OBLIVION PTY LTD and MINISTER FOR WATER - [2013] WASAT 153

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: DEVELOPMENT & RESOURCES

ACT: LAND ADMINISTRATION ACT 1997 (WA)

CITATION: OBLIVION PTY LTD and MINISTER FOR WATER [2013] WASAT 153

MEMBER: JUSTICE J A CHANEY (PRESIDENT)

HEARD: 17 JUNE 2013

DELIVERED : 13 SEPTEMBER 2013

FILE NO/S: DR 374 of 2012

BETWEEN: OBLIVION PTY LTD
Applicant
AND
MINISTER FOR WATER
Respondent

Catchwords:

Compensation - Public work - Value of land taken - Rural property - Water protection area - Water allocated for public water supply - Whether allocation of water should be ignored as factor affecting value attributable to public work

Legislation:

Country Areas Water Supply Act 1947 (WA)
Land Administration Act 1997 (WA), s 168, s 241, s 248
Rights in Water and Irrigation Act 1914 (WA), s 4(1), s 4(3), s 5A, s 5C, s 11, s 17, s 21A, s 26D, Sch 1, cl 7

Result:

Compensation amount assessed

Summary of Tribunal's decision:

The applicant applied for an assessment of the compensation payable by the respondent for the taking of a portion of the applicant's rural land near Jurien Bay. The respondent had offered, and made an advance payment of, compensation based on a valuation of land for grazing purposes. The purpose of the taking was said to be the protection of the Jurien Water Reserve and associated public water supply.
The applicant claimed that, but for the taking of the land and the steps leading to the taking, the land would have had access to abundant water which would have made it suitable for horticultural purposes. It valued the land unaffected by the taking on that assumption. The respondent contended that the assumption could not properly be made, and that the allocation of water for public water supply was not attributable to the public work and therefore could not be ignored for the purposes of assessing the value of the land taken or the reduction in value of the balance of the applicant's land.
The Tribunal examined how the principles to be applied in ignoring the increase or decrease in value attributable to the public work were to be affected in the circumstances of this case. It concluded that the allocation of water for public drinking water purposes, and the effect of that allocation on the value of the applicant's land, was not 'attributable to the public work'. Accordingly, it concluded that the compensation should be assessed in accordance with the respondent's contentions.

Category: B

Representation:

Counsel:

Applicant: Mr R Ferguson (Agent)
Respondent: Ms C Ide

Solicitors:

Applicant: WA Land Compensation (Agent)
Respondent: State Solicitor for Western Australia

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

Housing Commission (NSW) v San Sebastian Pty Ltd (1978) 140 CLR 196
McKay v Commissioner of Main Roads [No 7] [2011] WASC 223
Mount Lawley Pty Ltd v Western Australian Planning Commission [2007] WASCA 226; (2007) 34 WAR 499

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

This case concerns the amount of compensation to be paid for the acquisition of a portion of land owned by the applicant, Oblivion Pty Ltd (Oblivion) approximately 20 kilometres from the township of Jurien Bay within the Shire of Dandaragan. The land was taken pursuant to an agreement under s 168 of the Land Administration Act 1997 (WA) (LA Act) between Oblivion and the respondent, the Minister for Water dated, 13 September 2011 (Taking Agreement). The land was formally taken by a Taking Order dated 12 February 2012.
The designated purpose of the public work for which the land was taken was expressed in the Taking Order as 'Required for protection of the Jurien Water Reserve and associated Public Water Supply'.
The relevant date for valuation for the purposes of compensation was the date of the Taking Agreement under s 168 of the LA Act, that is 13 September 2011 - LA Act s 241(2)(b).
Prior to the taking, the applicant's land was divided into three lots being Lot 510, Lot 511 and Lot 512 located on Cockleshell Gully Road, Jurien. Lot 510 was and remains a bush block with a registered conservation covenant. It comprises an area of 303.1681 hectares.
Lot 512 is an irregular trapezium shaped lot comprising 525.3606 hectares. It comprises cleared pasture with an area of blackbutt running through a central band of the lot. The northern and western boundaries of Lot 512 adjoin Lot 511.
Lot 511 was an irregular shaped lot comprising a land area of 876.0882 hectares. It is mostly pastured, with some regrowth of acacias and low scrub over approximately 261 hectares in the western half of the lot. The irregular northern boundary of Lot 511 is the southern boundary of Lot 510. Lot 511 was subdivided for the purpose of enabling the Taking the subject of these proceedings. The western portion comprising an area of 419.3431 hectares was the subject of the Taking, and became known as Lot 514. The balance of Lot 511 which was not the subject of the Taking became Lot 513. Lot 513 comprises an area of 456.7507 hectares.
Compensation under the LA Act is to be determined in accordance with s 241 which requires that regard is to be had solely to the matters referred to in s 241(2) - (13). For present purposes, the relevant heads of compensation in respect of which a claim is made are:
•Section 241(2) - the value of the land taken as at the date of the agreement under s 168 'discounting any increase or decrease in value attributable to the proposed public work'.
•Section 241(6) - loss or damage, if any, sustained by the claimant by reason of:
(a) removal expenses; or
(b)disruption and reinstatement of a business; or
(c)the halting of building works in progress at the date when the interest is taken and the consequential termination of building contracts; or
(d)architect’s fees or quantity surveyor’s fees actually incurred by the claimant in respect of proposed buildings or improvements which cannot be commenced or continued in consequence of the taking of the interest; or
(e)any other facts which the acquiring authority, the court, or the State Administrative Tribunal considers it just to take into account in the circumstances of the case.
•Section 241(7) - where land is taken from a person who is also the holder of adjoining land, the amount of any damage suffered by the claimant due to the severing of the land taken from that adjoining land, or due to a reduction of the value of that adjoining land.
•Section 241(8) - where the interest in land is taken without agreement, an amount considered by the Tribunal appropriate to compensate for the taking without agreement.
•Section 241(9) - the additional amount under subsection (8) must not be more than 10% of the amount otherwise awarded unless the Tribunal is satisfied that exceptional circumstances justify a higher amount.
•Section 241(11) - interest at the rate prescribed under s 8(1)(a) of the Civil Judgments Enforcements Act from the date of the service of the claim on the acquiring authority.
The applicant had some difficulty in formulating its claim for compensation having regard to the provisions of s 241 of the LA Act. It left the formulation of their claim for compensation to a valuer, Mr Glenndin Miller, whose evidence it adduced at the hearing. In his initial report, Mr Miller formulated the claim at $5,128,750 made up as follows:

Value of land and improvements taken	s 241(2)	$ 4,353,500
Consequential Losses	s 241(6)(e)	$ 309,000
Severance Damage	s 241(7)(a)	$ Nil
Reduction in Value	s 241(7)(b)	$ Nil
Betterment	Nil
Sub-total	$ 4,662,500
Solatium at 10%	$ 466,250
Total	$ 5,128,750

It was, however, apparent on the face of Mr Miller's report that, within the figure shown as 'Value of land and improvements taken' there were components of what Mr Miller contended were depreciated values of Lot 512 and the balance of the land formerly part of Lot 511 and now Lot 513.
During the course of the hearing, Mr Ferguson, who represented Oblivion as agent at the hearing, submitted an alternative breakdown of the claim, prepared by Mr Miller, which read as follows:

Alternative breakdown of the 'heads of claim', under Section 24` of the Land Administration Act
Subject Lot 511:
Fair Market Value		Breakdown
'Unaffected Before Value' Lot 511	$3,252,000		Land $1,752,000 Water $1,500,000
Less
'Affected After Value' Lot 513	$342,500		Land $342,500
= Total 'loss of value to the owner'	$2,909,500		Difference in land = $1,409,500 Difference in water = $1,500,000
'Land' loss for Lot 511 'due to the Take' = 'Severance' loss for Lot 511 'due to the water Take' =			$1,409,500 $1,500,000
$2,909,500
Subject Lot 512:
Fair Market Value		Breakdown
'Unaffected Before Value' Lot 512	$1,939,000		Land $1,150,000 Water $789,000
Less
'Affected After Value' Lot 512	$495,000		Land only $495.000
= Total 'loss of value to the owner'	$1,444,000		Land and Water
'Land' loss for Lot 512 'due to the Take' = 'Severance' loss for Lot 512 'due to the water Take' =			$655,000 $789,000
$1,444,000
Summary
Sec 241(2) land only	$1,409,500	Loss of land value only from Lot 511
Sec 241(7)(a) severance	$1,500,000	Loss of water value from Lot 511
Sec 241(7)(a) severance	$655,000	Loss of land value from Lot 512
Sec 241(7)(a) severance	$789,000	Loss of water value from Lot 512
Total loss of value over entire '[Oblivion]' farm, due to the 'Public Work'	$4,353,500

The applicant's original claim for compensation made on 7 May 2012 claimed a total of $2,796,119.70 together with an amount of $216,926 made up of legal and valuation fees, and interest on a loan said to have been necessitated by the scheme of taking.
In response to the applicant's claim for compensation, the respondent made an offer of $517,000 plus interest from 13 April 2012 in full compensation for the Taking. That offer was rejected, but an advance payment of compensation pursuant to s 248 of the LA Act was made and accepted for a total of $530,002.90 being the amount offered by the respondent together with interest to the date of the advance payment.
The respondent maintained at the hearing that the proper amount of compensation was the amount which had been offered on 27 June 2012 save that it argued that the component of that offer comprising 'solatium' pursuant to s 241(8) of the LA Act was offered in error and that, accordingly, the proper amount of compensation should exclude any solatium. Although it made that submission, the respondent indicated that were its submissions as to the appropriate amount of compensation to be accepted, it would not seek a reimbursement from the applicant of that component of the advance payment which it now contended had been paid in error.
It can thus be seen that the parties are a very long way apart in their assessments as to the proper amount of compensation. In very large part, the reason for that difference turns on the question of what assumption should be made as to the availability of water for the purposes of assessing the value of the land taken, and the impact of the Taking on Oblivion's adjoining land. That difference arises because of a different approach by the parties to the application of the requirement in s 241(2) of the LA Act to discount any 'increase or decrease in value attributable to the proposed public work'. Oblivion contends that if the scheme leading to the taking of the land is ignored, the land should be valued on the basis that it had available to it an abundant source of water which would enable it to be used for horticultural purposes, thereby substantially increasing its value. The respondent contends that the limits on availability of water exist independently of the taking or any steps in the scheme leading to the taking. The respondent therefore argues that the assumption, that a large volume of water would be available for horticulture purposes, cannot be made for the purposes of assessing compensation.
Because that issue is fundamental to the parties' contentions, I turn to consider the principles which underlie the dispute, and then to examine the issue of water availability.

Discounting any increase or decrease in value attributable to the proposed public work

In order to bring to account the requirement to discount any increase or decrease in value attributable to the proposed public work, it is necessary to first identify with clarity 'the proposed public work'. It is then necessary to identify effects on value 'attributable' to the proposed public work.
The Taking Agreement recites that:
The Minister requires the Site for the purposes of a public work being underground drinking water protection area.
The Taking Order states that the land (being Lot 514) 'is hereby taken, for use for the designated purpose of the public work specified below'. Below appears the 'designated purpose' which is 'required for protection of the Jurien Water Reserve and associated Public Water Supply'.
The notice further provides:
REASON LAND CHOSEN FOR TAKING:
Is located within the Jurien Water Reserve and is required for the Jurien Public Water Supply which is a major drinking water source for the town of Jurien.
I accept that the public work for which the land was taken is as described in the taking order, namely the protection of the Jurien Water Reserve and associated Public Water Supply.

What influences on value must be ignored as 'attributable to the public work'?

Oblivion's contention is that the overriding purpose for which a protection area has been taken from Oblivion was to provide water for the expansion of the Jurien Bay town site. It submits that if there were no requirement to expand the town site, there would be no need for extra bores and therefore no need for a protection area on Oblivion's land. It contends, therefore, that restrictions on the potential use of its land, in particular the former Lot 511 and Lot 512, which have resulted from allocation of water for the future public water supply, are attributable to the public work, and therefore must be ignored for the purposes of assessment of compensation. I will return later to the particular events which the applicant relies upon in making that submission. In order to deal with the submission, it is necessary to consider what it is that affects value which must be ignored as being attributable to the public work.
This issue is recently considered by Beech J in McKay v Commissioner of Main Roads [No 7] [2011] WASC 223 (McKay) at [194] -[199]. His Honour referred to the judgment of the Court of Appeal in Mount Lawley Pty Ltd v Western Australian Planning Commission [2007] WASCA 226; (2007) 34 WAR 499 (Mount Lawley (2007)) where it construed s 36(2b) of the Metropolitan Region Town Planning Scheme Act 1959 (WA) (MRTPS Act). That section concerned assessment of the price to be paid for the acquisition of land for the purposes of the Metropolitan Region Scheme. The MRTPS Act required that the value of the land be determined 'without regard to any increase or decrease, if any, in value attributable wholly or in part to the Scheme'. The Court in Mount Lawley (2007) noted that any number of events having effect on the value of land, including political, scientific, social or commercial occurrences, might be precursors or lead up to, or have some relation to, a Scheme. It said, however, that that is not to say that those changes in value are necessarily attributable to the Scheme itself, although they may be - see Mount Lawley (2007) at [26]. The Court noted that the point at which the effect on value is attributable to a step in the 'Scheme', as opposed to something less than or different from the Scheme raises difficult questions in the application of s 36(2b).
At [30] in Mount Lawley (2007), the Court of Appeal said:
Also, the words 'attributable to the Scheme' plainly have the consequence that the effect on value of characteristics or location of the land, or other factors affecting the land (such as population pressures), which always had the capacity to enhance, or reduce, its prospects of development and hence its value are not to be disregarded merely because they led, ultimately, to the Scheme. That is so even if they are specifically identified, or otherwise referred to, by the Scheme: see in this respect the approach adopted (albeit in the context of different legislation) by Basten JA in Walker No 1 [63]. The same is true of inherent characteristics of, or other factors affecting, land that is adjacent to the subject land, so far as those characteristics or factors are capable, independently of the Scheme (and its steps), of affecting the development potential, and hence the value, of the subject land. Regard to characteristics and factors of either kind might lead a hypothetical, informed purchaser to anticipate, independently of the Scheme and its steps, an outcome similar to that which in fact happened as a result of the Scheme. In such a case the Scheme (or knowledge of steps leading to it) may have no impact on the value of the land.
Beech J in McKay at [196], extracted the following propositions from the passages in Mount Lawley (2007) to which he referred:
(a)It is not sufficient, in order that an increase or decrease in value be attributable to the Scheme, that something is a precursor to, leads up to or has some relation to the Scheme [26].
(b)The step or occurrence affecting value must be attributable to the Scheme itself and not to some different notion that ultimately led to the creation of the Scheme [29].
(c)The step must be attributable to the Scheme, not vice versa. That requires that the step must have been taken in order to bring about the Scheme itself or a variant of it that is not materially different [29].
(d)If it is to be attributable to the Scheme, the step must have been taken with the intention of facilitating or for the purpose of creating the Scheme [29].
(e)The effect on value of the characteristics or location of the land, or other factors affecting the land (such as population pressures), which always had the capacity to enhance or reduce its prospects of development and hence its value, are not to be disregarded merely because they led, ultimately, to the Scheme [30].
I consider, as Beech J accepted in McKay, that the propositions which can be drawn from Mount Lawley (2007) are applicable to the proper construction of s 241(2) in that they apply to increases or decreases in value attributable to proposed public works. In other words, where in the propositions set out above, the word 'Scheme' appears, the words 'public work' can be substituted so as to apply the propositions to s 241(2) of the LA Act. (I note that the decision in McKay was subject to an appeal which was partially successful, but that appeal did not involve any challenge to his Honour's conclusions as set out above).

Rights to water

Before turning to the history of the allocation of water from the aquifers beneath the Oblivion land, it is necessary to review the nature and extent of entitlements of land owners to water beneath their land.
Ownership and control of water within the State is governed by the provisions of the Rights in Water and Irrigation Act 1914 (WA) (RWI Act). By s 5A of the RWI Act, the right to the use and flow, and the control of, water in any water course, wetland or underground water source is vested in the Crown except as allocated under the RWI Act or another written law. Section 5C of the RWI Act makes it an offence to take water from any underground source save for certain statutory exceptions which are not relevant for present purposes, or except pursuant to a licence granted by the Minister. As Mr John Connolly, Director Regulation for the Department of Water (DoW), correctly stated in his evidence to the Tribunal, there is no right or entitlement for a landowner to take water that may be found under his land in the absence of a licence from the DoW.

Licensing of water extraction

Responsibility for the grant of licences to take water under the RWI Act rests with the Minister. Section 4(3) of the RWI Act requires that the Minister seek to ensure that the objects stated in s 4(1) are achieved. Section 4(1) provides:
(1)The objects of this Part are -
(a)to provide for the management of water resources, and in particular -
(i)for their sustainable use and development to meet the needs of current and future users; and
(ii)for the protection of their ecosystems and the environment in which water resources are situated, including by the regulation of activities detrimental to them;
and
(b)to promote the orderly, equitable and efficient use of water resources;
(c)to foster consultation with members of local communities in the local administration of this Part, and to enable them to participate in that administration; and
(d)to assist the integration of the management of water resources with the management of other natural resources.
The grant of licences is discretionary, but the Minister is required by cl 7(2) of Sch 1 of RWI Act to have regard to certain matters. Clause 7(2) provides:
(2)In exercising that discretion, the Minister is to have regard to all matters that the Minister considers relevant, including whether the proposed taking and use of water -
(a)are in the public interest;
(b)are ecologically sustainable;
(c)are environmentally acceptable;
(d)may prejudice other current and future needs for water;
(e)would, in the opinion of the Minister, have a detrimental effect on another person;
(f)could be provided for by another source;
(g)are in keeping with -
(i)local practices;
(ii)a relevant local bylaw; or
(iii)a plan approved under Part III Division 3D Subdivision 2; or
(iv)relevant previous decisions of the Minister;
or
(h)are consistent with -
(i)land use planning instruments;
(ii)the requirements and policies of other government agencies; or
(iii)any intergovernmental agreement or arrangement.
Mr Connolly explained that the DoW issues three types of licences and permits under the RWI Act. They are a licence to construct or alter a well (s 26D), a permit to interfere with beds or banks (s 11, s 17 and s 21A) and a licence to take water (s 5C). Licence exemptions may apply to certain stock and domestic, dewatering and monitoring well situations.
A licence to construct or alter a well does not allow a landowner to take or use water from the bore, but rather to alter, deepen or construct a well. A s 5C licence to take water allows a landowner to take a specified amount of water from a proclaimed groundwater area. It does not confer ownership of the groundwater on the licence holder, but rather amounts to a grant of access to water for use by the licence holder, the water remaining at all times vested in the Crown pursuant to s 5A of the RWI Act.
Mr Connolly explained that in the regulation of water, consideration is given to both the short and long term economic, environmental and social impacts of granting or refusing licences. He said that applications are generally assessed in the order in which they are received, that is, on a first in first served basis. After initial assessment, the DoW may seek further information in order to assess the application, and may require that the application be advertised if it is likely to have a significant impact on a water resource, is contentious, or is a request for an annual entitlement of more than 1,000,000 kilolitres per annum.
Mr Connolly explained that it is not always possible to grant a licence to take and use groundwater for various reasons, including where the grant of a licence would be inconsistent with an approved water allocation plan or departmental water licensing policies. Licences may also be refused where a water source is fully allocated.
The approach to the exercise of the discretion is guided by the DoW's Operational Policy No 3 entitled 'Principles and Guidelines for Assessing Water - Licence and Permit Applications in WA', published in February 2007.
In order to further guide the decisionmaking in relation to water licences, the DoW has developed what are referred to 'Water allocation plans'. The water allocation planning process was explained by Ms Susan Worley, the Manager of Water Allocation Planning for the DoW. She explained that the purpose of water allocation plans is to set out how much water can be extracted from a resource, and how that extraction and water resource will be managed and evaluated. Allocation plans guide the DoW's decisionmaking on water licences by setting out how much water is available for licensing at a resource scale, and any local conditions that will apply to individual water licences. She said that setting allocation limits is a complex process, primarily based on scientific information such as recharge, through flow and ecological water needs, and then balancing that against use information such as current and future water demand. Plans are developed by a Project Team and overseen by a Project Board which takes into account water resource information, water use information and stakeholder information and advice. Plans are released for a three month public comment period and public submissions are considered in finalising the plans. Plans then pass through an approval process resulting ultimately in approval by the Minister for Water. Once approved, the plans are applied as departmental policy.
Plans are implemented by the DoW's regional staff through local licensing and monitoring arrangements. The primary water resource management tool which is applied is a volumetric allocation limit set for each resource. Licence applications and renewals are assessed individually but the total value of licence entitlements must remain within the allocation limit.

Jurien groundwater allocation plan

The Oblivion land contains two groundwater aquifers. They are the superficial aquifer and the Lesueur aquifer. The superficial aquifer occurs in Tamala limestone and extends under the whole of the Oblivion land. Groundwater in the Tamala limestone is derived from direct recharge from rainfall, lateral flow from the east, runoff from laterite areas in the east and from the Nambung River where it enters caves near the coast. The Tamala limestone also receives recharge from upward leakage from westerly flowing groundwater in the Lesueur sandstone.
A Jurien Groundwater Area Management Plan was developed in 1995 by the Water Authority of Western Australia. That plan contained allocation limits for the various sub areas which it covers.
In January 2002, the Waters and Rivers Commission (a predecessor to the DoW) produced an Interim Subregional Allocation Strategy entitled 'Managing the Water Resources of the Jurien Groundwater Area WA' (2002 Strategy). In the introduction to that document, it was said that the strategy should be considered as a precursor to the Management Plan which will be developed in consultation with community groups and stakeholders in the area. The 2002 Strategy provided 'interim allocation limits'. The allocation limits said to be the maximum level of allocation (including public water supply held in reserve) that could be used on an annual basis and which allows acceptable levels of pumping stress, and protects dependent economic, social and environmental values. In relation to the Lesueur aquifer, the 2002 Strategy identified a sustainable allocation limit as 3 million kilolitres per year, of which 2.5 million kilolitres per year were shown as reserved for future public water supply purposes.
After a period of consultation in 2007 to 2008, the DoW published the Jurien Bay Reserve Drinking Source Protection Plan in December 2008 (2008 Protection Plan). The 2008 Protection Plan proposed that a water reserve be proclaimed to protect the quality of the Jurien water resource. The 2008 Protection Plan recited that the Water Corporation was currently licensed to draw 420,000 kilolitres per annum from the Jurien well field for public water supply purposes in accordance with a licence. The extraction of water under that licence was undertaken in accordance with the Jurien Water Resource Management Operation Strategy approved by the DoW.
Mr Steven Watson, Program Manager in the Water Source Protection Planning Branch of the DoW, explained the mechanism by which public drinking water sources are protected in Western Australia. He explained that the DoW establishes Public Drinking Water Source Areas (PDWSA), an expression used to define an area within which water flows on the ground or under the ground towards a storage reservoir or abstraction or production bores that are used for public drinking purposes. PDWSA are located wherever a major population centre public drinking water supply is provided. There are currently 136 PDWSA used to service major population centres in Western Australia and the Jurien Water Reserve is one of them.
In order to achieve protection of a PDWSA, the DoW proclaims the area or boundaries of each PDWSA, and defines priority areas, known as, P1, P2 or P3, within each PDWSA to guide land use planning, and defines protection zones within which specific by-laws may be developed for water quality protection.
Mr Watson explained that a PDWSA is defined based on four criteria, namely:
i)the strategic value of the water source;
ii)the existing zoning of the land;
iii)land tenure or ownership; and
iv)current or approved land uses.
Priority 1 (P1) areas generally apply over Crown land such as State forest. Priority 2 (P2) areas generally apply over rural zoned land, and priority 3 (P3) areas generally apply over urban and light commercial or light industrial zoned land.
From time to time PDWSA boundaries may change. That may occur in response to ongoing consultation, new information, existing bore locations, new bores or land use planning decisions made by the Western Australian Planning Commission.
A water quality information sheet published by the DoW explains the differences in P1, P2 and P3 areas. It describes typical land uses in P2 areas as rural or cropping and grazing land. The brochure describes land use and water management requirements as being:
•good quality water available for medium to long term use
•minimise risks to ensure no increased degradation of water quality
•low/medium treatment and water quality monitoring required
•best management practice for water quality protection is recommended
•land use intensification (eg rezoning) generally not recommended unless it is supported in a strategic level planning assessment
At the time of publication of the 2008 Protection Plan, the existing Jurien Water Reserve was south of and did not include the Oblivion land. The 2008 Protection Plan proposed an extension of the Jurien Water Reserve which would have included the whole of the Oblivion land, and provided for the placement of production bores within that area but to the west of the Oblivion land. It also proposed that there would be a P1 classification which included the western portion of Lot 511, with the balance of the Oblivion land being categorised as P2.
The 2008 Protection Plan was revised and replaced by the Jurien Water Reserve drinking water source protection plan published in 2009 (2009 Protection Plan). The new plan was said to reflect the Minister for Water's decision to change some P1 land within the proposed water reserve to P2. It was also said that the 2009 Protection Plan reflects a newer approach for the assessment of abstraction bores and domestic livestock issues in new subdivision proposals in P2 areas of the proposed Jurien Water Reserve. The 2009 Protection Plan showed the whole of the Oblivion land as P2 classification. Mr Watson explained that the 2008 Protection Plan boundary and then the 2009 Protection Plan boundary reflected the DoW's assessment of the appropriate boundary having considered modelling completed by the Water Corporation, public consultation including an open day in Jurien, submissions from landowners, the Water Corporation and the Shire of Dandaragan.
It is apparent that further consultation ensued leading to the further amending and updating of those plans and publication of the Jurien Water Reserve's Drinking Water Source Protection Review in June 2011 (2011 Protection Review). That review recommended the proclamation of the Jurien Water Reserve based on a substantially reduced boundary which included the western portion of Lot 511 on the Oblivion land, but left the balance of the Oblivion land outside the water reserve boundary. The whole of the area within the water reserve boundary was proposed to be classified as P1. That portion of Lot 511 which was included within the water reserve boundary substantially aligns with what became Lot 514 and the subject of the taking. The balance of Lot 511 (ultimately Lot 513), Lot 510 and Lot 512 were thus not subject to any priority classification.
In August 2012, the Jurien Water Reserve was proclaimed under the Country Areas Water Supply Act 1947 (WA) over the area recommended in the 2011 Protection Review.

Jurien Water Allocation Plan

In August 2010, the DoW published the Jurien Groundwater Allocation Plan. The plan updated and replaced the 2002 Allocation Strategy. Table 1 of the plan set out the groundwater allocation limits for the various aquifers within the Jurien groundwater area. In relation to the Lesueur aquifer within the Cervantes subarea, the allocation plan showed an allocation limit of 3 million kilolitres per year, of which 2.45 million kilolitres was set aside for public water supply. The remaining 550,000 kilolitres per year was shown as 'exempt unlicensed kilolitres/year' so that the resource was fully allocated and no further water allocation was available. Water was said to be available from the superficial aquifer.

Oblivion's history on the land

Mr Craig Underwood, and his wife, Jane Underwood are the Directors of Oblivion which they registered in October 1984 in order to acquire a rural property 'with upside to future uses' near Jurien Bay where they live. They bought the Oblivion property in December 1994. At the time, the property had Tagasaste, a perennial pasture which grew well in the area due to the availability of water and soil. They were then involved in an extended period of difficulties associated with obtaining a clearing permit for the land. Mr Underwood said that during the five year delay in relation to obtaining a clearing permit, they earned minimal income from the property which was subject to a mortgage, and were placed in financial stress.
Mr Underwood said that in 2001, the DoW published a map showing a water protection classification which included the Oblivion property. He produced a reproduction of that map which shows a similar area to that proposed in the 2008 Protection Plan and the 2009 Protection Plan, although it does not depict the division of P1 and P2 areas. Mr Watson was questioned about that plan, and said he was unable to identify any documents produced around 2001 containing the plan produced by Mr Underwood. Because Mr Underwood was unable to identify the source of the document, and because it is not found in any of the publicly available documents which were produced at the hearing, I am not able to conclude that the plan produced by Mr Underwood was a publicly available document. Mr Underwood relies on it for the proposition that 'the State had effectively notified the market that this land is part of a government scheme for the supply of water to the town of Jurien Bay for its expansion'. That is not a conclusion which I am able to draw in the absence of reliable information as to the source of the document. However, even if Mr Underwood's evidence as to the document were accepted, for reasons which will become evident, that would not affect the outcome of this decision.
Mr Underwood said that, since the original publication of the plan in 2001, the DoW had since published or advised of over 13 different iterations of the boundary.
Mr Underwood said that, because of the classification put on his property, banks have refused to provide finance for farming, and he concluded that the property 'was uninvestible [sic] as there wasn't any certainty as to its future uses'. Part of Oblivion's case is that, in effect, the uncertainty over the water situation had the effect of blighting the whole of the Oblivion property because it could not be developed as a result of the uncertainty in relation to water supply. In 2007, two proposed purchasers did not proceed because of the inability to obtain water.
In April 2002, Mr Underwood applied for and was granted a groundwater exploration licence requesting an application for 3 million kilolitres per annum from the shallow superficial aquifer for an unspecified horticulture enterprise. In April 2002, Oblivion was granted an exploration licence to investigate and prove up the required water supply from the superficial aquifer. It was a condition of that licence that an appropriate hydrogeological report be provided. It was not provided, and the licence lapsed.
A further application was received from Mr Underwood in March 2005 seeking both a s 26D and s 5C licence under the RWI Act. Mr Underwood apparently intended to drill two bores and take 100,000 kilolitres per annum for a bush camp. The licence for construction of the bores was issued on 5 April 2005 and a water licence issued in June 2005 with an expiry date of 19 June 2010. It is apparent that Oblivion did not utilise the licences and they lapsed in 2010.
During 2009 and 2010, Mr Underwood engaged in discussions with the Minister's Office with a view to the possible sale of the Oblivion land to the government at valuation. Those negotiations ultimately led to the completion of the Taking Agreement.
Mr Underwood considers that he was placed in a position where he had little option but to agree to the taking. To illustrate that point, he relied on the contents of a letter dated 15 June 2011 from the Acting Director General of the DoW. That letter attached two alternative plans which the letter said represented the 'only two options for Oblivion's land'. The first plan depicted the proposed Jurien Water Reserve including the portion of Lot 511 which the DoW was offering to purchase (ultimately Lot 514). The second plan showed the proposed Jurien Water Reserve excluding all of Lot 510, Lot 511 and Lot 512. No classification was applied to any of Oblivion's land under the second option. The letter of 15 June 2011 confirmed that regardless of whether the offer to purchase progressed or not, the DoW did not propose to include any of Oblivion's land as P2. The letter also stated that it was not possible under existing legislation and policy for the DoW to reserve a water allocation for Oblivion, but advised that approximately 23.4 gigalitres of water remained unallocated from the Perth superficial aquifer and it was open to Oblivion to apply for a licence to construct a bore and a licence to take water at any time, which application would be dealt with in the same manner as any application received by the DoW. The letter also advised that the DoW was not aware of any plans to impose any future restrictions on Oblivion's land, either by itself or by any other agency.
The letter concluded by summarising three options. The first was for Oblivion to accept an offer of a specified amount for the portion of Lot 511 to be taken with the Drinking Water Source Protection Plan being amended so as to include that portion of the land. The second was to accept an alternative approach of agreeing to the taking on the basis that the Protection Plan would be amended to include the taking of land, but the final purchase price would be set by this Tribunal. The third option was that Oblivion not agree to the taking, in which case the Protection Plan would be amended to remove all of Oblivion's land from the proposed Jurien Water Reserve.

As is now apparent, Mr Underwood took the second option. No doubt he did so because the third alternative would result in him retaining the whole of his land, being unable to access water from the Lesueur aquifer, and having no right to compensation.

Assumptions upon which the valuers have proceeded

As mentioned above, the applicant relied upon the evidence of Mr Miller both as to the value of the land taken and the formulation of its claim under s 241 of the LA Act. The respondent relied upon the evidence of a valuer, Mr John Clark. The very substantial difference in their respective valuations arises largely because of the fundamentally different assumptions upon which their valuations were based.
In Mr Miller's valuation report dated 13 September 2011 (Miller Report), Mr Miller assessed what he referred to as 'the unaffected value' of Lot 510, Lot 511 and Lot 512. He then assessed what he referred to as the 'affected value' of Lot 510, Lot 513 and Lot 512, they being the lots remaining in Oblivion's ownership following the taking. He considered that the unaffected and the affected values of Lot 510 were the same, a proposition with which Mr Clark agreed, so that it is not necessary to deal with any questions of value of Lot 510 for the purposes of the present proceedings. Mr Miller assessed the amount of compensation as being the difference between the total of the unaffected values of Lot 510, Lot 511 and Lot 512 on the one hand, and the affected values of Lot 510, Lot 513 and Lot 512 on the other. In effect, therefore, he measured compensation as the difference in the unaffected values of Lot 511 and Lot 512 and the affected values of Lot 513 and Lot 512. As mentioned above, he experienced difficulty in identifying the components of the relevant compensation figure by reference to the provisions of s 241 of the LA Act.
Mr Clark's view was that there was no change in the value of the land retained by Oblivion from the value which was attributable to those areas of Oblivion's land prior to the taking. Accordingly, Mr Clark's approach was to assess the value per hectare of Lot 511 at the time of the taking, and then to apply that value to the area of Lot 514, being the taken land.
In the Miller Report, he set out the assumptions upon which his valuation was based. He indicated that it was necessary for him to determine:
a)what the relevant 'public work' or 'Scheme' is that needs to be disregarded; and
b)the relevant 'steps in the process' that also need to be regarded.
In explaining his basis for valuation in the Miller Report, Mr Miller said in relation to Lot 511:
The market value of this lot, 'in the absence of the scheme' has been assessed in this valuation.
In this regard, the underlying purpose of the public work or 'scheme' is as follows:
'the desire of the State to collect, to maintain and protect the existing very substantial ground water reservoir available under the subject farm lands for the purpose of providing ground water for the future expansion of the Jurien townsite'.
•In determining the 'Highest and Best Use' of this subject lot, I have also ignored certain 'steps in the process' that led up to the making of 'the scheme'.
These 'steps in the process' include (but are not limited to) the following:
a.the Department of Water's proposed 'Priority 1' and/or 'Priority 2' water classification,
b.the 'Jurien Water Reserve drinking water source protection plan'
•When considering the market value of Lot 511 'in the absence of the scheme', I have assumed that the volume of the available ground water by the subject lot owner (and/or their heirs or transferors) must be isolated to the volume of ground water under this site that would have represented a reasonable and 'most likely' water allocation by the Department of Water, 'if not for the scheme'.
In this regard, my enquiries to Mr Sam Burton of 'Ground Water Consulting Services Pty Ltd', together with my own enquiries and investigations has revealed that currently an amount of 2.5 gigalitres would have been a reasonable amount 'if not for the scheme'.
Mr Miller then considered three scenarios, the third of which he adopted as the highest and best use of Lot 511. That scenario was as follows:
c.Scenario C:
As a 876 ha potential horticultural and grazing property, offered to the market place with a 2.5 gigalitre (or thereabouts) water license being:
i) already obtained by '[Oblivion]' prior to the property being offered to the market place
and/or
ii)after a due diligence period, an incoming buyer of Lot 511 being reasonably confident that they (the buyers) can eventually in the short term obtain a 2.5 gigalitre water licence for horticultural purposes.
Under this hypothetical scenario, I have assumed that 2.5 gigalitres of quality ground water is sufficient to intensively crop on a commercial level an area of say 139 ha of market garden (with an additional area of say 278 ha left fallow as crop rotational land).
Therefore, the remaining grazing lands would total some 459 ha.
For the purposes of the adopted scenario, Mr Miller also assumed that the DoW would have conditionally approved a 2.5 gigalitre water licence over Lot 511, that the land had suitable soil types, and that the cost of providing three phase power to the land would not exceed $425,000 (a figure he said was a costing estimate based on heavily qualified advice obtained through a consultancy firm).
In relation to Lot 512, Mr Miller made the same assumption concerning the underlying purpose of the public work but that Lot 512 also had some definite subdivision potential and could have accessed the superficial aquifer for an additional 450,000 kilolitres of groundwater if not for the public work. In the affected scenario Mr Miller assessed the highest and best use of Lot 513 and Lot 512 as being grazing property with at best only very limited access to very shallow aquifer groundwater for stock watering purposes only.
In his responsive witness statement, and in his oral evidence, Mr Miller identified the 'public work' as not simply the protection of the Jurien Water Reserve but including both:
a)initially the protection of the groundwater for all lands east of the new bore line and therefore within the groundwater flow area (of which the subject Oblivion farm is located)
and
b)then later in time when the 'Ardross Estates' subdivision actually commences, the collection of the groundwater from these new bores.
In his oral evidence, Mr Miller explained that, for the purposes of ignoring the increase or decrease in value attributable to the public work, he ignored all steps going back to the point where the proposed developer of the Jurien Bay town site, Ardross Developments, first required the allocation of drinking water. He assumed that the Jurien town site as it was at that time (a town site of approximately 1500 people serviced by three small water bores) existed but that it would never be expanded as proposed by Ardross Estates (or at all). He did assume the existence of a regulatory system in relation to licensing for water but assumed that, in the absence of plans to expand the Jurien town site, Oblivion would have had access to 2.5 gigalitres of water on Lot 511 from the Lesueur aquifer.
It follows that Mr Miller assumed that, had the water not been allocated for public drinking water purposes, no other landowner whose land is above the Lesueur aquifer whould have applied for and been granted any allocation for the Lesueur aquifer.
Mr Clark, on the other hand, proceeded on the basis that the allocation of water for public water supply did not constitute a step in the process of implementing the public work, and that the absence of any prospect of the grant of a water licence to extract sufficient water for horticultural purposes from the Lesueur aquifer was not attributable to the public work.
In my view, Mr Clark's approach is correct.
The situation presently under consideration is analogous to the example, explained by Jacobs J in Housing Commission (NSW) v San Sebastian Pty Ltd (1978) 140 CLR 196 at 206 207, of circumstances where the relationship between an event affecting value and a proposed public works does not lead to the event being ignored for compensation purposes . His Honour explained:
Assume an area of land on the outskirts of existing settlement, and assume a planning authority concerned to designate land uses in a planning scheme. The land is designated 'open space'. Thereafter it is resumed for the purpose of a public reserve. The fact that the land was zoned as 'open space' may have depreciated its value. Does the resuming authority pay compensation at the depreciated value of 'open space' or at some other value? The question cannot be correctly answered without knowing whether there was any connection between the zoning as 'open space' and the subsequent resumption. If the zoning was done with the intent or in anticipation that the land should be resumed for a purpose such as a public reserve or if the zoning was proposed or dictated by the resuming authority then s 124 requires that the zoning be ignored. It is only a step in the process of subsequent resumption. But in other circumstances the resumption may be unconnected with the act of zoning. It may be that the resuming authority selects the land for resumption as a public reserve because it is zoned 'open space'; if it does so it is doing no more than ensuring that it, as well as others, conforms to the planning scheme. In those circumstances there is no relevant relationship between the zoning and the public purpose. No public purpose, existing or anticipated, intended, or urged by the zoning authority, leads to the zoning; rather, the zoning leads to the public purpose and consequent resumption.
That passage was cited with approval in Mount Lawley (2007) at [18]. It illustrates the propositions identified by Beech J in McKay set out above.
It is correct, as Mr Miller contended, that the allocation of water for public drinking purposes can be said to have led to, or otherwise have some relation to, the subsequent protection of the water source. By itself, however, that is not sufficient to render any decrease in the value of the Oblivion land 'attributable to the public work'. The allocation of water is not attributable to the protection of the water source. It cannot be said that the allocation of the water was a step taken in order to bring about the protection of the water source. Nor can it be said that the allocation of water was a step taken with the intention of facilitating or for the purpose of the public work. The effect on the value of the land as a result of the unavailability of water is a result of decisions taken for social and economic reasons having regard to the potential expansion of the nearby town site of Jurien. Proximity to the town site of Jurien which has a potential for expansion is an inherent characteristic of the Oblivion land. Competition for limited water resources, and the potential allocation of water for public drinking water purposes, all existed independently of the public work.
The point can be clearly illustrated by having regard to the alternative propositions put to Oblivion in the letter of 15 June 2011 which led to the Taking Agreement. One option was that the Oblivion land not be taken, and that the Jurien Water Reserve boundaries would be wholly outside of all of the Oblivion land. That option involved no priority classification being imposed on the Oblivion land. Had that course been taken, the prior allocation of water for future public drinking water purposes would nevertheless have resulted in there being no capacity for a licence to be obtained by Oblivion to extract water from the Lesueur aquifer. The decreased value of the Oblivion land by reason of a lack of access to that water existed merely because the water had, some years earlier, been allocated for public water supply purposes. The taking of a portion of Oblivion's land for the purpose of protection of that water source did not affect that decreased value. It cannot be said that the allocation of water to other potential users is attributable to the purpose for which the land was taken.

The water potential for the Oblivion land

Each of the parties adduced evidence from a hydrogeologist. The applicant called Mr Sam Burton and the respondent called Mr Don Scott. There was substantial agreement between them as to the hydrology of the Jurien area, and in relation to the Oblivion land in particular. They agreed that the superficial aquifer had significant groundwater resources available for allocation but noted that the superficial aquifer typically enables construction of bores with modest yield, and those yields were expected to be smaller beneath the Oblivion land where the aquifer thins to the east. They considered therefore that development of a commercial scale bore field from the superficial aquifer may be uneconomic.
The hydrologists agreed that there is currently no groundwater available for licensing from the Lesueur aquifer which is 'a target aquifer for future public water supply in Jurien Bay due to its suitability for large scale groundwater development to the west of the site'.
The only point of disagreement between the hydrologists was as to the level of certainty with respect to the amount of water which might have been available from the Lesueur aquifer if the allocation had not been reserved for future public water supply. Mr Scott considered that if it had not otherwise been allocated, 2 gigalitres per annum would have been available. Mr Burton considered that there would have been 2.5 gigalitres per annum for allocation if the water had not been otherwise reserved.
For reasons which I have outlined above, the valuation of the Oblivion land cannot proceed on the assumption that water was available from the Lesueur aquifer. It follows that it is unnecessary to resolve the difference between the hydrologists as to the amount of water available in that hypothetical circumstance. It is sufficient to note that it was not considered by the hydrologists, nor contended for by the parties, that sufficient water was available from the superficial aquifer to enable the Oblivion land to be economically developed for horticultural purposes.

Valuation evidence

It follows from what I have said above that Mr Miller's valuation is based upon flawed assumptions. In particular, he assumed that Lot 511 had immediate potential to be developed as a single commercial horticultural garden with a 2.5 gigalitre water licence being able to be achieved. From that assumption, Mr Miller drew conclusions based upon a review of a range of property sales involving rural properties with or without water licences, and reached a value per hectare for the unaffected Lot 511 of $2,000 per hectare to which he added 'the value of hypothetical 2.5 gigalitre water licence allocation at say 60 cents per kilolitre' resulting in what he described as the 'Total value of Lot 511' of $3,252,000 or $3,712 per hectare.
In relation to the unaffected value of Lot 512, Mr Miller attributed 'additional speculative value' because of subdivision potential over the medium to longer term. That subdivision potential was said to be based on the proposition 'after discussions with Mr Sam Burton' that Lot 512 could have access to the superficial type aquifer for an additional 450,000 kilolitres of groundwater. Based on information from the Shire of Dandaragan, Mr Miller believed that a proposal to subdivide an adjoining farm to the south of Lot 512 'has gained reasonable traction' and was being considered by the Western Australian Planning Commission 'with a "connection to scheme water" type connection being applied'. On that basis, Mr Miller assessed the unaffected value of Lot 512 at $3,500 per hectare, to which he added $100,000 for buildings and other merged improvements giving a total unaffected value of Lot 512 at $1,939,000.
From the total of those two values, Mr Miller deducted the 'affected values' of Lot 512 and Lot 513. In each case, he assessed the affected value at $750 per hectare 'for cleared fenced and watered grazing lands, with access for grazing stock from dams, runoff and shallow aquifers only'. That figure resulted in an affected value for Lot 512 (including $100,000 for buildings and merged improvements) at $495,000, and for Lot 513 at $342,500.
There are a number of reasons why Mr Miller's valuation cannot be relied upon.
The first is that, as I have already concluded, the unaffected valuations are entirely based upon assumptions which cannot properly be made.
The second is that it is impossible to discern from Mr Miller's written reports, or from his oral evidence, any cogent process which led to the adoption of the values which he attributes to the unaffected assessments of Lot 511 and Lot 512. He identifies, as attachment 7 to his report, eight groups of property transactions (or offers for purchase) with a brief analysis of each. His breakdowns of some sales of properties with water licences lends some support to his conclusion that a 2.5 gigalitre water licence could be traded at around 60 cents per kilolitre, a figure not disputed by the respondent's valuer Mr Clark. The different groups of sales, both between groups and within groups, demonstrate wide ranging land values taking into account, where relevant, the value of water licences included in particular sales. No process of reasoning from the various land values contained within each group of sales, or even indicating which groups were comparable for the purpose of assessing land values as distinct from water licence value, is revealed by Mr Miller in arriving at the figures of $2,000 and $3,500 per hectare attributed to Lot 511 and Lot 512 respectively.
In relation to Lot 511, Mr Miller adopted a value per hectare of $3,712 per hectare broken down as to $2,000 per hectare value of horticultural land plus $1,712 per hectare value of 2.5 gigalitre 'groundwater value'. In his oral evidence, Mr Miller endeavoured to explain that figure. His explanation, to the extent that it could be understood, appeared circular. His report revealed that he considered certain sales which he referred to as 'group 1'. They were sales in the Jurien area located near the subject property. Sale 100, being Lot 1 Cantabilling Road Hill River, was the sale of an adjoining farm which sold for $928 per hectare. There was no water licence. Sale 101, being Lot 2 Canabilling Road Hill River which was grazing land sold with a $57,000 kilolitre water licence plus approval for a further 550,000 kilolitre per annum extraction from a fully equipped onsite artesian soak. That property showed a sale price of $1,481 per hectare which, putting aside the water potential, Mr Miller assessed at $1,000 per hectare for land value. Mr Miller then applied what he referred to as a 'valuation factor' in order to arrive at a 'horticultural land value' of $2,000 per hectare applicable to Lot 512.
When pressed as to the basis for selecting a factor of 2 to convert from grazing land to horticultural land, Mr Miller said that he worked backwards from his figure of $3,712 per hectare which he assessed as the value of Lot 511 with a 2.5 gigalitre water licence. His report shows, however, that in order to arrive at the figure of $3,712 per hectare, Mr Miller multiplied the figure of $2,000 per hectare by the 876.0882 hectares comprising Lot 511, and then added to that sum $1.5 million being 60 cents per kilolitre of value for a 2.5 gigalitre water licence. It cannot be therefore, as Mr Miller at least initially contended, that the figure of $2,000 per hectare, and accordingly the valuation factor of 2, was a result of working back from the assessed value of $3,712 per hectare.

When pressed on that point, Mr Miller said that he arrived at the figure of $3,712 per hectare from a direct comparison method, using sales of other properties with water licences for comparison purposes. In particular, he said that he used the sales in group 6 of his comparable sales for that purpose. Group 6 comprised farm sales in the Harvey and Myalup market garden area, being sales with a groundwater licence either in place or achievable. The prices achieved, on Mr Miller's analysis, for those properties comprised:
•Sale 15 at $61,671 per hectare for land and water licence (showing $45,000 per hectare land value);
•Sale 20 showing an effective rate of $26,119 per hectare for horticultural land only;
•Sale 23 showing $37,012 per hectare effective land value for horticultural land and water;
•Sale 19 showing an overall rate of $18,421 per hectare for land and water licence;
•Sale 16 showing $17,444 per hectare for land and water licence; and
•Sale 21 showing $22,772 per hectare for land value including a water licence.
Mr Miller said that, in addition to the group 6 sales, he took into account all of his 19 identified sales in all of his groups and arrived at the figure of $3,712, and considered that that was a figure with which he was comfortable. He did not attempt, however, either in writing or orally in his evidence, to explain how any particular sale might be thought to attract a higher or lower price than would be achieved for Lot 511. He made reference to Sale 800, being Lot 202 Brand Highway, Grandville near the town of Gingin which, on Mr Miller's analysis showed a value of cleared land and water potential of $5,983 per hectare which after taking account of the estimates of value of improvements and water potential, Mr Miller assessed to have a land value of $2,700 per hectare as horticultural land. Although that figure is somewhere near the $2,000 per hectare upon which Mr Miller settled for the land component of Lot 511, no explanation as to why the Gingin property achieved an apparently higher figure was attempted.
In those circumstances, even if Mr Miller's assumptions were correct, I would have had great difficulty in accepting his opinion of value in the absence of any cogent reasoning as to how he adopted particular figures. His figure for the unaffected value of Lot 512, including as it did 'speculative value as to future subdivision' similarly lacked any cogent reasoning.
For those reasons, I entirely reject the evidence of Mr Miller as to the value of the land prior to the taking. It can be noted that in his affected values of Lot 513 and Lot 512, Mr Miller adopted values which were lower than those adopted by Mr Clark, possibly because Mr Clark made certain assumptions favourable to the applicant, for example as to the potential to clear regrowth, which Mr Miller may not have brought into account.
In contrast to Mr Miller, Mr Clark's valuation made clear his process of reasoning.
Mr Clark considered the highest and best use of the Oblivion land, and in doing so considered four scenarios. They were:
a)Traditional agriculture in the area for which the soils would be grazing, not cropping with cereal crops;
b)Alternative buyers/investors;
c)Subdivision;
d)Horticulture.
As to traditional agriculture, Mr Clark considered that the Oblivion property came into the category of those properties which had not been fully developed because they have inherently poor soils for cropping and grazing. He considered that, if developed, Lot 511 would have been suitable for grazing with pastures of tagasaste or blue lupins and volunteer grasses.
In relation to alternative buyers or investors, Mr Clark noted that up until 2008, there had been some interest in the Dandargan/Coorow area from operation of managed investment schemes, subject to obtaining substantial water allocations to grow various crops under irrigation. He noted that that activity stopped following the economic downturn in 2008 and two of the companies who were particularly active buyers for managed investment schemes were, by the date of valuation, in receivership. Mr Clark concluded that the prospect of investors paying a premium for the land did not exist by September 2011.
In relation to subdivision potential, Mr Clark had regard to the draft local planning strategy which the Dandaragan Shire had in place as at September 2011. He said that that planning strategy had been developed over several years but was not yet approved. The strategy showed 'rural living direction of growth' over Lot 511. Mr Clark was advised by Mr Underwood that Oblivion had had an offer for some millions of dollars on their property subject to rezoning and planning approval. No approval had been sought and it is apparent that the offer lapsed.
Mr Clark noted that the draft local planning scheme contemplated two areas for rural subdivision, one being a lot to the south of the Oblivion land. One of those lots was the subject of one of Mr Clark's comparable sales. He noted that that property had a prepared development guide plan, had bitumen road frontage, and three phase power along its frontage. Mr Clark's enquires revealed that little interest had been received by the selling agent. He considered the property to be a better prospect for development than the Oblivion land and deduced that development of the Oblivion land for rural residential purposes would be unlikely for many years and that no premium for subdivision potential would be achieved in the market place. That was because of the large number of vacant lots at September 2011 as well as lots already identified as having subdivisional potential. He was reinforced in that view by a report from town planners which concluded that subdivisional potential for the subject land was somewhere between no potential, to the potential for possibly one or two additional lots. The report of Mr Burgess upon which Mr Clark relied was tendered in evidence by the respondent, and was not subject to any questioning by the applicant's representative.
Mr Clark then examined the horticultural potential of the land, and concluded that the soil types and landscape would be amenable to horticultural crop production, at least over a significant portion of the taken land. However, having regard to the hydro-geological report prepared by Mr Scott, Mr Clark concluded that water from the Lesueur aquifer would not be available, and that available water from the superficial aquifer via a number of small bores would not yield sufficient water or otherwise be economic. As a result, Mr Clark concluded that a purchaser, once due diligence was undertaken, would not pay any additional amount for the taken land for possible horticultural use.
Mr Clark did consider that a premium of up to 20% might be paid over the traditional cropping/grazing agricultural use value subject to due diligence which includes obtaining a water entitlement. He based that conclusion on his analysis of a transaction involving a property known as Twin Brooks situated 30 kilometres north of Gingin.
Mr Clark concluded that the subject land had no unique value. He observed that other properties in the Cervantes sub area have similar soil types. None of them have access to the water of the Lesueur aquifer which they would need for large scale horticultural development. He also noted the estimate which he had received from Western Power that the cost of connecting three phase power to the Oblivion land would be $1,070,000. He noted that other properties in the area have three phase power at their front gate which would put them at an advantageous position in developing horticultural land if access to the Lesueur aquifer were available.
Mr Clark considered the state of the rural property market as at September 2011. He noted that the market had been strong though until about 2008, but following the global financial crisis and tightening of finance by financial institutions, rural real estate activity had been very slow, with subdivisional developers not active because of the slow down in rural residential subdivisions. Mr Clark noted that there has been no horticultural development in excess of 100 hectares approved in the Dandaragan Shire since 2005 and that some large fully developed horticultural properties are for sale in Gingin and others are in receivership. Mr Clark indicated that he had previously valued Lot 511 at $900,000 in April 2010. He considered that, as at 13 September 2011, the value of that Lot 511 was unlikely to exceed $900,000 but would more likely be between $700,000 and $800,000 if a buyer could be found. Having regard to the fact that there might be a tendency to err on the more generous approach to compensation valuations, he adopted his previous value of $900,000 for the whole of Lot 511 as the 'before valuation'. That figure was achieved by applying a figure of $1,000 per hectare to ploughed and regrowth areas on Lot 511, and $1,200 per hectare in respect of cleared land without pasture. That produced an average value of $1,027 per hectare.
Mr Clark considered that although it might be considered that Lot 513 might achieve a higher rate per hectare because a smaller lot generally has a higher dollar per hectare value than a larger lot, he adopted what he described as a more generous approach of simply prorating the value of Lot 513 so as to produce a value for that lot of $430,000. Taking the value of Lot 511 and reducing it by the value of Lot 513 (the retained land) gave a compensation figure for the value of the land taken of $470,000.
Mr Clark's valuation provided an analysis of the 11 sales which he identified in his report together with the details of four other properties for sale in the area. Unlike Mr Miller, he explained which of those properties were of most relevance in comparability and thus how he came to adopt the figure of $1,027 per hectare.
Mr Clark's valuation is clear and well reasoned. It was, however, the subject of severe criticism by the applicant's representatives as understating the value of the taken land, and ignoring the effect of the taking of Oblivion's adjoining land.
I do not consider that the applicant's criticisms of Mr Clark's valuation should cause me not to accept it.
Most criticism of Mr Clark was, of course, based on the proposition that he had failed to take account of the effects on value attributable to the public work. The conclusions which I have reached as to that question resolve those aspects of the applicant's criticisms of Mr Clark's opinion.
Some time was spent at hearing dealing with observations made by Mr Clark that on the basis of his analysis of sales of land which were the subject of P2 classifications, he did not consider that the classification had any effect on value. Because, at the date of valuation, the remaining Oblivion land was not subject to any protection classification, and because the foreshadowed possible classification of the Oblivion land are not matters attributable to the public work, the issue as to the effect on value of protection classifications falls away and it is not necessary for me to consider it further.
Mr Clark was also criticised for adopting a value for Lot 511 less than a value which he had attributed to land immediately to the south of the Oblivion land owned by Mr TD Chisolm. In March 2010, based on a valuation carried out by Mr Clark, the DoW had offered to purchase Mr Chisolm's land at an effective rate of $2,538 per hectare. Mr Clark explained that he considered the Chisolm land superior to Lot 511 in that it was 6 kilometres from Jurien Bay, with bitumen road access, and was largely uncleared. He considered it to have greater development potential than Lot 511 which is 20 kilometres from Jurien Bay by a gravel road which would have to be upgraded and had less potential for development.
Given Mr Clark's cogent explanation for the difference in attribution of value between the Chisolm land and Lot 511, there is no basis to reject his opinion of Lot 511's value on the basis of that difference.
I am mindful that, on the assumption that water is unavailable from the Lesueur aquifer, Mr Miller in his 'affected value' assessment, placed the value of Lot 513 and Lot 512 at $750 per hectare. Mr Clark's value, assessed on the same (and in my view) correct assumptions was more generous. Mr Clark's value should be accepted.

Other heads of claim

As noted above, the applicant had some difficulty in identifying the particular heads of claim by reference to s 241 of the LA Act in formulating its claim. In the alternative formulation in the breakdown of the claim, Mr Miller identified claims pursuant to s 241(7)(a) by way of severance. Those claims comprised some $2.9 million for loss of water. For the reasons already outlined, those claims are not sustainable. In short, no loss of water, or water entitlement, resulted from the taking.
The only other head of claim relied upon by the applicant were consequential losses pursuant to s 241(6)(e) of the LA Act. The types of loss or damage provided for in s 241(6) are identified above at [7]. The claim which is made is for an amount of $309,000 being interest and penalty interest said to have been paid by Oblivion on money used to purchase the Oblivion land, or perhaps (this was not made clear at the hearing) paid to meet living expenses where no income was being made from the Oblivion land. It was clear from the witness statements and documents filed in advance of the hearing that the applicant had provided no evidence to explain the makeup of the figure of $309,000 or to explain how it was attributable to the taking. At the conclusion of the hearing, the applicant tendered a document entitled 'Schedule of borrowing costs July 2002 to March 2012'. That schedule consists of a series of debits, credits and running balances for what is presumably an account held by Oblivion, although with whom the account was held is not revealed. Nevertheless, the schedule reveals that in July 2002, the account was in modest credit. Thereafter, a series of cheques and point of sale transactions are revealed over a 10 year period leading ultimately to a very significant debit balance. To the extent that one can tell from the point of sale transactions, they appear to be for ordinary living expenses. The account appears to have been the subject of increasing overdraft limits from time to time to the point where by 2012 a very significant overdraft was in place. Interestingly, the overdraft does not appear to have been reduced by the advance payment made in April 2012.
There is simply insufficient evidence to relate the payment of interest revealed in the schedule of borrowing costs to the taking of the land. There is no basis upon which the claim for $309,000 interest can properly be made pursuant to s 241 of the LA Act.
The other head of claim relied upon by the applicant was an amount pursuant to s 241(8) and s 241(9) of the LA Act by way of solatium. The respondent contended that, although solatium had been included in the amount paid by way of advance payment, that was done in error and no solatium should be allowed because s 241(8) of the LA Act relates only to a situation where the interest in land is taken without agreement. There is a strong argument that the expression 'without agreement' in s 241(8) should be construed as a reference to without agreement as to the amount of compensation. It would be surprising if where, as in this case, there is a dispute as to the appropriate amount of compensation, but rather than have the land compulsory acquired, an owner agrees to the taking of the land subject to determination of compensation by the Tribunal, the owner should thereby be deprived of any entitlement to solatium.
It is not necessary to determine that question in the present case. That is because I have determined that the value of the land taken as assessed by Mr Clark, namely $470,000, is the appropriate amount of compensation under s 241(2) of the LA Act. The advance payment made to Oblivion in April 2012 was for $530,002.90 which was made up of $470,000 being the value of the land taken, together with $47,000 by way of solatium and interest on that amount in accordance with the provisions of s 241 of the LA Act. The respondent indicated at hearing that, were its contentions as to the value of the land taken to be upheld, as they have been, it would not seek reimbursement of the component of solatium paid by way of advance payment.
I should add that I do not see that the circumstances of this case are such as would give rise to an appropriate award of solatium in excess of the 10% limit provided for in s 241(9) of the LA Act. Mr Underwood clearly feels a sense of deep grievance as a result of the uncertainty concerning the availability of water on the Oblivion land over a long period of time. The position is, however, that the allocation of water for public water supply purposes had been in place possibly from as early as 1995, and certainly from 2002. The limitations which that placed on the Oblivion land have been clear for that period. The fact that Mr Underwood apparently chose to do virtually nothing with his land over that period is a choice which he made, but does not constitute exceptional circumstances for the purposes of s 241(9) of the LA Act.
In those circumstances, the proper award of compensation is the amount of the advance payment, and Oblivion is not entitled to any further payments of compensation.

Order

1.Compensation including interest pursuant to s 241 of the Land Administration Act 1997 (WA) is assessed at the amount of the advance payment made to the applicant, namely $530,002.90.

I certify that this and the preceding [120] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

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JUSTICE J A CHANEY, PRESIDENT