Sydney Water Corporation v Caruso - [2009] NSWCA 391

No judgment structure available for this case.

New South Wales

Court of Appeal

CITATION: Sydney Water Corporation v Caruso and Ors [2009] NSWCA 391

HEARING DATE(S): 6 October 2009

JUDGMENT DATE:
3 December 2009

JUDGMENT OF: Allsop P at 1; Tobias JA at 30; Sackville AJA at 190

DECISION: Appeal and cross-appeal dismissed with costs

CATCHWORDS: REAL PROPERTY – Compulsory Acquisition of land – Compensation – Assessment – Market value – Injurious affection or betterment of adjoining property – Whether increase in value of residue land was by reason of the carrying out of or proposal to carry out the public purpose for which land was acquired - Highest and best use – Acquired land located in flood zone – Council had adopted policies to use land for trunk drainage scheme involving detention basins – Whether hypothetical purchaser would be prepared to add value on the basis that a cut and fill scheme was likely to be approved by the Council and implemented so to enable development on flood affected land - Error on a question of law – Whether error of law constituted by statement of primary judge that where expert evidence is conflicting, doubts are to be resolved in favour of claimant – Whether finding vitiated by error of law - Whether an inherent characteristic of the acquired land was that it be used only for trunk drainage - Whether primary judge erred in determining underlying zoning of acquired land - Stamp duty – Claim under s 55(d) and s 59(d) of Land Acquisition (Just Terms Compensation) Act 1991 for loss attributable to disturbance due to stamp duty costs incurred in connection with purchase of a replacement property – Effect of s 61 of Land Acquisition (Just Terms Compensation) Act 1991 on stamp duty claim where market value is assessed on basis of potential use that is more valuable than actual use of land prior to acquisition

LEGISLATION CITED: Administrative Appeals Tribunal Act 1975 (Cth)
Administrative Decisions (Judicial Review) Act 1977 (Cth)
Baulkham Hills Local Environmental Plan 2005
Land Acquisition (Just Terms Compensation) Act 1991
Land and Environment Court Act 1979
State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004
Supreme Court Act 1970
Sydney Water Act 1994

CATEGORY: Principal judgment

CASES CITED: AMP Capital Investors Limited v Transport Infrastructure Development Corporation [2008] NSWCA 325
Archibald v Byron Shire Council [2003] NSWCA 292; (2003) 129 LGERA 311
Balenzuela v De Gail [1959] HCA 1; (1959) 101 CLR 226
Bisley Investment Corporation Ltd v Australian Broadcasting Tribunal (1982) 59 FLR 132
Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209
Cassidy v Sydney Water Corporation [2008] NSWLEC 223
Collins v Minister for Immigration and Ethnic Affairs (1981) 58 FLR 407
Commissioner of Succession Duties (SA) v Executor, Trustee & Agency Co of South Australia Ltd [1947] HCA 10; (1947) 74 CLR 358
Costantino and Maric v Roads and Traffic Authority of New South Wales [2006] NSWLEC 248
Cook and Edwards v City of Sterling (1991) 4 WAR 469
Crisp & Gunn Co-Operative v Hobart Corporation [1963] HCA 55; (1963) 110 CLR 538
Damjanovic v Roads and Traffic Authority of New South Wales (No 2) [2005] NSWLEC 371
Director-General of Social Services v Hales (1983) 78 FLR 373
Fenton Nominees Pty Ltd v Valuer-General (1981) 47 LGRA 71
Glenorchy City Council v Tacon Pty Ltd [2000] TASSC 51
Hamod v Suncorp Metway Insurance Ltd [2006] NSWCA 243
HG v The Queen [1999] HCA 2; (1999) 197 CLR 414
Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547
Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409
McBaron v Roads and Traffic Authority of New South Wales (1995) 87 LGERA 238
McDonald v Roads and Traffic Authority of New South Wales [2009] NSWLEC 105
Minister Administering the Crown Lands Act v Deerubbin Local Aboriginal Land Council (1998) 43 NSWLR 249
Minister for Immigration and Ethnic Affairs v Gungor [1982] FCA 99; (1982) 63 FLR 441
Morales v Minister for Immigration and Ethnic Affairs (1995) 60 FCR 550
Parkmore Investments Pty Ltd v Acer Forester (Darwin) Pty Ltd [2005] NTSC 9
Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of New South Wales (1998) 101 LGERA 30
R v Murphy (1990) 71 LGRA 1
Randwick Municipal Council v Manousaki (1988) 66 LGRA 330
Re Refugee Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82
Roads and Traffic Authority of New South Wales v Hurstville City Council [2001] NSWCA 11; (2001) 112 LGERA 223
Roads and Traffic Authority of New South Wales v Mosca [2006] NSWCA 159; (2006) 146 LGERA 335
Sapina v Coles Myer Limited [2009] NSWCA 71
Secretary of State for Foreign Affairs v Charlesworth Pilling & Co [1901] AC 373
Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141
Toll Pty Ltd v Craig Morrissey [2008] NSWCA 197
Tuite v Wingecarribbee Shire Council (No 2) [2008] NSWLEC 321
Vocisano v Vocisano [1974] HCA 14; (1974) 130 CLR 267
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259
Yates Property Corporation Pty Ltd (In liq) v Darling Harbour Authority (1991) 24 NSWLR 156

TEXTS CITED: A Hyam, The Law Affecting Valuation of Land in Australia (4th Ed 2009 Federation Press)

PARTIES:
Sydney Water Corporation
Nicola Caruso
Joseph Mesiti
Giuseppe Polito
Maria Polito
Domenico Caruso
John Nati

FILE NUMBER(S): CA 40094/09; 40095/09; 40096/09; 40097/09; 40098/09

COUNSEL: A: John Webster SC / Mark Seymour
R: Bret Walker SC / Ian Hemmings

SOLICITORS: A: Bartier Perry, Sydney
R: Hunt & Hunt, Sydney

LOWER COURT JURISDICTION: Land & Environment Court

LOWER COURT FILE NUMBER(S): L&E 30692/07; 30693/07; 30694/07; 30765/07 and 30766/07

LOWER COURT JUDICIAL OFFICER: Pain J

LOWER COURT DATE OF DECISION: 12 December 2008, 23 December 2008

LOWER COURT MEDIUM NEUTRAL CITATION: Caruso and Ors v Sydney Water Corporation [2008] NSWLEC 320
Caruso and Ors v Sydney Water Corporation (No 2) (2008) NSWLEC 331

CA 40094/09
CA 40095/09
CA 40096/09
CA 40097/09
CA 40098/09

ALLSOP P
TOBIAS JA
SACKVILLE AJA
Thursday 3 December 2009

SYDNEY WATER CORPORATION v NICOLA CARUSO

SYDNEY WATER CORPORATION v DOMENICO & NICOLA CARUSO

SYDNEY WATER CORPORATION v JOSEPH MESITI

SYDNEY WATER CORPORATION v JOHN NATI

SYDNEY WATER CORPORTION v GUISEPPE POLITO & MARIA POLITO

By notice published in the Government Gazette on 23 March 2007, the appellant compulsorily acquired part of the land owned by each of the respondents (the acquired land) for the public purpose of the provision of a trunk drainage scheme pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act). The respondents lodged with the Land and Environment Court objections to the amounts of compensation they were offered.

Prior to 13 April 2006, the whole of the respondents’ lands were zoned Rural 1(a) under Baulkham Hills Local Environmental Plan 2005 (the 2005 LEP). On the making of Amendment No. 5 the 2005 LEP on 13 April 2006, the acquired land was zoned Special Uses 5(a) whereas the residue of the respondents’ land (the residue land) was zoned Residential. In order to assess the market value of the acquired land and any increase in the value of the residue land caused by the acquisition it was necessary to determine the underlying zoning of the area.

It was also necessary to determine the highest and best use to which the acquired land could be put, given that part of this land surrounded a creek and was in a flood zone. Mr Bewsher, a hydrologist called on behalf of the respondents, gave evidence that a hypothetical purchaser of the acquired land would be advised that it could be developed by implementing a regional drainage scheme within the creek corridor (the Bewsher Scheme). Dr Joliffe, the hydrologist called on behalf of the appellant, gave evidence that the Bewsher Scheme was not likely to receive approval from Baulkham Hills Shire Council (the Council) as it did not conform to the Council’s drainage strategy for the area. However, the experts agreed that detention basins that had been planned for the area could be located elsewhere.

The primary judge relevantly held that:

(1) disregarding any increase or decrease in the land value caused by the carrying out of the public purpose for which the land was acquired in accordance with s 56(1)(a) of the Just Terms Act, at the date of the acquisition, the underlying zoning of the acquired land would have remained Rural 1(a);

(2) the rezoning of the residue land and any increase in value or “betterment” of this land was not caused by the public purpose of the appellant in undertaking trunk drainage works on the acquired land but rather reflected the overall planning aims and objectives of the Council;

(3) the prudent hypothetical parties to the sale of the acquired land would have assigned value to it on the basis that they would have been advised that the highest and best use of the acquired land within the flood zone was its development pursuant to the implementation of the Bewsher Scheme, which would not require rezoning, was likely to receive Council approval and was likely to be implemented on a property-by property basis rather than through cooperation amongst property owners.

(4) she intended to adopt an approach whereby when expert evidence is conflicting, all doubts are to be resolved in favour of the claimant where practicable in order to achieve a just result, in accordance with the passage from the judgment of Talbot J in McBaron v Roads and Traffic Authority of New South Wales (1995) 87 LGERA 238 at 244-245;

(5) it was not an attribute or characteristic of the lands within the flood zone that these were required for catchment trunk drainage;

(6) the claims of (most of) the respondents for the costs of any stamp duty incurred or proposed to be incurred by them in acquiring property to replace the acquired land were precluded by s 61(b) of the Just Terms Act.

The appellant appealed under s 57(1) of the Land and Environment Court Act 1979 (the Court Act), and challenged the primary judge’s findings numbered (2), (3), (4) and (5). The respondents cross-appealed and sought to challenge the findings numbered (1) and (6).

Held, dismissing the appeal and the cross-appeal:

As to (1) – the underlying zoning

Per Tobias JA, Allsop P and Sackville AJA agreeing:

A finding as to the underlying zoning of the acquired is not a decision on a question of law and is therefore unassailable on an appeal under s 57(1) of the Court Act.

As to (2) – the “betterment” of the residue land

Per Tobias JA, Allsop P and Sackville AJA agreeing:

Section 56(1)(a) of the Just Terms Act only applies to any increase or decrease in the value of the acquired land, and does not apply to assessing the value of any residue land. Rather, s 55(f) of the Just Terms Act is applicable to any question of “betterment”, that is, any increase in the value of land adjoining the acquired land by reason of the carrying out of the public purpose for which the land was acquired.

Whether the rezoning of the residue land was due to the public purpose for which the land was acquired so to engage s 55(f) of the Just Terms Act is a question of fact and is therefore unassailable on an appeal under s 57(1) of the Court Act.

As to (3) – the acceptance of the Bewsher Scheme as the highest and best use

Per Tobias JA, Allsop P and Sackville AJA agreeing:

The finding that a prudent hypothetical purchaser was likely to consider that it would be feasible to obtain development consent for a proposal such as the Bewsher scheme on the basis that any detention basins otherwise planned for the flood zone could ultimately be located elsewhere was a finding of fact and therefore unassailable on an appeal under s 57(1) of the Court Act.

As to (4) – the alleged misstatement of the principle in McBaron

(a) As to whether legal error was disclosed in the reasoning of primary judge

Per Allsop P, Sackville AJA agreeing:

The primary judge’s expression of principle that she should resolve competing expert evidence in favour of the claimant involved legal error. The general principle that in determining the compensation payable to a dispossessed owner doubts should be resolved in favour of a more liberal estimate does not detract from the need to engage with and evaluate the evidence of competing witnesses.

Per Tobias JA:

Where conflicting expert evidence is given in relation to a hypothetical as distinct from a real situation involving the use of land, a primary judge is entitled to resolve those doubts, like other doubts bearing upon value, in favour of the dispossessed owner.

Archibald v Byron Shire Council [2003] NSWCA 292; (2003) 129 LGERA 311 distinguished

(b) As to the test of whether legal error vitiates a decision

Per Allsop P and Tobias JA, Sackville AJA agreeing:

In order for a decision to be vitiated by error, the error has to be one upon which the decision depends.

Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409 applied

(c) As to the burden of persuasion with respect to whether legal error vitiates a decision

Per Allsop P:

A decision will be vitiated if the error went to a central issue for consideration and the appellate court cannot be persuaded to a relevant degree of satisfaction that the resolution of the central issue has not been materially affected.

Yates Property Corporation Pty Ltd (in liquidation) v Darling Harbour Authority

(1991) 24 NSWLR 156 considered

Collins v Minister for Immigration and Ethnic Affairs

(1981) 58 FLR 407 applied

Bisley Investment Corporation Ltd v Australian Broadcasting Tribunal

(1982) 59 FLR 132 considered

Director-General of Social Services v Hales

(1983) 78 FLR 373 considered

AMP Capital Investors Limited v Transport Infrastructure Development Corporation

[2008] NSWCA 325 considered

Per Tobias JA:

It is for the party asserting error to satisfy the appellate tribunal that the error has affected the relevant decision in the sense that it was one upon which the decision depended.

Roads and Traffic Authority of New South Wales v Mosca

[2006] NSWCA 159; 146 LGERA 335 considered

Hamod v Suncorp Metway Insurance Ltd

[2006] NSWCA 243 considered

Vocisano v Vocisano

[1974] HCA 14; 130 CLR 267 considered

Per Sackville AJA:

It is not necessary for the purposes of this case to decide where the burden of persuasion lies with respect to establishing whether a decision depended upon an error of law. In any event, the nature of the inquiry occasioned by legal error may differ, depending on the circumstances.

(d) As to whether the alleged error of law vitiated the decision of the primary judge

Per Tobias JA, Allsop P and Sackville AJA agreeing:

The finding that a hypothetical prudent purchaser would be prepared to add value to the purchase price he or she would be prepared to pay for the land in the flood zone on the basis that a scheme such as the Bewsher Scheme may obtain development consent was not one which depended upon any alleged error involving the resolution of the conflicting expert evidence.

As to (5) – the inherent attributes of the land

Per Tobias JA, Allsop P and Sackville AJA agreeing:

A determination of the characteristics or attributes of land involves a finding of fact and is therefore unassailable on an appeal under s 57(1) of the Court Act.

As to (6) – the stamp duty claim

Per Tobias JA, Allsop P and Sackville AJA agreeing:

Under s 61(b) of the Just Terms Act, if the market value of land is assessed on the basis that the land has the potential to be used for a purpose other than that for which it was used prior to the acquisition, compensation is not payable for any financial loss that would necessarily have been incurred in realising that potential. Thus, s 61(b) denies a claim under s 59(d) of the Just Terms Act for stamp duty costs incurred in connection with the purchase of land for relocation where such relocation is necessary to enable the realisation of a potential use of the acquired land for a purpose other than that for which it was used prior to the acquisition.

Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW

(1998) 101 LGERA 30 applied

Damjanovic v Roads and Traffic Authority of New South Wales (No 2)

[2005] NSWLEC 371 applied

McDonald v Roads and Traffic Authority of New South Wales

[2009] NSWLEC 105 applied

CA 40094/09
CA 40095/09
CA 40096/09
CA 40097/09
CA 40098/09

ALLSOP P
TOBIAS JA
SACKVILLE AJA
Thursday 3 December 2009

SYDNEY WATER CORPORATION v NICOLA CARUSO

SYDNEY WATER CORPORATION v DOMENICO & NICOLA CARUSO

SYDNEY WATER CORPORATION v JOSEPH MESITI

SYDNEY WATER CORPORATION v JOHN NATI

SYDNEY WATER CORPORTION v GUISEPPE POLITO & MARIA POLITO

Judgment

1 ALLSOP P: I have read the reasons of Tobias JA. I agree with the orders that his Honour proposes. I respectfully disagree, however, with important aspects of his Honour’s reasons.

2 The primary judge’s expression of principle (for that is what it was) as to how she would resolve competing expert evidence at [81] of her reasons was wrong and revealed legal error for the purposes of the Land and Environment Court Act 1979 (NSW) (“LEC Act”), s 57.

3 The general principle that in determining compensation to a dispossessed owner doubts should be resolved in favour of a more liberal estimate is well-known: see generally A Hyam The Law Affecting Valuation of Land in Australia (4^th Ed 2009 Federation Press) at 316-318. That does not, however, detract from the need to engage with and evaluate evidence and competing witnesses. If, however, upon engagement and assessment, the judicial valuer finds, for example, as Anderson J did in Cook and Edwards v City of Sterling (1991) 4 WAR 469, that the reasoning of both valuers was not fallacious, that their respective capitalisation rates were open, that none took into account irrelevant considerations and no errors otherwise appeared, the proper conclusion might be that there are simply two open views on the relevant issue – as there can be in ascribing a value: cf Fenton Nominees Pty Ltd v Valuer-General (1981) 47 LGRA 71 at 76-77. In such circumstances, applying the general principle would be uncontentious.

4 It is not helpful to examine the scope of the general principle in the abstract beyond saying that it is not a licence to accept one expert over another without undertaking the task of assessing the evidence in the usual way. If a judge properly undertakes that task, the evaluation of the evidence may well persuade the judge to accept the evidence favouring the resuming authority. That would be a product of assessing the evidence. That process is not to be abandoned as the statement of the judge at [81] of her reasons would suggest she did.

5 In my view, error was disclosed at [81] of the primary judge’s reasons.

6 The issue then arises as to how the consequences of that error should be assessed. The submissions of the parties did not deal with this issue in any detail. It is however appropriate to say something of the matter because it is the subject of my respectful disagreement with the reasons of Tobias JA.

7 It is first necessary to recognise that the power of the Court on the hearing of an appeal under the LEC Act s 57(1) is provided for by s 57(2). The Court may remit or make such other order as seems fit. Whilst these are wide words, their content is to be assessed by their place in the remedial consequences of dealing with an error of law: see Minister for Immigration and Ethnic Affairs v Gungor [1982] FCA 99; 63 FLR 441 at 454-455 dealing with the Administrative Appeals Tribunal Act 1975 (Cth) (the “AAT Act”), s 44. Nevertheless, whilst recognising this constraining context, a degree of flexibility is conferred upon the Court in its supervision of a superior court of record: the LEC Act, s 5(1).

8 In Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409 at 419, Moffitt P made the following statement that has been taken as a guiding principle in later cases as to what needs to be shown for demonstrated legal error to lead to remedial consequences. Moffitt P was dealing with the position of review for error of law in the context of a stated case. He said:

“I turn then to consider whether the appellant has demonstrated that, in coming to his decision, Ash J erred in law, or more correctly that such can be established within the terms of a question which Ash J has stated in the case before the court. It is not sufficient to show that some error of law appears in the judgment or during the course of the trial. The error has to be one upon which the decision depends, so the decision is vitiated by the error. It will not suffice to establish that one or some only of a number of alternate findings upon which the decision depends, so the decision is vitiated by the error. It will not suffice to establish that one or some only of a number of alternate findings upon which the decision was given involved errors of law, if one alternative involved no error of law. Even if that alternative involved an error the appellant will fail if the error is of fact.”

9 This passage might be seen to conceal an issue as to who bears the burden of persuasion of the vitiating character of the error and what that entails.

10 The passage of Moffitt P in Seatainer Terminals supports a proposition that the person complaining of the order or decision must “establish” (the word used by Moffitt P) that there has been legal error and that it vitiates the decision. What that entails is the issue.

11 This passage of Moffitt P has been applied by this Court on a number of occasions: Yates Property Corporation Pty Ltd (in liquidation) v Darling Harbour Authority (1991) 24 NSWLR 156 at 177 (per Handley JA); Minister Administering the Crown Lands Act v Deerubbin Local Aboriginal Land Council (1998) 43 NSWLR 249 at 254-255 (per Handley JA and Powell JA); and Roads and Traffic Authority of New South Wales v Mosca [2006] NSWCA 159 at [22] (per Handley JA, with whom Mason P and Bryson JA agreed).

12 In Yates, Handley JA after quoting from Moffitt P’s judgment in Seatainer Terminals said the following at 177:

Collins v Minister for Immigration and Ethnic Affairs

Bisley Investment Corporation Ltd v Australian Broadcasting Tribunal

Director-General of Social Services v Hales

Commonwealth Banking Corporation v Percival

13 It is important to the issue of what I will call the burden of persuasion or satisfaction to recall what was said in the Federal Court cases cited by Handley JA in Yates. In Collins, Fox J, Deane J and Morling J were dealing with a deportation appeal under the AAT Act, s 44 which was an appeal on a question of law. The Court was given remedial power in s 44 (4) and (5) in wide terms – see Gungor, above, relevantly not unlike s 57(2) here. The Court in Collins, finding legal error in the Tribunal’s approach, and notwithstanding that the decision was “manifestly open to [the Tribunal]” remitted the matter, saying at 413:

“… But it would only be proper for us to dismiss the appeal if it did not appear that his Honour placed weight on the Minister's decision to deport an applicant as distinct from the s 37 statement. As we have indicated, counsel for the Minister conceded that his Honour's reference to the Minister's decision was a reference only to the decision to deport and was not a reference to the reasons to be found in the ministerial statement. On balance, it seems to us that this concession was rightly made. We are therefore of the opinion that we must uphold the first submission made on behalf of the appellant.

It cannot be said with confidence that the Tribunal would have come to the same conclusion if it had not placed any weight at all upon the Minister's decision to deport the appellant

14 The emphasised passage would appear to support a proposition that once legal error has been shown of an apparently material character, the Court must reach a level of confidence that it has not affected the outcome below, if the matter is not to be remitted.

15 In Bisley, there was a legal error in the reasoning of the Australian Broadcasting Tribunal. Lockhart J at 146 cited Collins. Sheppard J at 156 relied on a passage from the reasons of Barwick CJ in Vocisano v Vocisano [1974] HCA 14; 130 CLR 267 at 275, a case dealing with wrongfully admitted evidence at a trial. The passage to which Sheppard J referred from Barwick CJ’s judgment in Vocisano was as follows:

it should be seen that the inadmissible matter has been used by the judge in reaching his verdict.

Bisley

Vocisano's

Collins

Vocisano

Bisley

Vocisano

Collins

Vocisano's

with a slightly different emphasis

Collins v Minister for Immigration and Ethnic Affairs

16 In Hales, whilst there was an error in the construction of the relevant statute, Lockhart J refused relief saying at 401:

, I am satisfied that the Tribunal's alternative finding of extreme hardship and scant chance of effective recovery was a proper exercise of its discretion in reviewing the Director-General's decision, that this finding stands independently of the erroneous finding and is sufficient to support the Tribunal's ultimate decision to set aside the Director-General's decision

Collins.

17 In Deerubbin at 254-255 Handley JA and Powell JA simply restated the relevant passage from the former’s judgment in Yates, citing Seatainer Terminals with approval.

18 In Mosca, in dealing with the LEC Act, s 57 Handley JA (with whom Mason P and Bryson JA agreed) said at [22]:

he must also establish that the decision is vitiated by that error:

Leichhardt Municipal Council v Seatainer Terminals Pty Ltd

Yates

19 In Hamod v Suncorp Metway Insurance Ltd [2006] NSWCA 243, Basten JA (with whom Beazley JA and Santow JA agreed) in the context of an appeal “in point of law” from the Local Court, said at [11]:

Leichhardt Municipal Council v Seatainer Terminals Pty Ltd

Yates Property Corporation Pty Ltd (In liq) v Darling Harbour Authority

HG

the effect

Balenzuela v De Gail

Vocisano.

20 The statement by Moffitt P in Seatainer Terminals has been taken as stating the law in other parts of Australia: Tasmania – Glenorchy City Council v Tacon Pty Ltd [2000] TASSC 51 at [7] per Cox CJ; and Northern Territory – Parkmore Investments Pty Ltd v Acer Forester (Darwin) Pty Ltd [2005] NTSC 9 at [52] per Martin CJ.

21 In AMP Capital Investors Limited v Transport Infrastructure Development Corporation [2008] NSWCA 325 a valuation case coming to this Court under the LEC Act, s 57 Gyles AJA put the matter at [120] as follows:

“[120] There is a particular difficulty here, as the award of nil compensation would have to be set aside and the amount attributed to market value awarded if Hodgson JA is correct as to the point of statutory construction. In my opinion that follows from the fact that Hodgson JA has demonstrated in considering the first cross claim that the respondent was correct in contending that, in fixing market value, the Land and Environment Court proceeded upon an erroneous construction of the legislation as to a fundamental question – the nature of that which is to be valued. That was obviously an error on a question of law. Such an error would require the finding based upon it to be set aside unless it is clear that the result would not change in the event of reconsideration. It is not sufficient that some basis may exist for upholding the decision. (cf. Balenzuela v De Gail [1959] HCA 1; 101 CLR 226; Stead v State Government Insurance Commission [1986] HCA 54; 161 CLR 141; Toll Pty Ltd v Craig Morrissey [2008] NSWCA 197 per Beazley JA at [10]). In my opinion the difference between valuing freehold on the one hand and a short-term leasehold on the other is so radical as to require re-hearing if the issue remains live. The issue would be live if the point of statutory construction were permitted to be raised and if it were to succeed. The fact that a re-hearing on this point would or may be necessary is a further reason to decline to enter upon the issue.”
(emphasis added)

This supports the proposition from Collins.

22 It is necessary to say something, briefly, about the authorities referred to by Gyles AJA. In Balenzuela, the High Court dealt with the principles governing the grant of leave for a new trial after the wrongful rejection of evidence. One aspect of the discussion was the difference between the common law and the judicature rule approaches in this regard. In that context, the Court discussed what I have referred to as the burden of persuasion: see in particular Dixon CJ at 232-233. As Dixon CJ said at 233-234, the issue is not one of burden of proof of an issue by evidence, but is one based on reasoning of what, from the record, appears to have occurred at a trial or hearing. In dealing with the question at common law, Dixon CJ said at 234-235:

unless the court felt some reasonable assurance that the error of law at the trial whether in a misdirection or wrongful admission or rejection of evidence or otherwise was of such a nature that it could not reasonably be supposed to have influenced the result or because, in any case, as a matter of law the same result must have ensued, while under the judicature rule the burden is the other way.

23 In Stead v State Government Insurance Commission [1986] HCA 54; 161 CLR 141 the Court was concerned with the principle to govern the ordering of a new trial in circumstances of a denial of procedural fairness at the first trial. No statute or rule of court was referred to by the Court as governing the position; thus, the Court can be taken as expressing the principle at common law. In stating the principle the Court (Mason J, Wilson J, Brennan J, Deane J and Dawson J) said at 147:

“Alternatively, if the Full Court is properly to be understood as saying no more than that a new trial would probably make no difference to the result, their Honours failed to apply the correct criterion. All that the appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome. In order to negate that possibility, it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result.

Balenzuela v. De Gail

(referred to by Gyles JA in AMP Capital Investors – see [21] above) was an extempore judgment of Beazley JA (with whom Handley AJA and McDougall J agreed) which concerned the proper approach of a Presidential member of the Workers’ Compensation Commission upon concluding that an arbitrator had relevantly erred. Beazley JA said at [10]:

Stead v State Government Insurance Commission

Sapina v Coles Myer Limited

Stead

25 The statement of principle of Moffit P applied in Yates, Deerubbin and Mosca should be accepted as governing the operation of s 57. That said, these cases should be recognised for what they are (judicial guidance to the exercise of power under, here, the LEC Act, s 57(2)) and for the proper content of the principle. The “vitiation of the decision” referred to by Moffitt P should be understood, as Handley JA made clear in Yates (and thus also Deerubbin and Mosca), as embodying the kinds of considerations discussed in the Federal Court in Collins, Bisley and Hales. As Dixon CJ said in Balenzuela notions of onus of proof are unlikely to be of assistance. It is an assessment based on reasoning from what, according to the record, occurred. Here, it is assessing, from a judge’s reasons, what effect her error had or may have had. The “vitiation” of the decision (that is its impairing, or spoiling, or corrupting or rendering invalid) is not necessarily only made out by demonstrating positively (if it can be) that the result would have been different without the error. A decision will be impaired, or spoilt or corrupted or “vitiated” if the error went to a central issue for consideration and the appellate court cannot be persuaded to a relevant degree of satisfaction that the resolution of the central issue has not been affected.

26 No mechanical or fixed approach is warranted in exercising the power under the LEC Act, s 57(2). The expressions of principle in and based on Seatainer Terminals do not require any inflexible approach requiring the appellant to establish positively that the decision would have been different. They do not say that. To establish “vitiation” one does not need to establish that the decision would have been different. What must be established is that the error is sufficiently material or operative to warrant the large step of setting aside in whole or in part the decision below. In terms of what Moffitt P said in Seatainer Terminals, as illuminated by what Handley JA said in Yates in his reference to the Federal Court cases, this requires the establishment of the vitiation (viz impairing, spoiling, corrupting or invalidating) of a decision. Depending on the nature and quality of the error, its relationship to the issues and the extent and quality of the reasoning of the tribunal an assessment must be made of the importance of the error and the degree of affectation of the decision. The burden or degree of persuasion will depend upon the circumstances of each case.

27 In valuation cases, it is often difficult to be positive to the point of clarity that the error has affected the outcome. This can be a product of the almost necessarily inexact and imprecise expression of reasons for views about valuation: Secretary of State for Foreign Affairs v Charlesworth Pilling & Co [1901] AC 373 at 391. If, however, the error goes to the heart of the cognitive and evaluative process and one cannot be satisfied that it did not play a relevant or material part in the decision then the appellant has established that the decision is vitiated.

28 It may be that the above views as to the proper scope and operation of the LEC Act, s 57 are affected by the UCPR Pt 51 r 51.53. There is an issue, it seems to me, whether this rule speaks to the operation of a statutory provision such as s 57 and if it does what its effect is. This matter was not argued and I leave it to one side.

29 Nevertheless, here, as the analysis by Tobias JA of the primary judge’s reasons reveals, it can be concluded that the error to which I have referred did not affect the result. In these circumstances, I am persuaded that the decision was not vitiated.

30 TOBIAS JA: By notice published in the Government Gazette on 23 March 2007, Sydney Water Corporation (the appellant) compulsorily acquired pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act) part of the land owned by each of Nicola Caruso, Domenico Caruso, Joseph Mesiti, John Nati, Guiseppe Polito and Maria Polito (together the respondents) for the purposes of the Sydney Water Act 1994. Before the acquisition the respondent Nicola Caruso owned two parcels of land whilst the other respondents owned one parcel each. Accordingly the compulsory acquisition affected six parcels of land comprising five properties in total (the acquired land).

31 The acquired land is located at Kellyville within the Rouse Hill Development Area (the RHDA) being a large area of land earmarked in various planning documents for rezoning to permit urban development. Strangers Creek runs through each of the five properties. Three of the properties fronted Windsor Road (to which I shall refer as the Caruso properties and the Mesiti land) whereas the other two properties (to which I shall refer as the Polito land and the Nati land) fronted Arnold Avenue. However the Arnold Avenue properties lost that frontage on acquisition.

32 Being dissatisfied with the amounts of compensation offered in respect of that part of their properties which had been compulsorily acquired, the respondents lodged with the Land and Environment Court objections to the amounts of compensation so offered pursuant to s 66 of the Just Terms Act.

33 The proceedings were heard by Pain J who delivered two judgments. The first was delivered on 12 December 2008 and dealt with most of the issues raised in the proceedings (the first judgment). As there were some loose ends, as it were, her Honour delivered a further judgment on 23 December 2008 (the second judgment) at the conclusion of which she made formal orders with respect to the awards of compensation to be made to each of the respondents. The actual amounts so awarded are not presently relevant. What is relevant is that the awards of compensation included amounts said to represent the market value of each of the acquired parcels as well as various amounts for disturbance. References hereunder to paragraphs of her Honour’s judgments are to the first judgment unless otherwise stated.

The relevant issues before the primary judge and her determination of them

(a) The underlying zoning issue

34 That part of the acquired land through which ran Strangers Creek was within a flood plain and was subject to flooding in a 1:100 year flood (the flood zone). The acquired land comprised part but not the whole of the land within that flood zone. Prior to 13 April 2006, the whole of the respondents’ lands were zoned Rural 1(a) under Baulkham Hills Local Environmental Plan 2005 (the 2005 LEP). On the making of Amendment No. 5 the 2005 LEP on 13 April 2006, the whole of those lands were rezoned. The acquired land was zoned Special Uses 5(a) (Existing and Proposed) whereas the residue of the respondents’ lands were zoned Residential 2(a2) and Residential 2(b1).

35 Relevantly, those parts of the respondents’ lands located outside the Special Uses 5(a) zone but within the flood zone were zoned Residential. This gave rise, both before her Honour and on the appeal, to the primary issue as to whether so much of each respondents’ residue land as was located between the boundaries of the acquired land and the flood zone, and which was zoned Residential, constituted what was referred to in argument as “betterment”. Her Honour was required, as the judicial valuer, to have regard to that issue either pursuant to s 55(f) or, according to the appellant, s 56(1)(a) of the Just Terms Act. Section 55 of the Just Terms Act was in the following terms:

36 At [10] the primary judge stated, relevantly, that the following issues were common to the claim for compensation of all respondents:

“(i) [W]hat is the appropriate underlying zoning, which is linked to the determination of the public purpose of the acquisition, on which the market value of the [acquired] land should be determined?

(ii) In relation to the highest and best use of the [acquired] land, whether the Bewsher scheme for filling the floodplain [that is, land within the flood zone] to enable development is advice a prudent hypothetical purchaser would obtain and act on.”

37 The acquired land comprised the whole of the respondents’ land zoned Special Uses 5(a). It was common ground that in determining the first of the issues to which I have referred, the public purpose for which the land was acquired was to be disregarded by virtue of the provisions of s 56(1)(a) of the Just Terms Act which provided as follows:

“(1) In this Act:

market value

(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, …”

38 The notices published in the Government Gazette on 23 March 2007 stated that the relevant acquisitions were for the purpose of the Sydney Water Act 1994. It was accepted that the public purpose for which the land was acquired gave rise to the Special Uses 5(a) zoning of the acquired land at the date of acquisition. The parties agreed that that zoning was to be disregarded pursuant to s 56(1)(a) as it reflected the public purpose for which the land was acquired. The market value of the acquired land therefore needed to be assessed on the basis of its underlying zoning which was in dispute. However, there was also disagreement about what was to be disregarded under s 56(1)(a) because of differences in how the parties defined the public purpose for which the land was acquired. That difference also led to different views about the appropriate underlying zoning. The respondents argued that the underlying zoning was Residential whereas the appellant argued that it was Rural.

39 Her Honour determined that the public purpose for which the land was acquired was the provision of a trunk drainage scheme to service the RHDA in general and what was later described as the Balmoral Road Release Area (the BRRA) in particular and within which the respondents’ lands were located. There was no challenge to this finding.

40 After a consideration of the planning history of the area as well as the expert evidence of the planners called by the appellant on the one hand and the respondents on the other, her Honour concluded (at [48]) that at the date of acquisition the underlying zoning of the acquired land would have remained Rural 1(a), being its zoning prior to the gazettal of Amendment No. 5 to the 2005 LEP.

41 I interpose that it would appear that after her Honour delivered the first judgment there was some doubt as to whether her finding with respect to the underlying zoning but for the acquisition applied only to the acquired land or to so much of the residue lands as were within the flood zone.

42 In the second judgment her Honour clarified the point (at [2]) by stating:

“I should clarify that my finding [in the first judgment] that the underlying zoning for the determination of market value is rural applies to all of the acquired land … not only the land [in the flood zone] … as I did not make a specific statement on that issue in my earlier judgment.”

43 In my opinion, in this passage her Honour was confirming that as at the date of acquisition she had found that the underlying zoning of the whole of the land within the flood zone (which would include the acquired land) would have been Rural 1(a) under the 2005 LEP.

44 The respondents have cross-appealed against this decision of the primary judge contending that she erred in law by failing to find that the underlying zoning of the whole of the lands within the flood zone was Residential rather than Rural 1(a).

(b) The Bewsher scheme issue

45 What was described in the proceedings as the Bewsher scheme formed a major part of the appellant’s submissions both at trial and on the appeal. Mr Bewsher, a hydrologist, was called on behalf of the respondents. As her Honour observed (at [59]), the respondents submitted that the prudent hypothetical parties to the sale of the acquired land would have been advised that the highest and best use of the land within the flood zone (including the acquired land) was its development pursuant to the implementation of the Bewsher scheme.

46 That scheme involved the development of a regional drainage scheme within the Strangers Creek corridor. That corridor was to be excavated, re-vegetated and the creek and its tributaries restored as a naturally functioning system. The approximate width of the corridor would be 60-65 metres. Filling would then take place within the remainder of the land in the flood zone which would have the effect of elevating existing, flood prone land lying beyond the creek corridor to above the 100 year flood level thus making it available for urban development.

47 The design proposed a cut and fill exercise so that there would be no adverse impact up or downstream. It was accepted that the scheme was purely a design concept and that a more detailed plan would be needed to support any development application to the Baulkham Hills Shire Council (the Council), whose approval of the scheme would be required.

48 Mr Bewsher considered that a hypothetical prudent purchaser would be likely to obtain advice from a hydrological engineer that such a scheme could be achieved. The scheme could be carried out in conjunction with other landowners or separately on an individual property basis. He considered that it was more likely that the landowners would either co-ordinate their activities or sell their lands to a development company.

49 If the scheme was implemented, Mr Bewsher considered that 38,857m² of the Caruso properties, 14,888m² of the Mesiti land, 15,314m² of the Polito land and 15,513m² of the Nati land could be developed for residential or other urban purposes permissible under the assumed Rural 1(a) zoning under the 2005 LEP which her Honour described (at [154]) as “unusually generous”.

50 At [62] her Honour referred to the evidence of Dr Joliffe (the hydrologist called on behalf of the appellant) that because the Bewsher scheme was a concept design only, he could not determine if it was likely to receive Council approval. However, he considered that the scheme did not conform to the regional drainage strategy for the area adopted in 2004 by the Council and would therefore require the Council to revise its planning principles and policies if it was to be approved. Furthermore, it required the provision of detention storage or basins at locations outside the drainage corridor that had not been previously considered by the Council. It had other negative aspects.

51 At [63] the primary judge noted that the hydrologists had met and produced three joint reports. According to her Honour (at [64]), those experts had agreed that it was possible to construct the Bewsher scheme so that it had no adverse impact downstream. Further, they had agreed that catchment detention facilities could have been located other than in the main channel of Strangers Creek. At [68] her Honour said:

“The Bewsher scheme provides drainage only for the properties in the relevant area along Strangers Creek and no catchment detention facilities. Catchment detention basins are proposed for this area but, if not constructed, alternative detention basins could be provided at other locations upstream of Windsor Road.”

52 It is sufficient at this point to note that her Honour accepted (at [82]-[83]) the following of the respondents’ submissions. First a rezoning would not be required before the Bewsher scheme could be implemented. Second, a hypothetical prudent purchaser would have obtained advice from the appropriate Council officer as to whether the Bewsher scheme was likely to be considered for possible approval and would have been informed that it would be so considered and that it was adequate for pre-DA stage consideration by Council planning officers. Third, the Bewsher scheme was adequate for consideration by a prudent hypothetical purchaser when determining whether any value should be added to the land within the flood zone based on an assessment by that purchaser of whether it was likely that the scheme would be approved.

53 Other findings of fact were made by her Honour the details of which are not presently relevant but, generally speaking, they supported her finding (at [86]) that a prudent hypothetical purchaser would be prepared to add value to the purchase price of the acquired land (and, presumably, the residue land within the flood zone) on the basis that the Bewsher scheme might receive development consent although that purchaser would not assume that all relevant property owners would cooperate and carry out the scheme at the same time. However, the purchaser would be advised that the scheme could be implemented on a property-by-property basis.

54 Furthermore, at [156] her Honour acknowledged that a prudent hypothetical purchaser would consider that there was uncertainty about whether the Bewsher scheme would gain development consent for any individual lot as a consequence whereof she adjusted the rate per square metre derived from the comparable sales evidence which she proposed to apply to determine the market value of the acquired land to take account of that fact.

The appellant’s challenges to the primary judge’s decision

55 The appellant advanced a number of challenges to her Honour’s finding as stated in the first sentence of [86] that

“there would be an assumption made [by the hypothetical prudent purchaser] that the Bewsher scheme was likely to be considered favourably by the Council”.

“(ii) the Bewsher scheme is a matter which a prudent, hypothetical purchaser is likely to obtain advice about and he or she would be likely to assign value on the basis that such a scheme could be implemented on individual properties, that is, development in isolation, not at the same time as a whole regional scheme …”

56 Before dealing with the appellant’s challenges it is appropriate to make some comments about its filed Grounds of Appeal. With one now irrelevant exception, the grounds were common to each respondent. Initially there were eight Grounds of Appeal of which Grounds 4 and 6 were abandoned at the commencement of the hearing of the appeal. The other Grounds which were maintained were stated in the following terms:

“1. The trial judge erred at law in the application of s.56(1)(a) of the Lands (sic) Acquisition (Just Terms Compensation) Act 1991 (‘the LAJTC Act’) in the determination of the probable zoning upon which the market value of the acquired lands and adjoining lands was to be assessed, including:

a. By determining that it was only in respect of the acquired land, and not of the whole of the former parcel, for which the application of s.56(1)(a) was to require the disregarding of the present zoning and hence an investigation of an ‘underlying’ zoning ([34]);

b. By failing to determine that the existing residential zoning of the lands within the 1:100 year flood extent was something to be disregarded under s.56(1)(a) of the LAJTC Act as something caused by the proposal of the Appellant to carry out a public purpose on the acquired land ([8] [9] (No 2));

c. By impermissibly disregarding under s.56(1)(a) of the LAJTC Act the planning purpose of authorities other than the Appellant in placing detention basins on the subject land and thus using the whole of the former parcel for trunk drainage purposes when those purposes were not part of, or were independent of, any proposal of the Appellant to carry out a public purpose on the land to be acquired.

2. The trial judge erred at law in misdirecting herself as to what was the highest and best use of the subject land and how compensation was to be derived under s.55 of the LAJTC Act as to the market value of the land in achieving that highest and best use (at [55], [80], [82], [83], [85]).

Particulars

a. The trial judge found that the present zoning of the subject land was a matter to be disregarded under s.55(1)(a) of the LAJTC Act, and that the ‘underlying zoning’ was one for rural purposes.

b. The trial judge failed to find that in order for the land to achieve its highest and best use of residential development, a re-zoning would be required to change the zoning from its underlying rural designation to something permitting residential development, injecting elements of time and risk into the determination of the appropriate compensation payable under s.55 of the LAJTC [Act] on achieving the highest and best use of the subject land;

c. The trial judge found that pursuit of a cut and fill scheme of land development was itself the highest and best use of the subject land without making findings as to the higher purpose to which that scheme of land development would be put or without finding that a re-zoning application would be a necessary pre-condition to achieving that higher purpose;

d. To the extent that the trial judge may be taken (at [154]) to have found that the highest and best use of the residue land may be for a form of rural development such as under State Environmental Planning Policy (Senior’s Living) 2004, or for some rural-commercial purpose, her Honour misdirected herself as to the test for determining the highest and best use or misdirected herself on the evidence by failing to take into account whether this purported ‘highest and best use’ or misdirected herself on the evidence by failing to take into account whether this purported ‘highest and best use’ (sic) would be likely to obtain the consent of the council given its potential impacts on flood affected land containing endangered ecological community vegetation.

e. The trial judge failed to make a finding that the cut and fill scheme of land development would be carried out under some distinct proposal for the rural use of the land, being the highest and best use; meaning that the trial judge either asked herself the wrong question as to what was the highest and best use of the subject land, or failed to take into account a relevant consideration of how the cut and fill scheme was connected to a determined ‘highest and best use’.

3. The trial judge erred at law and misdirected herself as to the relevant test for determining a ‘just’ amount of compensation under the LAJTC Act by finding that it was open to her to resolve an issue upon which the expert evidence relating to hydrological impacts of the scheme of cut and fill land development conflicted by finding in favour of the Respondent in cases of doubt (at [81]).

4. …

5. The trial judge erred in finding that the land was not subject to an inherent characteristic of being the only land in the catchment suitable for use for trunk drainage (at [52]).

Particulars

a. Her Honour found that the Appellant was required to show a ‘consistent coincidence’ between what was asserted to be an inherent characteristic of the land that it was uniquely suitable for a ‘use for trunk drainage’ and the public purpose for which the land was acquired, which was a misunderstanding of the Appellant’s case and a misapplication of s.56(1)(a) of the LAJTC Act;

b. Section 56(1)(a) of the LAJTC Act would require the Court to disregard increases or decreases in value by reason of the public purpose proposed to be carried out on the subject land but did not require the Court to disregard an inherent characteristic of the land that decreased its value when that decrease was not brought about by the public purpose of the Appellant.

c. As the inherent characteristic of the land was not taken into account, the trial judge failed to consider a relevant matter in the determination of a just amount of compensation to be paid by the Appellant under the LAJTC Act.

6. …

7. The trial judge erred at law in determining that the just compensation to be determined under s.55 of the LAJTC Act was by use of a piecemeal method of valuation, because:

a. Having made all findings on the town planning, hydrology and ecology evidence on the basis of a ‘before and after’ method of valuing the acquired land, it was not reasonably open to her Honour to then adopt a piecemeal method of land value (sic) to finally determine the compensation payable by the Appellant.

b. Her Honour failed to apply the provisions of a (sic) s.55(f) of the LAJTC Act for a deduction for the increase in value of the other land adjoining the acquired land;

Constantino v RTA

57 In opening the appeal, senior counsel for the appellant acknowledged that by virtue of s 57(1) of the Land and Environment CourtAct 1979 (the Court Act) any appeal from the primary judge’s orders was confined to an appeal against her Honour’s decision on a question of law. Senior counsel therefore attempted in opening the appeal to fashion what he asserted were four questions of law.

58 The first was whether, on the proper construction of s 56(1)(a) of the Just Terms Act, her Honour was required to apply that sub-clause only to the acquired land or to the whole of the land (including the residue land) of each of the respondents. This question of law was said to be encompassed by Grounds 1(a) and (b) and Ground 7 of the filed Grounds of Appeal. Senior counsel acknowledged that it raised the question of “betterment”.

59 The second asserted question of law was also founded on s 56(1)(a) combined with s 55 and was to the following effect: having found the underlying zoning of the land within the flood zone to be Rural 1(a), her Honour erred in then determining its highest and best use without having any regard whatsoever to the principles or policies adopted by the Council in 2004 to the effect, as I understand the submission, that the whole of that land was required for a regional trunk drainage scheme involving the location within that land of a number of drainage basins. In other words, notwithstanding her Honour’s recitation of the planning history (which included the proposed provision of trunk drainage within the Strangers Creek area), she had in essence adopted the Bewsher scheme without taking into account that that scheme was inconsistent with the Council’s adopted principles and policies with respect to trunk drainage upon the land within the flood zone.

60 It was submitted that it was simply not open to her Honour to adopt the Bewsher scheme in the face of the history of the Council’s and Department of Planning’s trunk drainage requirements for the area and which involved the whole of the land within the flood zone. It was asserted that Grounds of Appeal 1(c) and 2 covered the foregoing submission.

61 The third question of law was said to arise out of her Honour’s reliance upon a passage from the judgment of Talbot J in McBaron v Roads and Traffic Authority of New South Wales (1995) 87 LGERA 238 at 244-245 when determining whether to accept the evidence of Mr Bewsher with respect to the prospects of his scheme being approved by the Council in preference to the conflicting evidence of Dr Joliffe who considered that it was unlikely that the scheme would be approved by the Council given the planning history and the policies and principles with respect to trunk drainage adopted by the Council (and which was the subject of the second asserted question of law). The question of law so posed was said to be covered by Ground of Appeal 3.

62 The fourth and final question of law, which was but faintly pressed, asserted that her Honour, contrary to the decision of the High Court in R v Murphy (1990) 71 LGRA 1, had failed to find, and then to take into account, that it was an inherent characteristic of the acquired land (and presumably the whole of the land within the flood zone) that it be used only for the purpose of a regional trunk drainage scheme. Consequently, as I understand the submission, it was not open to her Honour to adopt the Bewsher scheme with respect to that land. This question of law was said to be covered by Ground of Appeal 5.

The respondents’ challenge to the filed Grounds of Appeal

63 The respondents submitted that Grounds of Appeal 2, 3 and 5 raised only questions of fact and were not related to any decision by her Honour on a question of law. They further submitted that Ground of Appeal 1 was misconceived insofar as it purported to assert that s 56(1)(a) of the Just Terms Act applied not only to the land acquired but also to any residue land within the flood zone adjoining the land acquired. Ground of Appeal 1(c) was also said to be misconceived insofar as it purported to raise a question of construction of s 56(1)(a).

64 Ground of Appeal 7 was also asserted to be misconceived as first, there was no requirement for her Honour to apply what is referred to in Ground of Appeal 7(a) as the “before and after” method of valuation and, second, Ground of Appeal 7(b) did not raise a question of law but only a question of fact which had been determined contrary to the appellant.

65 In my view there is substance in the respondents’ submissions, but at the end of the day it is unnecessary to deal with the respondents’ criticism of the individual Grounds of Appeal given the manner in which the appellant sought to confine its case on the appeal. In my view it is more appropriate to limit these reasons to a consideration of the issues actually advanced on the hearing of the appeal rather than those articulated in the filed Grounds of Appeal. I now turn to the former.

The first alleged question of law

66 I would reject the appellant’s submission that s 56(1)(a) of the Just Terms Act applies to any increase or decrease in the value of land other than the acquired land. Any question of so-called “betterment” is irrelevant to the determination of the market value of the acquired land and it is only the acquired land to which s 56(1) applies. This is made clear by the provisions of s 55(a) which requires regard to be had when determining the amount of compensation to which a person is entitled to

its

67 Any question of “betterment” falls under s 55(f) which relevantly provides that regard must be had to

“any increase or decrease… in the value of any other land of the person at the date of acquisition which adjoins … 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.”

68 It follows that the first question of law as framed by the appellant in its opening is misconceived insofar as it seeks to raise the “betterment” issue. However, s 55(f) is raised, in a fashion, by Ground of Appeal 7.

69 The primary judge did not deal with the issue of betterment in the first judgment, but did so in the second judgment. The respective arguments of the parties were stated by her Honour in the second judgment as follows:

Constantino v Roads and Traffic Authority of New South Wales

Constantino

70 It is a matter of judgment whether a “piecemeal approach” as distinct from a “before and after” approach is appropriate when dealing with issues of injurious affection or betterment under s 55(f) of the Just Terms Act. A “piecemeal approach” involves the assessment of the market value of the acquired land and accounts separately for any injurious affection to or enhancement of the value of any retained land, whereas a “before and after approach” involves calculating compensation by subtracting the market value of any retained land immediately after acquisition from the market value of the entire land immediately before acquisition. Both approaches depend in the first place upon a finding that any increase or decrease in the value of any residue land is “by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired”. What is required is a connection between any such increase or decrease in value and the carrying out, or the proposal to carry out, the relevant public purpose, in the present case being the undertaking by the appellant of trunk drainage works on the acquired land.

71 The primary judge’s findings with respect to this issue were as follows:

Caruso No 1

72 The reference at [8] above is to [35]-[49] of the first judgment under the heading “Finding on underlying zoning” which included, relevantly, the following findings:

“40. … The Department and the Council’s consideration of how drainage for the BRRA including Strangers Creek would be addressed was not to be disregarded at the time that the [Sydney Water Board] assumed responsibility for the provision of drainage in 1991. … The Council’s approach was that land in creek corridors which was flood affected would be used for trunk drainage and this could not be disregarded. This approach would mean that the rural zoning of the flood affected land which existed in 1991 would have continued until the date of acquisition.

41. …

Given the responsibility of the state and local levels of government for planning, particularly the Council in relation to the determination of zoning (ultimately with the approval of the Minister for Planning for any local environmental plan) the potential trunk drainage use of the land existed separately from the purpose of the [appellant] as the acquiring authority. That responsibility for drainage in the whole RHDA and the BRRA is reflected in the planning instruments being developed from 1989 such as the SREP and the Council’s LEP. The use of flood-liable land for drainage purposes was referred to in these

All further reports and studies on the implementation of drainage referred to in the chronology by the planners, while amending the detail of the implementation of that plan in relation to matters such as the location of basins, have continued with that essential scheme.

44. The underlying zoning as at the date of acquisition in 2007 (but effectively 2005 when the LEP Amendment 5 was made) therefore needs to be determined in light of the broader planning context. That is not subsumed by the [appellant’s] purpose of carrying out trunk drainage on the acquired land, inter alia.

This would mean that the land [within the flood zone] not required for trunk drainage would be zoned residential in this case and be subject to development controls relating to its flood prone nature.

46. … Subsequent studies concerning drainage were undertaken, in particular the 2002 GHD report and the PPK report in which detailed planning for trunk drainage was undertaken. Based on these broader planning considerations and informed by those studies, the Council’s LEP was developed over several years. … The BRRA structure plan was exhibited in 2003, adopted in 2004 and the LEP Amendment 5 which zoned the acquired land Special Uses 5(a) was then made. The adjoining land was then zoned residential. That all occurred in light of the involvement of the [appellant] since 1991.” (Emphasis added)

73 The appellant submitted that the last sentence of [46] indicated a connection between the zoning of the land adjoining the acquired land as Residential and the involvement of the appellant since 1991 in the trunk drainage proposals associated with Strangers Creek. The respondents submitted that the evidence established that the appellant’s “involvement” to which her Honour was referring related to and was a catalyst for the release of land in the Kellyville/Rouse Hill area for urban development including the means by which that release would be scheduled. They contended that her Honour was not making a finding that the Residential rezoning effected in 2006 by Amendment No. 5 to the 2005 LEP was due to the involvement of the then Water Board.

74 When one reads the last sentence of [46] in the context of her Honour’s findings in the preceding paragraphs including, in particular, her finding at [42] which I have emphasised, it is apparent that the appellant’s contention as to what her Honour was intending to convey in that sentence must be rejected.

146 In my opinion, the principle for which McBaron was cited at [7] extended to the so-called conflict between the advice which each of the hydrologists opined would be given to the hypothetical purchaser by a hypothetical hydrologist and, for that matter, a hypothetical town planner. The evidence of those experts falls, in my view, into the same category as the opinion evidence of expert valuers. In the normal course, in a case such as the present (and indeed in the present case), the valuers called by the respective parties would take and analyse comparable sales to determine a rate per square metre to apply to the acquired land. Each would express an opinion as to whether the rate derived from the comparable sales should be adjusted up or down to take account of, for instance, the potential highest and best use of that land and its other characteristics to the extent to which they differed from the sales evidence. In determining a rate to be adopted, the judicial valuer was required to resolve the doubts or conflicts raised in the expert evidence as to the rate to be derived from the analysis of the sales and the adjustments, if any, to be applied to that rate, in favour of the dispossessed owner.

147 The conflicts in the evidence of Mr Bewsher and Dr Joliffe involved the extent to which, if at all, the hypothetical purchaser would receive advice as to the possibility of the Council considering favourably a scheme such as the Bewsher scheme. The primary judge was entitled to resolve those doubts, like other doubts bearing upon value, in favour of the respondents. She stated the principle in unexceptionable terms at [7] and I do not believe that she was intending to refer to or rely upon a different principle in the last sentence of [81].

148 In my opinion, therefore, I would not be prepared to accept that in the context in which her Honour stated the principle or approach she intended to adopt in that sentence, she erred in law. Her choice of words when referring to a conflict in the expert evidence may have been better expressed but that should not be taken as evidencing an erroneous statement of a well-established principle of valuation.

149 It thus follows from the foregoing that either no error of law is to be found in the last sentence of [81] or, if error there be, it had no operative effect on any relevant finding of fact. I would therefore reject the appellant’s third ground of challenge.

The fourth alleged question of law

is authority for the proposition that when determining the value of land compulsorily acquired, the judicial valuer is required to take into account the effect on the value of any relevant attribute or inherent characteristic of that land. At 4 the Court (comprising Mason CJ, Brennan, Deane, Gaudron and McHugh JJ) said:

“Of course, a characteristic or attribute of the land which affects its value must be taken into account in the assessment of compensation even if the planning restriction which is a step in the process of resumption is dependent upon or directed to that characteristic or attribute.”

151 The appellant submitted to the primary judge that the use of the respondents’ land within the flood zone for trunk drainage was a characteristic thereof that affected its value and was required to be taken into account in the planning process. At [52] her Honour rejected that submission.

152 At [26] her Honour had said

“… while the [respondents’] lands are flood affected it is not an attribute or characteristic of the lands that these are required for catchment trunk drainage. The [appellant] cannot show a consistent coincidence between the characteristic of a ‘use for trunk drainage’ and the public purpose. The evolving nature of the trunk drainage schemes since that proposed by Kinhill demonstrates that there is no necessity for the scheme to be located on the [respondents’] lands. It is an entirely artificial construction designed to accept increased flow in water because of yet to be carried out upstream development.”

153 Her Honour returned to the issue at [52] observing that her rejection of the argument that an inherent characteristic of the land within the flood zone was that it be used for trunk drainage was made in light of

“evidence considered in detail in the next section of the judgment concerning whether the Bewsher scheme could be implemented and would be considered by the Council for development approval. As submitted by the [respondents], based on the agreed hydrological evidence, parts of such a scheme such as the detention basin could be located other than on the [respondents’] lands. While the use of lowlying, flood liable land for trunk drainage may well be a preferable option, that does not suggest it is an inherent characteristic of the land which would mean that the [respondents’] lands had to be used for trunk drainage.”

154 The findings to which I have referred above are, clearly, findings of fact. There can be no doubt that any determination of the characteristics or attributes of land involve a finding of that character. It follows that the appellant’s complaint is in relation to a finding of fact in respect of which no appeal lies. Accordingly, this fourth challenge should be rejected.

The respondents’ cross-appeal

155 The respondents Mr and Mrs Caruso raise two issues on their cross-appeal. The first is that the primary judge erred in the first judgment in determining the market value of the acquired land on the basis that the underlying zoning thereof was Rural rather than Residential. The second was that her Honour erred in the second judgment in rejecting the claim of the respondents other than Mr and Mrs Polito for stamp duty payable upon the actual or proposed acquisition of a property to replace the land which had been compulsorily acquired. In this respect, each of the Caruso respondents had sworn an affidavit in which it was stated that they had been market gardeners, had used the compulsorily acquired land as a market garden and that they were searching for a new property to replace the compulsorily acquired land so that they could continue their market garden activities.

156 The respondent Mr Mesiti deposed that he intended to purchase another property to replace his compulsorily acquired land, whereas the respondent Mr Nati deposed that he had in fact replaced his compulsorily acquired land by purchasing a property at Galston for the price of $1.65 million. There was no evidence as to whether the respondents Mr and Mrs Polito proposed acquiring a replacement property. It would appear that in relation to the respondents other than Mr and Mrs Polito, the amount of stamp duty was agreed but not their entitlement to it.

The Residential rezoning issue

157 The respondents submitted that in finding that the underlying zoning of the land within the flood zone was Rural 1(a), the primary judge erred on the basis that the evidence established that notwithstanding the residential release of surrounding land, the acquired land was held back from being so zoned until the process by which the issue of trunk drainage was to be dealt with was resolved.

158 Reliance was placed upon the Council memo of 24 January 1991 extracted by her Honour at [15(xiv)] which proposed the following amendments to the then draft LEP:

“Land previously zoned Rural 1(a) will be given one of the following designations:

■ Special Uses 5(a) (Trunk Drainage) to be acquired by the Water Board;

■ Open Space 6(a) (Existing and Proposed Public recreation) to be acquired by Council; and

■ Under private ownership in accordance with adjoining zone and subject to Special Development controls, i.e. restricted development areas.

The development of land below 1:100 year flood will require the concurrence of the Water Board.”

159 The effect of this memo, so it was submitted, was that land not required for trunk drainage purposes would have the same zoning as the immediately adjoining land notwithstanding that the former was within the flood zone. Once the trunk drainage position was resolved, Amendment No. 5 to the 2005 LEP in fact released the land outside that zoned Special Uses 5(a) for acquisition by the appellant and rezoned it Residential.

160 It followed, therefore, that once the Special Uses 5(a) zoning is disregarded, the finding was open to her Honour that the whole of the land within the flood zone would have been zoned Residential.

161 In my opinion this challenge to her Honour’s finding should be rejected. That finding did not involve a decision on a question of law unless, at the very least, the evidence was all one-way. It was not, given her Honour’s finding at [48] which was based on her preference for the evidence of Mr Rowan to that of Mr Grech which she had summarised at [47].

162 Even if her finding as to the underlying zoning were perverse or unreasonable, no error of law would be disclosed: Randwick Municipal Council v Manousaki (1988) 66 LGRA 330 at 333 per Clarke JA, with whom Hope and McHugh JJA agreed.

The stamp duty issue

163 At [176] the primary judge referred to the claims by the respondents, other than Mr and Mrs Polito, to stamp duty, noting that they were made under s 59(f) of the Just Terms Act. Section 55 requires the judicial valuer, when determining the amount of compensation to which a person is entitled, to have regard to “(d) any loss attributable to disturbance”. That expression is defined by s 59 to mean 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 reasonably incurred by those persons in connection with the compulsory acquisition 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.”

164 Her Honour noted that based on a number of single judge decisions of the Land and Environment Court commencing with Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of New South Wales (1998) 101 LGERA 30, the respondents’ claim was unavailable. However, her Honour deferred making any finding with respect to this issue to be dealt with in the second judgment.

165 The appellant’s resistance to the claims for stamp duty was based upon s 61 of the Just Terms Act which is in the following terms:

“If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:

(a) any financial advantage that would necessarily have been forgone in realising that potential, and

(b) any financial loss that would necessarily have been incurred in realising that potential.”

166 In Peter Croke, Bignold J considered that s 61 prohibited a claim for disturbance under s 55(d) because the market value of the acquired land had been determined on the basis of a higher and more valuable use than its use at the time of acquisition. The appellant argued that s 61 applied in the present case because the determination of market value for lands zoned Rural 1(a) under the 2005 LEP included as her Honour found, potentially more valuable uses of the lands than their pre-acquisition use.

167 At [18] of the second judgment her Honour noted that the current use of the respondents’ land was as rural home sites. However, she had determined the market value of the acquired land by taking into account its potential for development under its assigned Rural 1(a) zoning, including its use for seniors’ living facilities and specified commercial types of development permissible within that zone. It was common ground that the relevant lands were not being used for those purposes at the date of their acquisition.

168 Her Honour’s conclusions with respect to this issue were as follows:

Peter Croke

Walker

AMP

Peter Croke

20. I agree with the [appellant’s] submission that as the market value has been assessed on the basis that the land has the potential to be used for a purpose other than its current use, compensation (which includes disturbance under s 55(d)) cannot include the [respondents’] claims for stamp duty under s 59(f).”

169 Although it would appear that before her Honour the respondents placed reliance upon the decision of the High Court in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 and some statements of Hodgson JA in AMP Capital Investors Pty Ltd v Transport Infrastructure Development Corporation [2008] NSWCA 325 at [51]-[75], no such reliance was placed upon those decisions in the respondents’ written or oral submissions on the appeal. They can therefore be put to one side.

170 In Peter Croke, Bignold J (at 36-43) traced the history relating to the award of compensation for loss caused by a compulsory acquisition of the land upon which a business had been conducted. The authorities to which his Honour referred established the principle that compensation for compulsory acquisition should include not only the market value of the land acquired but also any personal losses imposed upon the owner by the forced sale. Thus in Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 at 563, the following proposition (omitting citations), amongst others, was stated by Glass JA as part of the relevant law relating to the assessment of compensation in compulsory acquisition of land cases:

“The compensation recoverable could also extend to consequential losses suffered over and above the market value of the land such as costs for removal, loss of profits etc. Actual losses caused by the forced acquisition are described as claims for disturbance. The principle of compensation includes such losses in the compensation assessed together with the market value of the land because otherwise the owner will not be fully compensated.”

171 At 41 of Peter Croke his Honour asserted that compensation for “disturbance loss” under s 55(d) and s 59 was subject to the effect of s 61. He observed that it was apparent that the latter section was intended to deny certain entitlements to compensation which would otherwise be claimable. Those entitlements were required to be sourced in s 55 (which provided for compensation to be assessed in accordance with Division 4 of Part 3 of the Just Terms Act which included ss 59 and 61) and the most obvious source was “any loss attributable to disturbance” contained in s 55(d) as defined in s 59.

172 Of particular significance to his Honour’s construction of s 61 was the decision of the High Court in Crisp & Gunn Co-Operative v Hobart Corporation [1963] HCA 55; (1963) 110 CLR 538, at 547-548, where the Court (comprising McTiernan, Taylor and Windeyer JJ) observed:

“Further we are of the opinion that the requirement of the statute that regard should be had in assessing compensation to a number of factors including ‘disturbance and any other matter not directly based on the value of the land’ does not justify the award of any amount for disturbance in addition to the market value of the land where, as here, that value exceeds the ‘present use’ value by an amount in excess of any loss resulting from disturbance.”

173 At 43 of Peter Croke Bignold J then noted that s 61 merely recognised the fact that the assessment of market value in accordance with s 56(1) of the Just Terms Act could proceed on one of two bases, namely, (i) its present use, or (ii) a higher (and more valuable) use for which the land possesses the potential and for which it is advantageously adaptable.

174 His Honour then continued in the following terms:

“Usually of course, the estimation of ‘market value’ will adopt basis (ii) because it yields the higher value. However, where that basis for assessing ‘market value’ is adopted, s 61 precludes the recovery of additional compensation with respect to (a) financial advantage that would necessarily have been foregone in realising the potential (for the higher use); and (b) financial loss that would necessarily have been incurred in realising that potential.”

175 It followed that on the facts of the case before him

“… if the first applicant’s claim to compensation which is founded on the entitlement to the ‘market value’ of the land (s 55(a)) were to lead to an assessment of compensation on the basis of a higher and more valuable use of the acquired land than on the basis of its existing use (being the use made by the second applicant, as lessee or tenant, in the conduct of its business) and that assessment on the basis of the higher use was predicated upon the termination of the second applicant’s tenancy of the land and the cessation of conducting its business thereon, the second applicant would not be entitled to compensation in respect of ‘loss attributable to disturbance’ because (i) the financial advantage of continuing in occupation and in the conduct of the business would necessarily have been foregone in realising that (higher) potential; and (ii) the financial loss to the second applicant of ceasing to conduct the business, or of having to relocate the business, would necessarily have been incurred in realising that (higher) potential.”

176 It is to be noted that in Peter Croke, the claim which was disallowed related to business losses, being financial costs incurred pursuant to ss 59(c) and (f). In Damjanovic v Roads and Traffic Authority of New South Wales (No 2) [2005] NSWLEC 371, the applicants conducted a poultry business upon the land which was compulsorily acquired. The acquired land was valued upon the basis of its potential to be used for a purpose other than its current use, namely for egg production. The applicants wished to continue with that business and acquired a replacement property with the intention of relocating their existing egg production business. They claimed legal costs and stamp duty incurred on that purchase. Bignold J rejected the claim applying his decision in Peter Croke.

177 At [23] his Honour observed that s 61 applied in that case as the market value of the compulsorily acquired land was determined upon the basis that it had potential to be used for a purpose other than that for which it was used prior to the acquisition so that in realising that potential (both with respect to the compulsorily acquired land and the residue land) the financial advantage of continuing the existing development (i.e. the poultry business and the ancillary dwelling houses) “would reasonably have been foregone” as would any financial loss of having to relocate that business and those dwelling houses which “would reasonably be incurred in realising that potential”.

178 Accordingly, compensation for disturbance loss in respect of the relocation of the poultry business was not recoverable; nor was the applicant’s disturbance claim with respect to legal costs and stamp duty incurred in respect of the acquisition of an alternative property. His Honour considered that there was nothing unfair or unjust in such a conclusion where the compensation awarded for market value based upon a higher potential use far exceeded the land’s value based upon its current or existing use for a poultry business.

179 In Costantino and Maric v Roads and Traffic Authority of New South Wales [2006] NSWLEC 248, Pain J (at [94]) considered that the words “costs” where used in s 59 and the word “loss” where used in s 61 were, in fact, interchangeable given the context in which they were used. Her Honour referred to and applied the decision of Bignold J in Damjanovic holding that s 61 operated to prevent recovery of compensation under s 59.

180 Most recently, in McDonald v Roads and Traffic Authority of New South Wales [2009] NSWLEC 105, Biscoe J analysed the relationship between ss 59 and 61 in, relevantly, the following terms:

”94. The market value of land in s 55(a) and any loss attributable to disturbance in s 55(d) are separate components of compensation. The former is assessed in accordance with the hypothetical exercise required by the definition of market value in s 56(1)(a). The latter is assessed by reference to the actual costs and fees specified in s 59, which are qualified by a reasonableness requirement and subject to the limitations on the recovery of loss in s 61 … .

…

Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW

Serbian Cultural Club v Roads & Traffic Authority of New South Wales

Peter Croke

‘[is] to deny recovery of compensation for disturbance loss where a claim to such compensation is inconsistent with another claim to compensation based upon the market value of the land, where that value is assessed on the basis of a potential higher use of the land than the existing use and where the realisation of that potential necessarily terminates (or postulates the termination of) that existing use.’

Horn v Sunderland Corporation

Horn

Commonwealth v Milledge

‘The conclusion reached was that when land being used for agricultural purposes is ripe for building, and compensation for its compulsory acquisition is fixed on the basis of its value as building land, compensation for disturbance of the agricultural business should only be awarded to the extent (if any) that the value of the land for agricultural purposes together with the compensation for disturbance exceeds the compensation payable on the basis of the land being building land.’

Horn

181 The respondents’ submission was that s 61 was limited to the assessment of market value alone and was not referrable to the other heads of compensation claimable under s 55 including compensation for disturbance. In their written submissions it was submitted that the correct approach to the assessment of loss attributable to disturbance – where s 61 is properly construed – was to apply s 59(f) which had been construed to be a “catch all” provision which permitted the recovery of stamp duty incurred as a consequence of the acquisition of replacement land.

182 However, on the hearing of the appeal, the respondents abandoned any claim to disturbance under s 59(f) and confined their claim to the recovery of stamp duty under s 59(d). That change created its own problems given that the respondents’ claim for stamp duty was confined before the primary judge to s 59(f). Consequently, she was not called upon to determine any factual issue under s 59(d) including, in particular, the correct construction of the words “in connection with the purchase of land for relocation”.

183 As I have observed, the respondents submitted that s 61 only regulated the market value of the land in respect of which compensation was payable pursuant to s 55(a) of the Just Terms Act. It was submitted that it had no impact upon a claim for loss attributable to disturbance pursuant to s 55(d) and which was otherwise recoverable in accordance with s 59(d). Section 61 merely qualified the determination of market value in accordance with the definition of that expression in s 56(1).

184 In my view those submissions should be rejected. They are inconsistent with the reasoning of Bignold J in Peter Croke and the many cases which have applied it since 1998. In particular, the submissions are inconsistent with the reasoning in McDonald which I consider to be correct. In my view s 61 deals with the consequences of the assessment of compensation under s 55 (other than s 55(a)) where the market value of the acquired land has been determined pursuant to s 56(1) in accordance with its highest and best use when that use exceeds the market value of the land upon the basis of its actual use as at the date of acquisition. The section does not purport to deal with market value as such. However, s 61(a) may deny a claim for special value pursuant to s 55(b) and s 57 just as s 61(b) may deny a claim for loss attributable to disturbance pursuant to s 55(d) and s 59.

185 Of course, it does not necessarily follow that if s 61 applies it trumps each of the sub-paragraphs of s 59. Relevantly to the present case, it only denies compensation for disturbance where the relevant costs in respect of which a claim is made under s 59 would necessarily have been incurred in realising the potential to which s 61(b) refers. Thus, s 61 would not prevent a claim for disturbance under ss 59(a) and (b). But where stamp duty is incurred by persons entitled to compensation in connection with the purchase of land for relocation where that relocation is necessary to enable the potential to which s 61 refers to be realised, then in my view s 61 denies a claim under s 59(d).

186 In expressing the above opinion, I have not lost sight of the change in language between s 59 and s 61 in that the former in sub-paragraphs (c), (d), (e) and (f) refers to “costs” reasonably incurred whereas s 61(b) refers to the incurring of financial “loss”. However, I agree with Pain J in Costantino that there is no relevant difference between the use of the word “costs” in four of the sub-paragraphs of s 59 and the use of the word “loss” in s 61. Her Honour’s construction is supported by the opening words of s 59, which provides that “loss attributable to disturbance” means, amongst other things, the incurring of financial costs, or stamp duty costs.

187 Although, as the respondents submit, s 61 refers only to the assessment of the market value of land on the basis of its potential to be used for a purpose other than that for which it is currently used, paragraphs (a) and (b) in my view are not directed to that assessment. In particular, it seems to me that paragraph (b) is directly related to financial losses which might otherwise fall within s 59 and which would necessarily be incurred in realising the potential of the land upon the basis on which its market value has been assessed.

188 Accordingly, in my view her Honour was correct to find that s 61(b) had the effect of denying to the relevant respondents compensation for the costs of any stamp duty incurred or proposed to be incurred by them in acquiring other property as a replacement for the land which was compulsorily acquired.

Conclusion

189 In my view the challenges to the decision of the primary judge by both the appellant and the respondents should be rejected. I would therefore propose that both the appeal and cross-appeal be dismissed with costs.

190 SACKVILLE AJA: I have had the advantage of reading the draft judgments prepared by Allsop P and Tobias JA. Subject to what appears below, I agree with the judgment of Tobias JA.

191 I agree with Allsop P that error was disclosed in [81] of the primary Judge’s reasons. However, I also agree with the view expressed by Tobias JA and adopted by Allsop P, that regardless of who bears the burden of persuasion, the error made by her Honour did not affect the decision she ultimately reached. Accordingly, the decision was not “vitiated” by reason of the error as required by Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409, at 419, per Moffitt P.

192 In Balenzuela v De Gail (1959) 101 CLR 226, at 234, Dixon CJ pointed out that there had been:

“inconsistent judicial statements … as to where the burden lies of satisfying the court of the tendency, or lack of tendency, of the misdirection [to the jury] or misreception of evidence or other error at the trial to affect the result.”

If the question really be of any importance, resting as it does rather on processes of reasoning than upon proof of an issue of fact

193 The opening words of the latter passage reflect Dixon CJ’s scepticism as to whether correctly locating the burden of persuasion in relation to a process of reasoning, as distinct from locating the burden in relation to the proof of a fact in issue, is likely to be a matter of importance. I would prefer to leave the resolution of the issue discussed by Allsop P and Tobias JA to a case in which it is important and in which the Court has had the benefit of full argument on the point.

194 Nonetheless, in the light of what my colleagues have said, I wish to make some brief observations.

195 Courts have to address the significance of legal error by a trial judge or by an administrative tribunal in a variety of contexts. The issue can arise, for example, where a judge has incorrectly rejected or admitted evidence in a civil jury trial (as in Balenzuelav De Gail), in a civil trial by judge alone (as in Vocisano v Vocisano (1974) 130 CLR 267; Hamod v Suncorp Metway Insurance [2006] NSWCA 243) or in a criminal trial (as in HG v The Queen [1999] HCA 2; 197 CLR 414); where a judge has denied procedural fairness to a party in a civil trial (as in Stead v State Government Insurance Commission [1986] HCA 54; 161 CLR 141); where a judge has committed an error of law in a non-jury trial (as in Roads and Traffic Authority of NSW v Mosca [2006] NSWCA 159; 146 LGERA 335; Minister Administering the Crown Lands Act v Deerubbin Local Aboriginal Land Council (1998) 43 NSWLR 249); where an administrative tribunal or decision-maker has made an error of law in the course of determining a claim (as in Collins v Minister for Immigration and Ethnic Affairs (1981) 58 FLR 407; Bisley Investment Corporation Ltd v Australian Broadcasting Tribunal (1982) 59 FLR 132); or where an administrative tribunal or other decision-maker has denied procedural fairness to a claimant (as in Re Refugee Tribunal; Ex parte Aala [2000] HCA 57; 204 CLR 82).

196 A court dealing with what is said to be legal error might be exercising original jurisdiction (for example, in the case of judicial review of an administrative decision) or appellate jurisdiction (for example, on an appeal from a trial judge sitting alone). The jurisdiction of the court may be limited, as in the present case, to entertaining an appeal against a decision of a court on a question of law: Land and Environment Court Act 1979 (“L&E Court Act”), s 57(1). Alternatively, the court may have jurisdiction to set aside decisions on a range of grounds going beyond an error of law (for example, in judicial review proceedings under the Administrative Decisions (Judicial Review) Act 1977 (Cth), s 5; cf Supreme Court Act 1970, s 69).

197 Further, the statutory powers of a court, once a relevant error is established, may be more or less extensive. In the present case, on the hearing of an appeal the Court must either remit the matter to the Land and Environment Court for determination in accordance with the decision of the Supreme Court or “make such other order in relation to the appeal as seems fit”: L&E Court Act, s 57(2); cf Administrative Appeals Tribunal Act, s 44(4); Morales v Minister for Immigration and Ethnic Affairs (1995) 60 FCR 550, at 560-562.

198 It should also be borne in mind that the nature of the inquiry occasioned by legal error may differ, depending on the circumstances. The inquiry may involve what in other contexts is referred to as a “counter-factual”. This is so, for example, where a court asks whether a jury would or might have reached a different verdict had wrongly excluded evidence been admitted. A court undertaking such a counter-factual inquiry does not have the advantage of the jury’s reasons for its verdict. Where a court asks whether a trial court or an administrative decision-maker would have reached the same decision had there been no denial of procedural fairness, it is also addressing a counter-factual (which is perhaps one reason courts tend to be reluctant to ask such a question). On the other hand, where a court determines that the decision of a trial court or administrative tribunal was or was not affected by legal error, made in the course of his or her judgment, the court is not asking what might have occurred in a counter-factual, but what actually did occur in the proceedings. The Court undertaking such an inquiry in relation to a trial court will of course have the advantage of the judge’s reasons for his or her decision.

199 The existence of legal error, whether by a court or an administrative decision-maker, can give rise to a variety of questions. Is the legal error material if it might have affected the decision or only if it did in fact affect the decision? Who bears the burden of persuading the court that the error did (or did not) affect the decision, or that it might (or might not) have affected the decision? If the error did or might have affected the decision, nonetheless would the decision have been the same had the error not occurred? Who bears the burden of persuasion on that question? In my view, the answers to these questions will not necessarily be the same in all circumstances. If this is correct, it follows that judicial observations on these issues in one context will not necessarily provide reliable guidance on apparently similar issues arising in a different context.

200 I agree with the orders proposed by Tobias JA.

**********

Citations

Sydney Water Corporation v Caruso [2009] NSWCA 391

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CITATION:	Sydney Water Corporation v Caruso and Ors [2009] NSWCA 391
HEARING DATE(S):	6 October 2009
JUDGMENT DATE:	3 December 2009
JUDGMENT OF:	Allsop P at 1; Tobias JA at 30; Sackville AJA at 190
DECISION:	Appeal and cross-appeal dismissed with costs
CATCHWORDS:	REAL PROPERTY – Compulsory Acquisition of land – Compensation – Assessment – Market value – Injurious affection or betterment of adjoining property – Whether increase in value of residue land was by reason of the carrying out of or proposal to carry out the public purpose for which land was acquired - Highest and best use – Acquired land located in flood zone – Council had adopted policies to use land for trunk drainage scheme involving detention basins – Whether hypothetical purchaser would be prepared to add value on the basis that a cut and fill scheme was likely to be approved by the Council and implemented so to enable development on flood affected land - Error on a question of law – Whether error of law constituted by statement of primary judge that where expert evidence is conflicting, doubts are to be resolved in favour of claimant – Whether finding vitiated by error of law - Whether an inherent characteristic of the acquired land was that it be used only for trunk drainage - Whether primary judge erred in determining underlying zoning of acquired land - Stamp duty – Claim under s 55(d) and s 59(d) of Land Acquisition (Just Terms Compensation) Act 1991 for loss attributable to disturbance due to stamp duty costs incurred in connection with purchase of a replacement property – Effect of s 61 of Land Acquisition (Just Terms Compensation) Act 1991 on stamp duty claim where market value is assessed on basis of potential use that is more valuable than actual use of land prior to acquisition
LEGISLATION CITED:	Administrative Appeals Tribunal Act 1975 (Cth) Administrative Decisions (Judicial Review) Act 1977 (Cth) Baulkham Hills Local Environmental Plan 2005 Land Acquisition (Just Terms Compensation) Act 1991 Land and Environment Court Act 1979 State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004 Supreme Court Act 1970 Sydney Water Act 1994
CATEGORY:	Principal judgment
CASES CITED:	AMP Capital Investors Limited v Transport Infrastructure Development Corporation [2008] NSWCA 325 Archibald v Byron Shire Council [2003] NSWCA 292; (2003) 129 LGERA 311 Balenzuela v De Gail [1959] HCA 1; (1959) 101 CLR 226 Bisley Investment Corporation Ltd v Australian Broadcasting Tribunal (1982) 59 FLR 132 Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209 Cassidy v Sydney Water Corporation [2008] NSWLEC 223 Collins v Minister for Immigration and Ethnic Affairs (1981) 58 FLR 407 Commissioner of Succession Duties (SA) v Executor, Trustee & Agency Co of South Australia Ltd [1947] HCA 10; (1947) 74 CLR 358 Costantino and Maric v Roads and Traffic Authority of New South Wales [2006] NSWLEC 248 Cook and Edwards v City of Sterling (1991) 4 WAR 469 Crisp & Gunn Co-Operative v Hobart Corporation [1963] HCA 55; (1963) 110 CLR 538 Damjanovic v Roads and Traffic Authority of New South Wales (No 2) [2005] NSWLEC 371 Director-General of Social Services v Hales (1983) 78 FLR 373 Fenton Nominees Pty Ltd v Valuer-General (1981) 47 LGRA 71 Glenorchy City Council v Tacon Pty Ltd [2000] TASSC 51 Hamod v Suncorp Metway Insurance Ltd [2006] NSWCA 243 HG v The Queen [1999] HCA 2; (1999) 197 CLR 414 Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409 McBaron v Roads and Traffic Authority of New South Wales (1995) 87 LGERA 238 McDonald v Roads and Traffic Authority of New South Wales [2009] NSWLEC 105 Minister Administering the Crown Lands Act v Deerubbin Local Aboriginal Land Council (1998) 43 NSWLR 249 Minister for Immigration and Ethnic Affairs v Gungor [1982] FCA 99; (1982) 63 FLR 441 Morales v Minister for Immigration and Ethnic Affairs (1995) 60 FCR 550 Parkmore Investments Pty Ltd v Acer Forester (Darwin) Pty Ltd [2005] NTSC 9 Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of New South Wales (1998) 101 LGERA 30 R v Murphy (1990) 71 LGRA 1 Randwick Municipal Council v Manousaki (1988) 66 LGRA 330 Re Refugee Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 Roads and Traffic Authority of New South Wales v Hurstville City Council [2001] NSWCA 11; (2001) 112 LGERA 223 Roads and Traffic Authority of New South Wales v Mosca [2006] NSWCA 159; (2006) 146 LGERA 335 Sapina v Coles Myer Limited [2009] NSWCA 71 Secretary of State for Foreign Affairs v Charlesworth Pilling & Co [1901] AC 373 Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141 Toll Pty Ltd v Craig Morrissey [2008] NSWCA 197 Tuite v Wingecarribbee Shire Council (No 2) [2008] NSWLEC 321 Vocisano v Vocisano [1974] HCA 14; (1974) 130 CLR 267 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 Yates Property Corporation Pty Ltd (In liq) v Darling Harbour Authority (1991) 24 NSWLR 156
TEXTS CITED:	A Hyam, The Law Affecting Valuation of Land in Australia (4th Ed 2009 Federation Press)
PARTIES:	Sydney Water Corporation Nicola Caruso Joseph Mesiti Giuseppe Polito Maria Polito Domenico Caruso John Nati
FILE NUMBER(S):	CA 40094/09; 40095/09; 40096/09; 40097/09; 40098/09
COUNSEL:	A: John Webster SC / Mark Seymour R: Bret Walker SC / Ian Hemmings
SOLICITORS:	A: Bartier Perry, Sydney R: Hunt & Hunt, Sydney

LOWER COURT JURISDICTION:	Land & Environment Court
LOWER COURT FILE NUMBER(S):	L&E 30692/07; 30693/07; 30694/07; 30765/07 and 30766/07
LOWER COURT JUDICIAL OFFICER:	Pain J
LOWER COURT DATE OF DECISION:	12 December 2008, 23 December 2008
LOWER COURT MEDIUM NEUTRAL CITATION:	Caruso and Ors v Sydney Water Corporation [2008] NSWLEC 320 Caruso and Ors v Sydney Water Corporation (No 2) (2008) NSWLEC 331