effect payment of the residue of the price on 30 June 2000 by giving written notice to that effect to the vendors and/or their solicitors."

Despite the obligation of the purchaser to use its best endeavours to procure a residential rezoning the contract did not prevent a response by way of an alternative form of zoning in the context of the pursuit of such best endeavours. Furthermore, it is apparent that the conditions in issue were fundamentally intended to be for the benefit of the claimant. It was open for the claimant to proceed with the purchase of the property as it in fact did despite the failure to obtain a residential rezoning.[21]
[21]On 12 September 2000 the claimant waived its rights pursuant to the above conditions and paid a further deposit of $250,000. The purchase was subsequently completed.

In November 2001 Council resolved to exhibit documentation for a planning scheme amendment which would implement the strategy for development of the Cooper Street precinct. It was proposed the subject land would be placed in a comprehensive development zone and that the zoning would be supported by a series of overlays which would guide development. The Council officer's report supporting the resolution specifically referred to the MSS requirement that the Cooper Street Precinct Strategy be reviewed following determination of the alignment of the Craigieburn bypass.

On 27 August 2002 after a further process of clarification of constraints, Council again resolved to exhibit the necessary documentation for a planning scheme amendment being amendment C31. The officer's report forming the basis of this resolution stated in part:

"Since the report to Council in November 2001, the outcomes of significant strategic investigations by authorities such as VicRoads, Melbourne Water and the Department of Infrastructure have been incorporated into the plan.
This has resulted in alterations to the plan that Council endorsed as an attachment in November 2001 as being suitable for public exhibition. …
The outcome of investigations undertaken by VicRoads which have influenced the amended plan include the following:
·     The location of O'Herns Road interchange with the Craigieburn bypass (the subject of a separate planning scheme amendment to be undertaken by VicRoads);
·     The alignment of the Edgars Road extension to Cooper Street;
·     The location for signalised intersections along Cooper Street;
·     The location of boulevard planting within the Cooper Street duplication and abutting properties.

The location of the transport corridor between Lalor station and the Epping North residential development has been further defined by the Department of Infrastructure and one of the preferred options is now incorporated in the plan.
Other changes to the plan include:
· Repositioning of some wetlands and drainage channels so that the plan is consistent with the most up to date version of Melbourne Water's Edgars Creek drainage scheme;
· The realignment of some minor roads to provide for improved traffic connections and to allow for the repositioning of drainage infrastructure.

The strategic significance of these investigations effectively prevented the plan from being exhibited as the location of road connections and land uses was dependent upon resolution of these major strategic issues."

Ultimately Council did not exhibit the amendment until June 2004.

As against this it may be observed that the matters identified by the officer's report as significant features of changed circumstances are at least to some substantial degree related to the freeway proposal and its impact on O'Herns Road and Cooper Street. In my view it is clear that the simple announcement of the freeway alignment did not fully resolve all associated planning issues affecting Cooper Street and the precinct containing the subject land. Mr Mawson's evidence further confirms this and in particular his evidence that the consequences of the freeway interchange for access to the subject land were not resolved until August 2001.

The authority submits that the rezoning was not held up by the bypass proposal for a series of reasons:

(a)The absence of a bypass proposal may have resulted in a slower rezoning process: the area to be rezoned may have been significantly greater, with more land owners to deal with, different environmental conditions and difficult extractive industries issues to manage.

In my view this proposition is speculative. The Scanlan rezoning demonstrates that the claimant's land (particularly if coupled with adjoining land as it was in the vision statement) cannot be rejected as comprising a unit which was inadequate. Likewise the Cooper Street precinct plan demonstrated that it could be regarded as reasonably capable of rezoning as part of a logical precinct. That plan also envisaged that rezoning would occur in stages and implicitly recognised that land to the west of the subject land might have to await rezoning until after the rezoning of the subject land (albeit that the subject land itself was placed in stage 2 of the proposed zoning only).

(b)The L143 panel identified eight reasons other than the bypass alignment as to why the Scanlan land should not be rezoned. These were relevant to the area generally.

An examination of the reasons which I have set out above shows that they were substantially resolved by the acquisition date.[22] Moreover, those reasons did not preclude rezoning of the Scanlan land and it is difficult to see that such remnant force as they may have had after such rezoning would preclude rezoning of the claimant's land. Furthermore, one of the reasons stated by the panel might be said to support the rezoning, namely the resolution of zoning for the land opposite the Scanlan land.

(c)There was no pressure for the rezoning of the area. The determination of the freeway alignment provided impetus for the development of the area. Although the Scanlan land had been rezoned for a number of years, it was not until the freeway alignment was announced that McMullin proceeded with the purchase of the Scanlan land.

[22]At the relevant date the MSS and new format planning scheme were in place, drainage for the Scanlan land was further resolved, the road network was better resolved, the freeway alignment was finalised, the options for adjacent land would be clarified by rezoning the subject land, and further work had been done on the provision of sewerage infrastructure.

Council's stated and active policy was to attempt to encourage development by rezoning. It did not require demonstrated demand for the proposed uses. It wished to encourage those uses for its own strategic purposes. Further, although I accept that the implementation of the freeway upon its final alignment enhanced the value of the Scanlan land and indeed the subject land, this does not imply that no rezoning would have taken place in the absence of this enhancement.

(d) A comprehensive sewerage strategy was only released in October 2000. That was after a significant review had been carried out by Montgomery Watson. Sewerage servicing uncertainty was an issue identified by the L143 panel as a significant reason for the Scanlan rezoning not proceeding.

October 2000 preceded the relevant date. I accept sewerage servicing uncertainty was a significant issue affecting the capacity to develop the land for reasons which I shall elaborate shortly. The planning evidence of Mr Milner and Mr Whitney ultimately favours the view, however, that rezoning may have occurred prior to the finalisation of sewerage infrastructure arrangements for the rezoned land. This was after all the policy specifically declared in the MSS prepared by Council and approved by the State Government. This is not of course to say that sewerage questions may not have affected the value of the land even if it were rezoned. The substantial difficulty confronting development at the relevant date was that of sewerage infrastructure. Resolution of this difficulty was, however, potentially capable of postponement until after rezoning. Such an approach would give effect to the policy articulated in Council's MSS. It would give the hypothetical purchaser rezoned land but no final development approval.

The City of Whittlesea's Cooper Street Development Plan of 2001 envisaged rezoning prior to finalisation of sewerage arrangements and stated as follows:

"With regard to the extent of rezoning a fundamental question to be considered is servicing capacity. As discussed in a range of related reports on the Cooper Street and Epping North areas there is a limited amount of sewer capacity which can be made to develop land. With regard to 'allocation' of available sewer capacity via the land planning system Council has previously indicated a consistent position that preference will be given to allocation of available capacity to employment land over residential land and that the extent of rezoning will be limited to that amount of land which can be provided with reticulated services. While Yarra Valley Water has prepared a servicing strategy for the area it is clear that all the land, or even a substantial amount of land, within the development plan area can not be immediately provided with reticulated sewerage. This being the case it is appropriate for Council to continue to indicate a preference for employment based land uses by delaying the rezoning of the future residential areas. With regard to the extent of rezoning of land for employment purposes it is considered that there may need to be a deviation from Council's earlier position.
Given the increasingly high profile nature of the Cooper Street area taking into account construction of the Craigieburn Bypass and duplication of Cooper Street, pressure needs to be exerted to ensure broad scale augmentation of services occurs so that the land can be provided with reticulated sewer and water. From a servicing authority perspective whether the land is zoned can be a significant indication as to whether the land is likely to be developed in the short to medium term. Taking this issue into account, it is proposed that the area bounded by the Craigieburn Bypass to the west, the O'Herns Road deviation to the north, the boundary of the land currently zoned industrial and the residential suburb of Lalor to the east and the residential land and the Whittlesea Gardens to the south be rezoned to a suitable urban zone."

Both Mr Milner and Mr Whitney expressly contemplated a situation where subsequent to rezoning, the grant of permits to develop would depend upon sewer availability. In my view this is the position that Council would have implemented at the relevant date if it could have. In my view if so requested by the claimant shortly after the purchase of the land, Council would have sought to expedite rezoning but for the difficulty created by uncertainty as to the freeway alignment. In the first instance it is likely this would have involved the rejection of any suggested residential component. Again it is likely that the claimant would have accepted this rejection as the price of a rezoning given that Council's position would squarely accord with the relevant strategies. Mr Whitney gave evidence that such a process would not necessarily materially delay a rezoning

(e)The actual experience of the C31 rezoning process confirms the complexity and consequent slowness of rezoning this area.

It is difficult to treat the history of delay in implementing amendment C31 as materially detracting from the above conclusions. In particular, the initial history of the C31 rezoning itself was, as I have already said, directly affected by the working out of the consequences of the freeway alignment. Its subsequent history has been complicated by other factors.

On the evidence as a whole I am satisfied that if no uncertainty relating to the freeway alignment had affected the land, it is likely that after purchase of the subject land by the claimant an amendment would have proceeded to the point either of implementation or substantial implementation by the relevant date. I accept the claimant's submission that the probable zoning would be that of comprehensive development zone and I accept Mr Whitney's evidence that any such zoning would have been accompanied by comprehensive overlays.

It is not possible to be positively satisfied that the rezoning process would have been completed. It is likely that the commonly experienced delay of 12 to 18 months in the amendment process of which evidence was given would be complicated by the positions adopted by other land holders and in particular the owners of the Scanlan land and the owners of the Haberfield/McKee land. It would be open to such owners to either support the rezoning as potentially beneficial to them or to oppose it. The evidence does not persuade me positively as to the likely position of such land owners in the situation hypothesised. Having said this, the delay that might be occasioned by the risk of at least one committed opponent leads to a realistic time frame for rezoning on the evidence in the order of two years.

(f) The MSS provided that the rezoning of the area was to follow the resolution of the bypass alignment. It does not follow that the rezoning of the area was held up by the alignment process. The reasons identified by the L143 panel and Whitney go beyond the alignment.

It is difficult to give great weight to the reasons of the L143 panel. Firstly, as I have said its concerns were substantially resolved by the relevant date. Secondly, they were not found by the planning authority or the Minister to be persuasive.

Moreover, the evidence as a whole leads to the conclusion that the rezoning was in fact held up by the alignment process. The evidence shows that the claimant was specifically advised by its consultant that resolution of the freeway alignment was a precondition to rezoning. There are a number of references in the documents to this effect and Mr Mawson's evidence confirmed that such advice was given. The claimant's approach to Council for a part residential rezoning took place in this context. The claimant was not initially faced with any realistic prospect of a rezoning in the short term. The exploration of what it viewed as the highest and best use of the land is entirely understandable in this context.

The consultants' advice that the resolution of the freeway alignment was a precondition to rezoning was on the whole of the evidence (including that of Mr Whitney) correct. The terms of the MSS were plain and reflected the advice of an independent panel. The new format planning scheme thus elevated the freeway alignment issue to a threshold issue of structure planning for the area. In turn, Council documentation reflects the fact that it was the clear view of Council planning officers that the finalisation of the freeway alignment was a precondition to a planning scheme amendment.

It was also submitted on behalf of the authority that the resolution of access arrangements to the land was independently delayed by the review of Council's Cooper Street strategy. This strategy was itself critically dependent on finalisation of the freeway alignment and I am not persuaded that finalisation of the freeway alignment was not the critical impediment to rezoning during the period at issue.

(h) Overlays

It was submitted that Mr Whitney's evidence should be accepted and that the historic evidence supports the view that Council would not have supported the rezoning without a detailed outline development plan rather than simply a more general local structure plan. I am not persuaded that absent the uncertainty concerning the freeway alignment an adequately resolved outline development plan could not have been formulated.

It follows that in my view, although the land was not zoned for urban purposes at the relevant date, its status was in substantial part a result of the delay in implementing the freeway proposal. Further, as I have said, I am satisfied that as at the relevant date but for the freeway proposal the land would either have been zoned or the process of rezoning would have been substantially implemented.

Sewerage

As the planning history set out above demonstrates, the availability of sewerage infrastructure was clearly identified as a key factor constraining development of the Cooper Street area in the period leading up to the date of acquisition.[23]
[23]See e.g. cl.21.06-7 of the MSS quoted above.

On 29 May 2006 the engineering experts retained by the parties[24] reached agreement as to the answers to a series of questions and endorsed a joint report. They did so in part as the result of advice received from two officers of Yarra Valley Water, Mr Hart and Mr Pearson. The first question and the answer to it were as follows:
[24]Mr Jordan and Mr Wright on behalf of the authority and Mr Hunter, Mr Hawkins and Ms Hamila on behalf of the claimant

“(1)At the relevant date, what would an independent consultant have told a hypothetical purchaser of the land as (to) the availability of reticulated sewerage services to the land?
Response: An independent consultant would have told a hypothetical purchase or vendor the following:
(a)The Yarra Valley Water Cooper Street Strategy included as Appendix F in Jordan 1[25], sets out the current servicing arrangements at the relevant date.
(b)The inquiry at Yarra Valley Water would have revealed that sewer (Cooper Street East branch sewer) is possibly available which would service the northern catchment of the property subject to advised capacity limitations.
(c)A temporary pumping station was available to connect to the existing sewers but was constructed by Northpoint and would require agreement from Northpoint for access. (Subsequent advice from Mr Pearson and Mr Hart was that access would be made available to the pump station by Yarra Valley Water.)
(d)Sewerage services for the southern section of the land would require the connection of sewer to the Haberfield (Edgars Creek) and golf course (Central Creek/Merri Creek) systems.
(e)It is expected that the consultant would negotiate with Yarra Valley Water to optimise the available capacity and reduce the costs to the developer.”

[25]dated October 2000

The effect of these answers is that at the relevant date development of the northern portion of the subject land fronting Cooper Street may have been capable of sewering to the east along Cooper Street via the Cooper Street East branch sewer (which in turn connected with a main along the Edgars Creek running to the south and joining the Edgars Creek sewer).

Sewering of the central portion of the subject land would require connection to the east across the Haberfield land to the Edgars Creek sewer.

Sewering of the southern portion of the land would require construction of a sewer to the south linking up with the Central Creek/Merri Creek systems to the south and west.

The conclusions of the joint report were further addressed and elaborated in evidence called on behalf of the complainant from Mr Hunter, Ms Hamila and Mr Hawkins. No engineering evidence was called by the authority. It relied on the terms of the joint report, background documentation and evidence elicited in cross-examination as to the sewerage context at the relevant date.

The central dispute between the parties in respect of sewerage matters is the evaluation of the possibility that the northern portion of the site might be sewered via Cooper Street. Such sewering would facilitate an initial stage of development in the optimal location for business/industrial uses.

The dispute arises from the fact that the Cooper Street branch sewer had a limited capacity and was also "possibly" available to other land owners who might materially take up such capacity.

Further such capacity constraint had led to flow conditions being placed on the supply of sewerage to the Northpoint industrial subdivision on the northern side of Cooper Street. If part of the subject land were sewered along Cooper Street such conditions would also have been imposed (hence the reference to advised capacity limitations in the joint report answer set out above).

The engineers' joint report subsequently addressed hypothetical plans of subdivision for the land which envisage the creation of new lots in the northern portion of the land (in different configurations).

The engineers further agreed:

"It is reasonable to assume that the sharing of costs of works in Cooper Street would have been agreed between Northpoint and the subject land."

In evidence Ms Hamila elaborated this conclusion as follows:

"The starting assumption was that the first stage of Northpoint, the 7.7 hectares or 110 lots had been effectively, if you like, secured by Northpoint and so the works were in place, being the branch sewer, for the first stage, the temporary pump station, the temporary rising main and a connection to an existing sewer near Yale Drive further east along Cooper Street. Yarra Valley Water told us for Murdesk to connect to that branch sewer he would need to upgrade the temporary pump station, construct the flow control facility and extend the temporary rising main further east to a second connection point. That would provide a servicing arrangement for 36 hectares of land, and it was agreed that that would be split equally between the Murdesk land and the Northpoint land."

At the relevant date an offer (dated 20 December 2001) had been made to Northpoint for the first stage of sewerage connection to its land. That offer was accepted on 12 February 2002 the day after the relevant date.

At the relevant date therefore a finite capacity had been identified for the Cooper Street branch sewer and part of that capacity had been offered to Northpoint and would have been understood by an informed purchaser as likely to be taken up by it.

The terms of the December offer to Northpoint further envisaged that thereafter Northpoint might take up the whole of the capacity of the branch sewer. The offer imposed conditions with respect to the whole of the Northpoint land. It stated in part:

"4.2.2. The following comments are related to the proposed plan of subdivision … The current plan of subdivision is specifically creating lot 21 which is to be used by a high water user Aquarium Industries Pty Ltd. Also being created are four super lots.
In discussions with the developer and Aquarium Industries in relation to the proposed lot 21 and stage 1 of the development it has been agreed that up to 7.7 hectares and 86.4 KL/day maximum daily flow be allowed, and that this area be serviced by a temporary pumping station (TPS) and temporary detention storage in the development sewers. The maximum development for stage 1 is subject to the achievement of low infiltration rates. The allowance of 1% has been allowed for a fully aged catchment. Note that infiltration performance of the sewer system will be monitored and assessed during the development of the project and higher than allowed infiltration may severely impact on the allowable future connection.
Design of stage 2 works i.e. permanent flow control facility (FCF) will be undertaken by YVW when this offer is accepted by the developer and will take 24 months to deliver.
Works required: The following works are required:
(1)Temporary pumping station and rising main connected to a new manhole within 300 Cooper Street …;
(2)Cooper Street East branch sewer and Scanlan Drive branch sewer …;
(3)Temporary detention storage of 350 KL in the development’s sewer system between the TPS higher level alarm and the ERS spill level;
(4)Two vent stacks installed on the branch sewers together with nearby suitable sites set aside for odour scrubbing boxes; and
(5)A site for the permanent FCF and pumping station fully approved by all authorities and acceptable to YVW …"

The offer further required that flow capacity be based on a discharge rate of 0.13 L/s/Ha. It foreshadowed an encumbrance on each allotment created for the Northpoint land limiting maximum average dry weather flow. It stated that developers would be required to commit to notifying all potential property owners of flow restrictions in the estate and the ramifications of this on their proposed individual lot developments. Conditions were specified for future contracts of sale.

The relevant functional design statement and the offer contemplated that following the construction of stage 1 further sewerage infrastructure could be provided by way of a series of stages to the whole of the Northpoint land.

The offer to Northpoint was made in the context of a sewerage strategy which emerges from the following matters.

In 1995 the Epping bulge position statement had referred to Melbourne Water's "well known" advice that the Epping area under consideration had a known spare capacity for additional lots. It further stated that Council had a fundamental objective that the distribution and use of sewer capacity should service the future employment land in the vicinity of Cooper Street.

In 1996 the Cooper Street Precinct Strategy envisaged staged rezonings and noted:

"Stages 2 and 3[26] zonings are based on additional sewer capacity being made available either through additional mains capacity, the establishment of a local treatment plant and/or the redirection of existing residential sewerage into a local treatment plant enabling the mains systems to be used for additional industrial development."

[26]The subject land fell in stage 2 and land to the west in stage 3.

In 1997 amendment L143 was put forward on the basis that it would utilise existing limited sewerage capacity. The independent panel report with respect to the amendment noted that Yarra Valley Water had advised that existing downstream sewers had the capacity for the equivalent of 3,000 additional residential lots provided that waste water was stored during wet weather conditions and only discharged to the mains system during off peak dry weather periods. It appeared to the panel that the amendment raised three main sewerage issues, namely the allocation of existing sewerage capacity, mechanisms to manage waste water discharge levels and planning to achieve an optimum solution for sewerage infrastructure. In its view further work was required to resolve a sewerage reticulation strategy for the amendment land and the surrounding area.

Council adopted the amendment recognising that the allocation of the 3,000 lot capacity would ideally be shared across several land owners but noting that only one land owner (Scanlan) had been prepared to actively pursue redevelopment to that point in time. In so doing it sought to create a "circuit breaker" to make things happen.

As already indicated in my analysis of the planning controls, in 1999 the MSS recognised the significance of sewerage infrastructure as a key strategic issue.

In February 2000 Montgomery Watson consulting engineers advised Yarra Valley Water as to the appropriate strategy for the area containing the subject land as follows:

"5.5 Recommended Strategy
STAGE 1: Initial Development (2001-2005, 950 lots) – into Edgars (750) & Central Creek (200)

Both Edgars Creek and Central Creek detention facilities are required to maximise the development area in the immediate vicinity of existing infrastructure, minimising the cost of works. In summary the following works are required;
· Detention facility with controlled discharge to Edgars Creek – to service development north of Childs Road, up to a total of 750 equivalent residential lots initially. Of the land holdings predicted for initial development it is expected the Haberfield, Scanlon or Porta land would consume this in the early stages of development. Other smaller detention tank options have been identified and are available options to Yarra Valley Water and developers if the location and number of lots serviced is suitable. The larger detention tank option (Option 1A) is recommended as a part of this strategy due to its use in the long term servicing strategy and the reduced operating and maintenance requirements associated with one tank compared with several in the area. This is not to rule out the possibility that a developer and Yarra Valley Water may agree to adopt a more local detention tank to the north of that proposed (i.e. site in the Epping North area that could be utilised in the future as a pump station).
· Detention facility with controlled discharge to Central Creek (Merri System). It is proposed this would serve the development of the Lalor Golf Course area and development south of Childs Road, up to a total of 200 equivalent residential lots initially. Whilst serving part of the development of the golf course it is envisaged some of this land will be acquired to locate the detention facility and the required buffer zones."

Following the purchase of the subject land by the claimant in February 2000 a series of meetings was held between the claimant's consultants, and officers of the sewerage authority or officers of the Council.

From the outset it was apparent that there may be serious competition for the available sewerage infrastructure. Minutes of a meeting between the claimant's representatives and Council officers of 15 February 2000 record:

"Scanlan's 120 acres or so are ready to go. Scanlan has been working on this industrial subdivision for 10 years. 2,000 of the available 3,300 sewerage lot capacity has been allocated to his land. Another 800 would be offered to the proposed Porta 105 acre resi [sic] subdivision."

On 1 March 2000 the claimant's consultants advised it in terms that expressly recognised that there might be competition between land owners for the available Cooper Street branch sewer capacity.

"It seems evident that given Council's commitment to Scanlan industrial we need to present a case that identifies benefits too in all the timely and shared cost of the provision of sewer infrastructure. Something that would not be achievable should Bell [subject land] be industrial as Scanlan would probably not work co-operatively with a competitor. …"

On 10 October 2000 Yarra Valley water relevantly advised the claimant's consultants:

"Yarra Valley Water has not allocated the available capacity of the neighbouring systems to any particular land holder. This capacity is available to the first developer ready to connect. However, Yarra Valley Water does not question the right of the planning authority (City of Whittlesea) to decide which areas will be rezoned and therefore utilise this capacity."

On 12 October 2000 Yarra Valley Water released the Epping North/Cooper Street sewerage servicing strategy. It is this document which the joint report of the engineers in this case identifies as setting out the servicing arrangements current at the relevant date. The strategy applied both to residential development north of O'Herns Road of approximately 1,300 hectares and predominantly industrial development of approximately 800 hectares south of O'Herns Road. The Epping North East section would discharge south to the Darebin Creek system and the Epping North West section would discharge south to the Merri Creek system. The strategy put forward an indicative branch sewer network to service future development. It identified capacity available in the existing downstream sewerage system at a number of locations. This capacity was expressed in terms of residential lots and a total capacity of 4,750 lots was identified. It was proposed the capacity would be accessed through detention storages upstream of each of the connection points, to hold flows during periods of peak dry weather flow and wet weather flow. Development exceeding the 4,750 lot capacity would require the extension of the Merri Creek main sewer which ran generally north south to the west of the subject land. The strategy placed the subject land into three or four sub-catchments:

(1)The north west corner of the site graded towards Cooper Street and would be serviced by the Cooper Street East branch sewer east to pumping station (PS1), the rising main outfall south along Edgars Creek, and a flow control facility near the discharge point on the Edgars Creek sewer;
(2)The central catchment would be serviced by the Haberfield branch sewer east to a pumping station (PS7) and a rising main running north to pumping station 1.
(3)The south eastern catchment would be serviced by the golf course branch sewer south to pumping station 2 and stage flow control facility with initial connection to the Central Creek sewer and later rising main transfer south to the Merri Creek sewer.
(4)The south western catchment would be serviced by the golf course north branch sewer which would connect to the golf course branch sewer south of the site.

The strategy thus identified an initial sewerage capacity in the Edgars Creek system available to the area containing the subject land and providing for a maximum of 750 residential lots. It further identified potential for 200 lots to be connected to the Central Creek system and 1,300 lots to be connected to the Merri Creek system.

On 25 October 2000 Yarra Valley Water advised the claimant's consultants that any works not part of the strategy would be treated as temporary works at full cost to the developer. It further advised:

"A functional design has been prepared for connection of 750 lots to the Edgars Creek system, including the option of relocating PS1 to Cooper Street. A works offer has been issued for the proposed development for Scanlan land (360 Cooper Street) but this has not been accepted at this stage. If the 750 lots capacity is taken up by the Scanlan development, temporary works may be required to utilise the 1,300 lot capacity of the Merri Creek system."

This advice canvassed the servicing of both the subject land and the adjoining Haberfield/McKee property.

In or about November 2001 Yarra Valley Water again issued a functional design statement for up to 750 equivalent lots as the basis for proposed sewerage servicing arrangements for the Scanlan development.[27] Sewerage was said to be required for the proposed 92 lot industrial subdivision of the land at 360 Cooper Street and land immediately to the east having a total of approximately 84 hectares.
[27]It appears this statement went through a series of iterations.

This functional design statement led to the offer of 20 December 2001 which I have quoted above. The offer imposed conditions relating to the whole of the Northpoint land but offered connection only with respect to stage 1 of the development.

As a result as Ms Hamila stated:

"As at the relevant date (11 February 2002) the position was that sewerage was available to the subject land and other development in the Cooper Street area up to the level of the available capacity of 2,250 residential lots or equivalent." (My emphasis)

Again, as I have stated, the offer to Northpoint was accepted on 12 February 2002. Subsequent to this further communications took place between the claimant's consultants and Yarra Valley Water. By letter of 15 August 2002 Yarra Valley Water advised in part as follows:

"Yarra Valley Water intends to review and refine the servicing strategy this year taking into account new information available such as the Craigieburn Bypass proposal and the metropolitan strategy.
…
The developer of the Northpoint Enterprise Park has installed sections of the Scanlan and Cooper Street East branch sewers within that property and also a temporary pumping station and pressure main connection to the local reticulation sewers to the east in Cooper Street. This temporary pumping scheme is not available to the subject land without the consent of the Northpoint developer.
Yarra Valley Water will be responsible for the design and construction of the key assets forming part of the ultimate servicing scheme i.e. pumping stations/pressure mains and flow control facilities and sewers greater than 450 [millimetres] diameter. This work will be funded by developers subject to reimbursement policy. The developer would be responsible for branch sewers 450 millimetres diameter or less and reticulation sewer outfalls to PS1, PS2 or PS7.
…
If development of the subject land proceeds prior to the installation of permanent pumping stations and flow control facilities, suitable temporary servicing arrangements for development of the land would need to be discussed with Yarra Valley Water. No allowance has been made for temporary works in the current New Connection Charges and would need to be fully financed by the developer
…
As an alternative to connecting to the existing sewerage system, the property could be serviced by a local sewage treatment plant, with winter storage and full reuse of treated effluent."

In my view it is clear that at the relevant date a hypothetical purchaser would have been satisfied that there was a real prospect of access to some of the capacity of the Cooper Street branch sewer.

Nevertheless, such prospect was attended by material uncertainties:

(a)If Northpoint was sewered initially in accordance with the offer that had been made to it, the temporary pumping station envisaged in the offer might be taken up by it alone. This after all is what the letter of offer envisages.
(b)Subsequent works required the further design of permanent pump station facilities. The authority had estimated the time required for this exercise at two years. It claimed responsibility for the design and construction of key assets. Hence uncertainty attended the question of whether this process could be expedited.
(c)Subsequent access to the branch sewer might also be subject to conflicting claims by Northpoint (the rezoning of the Northpoint land had proceeded on the basis it would have access to sewer capacity and both the functional design statement and the offer made by Yarra Valley Water envisaged that it would have such access) and Haberfield (Haberfield being designated by a planning strategy as appropriate for development at a prior stage to the subject land and having land abutting Cooper Street at its northern end which might be regarded as having an equal or better claim to access to the branch sewer to that of the claimant).
(d)Access to the sewers nominated in the strategy for the central and southern portions of the subject land would require substantially greater works of uncertain cost and timing traversing the land of third parties.

The sensitivity of these matters is corroborated by a valuation report prepared by Mr Dudakov in respect of part of the Scanlan land acquired compulsorily for the purposes of the widening of Cooper Street. This referred not only to the designation of existing sewerage infrastructure for the Scanlan land as at 5 October 2001 but also to the advantageous delay as a consequence to the development of other properties by up to three to five years.

There is no evidence prospective purchasers of the subject land in 2002 were in fact advised by the Council or Yarra Valley Water that sewerage was immediately available to the property and some hearsay evidence directly to the contrary.[28]
[28]Contained in the claimant's contemporaneous records of discussions with the prospective purchasers.

As against the matters of uncertainty noted above it was reasonably possible that the provision of pumping facilities might be expedited by cost sharing agreements with Northpoint (as the joint statement of engineers in this case envisages) or Haberfield. The upfront capital cost of such facilities could be split between developers.

It was also submitted that the comprehensive development zoning of the subject land would give it a higher value than the industrially zoned Northpoint land. A comprehensive development zone would facilitate both industrial and business uses. The valuation evidence does not, however, enable this potential advantage to be quantified satisfactorily. Further, I accept the evidence of Mr Brown that industrial use may include substantial office use coupled with warehousing, and the division between industrial and business use may be one of degree.

It was further put that the Northpoint sale occurred eight months prior to the relevant date in a rising market. While I accept that in general terms this is true, this factor requires evaluation in the context of the other matters e.g. enhancement, which I will elaborate. Ultimately, I am not persuaded this factor can be demonstrated to require adjustment[46].
[46]Mr Holland's evidence was that the rising market was a very difficult thing to quantify.

Adjustment

I turn then to a series of further matters potentially requiring adjustment. As Mr Dudakov said, the parameters for such adjustment can notionally be seen as the market price paid for the land by the claimant and the value derived from the Northpoint sale.

Two Lots

Mr Dudakov and Mr Brown valued the land as a single parcel. In my view they were correct to do so although it was divided into two lots both having frontage to Cooper Street as at the date of the acquisition.

Once it is accepted that the highest and best use of the land at the relevant date was to be held for further subdivision the presence of two lots made no material difference to its value. The capacity to subdivide presumes the capacity to change the title scheme and better achieve an appropriate sequence of development. Whether and in what form the land was in the first instance subdivided into super lots would be a matter for the developer and as Mr Dudakov said would involve little relative cost. Hence there is no real advantage inherent in the existence of two preceding lots in the circumstances which would arise once rezoning was achieved.

It would not be sensible to sell the two lots separately as at the relevant date, because as Mr Dudakov observed their elongated and relatively thin shape materially inhibited their individual subdivision. Separate sales would also create individual risks arising from competition for sewerage infrastructure.

Enhancement

The price paid for the Northpoint land reflects enhancement as a result of the freeway proposal. The same enhancement affected the subject land at the relevant date. Once the freeway alignment was finalised both the Northpoint land and the subject land became parcels of land adjacent to the freeway and a proposed diamond interchange at Cooper Street. The enhancement from the freeway would not fully crystallise until it was constructed in what might be anticipated to be three to four years after the relevant date. Thus the holding of the land during this period would also result in a benefit in this regard. As the highest and best use of the land was to hold it for future development the freeway proposal may be regarded as having materially enhanced its value. For like reasons the impact of the freeway construction period on the value of the subject land would not have the adverse impact upon a hypothetical purchaser asserted on behalf of the claimant.

The sales evidence at a series of locations referred to by the valuers including Somerton and Derrimut demonstrates ready access to freeway or other major transport infrastructure (such as fixed rail) enhanced the value of industrial land at the relevant date.

The evidence also shows there are categories of industrial/business uses to which such access is beneficial and other categories of uses which may be benefited by the visual exposure offered by a site adjacent to a freeway.

The claimant itself relies on the fact of expressions of interest in the subject land by Honda prior to the acquisition. The land offered by the claimant to Honda in November 2000 was an elongated parcel running down from Cooper Street along the western boundary of the subject land immediately adjacent to the then anticipated freeway alignment. It was intended that a variety of uses would be accommodated within this parcel of land all benefiting from the prominence of the site and its ease of access. The choice of abuttal to the freeway for the proposal was plainly deliberate. Indeed Mr Dickey sought a premium on this basis.

Insofar as the subject land as a whole is concerned the evidence discloses there were a number of potential purchasers who expressed interest to the claimant in the whole of the land after the freeway alignment was finalised and none who expressed such interest beforehand.

The Northpoint sale itself was not finalised until after the freeway announcement and despite hearsay evidence as to the alleged background to the sale, the price paid was paid in the context of certainty as to the freeway location and in the expectation of the inconvenience of freeway construction. Furthermore, following the freeway announcement Northpoint sold the south western corner of the Northpoint land facing Cooper Street and adjacent to the freeway off-ramp for the purpose of development of a BP service station. The terms of the sale fixed the obligation for settlement by reference to the (anticipated) freeway completion date. It is apparent the site was not simply selected because it was on Cooper Street but because it was adjacent to the freeway exit.

The claimant itself considered the possibility of a service station development on its land after the relevant date. I am satisfied that the freeway announcement facilitated a series of uses such as service stations benefiting directly from the freeway interchange.

The process of development of the Scanlan land has been slow and did not take off until after the freeway announcement despite the attributes of the area described in evidence by the claimant's valuers.

I reject the evidence of Mr Wallace that the freeway proposal should not be regarded as materially enhancing the value of the land. I accept the evidence of Wallace that within an industrial subdivision land immediately adjacent to a freeway may not sell as well as other land suffering lesser amenity effects but having good road access. This general proposition, however, does not detract from the strength of the fundamental proposition that the potential use of both the Northpoint land and the subject land was materially enhanced by finalisation of the freeway proposal and its implementation.

Mr Wallace also contended that the subject land was well served in any event by major arterial roads running north south and connecting with the ring road in that it had the Hume Highway to the west and Edgars Road (which was proposed to be upgraded as at the relevant date) located to the east. I do not accept these routes offered comparable access or exposure to that which a hypothetical purchaser would anticipate would be provided by the freeway.

Mr Holland allowed a figure of 10% enhancement in his calculations because in the after situation the subject land was "nearer" to the proposed freeway interchange. This implicitly reflects an even higher enhancement deriving from the freeway proposal as a whole.

Mr Holland arrived at this figure despite the view that enhancement would be offset by detriment during the freeway construction period. He also agreed in the course of his evidence that there was a sudden jump in values in the area following the announcement of the freeway alignment.

Mr Dudakov's September 2004 valuation attributed a 5% enhancement factor to the freeway proposal. In his final valuation he regarded this as off-set by the possibility that the after costs of subdivision would be greater on a developable area basis. Mr Brown noted that holding the land would create additional holding costs in that rezoning would trigger a supplementary valuation and potentially higher Council rates and land tax charges. As against this one of the benefits the land would achieve if it were held would be the development of the freeway infrastructure. This would enhance the value of the general locality as has been experienced in other industrial sectors of metropolitan Melbourne. Mr Brown did not identify a specific factor for enhancement.

In my view a figure of 10% for enhancement as at the date of acquisition is appropriate, although it is apparent that further enhancement would have occurred upon completion of the freeway and the highest and best use of the land was to hold it for future development after some years, during which it could be anticipated the freeway would be progressively constructed.

The 10% should be deducted in the before situation.

Zoning and Sewerage

For the reasons I have stated I am satisfied no material discount should be given for the fact the land was not rezoned at the relevant date. It should be regarded as probable that, but for the freeway proposal, the land would either have been rezoned or very substantially advanced in the rezoning process towards a comprehensive development zone as at the relevant date.

Likewise, for the reasons I have stated, however, I am of the view that a substantial risk still attended the timely provision of sewerage to the land and hence the capacity to subdivide.

Mr Dudakov applied a discount on the basis that the land would not be capable of being sewered before 2009. This conclusion was not supported by engineering evidence to this effect, although I accept he was so advised by engineers who were not called to give evidence. In my view the hypothetical purchaser as at the relevant date would have considered that sewerage could not be provided in less than two years, but there was a real and substantial risk that both the initial provision and progressive augmentation of such supply might be subject to further delays.

The engineers who signed the joint report also reported on the feasibility of a potential before and after plan of subdivision. The before and after plans ultimately agreed as feasible and forming the subject matter of agreed costings, provided for some 24 lots in the northern portion of the site in the before situation and some 17 lots in the after (although there was some disagreement as to whether the internal subdivisional figuration adjoining the freeway reserve was optimal). It was agreed the northern portion of the subject land was within the Edgars Creek drainage scheme and costs were based on:

·Costing prepared as if development proceeded at the acquisition date of 11 February 2002.
·Servicing conditions applicable at the relevant date or shortly thereafter.
·Concept design alternative before plan – staging plan prepared by Coomes dated 9 June 2006.
·Draft Cooper Street strategy plan version 2002.
·Construction rates and standards taken from relevant industrial developments in the northern areas of Melbourne applicable at the relevant date.

Other assumptions included:

·     Assuming the north west corner of the site drained to Cooper Street.
·     Allowing for a temporary sediment trap, litter trap and construction of main drain along the Haberfield frontage to proposed wetland (which was assumed to be reimbursable).
·     Assuming the central area drained east to Edgar Creek.
·     Allowing temporary sediment traps, litter traps and temporary outfall.
·     Assuming the north west catchment will connect to proposed sewers in Cooper Street and allowing for an outfall along the south side of Cooper Street.
·     Assuming the first stage of sewerage works would service up to 18 hectares.
·     Allowing new temporary pumping station and extension of temporary rising mains and joint funding of the Cooper Street flow control facility.

· Assuming the second stage of works to service the north west and central catchments, subject to sewer loadings and uptake of available capacity.

· Allowing an upgrade of the pump station and rising main outfall to Edgars Creek sewered at Charles Road.

· Allowing for a temporary pumping station located in the central catchment and rising main to Cooper Street.

· Assuming an upfront reimbursement discounted to 15%for the Cooper Street facility and outfall at Charles Road and 30% for internal branch sewers.

On the assumptions stated the average cost of servicing the northern portion of the land in the before situation was estimated to be $41.70 per square metre of saleable land. The equivalent cost in the after situation was $47.90.

Mr Brown noted that the reduction in the size of the subject land might be regarded as reducing the potential risk that sewerage would not be available to an initial stage of development in the northern portion of the site:

"As we understand it there is capacity to develop approximately 33 hectares of industrial land at the relevant date in the locality of the subject property.
The 'before' plan provides for a developable land area of 35.70 hectares which we understand includes the gas easement land which cannot have sewerage facilities placed upon it.
In the 'after' plan there is approximately 24.45 hectares of developable land as per the agreed plan.
As it would appear from the above no guarantees can be given in relation to the capacity available to service the 'before' land and in our view there is a risk that the whole of the capacity would not be able to be obtained by Murdesk at the date of acquisition.
There would appear to be a greater chance of obtaining this capacity for the 'after' land given that the 'after' area is significantly below the available capacity."

As against this the joint report of engineers stated that:

"(a)There was more land available before the bypass was proposed. As a result of the bypass there is less land available. This means that the cost of moving to the next catchment for sewer services is brought forward as there are less lots in each catchment on the subject land. The infrastructure arrangements would be the same before and after the bypass acquisition.
(b)Before the acquisition there was more land available to take up capacity but also more potential for others to contribute to infrastructure costs."

Having regard to the evidence as a whole it seems to me that both Mr Brown and Mr Dudakov were correct in allowing for an adjustment with respect to the valuation of the subject land because of the probable delay and uncertainty as to the implementation of sewerage infrastructure.

It was also true that the hypothetical purchaser of the subject land at the relevant date was confronted with the likely imposition of limitations on sewerage flow at the time of subdivisional permits. But this same limitation was known to affect the Northpoint land at the date of the Northpoint sale and hence does not call for any further adjustment.

Mr Brown dealt with the factor of delay and uncertainty in the provision of sewerage by utilising comparable sales of unzoned and unsewered land as the underlying basis of his valuation.

Mr Holland acknowledged the significance of the sewerage factor by valuing the westernmost of the two existing lots at significantly less than the easternmost, because the western lot was less well placed in terms of access to sewerage infrastructure.

Mr Wallace proposed the sequential subdivision of super lots and in so doing he also recognised the significance of infrastructure supply to the land.

In the ultimate I have concluded that Mr Dudakov's approach of explicitly adjusting the Northpoint sale for sewerage considerations is appropriate, but in my view the evidence supports an adjustment of 25% at the relevant date rather than the substantially greater adjustment which he made. The adjustment which should be made reflects a not insignificant risk, but it is not capable of precise mathematical modelling.

Severance

In the after situation the land was reduced in size, reduced in its frontage to Cooper Street, and altered in its overall shape and relative dimensions so as to create a more constrained area for development in terms of its east west dimensions.

As a result of the acquisition the subject land was reduced from 74.50 hectares to 55.14 hectares (leaving aside the severed splinter of 2.9415 hectares).

The valuation evidence demonstrated that ordinarily reduction in size would lead to a higher value per unit. In the present case, however, this is counterbalanced by evidence that at the relevant date land bankers were seeking large parcels of land with appropriate potential such as the subject land.[47] Moreover, the acquisition did not radically change the order of size of the site in the sense that it changed its potential range of future use in any fundamental respect.
[47]Mr Holland stated in evidence that developers would be willing to "punt it" and buy land such as this and hold it for the long term. He stated that developers often pay very large sums of money to land bank especially in areas which are seen to be great opportunities and where there is a constrained supply and where there is rapidly emerging activity in the precinct.

On the other hand the reduction in size meant that if development of the land proceeded in advance of other land holdings in the immediate area, fixed up front infrastructure costs might have to be amortised over a smaller area.

Save for this latter risk I am not persuaded the change in size materially affected the value per hectare of the after land.

The acquisition also resulted in a reduction of frontage to Cooper Street reducing such frontage to some 350 metres, of which only 272 potentially had relatively direct access[48]. Whilst it can be said the visual exposure of the subject land as a whole was improved by the prospect of lateral exposure to the freeway and exposure to the interchange at its north west corner in particular, it is nevertheless clearly correct that the direct exposure to Cooper Street available to business uses was reduced. Likewise, although the evidence supports the view that most lots having a frontage to Cooper Street in the before situation would have been likely to have been accessed via a service road, the potential number of business uses with direct vehicular access to Cooper Street would also be reduced.
[48]The slip lane alignment and tree reserve associated with the freeway interchange intruded across the north western corner of the land towards the east.

The acquisition produced an irregular western boundary and reduced east west dimensions both absolutely and in proportion to the depth of the subject land. The before and after plans produced following the joint experts conference demonstrate the potential cost of the initial stages of subdivision might as a result be materially increased particularly if it became necessary to build a less efficient road layout due to the more constrained site.

Subdivisional costing at the relevant date (including sewerage), showed $55.84 per square metres in the before situation and $70.80 per square metres in the after situation subdivision as at the relevant date, resulting in a cost differential in the order of $1.4 million.

I do not accept that this cost is capable of any precise assessment because I do not accept the land was ripe for subdivision as at the relevant date. Its potential for future development must be regarded as quite fluid. Thus there is no satisfactory basis on which a hypothetical purchaser would realistically exclude potentially larger land users such as Honda and it is difficult to postulate a particular form of subdivision as a satisfactory basis for assessing future costs. Further, unless the date for subdivision can be confidently predicted it is difficult to model future costs. In addition the costings do not cover the whole of the land and cannot necessarily be directly translated to a before and after valuation of the whole of the land. They include the cost of works such as the signalised intersection to Cooper Street which would benefit the whole of the land, but involve significant upfront cost in the initial subdivision. Hence this is a case where the hypothetical subdivision analyses undertaken demonstrate a significantly higher potential cost of subdivision[49] but they cannot be used as a direct basis for quantifying the effect on value as at the relevant date.
[49]Cf. Gobbo J in Coastal Estates at 576 quoted above.

As I have set out above Mr Dudakov acknowledged that the hypothetical plans of subdivision demonstrate that the shape of the front of the land in the after situation is more irregular and results in the possibility of having to construct a "one sided" road, giving rise to higher costs in the after situation. He also acknowledges the reduction in potential for lots fronting Cooper Street. As I have also said, however, he sees these matters as being off-set by other factors.

In my view the countervailing factors which he identifies and the set-off which he adopts do not adequately adjust for these matters.

Mr Brown made an adjustment for severance equivalent to 15.5% of significantly less land values than those adopted by Mr Dudakov and reflecting an allowance in the order of $690,000.[50]
[50]$80,000 per hectare reduced by $12,500 per hectare for severance.

The DDO 2 Planning Overlay

The claimant's valuers also contend that a further adjustment should be made for the DDO 2 overlay. The effect of this overlay is to impose a permit control intended to ensure adequate construction standards are adopted to protect noise sensitive uses adjacent to the freeway.

I accept the view of Mr Dudakov and Mr Brown that at the relevant date the hypothetical purchaser would have had some concerns as to the market perception of this overlay but it would not in fact materially constrain future use and development. Accordingly it gives rise to some but not significant severance impact. Further, the Northpoint sale reflected this factor in any event and no other sales, evidencing a negative impact were adduced. I do not accept the view of Mr Holland and Mr Brown that the DDO 2 overlay justifies a 5% deduction from the value of the land affected.

Conclusion

On the evidence as a whole I am satisfied that an adjustment of 15% should be made to Mr Dudakov's calculation to allow for severance in respect of factors relating to size, dimensions, subdivisional potential, the interface with Cooper Street and insofar as necessary the effect of the DDO 2 overlay.

For the above reasons the compensation payable with respect to loss of market value and severance should be assessed at $3,294,500 in accordance with the conclusion set out at [182] above.

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Appendix A

[2006] VSC 363

5 October 2006