Sales v Transport for NSW (No 2)

[2021] NSWLEC 96

Land and Environment Court

New South Wales

Medium Neutral Citation:

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

Hearing dates:

12 – 16 October, 3 November, 8 December 2020 and 8 February 2021 (written submissions filed, 13 and 19 February 2021)

Date of orders:

01 September 2021

Decision date:

01 September 2021

Jurisdiction:

Class 3

Before:

Robson J

Decision:

See orders at [279]

Catchwords:

VALUATION — Compulsory acquisition — Market value — Highest and best use — Statutory construction of environmental planning instruments — Residential subdivision — Valuation methodology — Injurious affection

VALUATION — Compulsory acquisition — Disturbance — Legal costs

Legislation Cited:

Environmental Planning and Assessment Act 1979 (NSW), ss 3.28, 4.15

Interpretation Act 1987 (NSW), ss 5, 33

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 54, 55, 56, 59, 66

Liverpool Local Environmental Plan 2008

Roads Act 1993 (NSW)

State Environmental Planning Policy (Western Sydney Employment Area) 2009, Sch 4, cll 3, 4, 8, 9, 10, 11, 12, 18, 23, 33A

Cases Cited:

4nature Incorporated v Centennial Springvale Pty Ltd (2017) 95 NSWLR 361; [2017] NSWCA 191

Apokis v Transport for NSW (2020) 101 NSWLR 844; [2020] NSWCA 39

Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209; [1999] HCA 64

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

Cassidy v Sydney Water Corporation [2008] NSWLEC 223

Closer Settlement Limited v The Minister (1942) 17 LGR (NSW) 62

Coastal Estates Pty Ltd v Bass Shire Council [1993] 2 VR 566; (1993) 79 LGERA 188

Commissioner of Police for New South Wales v Eaton (2013) 252 CLR 1; [2013] HCA 2

Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358; [1947] HCA 10

Cranbrook School v Woollahra Municipal Council (2006) 66 NSWLR 379; [2006] NSWCA 155

Dan Wei Zheng v Roads and Maritime Services [2017] NSWLEC 77

DEM (Australia) Pty Ltd v Pittwater Council [2004] NSWCA 434; (2004) 136 LGERA 187

Eureka Operations Pty Ltd v Transport for New South Wales [2021] NSWLEC 41

Graham Trilby Pty Ltd v Valuer-General [2008] NSWLEC 217

Hastings Point Progress Association Inc v Tweed Shire Council [2009] NSWCA 285; (2009) 168 LGERA 99

Ironhill Pty Limited v Transgrid; Ironhill Management Pty Limited v Transgrid [2004] NSWLEC 700; (2004) 139 LGERA 398

ISPT Pty Ltd v Valuer General (NSW) [2009] NSWCA 31; (2009) 165 LGERA 25

Kelliher v Commissioner for Main Roads (No 2) [2015] WASC 478

Marrickville Council v Sydney Water Corporation [2013] NSWLEC 222

Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111; [2003] HCA 8

New South Wales Cremation Company Pty Limited v Valuer General [2016] NSWLEC 135

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

Penrith City Council v Dincel Construction System Pty Limited (No 4) [2021] NSWLEC 1

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28

Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82

Sydney Water Corporation v Caruso [2009] NSWCA 391; [2009] 170 LGERA 298

Sydney Water Corporation v Marrickville Council [2014] NSWCA 438

SZTAL v Minister for Immigration and Border Protection; SZGTM v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34

Toveno Pty Ltd v Roads and Maritime Services [2014] NSWLEC 1266

Tovir Investments Pty Ltd v Waverley Council [2014] NSWCA 379

Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7

Vilro Pty Ltd (In Voluntary Liquidation) v Roads and Traffic Authority NSW (No 3) [2010] NSWLEC 234; (2010) 179 LGERA 47

Wingecarribee Shire Council v De Angelis [2016] NSWCA 189

Woolworths Ltd v Pallas Newco Pty Ltd (2004) 61 NSWLR 707; [2004] NSWCA 422

Category:

Principal judgment

Parties:

Nancy Eileen Sales (First Applicant)
Paul Howard Roots (Second Applicant)
Gail Elizabeth Borg (Third Applicant)
Transport for NSW (Respondent)

Representation:

Counsel:
P Tomasetti SC with A Pearman (Applicants)
L Waterson with T Poisel (Respondent)

Solicitors:
MJO Legal (Applicants)
Hunt & Hunt Lawyers (Respondent)

File Number(s):

2018/00387274

Publication restriction:

Nil

Judgment

1. Nancy Eileen Sales, Paul Howard Roots and Gail Elizabeth Borg (collectively, ‘applicants’), bring these proceedings pursuant to s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (‘Just Terms Act’), seeking compensation as a result of the compulsory acquisition on 23 February 2018 (the ‘date of acquisition’) of 3.482ha of land comprising Lot 5 in DP 1234822 at Luddenham (‘Acquired Land’) by Roads and Maritime Services (now Transport for NSW) (‘Transport’).

2. The Valuer General of NSW determined the amount of compensation to be offered for the Acquired Land and based upon that valuation Transport offered the applicants total compensation in the sum of $4,263,150 comprising $4,155,000 for the market value of the Acquired Land (including injurious affection) at the date of acquisition and $108,150 for disturbance. The applicants objected to the amount of compensation offered and commenced these Class 3 proceedings on 17 December 2018.

3. In their “amended further further amended” points of claim filed 26 May 2021, the applicants seek total compensation in the sum of $8,042,000 (alternatively, $7,905,000) comprising $7,875,000 (alternatively $7,737,500) for the market value of the Acquired Land (including injurious affection) at the date of acquisition and $166,798.95 for disturbance.

4. In its “further amended” points of defence filed 28 May 2021, Transport contends for total compensation in the sum of $5,149,503.60 comprising $5,008,510 for the market value of the Acquired Land (including injurious affection) at the date of acquisition and $140,993.60 for disturbance.

5. With the agreement of the parties, I have made a number of findings that will subsequently be applied by the parties in a valuation process to determine the market value of the Acquired Land (including injurious affection) at the date of acquisition. Accordingly, upon receipt of the details of this valuation process, I will determine the total compensation to which the applicants are entitled.

Background

6. At the date of acquisition, the applicants were the registered proprietors of the Acquired Land, as tenants in common in unequal shares. For the purpose of valuation, it is relevant to note that the Acquired Land formed part of a larger contiguous area of land that was owned by the applicants, either collectively or individually, which had an area of 12ha (‘Parent Parcel’). After the acquisition of the Acquired Land an area of 8.518ha either collectively or individually owned by the applicants remained of the Parent Parcel (‘Residue Land’).

7. The Acquired Land was acquired by Transport pursuant to the Just Terms Act for the purposes of the Roads Act 1993 (NSW), and in particular, the public purpose of upgrading and realigning The Northern Road (Stage 4) (which has since been constructed adjacent to the eastern boundary of the Residue Land), being a major road route to the proposed new Western Sydney Airport and surrounding “Aerotropolis”.

8. An understanding of the physical relationship between the Parent Parcel and the Acquired Land (which is roughly a coffin-shaped pentagon) is gleaned from comparing the Parent Parcel (comprising Lot 1 in DP 90157, Lot 1 in DP 215715 and Lot 2 in DP 629074) and the Acquired Land (previously part of Lot 1 in DP 90157 and now comprising Lot 5 in DP 1234822) as shown in the following plans and in Annexure A to this judgment.

Plan of Parent Parcel

Plan of Acquired Land

9. The Parent Parcel is located within the local government area of Liverpool City Council (‘Council’). At the date of acquisition, the Parent Parcel was located approximately 300m to the west of land on which it is proposed to develop the new Western Sydney Airport. To the north-west of the Parent Parcel is Luddenham village.

10. Relevantly for the purpose of valuation, at the date of acquisition the southern portion of the Parent Parcel (an area of 85,295m²), and accordingly the southern portion of the Residue Land (an area of 63,428m²), was zoned R2 Low Density Residential (‘R2’) under the Liverpool Local Environmental Plan 2008 (‘LLEP’) (land subject to the R2 zone is referred to as the ‘Southern Land’). The northern portion of the Parent Parcel (an area of 34,705m²), and accordingly the northern portion of Residue Land (an area of 21,752m²), was zoned RU1 Primary Production zone (‘RU1’) under the LLEP (land subject to the RU1 zone is referred to as the ‘Northern Land’).

11. For present purposes, it is sufficient to note that, at the date of acquisition, under the LLEP, development comprising a residential subdivision would be permitted in the R2 zone but would not be permitted in the RU1 zone. An extract from the zoning map (on which the lots comprising the Parent Parcel can be seen) from the LLEP at the date of acquisition follows.

Extract from zoning map from the LLEP

12. The following plan more clearly depicts the location of the zone boundary between the RU1 zone and R2 zone under the LLEP (and therefore between the Southern Land and the Northern Land) on the Parent Parcel prior to the date of acquisition.

13. At the date of acquisition, and since January 2015, the Northern Land, while within the RU1 zone under the LLEP, was also part of a precinct (‘Precinct 11’) in the south-western extremity of the Western Sydney Employment Area (‘WSEA’), being an area identified for future employment-related development and subject to the State Environmental Planning Policy (Western Sydney Employment Area) 2009 (‘WSEA SEPP’). As the boundary of the WSEA follows the boundary between the Northern Land and the Southern Land, the Southern Land, which was in the R2 zone, was not within the WSEA.

14. The WSEA SEPP was made in 2009 with aims, inter alia, of promoting economic development and the creation of employment in the WSEA by providing for development including major warehousing, distribution, freight transport, industrial, high technology and research facilities, as well as coordinated planning and development of land in the WSEA. The WSEA SEPP provides development controls for the WSEA, including land use zoning.

15. While the WSEA SEPP provides for four discrete land use zones in the WSEA, at the date of acquisition, the WSEA SEPP mapped the Northern Land as “Unzoned Land”, and cl 12 of the WSEA SEPP allowed innominate development on the unzoned land “with development consent”. As will be seen, there is an issue between the parties as to whether at the date of acquisition the Northern Land would be considered to be able to be developed for residential subdivision under the WSEA SEPP.

The statutory valuation task

16. The amount of compensation to which a person whose land has been compulsorily acquired is entitled is set out in s 54 of the Just Terms Act, as follows:

54   Entitlement to just compensation

(1)   The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land.

…

17. Section 54 directs attention to the amount by which the owner of the land is worse off as a result of the compulsory acquisition. The market value of the land is a relevant consideration, but is not the only consideration, as s 55 of the Just Terms Act makes clear:

55   Relevant matters to be considered in determining amount of compensation

In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division)—

(a)   the market value of the land on the date of its acquisition,

(b)   any special value of the land to the person on the date of its acquisition,

(c)   any loss attributable to severance,

(d)   any loss attributable to disturbance,

(e)   the disadvantage resulting from relocation,

(f)   any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

18. The “market value” of land is subsequently defined in s 56 of the Just Terms Act, as follows:

56   Market value

(1)   In this Act—

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

(a)   any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and

(b)   any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and

(c)   any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.

…

19. Noting the comments of Basten JA in Apokis v Transport for NSW (2020) 101 NSWLR 844; [2020] NSWCA 39 (‘Apokis’) at [36]-[44] regarding the role of the “judicial valuer”, it is apt to note at this point that the statutory task the Court is undertaking is not to objectively determine the market value of the Acquired Land, but rather, in accordance with the terms of the legislation set out above, to determine the terms of the hypothetical transaction that would occur between the hypothetical purchaser and the hypothetical vendor of the Acquired Land at the date of acquisition. As will be seen, in these proceedings this involves judicial consideration of two discrete hypothetical transactions.

20. In this way, the statutory definition of market value picks up the hypothetical transaction described by the High Court in Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82 (‘Spencer’) at 432, where Griffith CJ described the question for the Court as “[w]hat would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?”, and further indicated that the process required the Court to:

“…put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it…”

Highest and best use

21. When assessing market value under s 56 of the Just Terms Act, the Court considers the “highest and best use” of the Acquired Land at the date of acquisition.

22. While the concept of “highest and best use” is not explicit in the statutory text, it has been incorporated by reference to the hypothetical transaction, and the terms on which this would occur, being, “…the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted”: Spencer at 440-441 (Isaacs J).

23. The assessment of the “highest and best use” of land is “applicable to the land before the acquisition”: Apokis at [68]. This is when, in the process of undertaking the hypothetical transaction, the parties would assess what the highest and best use of the land would be. Thus, the question for the Court is “to discover the value of the land to the dispossessed owner if put to its best use”: Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7 (‘Turner’) at 274.

State of knowledge

24. In Spencer, the High Court adverted to the knowledge that can be attributed to the parties to the hypothetical transaction where Isaacs J at 441 indicated that the Court:

“…must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.”

25. In Apokis at [36]-[47], Basten JA surveyed key cases since Spencer that engaged with the scope of knowledge that can be attributed to the parties to the hypothetical transaction. This includes cases such as ISPT Pty Ltd v Valuer General (NSW) [2009] NSWCA 31; (2009) 165 LGERA 25 at [4], where Allsop P recorded his doubt as to the aptness of the phrase “perfectly acquainted”, a sentiment reflected by Basten J when he concluded, in terms which I consider are particularly apposite to these proceedings, that the reference to “perfectly acquainted” was unlikely to have been “intended to set a standard which would require an 11-day court hearing to determine the value of a largely undeveloped block of land of less than 80ha” and reiterated the need to focus on the statutory language: Apokis at [47].

26. I remain cognisant of the above matters in my consideration of the issues in these proceedings.

Summary of issues

27. As will be considered below, because the Acquired Land was not a discrete pre-existing parcel of land, the conventional “before and after” valuation method for determining the value of the Acquired Land has been adopted by both parties. This involves valuing the Parent Parcel as it existed immediately before the acquisition (‘before scenario’) by applying the statutory test and then applying the same test to the Residue Land after the acquisition (‘after scenario’), where the value of the Acquired Land is assumed to be the difference between the two valuations. The before and after valuation method captures not only the market value of the Acquired Land at the date of acquisition, but also any increase or decrease in the market value of the Residue Land caused by the carrying out of the public purpose for which the Acquired Land was acquired. It also means that two hypothetical transactions are undertaken, the first in the before scenario, and the second in the after scenario.

28. While the before and after valuation method is agreed, the parties disagree about how the Parent Parcel and the Residue Land are to be valued, which, apart from differences between the valuers as to the actual valuation methodology to be adopted, also raises a number of questions of nicety regarding the highest and best use of the Parent Parcel and the Residue Land, including the precise nature and extent of the respective land’s development potential as a residential subdivision.

29. Although it is agreed that the highest and best use of the Southern Land was residential subdivision, there is a disagreement (characterised by Transport as a “threshold dispute”) between the parties as to whether, having regard to the interpretation and application of the LLEP and the WSEA SEPP, the highest and best use of any of the Northern Land at the date of acquisition was residential subdivision. This disagreement is relevant to the advice that the parties to the hypothetical transaction of the Parent Parcel in the before scenario, and the Residue Land in the after scenario, would receive about the Northern Land and would inform the terms upon which the hypothetical parties would transact. This affects the valuation of the Parent Parcel and the Residue Land, and accordingly the valuation of the Acquired Land under the Just Terms Act.

30. Transport maintains, and the applicants contest, that, at the date of acquisition, no part of the Northern Land could have been used for residential subdivision, such that no residential subdivision could have been undertaken on that part of the Parent Parcel in the before scenario or the Residue Land in the after scenario. Transport’s position is that the highest and best use of the whole of the Northern Land (being 34,705m² in the before scenario and 21,752m² in the after scenario) was land banking for future employment purposes (‘land banking’) under the WSEA SEPP. As a result, any residential subdivision on the Parent Parcel and the Residue Land would be wholly contained within the boundaries of the Southern Land (being 85,295m² in the before scenario and 63,428m² in the after scenario).

27. Conversely, the applicants, although originally accepting that no part of the Northern Land could be used for residential subdivision pursuant to the LLEP, at the hearing of these proceedings contended that the effect of the WSEA SEPP was that the Northern Land, even though mapped as “unzoned land” thereunder, was available for residential subdivision. Given this, the applicants’ primary position was that the highest and best use of all of the land in the Parent Parcel and the Residue Land (including the Northern Land) was for residential subdivision (being 120,000m² in the before scenario and 85,180m² in the after scenario).

28. In the alternative, the applicants contend that if the residential subdivision was confined to the Southern Land, roads and other infrastructure associated with this residential subdivision (being ‘Ancillary Facilities’) could, in any event, be located on the Northern Land. As a result, the applicants’ alternative position is that the highest and best use of the Southern Land was residential subdivision (being 85,295m² in the before scenario and 63,428m² in the after scenario); that the highest and best use of part of the Northern Land was for Ancillary Facilities for this residential subdivision (being 10,105m² in the before scenario and 7,052m² in the after scenario); and that the highest and best use of the remainder of the Northern Land was land banking (being 24,600m² in the before scenario and 14,700m² in the after scenario).

29. Two further (essentially town planning) issues arise in relation to the residential subdivision that could be developed on the Parent Parcel and the Residue Land, centering around the “lot yield” and cost of the residential subdivision. Given the importance of lot yield to one of the competing valuation methodologies put forward by the parties, the hypothetical development method (‘HDM’), the resolution of these issues is particularly important if the HDM is adopted.

30. The town planning issues include, first, the appropriate provision for public open space in the residential subdivision in the before scenario and the after scenario and the impact of this public open space on lot yield (where the applicants maintain that, given the availability of public open space in the locality, lot yield would not be significantly affected by a requirement for public open space); and second, the type of physical treatment on the eastern boundary of the Residue Land likely to be required for a residential subdivision in the after scenario (essentially whether a 1.8m high timber boundary fence (‘1.8m fence’), as contended for by Transport is appropriate or whether, as the applicants contend, a 5m high masonry wall (‘5m wall’) would be required).

31. Despite accepting that the before and after valuation method was generally appropriate, the parties disagreed about the valuation methodology by which the Parent Parcel and the Residue Land were to be valued, with the applicants’ valuer adopting the HDM as his valuation methodology and Transport’s valuer adopting the “comparable sales approach” or “direct comparison approach” (‘DCA’) as his primary valuation methodology and then adopting the HDM as a secondary “check” methodology.

32. Transport’s position is that the DCA is the more appropriate valuation methodology because there are sales of englobo land zoned to allow residential subdivision which are reliably comparable to that part of the Parent Parcel and the Residue Land where the highest and best use is residential subdivision. The applicants dispute this on the basis that the identified sales of englobo land are not sufficiently comparable to support the use of the DCA, as the extent of the adjustments required when using the DCA undermines the valuation methodology.

33. The applicants’ position is that the HDM is the appropriate valuation methodology because (on their submission, the whole of) the Parent Parcel and the Residue Land are ripe for residential subdivision. Transport maintains that the use of the HDM, either as the sole valuation methodology or as a secondary “check” methodology, requires the input of a number of variables (about which there is dispute), that these variables are determined using a subjective and opinionative process, and as such the HDM has potential to provide an unreliable indicator of market values.

34. Two further valuation issues arise, the first being the appropriate approach to “hurdle rates” in the Estate Master development feasibility program (‘Estate Master program’) which is utilised in HDM valuation methodology, including the quantum of the hurdle rates (where the applicants submit that both the internal rate of return (‘IRR’) and profit and risk margin (‘P+R Margin’) should be considered, while Transport submits that the IRR is the appropriate hurdle rate). The second issue is whether an allowance for injurious affection needs to be made in the after scenario, on the basis that there is a decrease in the value of the Residue Land as a result of carrying out the public purpose (where Transport’s primary position is that no allowance would be made for injurious affection as the physical treatment on the eastern boundary of the Residue Land would adequately mitigate the impacts of the road, while the applicants claim that a −5% reduction in the average gross realisation of all lots should be applied where some, but not all, physical treatments on the eastern boundary of the Residue Land are likely to be required.

35. Finally, there remained an issue in relation to the applicants’ claim for loss attributable to disturbance arising from the acquisition. At hearing, the applicants’ final claim in the sum of $166,798.95 was mostly accepted by Transport except for a discrete claim, in the sum of $25,805.35, being the cost incurred by the applicants for expert town planning advice and a report obtained prior to the commencement of these proceedings.

36. Given the above, at the completion of the hearing, the parties’ respective positions as to the compensation to which the applicants are entitled under the Just Terms Act are as follows:

Heads of Compensation	Applicants’ Position	Applicants’ Alternative Position	Transport’s Position
Sections 55(a) and 55(f) – Market Value and Injurious Affection	$7,875,000	$7,737,500	$5,008,510
Section 59(1)(a) – Legal fees	$107,178.66	$107,178.66	$81,373.31
Section 59(1)(b) – Valuation fees	$59,620.29	$59,620.29	$59,620.29
Total	$8,041,798.95 rounded to $8,042,000	$7,904,298.95 rounded to $7,905,000	$5,149,503.60

41. The Court was invited to determine the issues raised in these proceedings in a manner which would facilitate the parties applying the Court’s findings in the valuation process to determine the market value of the Acquired Land (including injurious affection) at the date of acquisition and accordingly the total compensation to which the applicants are entitled. That approach has been adopted.

Evidence

42. The hearing proceeded over eight days and the Court received extensive expert evidence in the fields of town planning, engineering, and valuation. I was assisted in hearing the proceedings by Acting Commissioner Knight in accordance with s 37 of the Land and Environment Court Act 1979 (NSW).

43. In relation to the primary issues noted above, the applicants relied upon town planning evidence of Stephen Connelly and valuation evidence of Paul Dale; and Transport relied upon town planning evidence of Anthony Rowan and valuation evidence of Grahame Hollinshead. Each expert gave evidence of the advice that would have been given to the vendor and purchaser in the hypothetical transactions.

44. Although the Court also received detailed engineering and development costing evidence from Aman Kalsi and Terry Hams, which was utilised by the valuers, the parties reached agreement as to the requirement for, and cost of, a number of matters relating to the works involved in the development of residential subdivisions on the Parent Parcel and the Residue Land.

Town planning – WSEA

45. Although the primary question for the Court in these proceedings involves the valuation of land, it is appropriate that the disagreement between the parties in relation to the advice that the parties to the hypothetical transactions would receive regarding the interpretation and application of the LLEP and the WSEA SEPP and the resulting highest and best use of any of the Northern Land be resolved, given the implications for the valuation of the Parent Parcel and the Residue Land, and accordingly, the valuation of the Acquired Land under the Just Terms Act. This requires consideration of the applicable planning instruments and the likely view of the consent authority, being Council, as to the development of the Northern Land.

46. It is agreed that at the date of acquisition, the hypothetical parties would have received advice and transacted on the basis that the Southern Land was ripe for residential subdivision, and that Council would grant development consent for residential subdivision on land zoned R2, such that the highest and best use of the Southern Land as part of both the Parent Parcel and the Residue Land was residential subdivision.

47. Given this, the question is whether the parties to the hypothetical transactions would transact on the basis that the highest and best use of the Northern Land was residential subdivision, both in the before scenario and the after scenario. As outlined above, the Northern Land was subject to the RU1 zone under the LLEP (pursuant to which residential subdivision was prohibited) and also mapped as “unzoned land” under the WSEA SEPP at the date of acquisition.

48. The parties provided detailed submissions in relation to the interpretation and application of cl 12 of the WSEA SEPP to the Northern Land. In summary, the applicants’ primary position is that cl 12(1) of the WSEA SEPP (which provided that “[d]evelopment may be carried out on unzoned land only with consent”) operated to permit development for any purpose, including residential subdivision, on the Northern Land with development consent. The applicants submit that cl 12(2) (which requires the consent authority to consider impact on adjoining zoned land, and be satisfied the development is appropriate and compatible with land uses on any such adjoining zoned land, prior to granting development consent) should be interpreted by reference to the adjoining R2 zoned Southern Land (under the LLEP) and is accordingly satisfied, such that residential subdivision would be allowed on the whole of the Northern Land. The applicants’ alternative position is that Ancillary Facilities for a residential subdivision on the Southern Land could be located on the Northern Land.

49. In contrast, Transport, while accepting that cl 12(1) of the WSEA SEPP permitted development for any purpose, including residential subdivision, with development consent, contends that cl 12(2) only refers to physically adjoining land that is itself zoned under the WSEA SEPP, with the result that the requirements would not be satisfied by a residential subdivision and development consent for a residential subdivision would not be granted on the Northern Land. Transport further contends that, even if this was not the case, development consent would not be granted for a residential subdivision of the Northern Land because this use would be antithetical to the aims of the WSEA SEPP, which are to preserve the whole of the WSEA (including the Northern Land) for future employment purposes.

50. Apart from the legal submissions considered below, the Court received extensive and differing town planning evidence in relation to the interpretation and application of the WSEA SEPP and the LLEP, and accordingly, the highest and best use of the Northern Land. The town planners proffered various development scenarios across the Parent Parcel and the Residue Land, which differed in the nature and extent of the residential subdivision that would be undertaken, and a number of these scenarios were considered by the valuers. In summary, the applicants’ town planner, Mr Connelly, considering that cl 12(2) of the WSEA SEPP authorised residential subdivision to be carried out on the Northern Land with development consent, located a residential subdivision across the Northern Land. Mr Connelly also prepared an alternative residential subdivision layout confining the residential subdivision to the Southern Land but locating Ancillary Facilities on the Northern Land. Transport’s planner, Mr Rowan, took the view that cl 12(2) of the WSEA SEPP would not support a residential subdivision being developed on the Northern Land, and located his residential subdivision and Ancillary Facilities entirely within the R2 zoned Southern Land.

The application of the WSEA SEPP

51. Before considering the parties’ positions in further detail, it is convenient to note the relevant provisions of the WSEA SEPP applicable at the date of acquisition, noting that cl 12 was subsequently repealed on 11 June 2020, as follows:

Part 1 Preliminary

…

3   Aims of Policy

(1)   This Policy aims to protect and enhance the land to which this Policy applies (the Western Sydney Employment Area) for employment purposes.

(2)   The particular aims of this Policy are as follows:

(a)   to promote economic development and the creation of employment in the Western Sydney Employment Area by providing for development including major warehousing, distribution, freight transport, industrial, high technology and research facilities,

(b)   to provide for the co-ordinated planning and development of land in the Western Sydney Employment Area,

(c)   to rezone land for employment or environmental conservation purposes,

(d)   to improve certainty and regulatory efficiency by providing a consistent planning regime for future development and infrastructure provision in the Western Sydney Employment Area,

(e)   to ensure that development occurs in a logical, environmentally sensitive and cost-effective manner and only after a development control plan (including specific development controls) has been prepared for the land concerned,

(f)   to conserve and rehabilitate areas that have a high biodiversity or heritage or cultural value, in particular areas of remnant vegetation.

4   Land to which Policy applies

This Policy applies to the land identified on the Land Application Map.

Note. The Land Application Map shows the subject land divided into the following precincts:

…

(j)   Precinct 11 (Broader Western Sydney Employment Area).

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6   Consent authority

For the purposes of this Policy, the consent authority for development of land to which this Policy applies is, subject to the Act, the council (referred to in this Policy as the relevant council) of the local government area in which the land is situated.

Note. The approval of the Minister may also be required for the carrying out of development referred to in Part 3A of the Act (Major infrastructure and other projects).

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8   Relationship to other environmental planning instruments

(1)   State Environmental Planning Policy No 1—Development Standards does not apply to the land to which this Policy applies.

(2)   This Policy to prevail over LEPS In the event of an inconsistency between this Policy and a local environmental plan or deemed environmental planning instrument that applies to the land to which this Policy applies, this Policy prevails to the extent of the inconsistency.

Part 2 Permitted or prohibited development

9   Land use zones

The land use zones under this Policy are as follows:

(a)   IN1 General Industrial,

(b)   IN2 Light Industrial,

(c)   E2 Environmental Conservation,

(d)   SP2 Infrastructure.

10   Zoning of land to which Policy applies

For the purposes of this Policy, land is within the zones shown on the Land Zoning Map.

11   Zone objectives and land use table

(1)   The Table at the end of this clause specifies for each zone:

(a)   the objectives for development, and

(b)   development that may be carried out without consent, and

(c)   development that may be carried out only with consent, and

(d)   development that is prohibited.

(2)   The consent authority must have regard to the objectives for development in a zone when determining a development application in respect of land within the zone.

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12   Unzoned land

(1)   Development may be carried out on unzoned land only with consent.

(2)   Before granting consent, the consent authority:

(a)   must consider whether the development will impact on adjoining zoned land and, if so, consider the objectives for development in the zones of the adjoining land, and

(b)   must be satisfied that the development is appropriate and is compatible with permissible land uses in any such adjoining land.

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Part 4 Development Control Plans

18   Requirement for development control plans

(1)   Except in such cases as the Director-General may determine by notice in writing to the consent authority or as provided by clause 19, the consent authority must not grant consent to development on any land to which this Policy applies unless a development control plan has been prepared for that land.

(2) The requirements specified in Schedule 4 apply in relation to any such development control plan.

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Part 5 Principal development standards

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23   Development adjoining residential land

(1)   This clause applies to any land to which this Policy applies that is within 250 metres of land zoned primarily for residential purposes.

(2)   The consent authority must not grant consent to development on land to which this clause applies unless it is satisfied that:

(a)   wherever appropriate, proposed buildings are compatible with the height, scale, siting and character of existing residential buildings in the vicinity, and

(b)   goods, plant, equipment and other material resulting from the development are to be stored within a building or will be suitably screened from view from residential buildings and associated land, and

(c)   the elevation of any building facing, or significantly exposed to view from, land on which a dwelling house is situated has been designed to present an attractive appearance, and

(d)   noise generation from fixed sources or motor vehicles associated with the development will be effectively insulated or otherwise minimised, and

(e)   the development will not otherwise cause nuisance to residents, by way of hours of operation, traffic movement, parking, headlight glare, security lighting or the like, and

(f)   the development will provide adequate off-street parking, relative to the demand for parking likely to be generated, and

(g)   the site of the proposed development will be suitably landscaped, particularly between any building and the street alignment.

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Part 6 Miscellaneous provisions

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33A   Development near zone boundaries

(1)   The objective of this clause is to provide flexibility where the investigation of a site and its surroundings reveals that a use allowed on the other side of a zone boundary would enable a more logical and appropriate development of the site and be compatible with the planning objectives and land uses for the adjoining zone.

(2)   This clause applies to so much of any land that is within the relevant distance of a boundary between any 2 zones. The relevant distance is 50 metres.

(3)   This clause does not apply to:

(a)   land zoned E2 Environmental Conservation, or

(b)   land within the coastal zone, or

(c)   land proposed to be developed for the purpose of sex services or restricted premises.

(4)   Despite the provisions of this Policy relating to the purposes for which development may be carried out, consent may be granted to development of land to which this clause applies for any purpose that may be carried out in the adjoining zone, but only if the consent authority is satisfied that:

(a)   the development is not inconsistent with the objectives for development in both zones, and

(b)   the carrying out of the development is desirable due to compatible land use planning, infrastructure capacity and other planning principles relating to the efficient and timely development of land.

(5)   The clause does not prescribe a development standard that may be varied under this Policy.

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Applicants’ position

52. The applicants submit that the WSEA SEPP did not prohibit a residential subdivision on “unzoned land” at the date of acquisition, and that such development was governed by cl 12. Accordingly, subject to the consideration of any impact on adjoining zoned land and the objectives for development in those zones, and being satisfied that the development was appropriate and compatible with permissible uses on any adjoining land that was zoned (as required by cl 12(2)), a consent authority could grant consent for a residential subdivision under the WSEA SEPP. The applicants contend that the consent authority would be satisfied that a residential subdivision on the Northern Land would be entirely consistent with the objectives for development of the Southern Land which is zoned R2 under the LLEP. Thus, the parties to the hypothetical transactions would transact on the basis that the highest and best use of the Northern Land both as part of the Parent Parcel in the before scenario and as part of the Residue Land in the after scenario would be a residential subdivision.

53. The applicants contend that the fact that the Northern Land is “unzoned land” under the WSEA SEPP and that cl 12 permits development for any purpose on unzoned land with development consent (noting the qualifications in cl 12(2)), while under the LLEP, the Northern Land is zoned RU1 which would not permit residential subdivision, means there is inconsistency between the LLEP and the WSEA SEPP. Pursuant to cl 8 of the WSEA SEPP, the WSEA SEPP prevails over the LLEP.

54. The applicants submit that “unzoned land” in an environmental planning instrument (such as the WSEA SEPP) cannot be likened to “deferred land” in an environmental planning instrument, as while the environmental planning instrument controls unzoned land but does not purport to zone it, the environmental planning instrument does not control nor zone deferred land. The applicants submit that the WSEA SEPP controls unzoned land in the WSEA such as the Northern Land and requires development consent for development, creating an inconsistency between the WSEA SEPP and the LLEP, where the provisions of the WSEA SEPP prevail, citing DEM (Australia) Pty Ltd v Pittwater Council [2004] NSWCA 434; (2004) 136 LGERA 187 at [6]-[7]; Hastings Point Progress Association Inc v Tweed Shire Council [2009] NSWCA 285; (2009) 168 LGERA 99.

55. The applicants submit that where the WSEA SEPP prevails over the LLEP, the planning controls in the WSEA SEPP will apply to ensure that any development occurs in a logical, environmentally sensitive, and cost-effective manner. The applicants note that pursuant to cl 18 of the WSEA SEPP, a development control plan (‘DCP’) must be prepared for any land to be developed (unless there is an exception determined by the Director-General) and any such DCP must include specific development controls and comply with Sch 4 of the WSEA SEPP.

56. In the above circumstances, the applicants submit that to the extent that this Court in Penrith City Council v Dincel Construction System Pty Limited (No 4) [2021] NSWLEC 1 (‘Dincel’) held that cl 12 of the WSEA SEPP did not override a discrete prohibition on development under the Penrith Local Environmental Plan 2010 and there was therefore no inconsistency (so as to raise the operation of cl 8 of the WSEA SEPP), that case was wrongly decided and should not be followed. In that case, the Court did not accept an argument that because the WSEA SEPP allowed any development, and the Penrith Local Environmental Plan 2010 prohibited some forms of development, the planning instruments were inconsistent. Rather, the Court held that until the repeal of cl 12 of the WSEA SEPP, the use of certain land at Kemps Creek zoned RU2 Rural Landscape under the Penrith Local Environmental Plan 2010 and used for earthworks (and/or a warehouse/distribution centre), which was prohibited under the Penrith Local Environmental Plan 2010, continued to be prohibited under the WSEA SEPP.

57. Turning to the requirements in cl 12(2) of the WSEA SEPP, the applicants submit that the reference to “adjoining zoned land” in cl 12(2)(a) does not simply refer to adjoining land zoned pursuant to the WSEA SEPP, but also applies to adjoining land zoned under the LLEP. The applicants note that at the date of acquisition, much of the land the subject of the WSEA SEPP was in fact unzoned. Given this, the focus of cl 12(2) is that development on the “unzoned land” must be “compatible” with the objectives on land which adjoins the unzoned land, and which is zoned. Applying this interpretation, the applicants submit that the development of the unzoned Northern Land for residential subdivision is not incompatible with the objectives of the physically adjoining R2 zoned Southern Land and that Council would be comfortable granting development consent for a residential subdivision on the Northern Land as the criteria in cl 12(2) of the WSEA SEPP is (or would be) satisfied.

58. In support of their position, the applicants make the following submissions. First, even though land is not zoned for residential purposes under the WSEA SEPP, cl 23 specifically applies to land that is within 250m of “land zoned primarily for residential purposes” such that cl 23 must refer to land outside the WSEA SEPP, and land zoned under an instrument other than the WSEA SEPP. Further, where the Northern Land is within 250m of the Southern Land, which is zoned primarily for residential purposes, the requirements of cl 23 of the WSEA SEPP would be satisfied by residential subdivision of the Northern Land.

59. Second, cl 33A of the WSEA SEPP provides flexibility where a use that is allowed “on the other side of a zone boundary would enable a more logical and appropriate development”, by allowing development consent to be granted to development for any purpose that may be carried out in the adjoining zone. The applicants submit that the reference to “adjoining zone” is not only a reference to land zoned under the WSEA SEPP, given the reference to land within the coastal zone (which is not a zone under the WSEA SEPP), when limiting the application of the clause.

60. The applicants also contend that general planning principles and other provisions in the WSEA SEPP support their position. They submit that the “impediments” facing an applicant seeking residential subdivision of the unzoned land raised by Mr Rowan would not be accepted, as the requirement for a DCP to be prepared for the land to be developed in cl 18 of the WSEA SEPP, could be satisfied by the making of a concept development application under the Environmental Planning and Assessment Act 1979 (NSW) (‘EPA Act’), and the requirement to provide information in Sch 4 of the WSEA SEPP would not be a significant disincentive to securing a residential subdivision of the Northern Land under the WSEA SEPP.

61. Finally, the applicants submit that the parties to the hypothetical transactions would have been advised that to develop the Southern Land without developing the Northern Land would leave a strip of unzoned land of an irregular and narrow shape. This would not constitute orderly development. For that reason, a residential subdivision of the unzoned Northern Land is likely to be permitted.

62. In summary, the applicants submit that the parties to the hypothetical transactions, acting prudently and being fully informed (as discussed above), would conclude there was no planning reason not to permit a residential subdivision on the Northern Land, and thus, across the entirety of the Parent Parcel in the before scenario and the Residue Land in the after scenario. In those circumstances, the Court would find that the whole of the Parent Parcel would provide a lot yield of 124 lots in the before scenario and the whole of the Residue Land would provide a lot yield of 79 lots in the after scenario (without taking into account, as considered below, the resolution of additional town planning issues including the requirement for additional open space and/or a physical treatment on the eastern boundary of the Residue Land in the after scenario, which are discussed below).

63. In the alternative, the applicants submit that even if the Northern Land could not be used for residential subdivision, Ancillary Facilities for a residential subdivision could be located on the Northern Land. The applicants point to the fact that Council granted a development consent in 2005 for the 108-lot community title residential subdivision on the Parent Parcel (‘2005 development consent’) which provided for the location of certain works related to the residential subdivision (including a sewage treatment facility, stormwater detention basin, and a road) on that part of the Parent Parcel which was zoned “1(a) Rural” under the then current local environmental plan, and is now zoned RU1 under the LLEP. At that time, the R2 zoned Southern Land was considered the “last piece of englobo R2 zoned land at Luddenham”. The applicants submit that this would “bear upon” the minds of the parties to the hypothetical transactions, such that they would be satisfied that Council would grant development consent for Ancillary Facilities on the Northern Land.

Transport’s position

64. Transport accepts that cl 12(1) of the WSEA SEPP permits development for any purpose (including residential subdivision) on the Northern Land with development consent, with the apparent result that it accepts the WSEA SEPP prevails over the LLEP due to inconsistency.

65. However, Transport does not accept the applicants’ position that the Northern Land could be developed as a residential subdivision. This is because first, cl 12(2) only applies to physically adjoining land that is zoned under the WSEA SEPP; and second, in any event, the satisfaction of the criteria in cl 12(2) does not automatically lead to development consent for a residential subdivision being granted by Council, in circumstances where a residential subdivision is antithetical to the aim of the WSEA SEPP to preserve the whole of the WSEA for future employment purposes.

66. Transport takes the same view in relation to the applicants’ alternative position regarding Ancillary Facilities being located on the unzoned Northern Land, suggesting that this would not be approved because the sole purpose of the Ancillary Facilities would be to service the residential subdivision on the Southern Land rather than support the employment purposes of the WSEA. As a result, the parties to the hypothetical transactions would be advised that the highest and best use of the Northern Land was for land banking.

67. Transport’s first argument is that the reference to “adjoining zoned land” (in cl 12(2)(a) of the WSEA SEPP) relates to land discretely zoned under the WSEA SEPP that adjoins the “unzoned land” the subject of cl 12(1). In the circumstances before the Court, while the R2 zoned Southern Land physically “adjoins” the Northern Land, it is not “adjoining zoned land” (emphasis added) for the purposes of cl 12(2) because it has not been zoned as one of the land use zones specified under the WSEA SEPP. Transport provides a number of submissions to support this contention: first, the WSEA SEPP only applies to land identified in the “Land Application Map” (as per cl 4) which does not include the Southern Land; second, the WSEA SEPP contains a list of four “land use zones” in cl 9, none of which was equivalent to the R2 zone; third, pursuant to cl 10, the zoning of land under the WSEA SEPP is set out in the “Land Zoning Map”, which does not include the Southern Land; and fourth, the “Land Use Table” in cl 11 contains specific objectives, and permitted and prohibited uses, within the four nominated land use zones.

68. Transport submits that cl 23 of the WSEA SEPP does not assist the applicants’ position that the Southern Land constitutes “adjoining zoned land”. Transport contends that while cl 23 mandates consideration of particular matters where development in the WSEA is to be located “within 250 metres of land zoned primarily for residential purposes”, it is in this limited context in which the WSEA SEPP requires consideration of land outside the WSEA. In this respect, while cl 23 would apply to any proposed development on the Northern Land (and require consideration of land outside the WSEA and zoned under other instruments), this does not lead to, nor support, the proposition that a residential subdivision can be carried out within the WSEA itself. If this was the case, there would be a significant duplication or overlap between the considerations mandated by cll 23 and 12(2) (which would not arise if “adjoining zoned land” under cl 12(2) was limited to land zoned under the WSEA SEPP, where the WSEA SEPP does not contain a residential zone).

69. Transport submits that another factor militating against the applicants’ position is the incongruous consequence, if, as the majority of land in the WSEA was “unzoned land” at the date of acquisition, this land could be used for any purpose no matter how inconsistent with the employment-based aims of the WSEA SEPP, so long as the land was physically proximate to other land and the use was consistent with the zoning of that other land, thereby rendering the boundaries of the WSEA “illusory”. In contrast, Transport’s interpretation of cl 12(2) has no such incongruous consequences and is consistent with the aims of the WSEA SEPP. Where development is proposed in unzoned land in physical proximity to other parts of the WSEA that are already zoned under the WSEA SEPP, it is appropriate to mandate consideration of the consistency of the proposed development with particular objectives of those adjoining zones.

70. If, contrary to Transport’s contention, the Court accepts the applicants’ interpretation of cl 12(2) and finds that the R2 zoned Southern Land constitutes “adjoining zoned land”, Transport’s second argument is that, even if the criteria in cl 12(2) are satisfied, they are not exhaustive of the matters that must be considered by the consent authority when deciding whether to grant development consent. Council, as the consent authority, would be required to consider the “Matters of consideration” under the former s 79C (cf. now s 4.15) of the EPA Act, which includes the provisions of relevant environmental planning instruments, and this would militate against the grant of development consent. For example, the consent authority would consider the relevant provisions of the WSEA SEPP including the aims at cl 3. The use of the Northern Land for a residential subdivision is antithetical to those aims, for the following reasons: none of the aims of the WSEA SEPP refer to residential development; the use of the Northern Land for a residential subdivision would not protect the land for employment purposes and would not provide employment generating uses, nor allow for linkages between employment generating uses and the proposed airport; and would therefore, in effect, “shrink” the WSEA. Accordingly, Transport submits that the Court would prefer Mr Rowan’s evidence to the effect that the inconsistency between the aims of the WSEA SEPP and a residential subdivision renders it “near impossible” to obtain development consent for a residential subdivision on the Northern Land.

71. Transport contends that pursuant to cl 18 of the WSEA SEPP, for development consent to be granted for any use of the Northern Land (absent a written exemption from the Director-General), a DCP or alternatively a concept development consent under the EPA Act, where the concept plan is prepared in accordance with Sch 4 of the WSEA SEPP, would be required. At the date of acquisition, no DCP had been prepared. Transport submits that neither an exemption from the Director-General nor a concept development consent would be able to be obtained for residential subdivision of the Northern Land, for the following reasons:

1. Mr Connelly’s evidence was that the Director-General would take into account the aims of the WSEA SEPP in granting any exemption, such that an exemption would not have been forthcoming for the development of the whole of the Northern Land as a residential subdivision (however Mr Connelly opined that Ancillary Facilities on the Northern Land may have obtained an exemption);

2. Mr Connelly’s evidence was therefore that it would have been necessary to obtain a concept development consent for the subdivision of the whole of the Northern Land under the EPA Act;

3. Mr Connelly accepted that the relevant provisions of the WSEA SEPP, including its aims, were matters for consideration when deciding whether to grant an application for concept development consent under the EPA Act; and

4. Transport submits that, accordingly, as a residential subdivision of the Northern Land is antithetical to the aims in the WSEA SEPP, a concept development application for such a development to satisfy cl 18 would not be approved.

72. In response to the applicants’ reliance upon the 2005 development consent (wherein Council authorised the use of the Northern Land for associated infrastructure related to a community title residential subdivision), Transport submits that this development consent does not assist the applicants’ position given that the WSEA SEPP did not exist at that time and has only applied to the Northern Land since 2015.

73. In summary, Transport submits that the parties to the hypothetical transactions would not have proceeded on the basis that the Northern Land could be used for a residential subdivision, or for Ancillary Facilities for a residential subdivision. Rather, that the highest and best use of the Northern Land was land banking.

74. Finally, Transport submits that the late adoption of the applicants’ primary position regarding the highest and best use of the Northern Land militates against a finding by the Court that the parties to the hypothetical transactions would have been advised that the highest and best use of the Northern Land was a residential subdivision – as the parties to these proceedings initially proceeded on the basis of a different assumption, and this means that “a very basic and material matter” concerning the application of the WSEA SEPP had been overlooked or misunderstood.

Consideration

75. The interpretation and application of the WSEA SEPP and LLEP to the Northern Land raises issues of statutory construction. As noted above, my consideration is undertaken in the context of the advice that the parties to the hypothetical transactions would receive. However, where those parties are attributed a state of knowledge (which is, if not “perfectly acquainted” with the land and cognisant of the circumstances that may affect its value, likely in any event to have been informed by advice in relation to the legally correct interpretation and application of the WSEA SEPP and LLEP to the Northern Land), it is appropriate to determine what the legally correct interpretation and application of the WSEA SEPP and LLEP to the Northern Land is, given the implications this has for the resulting highest and best use of the Northern Land and thus the valuation of the Parent Parcel and the Residue Land.

76. The applicable legal principles that I am to apply when undertaking the task of statutory construction are well known, however some initial brief comments can be made. The objective is to construe the relevant statutory provision so it is consistent with the language and purpose of the statue when considered as a whole: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 (‘Project Blue Sky’) at [69]. While ordinarily the legal meaning of the provision will reflect the grammatical meaning of the provision, in certain limited circumstances, the context of the words, the consequences of construction, the purpose of the statute, or the canons of construction may require the words of the provision to be read in a different way: Project Blue Sky at [78]; SZTAL v Minister for Immigration and Border Protection; SZGTM v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34 at [14].

75. These general principles of statutory construction apply to the interpretation of environmental planning instruments such as the LLEP and the WSEA SEPP: Cranbrook School v Woollahra Municipal Council (2006) 66 NSWLR 379; [2006] NSWCA 155 at [36]. In this respect, while environmental planning instruments should be interpreted in a practical manner, this does not override general principles of statutory construction nor require “laxity or flexibility” in interpretation: Tovir Investments Pty Ltd v Waverley Council [2014] NSWCA 379 at [54]; Wingecarribee Shire Council v De Angelis [2016] NSWCA 189 at [20]; 4nature Incorporated v Centennial Springvale Pty Ltd (2017) 95 NSWLR 361; [2017] NSWCA 191 at [45]. This is also consistent with s 33 of the Interpretation Act 1987 (NSW) (‘Interpretation Act’), which applies to environmental planning instruments by virtue of s 5(6), and requires a construction which promotes the purpose or object of an Act over one which would not.

76. A number of initial observations can be made about the WSEA SEPP by way of context. First, it is clear that the WSEA SEPP only “applies” to land identified on the “Land Application Map” referred to in cl 4 and this does not include the R2 zoned Southern Land.

77. Second, perusal of both the “Land Zoning Map” referred to in cl 10 of the WSEA SEPP and the “Land Application Map” (each of which overlays cadastral lot boundaries including the lots comprising the Parent Parcel) clearly shows that the boundary of the land subject to the WSEA SEPP followed the demarcation between the R2 zone and the RU1 zone under the LLEP on the Parent Parcel (shown at [11] and [12] above) and not the cadastral boundaries of the lots comprising the Parent Parcel. I consider that this approach to the boundary of the WSEA reflects an intentional decision on the part of the drafter.

78. Third, it is clear that the WSEA SEPP contains (in cl 9) an exhaustive list of the four “land use zones” applicable under the WSEA SEPP being: IN1 General Industrial; IN2 Light Industrial; E2 Environmental Conservation; and SP2 Infrastructure, and further, that there is no equivalent zoning under the WSEA SEPP to the R2 zone under the LLEP.

79. Fourth, the “Land Use Table” in cl 11 of the WSEA SEPP identifies with specificity the objectives for development, as well as development that may be carried out without consent, may be carried out with consent, and is prohibited, in each of the four land use zones. It is clear that the objectives for each of the four land use zones do not directly or indirectly reflect matters that would be expected in the objectives of a residential (or equivalent) zone (cf. the objectives in the R2 zone; R3 Medium Density Residential zone; R4 High Density Residential zone; and R5 Large Lot Residential zone under the LLEP). Further, aside from the objectives of the four land zones, the specified type of development which “may be carried out only with consent” in each of the four land use zones provides no indication of support for a residential subdivision in the WSEA.

80. Fifth, the “particular aims” in cl 3 of the WSEA SEPP are clearly contrary to, and in my view incompatible with, a residential subdivision in the WSEA. In this respect, I accept and adopt Transport’s submissions summarised at [70] above.

81. Turning then to the interpretation and application of cl 12 of the WSEA SEPP, I find, as agreed between the parties, that at the date of acquisition cl 12 of the WSEA SEPP operated so as to permit any development on the Northern Land with development consent (where the requirements of cl 12(2) are complied with) and in this respect prevailed over the provisions of the LLEP which were inconsistent with this position, pursuant to cl 8 of the WSEA SEPP and/or the then s 36 (now s 3.28) of the EPA Act. Accordingly, although the LLEP did not permit residential subdivision in the RU1 zoned Northern Land, this is not determinative to my consideration of the highest and best use of the Northern Land.

82. Given the detailed submissions made, more particularly by the applicants, in relation to the interpretation and application of cl 12 of the WSEA SEPP, I do not consider Dincel and the reasoning therein in relation to cl 12 of the WSEA SEPP to be apt in the present proceedings (noting this reasoning was not relied on in granting relief in Dincel). Having regard to first, the explication of the purpose and context of cl 12 within the WSEA SEPP more generally; second, the treatment of unzoned land in environmental planning instruments; and third, the analysis of inconsistency arising between the specific provisions of the LLEP and the WSEA SEPP, to adopt the phrasing of Mason P in Woolworths Ltd v Pallas Newco Pty Ltd (2004) 61 NSWLR 707; [2004] NSWCA 422 at [137], “the matter does not appear to me now as it appears to have appeared to me then” such that I am satisfied that in the context of these proceedings an inconsistency arises between cl 12 of the WSEA SEPP and the LLEP, and therefore the WSEA SEPP prevails.

83. Accepting then that cl 12(1) of the WSEA SEPP regulates development on the Northern Land and may prima facie permit development for any purpose including residential subdivision (which would be prohibited under the LLEP), cl 12(2) requires consideration.

84. Although the wording of cl 12(2) of the WSEA SEPP is not pellucidly clear, for the reasons that follow, I find that the phrase “adjoining zoned land” in cl 12(2)(a) relates to zoned land within the WSEA (and identified in the “Land Application Map” under cl 4 and the “Land Zoning Map” under cl 10 of the WSEA SEPP) that adjoins the “unzoned land” referred to in cl 12(1). While acknowledging that the R2 zoned Southern Land “adjoins” the Northern Land in a physical sense, I accept Transport’s submission that for the purposes of cl 12(2), the land must be adjoining land that is zoned under the WSEA SEPP. My reasons for this finding are as follows.

85. The reference to “adjoining zoned land” in cl 12(2)(a) must be considered in the context of the WSEA SEPP as a whole. Preceding the provision is the articulation of the actual land use zones provided for in the WSEA SEPP, and it follows that this expression refers to those land use zones earlier specified. In this respect, considering the structure of the clauses in the WSEA SEPP, cl 12 refers to “unzoned land” and, is preceded by cl 9 which specifically refers to “land use zones”; cl 10 which refers to “Zoning of land to which policy applies”; and cl 11, which relates to “Zone objectives and land use table” and which, as noted above, sets out in detail the objectives of the land use zones and specific development types.

86. Moreover, I do not accept that the WSEA SEPP should be interpreted in a manner which, leaving aside both the aims of the instrument itself and the discrete objectives of the land use zones in that instrument, requires the consent authority (in the present circumstances, Council) to simply consider the objectives of the R2 zone pursuant the LLEP. In this respect, there is a clear divergence between the aims of the WSEA SEPP which relate to protecting and enhancing the WSEA for employment purposes (in addition to the “particular” aims detailed in cl 3(2) of the WSEA SEPP), and the objectives of the R2 zone under the LLEP which include “[t]o provide for the housing needs of the community within a low density residential environment … [t]o provide a suitable low scale residential character commensurate with a low dwelling density … [t]o ensure that a high level of residential amenity is achieved and maintained”. Taking into account the purpose of the WSEA SEPP, the interpretation of cl 12(2) which supports consideration of the objectives of the land use zones under the WSEA SEPP when considering the appropriateness of granting development consent for a development on land in the WSEA is to be preferred.

87. I accept Transport’s contention that there would be an incongruous consequence if the unzoned land within the WSEA could be developed for a purpose which was inconsistent with the economic development and employment aims of the WSEA SEPP, simply because that land was physically proximate to other land not part of the WSEA and the intended development was consistent with the land use zoning of that other land under a different environmental planning instrument. Rather, for the reasons noted above, I consider that it is logical that development of unzoned land in the WSEA which is proximate to other land that has already been zoned under the WSEA SEPP, would require consideration of the consistency between that which is proposed on the unzoned land and the objectives of the land use zone under the WSEA SEPP of the adjoining land.

88. I have considered the submissions made by the applicants in relation to the effect of references to zoned land and adjoining zone in cll 23 and 33A of the WSEA SEPP. I accept Transport’s position in relation to cl 23, being that it is in the limited context of cl 23 that consideration of land outside the WSEA and zoned under a different environmental planning instrument is required. I find that this interpretation promotes a harmonious result in the internal construction of the WSEA SEPP, and avoids the duplication or overlap between cll 12 and 23 identified by Transport: Project Blue Sky at [70]; Commissioner of Police for New South Wales v Eaton (2013) 252 CLR 1; [2013] HCA 2 at [78]. Further, I accept that cl 23 does not support residential development being undertaken within the WSEA.

89. I note that cl 33A of the WSEA SEPP applies to land that is within a specific distance of a boundary between two zones, and as such does not apply to the Northern Land which is “unzoned land”. In relation to the reference to adjoining zones in that provision, I accept the evidence of Mr Rowan and find that this refers to adjoining zones under the WSEA SEPP. This interpretation is consistent with the objective of the clause as it provides flexibility between zones under the WSEA SEPP. It also avoids the incongruous consequence, discussed above, of the integrity of the WSEA being compromised by development which is not provided for in the WSEA SEPP. I consider the reference to “the coastal zone” (with the definite article) in cl 33A to be a specific, descriptive reference to land zoned in a particular manner under an instrument that is not the WSEA SEPP.

90. Applying this interpretation of “adjoining zoned land”, it follows that when considering any application for development consent for a residential subdivision in the unzoned Northern Land, Council must:

1. Consider the impacts on adjoining land zoned under the WSEA SEPP;

2. Consider the objectives of the specific land use zones of the adjoining land zoned under the WSEA SEPP; and

3. Be satisfied as to the appropriateness and compatibility of the residential subdivision with permissible land uses under the WSEA SEPP land use zones of that adjoining land.

93. In my view, development of a residential subdivision would not be considered appropriate and compatible with the objectives or permissible land uses in adjoining land zoned under the WSEA SEPP, where this land is zoned IN1 General Industrial, E2 Environmental Conservation, and SP2 Infrastructure. It follows that development consent for a residential subdivision on the Northern Land would not be granted.

94. Even if I am wrong about the above construction of “adjoining zoned land” such that it refers to the adjoining R2 zoned Southern Land, and on the basis that the consideration and state of satisfaction required in cll 12(2)(a) and (b) respectively could be obtained by reference to the R2 zone, I find that it is very likely (if not beyond doubt) that when assessing any application for development consent on the unzoned Northern Land, Council would consider the overall aims and objectives of the WSEA SEPP and find that these aims and objectives would not be met by a residential subdivision of the Northern Land, such that development consent would not be obtained.

95. I am further persuaded in this view by the evidence given by Mr Connelly, noted at [71] above, regarding the consideration of the relevant provisions of the WSEA SEPP, including its aims, during the process of meeting the requirements of cl 18 of the WSEA SEPP relating to a DCP. In this respect, the parties accepted that cl 18 of the WSEA SEPP would require a DCP to be prepared or alternatively a concept development consent to be obtained for development to be undertaken on the Northern Land (or an exemption determined by the Director-General) and that Sch 4 provides details of the matters to be included in any such DCP or concept development consent. I find that this provides a number of opportunities for the consideration of the provisions of the WSEA SEPP, where:

1. The Director-General would consider the aims of the WSEA SEPP when deciding whether to grant an exemption from the requirement to obtain a DCP; and

2. A consent authority such as Council has the ability to consider the WSEA SEPP when considering an application for a concept development consent.

96. It is more likely than not that those considering whether to grant an exemption to the requirement to obtain a DCP or grant a concept development consent would find that a development of a residential subdivision on the Northern Land would be antithetical to the aims of the WSEA SEPP, and an exemption or development consent would not be obtained.

97. Finally, I do not accept the contention of the applicants that to develop the Southern Land without developing the Northern Land would leave a “strip of unzoned land of an irregular and narrow shape which is not orderly development”. Rather, I find that the Northern Land is properly conceived as part of the WSEA and can be incorporated into development that is properly undertaken in the WSEA in accordance with the aims of the WSEA SEPP. I am further comforted in my findings by the consideration that the WSEA SEPP has, as its boundary, the precise demarcation between the land zoned R2 and the land zoned RU1 under the LLEP.

98. For the above reasons, I consider that the parties to the hypothetical transactions would approach the sale on the basis that Council would not favourably entertain an application for development for a residential subdivision on the Northern Land.

99. Therefore, in summary, I find that the parties to the hypothetical transactions would transact on the basis that the correct interpretation and application of the WSEA SEPP and LLEP is that the WSEA SEPP prevails and that any development can be undertaken on the Northern Land with development consent. However, I accept Transport’s position and find that the reference in cl 12(2) of the WSEA SEPP to “adjoining zoned land” is a reference to land in the WSEA and zoned under the WSEA SEPP, with the consequence that Council would not grant development consent to a residential subdivision on the Northern Land, as it would be inconsistent with the objectives and land uses in the adjoining zoned land, and this would be the basis upon which the hypothetical transactions would have been undertaken. I further find that no exemption to the requirement for a DCP or concept development consent, nor any DCP or concept development consent itself, would have been granted to fulfil the requirements of cl 18, as a residential subdivision of the Northern Land in whole or in part would have been entirely inconsistent with the aims of the WSEA SEPP, and that this would also be the basis upon which the hypothetical transactions would have been undertaken.

100. These findings are also applicable to the applicants’ alternative position, being that the highest and best use of part of the Northern Land would be for the development of Ancillary Facilities in support of a residential subdivision on the Southern Land. In this respect, I accept the submissions of Transport, which highlight that in circumstances where the purpose and use of Ancillary Facilities is to facilitate and service the residential subdivision on the Southern Land, the same factors that militate against a grant of development consent to a residential subdivision on the Northern Land apply in relation to the grant of development consent for Ancillary Facilities on the Northern Land.

101. I find that Council would not grant development consent to the development of Ancillary Facilities on the Northern Land, on the basis that the objectives and land uses of the adjoined land zoned under the WSEA SEPP do not support the provision of infrastructure supporting residential development. The adjoining WSEA SEPP zones focus on facilitating employment-generating development (in respect of the IN1 General Industrial zone) and protection and management of environmental value (in respect of the E2 Environmental Conservation zone). While the SP2 Infrastructure zone includes the wider objective of providing “for infrastructure and related uses”, the land use table indicates the only supported land uses are roads, or purposes identified in the Land Zoning Map (being classified roads). Given this, development consent for Ancillary Facilities would not be obtained.

102. A similar outcome is reached in relation to an application for an exemption to the requirement for a DCP or a concept development consent, and any DCP or concept development consent itself, sought to fulfil the requirements of cl 18 of the WSEA SEPP, on the basis that the development of Ancillary Facilities is not consistent with the stated aims of the WSEA SEPP. Given this, the parties to the hypothetical transactions in the before scenario and the after scenario would not transact on the basis that the Northern Land could be utilised for Ancillary Facilities.

103. To the extent that the applicants place reliance upon the 2005 development consent, I do not consider that this assists the applicants’ position in relation to the approval of a residential subdivision on the Northern Land. It is clear that the WSEA SEPP did not exist at the time Council granted that development consent – as it only applied to the Northern Land from 2015 – and I consider that the parties to the hypothetical transactions would have been advised of this.

104. Both parties made submissions in relation to the weight to be attributed to the respective town planners’ evidence. By and large, I have found it unnecessary to decide between the town planners’ evidence, as the interpretation and application of cl 12 of the WSEA SEPP is primarily a legal issue, and the evidence of the town planners was often responsive to the specific regulatory and factual scenarios that they were commenting on, which were based on different assumptions and did not lend themselves to comparison. Moreover, both town planners provided reasoned, responsive and relevant evidence to assist the Court. However, to the extent to which it is required, I prefer Mr Rowan’s evidence about the impediments that would likely be experienced by the hypothetical parties seeking to obtain development consent for a residential subdivision under the WSEA SEPP on the Northern Land. The town planners reached agreement about the requirements of cl 18 of the WSEA SEPP when applying for development consent but had different opinions about the ease with which these requirements could be complied with. I do not subscribe to Mr Connelly’s view that these requirements would not be a disincentive to obtaining development consent, rather, I prefer Mr Rowan’s view that the effect of these requirements is that development consent for a residential subdivision on the Northern Land would be “near impossible” to obtain.

Town planning – lot yield and development cost

105. Apart from the consideration of the area on which a residential subdivision would be able to be undertaken on the Parent Parcel in the before scenario and the Residue Land in the after scenario, and based upon the above discussion in relation to the LLEP and the WSEA SEPP, the Court received detailed evidence on a number of further town planning matters which would likely impact the lot yield and development cost of any such residential subdivision. The issues to be resolved by the Court, in the context of the position that would be adopted by the parties to the hypothetical transactions, include, first, the amount of public open space that would need to be provided in a residential subdivision in the before scenario and the after scenario; and second, whether physical treatment would need to be applied on the eastern boundary of the Residue Land in the after scenario.

242. Mr Hollinshead originally reduced the per square metre rate of the R2 zoned land on the Residue Land by −2.5% to account for injurious affection in the after scenario, as a result of the impact of the road on the private open space of the residential subdivision, when undertaking his primary DCA valuation. When undertaking his HDM valuation, Mr Hollinshead applied a −5% discount to the gross realisation of the lots along the eastern boundary of the Residue Land to account for the impact of road noise. However, after observing the earthen mound on the Acquired Land at the site view and considering the future aircraft and aircraft-related activity noise that would impact the Residue Land in both the before scenario and the after scenario, Mr Hollinshead reduced his allowance for injurious affection for both the DCA and HDM valuation methodologies to 0%.

243. Mr Dale opines that if a 1.8m fence is the physical treatment that was found to be appropriate on the eastern boundary of the Residue Land in the after scenario, the gross realisation of $530,000 per lot (in the before scenario) should be reduced by −4.53% across all lots in the after scenario when undertaking the HDM valuation to account for injurious affection, arising from the amenity impacts of the road on the Acquired Land on residential subdivision on the Residue Land. However, where “effective screening” of the public purpose is undertaken, encompassing noise impacts, visual impacts and air pollution, Mr Dale opines that no reduction for injurious affection is required in the after scenario. Mr Dale adopted Mr Connelly’s evidence to the effect that a 5m wall would be an adequate screen, but a 1.8m fence would not.

Applicants’ position

246. The applicants criticise Mr Hollinshead’s change of position on injurious affection on the basis of the earthen mound being observed on the Acquired Land, noting that he does not have access to details of the characteristics of the mound, and as such cannot be sure of mound’s ability to mitigate the negative impact of the road on the Residue Land. They also note that Mr Hollinshead’s position is inconsistent with Mr Rowan’s position, where Transport’s town planner accepted that injurious affection would have occurred.

247. The applicants submit that it would be appropriate for the Court to find that the public purpose has caused injurious affection across the Residue Land. If the appropriate physical treatment on the eastern boundary in the after scenario is a 1.8m fence, the applicants’ position is that the Court would nonetheless accept injurious affection has occurred across the Residue Land and that a −5% reduction to the average gross realisation of the lots should be applied to all lots in the after scenario. However, the applicants appear to accept that no additional allowance for injurious affection would be required if an adequate physical treatment is applied on the eastern boundary to mitigate injurious affection to the Residue Land.

Transport’s position

248. Transport submits that it has never taken the position that the public purpose will have no impact on the Residue Land – rather, its position is that the degree and nature of the visual and noise impacts of the public purpose on the Residue Land is such that a 1.8m fence physical treatment on the eastern boundary would be adequate to address these impacts. Given this, Transport submits that, accepting the construction of a 1.8m fence, there would be no decrease in the value of the Residue Land in the after scenario due to injurious affection resulting from the public purpose. However, if the Court finds that a reduction for injurious affection in the after scenario is appropriate in any event, then Transport’s position is that if the HDM is the preferred valuation methodology, Mr Hollinshead’s −5% reduction to the gross realisation of the lots along the eastern boundary of the Residue Land should be adopted.

249. Transport criticises Mr Dale’s position on injurious affection on the basis that this was adopted during the hearing as a “fallback” because the applicants’ position on a 5m wall was “disproportionate”. Further, Transport submits that Mr Dale failed to provide a “cogent explanation” of why he adopted the approach of applying the reduction for injurious affection to all lots rather than just the lots on the eastern boundary of the Residue Land which are adjacent to the public purpose.

Consideration

250. The submissions made by the parties about injurious affection in the after scenario are contingent on my findings about the physical treatment on the eastern boundary of the Residue Land likely to be required by Council. I have found that the parties to the hypothetical transaction would transact on the basis that Council would be likely to require a physical treatment on the eastern boundary, in the form of a 5m wall.

251. Where a 5m wall is constructed in the after scenario, the Residue Land would be effectively screened from noise impacts, visual impacts, and air pollution generated by The Northern Road, such that no further allowance for injurious affection needs to be made.

Conclusion on valuation issues

252. My findings in relation to the two outstanding valuation issues are as follows: the appropriate hurdle rates to be adopted when undertaking valuations using the HDM are a target P+R Margin of 25% and a target IRR of 16.5% in the before scenario and the after scenario, as opined by Mr Dale. No discrete allowance needs to be made for injurious affection in the after scenario.

253. On the basis that the Court accepted the appropriateness of the HDM valuation methodology when valuing the land with the highest and best use as residential subdivision (which I have), and given the significant areas of agreement between the various experts, the Court was invited to make discrete findings in relation to outstanding matters, and to direct the parties to confer and provide an agreed quantum of the market value of the Acquired Land (including injurious affection) determined by the adoption of the Court’s findings, including through appropriate modelling in the Estate Master program, to enable the Court thereafter to make an order for the determination of the total compensation to which the applicants are entitled.

254. Although I take this course somewhat reluctantly, I am conscious that the evidence of the Estate Master program modelling presently before the Court that reflects or is similar to my findings (particularly in relation to the lot yield of a residential subdivision on the R2 zoned Southern Land in both the before scenario and the after scenario), is confined to: Mr Hollinshead’s modelling detailed in Mr Hollinshead’s “HDM Detailed Inputs and Discussion” within Annexure 1 of the supplementary joint report of the valuation experts dated 1 October 2020 (part of Ex A (C5)); and Mr Dale’s “Development Cost Correction, AR Design Proposal” within the “Supplementary JER Valuation” within Annexure 3 of the further supplementary joint report of the valuation experts dated 29 October 2020 (Ex J), which updated Mr Dale’s earlier modelling detailed in Mr Dale’s “HDM Detailed Inputs and Discussion” within Annexure 2 of the supplementary joint report of the valuation experts dated 1 October 2020 (part of Ex A (C5)) to make provision for the physical treatment on the eastern boundary of the Residue Land in the after scenario by allowing $1,060,000 for the construction of a 5m wall.

255. I consider that the later expert evidence received by the Court (including the supplementary report of the town planners provided 14 October 2020 (Ex D); Mr Hams’ and Mr Connelly’s joint report for development costing filed 15 October 2020 (Ex G); and most of the further supplementary joint report of the valuation experts dated 29 October 2020 (Ex J)) appears to address development scenarios which do not precisely reflect my findings detailed above. I am also concerned that the various costs of construction (including matters such as the construction bond, cost of provision of external sewerage works, including rising main works) which were otherwise agreed between the experts in relation to certain development scenarios, may not remain directly applicable as a result of the findings that I have made.

256. In these circumstances, I consider that there is insufficient evidence before the Court to finally determine the total compensation to which the applicants are entitled (as the Court is unable to run the Estate Master program modelling). I therefore proceed on the basis that the parties will confer and provide an agreed quantum of the market value of the Acquired Land (including injurious affection) determined by the adoption of the Court’s findings, including through appropriate modelling in the Estate Master program.

Disturbance costs

257. Pursuant to s 55(d) of the Just Terms Act, in determining the amount of compensation regard must be had to any loss attributable to disturbance. This is defined exclusively in s 59(1) as follows:

59   Loss attributable to disturbance

(1)   In this Act—

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

(a)   legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land,

(b)   valuation fees of a qualified valuer reasonably incurred by those persons in connection with the compulsory acquisition of the land (but not fees calculated by reference to the value, as assessed by the valuer, of the land),

(c)   financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs),

(d)   stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired),

(e)   financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage),

(f)   any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.

258. The parties are mostly in agreement as to the loss attributable to disturbance that is claimed by applicants, however, one matter remains in dispute. The applicants claim the sum of $25,805.35, being fees for obtaining town planning advice and a report incurred prior to the commencement of these proceedings (‘early town planning fees’), as legal costs under s 59(1)(a) of the Just Terms Act. Transport contests this amount on the basis that the early town planning fees do not constitute legal costs for the purposes of the Just Terms Act. Otherwise, the parties agree that the applicants are entitled to the sum of $81,373.31 for legal costs under s 59(1)(a) of the Just Terms Act, and the sum of $59,620.29 for valuation fees under s 59(1)(b).

Applicants’ position

259. The applicants make the following submissions in support of their claim for disturbance including the early town planning fees as legal costs, bringing the claim to the total sum of $166,798.95.

260. First, the applicants’ lawyer Mr Peter James required input from the applicants’ town planner, Mr Connelly, as a “precedential step” in order to give legal advice, and so retained Mr Connelly and incurred disbursement costs. The applicants submit that if a lawyer requires town planning (or other) advice in order to give proper legal advice to their client, then the cost of that town planning (or other) advice is “encapsulated” within the right to recover legal costs under s 59(1)(a) of the Just Terms Act. The applicants also note that Mr James required the town planning advice in order to properly brief the applicants’ valuer, Mr Dale, to obtain valuation advice.

261. Second, the early town planning fees are “disbursements” of Mr James, where the expression “legal costs” includes disbursements (by reference to s 4 of the then Legal Profession Act 2004 (NSW), currently s 6 of the Legal Profession Uniform Law (NSW)). Therefore, the early town planning fees would be included in the applicants’ legal costs. The applicants note that Transport has not disputed at the inclusion of other disbursements in their claim for legal costs. The applicants’ counsel contend that the position taken by Transport in relation to the early town planning fees was unusual.

262. Third, the scope, purpose and intention of s 59 of the Just Terms Act suggests that a broad approach to legal costs should be taken by the Court. The applicants note the right to obtain compensation for disturbance is provided in the context of a person being required to participate in a number of statutory processes and incur costs as a result of the acquisition of their land by a public authority, through no fault of their own. The applicants submit that the intention of s 59, through the inclusion of legal costs; valuation fees; relocation costs; stamp duty costs; financial costs reasonably incurred; and other financial costs relating to the use of the land as a direct and natural consequence of the acquisition, is to cover the person’s costs involved in the process.

263. Further, the applicants submit that a person is entitled to take advice from valuers and lawyers as to their rights in the circumstances of the acquisition. The Just Terms Act clearly provides for a person to recoup the professional fees and disbursements of a valuer – where valuers costs often include the costs of information and advice obtained from third parties, such as planning costs; engineering costs; graphic design work; and quantity surveyor work, which inform the valuation. The applicants contend that the situation for recouping legal costs should be analogous to this, with the result that s 59(1)(a) of the Just Terms Act should not be construed narrowly so as to include professional fees for legal advice, but exclude disbursements, such as search fees, that enable the legal advice to be given.

264. Fourth, the applicants reject Transport’s reliance on the previous cases of Penfold and Bracey v Health Administration Corporation [2009] NSWLEC 157 (‘Penfold and Bracey’) and Ironhill Pty Limited v Transgrid; Ironhill Management Pty Limited v Transgrid [2004] NSWLEC 700; (2004) 139 LGERA 398 (‘Ironhill’). The applicants submit that in Penfold and Bracey, Biscoe J did not provide reasons as to why he accepted the resuming authority’s submissions and found that costs of town planners; negotiators; surveyors; researchers; quantity surveyors; architects; and a developer, were not legal costs, limiting the weight that can be put on his Honour’s finding. The applicants submit that the question of legal costs was raised in very different circumstances in Ironhill, as the Court was concerned with whether tasks undertaken by a person were legal tasks (and therefore compensable as legal costs) or tasks relating to that person’s role as a director of the applicant.

265. Finally, the applicants contend that the nature of the case “strongly supports” a finding that the applicants required planning advice and a report prior to commencing these proceedings. In this respect, the applicants appear to be suggesting that where a significant part of the proceedings related to legal issues arising from town planning matters, it was reasonable for the early town planning fees to be included in the applicants’ legal costs in their claim for disturbance.

Transport’s position

266. Transport submits that the total sum of $140,993.60 is appropriate for loss attributable to disturbance, which excludes the applicants’ claim for early town planning fees. Transport makes the following submissions in support of their position: first, Transport refers to previous cases of this Court in which legal costs were found to exclude the costs of third parties and work of a non-legal nature. In Penfold and Bracey at [132], Biscoe J found that the costs of town planners; negotiators; surveyors; researchers; quantity surveyors; architects; and a developer, were not legal costs and were not allowable under s 59(1)(a) of the Just Terms Act. In Ironhill at [258], McClellan CJ of LEC, analysed the work done by a person who was both a solicitor and a director of the applicant, and found that “various research and investigative tasks” were carried out by the person on behalf of the applicant and could not be “correctly described as legal work which would give rise to legal costs…”.

267. Second, Transport submits that the statutory text of the Just Terms Act does not support a broad interpretation of legal costs to include the costs of obtaining town planning advice. In this respect, “[f]or better or worse”, the Just Terms Act is not intended to permit applicants to recover town planning costs and the applicants should not be able to obtain compensation for town planning costs merely by structuring the cost as a disbursement in the course of obtaining legal advice.

268. Transport refutes the suggestion by the applicants that the nature of the case affects the operation of s 59(1)(a) of the Just Terms Act, which, Transport submits, applies to all acquisitions of land “in accordance with its tenor”. In this respect, where legal costs are not defined in the Just Terms Act and the definition is not imported from the then Legal Profession Act 2004 (NSW) or, the current Legal Profession Uniform Law (NSW) (contrary to the applicants’ submission), Transport submits that it only extends to “costs incurred in respect of work of a legal nature by legal practitioners”.

Consideration

269. Having considered the submissions made by each of the parties, I am satisfied that the early town planning fees constitute legal costs for the purposes of the Just Terms Act, and that as a result, these fees should be included in the applicants’ loss attributable to disturbance, such that the total sum is $166,798.95.

270. Starting with s 59 of the Just Terms Act, I consider that the scope, purpose and intention of the section indicates a legislative intention that a person who has had land compulsorily acquired by a public authority is compensated for the statutory process that they are inevitably involved in, through loss attributable to disturbance. In this respect, I accept the applicants’ submissions at [262].

271. In relation to s 59(1)(a) of the Just Terms Act, I note that legal costs which are eligible to be compensated as loss attributable to disturbance are those legal costs which are “reasonably incurred”, and further incurred “in connection with” the compulsory acquisition of the land. I consider that the text and context of this section indicates a legislative intention that the reasonable costs of a person obtaining legal advice in relation to compulsory acquisition are compensated. This ensures that the person is informed about the statutory process, their rights and obligations under this process, and whether offers of compensation are appropriate. Moreover, I consider that it would be inconsistent with the legislative purpose to compensate a dispossessed owner for only part of the fees required to be incurred to enable legal advice to be provided: Eureka Operations Pty Ltd v Transport for New South Wales [2021] NSWLEC 41 at [153].

272. I accept that the reasonable costs of obtaining legal advice includes the costs of obtaining third party information and advice, where this third-party information and advice directly informs, in the sense of being required for the provision of, the legal advice. Simply stated, if a legal practitioner requires third party information and advice to provide proper and comprehensive legal advice, then this information and advice is properly considered a legal cost.

269. I note the concern of Transport in relation the purposeful structuring of costs as disbursements in the course of obtaining legal advice, in order to obtain the benefit of the costs being legal costs, and compensation for loss attributable to disturbance. I do not consider the contractual relationship between the legal practitioner and the third party, or whether the services of the third party are recoverable as a disbursement, to be determinative in my consideration. Rather, it is the content of the third-party information and advice, and its relevance to the legal advice that is being given to the person who has had their land compulsorily acquired, that is the key consideration.

270. I consider that these circumstances can be distinguished from the previous cases of this Court to which Transport has brought to my attention, in which the Court excluded the costs of third parties and work of a non-legal nature. In Penfold and Bracey, a claim was made by the claimants for a broad gamut of third-party advice and information, running to seven different disciplines. Given the concise summary of the submissions and the Court’s consideration in that case, it is unclear if the issue of whether the advice and information received from the third parties was being used to directly inform legal advice was raised with, or considered by, the Court.

271. In Ironhill the Court was concerned with classifying whether tasks undertaken by a person who was both a solicitor and a director of the claimant constituted legal work or work undertaken on behalf of the claimant. These circumstances are different to the not uncomplicated circumstances before me, as the Court was not undertaking an inquiry into whether the advice or information of a third party was being used to inform legal advice.

272. In these proceedings I am satisfied that the early town planning advice and report informed the legal advice of Mr James, and that the costs (in the sum of $25,805.35) were reasonably incurred in connection with the compulsory acquisition of the Acquired Land. I therefore find that the applicants are entitled to the amount of $107,178.66 for legal costs under s 59(1)(a) of the Just Terms Act, and $59,620.29 for valuation fees as loss under s 59(1)(b).

Costs of proceedings

277. The applicants submit that because Transport’s assessment of compensation is higher than the amount of compensation determined by the Valuer General of NSW, the applicants should be awarded their costs of the proceedings.

278. While I consider that this reflects the usual order, I appreciate that the parties may wish to revisit the matter of costs. As a result, costs will be reserved.

Orders

279. The Court orders that:

1. The parties are directed to confer and provide the Court with an agreed sum representing market value (including injurious affection) of Lot 5 in DP 1234822 at Luddenham in accordance with my findings, including through appropriate modelling using the Estate Master development feasibility program.

2. The parties are granted leave to contact my Associate regarding the determination of the total compensation to which Nancy Eileen Sales, Paul Howard Roots and Gail Elizabeth Borg are entitled.

3. Costs are reserved.

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Annexure A (868381, pdf)

Decision last updated: 02 September 2021