Peter Sleiman Property Investments Pty Ltd v Valuer-General of New South Wales (No 2) - [2021] NSWLEC 47

Land and Environment Court

New South Wales

Medium Neutral Citation: Peter Sleiman Property Investments Pty Ltd and Anor v Valuer-General of New South Wales (No 2) [2021] NSWLEC 47
Hearing dates: 27, 28 and 29 July, 15 September and 5 November 2020
Date of orders: 21 May 2021
Decision date: 21 May 2021
Jurisdiction: Class 3
Before: Robson J
Decision:
See orders at [241]

Catchwords:
VALUATION — Service station — Dispute regarding risk of contamination — Appropriate valuation methodology

Legislation Cited:
Burwood Development Control Plan 2013
Burwood Local Environmental Plan 2012
Contaminated Land Management Act 1997 (NSW) s 60
Environmental Planning and Assessment Act 1979 (NSW) ss 3.43, 3.45, 4.15
Protection of the Environment Operations Act 1997 (NSW)
State Environmental Planning Policy No 55—Remediation of Land
State Environmental Planning Policy No 65—Design Quality of Residential Apartment Development
Valuation of Land Act 1916 (NSW) ss 6A, 37, 40

Cases Cited:
680-682Kingsway Caringbah Pty Ltd v Sutherland Shire Council [2017] NSWLEC 99
Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 167 ALR 575
Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170
Bronzel v State Planning Authority (1979) 21 SASR 513; (1979) 44 LGRA 34
Challenger Listed Investments Limited v Valuer General (No 2) [2015] NSWLEC 60
Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365; (2007) 156 LGERA 186
Co-ordinated Resources Pty Ltd v Valuer General (1983) 27 the Valuer 779
Crompton v Commissioner of Highways (1973) 5 SASR 301; (1973) 32 LGRA 8
Graham Trilby Pty Ltd v Valuer-General [2008] NSWLEC 217
Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68
New South Wales Cremation Company Pty Limited v Valuer General [2016] NSWLEC 135
Olefines Pty Ltd v Valuer-General of New South Wales [2018] NSWCA 265; (2018) 234 LGERA 444
Olefines Pty Ltd v Valuer-General of New South Wales [2018] NSWLEC 18; (2018) 228 LGERA 407
Peter Sleiman Property Investments Pty Ltd v Valuer-General of New South Wales [2020] NSWLEC 123
Redeam Pty Ltd v South Australian Land Commission (1977) 17 SASR 508; (1977) 40 LGRA 151
River Bank Pty Ltd v The Commonwealth of Australia; Rumble v The Commonwealth of Australia (1974) 4 ALR 651
Spencer v The Commonwealth of Australia (1907) 5 CLR 418; [1907] HCA 82
Toohey’s Ltd v the Valuer-General (1924) 25 SR (NSW) 75; [1925] AC 439
Trust Company of Australia Ltd v the Valuer-General [2007] NSWCA 181; (2007) 154 LGERA 437
Universal Property Group Pty Ltd v Blacktown City Council [2020] NSWCA 106
Valuer-General of New South Wales v Oriental Bar Pty Limited [2016] NSWCA 48; (2016) 217 LGERA 1
Valuer-General v Fivex Pty Ltd [2015] NSWCA 53; (2015) 206 LGERA 450
Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47

Texts Cited:
NSW Department of Planning and Environment, Apartment Design Guide, July 2015
NSW Environment Protection Authority, Contaminated Sites: Sampling Design Guidelines (1995)
NSW Environment Protection Authority, Guidelines for Assessing Service Station Sites (1994)

Category: Principal judgment
Parties: Peter Sleiman Property Investments Pty Ltd (First Applicant)
Nabil Sleiman Property Investments Pty Ltd (Second Applicant)
Valuer-General of New South Wales (Respondent)
Representation:
Counsel:
R Lancaster SC with M Seymour (First and Second Applicants)
R White (Respondent)
Solicitors:
CMM Quay Legal Group (First and Second Applicants)
Crown Solicitor’s Office of New South Wales (Respondent)

File Number(s): 2018/00366200; 2018/00366212
Publication restriction: Nil

Judgment

Peter Sleiman Property Investments Pty Ltd and Nabil Sleiman Property Investments Pty Ltd (the ‘applicants’), bring two appeals pursuant to s 37(1) of the Valuation of Land Act 1916 (NSW) (‘Valuation Act’) against the determination by the Valuer-General of New South Wales (the ‘Valuer-General’) of objections to the valuations of a parcel of land located at 287 Liverpool Road, Strathfield (the ‘Land’).
The applicants appeal the determination of objections and issued land values for the Land as at the base dates of 1 July 2016 and 1 July 2017 (‘base dates’), when the Valuer-General valued the Land at $5,365,000 and $6,200,000 respectively. The applicants contend that these land values are too high, and submit that the appropriate land values at the base dates are instead $1,150,000 and $920,000 respectively.
The areas of dispute between the parties, and the issues to be determined by the Court in these appeals, concern: first, the material available at the base dates in relation to contamination of the Land (including the cost of remediation of any contamination) and the effect of the material on the statutory valuation task; second, the effect of the applicable planning controls on the likely achievable floor space where a mixed-use development is the highest and best use; third, the highest and best use of the Land at the base dates for the purposes of determining the land values; and fourth, the appropriate valuation methodology to be adopted to determine the land values.
The hearing of both appeals proceeded concurrently over five days. Mr R Lancaster of senior counsel, with Mr M Seymour of counsel, appeared for the applicants and Mr R White of counsel, appeared for the Valuer-General.
For the reasons that follow, I determine that the land values of the Land as at the base dates are $4,883,000 and $5,165,000 respectively.

Background

The Land

The Land comprises Lots A and B in DP 409923 and Lots 1 and 2 in DP 208597, within the local government area of Burwood. It is an irregularly shaped corner parcel occupying an area of 1,764.1m² on a prominent bend in Liverpool Road, Strathfield. There are two street frontages, with the primary frontage being approximately 60m to Liverpool Road.
At the base dates, the Land was occupied and operated as a service station by Woolworths Ltd, subject to a registered lease dated 15 December 2008 which commenced on 31 May 2008 and expires on 30 May 2023 subject to four, five-year options to renew. At the base dates, the Land was improved with a single-storey service station and underground storage tanks (also referred to as the underground petroleum storage system or ‘UPSS’) and related infrastructure for storing petroleum products. The Land has been used as a service station since the 1950s, with the existing improvements constructed in 2006 following the remediation, validation and redevelopment of the Land in 2005.
At the base dates, most of the Land was zoned “B2 Local Centre” under the Burwood Local Environmental Plan 2012 (‘Burwood LEP’). This zoning provides for a broad range of commercial, retail and residential uses to be undertaken on the Land with development consent. A small part of the Land was zoned “R2 Low Density Residential”.

The land valuations subject to appeal

The Valuer-General undertook land valuations of the Land for the base dates, resulting in a land value of $5,600,000 at 1 July 2016 (being the ‘2016 base date’) and a land value of $6,990,000 at 1 July 2017 (being the ‘2017 base date’). Objections to the land values for the base dates were lodged on the basis that the issued land values were too high. The objections were allowed, and the land values were reduced to $5,365,000 for the 2016 base date and $6,200,000 for the 2017 base date on 4 October 2018.
On 28 November 2018, the applicants filed appeals against the determinations of the objections, and the land values. The applicants contend that the land values for the Land remain too high. They seek a determination of land values for the Land at the base dates in accordance with the Valuation Act, and any other orders the Court sees fit. The applicants have the onus of proving that the Valuer-General's determinations of the objections to the land values are erroneous and too high: s 40(2) of the Valuation Act.

These appeal proceedings

The parties provided written and gave oral submissions to the Court. The concurrent hearing of the appeals meant that the evidence tendered was accepted as evidence in each of the appeals.
The Court received extensive evidence in a Court Book of approximately 1,000 pages, including 8 individual expert reports and 4 joint expert reports. Each party called experts in the fields of contamination, town planning, and valuation. In relation to contamination, Ken Henderson and Tony Nakhoul gave evidence for the applicants and Colin McKay gave evidence for the Valuer-General (together, the ‘contamination experts’); in relation to town planning, Peter Smith gave evidence for the applicants and David Haskew gave evidence for the Valuer-General (together, the ‘town planning experts’); and, in relation to valuation, Grant Jackson gave evidence for the applicants and Derek Hill gave evidence for the Valuer-General (together, the ‘valuers’). The Court also received expert evidence in relation to quantity surveying from Tony Sassine, retained by the applicants.
On the third day of the hearing, judgment was handed down in respect of objections taken by the Valuer-General to various paragraphs of the expert valuation report of Mr Jackson dated 21 April 2020: Peter Sleiman Property Investments Pty Ltd v Valuer-General of New South Wales [2020] NSWLEC 123.

The statutory valuation task

These appeals concern the determination of land values for the Land at the base dates, and as such, focus on the application of s 6A of the Valuation Act. Section 6A relevantly provides:

6A   Land value
(1)   The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.
(2)   Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that—
(a)   the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and
(b)   such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used,
but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made.
…

The broader statutory framework relevant to these proceedings was conveniently summarised, in terms I respectfully adopt, by Sackville AJA in Valuer-General of New South Wales v Oriental Bar Pty Limited [2016] NSWCA 48; (2016) 217 LGERA 1 at [61]-[62], [64], [68]-[70] as follows:

“[61] Subject to certain exceptions, the land value of each parcel of land in New South Wales is to be ascertained each year. The valuation is to be made as at 1 July in the valuing year in which the valuation takes place. The Valuer-General is empowered to value any parcel of land at any time.
[62] Assessment of land value is to take place in accordance with s 6A(1) of the [Valuation Act]…
…
[64] Section 6A(2) of the [Valuation Act] was introduced by the Valuation of Land and Local Government (Amendment) Act 1959 (NSW) (1959 Act). The principal purpose of the provision, as Tobias JA explained in Commonwealth Custodial Services Ltd v Valuer-General [[2007] NSWCA 365; [(2007)] 156 LGERA 186 at [46]-[57]], is to ensure that land value should be determined having regard to the highest and best use of the land, including its use at the date to which the valuation relates. Section 6A(2) provides…
…
[68] The Valuer-General is required to give notice of each valuation of land to specified persons, including the owner of the freehold estate on the land. A person to whom the Valuer-General has given notice may lodge a written objection to the valuation. Section 34(1) specifies the only grounds on which objection may be taken under the [Valuation Act] to a valuation….
[69] The Valuer-General is required to consider an objection that has been duly made and either allow or disallow it. If the objection is disallowed in whole or in part, the Valuer-General must give reasons for doing so.
[70] A person entitled to object to a valuation may appeal to the [Land and Environment Court] if dissatisfied with the Valuer-General’s determination of the objection. Section 40(1) of the [Valuation Act] provides that on appeal the [Land and Environment Court] may do any one or more of the following:
(a)   confirm or revoke the decision to which the appeal relates,
(b)   make a decision in place of the decision to which the appeal relates,
(c)   remit the matter to the Valuer-General for determination in accordance with the Court’s finding or decision.

On an appeal, the appellant has the onus of proving the appellant’s case.” (Some citations and emphases omitted.)

In undertaking the statutory valuation task and determining land values for the Land at each base date, the Court needs to consider a notional sale, whereby the Land is being hypothetically purchased for its highest and best use. As explained by Campbell JA in Trust Company of Australia Ltd v the Valuer-General [2007] NSWCA 181; (2007) 154 LGERA 437 (‘Trust Company’) at [32]:

“There is no explicit recognition in the Act of the concept of "highest and best use". However it is well established that that concept is to be used for the purpose of ascertaining the land value under the Act: Spicer v Valuer-General (1963) 10 LGRA 319 at 320. Section 6A(1) requires the postulation of a notional sale. It has been accepted that this notional sale is one that is assumed to take place in a market, and that the seller would conclude the sale for the highest price it could obtain in that market. As well, if there is some use of the property that is more beneficial than its present use, it is assumed that the potential purchasers in the market would include at least one who was prepared to pay more for the land by reason of the land being able to be used in that more beneficial way. In this way, the concept of highest and best use comes to be applied through the notional sale that section 6A requires to occur.” (Some emphases omitted.)

In Olefines Pty Ltd v Valuer-General of New South Wales [2018] NSWCA 265; (2018) 234 LGERA 444 (‘Olefines’) at [16]-[17], Basten JA indicated that the phrase “highest and best use” refers to “the most financially rewarding use permitted within the boundaries of applicable legal regulation”. His Honour noted that the highest and best use is not prescribed by s 6A of the Valuation Act, but is chosen from the existing (continuing) use (subject to certain assumptions) or the uses permissible by the relevant zoning, through the statutory valuation task in accordance with s 6A of the Valuation Act.
In this way, the notional sale occurs between a hypothetical willing purchaser and a not unwilling vendor: Spencer v The Commonwealth of Australia (1907) 5 CLR 418; [1907] HCA 82 (‘Spencer’) at 432. This means that a hypothetical “bona-fide seller”, cognisant of land value (based upon the land’s potential use or continuing use) would not part with the land for less than it is worth.

Summary of submissions

Although both parties accept that the Land is to be valued in accordance with the strictures of s 6A of the Valuation Act, the parties differ in respect of the application of this section and the resulting determination of land values.
An initial summary of the differing positions adopted by the parties in relation to contamination, town planning, and valuation issues, as well as the parties’ contentions in relation to the highest and best use of the Land at the base dates, provides an appropriate background to consider the extensive evidence and submissions received by the Court about these matters.

Contamination

The applicants submit that the material that would have been available to the hypothetical parties transacting the notional sale at each of the base dates, in particular, the contents of a “Baseline Subsurface Contamination Investigation Report” (dated 21 December 2007) commissioned by Woolworths Ltd in 2007, prepared by Geo-Logix Pty Ltd (‘Geo-Logix Report’) which considers earlier reports including: “Site Audit Report, Former Mobile Service Station, 287 Liverpool Road, Enfield, NSW” (prepared in 2005 by ENVIRON Australia Pty Ltd) and “Environmental Baseline Lease Condition, Former Mobil Service Station, 287 Liverpool Road, Enfield, NSW” (prepared in 2007 by Geo-Logix Pty Ltd), indicates a level of contamination, or at least the risk of a level of contamination, of the Land. The applicants submit that this needs to be taken into account when considering the highest and best use of the Land (which the applicants contend is the continuation of the use of the Land as a service station) and therefore the resulting determination of land values.
Although the Valuer-General concedes that, if as a matter of fact the Land was contaminated at each of the base dates, this would be required to be taken into account in the resulting determination of land values, the Valuer-General submits that the applicants have not discharged their onus of proving this to be the case. The Valuer-General submits that the evidence of Mr McKay and Mr Henderson, regarding the material available at the base dates in relation to contamination of the Land, indicates that the Land was not significantly contaminated, if at all, at the base dates. Accordingly, the extent of contamination of the Land at the base dates was likely minimal. The Valuer-General further submits that the mere risk of contamination is insufficient to discharge the applicants’ onus.

Highest and best use of the Land

The applicants submit, with reference to the assumptions in s 6A(2) of the Valuation Act, that the highest and best use of the Land at the base dates is for a continuing use as a service station. The applicants reject the Valuer-General’s position that the highest and best use of the Land at the base dates is as a mixed-use development, due to the high costs involved in redeveloping the Land given what the applicants contend is the level of contamination, or risk of the level of contamination (in the circumstances of the Land’s use as a service station) and also the limits on achievable floor space in a mixed-use development, as discussed below.
The applicants submit that any valuation based on a proposal to redevelop the Land for a mixed-use development must take into account investigation and remediation obligations related to contamination under State Environmental Planning Policy No 55—Remediation of Land (‘SEPP 55’) (which applies by virtue of the Land’s current use as a service station), and that the cost of remediation would be so significant (within the range of $2,000,000 to $7,000,000 dollars) that this precludes a mixed-use development being the highest and best use of the Land. In contrast, the applicants submit that the continuing use of the Land as a service station avoids triggering significant remediation costs associated with a change of use.
The Valuer-General submits that the applicants erroneously assume that, in undertaking the statutory valuation task under s 6A of the Valuation Act, the valuer can, and should, consider the history of the use of the Land as a service station when assessing the contamination of the Land, or risk of contamination of the Land, and the likely cost of remediation due to contamination of the Land. The Valuer-General submits that for the purposes of valuation, it must be assumed that the service station does not exist and has never been built. In the alternative, even if such matters could be taken into account, the Valuer-General submits that the hypothetical parties transacting the notional sale would, on the material available, conclude either that the Land was not significantly contaminated, or otherwise, that there was no risk of significant contamination. Accordingly, the Valuer-General submits that the costs of any remediation as a result of contamination would be low and within the range nominated by Mr McKay. As a result, the highest and best use of the Land at the base dates would be as a mixed-use development.

Town planning

Notwithstanding their primary position regarding the highest and best use of the Land outlined above, the applicants submit that, having regard to the town planning evidence in relation to the likely gross floor space yield that could be achieved (the ‘achievable floor space’) in a mixed-use development on the Land, the achievable floor space would be limited to 2,818m². This is because the applicants contend that the planning controls applicable to a mixed use development within the two primary applicable planning instruments (being the NSW Department of Planning and Environment, Apartment Design Guide (‘ADG’) within State Environmental Planning Policy No 65—Design Quality of Residential Apartment Development (‘SEPP 65’) and Burwood Development Control Plan 2013 (‘DCP’)), are not inconsistent (and therefore would not trigger a primacy clause in favour of the ADG which would allow for greater achievable floor space). As a result, the planning controls within the DCP would operate to impose a 45-degree height plane on the building envelope for a mixed-use development (which represents a material reduction in achievable floor space and thus land values). The applicants characterise this as a further reason why a mixed-use development would not be the highest and best use of the Land at the base dates.
In contrast, the Valuer-General submits that where both the ADG and the DCP contain discrete planning controls that establish requirements in relation to matters such as separation distances between properties, there is inconsistency between the planning controls. The operation of a primacy clause in favour of the ADG means the less restrictive planning controls in the ADG prevail. This provides for greater achievable floor space of 3,529m² in a mixed-use development, thereby making the Land more valuable.

Valuation

On the issue of the appropriate valuation, apart from the contentions about the highest and best use of the Land noted above, the applicants submit that the hypothetical development approach propounded by Mr Jackson ought to be preferred as a valuation methodology to the direct comparison approach adopted by Mr Hill.
The applicants criticise the direct comparison approach, first, because there are no truly comparable sales; and second, because of the nature and use of a number of inputs and adjustments to the sales Mr Hill identified as comparable. Moreover, the applicants contend that Mr Jackson’s use of the hypothetical development approach takes into account the available evidence regarding contamination, while Mr Hill’s direct comparison approach “radically underestimates” the effect of any contamination. In contrast, the Valuer-General submits that the direct comparison approach is the conventional valuation technique that should be preferred, and the applicants’ use of the hypothetical development approach is flawed and suspect. Further, the Valuer-General criticises the number of inputs and deductions used in the hypothetical development approach and suggests that Mr Jackson has failed to provide reasoning supporting his chosen inputs and deductions.

Contamination

Evidence and submissions

Mr Henderson and Mr Nakhoul’s evidence

The applicants rely upon the evidence of Mr Henderson, an environmental scientist with experience in the assessment and remediation of contaminated sites; and Mr Nakhoul, a chemical engineer with experience in the preparation of cost estimates for environmental investigations and remediation. Mr Henderson provided evidence, based on the assumption that the improvements (other than land improvements) were not made, in relation to the risks and likely costs of a proposed mixed-use development (identified as residential development, shop top development, and commercial development); and development for the purpose of a service station. Mr Nakhoul considered the risks and likely costs identified by Mr Henderson and provided evidence of the quantum of costs. There was a significant degree of duplication and overlap in their respective reports.
Mr Henderson opined that if there was to be a change in use of the Land (for example, by undertaking a mixed-use development), the unimproved land could not be considered suitable until it was “investigated, remediated, validated and audited” as a result of the “potential risk of harm” to future users due to petroleum hydrocarbon storage and/or potential petroleum contamination of the Land. Mr Henderson adopted the cost estimates provided by Mr Nakhoul when considering the likely costs to make the Land suitable for undertaking a mixed-use development.
In relation to the continuing use of the Land as a service station, Mr Henderson analysed two scenarios: first, a scenario in which the Land is suitable without remediation where Mr Henderson provided costs of approximately $42,000 for ongoing monitoring; and second, a scenario in which remediation is required where Mr Henderson adopted the cost estimates provided by Mr Nakhoul for remediation where this was required.
In relation to the likely cost of remediation involved in making the Land suitable for a change in use, Mr Nakhoul, having considered and adopted Mr Henderson’s assessment of the extent and risk of contamination of the Land, provided a range of costs (differentiated as “low range”, “likely cost”, and “high range cost”). Mr Nakhoul opined that the costs involved in investigation and remediation to undertake a mixed-use development could be in the range of $2,929,000 to $7,976,000. By comparison, Mr Nakhoul opined that the continuing use of the Land as a service station may involve costs (of investigation and remediation) of $42,000 if the Land was suitable for continued use as a service station and between $440,000 to $1,900,000 in addition to ongoing monitoring costs if the Land was unsuitable for continued use as a service station.

Mr McKay’s evidence

The Valuer-General relies upon the evidence of Mr McKay, an environmental scientist with expertise in contaminated site assessment and remediation, who was retained to consider “…the contamination on the [Land], if any, and the cost to remediate any such contamination having regard to the development proposed by [the applicants]”.
Mr McKay opined that contamination of the Land is likely to be minimal as the Land was remediated in 2005; was suitable for residential use in 2007; and there is no evidence that the current use has caused contamination of the Land. Mr McKay came to this conclusion for the following reasons:

Although the Land had been used as a service station since the 1950s, the summary in the Geo-Logix Report of a site audit report being the “ENVIRON (2005) Site Audit Report, Former Mobil Service Station, 287 Liverpool Road, Enfield, ENVIRON Australia Pty Ltd, 2005” (‘2005 SAR’) indicated that the site auditor determined that the Land was suitable for the purpose of residential use with accessible soil, subject to compliance with an environmental management plan;

The regulatory environment that the Land has operated in since 2007 requires operators to take a proactive approach to managing environmental risk. Under the Protection of the Environment Operations (Underground Petroleum Storage Systems) Regulation 2008 (NSW) (the ‘UPSS Regulation’), there is a requirement to monitor the surrounding groundwater every six months for contamination and to utilise a double skinned petroleum storage tank design which provides secondary containment for the UPSS;

Under s 60 of the Contaminated Land Management Act 1997 (NSW) (‘CLM Act’) there is a requirement to notify the NSW Environment Protection Authority (‘EPA’) if significant contamination has been identified. As there has been no such notification to the EPA, it is likely that no significant contamination has been detected; and

At each of the base dates, the Land was not individually listed as contaminated on the public registers maintained by the EPA that identify contaminated land.

Mr McKay concluded that the “information reviewed” (including the Geo-Logix Report, the 2005 SAR, and the evidence of the applicants’ contamination experts) was “lacking in specific information on the contamination status of the [Land] and did not demonstrate a need for remediation for either the ongoing current use or for a commercial and/or residential development…”. As a result, Mr McKay came to the following two conclusions about the use of the Land.
First, Mr McKay concluded that where the current use of the Land as a service station is continued there is no “demonstrated reason” why remediation would be required, and thus there would be no remediation costs (where he characterised ongoing monitoring as a general operational cost, not a remediation cost).
Second, Mr McKay noted that where the use of the Land is changed to residential development or mixed-use development, a process of investigation, remediation planning and validation would need to be undertaken. Any contamination of the Land would need to be considered during the development application process, however Mr McKay opined that the extent of contamination of the Land is “unlikely to be significant”.
Mr McKay provided his estimate of remediation costs: first, through a critique of the costs nominated by Mr Nakhoul; and second, through his own recommended remediation cost estimates. Mr McKay adopted three potential cost scenarios at each of the base dates: first, where no contaminated soil is found (where the material demonstrates that remediation is not required, this cost would be considered a development cost during redevelopment) – approximately $240,000 (being ‘scenario A’); second, where it is assumed there is some contaminated soil (up to 640m³) around the underground petroleum storage system – approximately $360,000 (being ‘scenario B’); and third, where that contaminated soil (up to 640m³) is required to be disposed of offsite and virgin excavated natural material (‘VENM’) is required to be imported to replace soil and tank voids (which is considered by Mr McKay to be unlikely) – approximately $625,000 (being ‘scenario C’).

Joint reports

In their joint report which related to “site condition, risk of contamination and the need for remediation” dated 19 December 2019, Mr McKay and Mr Henderson agreed that:

Service station infrastructure has the potential to cause contamination of the Land until the UPSS is decommissioned;

That there is the potential for contamination migration at the Land within groundwater and/or soil vapour;

There is insufficient data available to provide “full knowledge” of the extent of contamination of the Land in relation to both the UPSS and other potential sources of contamination such as fill on the Land;

A change in use of the Land would require assessment of the potential for contamination with the framework for assessment provided in SEPP 55 and would involve a detailed site investigation; preparation of a remediation action plan; remediation work; site validation and most likely a site audit; and

The instructions provided to Mr Henderson and Mr McKay (their “briefs”) were different and this had a bearing on their assessment of the risk of contamination and their opinion of what constitutes remediation, and consequentially, costs of remediating any contamination.

In their joint report, Mr Henderson and Mr McKay disagreed on: first, the extent to which the Geo-Logix Report could be relied upon and the extent to which the Geo-Logix Report represents the condition of the Land in 2007; second, the risk of contamination arising from the current UPSS; third, the risk of contamination presented by fill on the Land; fourth, the extent of any remediation required and whether bioremediation would be an option; and fifth, whether monitoring and maintenance for continuing use of the Land as a service station constitutes remediation.
Mr Henderson did not consider that the Geo-Logix Report was persuasive for the following reasons: first, the investigation was provided as a baseline and was not expressed to be a comprehensive environmental site assessment to assess potential for contamination (as required by the EPA, Contaminated Sites: Sampling Design Guidelines (1995)); second, while the Geo-Logix Report “summarised” the 2005 SAR which in turn referred to documents produced by IT Environmental (being Phase I and II Environmental Site Assessments (‘ESAs’); a Post Phase II ESA; a Remedial Action Plan; Tank Excavation Assessment; and an Environmental Management Plan between 2003 and 2005), Mr Henderson did not have access to those reports and he could not verify the accuracy of the summary; third, only “petroleum hydrocarbon contaminants” (total petroleum hydrocarbons (TPH), benzene, toluene, ethylbenzene, and xylene (BTEX), polycyclic aromatic hydrocarbons (PAHs), volatile organic compounds (VOCs) and heavy metals) were investigated in circumstances where other contaminants (pesticides, polychlorinated biphenyls (PCBs) or asbestos) could exist on the Land but were not investigated; fourth, other potential sources of contamination such as “fill from unknown sources”, were not targeted; fifth, as the Geo-Logix Report (and investigations referred to therein) were undertaken in 2007, the condition of the Land may have changed since then; sixth, the guideline criteria used in the analysis considered commercial/industrial land uses rather than residential land use; and seventh, the guidelines and regulations applicable to the Land have changed since 2007.
In contrast, Mr McKay considered that the Geo-Logix Report is persuasive and useful in understanding the condition of the Land in 2007. Mr McKay accepted that while the Geo-Logix Report is not a detailed site investigation and may have been limited to contaminants related to the UPSS, the 2005 SAR (which is a formal report of an audit) must have complied with the relevant guidelines at the time, and both the 2005 SAR and the “validation report” by IT Environmental were required to consider all potential contaminating activities, contaminants of concern, and pathways for exposure (including, for example, risk presented by fill) on the Land. Mr McKay came to the view that all contamination that “could” be present on the Land at the base dates “must have been imported during the construction of the current service station in 2007, or have arisen as a result of service station activities conducted between 2007 and the base dates”.
In relation to the current use of the Land, Mr Henderson opined that the presence of the UPSS at the base dates presents an ongoing risk for contamination, as even UPSSs built with modern materials and equipped with monitoring processes can experience issues. Mr McKay opined that, while any UPSS represents a potential risk to the environment, the available evidence indicates that the current UPSS is not leaking and does not present an actual contamination concern.
It was agreed by Mr Henderson and Mr McKay that the Geo-Logix Report indicated there was between 1.5m and 2.5m of fill on the Land. Mr Henderson opined that there is a contamination “risk” arising from an average of 2m of fill placed across the Land; that asbestos may be present in the fill; and further, that natural soil could be contaminated by current and historical activities on the Land. Mr McKay opined that the risk of contamination of fill on the Land is relatively low and unlikely to be significantly different to risks expected on any development site in the inner west of Sydney. He provided a number of reasons for this opinion, including the results of the Geo-Logix Report and the 2005 SAR; the regulatory framework governing the importation of fill since 2005; and that the presence of fill on land in older areas of Sydney is not unexpected and a developer seeking to excavate for a basement would expect to classify and dispose of soil. Mr McKay explained that the mere presence of fill itself does not mean it must be contaminated (by reference to the CLM Act).
In the above circumstances, Mr Henderson and Mr McKay did not agree on the extent of the “clean-up” or the remediation that may be required. Mr Henderson opined that remediation costs for soil and groundwater need to be considered, and that historical and/or current sources of contamination may have an impact on the extent of contamination, waste classification, and the cost of remediation which would be required to address such a concern. Mr McKay considered that the Land only needs to be managed such that human health and the environment are protected and therefore the costs associated with waste classification and lawful disposal of fill is all that would be required. He further considered that a developer would have an option to design a building so that it does not require the removal of fill material.
Finally, Mr McKay and Mr Henderson disagreed as to whether bioremediation (which includes excavating contaminated soil and allowing the contaminant levels to degrade through oxygenation, by rotating the soil, aerating the soil or supplementing the soil with chemical compounds to aide contaminant breakdown) and onsite remediation of contamination was an option in respect of remediation of the Land. Mr Henderson opined that bioremediation is not likely to be adopted as it requires time to be undertaken successfully and as such would not be economically practical. Mr McKay opined that remediation should not be constrained to a “dig and dump” method, as this delivers an “improved site” that facilitates development rather than simply a remediated site. He considered that in certain circumstances, bioremediation remains a valid and frequently used technology.
Mr McKay and Mr Henderson agreed that certain regulatory activities must be undertaken for the continuing use of the Land as a service station, but they disagreed as to whether this constitutes a remediation cost or an operational cost. Mr Henderson considered that these activities are remediation as they are part of a contamination assessment, while Mr McKay considered that the monitoring and maintenance activities are an operational cost as they would otherwise be required under the Protection of the Environment Operations Act 1997 (NSW) (‘POEO Act’) in relation to continuing storage and distribution of fuel on the Land.
In their joint report in relation to the likely cost of remediation dated 19 December 2019, Mr Nakhoul and Mr McKay agreed, in the same terms as Mr Henderson and Mr McKay agreed in their joint report, that service station infrastructure had the potential to cause contamination; that there was insufficient data available to provide “full knowledge” of contamination of the Land; that a change in use of the Land would require assessment of the potential for contamination; and their instructions (their “briefs”) were different.
Mr Nakhoul and Mr McKay disagreed, first, as to what, if any, remediation may be required; and second, as to the cost estimate for that remediation (largely as a result of differences in their briefs, perception of risk and liability, and definition of what actually constitutes remediation).
Mr Nakhoul opined that remediation includes all works necessary to comply with the requirements of the CLM Act, the POEO Act, SEPP 55 and any development approval by Burwood Council for any future development and that this includes waste classification and the removal of material from the Land. He noted that the level and extent of contamination would impact the cost of any remediation required to be undertaken (for example, if natural soil is impacted by residual contamination this would incur additional costs).
Mr McKay opined that remediation is what is required to address any contamination of the Land such that human health and the environment are protected, and that costs associated with waste classification and removal of material are properly considered a development cost. In this manner he excluded remediation “ancillary to … development”, noting that a developer has the option to design their development so that it does not require removal of material from the Land.

Mr Nakhoul and Mr McKay identified the key differences in their cost estimates for remediation as follows:

Mr McKay excluded waste classification and disposal costs for bulk earthworks as a development cost; while Mr Nakhoul included them;

Mr McKay considered bioremediation to be a relevant technology; whereas Mr Nakhoul considered it to be economically impractical;

Mr McKay limited the scope of soil importation to tank voids and limited soil removal; while Mr Nakhoul extended the scope of soil importation to a worst-case scenario of replacing contaminated soil across the Land to a depth of six metres;

In a similar manner, Mr McKay excluded costs associated with disposal of soil that is not VENM; while Mr Nakhoul accounted for the potential for natural material on the Land not being classified as VENM and requiring disposal on that basis;

Mr Nakhoul considered waste classification across the Land; whereas Mr McKay limited consideration to specific soil in the footprint of the UPSS;

Mr McKay did not provide for the cost of remediating groundwater contamination on the basis that the evidence does not suggest groundwater contamination has occurred; whereas Mr Nakhoul provided for the cost of remediating groundwater contamination from the UPSS;

Mr McKay considered tank integrity testing and UPSS monitoring to be operational costs; whereas Mr Nakhoul included these costs in remediation costs.

Submissions

The Valuer-General submits that Mr McKay’s approach to the issue of contamination of the Land is to be preferred. In particular, it is the Valuer-General’s position that the evidence demonstrates that the extent of contamination of the Land is likely minimal, and the hypothetical parties transacting the notional sale would consider only “limited remediation works” would be necessary.
The Valuer-General criticises Mr Nakhoul’s estimated remediation costs as speculative, lacking in foundation and inflated, given the lack of material indicating that the Land was contaminated at the base dates. The Valuer-General specifically suggests that the assumption in Mr Nakhoul’s costs that soil is contaminated across the whole of the Land to a depth of between two to six metres and would need to be removed from the Land and disposed of offsite, is unrealistic and unjustified given the material regarding known or potential contamination. The Valuer-General also takes issue with the costs assigned by Mr Nakhoul to groundwater remediation, in circumstances where Mr Nakhoul’s firm has been undertaking groundwater monitoring at the Land and has not found any evidence of groundwater contamination.
The Valuer-General submits that the Court must assume that the hypothetical “bona-fide seller”, as one of the hypothetical parties transacting the notional sale, would not part with the Land for less than it is worth, and the evidence demonstrates that a hypothetical “bona-fide seller” would not sell the Land for a value reflecting anything greater than a minor risk that the Land is contaminated and therefore would require very limited remediation.
In contrast, the applicants submit that the evidence does not support the assertion that the Land was not contaminated or was only minimally contaminated at the base dates. Rather, the applicants submit that, in accordance with Mr Henderson and Mr Nakhoul’s evidence, the condition of the Land is such that it is likely that significant costs would be incurred in investigating and remediating contamination of the Land.
The applicants make the following criticisms of Mr McKay’s evidence:

Mr McKay’s instructions focused on the issue of contamination as something to be determined as an objective fact, rather than a source of information for valuers to take into account in terms of risk and likely remediation costs;

His approach was incorrect because it equated an asserted absence of proof of contamination with an absence of any “risk” of contamination, and ignored that an important consideration in the minds of the hypothetical parties transacting the notional sale of the Land at the base dates would have been the potential costs involved in redevelopment of the Land having regard to the Land’s use as a service station; and

It was based upon limited material which was apt to distort the appropriate appreciation of any risk, noting that some primary material was not available; material relied upon was produced for a specific limited purpose; conclusions were contingent on compliance with environmental management plans and subsequent material had identified uncertainties with earlier material.

In these circumstances, the applicants submit that the Court would not accept Mr McKay’s opinion: first, because the Geo-Logix Report identified several aspects of the Land that involved soil and groundwater contamination; second, Mr McKay’s reliance on the summary of the 2005 SAR was misplaced; and third, in the contamination experts’ joint report, Mr McKay confirmed his agreement that service station infrastructure has “a potential to cause site contamination” which could affect groundwater and agreed with Mr Henderson that the historical material “does not provide full knowledge of the extent of contamination on the site” and accepted that further investigation might uncover unknown contamination. The applicants also criticise Mr McKay’s delineation between remediation costs and development costs.

Consideration

Scope of consideration

In simple terms, what the Court is considering in relation to contamination, as an aspect of the determination of the land values, is whether the material available to the hypothetical parties transacting the notional sale (pursuant to and in accordance with the requirements of s 6A of the Valuation Act) at each of the base dates indicated that the Land was contaminated and, if so, the likely cost of remediation of the Land that would be considered by the hypothetical parties transacting the notional sale. In this way, the presence and extent of contamination and the consequent cost of remediation of the Land, if any, impacts on the land values of the Land.
In considering this, there is a question of nicety as to what material is to be taken into account. In terms of evidence before the Court, although there was a sustained submission by the Valuer-General that the fact there was, and had been, a service station on the Land could not be taken into account, there was no discrete objection taken by the Valuer-General to the admission of material relating to, or prepared as a result of, earlier service station operations on the Land (in particular in relation to the Geo-Logix Report and its summary of the 2005 SAR) as evidence on this ground. In this circumstance, I have proceeded on the basis that to the extent that this evidence provides insight into the condition of the Land – which has formed the basis of the detailed expert evidence in relation to contamination (and consequential evidence in relation to cost of remediation) – it was material available to the hypothetical parties transacting the notional sale. Despite this, my factual findings in relation to contamination of the Land would likely remain the same whether or not the Geo-Logix Report was available, given the other evidence available, such as the fact that there had been no notification to the EPA of contamination of the Land.
There were also distinctions made in the evidence of the contamination experts and the submissions made by the parties between whether (and how) the hypothetical parties transacting the notional sale would consider:

The presence of contamination of the Land and the likelihood of, or risk of, the presence of contamination of the Land; and

The cost of remediation of the Land, and the cost to be attributed to the likelihood of, or risk of, remediation of the Land.

As outlined in Spencer at 441, the Court must suppose that both the hypothetical parties would be “perfectly acquainted with the land, and cognizant of all circumstances which might affect its value … including … the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.” This provides for a breadth and depth of consideration by the hypothetical parties transacting the notional sale which would extend to consideration of risk. As a result, I accept that, prima facie, evidence of actual contamination and the likelihood of, or risk of, contamination of the Land can be considered, as well as the cost of remediation and the cost of the likelihood of, or risk of, remediation of the Land.
However, this position is affected by the statutory assumptions in s 6A of the Valuation Act. While s 6A of the Valuation Act is discussed in detail in the assessment of the highest and best use of the Land below, I note the following in relation to the evidence of contamination. I accept that, pursuant to s 6A(1) of the Valuation Act, when valuing the Land on the basis that the highest and best use of the Land is assumed to be a mixed-use development, it is assumed that improvements on the Land had not been made. Therefore, the fact that there was, and had been, a service station on the Land must be disregarded. As a result, I do not consider the risk of contamination arising due to the use of the Land as a service station – rather, my consideration of risk is limited to that risk which arises as a result of the evidence of the condition of the Land.
In contrast, when valuing the Land on the basis that the highest and best use of the Land is its continuing use as a service station, pursuant to s 6A(2) of the Valuation Act, it is assumed that improvements may be continued or made to facilitate this continuing use. In these circumstances, the fact there was, and had been a service station on the Land can be considered. As a result, I consider the risk of contamination arising due to the use of the Land as a service station is to be considered.
However, the materiality of my findings on these distinctions is lessened by my factual findings in relation to contamination of the Land, to which I now turn.

Result of consideration

For the reasons that follow, and to an extent based upon my acceptance of the submissions made on behalf of the Valuer-General, and the reasoning and the evidence of Mr McKay summarised above, I am satisfied that the evidence before the Court demonstrates that at each of the base dates, the material available to the hypothetical parties transacting the notional sale indicates the existence and extent of contamination was likely to be minimal, and the cost of remediation was likely to be relatively low. This finding remains consistent whether or not I have regard to the evidence that a service station was, and had been, on the Land, in relation to the highest and best use of the Land.
As the contamination experts called by the parties note, the “data” or information available about the extent of contamination does not provide “full knowledge” of the existence and extent of contamination at the base dates. However, I consider there was sufficient material that would have been available to, and informed, the hypothetical parties transacting the notional sale as to the condition of the Land. This material includes the following facts:

The 2005 SAR was prepared to provide an independent review on land use suitability and concluded that the Land was suitable for the purposes of “residential” land use albeit subject to compliance with the environmental management plan prepared by IT Environmental;

The Geo-Logix Report, albeit being a baseline subsurface contamination investigation of soil and groundwater for specific contaminants beneath the service station, indicates that no significant contamination was identified in 2007 (for the specific contaminants investigated) although levels of methyl tertiary butyl ether were present in groundwater;

Actual monitoring had been undertaken of groundwater with no evidence being provided of contamination;

There had been no notification to the EPA of contamination of the Land pursuant to s 60 of the CLM Act (and it follows that I accept the Valuer-General’s submission, and find, accepting Mr McKay’s evidence, that this indicates it is likely that no significant contamination had been detected);

At each of the base dates, the Land was not individually listed as contaminated on the public registers maintained by the EPA identifying contaminated land;

There was a 1.5m to 2.5m layer of fill on the Land, where the presence of fill imports a risk of contamination (including from heavy metals (including copper, lead, zinc, cadmium, chromium, nickel, arsenic and mercury), total recoverable hydrocarbons, benzene, toluene, ethylbenzene, xylene and naphthalene, PAHs, pesticides, PCBs and asbestos) (as was agreed by Mr Nakhoul and Mr McKay); and

The importation of any fill onto the Land since 2005 would have been governed by a regulatory framework, which lowers but does not preclude the risk of contaminated fill being present on the Land (in this respect, I accept the evidence of Mr McKay that any contamination risk due to fill would be of a similar profile to any other development site in the inner west of Sydney, and I accept his opinion that a developer seeking to excavate a basement would expect to classify and dispose of soil).

To the extent that the Court would have regard to the evidence that a service station was, and had been, on the Land, the following facts are also relevant: the Land was remediated and validated in 2005 to address its historical use as a service station; the current service station on the Land benefits from secondary containment mechanisms for the UPSS and is operating in a proactive regulatory environment that is designed to manage environmental risk; and that the regulatory environment requires testing to be undertaken, which has not indicated that the present UPSS is leaking. Considering the implications of these facts, I accept the opinion of Mr McKay that the evidence indicates contamination of the Land is likely to be minimal.
In addition to my findings above, I make the following specific comments about the material available to the hypothetical parties transacting the notional sale and the weight to be attributed thereto, where this was the subject of disagreement between the parties.
I accept that the Geo-Logix Report (in summarising the 2005 SAR) recorded that the site auditor undertaking the 2005 SAR considered the potential risks posed by residual conditions on the Land, and made a number of findings about the extent and existence of contaminants on the Land. I further accept that the Geo-Logix Report was undertaken for a specific, somewhat limited, purpose which impacted the investigations undertaken. I acknowledge and accept that, as noted by the applicants, some concern was expressed by the site auditor in relation to the direction of groundwater flow and the placement of groundwater monitoring wells in relation to former potential sources of contamination. However, I do not consider that these points weaken the other matters dealt with in the Geo-Logix Report and the 2005 SAR.
I find that the existence of the 2005 SAR, and its conclusion (as noted in the Geo-Logix Report) that in 2005 the Land was suitable for residential use, is likely to be, and would be seen to be, reliable information about the condition of the Land (even in circumstances where the 2005 SAR itself may not be discretely available). In this respect, Mr McKay and Mr Henderson accepted in their concurrent oral evidence that the relevant guidelines in 2005 required a site auditor to certify that the validation then undertaken complied with the then applicable EPA guidelines. Mr McKay also gave evidence that these guidelines were the “NSW EPA (1994) Guidelines for Assessing Service Station Sites, Contaminated Sites Section, Hazardous Substances Branch, NSW Environmental Protection Authority, 1994”. In these circumstances, I consider that the material suggests that contamination of the Land was likely to be minimal.
Mr McKay opined that where there is no evidence of contamination of the Land and the risk of contamination of the Land is likely to be minimal. I consider this opinion to be persuasive. I am conscious that the applicants criticise Mr McKay’s approach on the basis that it incorrectly equated an asserted absence of proof of actual contamination with an absence of any risk of contamination. I do not accept the applicants’ position, as the absence of evidence of contamination where testing (albeit limited testing) has been undertaken informs the assessment of risk, and indicates that the risk or likelihood of contamination being present is minimal.
For the reasons above, I find that the hypothetical parties transacting the notional sale, properly advised (and “perfectly acquainted”), would consider the cost of the risk of contamination of the Land, but would conclude that this cost would be minimal. Given this, I do not accept the applicants’ submissions that the likely remediation and development costs for a mixed-use development of the Land in the order of $2,929,000 to $7,976,000 would arise. In particular, I note:

This includes costs attributed to the removal of service station infrastructure and the UPSS, and the risk of contamination arising from the service station and UPSS, in circumstances where for the purposes of the valuations it must be assumed that improvements had not been made (noting that in oral submissions counsel for the applicants properly indicated that the applicants did not submit that costs attributed to the removal of improvements should be adopted by the Court);

The costs involved the suggested removal and safe disposal of soil to a depth of some metres (at a cost ranging from $1,844,680 to $5,803,321) – where I accept the Valuer-General’s characterisation of this amount of soil as unjustified, considering the evidence about the condition of the Land;

Similarly, the costs involved the disposal of a significant amount of soil that cannot be classified as VENM – where I also consider these costs to be unsupported by the evidence about the condition of the Land;

The costs reflected the assumption, based on Mr Nakhoul’s experience with service station sites, that the groundwater is contaminated and would require remediation (at a cost of $250,000 to $1,500,000), however again it must be assumed that improvements had not been made; and

In justifying some of his remediation costs, Mr Nakhoul indicated that he “need[ed] to present to the prospective purchaser the possibility of a worst case scenario”. I do not consider that this represents an appropriate approach to the consideration of the risk of contamination in circumstances where the hypothetical parties transacting the notional sale includes the hypothetical “bona-fide seller” who would not part with the Land for less than it is worth, that is, would not be guided by the “worst case scenario”.

As such, I consider that the position adopted by the hypothetical parties transacting the notional sale on the likely costs, and risk of the cost, to remediate the Land for a mixed-use development, would reflect the following:

The cost of an environmental site investigation; remediation action plan; site validation; site audit; and quantitative risk assessment. Both Mr McKay and Mr Nakhoul identified these costs as relevant, and there was some overlap in their opinions of the appropriate quantum of costs. Taking into consideration Mr McKay and Mr Nakhoul’s views, I consider the amount of $135,000 would be attributed to these costs;

A cost attributable to the likely low remediation costs arising from the likely minimal existence and extent of contamination of the Land, based on my findings above. Based on my adoption of Mr McKay’s evidence about contaminated fill, I consider that the hypothetical parties transacting the notional sale would cost for a low risk, but not no risk, of excavation and disposal of contaminated fill being required. In this respect, I consider the amount of $180,000 would be attributed to the risk of this cost;

A corollary cost attributable to waste classification associated with the excavation and disposal of contaminated fill. Mr McKay and Mr Nakhoul provided similar evidence in relation to prices for waste classification. Utilising these prices and assessing the risk of contaminated fill I consider the amount of $15,000 would be attributed to this cost.

I consider that the position of the hypothetical parties transacting the notional sale would exclude costs associated with the removal and remediation of the existing UPSS and service station infrastructure on the Land, as well as groundwater remediation costs, applying the assumption that the improvements triggering these costs had not been made. Doing the best I can on the evidence, I find the resulting amount of $330,000 would be attributed to contamination. I note that this amount is similar to, but constituted differently to, Mr McKay’s scenario B.
In adopting this likely cost of remediation, I have considered the dispute between the parties in relation to the scope of remediation, the use of bioremediation and the delineation between “remediation” and “development” costs. Given my findings in relation to the extent and risk of contamination, I am comfortable that the impact of these disagreements would not be material.
However, I note for completeness that I have adopted Mr McKay’s approach to the scope of remediation, in making an allowance directed at facilitating the ongoing use or the development of the Land (that is remediating to an acceptable level, not restoration to virgin condition). This is because I accept that the hypothetical parties transacting the notional sale would attribute costs in the context of facilitating the highest and best use of the Land, rather than seeking full restoration of the Land.
For the same reason, I reject Mr McKay’s strict delineation between “remediation” and “development” costs in favour of Mr Nakhoul’s more contextual approach, which I consider better reflects the approach of the hypothetical parties transacting the notional sale. In this way, whether or not remediation work is “ancillary” to a development is secondary to the primary question of whether the remediation work would be anticipated and costed by the hypothetical parties when transacting the notional sale on the basis of the highest and best use of the Land.
This approach also means that I do not take into account the use of bioremediation as a means of lowering the cost of remediation. Where the hypothetical parties are transacting the notional sale, they would be guided by the remediation required for the highest and best use of the Land, whether that be facilitating the ongoing use or the development of the Land. In this context, I do not consider it reasonable to adopt a lower likely cost of remediation based on the use of bioremediation.
Although not determinative given my ultimate findings in relation to the highest and best use set out below, when considering the continuing use of the Land as a service station, I do not accept the applicants’ submission that likely investigation and remediation costs in the order of $440,000 to $1,900,000 may arise for the continuing use of the Land as a service station (if the Land was not suitable for continued use as a service station). I note that this amount includes costs attributed to the removal, disposal and replacement of “tanks” and groundwater remediation (in circumstances where it is assumed that service station improvements may be continued and therefore the continuing use does not trigger remediation costs such as this).
I accept that were the highest and best use of the Land is as a service station, the hypothetical parties transacting the notional sale would give more weight to the risk of contamination as a result of the use of the Land (for example, the contamination experts agree that the presence of the UPSS on the Land constitutes a risk of contamination, although they differ as to the magnitude of this risk). Importantly however, the hypothetical parties transacting the notional sale would have access to material relating to the operation of the service station, which would inform their position on risk. Having reviewed the evidence of this material, I consider that they would consider the existence and extent of contamination was likely to be minimal. I further note that where the highest and best use of the Land is continuing its use as a service station, it is common ground between the parties that the obligations in SEPP 55 are not triggered.
Finally, I accept the evidence of Mr McKay that while there is likely to be ongoing monitoring for contamination required if the Land continues its use as a service station, this constitutes an ongoing operation cost. I do not consider this to be a cost of remediation that would be factored in by the hypothetical parties transacting the notional sale of the Land.

Town planning

Evidence and submissions

Mr Smith and Mr Haskew’s evidence

The determination of the achievable floor space in a mixed-use development has consequences for the valuations of the Land. This issue involves the interaction between planning controls in the DCP and the ADG. Although extensive town planning evidence was called, the applicable planning controls were not in dispute between the parties, and the sole disagreement between the town planning experts relates to interpretation and the likely application by Burwood Council of one or both of these planning controls and the resulting achievable floor space.
The applicants rely on the evidence of Mr Smith, an architect and urban designer, who provided his opinion on the development potential of the Land and the urban design most likely achievable for a mixed-use development on the Land. The Valuer-General relies on the evidence of Mr Haskew, a town planner, who provided his opinion on town planning aspects of the Land having regard to the applicants’ “proposed development”. The town planning experts considered two building envelopes prepared by Mr Smith (one based on the operation of both the DCP and the ADG planning controls, and one based solely on the operation of the ADG planning controls). I note that in Mr Haskew’s opinion, both the building envelopes prepared by Mr Smith understated the achievable floor space.
At the base dates, the Land was primarily zoned “B2 Local Centre” under the Burwood LEP and was part of the Enfield Local Centre under the DCP. The relevant planning control in the DCP is Control P3 (part of the Side and Rear Setbacks controls contained within cl 3.5.2) which provides that when a lot adjoins a residential zone containing a residential development, as is the case in relation to the Land, “buildings are not to exceed a 45 degree height plane projected over the site and commencing 1.8m above the rear or side boundary…”.
At the base dates, the Land was also subject to planning controls within the ADG. The relevant control in the ADG is Objective 3F-1 which specifies (under the heading “Design criteria”) minimum “separation distances from buildings to the side and rear boundaries”. Under the heading “Design guidance”, the ADG further provides that “[g]enerally one step in the built form as the height increases due to building separations is desirable. Additional steps should be careful not to cause a 'ziggurat' appearance”.
In simple terms, the application of Control P3 in the DCP results in a more truncated building envelope (particularly at the upper levels of a development) in comparison to what would be allowable when a building envelope is solely regulated by Objective 3F-1 in the ADG. The difference between the town planning experts as to the application of the relevant planning controls results in a difference in achievable floor space, which then causes a difference in land values where a mixed-use development is determined to be the highest and best use of the Land.
The disagreement between the town planning experts only concerns the upper levels of a proposed mixed-use development on the Land, as it is agreed that up to 918m² of leasable retail/commercial space would be achievable on the ground floor level of a mixed-use development.
Mr Smith opined that taking into account the planning controls described above, the building envelope for a mixed-use development on the Land would need to comply with both Objective 3F-1 in the ADG and Control P3 in the DCP. He opined that any residential development above the retail/commercial level would be required to be set back 9m to the adjoining low-density residential uses. In these circumstances, Mr Smith identified that the achievable floor space for a mixed-use development on the Land at the base dates applying Objective 3F-1 in the ADG and Control P3 in the DCP would be 2,818m² (being the ‘DCP-regulated building envelope’).
Conversely, Mr Haskew opined that the building envelope for a mixed-use development on the Land can disregard the more restrictive Control P3 in the DCP in favour of the planning controls in the ADG because Control P3 is in conflict with the ADG, and cl 6A in SEPP 65 gives primacy to the ADG over the DCP. As such, the application of the ADG planning controls means a larger achievable floor space ratio can be achieved by a mixed-use development on the Land, than would be achieved if Control P3 in the DCP was applied. Using Mr Smith’s building envelopes, the achievable floor space if the ADG was applied would be 3,529m² (being the ‘ADG-regulated building envelope’).
Clause 6A of SEPP 65 (under the heading “Development control plans cannot be inconsistent with Apartment Design Guide”) provides that, in respect of certain matters identified in cl 6A(1) – including visual privacy; solar and daylight access; common circulation and spaces; apartment size and layout; ceiling heights; private open space and balconies; natural ventilation; and storage – the “objectives, design criteria and design guidance set out in Parts 3 and 4 of the [ADG]” prevail over provisions that specify requirements, standards or controls for the same matters in a development control plan (which have no effect). The town planning experts have differing views on the effect of clause 6A of SEPP 65.
Mr Haskew opined that the 45-degree height plane requirement in Control P3 was in the DCP before the ADG came into force. He considered the requirement for separation distances between buildings in Objective 3F-1 in the ADG to be inconsistent with Control P3, which also sets a measurable separation distance between adjoining boundaries. Further, the application of Control P3 would produce a “ziggurat” building form which Objective 3F-1 in the ADG specifically designates as an undesirable building form. Mr Haskew further considered that the reference to “visual privacy” in cl 6A(1) of SEPP 65 encompassed the requirement for separation distances between buildings provided by Objective 3F-1 in the ADG (which provides separation between windows and balconies “to ensure visual privacy is achieved”). As such, Mr Haskew considered that as there is a conflict between the ADG and the DCP planning controls, cl 6A of SEPP 65 directs that the ADG prevails over the DCP, and this provides for a larger building envelope for a mixed-use development on the Land.
Mr Smith did not accept that there is a conflict between the planning controls in the DCP and the ADG. Mr Smith opined that primacy should only be accorded to the ADG in respect of the specific matters listed in cl 6A(1) of SEPP 65 and these do not include building envelopes and setbacks (which are matters specifically dealt with in Pt 2B and Pt 2H of the ADG). In cross-examination, Mr Smith characterised cl 6A(1) of SEPP 65 as being principally directed to the amenity of the design and development on a specific site, rather than protection of the amenity of other sites.

Submissions

The applicants submit that Mr Smith’s opinion should be preferred as it properly identifies and characterises the specific concern of the DCP and the ADG planning controls and promotes the harmonious operation of the two planning instruments. In this respect, Mr Smith opines that the clear purpose of the DCP controls (particularly the 45-degree height plane in Control P3) can be discerned from the express objects of the relevant part of the DCP, which are to define urban form and minimise amenity impacts on adjoining properties. Mr Smith indicated that planning controls similar to Control P3 are regularly used at sites where there is a transition between low to high density which indicated to him that the purpose of the planning control is not meant to engage with visual privacy.
The applicants submit that Mr Haskew’s view that Control P3 in the DCP (and the 45-degree height plane) relates to visual privacy should not be accepted because he accepted in cross-examination that the relevant part of the DCP does not refer to visual privacy as an objective. Further, they contend that Mr Haskew’s opinion is less reliable in circumstances where he agreed that the express matters listed in cl 6A(1) of SEPP 65 related to the internal dimensions of proposed apartment buildings and at least some aspects of internal communal circulation space.
The applicants further submit that the better approach to interpreting the two planning instruments is to adopt the principle of harmonious operation. This would support an interpretation that cl 6A(2) of SEPP 65 is only intended to disallow such parts of a development control plan that are specific “requirements, standards or controls” in relation to a matter in cl 6A(1). Clause 6A(2) of SEPP 65 should not be used to render matters in a development control plan ineffective by expanding the list explicitly contained in cl 6A(1), noting that Mr Haskew accepted in cross-examination that a mixed-use development on the Land could comply with both sets of planning controls.
As a consequence, the applicants submit that where the highest and best use of the Land is as a mixed-use development, the relevant planning control limits the achievable floor space to 2,818m². They contend that this limit is a further reason (in addition to concerns relating to contamination) why a mixed-use development would not be the highest and best use of the Land at the base dates.
The Valuer-General submits that the applicants’ reliance on the harmonious operation of the two planning instruments is unsupported by authority and contrary to previous decisions of the Court, which emphasise the primacy of the ADG planning controls over the DCP planning controls.
The Valuer-General also submits that even if the Court did not find that the primacy clause in SEPP 65 does not render Control P3 in the DCP of no effect, the Court would still not accept that the building envelope of a mixed-use development on the Land would be constrained by a rigid application of Control P3 in the DCP. In this respect, the Valuer-General relies on provisions of the Environmental Planning and Assessment Act 1979 (NSW) (‘EPA Act’) that provide for the flexible application of provisions of a development control plan, such that the consent authority “…is to be flexible in applying those provisions and allow reasonable alternative solutions that achieve the objects of those standards for dealing with that aspect of the development”: s 4.15(3A)(b) EPA Act; 680-682Kingsway Caringbah Pty Ltd v Sutherland Shire Council [2017] NSWLEC 99 at [111].

Consideration

Although not without some hesitation (as the essential question in these proceedings involves the valuation of land, and not a merit consideration of a defined development proposal), I consider that it is appropriate that the disagreement in relation to the likely interpretation and application of the planning controls and the resulting achievable floor space between the town planning experts should be resolved in the context of this valuation matter. This is because, as submitted by the applicants, the hypothetical parties transacting the notional sale would not simply accept the two differing opinions of Mr Smith and Mr Haskew as equally available with a legally sound basis. Rather, the hypothetical parties, given proper advice, would likely transact on the basis of a particular position that reflects how they thought (or were advised) Burwood Council would interpret the planning controls that govern the achievable floor space for the Land’s use as a mixed-use development. Given this, for the reasons that follow, and, although not, on its own, determinative of the primary question before the Court, I consider that the applicants’ position, based upon the evidence of Mr Smith in relation to the planning controls and resulting likely achievable floor space, is a more appropriate conclusion.
It is clear that cl 3.5.2 of the DCP contains discrete controls for the Enfield Local Centre (which includes the Land which is neatly located within the relatively small and restricted areas designated as the Enfield Local Centre providing almost site-specific provisions in relation to the Land). Under the heading “Side and Rear Setbacks”, the objectives of the planning controls are expressly stated as: first, to define the urban form of development; and second, to minimise the amenity impact of development on adjoining properties. In these circumstances, Control P3 in the DCP sets out a 45-degree height plane for the building envelope. I consider that, as stated by Mr Smith, this height plane enables the expressed objectives by managing the built form transition from the higher proposed mixed-use development on the B2 Local Centre zoned land to the lower development on the adjoining R2 Low Density Residential zoned land.
Seen in this way, and although the matter is not without some nicety, Control P3 in the DCP does not relate to a matter to which the items listed in cl 6A(1) of SEPP 65 apply, because those items do not include built form, height planes or setbacks. I accept that the planning control Objective 3F-1 in the ADG (which is within Pt 3F Visual Privacy) relates to protection of external and internal visual privacy, as the design criteria are stated in terms requiring separation between “windows and balconies”, and it is in that context that the numerical controls for separation between adjoining buildings is provided. In this context, I consider that the direction to avoid a “ziggurat” appearance in Objective 3F-1 in the ADG is simply ancillary to the protection of visual privacy, and does not result in inconsistency with Control P3 in the DCP.
Further, I find that the specific planning controls in the ADG which relate to “building envelopes” and “side and rear setbacks” are separately contained in Pts 2B and 2H respectively in the ADG. Given this, I do not accept the submission of the Valuer-General criticising the applicants for using the structure of SEPP 65 to support the view that the planning controls in the DCP that control building envelopes and setbacks should have full effect.
The Court has frequently been required to determine the interaction between differing planning controls and the hierarchical nature of environmental planning instruments and local policies (including development control plans, which are usually trumped by environmental planning instruments where there is conflict between them: s 3.43(5) of the EPA Act) is well understood. In Universal Property Group Pty Ltd v Blacktown City Council [2020] NSWCA 106 (‘Universal Property’), Basten JA, although considering the interaction between two State environmental planning policies (‘SEPPs’) in the context of an appeal from a decision of this Court to refuse a development application, noted at [6]-[7] that:

“…it is important to identify with precision the nature and scope of the supposed inconsistency. If it cannot be resolved as a matter of statutory construction, it will be necessary to ask whether the earlier provision was impliedly repealed by the later…

“…ideally, the valuer should, in the first instance, look at the sales of land over a wide geographical and temporal range, and from these select those that appear potentially useful as a basis for comparison. Those selected should then be carefully analysed by reference to an extensive list of characteristics of land sales the compilation and assessment of which fall clearly within the province of the experts. Whether or not one or more of those sales is, and how it or they ought, to be compared with the subject land becomes then a matter of degree, and a final decision is reached, often by those same experts drawing a series of nice distinctions. Obviously, no two sales of land will be found to be the same, or even similar in all respects. Those that bear a close similarity to the assumed sale of the subject land will be more reliable than those whose similarity is less proximate and in respect of which adjustments or allowances must be made before they can be safely introduced into the valuation process. At a particular point it will be found that, in respect of the remaining available sales, the adjustments and allowances that would need to be made are of such a magnitude that it ceases to be safe or sound to treat them as sufficiently similar to the assumed sale of the subject land, and they must thenceforward be rejected.”

I therefore find that the direct comparison approach preferred by Mr Hill (and also undertaken by Mr Jackson), subject to changes to various aspects to reflect factual matters determined earlier, should be adopted when undertaking valuation assessments of the Land with mixed-use development the highest and best use.
For completeness I note that the valuers provided evidence, and the parties made submissions, as to the valuation methodology to be used where the highest and best use of the Land was its continuing use as a service station. However, as I have found that the highest and best use of the Land is a mixed-use development, I do not further consider the position relating to the continuing use of the Land as a service station.

Valuation determination

Given the powers of the Court in these appeals identified in s 40 of the Valuation Act, my findings above, and the detailed valuation evidence before the Court (and notwithstanding the various differences in relation to the valuation assessments undertaken by the valuers and inputs thereto), I consider it is appropriate that the Court determine land values for the Land at the base dates. As will be apparent, I consider that an adjustment to the issued land values at the base dates is appropriate.
I note the following key findings which I incorporate into my determination of the land values. The evidence before the Court demonstrates that at each of the base dates, the existence and extent of contamination of the Land was likely to be minimal and the risk of remediation being required is low (but certainly not valueless). I consider that the hypothetical parties would make some provision in their transaction to reflect the probability that some (or further) contamination – either by way of fill or otherwise – may have occurred on the Land. Given this, and doing the best I can, I have factored this into the makeup of the allowance in the amount of $330,000 for remediation costs, would be made by the hypothetical parties transacting the notional sale for reasons I have given. It follows that the highest and best use of the Land at the base dates is as a mixed-use development. I find that the alternative exercise of valuing the Land on the basis of the continuation of a service station use does not produce the most financially rewarding use and that exercise can therefore be disregarded. The achievable floor space for a mixed-use development on the Land is regulated by both Control P3 in the DCP and Objective 3F-1 in the ADG. Given this, the hypothetical parties transacting the notional sale would utilise an achievable floor space of 2,818m² for the purpose of assessing the land values.
I accept that the preferred valuation methodology of Mr Hill, being the direct comparison approach, should be adopted when valuing the Land. I find that the valuers, in their joint report, have identified sufficiently comparable sales. While I accept that there are a number of subjective assumptions and inputs which result in differing adjustments when applying the direct comparison approach, given the availability of comparable sales, and the fact that both the valuers have given evidence (albeit noting Mr Jackson’s reservations in relation to the application of the direct comparison approach) in relation to their respective adjustments to the comparable sales, I am comfortable that there is sufficient evidence to appropriately inform the valuation assessments undertaken by the Court.
The valuation assessment by the Court detailed below occurs in the following manner. Having considered the evidence of both valuers, adopting their approach, and using the comparable sales they have both identified and analysed in their joint report, I have made findings in relation to discrete adjustments to the comparable sales, and determined an adjusted GFA rate for the Land for each of the base dates. My rate falls between the suggested GFA rates of each of Mr Jackson and Mr Hill. I have then determined an initial land value for each base date, by applying my adjusted GFA rate to my finding that the achievable floor space of a mixed-use development is 2,818m². Thereafter, similarly to the approach of each valuer, I deducted the sum of $330,000 from the initial land value, which I have found to be the appropriate amount that the hypothetical parties to the notional sale would attribute to any concern regarding contamination and remediation. I have adopted the same amount for each of the base dates.

Comparable sales

In their joint report, both valuers adopted and analysed seven comparable sales selected on the assumption that the highest and best use of the Land was a mixed-use development (listed below):

Sale No. 1

266-268 Liverpool Road, Enfield

Sale No. 2

248-250 Liverpool Road, Burwood

Sale No. 3

12 Coronation Parade, Enfield

Sale No. 4

17 Wetherill Street, Croydon

Sale No. 5

507-511 Liverpool Road, Strathfield

Sale No. 6

459-463 Liverpool Road, Strathfield

Sale No. 7

1 Lion Street and 402 Liverpool Road, Croydon

Five of the seven comparable sales are located upon Liverpool Road, the same road as the Land. Most are proximate to the Land and transacted close to the base dates. Having considered the detailed evidence and analysis regarding each sale as well as the photographic evidence (which I have viewed both electronically – which allows magnification – and in document form), accepting the evidence of Mr Hill, I consider that the most comparable sales are Sale No. 3, Sale No. 2 and Sale No. 1.
I have considered the various adjustments to the comparable sales made by each valuer to create equivalence with the Land detailed in ‘Annexure 1’ to this judgment. Adjustments which the valuers agreed upon (or maintained minor differences) including adjustments for size, shape, time, planning and views, do not require further consideration. As noted at [180] above, the more significant differences between the valuers related to adjustments for location (in relation to five of the sales), corner/street frontage (in relation to three of the sales) and the existence of development approval (in relation to five of the sales).
I consider the valuers’ evidence below before noting my findings in relation to these discrete adjustments and then determining a resulting adjusted GFA rate for a mixed-use development on the Land. For completeness, I note that where the initial GFA rate (that is, before any adjustments are made in ‘Annexure 1’) for the comparable sales differed between valuers, I adopted a rate approximately halfway between the valuers’ rates.

Adjustments

Location

The different adjustments made for location with Sale No. 3, Sale No. 4, Sale No. 5, Sale No. 6, and Sale No. 7 result from the valuers taking differing approaches when assessing locational attributes. Mr Hill utilised “suburb-based” sales data (by considering median property prices for residential units in suburbs) to guide his adjustments for location, and also had regard to the kind of development surrounding the comparable sale.
Mr Jackson determined his adjustments for location by considering sales and asking prices of apartments in developments in the locality (some of which are located on the site of the comparable sale) to identify locational advantage or disadvantage, and also had regard to the “busy main road location” of the Land compared to some of the comparable sales. He prepared and relied on a summary of the sales of apartments including sales of 15 apartments in the 31 apartment development at Sale No. 5; 11 apartments in the 16 apartment development at Sale No. 2; 15 apartments in the 15 apartment development at Sale No. 1; and the asking prices for 24 apartments in the development at Sale No. 6; 38 apartments in the development at Sale No. 7; and 55 apartments at a further development at 380-382 Liverpool Road, Ashfield. He opined that this analysis identifies locational advantage or disadvantage more accurately than the generalised suburban-based data relied upon by Mr Hill, and thus provides better evidence.
The valuers provided specific commentary in relation to their adjustments for location. Mr Jackson noted that Sale No. 3 is situated on a road which carries approximately half the volume of traffic of Liverpool Road, and further, the upper levels of the development at Sale No. 3 will have views of Sydney’s CBD. As a result of the “obvious locational advantages” of Sale No. 3, he makes an adjustment of −15%. In comparison, Mr Hill noted that Sale No. 3 is in the suburb of Enfield while the Land is in the suburb of Strathfield which is regarded as a superior suburb to Enfield due to its more established residential location with prestige and heritage residential homes and access to transport hubs and schools. He also considered the low-rise residential development around the Land to be superior to the development mix around Sale No. 3. Mr Hill concluded that Sale No. 3 is inferior to the Land and as such adopts a +5% adjustment.
In relation to Sale No. 4, Mr Hill opined that there was little if any difference in locational attributes between this sale and the Land. Taking a conservative view, he agreed that Sale No. 4 is in a “slightly” superior suburb (and applied a −5% adjustment). He did not agree that the −15% adjustment for superior location by Mr Jackson was warranted. Mr Hill also opined that there is a difference in views able to be enjoyed in the respective developments, as Sale No. 4 is able to be developed to three levels whilst the Land is able to be developed to six levels. As a result, he makes a further “slight” adjustment of +5% for views.
Mr Hill adopted a +10% adjustment reflecting his view that Sale No. 5 is in an inferior location to the Land and justified his adjustment by noting that this sale is 1.78km south-west from the Land and close to the Enfield Intermodal Terminal and Strathfield South industrial area. Mr Jackson disagreed with this adjustment as he opined that the sale prices for apartments developed at Sale No. 5 are superior to the price being achieved for apartments in the immediate locality of the Land (where if the Land was in a superior location the price achieved for apartments at Sale No. 5 would be considerably less – but this is not the case). Rather, Mr Jackson opined that the sale is in a comparable location to the Land.
There is a significant (20%) difference between the valuers in relation to Sale No. 6. Mr Hill considered that Sale No. 6 is in a far inferior residential location to the Land, noting it is approximately 1.35km from the Land, is within a secondary retail location, directly adjoins Strathfield South Public School and is overlooked by surrounding multi-story developments. As a result, he adopts a +20% adjustment. Mr Jackson considered that no adjustment for location is necessary, and criticised Mr Hill’s adjustment on the basis that Sale No. 6 is closer to the Land that Sale No. 5 – suggesting Mr Hill’s adjustments in relation to Sale No. 6 (+20%) and Sale No. 5 (+10%) are inconsistent.
In relation to Sale No. 7, Mr Jackson adopted an adjustment of −15% because he considered that the irregular shape of the site and relatively small Liverpool Road frontage (in comparison to the overall site) allowed the site to be developed with only minimal retail/commercial space and a majority of (more profitable) residential apartments. In contrast, Mr Hill noted that Sale No. 7 is at Croydon, 2.25km from the Land and is surrounded by a service station, a mix of residential developments, and industrial-style and low-rise retail/commercial developments. He considered Croydon to be a slightly superior suburb in “value levels”, but that there was little difference in locational attributes between Sale No. 7 and the Land. Taking a conservative approach, he made an adjustment of −5%.
Having considered the detailed material before the Court (including extensive photographic material), I generally prefer the evidence and adjustments for location in relation to each of the five sales made by Mr Jackson primarily for the reasons he has given. In particular, I consider that Mr Jackson’s analysis of apartment sales and asking prices in the locality of the comparable sales provides a better guide to the effect of location than Mr Hill’s preference for locational adjustment based primarily upon suburban location.

Corner/street frontage

Different adjustments are made by the valuers for corner/street frontage for Sale No. 1 (10% difference); Sale No. 2 (10% difference); and Sale No. 6 (30% difference). Mr Jackson opined that these differences arise primarily because of Mr Hill’s view that the 58m long arc frontage of the Land is beneficial in comparison to the frontage of these comparable sales.
Mr Hill identified the benefits of frontage as greater exposure and prominence, with more light and air access to units and/or verandas. As a result, Mr Hill made the following adjustments:

Sale No. 1 – Adjustment of +15% on the basis the sale has a single street frontage which is approximately half the length of the frontage of the Land (where the Land has the additional benefit of a splay frontage, a secondary street frontage, and is a corner allotment).

Sale No. 2 – Adjustment of +15% on the basis that the Land is a superior corner allotment with two street frontages, while the sale is an inside allotment, has a frontage which is approximately one third of the length of the frontage of the Land, and rear lane access.

Sale No. 6 – Adjustment of +30% on the basis that the sale has a frontage which is one third of the length of the frontage of the Land, and the sale is hampered by narrow access/egress from Liverpool Road (with construction access issues). A further adjustment of +5% was made to account for topography as the land falls away from the street to the rear in a northerly direction.

In contrast, Mr Jackson opined that a long frontage to a busy arterial road is not a positive attribute for apartment developments. Mr Jackson also maintained that Mr Hill’s adjustments for corner/street frontage are inconsistent – criticising the difference between Mr Hill’s +10% and +35% adjustments, in circumstances where the relevant comparable sales all have a street frontage and either rear laneway access, side laneway access or rear road frontage. Mr Jackson made +5% adjustment for all three comparable sales. Mr Jackson also suggested the magnitude of Mr Hill’s adjustments are not supported by the sales evidence, as the GFA rates for comparable sales with corner frontages are not significantly different to the sales that Mr Hill has adjusted as a result of their inferior frontages.
I have considered the evidence (written and photographic) of the Land and the comparable sales that have been adjusted for corner location/street frontage. I accept that the Land is a corner allotment with two street frontages, the primary frontage having a length of 58m.
The relationship between the Land and Sale No. 1 is clearly depicted in the aerial photographs before the Court. I accept that Sale No. 1 is an inside allotment with a single street frontage and a rear access via a right of carriageway. I accept that the Land frontage is superior and prefer Mr Hill’s adjustment of +15% to account for this.
I make a similar finding and prefer Mr Hill’s adjustment of +15% in relation to Sale No. 2. Again, the aerial photography shows the relationship between the Land and the sale in terms of corner/street frontage (as well as the shape and distance between the Land and the sale). Sale No. 2 is an inside allotment with a rear lane access, compared to the Land which I accept is a superior two-street corner allotment.
Sale No. 6 is an inside allotment with a single street frontage of 20m with a narrow access. I accept Mr Hill’s view that the sale is inferior, given the irregular land shape, street frontage of one third of that of the Land, with access issues (including construction access limitations caused by being located on a busier road with a narrow access/egress from Liverpool Road). I accept an adjustment of +30% would account for the sale’s inferior characteristics as opined by Mr Hill.

Development approval

The valuers differed in relation to the appropriate adjustment for the five comparable sales with development approval, being Sale No. 1, Sale No. 2, Sale No. 3, Sale No. 4, and Sale No. 6. Mr Hill allowed an adjustment of −10% for each of these sales, while Mr Jackson allowed an adjustment of −15%.
Mr Jackson considered that obtaining a development approval is time-consuming and expensive (incurring consultant fees and holding costs). In contrast, where there is a development approval in place at the time of sale, a purchaser knows the development outcome and the conditions of approval and therefore would purchase the land with greater certainty. His −15% adjustment assumes a total period of 18 months to obtain a development approval, including the retention of consultants (usually a planner, an architect, an urban designer, a traffic engineer, a structural engineer, and an environmental consultant), conferences with Burwood Council and the submission of a development application. Mr Jackson referred to the actual 20 months it took for Sale No. 5 to obtain development approval.
Mr Hill suggested that his adjustment of −10% for the benefit of a development approval has been established in many matters before the Court, including in matters of more complexity than the one now before the Court. He appeared to suggest this established a precedent for the adjustment for the benefit of a development approval.
Although the matter is not without some doubt, I prefer the −15% adjustment to the five sales adopted by Mr Jackson, for the reasons he has given. I consider his analysis of the time taken to obtain a development approval, and use of specific examples to support his adjustment, to be appropriate and persuasive. The current matter is indicative of the type of concerns that may delay development approval. Further, I do not consider that where an adjustment of −10% may have been adopted in previous matters before the Court, the Court could or should adopt this as a “precedent”.

Analysis using above findings

In addition to my consideration of the adjustments made by the valuers, and as noted above, although I have considered all the comparable sales, I consider that on the evidence available, Sale No. 3, Sale No. 2, and Sale No. 1, are the most comparable to the Land (as suggested by Mr Hill). Each sale is close (within 300m) to the Land, was transacted relatively close to the base dates and provides good comparable market evidence. As a result, I give these comparable sales more weight in my determination.

In relation to Sale No. 3, the primary difference between the valuers relates to location, where I have considered this above and accepted Mr Jackson’s view that the sale is in a superior location and his proposed adjustment. Having noted my preference for the −15% adjustment for development approval (and noting that the only other difference between the valuers is in relation to time, where I adopt the 0% adjustment proposed by Mr Jackson), the appropriate total adjustment is −30% to this sale as suggested by Mr Jackson. This leads to an adjusted analysis of approximately $1,750/m² (for the 2016 base date) and adopting the valuers’ agreed 5% adjustment for market movement between the base dates, $1,835/m² (for the 2017 base date).
In relation to Sale No. 2, given my preference for Mr Hill’s adjustment of +15% to account for corner/street frontage, and my acceptance of Mr Jackson’s −15% adjustment for development approval, the appropriate total adjustment is −27.5% which leads to an adjusted analysis of approximately $1,994/m² (for the 2016 base date) and $2,094/m² (for the 2017 base date).
In relation to Sale No. 1, I again prefer Mr Hill’s adjustment of +15% to account for corner/street frontage, and my acceptance of Mr Jackson’s adjustment of −15% for development approval. This leads to an appropriate total adjustment of 32.5% leading to an adjusted analysis of approximately $1,992/m² (for the 2016 base date) and $2,091/m² (for the 2017 base date).
I have also given consideration to the appropriate total adjustments for each of Sale No. 4, Sale No. 5, Sale No. 6, and Sale No. 7, and factor these into my determination. In summary, as noted above, I have accepted Mr Jackson’s adjustment for location in relation to each of those sales, Mr Hill’s adjustment for corner/street frontage in relation to Sale No. 6, and Mr Jackson’s adjustment for development approval where relevant to the sale.
In addition, I have considered the minor differences in adjustments between the valuers and record my findings as follows: for Sale No. 4, I accept the position of Mr Hill in relation to adjustments for time (given the sale occurred in late 2017) and views (accepting his evidence about the difference in storeys that can be developed between the Land and the sale); for Sale No. 6, I accept the position of Mr Hill in relation to the adjustment for views (accepting his evidence of the impact of the surrounding development on the sale); and for Sale No. 7, I accept the position of Mr Hill in relation to adjustments for shape (accepting his evidence of greater irregularity) and views (accepting his evidence about the difference in storeys that can be developed between the Land and the sale), and Mr Jackson in relation to the adjustment for planning (accepting that there would be an impact on the basis of the difference in zoning between the Land and the sale).
Given this, I find the appropriate adjusted analysis across those sales is as follows:

In relation to Sale No. 4: $1,666/m² (for the 2016 base date) and $1,749/m² (for the 2017 base date);

In relation to Sale No. 5: $1,579/m² (for the 2016 base date) and $1,658/m² (for the 2017 base date);

In relation to Sale No. 6: $1,674/m² (for the 2016 base date) and $1,758/m² (for the 2017 base date); and

In relation to Sale No. 7: $1,926/m² (for the 2016 base date) and $2,022/m² (for the 2017 base date).

Taking all the above evidence into account, and doing the best I can, I find that the appropriate adjusted GFA rate for the Land for the 2016 base date is $1,850/m² and, adopting the valuers’ agreed adjustment for market movement of 5%, the analysed GFA rate for the Land for the 2017 base date is $1,950/m².
Applying the above analysed GFA rate for the Land for the base dates to the 2,818m² achievable floor space, I find that the initial land values for the base dates is $5,213,300 and $5,495,100 respectively. Adopting the approach of the valuers, I then deduct the amount of $330,000 from the initial land values, as attributable to the likely risk of remediation. As a result, I determine the following land values, as rounded, for the respective base dates:

$4,883,000 at the 2016 base date; and

$5,165,000 at the 2017 base date.

Conclusion

I find the land value for the Land at the 2016 base date to be $4,883,000; and I find the land value for the Land at the 2017 base date to be $5,165,000.

Orders

Accordingly, the orders I make are as follows:

In proceedings 2018/00366212:

Appeal allowed.

Pursuant to s 40(1)(b) of the Valuation of Land Act 1916 (NSW), determine the land value of land being Lots A and B in DP 409923 and Lots 1 and 2 in DP 208597 located at 287 Liverpool Road, Strathfield as at base date 1 July 2016 to be $4,883,000.

In proceedings 2018/00366200:

Appeal allowed.

Pursuant to s 40(1)(b) of the Valuation of Land Act 1916 (NSW), determine the land value of land being Lots A and B in DP 409923 and Lots 1 and 2 in DP 208597 located at 287 Liverpool Road, Strathfield as at base date 1 July 2017 to be $5,165,000.

**********

Annexure 1 (63629, pdf)

Decision last updated: 24 May 2021

Medium Neutral Citation:	Peter Sleiman Property Investments Pty Ltd and Anor v Valuer-General of New South Wales (No 2) [2021] NSWLEC 47
Hearing dates:	27, 28 and 29 July, 15 September and 5 November 2020
Date of orders:	21 May 2021
Decision date:	21 May 2021
Jurisdiction:	Class 3
Before:	Robson J
Decision:	See orders at [241]
Catchwords:	VALUATION — Service station — Dispute regarding risk of contamination — Appropriate valuation methodology
Legislation Cited:	Burwood Development Control Plan 2013 Burwood Local Environmental Plan 2012 Contaminated Land Management Act 1997 (NSW) s 60 Environmental Planning and Assessment Act 1979 (NSW) ss 3.43, 3.45, 4.15 Protection of the Environment Operations Act 1997 (NSW) State Environmental Planning Policy No 55—Remediation of Land State Environmental Planning Policy No 65—Design Quality of Residential Apartment Development Valuation of Land Act 1916 (NSW) ss 6A, 37, 40
Cases Cited:	680-682Kingsway Caringbah Pty Ltd v Sutherland Shire Council [2017] NSWLEC 99 Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 167 ALR 575 Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170 Bronzel v State Planning Authority (1979) 21 SASR 513; (1979) 44 LGRA 34 Challenger Listed Investments Limited v Valuer General (No 2) [2015] NSWLEC 60 Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365; (2007) 156 LGERA 186 Co-ordinated Resources Pty Ltd v Valuer General (1983) 27 the Valuer 779 Crompton v Commissioner of Highways (1973) 5 SASR 301; (1973) 32 LGRA 8 Graham Trilby Pty Ltd v Valuer-General [2008] NSWLEC 217 Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68 New South Wales Cremation Company Pty Limited v Valuer General [2016] NSWLEC 135 Olefines Pty Ltd v Valuer-General of New South Wales [2018] NSWCA 265; (2018) 234 LGERA 444 Olefines Pty Ltd v Valuer-General of New South Wales [2018] NSWLEC 18; (2018) 228 LGERA 407 Peter Sleiman Property Investments Pty Ltd v Valuer-General of New South Wales [2020] NSWLEC 123 Redeam Pty Ltd v South Australian Land Commission (1977) 17 SASR 508; (1977) 40 LGRA 151 River Bank Pty Ltd v The Commonwealth of Australia; Rumble v The Commonwealth of Australia (1974) 4 ALR 651 Spencer v The Commonwealth of Australia (1907) 5 CLR 418; [1907] HCA 82 Toohey’s Ltd v the Valuer-General (1924) 25 SR (NSW) 75; [1925] AC 439 Trust Company of Australia Ltd v the Valuer-General [2007] NSWCA 181; (2007) 154 LGERA 437 Universal Property Group Pty Ltd v Blacktown City Council [2020] NSWCA 106 Valuer-General of New South Wales v Oriental Bar Pty Limited [2016] NSWCA 48; (2016) 217 LGERA 1 Valuer-General v Fivex Pty Ltd [2015] NSWCA 53; (2015) 206 LGERA 450 Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47
Texts Cited:	NSW Department of Planning and Environment, Apartment Design Guide, July 2015 NSW Environment Protection Authority, Contaminated Sites: Sampling Design Guidelines (1995) NSW Environment Protection Authority, Guidelines for Assessing Service Station Sites (1994)
Category:	Principal judgment
Parties:	Peter Sleiman Property Investments Pty Ltd (First Applicant) Nabil Sleiman Property Investments Pty Ltd (Second Applicant) Valuer-General of New South Wales (Respondent)
Representation:	Counsel: R Lancaster SC with M Seymour (First and Second Applicants) R White (Respondent) Solicitors: CMM Quay Legal Group (First and Second Applicants) Crown Solicitor’s Office of New South Wales (Respondent)
File Number(s):	2018/00366200; 2018/00366212
Publication restriction:	Nil

Sale No. 1	266-268 Liverpool Road, Enfield
Sale No. 2	248-250 Liverpool Road, Burwood
Sale No. 3	12 Coronation Parade, Enfield
Sale No. 4	17 Wetherill Street, Croydon
Sale No. 5	507-511 Liverpool Road, Strathfield
Sale No. 6	459-463 Liverpool Road, Strathfield
Sale No. 7	1 Lion Street and 402 Liverpool Road, Croydon