Penfold and Bracey v Health Administration Corporation - [2009] NSWLEC 157

No judgment structure available for this case.

Pending Appeal: Notice of intention to appeal filed 13/10/09

Land and Environment Court

of New South Wales

CITATION: Penfold and Bracey v Health Administration Corporation [2009] NSWLEC 157

PARTIES:
30413 of 2008
APPLICANTS:
Keith Lavis Penfold and Wendy Carolyn Penfold
RESPONDENT:
Health Administration Corporation
30414 of 2008
APPLICANTS:
John Everett Bracey and Jan Scott Bracey
RESPONDENT:
Health Administration Corporation

FILE NUMBER(S): 30413 of 2008; 30414 of 2008

CORAM: Biscoe J

KEY ISSUES: COMPULSORY ACQUISITION OF LAND :- existing adjoining single house uses - whether development potential for private hospital - whether potential for private hospital use carried market value premium - whether claimed disturbance losses all allowable

LEGISLATION CITED: Environmental Planning and Assessment Act 1979, s 79C
Health Administration Act 1982, ss 4, 5(2)(a), 8(3), 8A(1)(a), 9, 10(1)
Health Services Act 1997, ss 8(1), 17, 25(b)
Housing Act 2001, s 6(2)
Land Acquisition (Just Terms Compensation) Act 1991, ss 3, 14, 55, 56(1), 59, 61
Warringah Local Environmental Plan 2000

CASES CITED: Chaudry v Liverpool City Council [2008] NSWLEC 251
Gillespies v Warringah Council [2002] NSWLEC 224, (2002) 124 LGERA 147
Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196
Maidment and Roads and Traffic Authority of NSW [2006] NSWLEC 606, (2006) 153 LGERA 249
McDonald v Roads and Traffic Authority of NSW [2009] NSWLEC 105
Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565
Residential Lifestyles Pty Ltd v Warringah Council [2005] NSWLEC 250
Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243
Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [2005] NSWCA 251, (2005) 63 NSWLR 407
Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [No 2] [2006] NSWCA 386, (2006) 68 NSWLR 487
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5, (2008) 233 CLR 259
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178

DATES OF HEARING: 22 - 25 June 2009, 28 - 29 July 2009

DATE OF JUDGMENT:
16 September 2009

LEGAL REPRESENTATIVES: APPLICANTS:
Mr T. Hale SC with Mr P. Nagle
SOLICITORS
Sydney Property Lawyers

RESPONDENT:
Mr J. Maston
SOLICITORS
Crown Solicitor's Office (NSW)

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

BISCOE J

16 September 2009

30413 of 2008

PENFOLD & ANOR v HEALTH ADMINISTRATION CORPORATION

30414 of 2008

BRACEY & ANOR v HEALTH ADMINISTRATION CORPORATION

JUDGMENT

1 HIS HONOUR: These are two claims for determination of compensation payable for the compulsory acquisition of land under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act).

2 On 30 November 2007, the respondent, the Health Administration Corporation (Corporation), compulsorily acquired the single house property at 15 Bantry Bay Road of the applicants Keith Lavis Penfold and Wendy Carolyn Penfold (Penfold Land), and the adjoining single house property at 17 Bantry Bay Road of the applicants John Everett Bracey and Jan Scott Bracey (Bracey Land) (collectively, Lands). The Lands were acquired for the purposes the Health Administration Act 1982, in particular for the construction of the new Northern Beaches Hospital on the Lands and surrounding land on both sides of Bantry Bay Road between Frenchs Forest Road and Warringah Road.

3 The applicants submit that the Lands should be valued at the acquisition date on the basis that they were consolidated with a highest and best use as a small private hospital; alternatively, as a medical centre; alternatively for seniors living or single house sites. The Corporation submits that, any limited potential for use as a private hospital, medical centre or seniors living carried no market value premium and therefore they should be valued as single house sites.

4 The polarised valuation contentions of the parties and their valuers as to market value under s 55(a) of the Just Terms Act are as follows:

Applicants
$

Corporation
$

a) Hospital or medical centre

Penfold Land

1,331,100

Bracey Land

2,122,800

b) Single house sites or seniors living

Penfold Land

906,575

820,000

Bracey Land

1,445,700

1,100,000

5 The applicants claim loss attributable to disturbance under s 55(d) of the Just Terms Act. The competing disturbance loss quantum contentions are also polarised, as follows:

Applicants $	Corporation $
Penfold Land	101,770	55,674
Bracey Land	191,935	92,577

6 Solatium under s 55(e) of the Just Terms Act is agreed at $21,150.

7 However, the Corporation’s assessment for disturbance and solatium is on the basis that the Lands are valued as single house sites. Otherwise, the Corporation submits that the applicants are entitled to nothing for solatium nor for disturbance loss insofar as it falls within s 59(c) or (d).

8 The Just Terms Act relevantly provides as follows:

3 Objects of Act

55 Relevant matters to be considered in determining amount of compensation

56 Market value

market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):

59 Loss attributable to disturbance

In this Act:

loss attributable to disturbance of land means any of the following:

61 Special provision relating to market value assessed on potential of land

Lands description and location

9 The Penfold Land has an area of about 765 square metres and is rectangular shaped. It has a width of approximately 17.98 metres and a depth of 42.67 metres.

10 The larger Bracey Land has an area of about 1,220 square metres and is roughly rectangular shaped with a splayed corner in the south-eastern rear boundary. It has an average width of about 25.3 metres and a depth of about 49 metres.

11 The Lands are less than 18 kilometres north of the Sydney Central Business District.

12 The properties acquired or used for the purpose of the new Northern Beaches Hospital are on both the western side (Western Site) and the eastern side (Eastern Site) of Bantry Bay Road and that part of Bantry Bay Road (collectively, Bantry Bay Road Site). They are bound on the north by Frenchs Forest Road, on the east by Wakehurst Parkway, on the south by Warringah Road, and on the west by The Forest High School. It is necessary to distinguish between the Western Site and the Eastern Site when considering the planning history and development potential of the Lands.

13 The Western Site had been in the ownership of the State for many years. The Eastern Site comprised 11 single house sites (Nos 1, 3, 5, 7, 9, 11, 13, 15 and 17 Bantry Bay Road and 107 and 109 Frenchs Forest Road West).

14 The Bracey Land is on the corner of Warringah Road except for a council owned bushland public reserve adjacent to its southern and eastern boundaries. The reserve occupies the remainder of the Eastern Site between the residences and the Wakehurst Parkway.

15 There are predominantly low density, detached housing residential neighbourhoods to the south of Warringah Road, to the north of Frenchs Forest Road, and to the west of The Forest High School stretching to Forest Way shopping centre at the intersection of Warringah Road and Forest Way. A business park is to the east of Wakehurst Parkway, the Bantry Bay local retail centre is to the south fronting Warringah Road and the continuation of Bantry Bay Road, the community health centre including respite care is directly opposite the Lands, and a high school and police station are to the west fronting Frenchs Forest Road.

16 The applicant’s planner, Mr Player, employed the description, which I accept, that the Eastern Site was an “island” street block surrounded by a cluster of mixed transitional retail, industrial, business and special uses set amongst residential uses.

17 The Lands are highly accessible by motor vehicle, public bus, bicycle (on a designated bicycle route) and foot. Regular scheduled bus services are available to Sydney and the Northern Beaches, with Dee Why and Curl Curl Beaches approximately 6.0 kilometres to the east. The Lands are close to the proposed site for a planned Chatswood to Dee Why rail link.

Land use and planning history

18 Upon the introduction of statutory planning controls in 1951, the Lands were zoned Open Space and the Western Site was zoned Special Use.

19 In 1959, the Western Site was resumed for the purpose of the Manly District Hospital. In 1963 the Lands were zoned Residential 2(a) and the Western Site was zoned “Special Uses 5(a) – Hospital”. Such a hospital zoning reflected the relevant public authority’s identification of the public need for a hospital on the Western Site having regard to the existing population, future population projections, the availability of existing hospitals in the general vicinity, and its appropriateness for that use.

20 The Western Site comprised lots 12 to 15 DP 792918. Since the 1980’s, a minor part of the Western Site (lots 12 to 14, directly opposite the Lands) has been used for a community health centre including two respite care dwellings. The major part, lot 15, is a vacant bushland site. In 1989, lot 15 was transferred from the Department of Health to the New South Wales Land and Housing Corporation, and in 1991 was rezoned Residential 2(e).

21 That zoning continued until commencement in 2000 of the Warringah Local Environmental Plan 2000 (WLEP), which does not contain land use zones. Under the WLEP, the Lands and the Western Site are in the extreme north-west corner of the G3 Manly Lagoon Suburbs Locality, which covers a large area. Hospitals are permissible with development consent on both sides of Bantry Bay Road.

The proposal to construct a public hospital at the Bantry Bay Site

22 It is relevant to consider the history of the proposal to construct the new Northern Beaches Hospital at the Bantry Bay Road Site.

23 This requires some understanding of the functions of, and the relationships between, the Minister for Health, the Department of Health, the Corporation and area health services. The Director-General of the Department of Health is incorporated as a corporation sole with the corporate name “Health Administration Corporation”: s 9(1) Health Administration Act 1982. Any function of the Director-General may, if the Director-General so determines, be exercised by the Corporation: s 8A(1)(a). The Corporation and Director-General are subject to the control and direction of the Minister for Health: ss 9(5), 8(3). The Minister for Health may provide, conduct, operate and maintain any “health service”, which is defined to include a hospital: ss 5(2)(a), 4. The Corporation, with the approval of the Minister and subject to such terms and conditions as the Minister may attach to the approval, may acquire land by agreement or by compulsory process under the Just Terms Act: s 10(1). The NSW Health System is made up of the Department of Health, the Health Administration Corporation, the Ambulance Service of NSW, and area health services constituted under s 17 of the Health Services Act 1997. The chief executive of each area health service is subject to the control and direction of the Director-General of the Department of Health: s 25(b) Health Services Act 1997. The principal reason for constituting area health services is to facilitate the conduct of public hospitals and health institutions and the provision of health services for residents of areas of the state: s 8(1) Health Services Act 1997.

24 It is also relevant to note that the affairs of the NSW Land and Housing Corporation, the owner of lot 15 on the Western Site (prior to the purchase by the respondent in June 2007), are managed by the Director-General of the Department of Housing (Housing): s 6(2) Housing Act 2001.

25 On 30 July 2000, North Sydney Area Health Service (Area) wrote to “NSW Health” - a reference, I infer, to the Department of Health (Health) - that Area had identified as a potential site for a new Northern Beaches Hospital the part of the Western Site owned by the Department of Housing and thirteen residences on the eastern side of Bantry Bay Road. The letter stated that the site had been identified through a detailed travel study, as providing best access for most residents of the northern beaches, at all times of the week.

26 On 20 November 2000, Area wrote to Housing’s Finance Investments Group stating that they were exploring site options for a possible new Northern Beaches Hospital which would replace the Manly and Mona Vale Hospitals, that the Bantry Bay Road site (apparently meaning Housing’s lot 15) was ideal because of its accessibility, and indicating their interest in the site. The letter concluded with the hope of working closely with Housing “as the proposal becomes a reality”.

27 On 20 September 2001, Health wrote to the NSW Land and Housing Corporation stating that Area was considering options for the establishment of a new Northern Beaches Hospital which would replace the present Manly and Mona Vale Hospital.

28 On 6 November 2001, Housing, per its Housing Finance Investment Group, wrote to Health referring to their meeting to progress the sale of Housing’s land to Health. The letter noted that Housing had dedicated significant time to obtaining development consent for residential subdivision, which it would delay pending completion of the valuation and negotiations process. Shortly afterwards, Housing obtained a valuation of its lot 15.

29 A letter of 29 November 2001 from Health to Housing recorded “in principle” support by Housing for Health to acquire Housing’s land, subject to Health undertaking a detailed feasibility study of all options available.

30 On 29 November 2001, Health wrote to the Government Assessment Management Committee (Committee) stating that it was considering options for the establishment of a new Northern Beaches Hospital and that the Western Site owned by Housing was considered to be “ideal” due to its accessibility and its major transport links. Although Health had given “in principle” support to acquire Housing’s site, it was unable to formally commit until a detailed feasibility study had been completed and that significant community consultation was required.

31 On 5 December 2001, a Health consultant’s report to Health referred to the possibility of a single hospital serving the Northern Beaches sector, and recorded that a number of sites were examined to determine whether there were any suitable sites for a new hospital. Five sites were identified, of which four were described as not feasible. The fifth site, described as a feasible site of sufficient size in the right location, was identified as: “Corner Warringah Road and Wakehurst Parkway (adjacent to Forest HS). This site includes the land immediately to the east of Forest HS, and could potentially include the Bantry Bay Road reserve between Warringah Road and Frenchs Forest Road, plus the dozen or so houses along that road”. The advantages of this site were listed as close to the centre of population, close to the centre of travel, good north-south and east-west accessibility, sufficient size for hospital and related services contemplated for a new single Northern Beaches Hospital, currently served by public transport, and opposite the proposed site of a station on the planned Chatswood to Dee Why rail line.

32 On 21 December 2001, the Committee replied asking for further information on several issues including why Housing’s land was considered to be ideal. Health replied on 22 January 2002 setting out the advantages of the site as identified in their consultant’s report of 5 December 2001.

33 On 31 January 2002, Housing wrote to Health stating that in the absence of a firm undertaking by Health to acquire its land within an agreed time frame, Housing was left with little alternative but to move forward with its initial plans for the site, and so was in the process of initiating the preparation of a low-density residential development application with the goal of taking it to market immediately following the grant of an acceptable development consent.

34 On 13 February 2002, the Committee wrote to Health noting that Housing intends to dispose of its site in 2002/2003, that Health had requested the Committee to request Housing to defer the sale, that the Committee declined to request Housing to do so, and that Health should demonstrate a firmer commitment to buying Housing’s site and continue negotiations with Housing.

35 On 24 April 2002, Health wrote to the Committee stating negotiations with Housing would continue. On the same date, Health wrote to Housing requesting further discussions and stating that Housing’s site was the lead contender for development of any new hospital to serve the northern beaches.

36 A letter of 9 May 2002 from the Committee to Health said that the issue would be placed on the Committee’s agenda for its next meeting on 13 June 2002 and that the Acting Director General of Health and the Director General of Housing were invited to attend so that the issue could be resolved to a mutually acceptable outcome.

37 A fax of 7 June 2002 from a Health consultant to Health enclosed a concept sketch for a new hospital on both the Western and Eastern Sites. It assumed acquisition of the houses on the Eastern Site and closure of that part of Bantry Bay Road. Another potential site at Brookvale for a centrally located hospital was also identified.

38 On 8 July 2002, Health wrote to Area stating that a consultation study had identified a number of sites suitable for the location of hospitals and health care facilities, and that it would be necessary to discuss all sites under investigation in order that the required health service delivery option can be clearly established.

39 On 31 July 2002, a North Sydney Health news release said that twenty optimal future health care sites were identified at a recent workshop and that all submissions agreed that northern beaches needed a number of things, including a new metropolitan general hospital. Options for community consultation were identified including two metropolitan hospitals one of which would be at Brookvale or Frenchs Forest, or one metropolitan hospital at Brookvale, Frenchs Forest or Mona Vale.

40 On 2 August 2002, the Committee wrote to Health stating that at its meeting on 13 June representatives of Health and Housing attended and it was agreed Housing would hold its site for Health until 30 April 2003 on certain conditions, including that Health must make a decision by then.

41 On 1 November 2002, Health wrote to Area noting that community consultation and a feasibility plan process had now been completed with the agreed outcome that Manly Hospital would be redeveloped on a site at Brookvale; Mona Vale Hospital would be upgraded; and community health services would be consolidated. The letter said it was understood that the Minister had publicly stated that Manly and Mona Vale Hospital would not close and that the northern beaches will have two public hospitals. Health wrote that it would appear prudent to advise Housing that its Frenchs Forest site was not required for the purposes of development of health services. Confirmation was sought that Area had no further interest in that site and that there was no objection to Health notifying Housing that Health’s interest had lapsed. On 22 November 2002, Area replied agreeing with the logic that it had no further interest in the Bantry Bay Road site, but raising a number of points including that the planning process for Northern Beaches is in its very early stages and concrete outcomes had yet to be agreed.

42 On 30 December 2003, Health wrote to Area reiterating its view that Health should withdraw its interest in the Bantry Bay Site and that, subject to Area’s views, it proposed to formally advise the Committee and Housing of this in late January 2003. On 14 February 2003, Area replied stating it would relinquish its interest in the holding of the Bantry Bay Road site once the preferred site in Brookvale was confirmed and acquisition assured.

43 On 18 May 2004, the Committee wrote to Housing noting that since May 2003 Housing had been in a position to progress its disposal considerations for its site unencumbered by Health’s potential interest in the site; and that the Minister for Health had recently announced that a site at Dee Why was potentially the most suitable site for the new hospital.

44 An undated circular letter to the applicants from Health indicated that the potential new public hospital site at Bantry Bay Road included both Western Site and the Eastern Site. The letter was not referred to in the evidence of Mr Penfold and Mr Bracey. Mr Player initially gave evidence that the applicants received it in March 2006. However, in cross-examination it was put to him that 19 March 2005 was a Saturday and on that basis he appeared to agree that the undated letter was received in March 2005. In the absence of other evidence, I conclude that the letter was probably received in March 2005. The letter stated that six sites for the new public hospital had been identified and analysed, that their property fell within the boundaries of one of the potential sites, and that information regarding the potential sites would appear in the Manly Daily on 19 March.

45 This letter appears to have been the first indication to the applicants that the Eastern Site itself would be required for the new public hospital site if the Frenchs Forest site was chosen.

46 The information referred to in the undated letter appeared in an article in the Manly Daily soon afterwards. Once again, the copy in evidence is undated, but I infer from the letter and the evidence to which I have referred that it was on or about 19 March 2005. It stated that residents of Bantry Bay Road learned for the first time on the preceding Friday that their homes were included as part of the Frenchs Forest Site if that site emerged as the preferred option for the new public hospital. Mr Player acknowledged in oral evidence that thereafter the potential to sell the Lands privately as a private hospital or medical centre would have been very difficult because it was in the public domain that that they were under consideration as part of the Frenchs Forest site option for the new public hospital.

47 There was evidence from Mr Player that a hypothetical purchaser would have been aware in the early to mid 2000’s that the Western Site was one of several sites under consideration for the new hospital. However, on the basis of the newspaper article and the letter to which I have referred, it appears that from March 2005 the applicants and the market knew that the Eastern Site and the Western Site together were under consideration as the site for the new public hospital.

48 On 16 November 2005, Health wrote to Housing stating that Health had been undertaking a detailed analysis of short-listed siting options for a new hospital to service the Northern Beaches, including a site at Frenchs Forest which incorporated the Western Site owned by Housing. The assessment process had concluded that Housing’s site at Frenchs Forest along with adjoining privately owned lands would be a good development option for the new hospital, if supported and approved by Cabinet. Confirmation was sought that Housing had no objection to Health approaching the government to seek approval to a preferred site for the construction of the new hospital at Frenchs Forest, including Housing’s site.

49 On 18 November 2005, Housing replied stating that it required a further discussion with Health before any approach was made to the government, that they had been waiting two years to resolve the issue and they had plans for the use of the site.

50 There is in evidence a copy of another undated Manly Daily article. The evidence indicates that it was published in early 2006. It identified, including by plans, six potential sites for the new public hospital and summarised Health’s assessment of each. One was identified as Housing’s land on the Western Site. The Eastern Site is marked “complementary development” but is not marked as a public hospital. It is not crystal clear but I am prepared to proceed on the basis (as the parties appeared to do) that the article only flagged the Western Site and not the Eastern Site as one of the options for acquisition for the new public hospital. It follows that complementary development on the Eastern Site might be private development. This, of course, was different from the Bantry Bay Road Site option indicated in the Manly Daily article in March 2005.

51 On 30 March 2006, the Minister for Health issued a media release which included the following:

“The NSW Minister for Health… today announced that Frenchs Forest will be the site for the new Northern Beaches Hospital…The NSW Government considered a number of sites for the new hospital, but after detailed assessment the Frenchs Forest site was identified as the best place for a major metropolitan hospital. The assessment considered many factors including accessibility, public amenity, room for expansion, environmental impacts and an economic analysis…

52 This announcement was imprecise as to what private residences were included, but letters of 30 March 2006 to the applicants and other residents of the Eastern Site from Northern Sydney Central Coast Area Health Service made it clear that all the land between The Forest High School and Wakehurst Parkway was included. The letter also said that NSW Health would therefore like to commence discussions with them in relation to purchasing their property.

53 On 25 May 2007 the New South Wales Land and Housing Corporation transferred lot 15 to the Corporation.

Joint Development

54 Between 1986 and 2006, the applicants had discussed with each other the planning of their retirement and the possibility of undertaking a joint development spanning both their Lands. They developed a strong bond. In February 2005, the applicants had a conversation in which they agreed they would have a better development if all the houses on the Eastern Site were also developed jointly, and that it was time they got serious about it. Mr Bracey said that whatever they decided to build, it should be something that complements the zoning of the property across the road, which is zoned for a hospital. Mr Penfold’s evidence indicated that this was a reference to lot 15, Housing’s land. That was a mistake because that land had ceased to be zoned as a hospital in 1991. They agreed that Mr Bracey would contact the other residents of the Bantry Bay Site and also the council about the planning process, which he did.

55 In April 2005, the applicants signed a written agreement authorising Mr Bracey to explore development opportunities and acknowledging that discussion may involve all 11 properties on the Eastern Site. Soon afterwards, Mr Bracey sought and received written permission from all the owners of residential properties on the Eastern Site except No 1 to explore development opportunities. Thereafter he investigated such opportunities, including a hospital, until March 2006.

56 Why the applicants thought the prospect of development of the Eastern Site was worth pursuing after March 2005 in light of the letter they received in March 2005 and the Manly Daily article of March 2005 (neither of which they referred in their evidence) was not explored at trial: see [44] – [47] above.

57 In February 2006, the applicants met with most of the other residents of the Eastern Site to discuss the possibility of joint development and to consider their position in relation to the possible acquisition of the Lands by the NSW government. The meeting was attended by their planning adviser who told them that under the planning laws the Eastern Site could be developed as a child care centre, hospital, aged care or a medical facilities centre. Subsequently, on 9 February 2006 the planning adviser wrote to Mr Bracey referring to his advice at the meeting in relation to the possible acquisition of the group’s properties by the government if the Frenchs Forest site was nominated as the location of the new hospital. This evidence indicates that the applicants were aware in February 2006 that the Eastern Site, including their Lands, might be part of the Bantry Bay Road site acquired for the new public hospital.

Development potential as a private hospital

58 The applicant’s primary submission is that, as at the acquisition date, the highest and best development potential of the consolidated Lands was as a small private hospital.

59 Evidence as to the development potential of the Lands was given by planning experts, Mr Robert Player for the applicant and Ms Deborah Laidlaw for the Corporation.

60 Mr Player considered that the highest and best use of the Lands was for a small specialist private hospital for day surgery or a day procedure centre with nil or limited in-patient ward facilities, alternatively a private hospital and medical centre, alternatively a medical centre. He envisaged a well designed two-storey building with one or two levels of basement carparking. He put forward a concept plan for the building and clarified in oral evidence that it was not intended to represent the building’s architectural form and would require articulation to make it compatible with the residential street space.

61 The planners agreed that, because of its size, at around 2,000 square metres, Mr Player’s proposed private hospital would only be suitable for a hospital which solely served in-patients if it was a specialised hospital such as the sleep disorder hospital at 49 Frenchs Forest Road which had a gross floor area of about 600 square metres; but that it would not be viable for a conventional in-patients hospital requiring a range of different types of surgery.

62 In assessing development potential for a private hospital at the acquisition date, it is necessary to consider the location and characteristic of the Lands and the prospects of obtaining development consent for their proposed use.

Location and Characteristics

63 While Mr Player lauded the location and characteristics of the Lands for a private hospital use, Ms Laidlaw thought that the properties on the Eastern Site offered no obvious suitability for this purpose above other sites in the immediate locality.

64 Mr Phillip Smiles prepared a report for the applicants in November 2006 entitled, “A Consideration of the Provision of Health Facilities at Bantry Bay Road (North) Frenchs Forest”. It records information available to the hypothetical purchaser at the acquisition date and supports the view of Mr Player about the suitability of the site for a medical use. It also demonstrates demand. In particular, it evidences the following:

65 In late 2006, the council granted development consent for a proposed private hospital and medical centre for sleep disorders at 49 Frenchs Forest Road East, approximately 800 metres east of the Lands. It comprised a three storey building with two levels of basement car parking, with a total site area of over 1,600 square metres compared with a total site area for the Lands of about 2,000 square metres. It is located within a business park development characterised by buildings of a substantial scale within the G4 Locality, in which a hospital and medical centre are Category 3 land uses. It was approved notwithstanding that a Category 3 use is presumed to be inconsistent with the desired future character in the G4 Locality Statement. However, the desired future character of Locality G4 is whether “future development will maintain the predominant scale of existing development in the locality”, in contrast to the locality G3 test of “complementary or compatible land use”. A council report relating to that development stated that use of the building as a medical centre was appropriate given that the site was in close proximity to residential uses and public transport and, as such, was accessible and in a convenient location; and that its operation was unlikely to result in any significant impacts such as acoustics or traffic on the residential development opposite the site. Mr Player considered that a similar conclusion could be drawn with respect to a proposed private hospital on the Lands where the nearest residential neighbourhood (other than the properties acquired by the Corporation) are on the other side of Frenchs Forest Road. Ms Laidlaw thought 49 Frenchs Forest Road was not comparable because it was in a different physical environment characterised by multi-level commercial style buildings. While statements in the council report concerning accessibility and convenient location apply equally to the Lands, I think that this development consent is of little assistance given the different physical environment.

66 In my view, at the acquisition date the location and characteristics of the Lands, described at [14] – [17] above, made them well suited for development for a small private hospital, and somewhat better suited than Frenchs Forest residential sites outside the Eastern Site. This is supported by the recognition of the suitability of the Western Site for a hospital use through its former special use or hospital zoning, the factors which brought about the short listing of this location as suitable for a public hospital, and the existence of some health care facilities on the Western Site. Private hospitals are regularly in residential localities around Sydney, as illustrated in photographs and descriptions in evidence. The report by Mr Smiles evidences that there was demand for private hospitals/medical uses in the Frenchs Forest area and beyond and that there were potential developers and investors in the market for such a use.

Western Site

67 The applicants submit that the development potential of the Lands for a private hospital use was also enhanced by public knowledge that the Western Site directly opposite had been short listed as the site for the new Northern Beaches Hospital. I accept that the development potential of the Lands for a private hospital would benefit from the synergy of being opposite a public hospital. Mr Player said it was a relevant consideration that a hypothetical purchaser would be aware from available public information prior to 30 March 2006 that the government was considering various potential sites for a new public hospital including the Western Site directly opposite the Lands, with the possibility of consequential enhancement of the Lands; and that the Western Site had formerly been zoned for hospital use. That proposition is correct as far as it goes but, for reasons discussed later, I conclude that the uncertainty as to whether the new public hospital would be built on the Western Site alone was such that the hypothetical purchaser would not, on that account alone, have paid more than a modest premium over the single house market value of the respective Lands: see [109] – [110] below.

Development Consent

68 I turn to consider the likelihood, as at the acquisition date, of obtaining consent to develop the Lands as a private hospital.

69 Mr Player considered that there would be a high degree of certainty of obtaining consent from council or, on appeal, the Court to a development application for a well-designed, small private hospital that satisfied all the relevant planning controls of the Warringah Local Environmental Plan 2000 (WLEP); in particular, capable of satisfying the requirements of being a “complementary and compatible use” as defined in the WLEP. The planners agreed that, as a Category Two use under the WLEP a small, specialised private hospital could in principle be approved on the consolidated Lands. Ms Laidlaw had a concern as to whether the scale of Mr Player’s proposed use satisfied the desired future character of the Location as prescribed in the WLEP. She thought that something of a much smaller scale could be approved if it was better articulated than Mr Player’s concept plan to reflect the character of the area.

70 Section 79C of the Environmental Planning and Assessment Act 1979 relevantly provides:

“ 79C Evaluation

Matters for consideration—general

71 At the acquisition date, the relevant environmental planning instrument for which s 79C mandated consideration was the WLEP. Planning evidence was also given as to the effect of a draft Warringah (Standard Instrument) Local Environmental Plan (Draft WLEP), which the council resolved to adopt on 13 November 2007, about two weeks before the acquisition date. As it had not been placed on public exhibition at the acquisition date, it was not a mandatory consideration under s 79C at that date.

72 The main issues between the planners concerned the construction of the WLEP definition of a “complementary and compatible use”, and the risk that the hypothetical purchaser would have perceived in the Draft WLEP.

73 Under the WLEP, the Lands and the Western Site are zoned Locality G3 Manly Lagoon Suburbs, within which a hospital is a Category Two use permissible with council development consent. Outside a local retail centre, a medical centre and housing for older people are in Category Three. “Hospital” and “medical centre” are defined in the WLEP as follows:

“ hospital means a building or place (other than an institution) used for providing professional health care services (such as preventative or rehabilitative care, diagnosis, medical or surgical treatment, care for people with disabilities, psychiatric care or counselling and services provided by health care professionals) to people whether or not they are admitted as in-patients, including any:

(a) ancillary facilities for the accommodation of nurses or other health care workers, ancillary shops or restaurants and ancillary accommodation for persons receiving health care or for their visitors, and
(b) facilities situated in the building or at the place and used for educational or research purposes, whether or not they are used only by hospital staff or health care workers and whether or not any such use is a commercial use, and includes a building or place that is used exclusively as a day surgery or day procedure centre,

but does not include health consulting rooms or a medical centre.

medical centre

74 There is a question whether a building can be a “hospital”, as defined in the WLEP, if it provides professional health services to outpatients only. The answer is unclear because there is a tension between the words of the definition “whether or not they are admitted as in-patients“ and the exclusion from that definition of a “medical centre”, which is defined as a place used for the purpose of providing professional health services to out-patients only. In my view, the question should be answered in the affirmative given the strength of the words “whether or not they are admitted as in-patients”.

75 Under cl 12(3)(b) of the WLEP, before granting consent for development classified as Category Two or Category Three, the consent authority must be satisfied that it is consistent with the desired future character described in the relevant Locality Statement. A note to cl 12 states that, “To assist with understanding: Category One development is development that is generally consistent with the desired future character of the locality, Category Two development is development that may be consistent with the desired future character of the locality, and Category Three development is development that is generally inconsistent with the desired future character of the locality.” The word “consistent” in a context such as this has been held to have its ordinary and natural dictionary meaning, including agreeing or accordant, compatible, not self-opposed or self-contradictory, consistently adhering to the same principles or course: Gillespies v Warringah Council [2002] NSWLEC 224, 124 LGERA 147 at [70] – [77]; Residential Lifestyles Pty Ltd v Warringah Council [2005] NSWLEC 250 at [30].

76 The desired future character of Locality G3 is set out in appendix G to the WLEP:

“The Manly Lagoon Suburbs locality will remain characterised by detached style housing with a pocket of apartment style housing in landscaped settings interspersed by a range of complementary and compatible uses . The development of further apartment style housing will be confined to the ‘medium density areas’ shown on the map. Substantial regional parklands and bushland will remain significant elements of the locality.

Future development will maintain the visual pattern and predominant scale of existing detached style housing in the locality except in areas marked as ‘medium density areas’ on the map. The street will be characterised by landscaped front gardens and consistent building setbacks. Unless exemptions are made to the housing density standard in this locality statement, any subdivision of land is to be consistent with the predominant pattern, size and configuration of existing allotments in the locality.”

77 The WLEP dictionary contains a definition of “complementary and compatible use”, which relevantly states:

“ complementary and compatible use means an activity:

the scale and intensity of the activity are such that it predominantly serves only the needs of residents of the local area,…

78 It is the “locality”, relevantly Locality G3, rather than Bantry Bay Road, that is to remain characterised by detached style housing, recognising that a significant change to one part of the locality has the capacity to affect the character of the whole. The Locality Statement recognises that the character will be interspersed with a range of complementary and compatible uses. The planners accepted that hospitals are a permissible Category One or Two use on many sites in residential localities in the Warringah local government area, including residential localities along Warringah Road, and that the WLEP provides that such a location may be appropriate.

79 There is an issue as to whether the scale of Mr Player’s contemplated private hospital (or medical centre) activity on the Lands is such that it predominantly serves only the needs of residents of the local area, so as to meet the definition of complementary and compatible use. “Local area” is not defined. It must be different from “Locality”, which is defined in the Dictionary to the WLEP as “a discrete area of land (or water) listed as a locality in an Appendix to this plan and identified on the map”. Thus, a “Locality” includes Locality G3, in which the Lands are located.

80 The absence of a definition of “local area” is an unsatisfactory aspect of the WLEP since much may turn on it in a particular case. Mr Player interpreted “local area” to mean an imprecise area much larger than Locality G3, in effect a “district”. Ms Laidlaw interpreted “local area” to mean a “neighbourhood” which, relevantly, she thought was bound on the east by Wakehurst Parkway, on the south by Warringah Road or an imprecise point to the south of Warringah Road, on the north by an imprecise point north of Frenchs Forest Road, and on the west by an imprecise point including the residential area east of Forest Way. Thus, Ms Laidlaw’s perception of a “local area” was a small fraction of Mr Player’s perception. The relevant “local area” assumed by each planner was ill-defined and somewhat arbitrary. Some Category Two uses (such as child care centres) would seem to be incapable of satisfying the limited interpretation favoured by Ms Laidlaw. On the other hand, perhaps all such uses would satisfy the wide interpretation adopted by Mr Player. On Mr Player’s interpretation, the proposed hospital would predominantly serve only the needs of residents of the local area. On Ms Laidlaw’s interpretation, that may not be so (at least in the case of a medical centre) although it may be arguable that it still “predominantly” serves only the needs of the residents of the local area if by reason of their proximity they would predominantly use it.

81 In my view, “local area” in this context should be construed as an area approximating the area of the Locality, as defined, in which the proposed development site is located, rather than as that Locality. For example, if (as in the present case) the activity is proposed on a site in Locality G3 bordering another Locality, the “local area” would straddle Location G3 and that other Location and would approximate the area of Locality G3. On this basis, in my opinion, the scale and intensity of the proposed private hospital is such that it predominantly serves only the needs of the residents of the local area. Private hospitals probably do not come any smaller than this.

82 I turn to the issue between the planners as to whether, at the acquisition date, a hypothetical purchaser would have perceived a risk arising from the Draft WLEP adopted by council some two weeks before the acquisition date.

83 The Draft WLEP zoned the Lands R2 Low Density Residential, prohibited medical centres in that zone, and relevantly defined a hospital, which was permissible with consent in that zone, so as to impose a requirement of providing professional health care services to in-patients, as follows:

“hospital means a building or place used for the purpose of providing professional health care services (such as preventative or convalescent care, diagnosis, medical or surgical treatment, psychiatric care or care for people with disabilities, or counselling services provided by health care professionals) to people admitted as in-patients (whether or not out-patients are also cared for or treated there ), and includes ancillary facilities for (or that consist of) any of the following…

(a) day surgery, day procedures or health consulting rooms...”

84 In my view, the Draft WLEP definition of hospital requires the provision of professional health care services to people admitted as in-patients as a substantial part of the proposed use, whether or not the care or treatment of out-patients is also a substantial part of the proposed use. Nil or insubstantial, in-patient ward facilities would not satisfy the definition.

85 The Draft WLEP was a step towards implementation of the Standard Instruments (Local Environmental Plans) Order 2006, which was gazetted on 31 March 2006. The standard instrument for a principal local environmental plan was set out in the Order. No transitional provision was included. The definitions in that instrument were compulsory. The Department of Planning prescribed three years (to 31 March 2009) as the date by which the council was to produce a standard template LEP. Pursuant to a memorandum of understanding with the Department of Planning, the council resolved on 13 March 2007 to prepare a comprehensive LEP in the standard template by September 2007. That did not happen. The council report to its meeting of 13 November 2007 anticipated exhibition in February/March 2008, which the planning experts considered too optimistic.

86 As at the acquisition date, Mr Player would have advised a prospective purchaser that (a) council had adopted a Draft WLEP on 13 November 2007, which proposed to zone the Lands as R2 Low Density Residential, under which a “medical centre” would become a prohibited development, but a “hospital” would remain a permissible development with the consent of council; (b) the draft WLEP was not certain and imminent for gazettal in that it was at an early stage of preparation and had not been placed on statutory public exhibition; (c) the draft WLEP was not a matter for consideration referred to in s 79C(1)(a)(ii) of the EPA Act until such time as the proposed WLEP had been issued by the Department of Planning with a s 65 certificate and council had placed it on public exhibition; (d) he would expect the draft WLEP in due course to include a transitional savings clause to enable any undetermined development application to be dealt with under the WLEP; and (e) the risk of the new definition of “hospital” presenting an obstacle to a development application for a private hospital was extremely low.

87 Ms Laidlaw thought that, at the acquisition date, the Draft WLEP’s requirement for in-patients in its definition of a hospital would be a risk for the hypothetical prudent purchaser contemplating a private hospital that did not include in-patient wards. She acknowledged that local environmental plans normally had transitional provisions, but as the Draft WLEP did not, then, viewed as at the acquisition date, she would have advised a prospective purchaser that there was a possibility that this one would not. If a prospective purchaser intended inpatient wards as a minor component of the facility with the dominant use being out-patients or day surgery, she would have referred them to a lawyer to obtain advice as to whether, as a matter of legal interpretation, it fell foul of the definition of “hospital”.

88 As at the acquisition date, the resolution would not be included in any s 149 certificate which advised potential purchasers of planning matters. A potential purchaser would only have found out about the resolution if specific inquiries were made to council staff or a planner had been engaged to make enquiries.

89 In my view, at the acquisition date, if the hypothetical purchaser knew of the resolution, they would have given little weight to the draft WLEP if they were considering private hospital development. It was not a mandatory consideration for the council under s 79C and it was likely that it would take a substantial amount of time to be made. When made, it was likely that it would contain a transitional clause. A hypothetical purchaser, in my view, would have considered that it posed little risk for the sort of private hospital development proposed by Mr Player.

Conclusion

90 From a planning perspective, my conclusion is that the highest and best development potential of the Lands was for a small private hospital.

91 It is therefore unnecessary to consider the applicant’s alternative submissions as to development potential. However, I would briefly comment on the alternative medical centre use submission. As a medical centre is a Category Three development under the WLEP, Mr Player accepted that it would have a lesser prospect of obtaining development consent than a private hospital. Ms Laidlaw thought it oxymoronic that a Category 3 development such as a medical centre that is generally inconsistent with the desired future character of the locality should be described as a “complementary and compatible land use” in the absence of any other mitigating circumstance. She pointed out that the nearby medical centres cited by Mr Player (including one at 48 Bantry Bay Road) were around a quarter or a fifth of the size of the medical centre proposed by Mr Player. There is force in her views. Viewed at the acquisition date, the hypothetical purchaser would have been pessimistic, I think, about the prospect of obtaining development consent for a medical centre on the Lands.

Market value

92 I turn to consider the Corporation’s submission that any development potential of the Lands for a private hospital carried no market value above their respective values as single house properties.

93 Expert valuation evidence was given by Mr Terry Large for the applicant and Mr David Lunney for the Corporation. Their competing valuations are set out at [4] above.

Western Site proposal and the s 56(1)(a) disregard

94 As stated earlier, the applicants submit that development potential for a private hospital use was enhanced by the fact that it was public knowledge that the Western Site had been short listed for selection as the site for the new Northern Beaches hospital. The result, the applicants submit, was that the development potential of the Lands would benefit from the synergy of being in close proximity to the public hospital. I have earlier identified the evidence relating to the major premise of this submission: see particularly [44] – [50]. It is true that during the early to mid 2000s there was a public awareness that the Western Site was one of several sites under consideration for a new public hospital. However, in March 2005 the applicants received a letter indicating that the whole Bantry Bay Road Site was under consideration for that purpose and there was an article in the Manly Daily to that effect. A Manly Daily article in early 2006 identified six potential sites for the new public hospital and set out the health service’s assessment of each. One was identified as Housing’s land on the Western Site. This article may have been inaccurate given that in November 2005 the Health Department appears to have been considering the option of the Western and Eastern Sites together as the location for a new hospital: see [48] above. Nevertheless, against the background of earlier public awareness that the Western Site was an option, I am prepared to accept that the market would have perceived that article as an indicator that the Western Site, was still a possible site for the new public hospital.

95 On the assumption that such public perception enhanced the development potential and therefore increased the value of the Lands to some degree, there was debate as to whether the increase had to be disregarded under s 56(1)(a) of the Just Terms Act. That provision defines “market value” so as to require disregard of ”any increase or decrease in the value of land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired”.

96 The construction of s 56(1)(a) was considered in the three decisions of the Court of Appeal and the decision of the High Court in the Walker resumption compensation litigation concerning Ballast Point (which is still pending in this Court): Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [2005] NSWCA 251, 63 NSWLR 407 (Walker CA1); Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [No 2] [2006] NSWCA 386, 68 NSWLR 487 (Walker CA2); Walker Corporation Pty Ltd vSydney Harbour Foreshore Authority [2008] HCA 5, 233 CLR 259 (Walker HCA); and Walker Corporation Pty Ltd vSydney Harbour Foreshore Authority [2009] NSWCA 178 (Walker CA3).

97 In Walker HCA at [53] – [54] the High Court accepted the following concise submissions, of which the fourth seems somewhat opaque:

Spencer's Case

The Crown v Murphy

98 Several observations may be made concerning the construction of s 56(1)(a):

Walker HCA

Walker CA1

Walker CA3

Walker

Housing Commission of NSW v San Sebastian Pty Ltd

Walker HCA

Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands

Walker HCA

99 The Corporation submits that the s 56(1)(a) proposal in this case was to establish the new Northern Beaches Hospital on the Bantry Bay Road Site. As this seems to be common ground, I am prepared to proceed on that basis. Accordingly, any change in the value of the lands by reason of the proposal to carry out the establishment of a new Northern Beaches hospital on the Bantry Bay Road Site must be disregarded under s 56(1)(a).

100 There is an issue as to the date of that s 56(1)(a) proposal. The applicants submit that it was made and first publicly known when the Minister for Health issued a media release on 30 March 2006 announcing that the Bantry Bay Road Site will be the site for the new Northern Beaches Hospital: see [51] above. The Corporation submits that the s 56(1)(a) proposal existed by 30 July 2000 (see [25] above) and that everything thereafter done by Health constituted carrying out of the proposal.

101 It is unnecessary to decide between the competing submissions because, given the common ground as to what constituted the s 56(1)(a) proposal, another proposal to build the hospital on the Western Site only was not the s 56(1)(a) proposal. Therefore, any effect that that other proposal may have had on the value of the Lands should not be disregarded under s 56(1)(a).

102 In his initial valuation report, Mr Large said that his value had been assessed on the basis that a hospital/medical centre was the Lands’ highest and best use from “a town planning and valuation point of view. Prior to the properties being compulsorily acquired by the [Corporation], a number of the owners had discussed their property’s redevelopment potential including the dispossessed owners, as medical oriented redevelopment sites due to the long term knowledge of the proposal for the new hospital opposite the subject Lands. The site to be occupied by the hospital is opposite the subject properties and was not part of the acquired Land. The influence of the hospital should not be ignored”. Thus, he placed strong reliance on a proposal for the new public hospital to be on the Western Site only.

103 Mr Large’s later valuation approach, as expressed in the valuers’ joint report, went too far in assuming that that proposal had been approved:

and approved

104 However, in oral evidence Mr Large said that he had not taken into account the fact that there was “definitely” going to be a public hospital directly opposite the Lands, and that he valued it on the basis of Mr Player’s town planning advice. At one point, he appeared to blame Mr Lunney for drafting the joint report erroneously in this respect, which I do not think is an acceptable excuse. If one valuer misunderstands and misstates the position of the other when drafting a joint report, it is the responsibility of the latter to ensure that his position is stated accurately before signing the report. This contradiction in Mr Large’s evidence is unfortunate not only of itself but because it led Mr Lunney to value the Lands on Mr Large’s stated assumption in the joint report, even though he thought the assumption was erroneous. On that assumption, Mr Lunney valued the Penfold Land at $1,000,000 and the Bracey Land at $1,600,000.

105 The Corporation submits that Mr Large took it as a fait accompli that the Lands would soon be across the road from a major hospital. His evidence as ultimately corrected orally may not go quite that far, but it goes close.

106 Disregarding the s 56(1)(a) proposal and in light of the history of the proposal discussed earlier, particularly at [44] -[50], in my view, from at least 2005 a prudent hypothetical purchaser would think that it was far from certain that the new public hospital would be built at Bantry Bay Road and, if it was, that it would be built only on the Western Site. Consequently, in my opinion, a prudent hypothetical purchaser would be prepared to pay no more than a modest premium for the Lands over their single house values for their potential to be opposite a new hospital on the Western Site only.

107 The Corporation submits that there should be taken into consideration a risk for the hypothetical purchaser when acquiring one of the Lands that it might not be able to acquire the other of the Lands for the purpose of amalgamating them for joint development. Given the resolve of the applicants to develop their Lands jointly and their special bond as discussed earlier at [54] – [57], I do not think that this presented a significant risk affecting value.

108 To some extent, I accept Mr Lunney’s view that the potential of the Lands to be developed for use as a private hospital was limited. I consider that the Eastern Site was in a somewhat better location for a private hospital development than elsewhere in Frenchs Forest but not greatly more than some other areas in Frenchs Forest; the Lands were somewhat better located than other properties on the Eastern Site because of their corner location with a reserve on two sides when amalgamated; and they had unusually good potential for amalgamation because of the special relationship of the applicants and their commitment to amalgamation for joint development.

109 I do not accept either of the valuers’ polarised valuation assessments. The Lands’ development potential for a private hospital was sufficiently limited that it would be inappropriate to simply apply, or adopt a top down approach of subtracting from, Mr Large’s top value derived from sales for the purpose of private hospital development elsewhere in the Sydney area. Nor do I accept Mr Lunney’s bottom assessment that the development potential was so limited that it added nothing to their value as single house sites. The top down and bottom up valuation approaches were discussed in Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243 at [74] – [85] and Maidment and Roads and Traffic Authority of NSW [2006] NSWLEC 606, 153 LGERA 249 at [51].

110 In my opinion, there should be a bottom up approach which reflects the limited potential for private hospital development as a premium over their single house market values at the acquisition date. In my judgement, the premium should be assessed at 25 per cent.

111 It is then necessary to determine the market value of each of the Lands as a single house site, before adding a premium of 25 per cent.

112 Mr Large valued the Lands as a hospital / medical centre on the basis of a rate of $1,740/m2. He derived this rate primarily by direct comparison with comparable sales, generally of private hospital sites, after adjusting for land size and time to the acquisition date. He also conducted a secondary check on the valuation by using the hypothetical development method. His assessment yielded the following values:

Penfold Land 765 m2 @ $1,740/m2
$1,331,000

Bracey Land 1,220m2 @ $1,740/m2
$2,122,800

113 Mr Large had regard, ultimately, to the following comparable sales:

114 As I have said, I have decided that Mr Large’s approach is inappropriate. In addition, even on Mr Large’s approach, there is force in Mr Lunney’s view that the majority of Mr Large’s sales are not comparable because they were sales of properties to adjacent or very close existing hospitals; and 1 Bantry Bay Road does not seem a fair comparison given that it was a sale of a single block for a residential use and sales for such a use are not valued on the basis of a rate per square metre.

115 Mr Lunney conceded that the comparable sales advanced and analysed by Mr Large would support a valuation higher than a single residential value, if directly applied to the subject property. However he considered that such a valuation would be wholly inconsistent with the actual sales of properties on the Eastern Site transacted between October 2002 and June 2006.

116 Mr Lunney accepted that the Lands had limited potential to be developed for alternate purposes including for a small private hospital, but considered that there was no market evidence to support the conclusion that the potential carried any value benefit above their value as single dwelling sites. He considered that was borne out by numerous transactions in the market place, but in particular, nine sales on the Eastern Site between 2002 and 2006. Four of those nine sales were negotiated to the Corporation after the Minister’s announcement of on 30 March 2006, the other five were open market transactions between 2002 and 2005.

117 In addition, five properties on the Eastern Site were the subject of Just Terms Act compensation proceedings in this Court, which were settled during the course of litigation, following mediation (Nos 3, 7 and 11 Bantry Bay Road and 107 and 109 French’s Forest Road). Mr Lunney said that their settlement price was based on the highest and best use of each of the sites as a single residential homesite with existing improvements. However, as they were litigation settlements, he did not place significant weight on them. Nor do I.

118 Mr Lunney concluded that none of the said nine sales and resales of properties on the Eastern Site reflected any premium in excess of the single residential value of the property. He tabulated those sales as follows, while emphasising that they were mostly not directly comparable with either of the Lands:

Address

Sale Date

Sale Price

Site Area

1 Bantry Bay Road, Frenchs Forest

6 May 2002

$585,000

556.4m2

1 Bantry Bay Road, Frenchs Forest

27 Jan 2005

$780,000

556.4m2

1 Bantry Bay Road, Frenchs Forest

13 Jun 2006

$805,000

556.4m2

3 Bantry Bay Road, Frenchs Forest

24 Oct 2002

$535,000

752.5m2

5 Bantry Bay Road, Frenchs Forest

23 Oct 2006

$850,000

752.5m2

9 Bantry Bay Road, Frenchs Forest

17 Nov 2005

$656,000

752.5m2

9 Bantry Bay Road, Frenchs Forest

31 May 2006

$675,000

752.5m2

13 Bantry Bay Road, Frenchs Forest

5 Apr 2004

$700,000

765.1m2

13 Bantry Bay Road, Frenchs Forest

1 Jun 2006

$730,000

765.1m2

119 The sales marked in bold in this table were negotiated sales to the Corporation for the purpose of the Northern Beaches Hospital. Sales to acquiring authorities are to be treated with caution (as Mr Lunney acknowledged): Chaudry v Liverpool City Council [2008] NSWLEC 251 at [21] – [28] where the cases are reviewed. Nevertheless, they should not be ignored given that the statutory regime establishes an entitlement to market value and, in the present case, the evidence indicates that there was a process of negotiation as to what the market value was. There is an issue as to whether their true market value was 10 per cent above the sale price stated in Mr Lunney’s table. The issue arises because the actual contract price in respect of each of those sales to the Corporation was 10 per cent higher than the “sale price” in Mr Lunney’s table. Mr Lunney rationalised his table on the basis that in each case the contract contained the following special condition which was inserted at the request of the Corporation: “The Parties agree that the Purchase Price includes a 10% premium on the market value of the Property”. Mr Lunney gave evidence that the Corporation offered 10 per cent over market value in order to achieve a quick and efficient acquisition process, and that there was a period of negotiation as to what the market value was in many cases.

120 Overall, I consider that there is insufficient reason to reject the prima facie accuracy of the statement in the special condition. I conclude that the sale price of the four properties on the Eastern Site sold to the Corporation after March 2006 included a 10 per cent premium on the market price, and that the premium was probably in order to achieve a quick and efficient acquisition process.

121 The Corporation submits that there is no market evidence in the row of sales on the Eastern Site suggesting a desire for amalgamation driven by some advantage that would flow from it. Generally, I would not expect there to be such evidence because those sales were nearly all before the initial approach in March 2005 of the applicants to those other owners to amalgamate for development, or after the Minister’s announcement of 30 March 2006 when amalgamation would have been futile. It is true that the sale of 9 Bantry Bay Road between those dates, in November 2005, (on which Mr Lunney placed some reliance) did not reflect a premium for an amalgamation benefit, but I would not draw a general conclusion from this one instance in the absence of more information. The applicants had a special bond and a longstanding interest in amalgamation for a joint development and a firm resolve to amalgamate whereas little is known of their neighbours in those respects. The amalgamated Lands would also enjoy a near corner situation with a reserve on two sides, which was, I think, superior for amalgamation and joint hospital development than No 9 and one of its neighbours.

122 Mr Lunney analysed seven sales within one kilometre of the Lands in order to determine the market value of each of the Lands as single residential sales:

123 In relation to the larger Bracey Land only, Mr Lunney also had regard to the three following single residential sales of larger lots:

124 Adjustment of comparable sales for time should reflect property market movements. According to the evidence, there was a peak in the market in 2003 and 2004; a trough in 2005; the market was slow in 2006 but by mid to late 2006 was well on the way to recovery; it boomed in 2006/2007; between September 2006 and July 2007 there was growth of 13.5 per cent per annum; and the period from September 2006 to November 2007 showed an increase of more than 20 per cent.

125 The Corporation submits that a comparison of 8 Cobb St and 9 Bantry Bay Road demonstrates that the former supports the sale price of the latter to the Corporation in 2006 (minus the 10 per cent premium referred to in the contract), and provides good evidence to support Mr Lunney’s valuation of the Penfold Land. The reasoning, which is persuasive, is along the following lines:

(1) 9 Bantry Bay Road sold in May 2006 for $675,000 (excluding the 10 per cent premium over agreed market value);
(2) adjusting this sale to the date of the 8 Cobb Street sale (July 2007) requires an adjustment of time at 11% per annum. For the 14 months between the sales, this is 12.8%, which shows $761,000;
(3) Mr Large stated that 9 Bantry Bay Road is 10 per cent better than 8 Cobb Street. By the hearing this was increased to 15 per cent. I accept 10 per cent;
(4) as 8 Cobb Street sold for $690,0900, 10 per cent ($69,000) would adjust the value of 8 Cobb Street to $759,000. This is virtually identical to the figure of $761,000 for 9 Bantry Bay Road referred to in (2) above. The comparison of these two figures indicates that the sale price in (1) above represented market value of 9 Bantry Bay Road;
(5) as to the comparison between 9 Bantry Bay Road and the Penfold Land, Mr Large said that the Penfold Land was more valuable by $18,000 because its land size is 13m2 larger than 9 Bantry Bay Road and the Penfold Land has 15m2 larger floor area in the house;
(6) as 8 Cobb Street sold for $690,000 in July 2007, this sale price needs adjustment the market movement between July 2007 and 30 November 2007. This is four months at 11% pa or +3.67%, which equals $715,000;
(7) to this must be added the adjustment of 10% for superior features of 9 Bantry Bay Road. This yields $787,000;
(8) accepting Mr Large’s $18,000 difference between 9 Bantry Bay Road and the Penfold Land, this yields $805,000 as the market value of the Penfold Land, which is less than Mr Lunney’s valuation of that Land at $820,000.

126 On the other hand, further analysis of the comparable sales listed earlier, along lines suggested by the applicants, suggests that Mr Lunney’s assessment of the residential market value of the Lands may be too low:

(a) 9 Bantry Bay Road. Its market value at the sale date of 31 May 2006 was $675,000 which, if adjusted at 13.5 per cent per annum, leads to a value on 30 November 2007 of $810,000. I am prepared to accept Mr Large’s evidence that No 9 was inferior to the Penfold Land, therefore a further adjustment needs to be made for that fact;
(b) 14 Penrose Place, Frenchs Forest was sold for $845,000 on 14 October 2007. I accept Mr Large’s evidence that it is not as good as the Penfold Land. A small increase for time to 30 November 2007 is required on account of the good market conditions. Mr Lunney suggested that the sale was out of line, but I am not persuaded that that is so;
(c) 56 Bantry Bay Road. Mr Lunney agreed that the June 2008 sale price of $880,444 would have been achieved by December 2007;
(d) 1 Bantry Bay Road referred to at [113] above which sold for a market value of $805,000 in June 2006 (after deducting the premium over market value). The applicant submitted that it was in poor condition compared with the Penfold Land but I am not satisfied that that was so. The proposition seems inconsistent with the valuation report in evidence and I am not satisfied that the photographs on which the applicant relied represented its condition at its sale date.

127 Balancing these competing considerations, I conclude that Mr Lunney’s residential valuations should be increased by 5 per cent to $860,000 for the Penfold Land and to $1,155,000, for the Bracey Land. To this should be added the premium of 25 per cent for their private hospital development potential, discussed earlier, to arrive at market value (rounded) for the Penfold Land of $1,075,000 and for the Bracey Land of $1,444,000.

Disturbance loss

128 The following table summarises the parties’ competing contentions and my decisions concerning the quantum of s 59 disturbance loss:

Penfold Land

Applicants
$

Corporation
$

Court
$

s 59(a) legal costs

22,920.17

6,171.43

10,416.05

s 59(b) valuation fees

8,213.59

8,213.59

8,213.59

s 59(c) relocation costs

34,347.55

5,000.00

34,347.55

s 59(d) stamp duty

36,289.00

36,289.00

36,289.00

101,770.31

55,674.02

89,266.19

Bracey Land

s 59(a) Legal costs

78,642.68

13,300.35

39,329.11

s 59(b) valuation fees

8,213.59

8,213.59

8,213.59

s 59(c) relocation costs

34,170.00

5,000.00

34,170.00

s 59(d) stamp duty

66,064.00

66,064.00

66,064.00

s 59(f) other financial costs

4,844.80

Nil

4,844.80

191, 950.07

92,577.94

152,621.50

129 Two comments may be made concerning the extent of agreement between the parties. First, the s 59(d) claims for ad valorem stamp duty are agreed in principle but final quantification depends upon the Court’s determination of the market value of the Lands. The parties are to calculate the stamp duty following delivery of these reasons for judgment. Secondly, the Corporation’s agreement that s 59(c) and (d) relocation costs and stamp duty, as well as solatium, are payable on the basis that the Lands are valued on a single dwelling basis; otherwise, it says, the higher use would require cessation of the use of the dwellings. That agreement is engaged by my valuation of each of the Lands on a single dwelling basis (while allowing a limited premium for some higher development potential).

130 The applicants’ disturbance loss claims are for costs incurred after 30 March 2006, the date of the Minister’s announcement of the acquisition, and before 24 April 2008 when the applicants commenced proceedings, except that relocation costs have not yet been incurred because the applicants still reside on the Lands and apparently have not yet been required by the Corporation to vacate. To the extent that the disturbance claims are in dispute, I address them below.

131 The “reasonably” incurred requirement of each sub-section of s 59 should be construed in the context of the Just Terms Act’s encouragement of the acquisition of land by agreement: ss 3(1)(e), 14(1)(a).

Legal costs – s 59(a)

132 Section 59(a) disturbance loss comprises “legal costs reasonably incurred by the person entitled to compensation in connection with the compulsory acquisition of the land”. In addition to costs paid to lawyers, the applicants’ claims under s 59(a) relate to costs of town planners, negotiators, surveyors, researchers, quantity surveyors, architects and a developer. The Corporation submits that, apart from costs paid to lawyers, they are not “legal costs” and therefore are not allowable under s 59(a). I accept the submission. However, it may be that some of the disallowed costs are recoverable by the applicants as costs of these proceedings.

133 As regards the Penfolds’ claim for costs paid to lawyers, the parties’ competing positions are as follows:

Payee
Applicants
$

Corporation
$

Solicitors
(Lane & Lane)

599.36

599.36

Solicitors (Hicksons)

4,750.33

Nil

Barrister

94.29

Nil

Solicitors
(Sparke Helmore)

4,972.07

4,972.07

10,416.05

5,571.43

134 As regards the Braceys’ claim for costs paid to lawyers, the parties’ competing positions are as follows:

Payee
Applicants
$

Corporation

$

Solicitors
(Lane & Lane)

599.35

599.35

Barrister

440.00

Nil

Solicitors
(Hicksons)

4,750.33

Nil

Barrister

94.29

Nil

Barrister
Solicitors
(Sparke Helmore)

3,465.00
29,980.14

12,000

39,329.11

12,599.35

135 The Corporation submits that (a) in the Bracey claim the amount paid to Sparke Helmore is not demonstrably limited to completion of the claim for compensation and advice with respect to compulsory acquisition steps prior to institution of the proceedings; and (b) the amounts claimed are duplicated because no less than three firms of solicitors were engaged.

136 There was unchallenged evidence from Messrs Penfold and Bracey that these costs were incurred in order to negotiate an agreed price for acquisition with the Corporation but, if agreement could not be reached, used as part of the compulsory acquisition process. On the evidence, they appear to be in connection with the compulsory acquisition of the Lands and to be focussed on ascertainment of the Lands’ highest and best use or development potential. Some of the costs represent the applicants’ respective proportions of total costs shared with other dispossessed owners on the Eastern Site. I cannot see any duplication as between Lane and Lane and Hicksons Lawyers because the latter continued with the work as a result of a merger with the former. Nor is it clear to me that any costs paid to Sparke Helmore are duplicated costs. There was no cross-examination of Messrs Penfold or Bracey to that effect. I am satisfied that the costs paid to lawyers were reasonably incurred. I propose to allow under s 59(a) the Penfolds’ legal costs in the sum of $10,416.05 and the Braceys’ legal costs in the sum of $39,329.11.

Relocation costs – s 59(c)

137 Section 59(c) disturbance loss comprises “financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs)”. The Penfolds’ claim relocation costs of $34,347.55 and the Braceys’ claim relocation costs of $34,170.00, based on estimates and quotations obtained in October 2008 when their schedule of losses was prepared. The applicants suggest that they are likely to have increased due to the time that has passed.

138 The Corporation disputes these claims on the ground that, as the applicants still reside at their former properties, they have not yet incurred costs in connection with relocation and, therefore, they are not allowable under s 59(c). Nevertheless, the Corporation allows $5,000 on account of relocation costs, which it says is reasonable having regard to the nature of the premises.

139 The relocation costs paid by the Corporation to four other owners along Bantry Bay Road who negotiated sales after 30 March 2006 were $34,415, $36,890, $40,715 and $42,742. These amounts were respectively specified in the contracts of sale between each of those owners and the Corporation. Earlier, I have upheld the Corporation’s submission that full weight should be given to another clause of those contracts which specified that the purchase price included a 10 per cent premium on the market value: see [119] – [120] above. Consistency irresistibly suggests that equal weight be given to the clause quantifying relocation costs as evidence of their reasonableness and, therefore, the reasonableness of the lesser quantum of the applicants’ claims for relocation costs.

140 I am satisfied that the relocation costs claimed will be incurred and that they are reasonable. In my opinion, they are allowable notwithstanding that they have not yet been incurred, on the construction of s 59(c) adopted in McDonald v Roads and Traffic Authority of NSW [2009] NSWLEC 105 at [117].

Other financial costs – s 59(f)

141 Section 59(f) disturbance loss comprises “any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land as a direct and natural consequence of the acquisition”. There are three requirements for financial costs to fall within s 59(f). First, they must be reasonably incurred or might reasonably be incurred. Secondly, they must relate to the actual, as distinct from the potential, use of the acquired land. Thirdly, they must arise as a “direct and natural consequence of the acquisition”, which directs attention to the nature or degree of the required causal relationship: see McDonald v Roads and Traffic Authority of NSW at [110] where the authorities are reviewed. I consider that these requirements are satisfied in the present case.

142 The Braceys claim $4,844.80 for storage costs under s 59(f). Mr Bracey is a private investigator by occupation and uses his cellar area for purposes of storing files, exposed film etc. So far, he has been unable to find a new property with equivalent storage capacity. He is claiming the amount of renting a storage area with equivalent storage for at least 12 months. The Corporation disputes this claim on the principle that where an applicant is to receive full compensation reflecting the market value of the compulsorily acquired land in its existing use, then to award further compensation for the cost of fitting out newly acquired premises would involve an element of double recovery: see McDonald v Roads and Traffic Authority of NSW [151] – [154] where the authorities are reviewed. This principle, in my view, is inapplicable to delay costs in a situation such as the present. There is delay in the Braceys being able to find equivalent alternative premises to meet a particular use, and what is claimed is not the cost of fitting out newly acquired premises but, rather, a consequential extra financial cost to be incurred for a reasonable time during the delay period. In the alternative, the Corporation submits that this amount is not recoverable as it relates to costs that have not yet been incurred. I do not accept the submission. Section 59(f) expressly allows financial costs that might reasonably be incurred. I am satisfied that these financial costs are likely to be reasonably incurred. I allow the s 59(f) claim.

143 In summary, the amount of compensation payable by the Corporation to the applicants is as follows, subject to the parties making any adjustment for ad valorem stamp duty in accordance with my determination of market values:

Penfold Claim	$
s 55(a) market value	1,075,000
s 55(d) loss attributable to disturbance	89,266
s 55(e) solatium	21,150
1,185,416
Bracey Claim	$
s 55(a) market value	1,444,000
s 55(d) loss attributable to disturbance	152,621
s 55(e) solatium	21,150
1,617,771

144 To give effect to my conclusions, the parties are to bring in agreed or competing draft orders in each matter within two working days. I anticipate that they would include an order that the respondent pay the applicants’ costs. The exhibits may be returned.

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Citations

Penfold and Bracey v Health Administration Corporation [2009] NSWLEC 157

Most Recent Citation

Sales v Transport for NSW (No 2) [2021] NSWLEC 96

Cases Citing This Decision

3

David Fox v Planning Ministerial Corporation [2023] NSWLEC 109

Buhach v Transport for New South Wales [2022] NSWLEC 148

Sales v Transport for NSW (No 2) [2021] NSWLEC 96

Cases Cited

15

Statutory Material Cited

6

Dem Gillespies v Warringah Council [2002] NSWLEC 224

Residential Lifestyles Pty Ltd v Warringah Council [2005] NSWLEC 250

Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [2005] NSWCA 251

CITATION:	Penfold and Bracey v Health Administration Corporation [2009] NSWLEC 157
PARTIES:	30413 of 2008 APPLICANTS: Keith Lavis Penfold and Wendy Carolyn Penfold RESPONDENT: Health Administration Corporation 30414 of 2008 APPLICANTS: John Everett Bracey and Jan Scott Bracey RESPONDENT: Health Administration Corporation
FILE NUMBER(S):	30413 of 2008; 30414 of 2008
CORAM:	Biscoe J
KEY ISSUES:	COMPULSORY ACQUISITION OF LAND :- existing adjoining single house uses - whether development potential for private hospital - whether potential for private hospital use carried market value premium - whether claimed disturbance losses all allowable
LEGISLATION CITED:	Environmental Planning and Assessment Act 1979, s 79C Health Administration Act 1982, ss 4, 5(2)(a), 8(3), 8A(1)(a), 9, 10(1) Health Services Act 1997, ss 8(1), 17, 25(b) Housing Act 2001, s 6(2) Land Acquisition (Just Terms Compensation) Act 1991, ss 3, 14, 55, 56(1), 59, 61 Warringah Local Environmental Plan 2000
CASES CITED:	Chaudry v Liverpool City Council [2008] NSWLEC 251 Gillespies v Warringah Council [2002] NSWLEC 224, (2002) 124 LGERA 147 Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196 Maidment and Roads and Traffic Authority of NSW [2006] NSWLEC 606, (2006) 153 LGERA 249 McDonald v Roads and Traffic Authority of NSW [2009] NSWLEC 105 Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565 Residential Lifestyles Pty Ltd v Warringah Council [2005] NSWLEC 250 Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243 Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [2005] NSWCA 251, (2005) 63 NSWLR 407 Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [No 2] [2006] NSWCA 386, (2006) 68 NSWLR 487 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5, (2008) 233 CLR 259 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178
DATES OF HEARING:	22 - 25 June 2009, 28 - 29 July 2009
DATE OF JUDGMENT:	16 September 2009
LEGAL REPRESENTATIVES:	APPLICANTS: Mr T. Hale SC with Mr P. Nagle SOLICITORS Sydney Property Lawyers RESPONDENT: Mr J. Maston SOLICITORS Crown Solicitor's Office (NSW)

Applicants $	Corporation $
a) Hospital or medical centre
Penfold Land	1,331,100
Bracey Land	2,122,800
b) Single house sites or seniors living
Penfold Land	906,575	820,000
Bracey Land	1,445,700	1,100,000

Penfold Land	765 m2 @ $1,740/m2	$1,331,000
Bracey Land	1,220m2 @ $1,740/m2	$2,122,800

Address	Sale Date	Sale Price	Site Area
1 Bantry Bay Road, Frenchs Forest	6 May 2002	$585,000	556.4m2
1 Bantry Bay Road, Frenchs Forest	27 Jan 2005	$780,000	556.4m2
1 Bantry Bay Road, Frenchs Forest	13 Jun 2006	$805,000	556.4m2
3 Bantry Bay Road, Frenchs Forest	24 Oct 2002	$535,000	752.5m2
5 Bantry Bay Road, Frenchs Forest	23 Oct 2006	$850,000	752.5m2
9 Bantry Bay Road, Frenchs Forest	17 Nov 2005	$656,000	752.5m2
9 Bantry Bay Road, Frenchs Forest	31 May 2006	$675,000	752.5m2
13 Bantry Bay Road, Frenchs Forest	5 Apr 2004	$700,000	765.1m2
13 Bantry Bay Road, Frenchs Forest	1 Jun 2006	$730,000	765.1m2

Penfold Land	Applicants $	Corporation $	Court $
s 59(a) legal costs	22,920.17	6,171.43	10,416.05
s 59(b) valuation fees	8,213.59	8,213.59	8,213.59
s 59(c) relocation costs	34,347.55	5,000.00	34,347.55
s 59(d) stamp duty	36,289.00	36,289.00	36,289.00
101,770.31	55,674.02	89,266.19
Bracey Land
s 59(a) Legal costs	78,642.68	13,300.35	39,329.11
s 59(b) valuation fees	8,213.59	8,213.59	8,213.59
s 59(c) relocation costs	34,170.00	5,000.00	34,170.00
s 59(d) stamp duty	66,064.00	66,064.00	66,064.00
s 59(f) other financial costs	4,844.80	Nil	4,844.80
191, 950.07	92,577.94	152,621.50

Payee	Applicants $	Corporation $
Solicitors (Lane & Lane)	599.36	599.36
Solicitors (Hicksons)	4,750.33	Nil
Barrister	94.29	Nil
Solicitors (Sparke Helmore)	4,972.07	4,972.07
10,416.05	5,571.43

Payee	Applicants $	Corporation $
Solicitors (Lane & Lane)	599.35	599.35
Barrister	440.00	Nil
Solicitors (Hicksons)	4,750.33	Nil
Barrister	94.29	Nil
Barrister Solicitors (Sparke Helmore)	3,465.00 29,980.14	12,000
39,329.11	12,599.35