Tolson v Roads and Traffic Authority of New South Wales
[2012] NSWLEC 170
•24 July 2012
Land and Environment Court
New South Wales
Medium Neutral Citation: Tolson v Roads and Traffic Authority of New South Wales [2012] NSWLEC 170 Hearing dates: 2, 3, 4, and 9 May 2011; 20, 21, 22, 23, and 24 June 2011 Decision date: 24 July 2012 Jurisdiction: Class 3 Before: Sheahan J and Parker AC Decision: (1)The first applicants' claims for market value, special value, and injurious affection compensation for the respondent's acquisition of lots 19 and 20 of deposited plan 1138749 are dismissed.
(2)The first applicants' claim for disturbance is determined at an amount of $14,733.62
(3)The second applicant's claim for disturbance is determined at an amount of $21,002.30
(4)Costs are reserved.
(5) All exhibits are returned to the parties.
Catchwords: COMPULSORY ACQUISITION OF LAND - compensation - equitable lease - separate legal entitles involved in family "group" - market value - value of development potential of land - special value -disturbance - injurious affection - betterment - continuing use rights of various kinds Legislation Cited: Environmental Planning and Assessment Act 1979
Land Acquisition (Just Terms Compensation) Act 1991
Land and Environment Court Act 1979
Supreme Court Act 1970
Water Management Act 2000
Environmental Planning and Assessment Regulation 2000
State Environmental Planning Policy No.30 - Intensive Agriculture
Sydney Regional Environmental Plan No.20 - Hawkesbury-Nepean River (No.2 - 1997)
Hawkesbury Local Environmental Plan 1989Cases Cited: AMP Capital Investors Ltd v Transport Infrastructure Development Corporation [2008] NSWCA 325; (2008) 163 LGERA 245
Australian Provincial Association Co Limited v Rogers (1943) 43 SR (NSW) 202
BMP Manufacturing Pty Ltd v Roads and Traffic Authority of New South Wales [2008] NSWLEC 298
Boland v Yates Property Corporation Pty Limited [1999] HCA 64; (1999) 167 ALR 575
Borman v Griffith [1930] 1 Ch 493
Boxall v Sly [1911] HCA 6; (1911) 12 CLR 63
Buckinghamshire County Council v The Secretary of State for the Environment, Transport and the Region [2000] EWHC Admin 386 (31/08/2000)
Carberry v Gardiner (1936) 36 SR (NSW) 559
Corrie v MacDermott [1914] HCA 38; (1914) 18 CLR 511
DHN Food Distributors v London Borough of Tower Hamlets [1976] 1 WLR 852; [1976] 3 All ER 462
Dockrill v Cavanagh (1944) 45 SR (NSW) 78; (1944) 62 WN (NSW) 94
Eastman v Commissioner for Superannuation (1987) 74 ALR 221
Eaton & Sons Pty Limited v The Council of the Shire of Warringah [1972] HCA 33; (1972) 129 CLR 270
Everest Project Developments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 [2010] NSWLEC 88; (2010) 177 LGERA 43
Halloran and Sealark Pty Ltd v Shoalhaven City Council [1999] NSWLEC
Huddart, Parker & Co Proprietary Limited v Moorehead [1909] HCA 36; (1909) 8 CLR 330
Hurstville City Council v Road and Traffic Authority [1999] NSWLEC 100
Hunt v Blacktown City Council [2001] NSWCA 216; (2001) 116 LGERA 356
James Hardie v Putt [1998] NSWSC 434
Lake Macquarie City Council v Luka [1999] NSWCA 447; (1999) 106 LGERA 94
Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353; (2006) 149 LGERA 439
Lemworth Pty Ltd v Liverpool City Council [2001] NSWCA 389; (2001) 53 NSWLR 371
Lemworth Pty Ltd v Liverpool City Council [2001] NSWLEC 23; (2001) 113 LGERA 8
Mario Piraino Pty Limited v Roads Corporation (No. 2) [1993] 1 VR 130; (1993) 76 LGRA 263
Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWCA 314
Mona Vale Pty Ltd v Pittwater Council [2003] NSWLEC 74; (2003) 124 LGERA 449
Mt Isa Mines Ltd v Federal Commissioner of Taxation (1976) 10 ALR 629
Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30
Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254
Prince Alfred Park Reserve Trust v State Rail Authority of New South Wales (1997) 96 LGERA 75
Roads and Traffic Authority (NSW) v Collex Pty Ltd [2009] NSWCA 101; 165 LGERA 419
Roads and Traffic Authority (NSW) v Hurstville City Council [2001] NSWCA 11; (2001) 112 LGERA 223
Romeo v Pittwater Council [2006] NSWLEC 645; (2006) 149 LGERA 107
R v Davidson (1954) 90 CLR 353 at 367-368
R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Proprietary Limited [1970] HCA 8; (1970) 123 CLR 361
Re Commercial Bank of Australia Ltd (1893) 19 VLR 333
Salemi v Minister for Immigration and Ethnic Affairs (No 2) (1977) 14 ALR 1
Salvation Army v Newcastle City Council [2000] NSWLEC 36; (2000) 107 LGERA 40
Smith v The Minister for Home and Territories [1920] HCA 1; (1920) 28 CLR 51
Springfield Land Corporation (No 2) Pty Ltd v State of Queensland [2011] HCA 15; (2011) 242 CLR 632
Starray Pty Ltd v Sydney City Council [2002] NSWLEC 48
Stromness Pty Limited v Woollahra Municipal Council [2006] NSWLEC 587
The Adelaide Fruit and Produce Exchange Company Limited v The Corporation of the City of Adelaide [1961] HCA 20; (1961) 106 CLR 85
The Council of the City of Parramatta v Brickworks Limited [1972] HCA 21; (1972) 128 CLR 1
The Minister v The New South Wales Aerated Water and Confectionery Company Limited [1916] HCA 48; (1916) 22 CLR 56
The Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited [1985] HCA 14; (1985) 157 CLR 17
The Railway Commissioners of New South Wales v The Perpetual Trustee Company Limited [1905] HCA 38; (1905) 3 CLR 2
Tuscany Farm Holdings Pty Limited v Hawkesbury City Council (No 2) [2011] NSWLEC 190
Vilro Pty Ltd (in voluntary liquidation) v Roads and Traffic Authority (NSW) [2010] NSWLEC 234; (2010) 179 LGERA 47
Walsh v Lonsdale (1882) 21 Ch D 9
WG & C Nominees Pty Ltd v Sydney Water Corporation Ltd [1996] NSWLEC 165
Woolfson v Strathclyde Regional Council (1978) 38 P & CR 521Category: Principal judgment Parties: Robert Neville Tolson and Ruth Norah Tolson (First Applicants)
Elf Farm Supplies Pty Limited (Second Applicant)
Road and Traffic Authority of New South Wales (Respondent)Representation: Mr J A Ayling SC with (2-9 May) Mr A Pickles (Applicants)
Mr J B Maston with Mr N M Eastman (Respondent)
Shaddicks Solicitors (Applicants)
Henry Davis York (Respondent)
File Number(s): 30678 of 2010
Judgment
A: Introduction to the Applicants' Claims
The acquisition of land (at Mulgrave, 2km south of Windsor in Hawkesbury City Council's area) for which just terms compensation is sought from the RTA in these class 3 proceedings, was gazetted on 11 December 2009 (Exhibit R1, tab 1). The land was acquired for road purposes, namely construction of a flood-free "Windsor flood evacuation route" ('the WFER'), which has become Hawkesbury Valley Way and crosses South Creek.
Robert Neville Tolson and his wife Norah Ruth Tolson are the first applicants in these proceedings, which they commenced on 27 August 2010. They are partners (Exhibit R8, tab 8), and make their claims as the registered proprietors in fee simple of the parent parcel at 108 (84-112) Mulgrave Road, which comprised two contiguous lots (Lot 3 DP771652 and Lot 4 DP610341), including the acquired land (now lots 19 and 20 DP 1138749). Lot 3 had an area of 22.39ha and Lot 4 2.024ha. They had purchased the 22 odd hectare dairy farm in 1979. Lot 4 is an adjoining strip of land to the southeast of it. The parent parcel is described (in Exhibit A9, at fol 82) as:
"part of a wide band of rural land stretching in a north south direction along the flood plain of South Creek. At Mulgrave this rural area is about 1.5 kilometres wide. A sewage treatment plant is located about 700 metres to the north beside Mulgrave Road, with Windsor High School opposite."
As at the date of acquisition the whole of the parent parcel was leased to a Tolson family company.
The RTA acquired an area of 2.39ha, leaving a total residue of 22.021ha. Mr & Mrs Tolson remain the registered proprietors of the two severed portions of the residue land (Lots 13 and 14 DP 1138749, 20.09ha and 1.931ha respectively. Relevant title documents are in Exhibit R1, tabs 16-22).
Prior to formalisation of the RTA acquisition, the Tolsons sought compensation of $2.8M for market value, plus disturbance "to be negotiated" (Exhibit R1, tab 3). On 18 June 2010 their compensation was determined at NIL market value and $30,800 disturbance (Exhibit R1, tabs 4 and 6).
In these proceedings the applicants claim (in Amended Points of Claim ('APOC') filed 7 March 2011):
Market Value $1,990,000.00
Special Value $597,000.00
Disturbance:
Legal Costs $9,233.62
Valuation Fees $5,500.00
Town Planning Fees $2,870.45 $17,604.07
Injurious affection $602,000.00
APOC par 8 says that these figures represent a total claim of $3,207,155.10, but that is not arithmetically correct. The RTA (Points of Defence 14 March 2011 ('POD') par 8(g)) calculates the total as $3,206,604.07. The final contentions of the parties, in both written and oral submissions, departed from these pleaded figures.
Following revised planning and valuation opinions, based on the "before and after" approach, the first applicants claim compensation in the amount of $1,560,000 (rounded) plus disturbance costs and an additional amount for special value. They note that injurious affection is captured in that figure (applicants' town planning and valuation submissions, pars 67-69). Alternatively, based on a piecemeal approach, the applicants claim $1,490,000 (rounded) for the acquired land (injurious affection included), again with disturbance and special value to be added (par 72).
The RTA denies any entitlement of the first applicants to the amounts claimed for market value, special value, and injurious affection. It says that the public purpose "afforded the applicant the opportunity to extend its industrial activities", so it argues betterment (T2.5.11, p35, LL22-28). Of the disturbance items, the RTA accepts the quantum of legal and valuation fees (a total of $14,733.62), but argues that they should be set-off against betterment. In respect of the town planning fees, it notes that they were invoiced to Elf Farm Supplies Pty Ltd, rather than to the Tolsons.
Mr & Mrs Tolson are two of the three directors, and the only shareholders, of Elf Farm Supplies Pty Ltd ('Elf FS'), which is the second applicant in these proceedings. Elf FS lodged a separate claim for disturbance compensation for the subject acquisition, in the sum of $18,140.85 (Exhibit R1, tab 4) on 2 February 2011. That claim was rejected on 24 February 2011 (Exhibit R1, tab 7) and the company was joined as the second applicant on 25 February 2011. In the proceedings Elf FS claims only $18,131.85 for disturbance, made up of:
Construction of new access road $17,832.10
Rectification of gas flow $299.75
The RTA now accepts this revised disturbance claim (POD par 9).
Some invoices regarding disturbance items are attached to one of the three affidavits sworn by Mr Tolson on behalf of the applicants. The first affidavit of 11 November 2010 dealt with the mushroom industry, the second dated 17 January 2011 dealt with the disturbance claim made on behalf of Elf FS, and the third dated 6 May 2011, explained Mr Tolson's strategic approach to the development of his land and his enterprise, and introduced Mr Warren Cole's survey work, along with earthmoving quotes in respect of filling the Tolson lands. I also accepted the tender of Exhibit A16 which was an unsworn statement authored by Mr Tolson on 17 June 2011. He adhered to, and relied upon, all four documents at the hearing. He also gave oral evidence and was cross-examined (T20.6.11, pp66-80). The applicants' case also included sworn affidavit evidence from Warren Cole and two other witnesses on questions of landfilling, to which I will return.
Concerning their special value claim, Mr Tolson deposes (par 17, affidavit 11 November 10) that he would "certainly have been prepared to pay considerably more than its market value as farm land or even as industrial land" to persuade the respondent not to acquire such developable land, or to persuade the respondent to sell it back to him.
I gratefully acknowledge the assistance of Acting Commissioner Dr David Parker in the determination of this complex claim.
I will now set out some relevant statutory provisions, then list the issues before the court, and then provide an index to what follows.
B:The Relevant Legislation
The issues in this case must be considered in light of the following relevant statutory provisions of the Land Acquisition (Just Terms Compensation) Act 1991 ('the JTC Act'):
"3 Objects of Act
(1) The objects of this Act are:
(a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and
(b) to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and
(c) to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and
(d) to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and
(e) to encourage the acquisition of land by agreement instead of compulsory process.
(2) Nothing in this section gives rise to, or can be taken into account in, any civil cause of action.
4 Definitions
(1) In this Act:
acquisition of land means an acquisition of land or of any interest in land.
...
interest in land means:
(a) a legal or equitable estate or interest in the land, or
(b) an easement, right, charge, power or privilege over, or in connection with, the land.
land includes any interest in land.
....
owner of land means any person who has an interest in the land.
...
10 Statement of guaranteed acquisition at market value
(1) When, on request by or on behalf of an owner or prospective purchaser of land, an authority of the State gives a person written notice to the effect that the land is affected by a proposal for acquisition by the authority, the notice must contain the following:
(a) a statement that the Land Acquisition (Just Terms Compensation) Act 1991 guarantees that, if and when the land is acquired by (insert name of authority) under that Act, the amount of compensation will not be less than market value (assessed under that Act) unaffected by the proposal,
(b) such other information as the regulations may require.
(2) This section does not apply to a proposal to acquire an easement, or right to use land, under the surface for the construction and maintenance of works.
(3) Nothing in this section or in a statement made in a notice pursuant to this section gives rise to, or can be taken into account in, any civil cause of action.
...
20 Effect of acquisition notice
(1) On the date of publication in the Gazette of an acquisition notice, the land described in the notice is, by force of this Act:
(a) vested in the authority of the State acquiring the land, and
(b) freed and discharged from all estates, interests, trusts, restrictions, dedications, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land.
...
37 Right to compensation if land compulsorily acquired
An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land.
...
54 Entitlement to just compensation
(1) The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land.
(2) If the compensation that is payable under this Part to a person from whom native title rights and interests in relation to land have been acquired does not amount to compensation on just terms within the meaning of the Commonwealth Native Title Act, the person concerned is entitled to such additional compensation as is necessary to ensure that the compensation is paid on that basis.
55 Relevant matters to be considered in determining amount of compensation
In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division):
(a) the market value of the land on the date of its acquisition,
(b) any special value of the land to the person on the date of its acquisition,
(c) any loss attributable to severance,
(d) any loss attributable to disturbance,
(e) solatium,
(f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.
56 Market value
(1) In this Act:
market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):
(a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and
(b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and
(c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.
(2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition.
57 Special Value
In this Act:
special value of land means the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person's use of the land.
...
59 Loss attributable to disturbance
In this Act:
loss attributable to disturbance of land means any of the following:
(a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land,
(b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land,
...
61 Special provision relating to market value assessed on potential of land
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."
Also relevant are the following sections of the Land and Environment Court Act 1979 ('the Court Act'):
24 Claim for compensation in compulsory acquisition cases
(1) If:
(a) a claim is made for compensation because of the compulsory acquisition of land in accordance with the Land Acquisition (Just Terms Compensation) Act 1991, Division 2 of Part 12 of the Roads Act 1993 or any other Act, and
(b) no agreement is reached between the claimant and the authority required to pay the compensation,
the claim is (subject to any such Act) to be heard and disposed of by the Court and not otherwise.
(2) The Court shall, for the purpose of determining any such claim, give effect to any relevant provisions of any Acts that prescribe a basis for, or matters to be considered in, the assessment of compensation.
(3) (Repealed)
25 Determination of estate, interest and amount
(1) In hearing and disposing of any claim referred to in section 24, the Court shall have jurisdiction to determine the nature of the estate or interest of the claimant in the subject land and the amount of compensation (if any) to which the claimant is entitled.
(2) In the exercise of its jurisdiction under subsection (1), the Court may order that any other person who claims to have had or who may have had an interest in the subject land at the date of acquisition or taking be joined as a party to the proceedings and may then proceed to determine the nature of the estate or interest of that person and the amount of compensation (if any) to which the person is entitled.
(3) (Repealed)."
C:The Issues before the Court
Mr Maston and Mr Eastman, Counsel for the RTA, identified for the court the issues in dispute in the proceedings (pars 4 to 7 of their closing submissions, filed on 23 June 2011) in these terms:
"4. The town planning issues in this case relate to the development potential of the land in both the before and after scenarios. The resolution of this requires an analysis of these matters in the before scenario:
a. The physical development constraints;
b. What development controls apply to those constraints (including whether existing use rights apply);
c. Whether development would have been permitted outside of the likely industrial zone boundary (in the before);
d. The extent to which the 2006 development consent either represented a 'change in policy' or was influenced by the existence of the WFER.
5. In the after, the following town planning matters in dispute are:
a. The constraints on future development of the residue land; and
b. Whether or not there is betterment (from a factual perspective) to the residue land because of the carrying out of the public purpose.
6. The valuation issues in dispute are:
a. The extent to which the valuers have adequately understood the town planning evidence;
b. The applicants' approach to the risk adjustment on the land identified by the planners as constrained;
c. The quantum of special value.
7. The legal issues in dispute are:
a. The approach to existing use rights;
b. The effect of the leasehold interest;
c. The legal approach to special value; and
d. Betterment."
Mr Ayling SC, for the applicants, primarily submitted that, if he succeeded on the town planning issues, the "before and after" valuation method would provide his clients with adequate compensation.
Because of the complexity of the relationships among all these issues, the balance of this judgment is divided into the following sections:
D:The Subject Land in more detail
E:The Tolson family interests and the mushroom industry
F:Background to Rezoning, Planning and Development Issues
G:The Expert Town Planning evidence
H:The Valuation evidence
I:The Impact of the Lease/sub-lease
J:Filling of the land for future development
K:The claim for special value
L:Betterment/Injurious Affection
M:Market Value Compensation
N:Disturbance
O:Conclusion and Orders
D:The Subject Land in more detail
The subject land is depicted in several exhibits.
Exhibit A1 is an aerial photograph of the district with the road in place. The photograph is admitted to be not completely up-to-date, but it was helpful to the court. The acquired land is not clearly delineated, but it can be seen that the new road route cuts across the parent parcel, such that approximately three-quarters of the residue land is generally on the western side of the road and the rest is to the north of the on-ramp and east of the new road.
The parent parcel abutted the Richmond-Blacktown railway line to the south-west, South Creek to the north, and Mulgrave Road to the south. The third component of what was the parent parcel, and is now the "strip" of acquired land along which the new main road has been constructed, is a "tulip-shaped" area in the south-eastern corner of the acquired land, bounded by the new road to the west, the new ramp to the north, and Mulgrave Road to the south.
The whole of the acquired land including the "tulip" area has been dedicated as public road, but it is not accessible from either of the two residue parcels. The town of Windsor, the Hawkesbury River and Richmond RAAF Base can all be seen in the distance in Exhibit A1, and the dam on the smaller residue parcel is clearly shown. (The relationship between the relevant components of the residue land is clearly depicted in Exhibit R1, tab 36, fol 307).
Exhibit A2 is a 'google' map dated 1 January 2009 showing quite intensive industrial-type development on the opposite side of Mulgrave Road. Exhibit A3 is an aerial photograph depicting an area of "existing approved fill" between a proposed zone boundary (IN2/RU4) around the plant and the northern boundary of the Tolson lands. The new road can be seen to the top right-hand corner of the photograph, to the east of that area.
Exhibit A4 is unclear and of little use, but purports to be a panoramic view of the relevant lands.
The RTA tendered three relevant maps:
(1) a topographical map of the land (Exhibit R6), to which Mr Rowan refers (in Exhibit R3), dating from pre-1980, i.e. prior to the development of the Tolsons' mushroom substrate plant on the land, and other filling of the land, in the few years before the acquisition;
(2) a large catchment area map ("No.27") (Exhibit R5), which appears in the Sydney Regional Environmental Plan No.20 - Hawkesbury-Nepean River (No.2 - 1997) ('SREP 20' - Exhibit R1, at tab 13); and
(3)a Council map (Exhibit R10) published in 2011 showing contours and deposited plan details on both eastern and western sides of South Creek. The date of mapping is unknown but the post-acquisition DP numbers appear on it.
The Mulgrave area has had a history of significant flooding since 1799. The highest recorded flood level in the area was 19.7m AHD in 1867. The 1 in 100 year level, as at the date of acquisition, is agreed to be 17.3m AHD (Exhibit A9, fol 12). Serious consideration was given to the challenges of flood management in the area, and a preferred option for an evacuation route emerged in October 2001. An EIS (Exhibit R2) for the WFER went on exhibition in late 2002. It proposed that the road surface be generally at 18m AHD, increasing to 18.6m AHD for the Mulgrave Road overpass, and having an upper parapet at 18.9m.
The EIS acknowledged that the road proposal would require noise barriers, and have substantial visual impact from Mulgrave Road. The new road would "intrude significantly into the rural landscape" north of the railway line, and obscure "sections of the riparian vegetation of South Creek". Landscaping would be required.
The Minister for Planning approved the project in May 2003. It was desirable for flood evacuation purposes, but also as an improvement to the arterial road network.
The route having been chosen, construction of the new road commenced in March 2006, prior to the acquisition of the subject land, the Tolsons having given the respondent permission to enter and lease (from 1 December 2004) the land it proposed to acquire, and certain adjoining land now forming part of the residue parcel, for purposes associated with the construction. (See Exhibit R1, tab 23).
The new road opened on 16 September 2007. Most of its structure, as it runs through (or over) the acquired land, is either in the form of a concrete bridge, standing either on concrete pillars above ground level, or on a concrete and earth formed embankment.
There is no direct or formal access between the two non-contiguous residue portions. It is necessary to leave one and use the public road system to gain access to the other. Access between the residue parcels would be physically possible beneath the elevated new road, and across the service road constructed on the acquired land adjacent to it, but the RTA has not granted, and does not intend to grant, to the applicants, any formal rights, in the nature of an easement or otherwise.
The RTA constructed for the Tolson interests a sedimentation dam on the smaller residue portion, together with a pipeline which passes under the service road and the acquired land, linking the larger residue portion to the dam. Access across the acquired land is not prevented by the RTA, and Mr Tolson has been given keys to a padlocked gate which encloses the area in question.
The smaller residue portion of the Tolson lands has a frontage to Mulgrave Road. It was formerly a paddock in which a small number of cattle could be grazed and it had a water supply in the form a dam which was a predecessor to the sedimentation dam which the RTA constructed. The RTA heavily planted the area with trees, apparently without the Tolsons' permission, and those trees are now several years old and growing vigorously. The low-lying land between the filled land on the parent parcel and the creek was used for no specific purpose other than grazing, just as the underutilised areas of the parent parcel were used for grazing. Restoration of the area so that it could again support grazing to the previous extent would now be possible only by clearing many if not most of the trees the respondent has planted.
According to Mr Tolson, prior to the acquisition, part of the smaller residue parcel, as well as part of the acquired land, was at a level sufficiently high for it, like the land in the larger residue parcel, to be filled to a point where it would be effectively above all but the highest forecast flood level, and to a level which had been previously approved by the Hawkesbury City Council as appropriate to allow development of the land for industrial purposes.
Mr Maston submitted that the maps in Exhibits R5 and R6 illustrated that the lowest point of the land was at 6m AHD, which is 11.3m below the 1 in 100 year flood level. Filling has taken place to 16m. Hence, the court proceeds on the basis that all the relevant land is significantly affected by flooding. That was, he said, a factor which could not be overlooked when considering the development potential of the land.
The respondent also notes the watercourse which affects the north-eastern sector of lands remaining in the hands of the applicants in the after scenario, with the consequence that that area of land had no reasonable prospect of any development for any building purpose or for any mushroom substrate activity (T2.5.11, p28). The evidence frequently refers to the Tolson lands as a mushroom substrate farm ('MSF') and to the industrial activity on it as mushroom substrate production facility or as a mushroom substrate plant ('MSP').
E:The Tolson family interests and the mushroom industry
"Mushroom compost" or "substrate" is the organic mixture of straw and other ingredients in which, when inoculated, the mushroom spawn acts as the growing medium in mushroom farming.
Historically, mushroom growers made their own substrate, but the industry now sees advantages in the two operations being separated. The traditional composting phase is phase 1, to which has been added the pasteurising phase (phase 2), and the introduction of spawn to the mix (phase 3). Elf FS "has pioneered complete substrate processing and preparation on one site", so that much of the substrate is delivered from plant to farm in "finished" state, ready for mushroom growing. Mushrooms can be grown in fifteen days using phase 3 substrate.
Mr Tolson has been a leader in the mushroom industry for many years, and was involved heavily in the development of the Australian Mushroom Growers Association, an organisation which consists of mushroom compost manufacturers and mushroom growers. The association aims to increase the consumption of mushrooms in the Australian community. Mr Tolson believes the industry has a great deal of room to expand, and takes an active role in the promotion of mushrooms as a food item. Demand was increasing at the rate of 10% pa until 1995 and has been increasing 7% pa since. The present consumption of mushrooms is about one mushroom per person per day, and the current volume of mushroom sales in Australia is 62,000 tonnes per annum, an increase from 50,000 in 2000. Mushrooms have to be grown in or near high population areas, because they are picked by hand and require many pickers. (Exhibit A16, par 25).
Growth in the market for mushrooms involves growth in the opportunities for growing the business of making mushroom compost. However, the process of making compost is generally thought to be a highly undesirable industry due to the odour it generates. (The evidence demonstrates a good performance by the Tolson interests in the area of odour mitigation).
Prior to the Mulgrave purchase in 1979, the Tolsons had conducted both a mushroom farm and a mushroom compost plant in Wallace Road Vineyard, from apparently 1967 (Exhibit R1, tab 43, fol 335), until Council decided to rezone that land for housing. Development consent ('DC') was granted 14 October 1980 to the Tolsons, trading as "Elf Mushrooms" (T20.6.11, p77), for mushroom compost to be manufactured on the Mulgrave site. Landfilling was required for those early stages of development (to 16m AHD).
Since they began manufacturing compost on the Mulgrave land (in about 1981), the Tolsons have provided executive direction to the enterprise. Their Mulgrave plant is the only one in the Sydney metropolitan area and the nearest other substantial mushroom composting factory is at Singleton.
A series of DCs for additions to the Mulgrave plant (see schedules in Exhibit A9, fols 7-8, 60-63, and 83) has seen Elf FS become the largest manufacturer, and the only bulk supplier, of mushroom substrate/compost in NSW, and the second largest in Australia. Elf FS presently supplies approximately 65% of the mushroom compost used by commercial mushroom growers in NSW. It employs 17 people, including Mr & Mrs Tolson themselves (Exhibit R1, tab 26). Mr Tolson estimates the business's expenditure on infrastructure to date at $25.5 M, and it has been the intention to progressively discontinue supplying phase 1 substrate, and then to offer only finished substrate (see Exhibit R1 tab 43, fol 335).
By 2004 the Tolsons (Exhibit A16, par 14) were "using our licence and approvals to their limit of 1,000 tonnes of phase 1 (or equivalent 600 tonnes of phase 3) compost per week". Subject to the EPA licence, production at Mulgrave is controlled by two major consents (Exhibit A9, fols 63ff): consent 8/80 allowed for the traditional method "within an open shed building", and consent 218/90 allowed for the more modern method, i.e. production "within 21 tunnels in a climate controlled environment".
During the 1990s the Council tolerated the failure of the enterprise to take full advantage of the 21 tunnels approved. As at 29 February 2000 only two had been constructed, and were in use. Council considered issuing orders to the Tolsons to "complete the development" (Exhibit A9, fol 66). There had also been complaints about odour, and Council requested the EPA, in August 1999 and March 2000 (Exhibit A11), to enforce the relevant conditions of consent. (There is mention in the materials of some enforcement proceedings, which were apparently resolved in 2004). By 2000, it had been determined that possible relocation of the plant to Blaxlands Ridge was not a feasible option.
In July 2006, it was clear to the Tolsons that they would need more space adjacent to the existing filled area so that they could expand their operation. The new road was under construction at the time and they felt they could use the space available between the existing edge of the filled area and the new road, if supplemented by the area between the existing filled area and the northern boundary, to get enough space to meet anticipated need. An application was made for 5.5ha of landfilling on the subject lands, to 16m AHD, to augment previously filled areas. (Exhibit A9, fols 106-112: see also Exhibit R1, in which tab 44 contains the SEE, and tab 42, and Exhibit R8, tabs 1 and 2, which include plans). That filling was fully assessed by Council (Exhibit A9, fols 113-134, and the document added to Exhibit A9 after folio 146), approved on 22 November 2006 ('2006 consent' - Exhibit A9, fols 135-146), and then occurred. The RTA did not provide fill, and it would appear that the Tolsons were paid to receive it from elsewhere (T20.6.11, p79). In assessing the 2006 consent the Council stated the following (Exhibit A9 folio 118):
"The land situated adjacent the subject land is zoned for a mixture of land uses including Rural Living Mixed Agriculture, Industrial 4(b) and Special Uses 5(b) Railway. Surrounding land uses include agricultural activities, industrial development, sewerage treatment works and railway.
Given that the development situated on the subject land is classified as an identified land use and the nature of the proposed works it is considered that the proposed works are generally consistent with the stated objectives of the Rural Living zone."
In 2007 the Tolsons applied for a "bagging and blocking" shed. This also was approved. "Blocks" are wrapped packages of substrate, and making them gives the Tolsons the ability to sell to other States, as well as to export overseas. In 2008 extra phase 2 and 3 tunnels were completed and most of the phase 1 substrate was then directed through the phase 2 and 3 processes, which allowed Tolsons to supply customers with phase 3 substrate. In 2009 a tractor shed was added to the application, and this was also approved.
Mr Tolson pioneered the use of a "bio-scrubber" (T 20.6.11, p75). Licensed emissions from the Elf FS plant are discharged through a 40m chimney, but ground-level "fugitive" emissions are still possible. Despite locating the plant on the old dairy site, on high ground 200m off Mulgrave road, the main odour risk remains the residential areas some 500m to the west, on the other side of South Creek (T20.6.11, p78-9, and Exhibit A9, fol 82).
From 1998 onwards, Tolson has been engaged in developing technologies to reduce the adverse impacts of compost making, earning an international reputation. Having been unsuccessful in relocating its operation, the group undertook a major upgrade of the Mulgrave works to world's best practice in 2003. He now employs expert staff from overseas, including from Belgium and Holland (T20.6.11, p79).
Mr Tolson believes that it would now be virtually impossible to obtain planning permission to set up a new mushroom compost plant elsewhere in Sydney, or close to Sydney. He has made a number of unsuccessful attempts over the years to obtain approval for other mushroom composting industries. He says (at par 22 of his affidavit of 11 November 2010):
"The current site of the plant is especially suitable for the conduct of our particular operation as it is in closer proximity to the nearby industrial area and surrounded by the flood plan, thus providing a permanent buffer between the plant and any present or future housing development. Its situation facilitates compliance with odour level requirements for licensing purposes".
In Exhibit A16 (at par 26) he listed the following 9 factors as being "of crucial importance" in respect of the present site, making it unique and not able to be duplicated anywhere else in NSW:
"1.We have a unique site. It is located in the floodplain and as such cannot have any houses built closer than at present.
2.We are have (sic) the legal right to use the land for industrial purposes, without conditions, which gives us the benefit of extended working hours ie 24/7.
3.There is a large power supply (the Mulgrave network is currently being upgraded) sufficient to allow us to expand the activities on site.
4.Natural gas is available and being used
5.The land is sewered.
6.A town water supply is available, which is critical in supporting our hygiene requirements
7.We have access to South Creek and a large water licence - large enough for our current expansion tonnages and well beyond
8.We have a bore which contains enough salt to give us the redox potential needed
9.Our largest customers are within a 20km radius which equates to enormous and ongoing transport savings"
Some preparation for the future development of the Mulgrave site has, in the Tolsons' submission, been overtaken by construction of the WFER.
Mr & Mrs Tolson have three sons, Robert, Kevin and David. All have grown up in the mushroom industry, and have acquired and conducted mushroom farming businesses (see ASIC searches at Exhibit R1, tabs 30-32). While Mr Tolson deposes that he does not have a direct financial interest in the individual businesses run by his sons, he admits to a great interest in ensuring the success of those businesses.
Elf FS is the only compost supplier to the sons' businesses. It supplies all of the mushroom compost they use in the production of their mushrooms. They use up to 75% of the plant's current production capacity. Each farm is located within reasonable proximity to the compost plant, and transport costs are reasonable.
Robert's operation at Glossodia uses approximately 76 tonnes of "phase 3 compost" per week and has planning approval to expand his operation to the extent that would require the use of 152 or perhaps 228 tonnes per week. Kevin's operation at Londonderry uses 114 tonnes of phase 3 compost per week and he also has planning approval to increase the size of his plant such that it would require 228 tonnes per week. David owns and operates "Elf Mushrooms" at Vineyard currently using 152 tonnes of phase 3 at full capacity. David's proposal for Northern Road Londonderry is the second component of the Part 3A application. If approved, his new mushroom farm at Londonderry will replace that at Vineyard (Exhibit A16, par 20). It will be constructed as a staged development over eight years, and will eventually require 600 tonnes of phase 3 compost per week.
Future increases in demand for Tolson/Elf mushrooms should be capable of being met at least in part by growth in production of these businesses, and their proximity to Mulgrave will assist in keeping the costs low. However, Mr Tolson opines that, owing to the RTA acquisition, his compost operation will not have the capacity to serve the requirements of David's planned operation at Londonderry beyond 2018.
The Tolsons are encouraging future customer enquires, but they are unable to supply sufficient product until they obtain approval for expansion. Their current approvals and licences restrict compost production at Mulgrave to 1000 tonnes per week while current potential capacity is 1600. Expansion will require additional storage shed space for straw, the principal raw material. The consequences of failing to expand "would almost certainly expose us to competition from other states and New Zealand" (Exhibit A16, par 25).
With the road now in place, Mr Tolson suggests that he may have room at Mulgrave for some more phase 2 and 3 facilities, but additional phase 1 facilities will be "out of the question". He says (Exhibit A16, par 21) that "the road has effectively reduced the area of our property available for development by a substantial proportion - up to one third, if we regard the land severed from the main section as wholly potentially developable".
The various Tolson enterprises operate in concert, and together employ up to 500 people in the Hawkesbury district (Exhibit A16, par 25). However, the family group's corporate structure is not entirely clear to the court.
All of the mushrooms produced by all three sons' businesses are marketed by White Prince Mushrooms Pty Ltd ('White Prince'), a company of which Mr Tolson and the three sons are four of the five directors (ASIC search at Exhibit R1, tab 29).
Some of the shares in White Prince are held by a company called R N and N R Tolsons Management Pty Ltd ('Management'), first registered on 14 June 1972. The Tolsons are directors and the only shareholders (Exhibit R1, tab 28). At one point Management was advanced as a possible third applicant in these proceedings, but that proposal did not proceed. Management was referred to in relevant correspondence as the head lessee of the lands (see Exhibit R8, tab 3).
There is said to be a family-owned trucking operation run from the Mulgrave site, but it is not the subject of specific evidence.
Mr & Mrs Tolson leased all their Mulgrave land to R N Tolson Holdings Pty Ltd ('Holdings' - see ASIC docs in Exhibit R1, tab 27), a company of which they are the sole directors and shareholders, for a term of five years from 1 July 2008 to 30 June 2013, with three, five year options to extend (Exhibit R1, tab 24). The rent is $12,500 per month plus GST ($150,000 pa). Holdings sub-leased to Elf FS for four years 11 months 28 days from 1 July 2008 to 26 June 2013 (Exhibit R1, tab 4, fol 10, and tab 25). The sublease also has three, five year options to extend. The rent under the sub-lease is specified at $900,000 pa by monthly instalments of $75,000 plus GST. Neither of the leases has a clause providing for the review of rent. Both the lease and sublease were signed on behalf of both landlord and tenant, by Mr Tolson as director and Mrs Tolson as secretary. Neither is registered. (Exhibit R1, tabs 24-25).
The financial report package for Holdings for the year ended 30 June 2009 notes that Holdings was "formerly Elf Farm Supplies Pty Ltd ABN 92 000 999 324". The company return describes the main business activity as mushroom growing (see Exhibit R8, tab 7, but c.f. tabs 9 and 10).
Both Mr Ayling SC (for the applicants) and Mr Maston (for the respondent) raised, in their opening addresses (on 2 May 2011), the possible complication of the valuation exercise by the lease arrangements.
There was an early debate between Acting Commissioner Parker and Mr Ayling SC about setting aside the leases for valuation purposes (see T4.5.11, pp4-8), and Parker AC later returned to the leases with Mr Maston (at T4.5.11, pp11-14). The lease/sub-lease arrangement, and its importance to questions of compensation in this case, are central issues before the court, and I will return to them. (See [152]ff below).
F:Background to Rezoning, Planning and Development Issues
Relevant Instruments
At the time of the 1980 consent (August 1980), the subject land was zoned non-urban 1(c) under the Windsor PSO. When the Hawkesbury Local Environmental Plan ('LEP') (Exhibit R1, tab 8) was first gazetted in 1989 the subject land was zoned rural 1(c), and remained so zoned for some years. At the date of acquisition it was zoned "Rural Living" under that LEP.
"Rural industry" uses became prohibited in that zone in 2001, when protection of "identified land uses" ('ILU') was enacted. The definitions of ILU in the LEP (tab 8, fol 23), as amended on 18 August 2006 by amendment 108 (tab 11, fol 112), and in amendment 110 dated 28 or 30 March 2001 (tab 9 fol 49) embraced any "use for which a consent or approval had been granted by the Council on or after" the commencement of the LEP on 22 December 1989, and for which the land was being used as at the date of the relevant amendments. For a discussion on the definition of "rural industry" in the LEP, see my judgment in Tuscany Farm Holdings Pty Limited v Hawkesbury City Council (No 2) [2011] NSWLEC 190.
The parties disagree over the statutory rights of the applicants in relation to future development of the land. The applicants' point is that the ILU is caught by s 108(2) of the Environmental Planning and Assessment Act 1979 ('EPA Act') as "derogating" from existing use rights. Mr Tolson relies upon advice he has received from his town planner, Robert Montgomery, that the Elf FS plant enjoys "existing use" rights. He understands that those rights mean that he is at liberty to continue to operate at Mulgrave, and to make applications for approval to expand, enlarge and intensify his activities.
Clause 2(2) of State Environmental Planning Policy No.30 - Intensive Agriculture (Exhibit R1, tab 12) indicates that the policy aims to extend the definition of the term "rural industry" in relevant environmental planning instruments so as to include "composting facilities and works, including facilities and works for the production of mushroom substrate". Clause 8 provides that a reference in an instrument to "rural industry" is taken to include a reference to composting facilities and works, including facilities and works for the production of mushroom substrate.
The Sydney Regional Environmental Plan No.20 - Hawkesbury-Nepean River (No.2 - 1997) (Exhibit R1, tab 13) deals with land uses in riverine scenic areas, relevantly providing that conditions of consent should be imposed to protect scenic character. Those conditions include conditions requiring tree planting. The NSW Government "Floodplain Development Manual" dated April 2005 (Exhibit R1, tab 15) is also relevant.
The Draft Hawkesbury Local Environmental Plan 2009 ('Draft LEP' - Exhibit R1, tab 14) includes (at fol 182) provision for a zone RU4 Rural Small Holdings and (at fol 184) a zone IN2 Light Industrial. One of the objectives of the RU4 zone is "to enable identified agricultural land uses to continue in operation". Objectives of the light industrial zone are to provide a wide range of light industrial, warehouse and related land uses, and to encourage employment opportunities. The draft LEP was publicly exhibited February - April 2010.
Possible Rezoning 1994-2011
Since at least 1994 the Tolsons have been seeking to have at least 5.47ha of their land rezoned from Rural 1(c) to General Industrial 4(a), or, as Council would prefer (Exhibit A9, fols 27-30), to Light Industrial 4(b), like the land on the other side of Mulgrave Road. Rezoning application 9/94 for the subject land became known as Amendment 48, and tabs 45 to 48 of Exhibit R1, covering the period 1994 to 2005, refer to that. A detailed chronology of the proposal is provided by Mr Rowan (Exhibit R3, pp37 - 45, par 100).
The original application was prepared by R A Cole Town Planning Pty Ltd (Exhibit A9, fols 1-26). Robert Cole commented (Exhibit A9, fol 13):
"It is likely that the mushroom composting establishment will remain on the site for some time however, it may be necessary to relocate this activity to another site in the future, and it would be desirable to have in place a zone to allow appropriate use of the filled areas, buildings and sealed surfaces. A rezoning of part of the land does not preclude the mushroom composting establishment from continuing as it would be a conforming or non-conforming use, depending upon the zoning introduced for the site.
Therefore retaining the existing Rural 1(c) zone and the existing development is appropriate for the short term but is not appropriate for the long term use of the site."
The 5.47ha area was said to be "sufficiently isolated from zoned residential areas and dwellings on rural lots to ensure that there will be minimal if any adverse impact by the future use of the buildings and site generally for industrial purposes" (Exhibit A9, fol 18, s 6.2). The proposal was assessed by Council (Exhibit A9, fols 32-46).
Draft instruments were prepared (Exhibit A9, fols 31 and 48), plans drawn (Exhibit A9, fols 47 and 49), and the rezoning proposal advertised. However, it was then held in abeyance for about six years while Council explored the option of requiring the Tolsons to relocate the plant from the subject land (Exhibit A9, fols 52-59), and awaited finalisation of the WFER proposal. Council had been generally supportive of rezoning, while remaining concerned about amenity impacts on the substrate plant. The Department of Planning expressed reservations from time to time, wanting, for example, a flood plain management strategy to be settled, and the need for more industrial land to be established (Exhibit R1, tabs 46-47).
Council gave further approval to the rezoning in 2000-2006 (Exhibit A9, fols 60-76 and 93-101, and Exhibits A11, A12, A13 and A14), after relocation of the plant could not be achieved. Council reviewed the shape and boundaries/extent of the area to be rezoned (up to 10 or 12.37ha), in view of the location of the road. The court identified some dispute in the evidence over which contours were followed in various approvals, and some disparity between the text of any approval and its relevant plan. However, and importantly, rezoning was seen as a logical extension of the existing, but fully occupied, Mulgrave industrial lands (see generally Exhibit A9, fols 69-101). A fresh report (Exhibit A9, fols 77-92) and re-advertising were required. Council settled on "Option 4" (2005) as its preference (Exhibit A9, fols 70, 72, and 95). After a review of the demand for industrial land during 2006, the Department asked Council to include the rezoning LEP in a new standard template LEP, which was then in preparation (Exhibit A9, fols 102-105). Option 4 appeared in the draft new LEP publicly exhibited February - April 2010.
As at the date of hearing the rezoning had not occurred.
Part 3A Application 2008-2011
In early 2008 Perram & Partners, an environmental consultancy, acting as Tolsons' "lead" consultant, sought Department of Planning agreement to the assessment of a dual proposal - comprising additions to the Mulgrave plant for Elf FS, and establishment of a new farm at Londonderry, for Elf Mushrooms - as a Part 3A "major proposal".
The relevant senior Council officer (from 1997), Robert Montgomery, had left Council in March 2006 to establish a town planning consultancy (Exhibit A10). On 18 February 2008 he provided advice to Mr Perram (Exhibit R7) that the proposed expansion at Mulgrave met the definition of "ILU", and so was permissible with consent. He commented that "Hawkesbury City Council has always interpreted the definition to allow expansion, intensification or enlargement" on the basis that if the use is permissible, any expansion must be permissible. To "confirm my interpretation", Mr Montgomery drew attention to Council's consent 0921/06 on 22 November 2007 for "tunnel building extensions (phase 2 and 3) and maintenance equipment shed", noting:
"These were major extensions which effectively doubled the existing tunnel building. At the time of determination, the land use fell within the definition of identified land use. Therefore, the Council would have formed the view that the proposed development was permissible with consent.
In conclusion, it is my view that the development now proposed is permissible with consent."
The Minister accepted the proposal as a "major project" to be assessed under Part 3A, and the major project application was lodged on 2 December 2008 (Exhibit R1 tab 43). Mr Tolson signed the application as "head family group", and David Tolson also signed it as the proponent of the new farm at Londonderry. The estimated capital investment of the whole proposal is $40M. It envisaged a three-staged 10 year programme 2008-2018. As at the date of hearing the Minister had not determined the application.
If approved, the quantity of substrate which can be legally produced at the Mulgrave plant will treble. Current production at Mulgrave is limited by its licence to 1000 tonnes of phase 1 substrate per week, but its capacity or potential under existing consents is 1600 tonnes phase 1 per week. The first stage of the Part 3A development will enable it to achieve 1600, assuming the licence can be updated to reflect the consent. (The only physical changes required are some filling and a new shed for storing straw, the principal raw material, and these form part of the proposal). Stage 2 will take output to 2400 tonnes per week, and stage 3 to 3200 tonnes per week, of phase 1. (Every 1000 tonnes of phase 1 produced reduces to 600 tonnes of phase 3). A draft schematic plan of the plant at stage 3, with the road in place, appears in Exhibit R1 at tab 43, fol 350, and the environmental safeguards and odour management arrangements are dealt with in chapter 6, commencing at fol 363.
Mr Tolson says (Exhibit A16, par 17) that:
"with current and forecast demands, we believe this approval will serve us up to about 2018. After this time, we will need more production ability and the impact of the road across our property will then seriously impinge on our ability to further expand the plant."
The Part 3A proposal takes advantage of the 2006 DC allowing the filling of a large area of the parent parcel then undeveloped. Mr Tolson says that, prior to becoming aware of the RTA's public purpose proposal involving the acquisition, he had planned to apply for permission to fill a substantially larger area of his then lands, including an area now within the acquired land and areas extending onto the now smaller severed parcel. Expansion in an easterly direction, beyond where the road now crosses the acquired land, had always been his preference, but he believes there will now not be sufficient residue land to enable development to the same capacity as would have been possible without the acquisition, and consequential severance of his holdings.
He will now have to place buildings to the north of the current plant, on land which would have been available and more suited for other uses related to the plant, such as parking, manoeuvring, cleaning and maintenance of vehicles etc. Such ancillary areas would not have required the filling of the land to higher than the 1 in 100 year flood level because they would not have been occupied by buildings. Some of the area could also have been filled to a level of 2m less than 16 AHD, and would have served the purpose of providing storage structures for maintenance equipment and racked hay storage. (The only disadvantage to the location of such vehicles, equipment and hay at the lower levels of fill would be the need to move vehicles equipment or hay when flooding was threatened).
Eventually, he says, these site restrictions on expansion will cause the Tolson interests financial loss.
G:The Expert Town Planning evidence
The applicants relied on oral and written evidence given by Robert Montgomery, (see Statement of Evidence, filed on 1 March 2011 - Exhibit A5) and the respondent on the evidence of Anthony Rowan (see Statement of Town Planning Evidence, filed on 17 February 2011 - Exhibit R3). The court also has the benefit of two joint town planning reports, prepared by Rowan and Montgomery. The first of those ('JPR1' - Exhibit A7), was filed on 18 March 2011. It was later supplemented by the second ('JPR2' - Exhibit A15), filed on 9 May 2011.
Tabs 33-42 of Exhibit R1 include various area calculations superimposed upon images in the town planning evidence. Tab 42 (being drawing number 200607) is said to depict (in a red border) the proposed site filling development application, but it is not dated. However, there is a non-marked-up copy of this drawing at Exhibit R8, tab 2, bearing date 16 August 2006.
In their joint reports the town planners were able to reach agreement on some of the town planning issues, but there remains a major dispute in relation to the development potential of the land before and after the acquisition. The town planning dispute essentially comes down to whether the whole of the parent parcel could have been used for industrial purposes, and if not, what area would have been confined to rural uses only. Mr Tolson is of the view that industrial development would have been permitted on at least part of the acquired land, and on the smaller residue parcel of land. It is convenient here to briefly set out the matters upon which the town planners were able to reach agreement, and those that remain in dispute.
Planning matters in dispute are:
(i) The statutory rights of development - whether expansion would have been (a) development permissible with consent (as an ILU), or (b) development reliant upon existing use right provisions.
(ii) Whether the filling and development approved in the 2006 consent would have been permitted without the public purpose.
(iii) The extent of filling possible in the north-eastern corner.
The town planners agreed that:
(i) The highest and best use of the land is as a MSF.
(ii) Use as a MSF was permissible at the date of acquisition as an ILU.
(iii) Absent the public purpose, the likely zone boundary between the IN2 zone and the RU4 zone would have been the area depicted in Figure 1 of JPR1 (Exhibit A7).
(iv) Without filling, the land in the north-eastern corner could be used for intensive agriculture such as turf farming, but, with filling, further expansion of the MSF would have been possible.
(v) The site constraint issues that would have influenced advice regarding the potential for filling in the north-eastern corner of the land were primarily scenic impact, potential impact upon the watercourse, and the need to provide for future storm water detention.
(vi) The potential of gaining approval for filling increases as the existing topographical landform rises.
(vii) The likely maximum of future development of the MSF on the residue land is reflected in the Part 3A application (Exhibit A7, par 55).
Because the conclusions to be reached by the court on the town planning dispute between the parties are crucial to the court's analysis of the valuation dispute, I will now deal with the three issues on which the experts could not agree.
Disputed planning matter (i) - ILUs c.f. Existing Use rights
Given the fact that both the town planners, Rowan and Montgomery, have agreed that, at the date of acquisition, continuing use of the land as an MSF was permissible as an ILU in the LEP, as amended in March 2001, and in August 2006 (Exhibit R1, tab 8, fol 23; tab 9, fol 49; and tab 11, fol 112), the respondent relies on Hunt v Blacktown City Council [2001] NSWCA 216; (2001) 116 LGERA 356 (at [43]) to submit that a use classified as an ILU is not a use that is "absolutely prohibited" in the LEP, but merely one regarding which there are limits on Council's power to grant consent. Therefore, being a permissible use in the LEP, s 106 of the EPA Act would not apply, and no existing use rights can arise.
In the absence of existing use rights, s 108 of the EPA Act and the Environmental Planning and Assessment Regulation 2000 ("the EPA Regulation") are not applicable, and any future intensification or additional development of the MSF, whether assessed under the zoning as at the date of acquisition, or under the draft LEP, would require satisfaction of the "merit issues", including the provisions of the LEP (including the Rural Living zone objective, and cl 25), the SREP, the DCP, and the Water Management Act 2000. Mr Maston argues that, even if the court finds existing use rights arise in this case, this does not obviate the requirement to consider the merit issues: Stromness Pty Limited v Woollahra Municipal Council [2006] NSWLEC 587, at [82].
Rowan, for the respondent, noted that Council had treated all applications for alteration since 2001 as an ILU, and asserts there was no suggestion that its approach would have changed at the date of acquisition (Exhibit A7, par 26). He also noted that an ILU, is "a land use in its own right", separately defined in the LEP (Exhibit R3, p35), permissible with consent. Development and expansion would, therefore, have to be pursuant to the land's characterisation as ILU only.
Montgomery is of the view that the whole of the parent parcel benefits from "existing use" rights. His point is that the definition of ILU is confined to the consent itself, and appears to protect the approved use only. On his view, where the use is otherwise prohibited, the consent authority is denied any capacity to give consent to enlargement, expansion or intensification of the use, and it is, therefore, necessary to rely on existing use rights (JPR1, pars 27-28). The applicants' point is that the concept of ILU derogates from, and impinges upon, the full operation of existing use provisions in the EPA Act and the EPA Regulation. The use should, therefore, be regarded as an "existing use simpliciter", rather that as an ILU (applicants' submissions, par 16).
The applicants' contend that the whole of the parent parcel in the before situation had a highest and best use as a MSP, was operated as "one physically unconstrained holding" (T2.5.11, p13, L20), and had continuing use rights, whether they be existing use rights, or ILU rights under the LEP. Mr Ayling submits that, due to the long history of "continuing use rights" on the land, there are no effective restraints upon approval for further development, and expansion beyond the draft zone boundaries would have been possible into areas now occupied by the WFER and the smaller residue parcel of land.
A relevant case on existing use rights and their application, is Lemworth Pty Ltd v Liverpool City Council [2001] NSWLEC 23; (2001) 113 LGERA 8. That case concerned a question of whether the EPA Regulations would permit enlargement, expansion and intensification of an existing use. The premises were used as a brothel, and the application concerned the expansion of use from the first floor to the ground flood. The court held that s 107 of the EPA Act would not permit any increase in the use made of a part of a building. Although the decision was partly overturned on appeal in LemworthPty Ltd v Liverpool City Council [2001] NSWCA 389; (2001) 53 NSWLR 371 ("Lemworth"), the Court of Appeal considered that expansion pursuant to existing use rights was not possible on the facts of that case. Hodgson JA thought that the current regulations should be applied in accordance with the approach of the High Court in The Council of the City of Parramatta v Brickworks Limited [1972] HCA 21; (1972) 128 CLR 1 ("Brickworks"), and Eaton & Sons Pty Limited v The Council of the Shire of Warringah [1972] HCA 33; (1972) 129 CLR 270. His Honour stated (at [71]) that those cases:
"... decided in effect that this land was not restricted to the area of land actually physically and lawfully used at the relevant time, but extended to so much land as could be regarded as being used for the relevant purpose: questions of fact and degree could arise in particular cases as to whether areas not physically used for the purpose at the relevant time should reasonably be regarded as included in a whole area of land used for the purpose, or rather regarded as distinct areas not used for the purpose."
In some cases existing use rights have been applied to a unit of land less than the whole lot, (Salvation Army v Newcastle City Council [2000] NSWLEC 36; (2000) 107 LGERA 40; Lemworth, and Starray Pty Ltd v Sydney City Council [2002] NSWLEC 48), but in other decisions the existing use has extended to the whole of the land, and not been confined to part of it (see Brickworks; Mona Vale Pty Ltd v Pittwater Council [2003] NSWLEC 74 ; (2003) 124 LGERA 449, at [20]-[22], and Romeo v Pittwater Council [2006] NSWLEC 645 ; (2006) 149 LGERA 107, at [20], and [31]-[32]).
On the question of existing use rights in the present case, I accept the respondent's position and find that no existing use rights arise. An "existing use", as defined in s 106 of the EPA Act, is a specific use of land, now prohibited, but which prior to the introduction of an environmental planning instrument (or a provision within it) was lawful, whether by DC or otherwise.
Finding on (i)
I, therefore, conclude that the continuing use of the subject land at the date of acquisition is permissible with consent as an ILU. It is not prohibited by the LEP, and it is, therefore, not an "existing use" under the EPA Act.
Disputed planning matter (ii) - The 2006 consent and the public purpose
In July 2006, Council granted approval for the landfilling of part of the subject lands (See [47] above and Exhibit A9, fols 113-134).
Montgomery opines that the consent confirmed a change in Council policy in relation to the filling of the land, and further illustrated that the area available for building and operational purposes was not determined by the draft zone boundaries in the draft LEP 2009. He is of the view that, on the date of approval, taking into account the size of the land and the long history of approvals for expansion, and as evidenced by the Council's written records, Council was not opposed to the expansion of the plant's area or its continued use for industrial purposes, and was of the view that the development and filling of the land did not have an adverse impact on scenic values of the region.
Montgomery states that, "absent the public purpose, the closest distance from which the fill would have been viewed from a public place was some 300m away in Mulgrave Road" (Exhibit A7, par 42). He, therefore, rejects the proposition that the public purpose provided a screen for filling - he thought that the WFER made the filling more visible. Further, it was not inconsistent with environmental impacts in the area such as flooding.
Montgomery is also of the view that although the "acquisition boundary" provided a convenient edge to the expansion, there is no real basis for concluding that Council would have rejected the 2006 development application, had the WFER not been in place. He is of the opinion that there is no discernible difference between what was achieved by the 2006 consent and what might have been the position, if the WFER had not been in place. The boundary represented a "sensible smoothing out of the shape of the platform and is reasonably consistent with the position of the contours of the unfilled land and the need to create an engineered batter over them" (applicants' outline submissions: Town planning and valuation, par 7). Although a matter of conjecture, the area of approved fill would have been in the vicinity of that approved in the 2006 consent, and would have sought an edge line of a relatively straight nature (T09.05.11, p27, LL10-30).
The Council's 2006 approval for the filling works treated the proposal as an industrial activity, seeing the proximity of the Mulgrave Road Industrial Area as indicative of the area's general character. Although the Council reports approving rezoning between 2000-2006 refer to the public purpose, the applicants submit that they were "simple factual statements", and not "arguments or justifications for the approval" (applicants' submissions, par 49).
The respondent argues that the filling and expansion permitted by the 2006 consent was influenced by the public purpose, and, therefore, must be disregarded in the "before" scenario, pursuant to s 56(1)(b). On this view, the Part 3A application which was dependent on the filled land established under the 2006 consent, must also be disregarded.
The respondent rejects Montgomery's evidence that the 2006 consent represented a "change in policy". It submits that the absence of changes to any environmental planning instrument, and the absence of any other consents giving credence to the change in policy refutes such a proposition. Rowan is of the opinion that, absent the WFER, the filling proposed by the 2006 consent would have been highly visible from a number of points. The respondent also submits that the 2006 consent was issued at a time when construction of the WFER had commenced, that it approved expansion beyond the zone boundary, despite Council's concerns in 2005 about the visual impact of filling, and that it was, therefore, influenced by the public purpose. Rowan is of the opinion that without the public purpose, filling below RL11.0 would have undermined Council's planning objectives in establishing the zone boundary at that level, a factor which Montgomery argues is irrelevant to the issue.
According to Rowan, the area between the eastern boundary of Figure 1 and the WFER, which the Council gave permission to fill, in the 2006 consent, represented an additional area for expansion available due to the public purpose. As a result of this greater development opportunity, the respondent argues betterment of the land.
The respondent draws attention to comments in the SEE and the Development Assessment Report (Exhibit R1, tab 44, p385), where the Council states, for example, "much of this area is surrounded by land that is either already raised or is being raised as a result of the WFER". In relation to assessment of the visual and scenic quality of the area and the context and setting of the assessment, the respondent highlights the repeated references to the site being adjacent to the WFER. (Exhibit R1, tab 44, p394. See also Exhibit R3, pars 132ff.)
Finding on (ii)
I prefer Mr Montgomery's view on this issue, and, therefore, conclude that it cannot be said with any certainty either that the 2006 consent would not have been granted, or that it would have been limited to the proposed zone boundary, as submitted by the respondent, had the WFER not been in place.
Disputed planning matter (iii) - Filling in the north-eastern corner
Clause 25(2) of the LEP prohibits or restricts the erection of buildings at a level less than 3m below the flood planning level, i.e. 17.3m-3m = 14.3m. It provides as follows:
"A building shall not be erected on any land lying at a level lower than 3 metre below the 1-in-100 year flood level for the area in which the land is situated, except as provided by subclause (4), (6) and (8)."
That provision was accepted by both planners as a development standard, but one that could not be complied with in the north-eastern area without filling. Thus an application to erect a building on land lower than 14.3 AHD would require a dispensation from the standard pursuant to SEPP 1. The town planners agreed that such a process "introduces a higher level of scrutiny", and a "risk that a hypothetical purchaser would have to evaluate" (Exhibit A15, pars 9 ff).
Montgomery was initially of the opinion that, absent the public purpose, approval for filling and subsequent development over most of the acquired land, as well as a further 1.73 hectares of the residue land in the north east corner, would have been possible. He initially thought that most of the north-eastern section of land (including the acquired land) was available for filling and industrial development (Exhibit A7, par 54). However, he later revised his opinion, stating that there was some development potential in the north-eastern section of the land beyond the proposed zone boundary, (the "red area" in marked-up Exhibit R6), but agreed with Rowan that he would have advised a hypothetical purchaser that filling would not be supported in the "green area" (see Exhibit A15 and T05.5.11, p28, LL18 ff. See also Exhibit R6).
Montgomery thought that "there may be some limited opportunity for some ancillary development in a portion of the green area", but Rowan thought it was more likely to be used by the NSW Office of Water for regeneration/rejuvenation purposes, and that "nothing beyond utilities... would have been supported" (Exhibit A15, par 7).
Both town planners agreed that the "red" area between the western alignment of the WFER and the northern property boundary was an area of lesser constraint, the primary test being scenic impact.
Montgomery, relying on the existing use of the land as "rural industry", thought that further development would not be reliant on an industrial zone, and stated that because the land is bounded by the WFER on one side and rural land on the other three sides, development would not necessarily have a negative impact on the landscape. He was of the opinion that the zone boundary was based on the 11m contour and the WFER alignment, rejecting the requirement of a rural buffer between two industrial areas. The subject land being 24ha in area was sufficient to create barriers to any fill, and, therefore, filling to the east would have been possible on both the parent parcel and on the residue land.
He also thought that the applicants would have sought to pipe the watercourse in a similar fashion to the work done by the RTA in constructing the Mulgrave Road access ramp.
According to Mr Rowan, at the date of acquisition, ignoring the public purpose, there was virtually no prospect of the plant area being capable of lateral expansion over the area occupied by the WFER, or into the severed area, and no hypothetical purchaser would have thought that there was any prospect of it (Exhibit A7, par 44). As a result of the objects of the Rural Living zone, cl 25 of the LEP, the provisions of the DCP, and visual and physical impacts, filling of the floodplain in the north-eastern corner would have been highly unlikely in both the "before" and "after" scenarios. (Exhibit A7, par 46)
He noted that Council, in preparing the draft LEP 2009, considered a range of zoning options in relation to the subject land, and was of the view that the rationale behind the Council's selection of the zone boundaries in the draft LEP represented the same rationale that it would have adopted to an expansion of the existing MSF. That is, filling for industrial use would not have been permitted beyond the proposed zone boundaries in figure 1 of JPR 1 (Exhibit A7). Rowan stated that the land in the smaller residue parcel is visually sensitive, and of a different character from that in the industrial zones, and filling would have the effect of infilling the rural buffer between the two zones. Further, conversations with the Office of Water confirmed, in Rowan's opinion, that piping of the watercourse would have been unacceptable.
Rowan is of the opinion that the land in the north-eastern corner has the same development potential (and is subject to the same constraints) in the "before" and "after" scenarios. Montgomery considers that as a result of the severing of the land by the WFER, filling and use for purposes associated with the MSF in that area are no longer available in the "after" scenario (Exhibit A7, par 62).
The respondent submits that, as the WFER is a public road, which has no restriction on its use for that purpose, in the after scenario "full access was available to the northern-eastern land beneath the bridge of the WFER". The respondent argues this does not have regard to the "availability of access from Mulgrave Road via WFER in the 'after' scenario and the access from the parent parcel on the southern side of the WFER to the northern side" (respondent's opening submissions, par 29).
Finding on (iii)
Although Council had generally supported continued/expanded use of the Tolson lands as a MSF (and for ancillary uses other than filling), I conclude that a hypothetical purchaser would consider that the likelihood of consent being granted to fill the smaller residue parcel is so uncertain that no value should be attached to it on that account.
Severance
I should add, for completeness, that I also note, in respect of the town planning evidence, that the severance of the residue land into two parcels constrains use of the residue land as a MSF.
H:The Valuation evidence
The valuation evidence provided to the court included a valuation report of Rachel Cooper (Exhibit A6 - filed 18 April 2011) for the applicants, and a Statement of Evidence by David Lunney (Exhibit R4 - filed 12 April 2011) for the respondent.
Lunney and Cooper also prepared three joint reports - the first dated 21 April 2011 (Exhibit A8 ('JVR1')), later supplemented by a report dated 21 June 2011 (Exhibit R9 ('JVR2')) following the town planners' revision of their findings in JPR2 (Exhibit A15), and the provision of additional surveying evidence filed on behalf of both parties. The two joint valuation reports were then further amended by an agreed/joint statement (Exhibit R11 ('JVR3')), as a result of an error identified in the area of developable land adopted in the "after" scenarios in the two previous joint reports.
The primary valuation method adopted by both valuers was the "before and after" method, but valuation on a "piecemeal" basis was also undertaken (see Exhibit A6, p1, Exhibit R4, p4, and Exhibit A17). Both valuers approached the planning evidence contingently, using four scenarios which turned on whether the evidence of Montgomery or Rowan is accepted (scenario 1 or 2), and the impact of the lease/sub-lease arrangement(s) (scenario A or B - A being the situation where vacant possession is assumed).
Points of agreement between the valuers include:
- Highest and Best use of the land is as an MSF
- Filling of property at the date of acquisition would be at no cost (Exhibit R9, p3)
- The non-developable parts of the parent parcel and the residue land had a market value of $5.50/m2 (Exhibit A8, par 2.5)
- For all four scenarios, the market value of the filled land, both before and after acquisition, was $100/m2. (Exhibit A8, pp7-13, and Exhibit R9).
- If the lease/sub-lease were considered in the valuation assessment, it would be appropriate to discount the present value of the rent (at 8%) to be paid over the duration of the lease (plus options), and add to that a value for the reversion, also deferred at 8%. Counsel for the applicants take issue with this method of calculation, and I will elaborate in due course.
Hanley JA considered that it would be unrealistic to ignore the burden that private interest holders may place upon the land when calculating the amount that a "willing but not anxious purchaser who was well informed would pay" for the land (at [22]), noting that equitable claims enforceable at the resumption date could potentially diminish the compensation payable to the owner (at [66]).
DHN considered, internationally and domestically
DHN was not followed in Buckinghamshire County Council v The Secretary of State for the Environment, Transport and the Region [2000] EWHC Admin 386 (31/08/2000), nor in Woolfson v Strathclyde Regional Council (1978) 38 P & CR 521. In the latter case, Lord Keith expressed doubts with the approach taken by the Court of Appeal in the DHN case, saying (at 526 - my emphasis):
"I have some doubts whether in this respect the Court of Appeal properly applied the principle that it is appropriate to pierce the corporate veil only where special circumstances exist indicating that is a mere facade concealing the true facts. Further, the decisions of this House ... which were founded on ... to some extent ... Lord Denning MR do not, with respect, appear to me to be concerned with that principle."
In Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254 ('Pioneer'), Young J noted that DHN had been followed in some English cases, but thought that a significant factor influencing its application was whether the company "was a wholly owned subsidiary receiving no fees, making no profits or losses and merely a conduit pipe for transactions within the group" (at 264-268). His Honour thought DHN should be confined to its own facts and stated (at 267):
"... it is only if the court can see that there is in fact or in law a partnership between companies in a group or alternatively where there is a mere sham or façade that one lifts the veil. The principle does not apply in the instant case where it would appear that there was a good commercial purpose for having separate companies in the group performing different functions even though the ultimate controllers would very naturally lapse into speaking of the whole group as 'us'". (emphasis mine)
In Mario Piraino Pty Limited v Roads Corporation (No. 2) [1993] 1 VR 130; (1993) 76 LGRA 263 ('Piraino'), Gobbo J considered that DHN was an illustration of a case where a parent can mount a claim for compensation for its own loss, even though the business to which the loss was related was conducted on land owned by the subsidiary. His Honour observed that DHN had not been specifically applied in Australia, had been distinguished in Pioneer, and, although acknowledging that the precise relationship of the companies was not the subject of evidence in that case, declined to follow it. His Honour was not satisfied that "mere common control" in contrast to "common ownership", was sufficient to provide an identity of "interest sufficient to make claims and entitlements in effect interchangeable" (at p150) and, therefore, found that the circumstances of that case did not permit the corporate veil to be lifted.
The respondent also referred the court to Halloran and Sealark Pty Ltd v Shoalhaven City Council [1999] NSWLEC 171 (at [67]), and to James Hardie v Putt [1998] NSWSC 434 (unreported 22 May 1998 - at pp29-34), both of which decisions refused to follow DHN. In both cases the court was not satisfied that the facts justified a lifting of the corporate veil, with the latter emphasising that it is only appropriate to take such a course of action when the circumstances indicate the company is a sham or façade. That case was not, however, concerned with the calculation of compensation pursuant to the JTC Act.
Consideration
I yield to the weight of authority, and decline to apply DHN in the present circumstances.
I cannot accept the applicants' submission that the enforcement of the lease in equity is a consideration entirely personal to Mr & Mrs Tolson, and, therefore, not relevant to the market value of the land. They, Holdings, and Elf FS are legally separate and identifiable entities, even if they might be seen as one from an economic perspective.
Although s 25 of the Court Act allows involvement of other interest holders, it does not require that every interest attract compensation. Section 55 of the JTC Act lists the matters to be considered. Section 56 and Leichhardt2006 require objective consideration of the evidence, having regard to the interest held by the claimant (possibly less than the fee simple), and no regard to matters entirely personal to the owner. Section 54 provides the overriding guarantee of a "just" result, even if "nil" compensation is indicated: see Everest.
In regard to the applicants' alternative submissions based upon s 20 of the JTC Act, I note that that section has the effect of terminating the lease agreements on the date of acquisition in so far as they affect the acquired land, but that the section relates to the acquisition notice and the consequences it has on the acquired land. It is not relevant to the calculation of the value of the land at that date. As Griffiths CJ said in Aerated Water "the value is, of course, to be determined irrespective of the fact of the notification, and as if it had not been published". Compensation is determined in accordance with Part 3 of the JTC Act (see s 37), which does not include any express provision allowing the court to disregard limitations impacting on the use of the land at the date of the acquisition (except of course those specifically relating to the public purpose).
Accordingly, due to the existence of the lease agreements, the first applicants' interest is a reversionary interest. A hypothetical purchaser in this case would acquire the freehold interest subject to a pre-existing lease and any potential for future development in areas occupied by the MSF would necessarily be deferred for the period of the lease, plus the options. This is not a matter that can be simply disregarded for the purpose of valuation.
The difficulty lies, however, in determining what value a hypothetical purchaser would be likely to attribute to such a lease. The valuers have agreed that if the lease is considered relevant, the value of the acquired land should be calculated based on the present value of the rental revenue to be received for the remainder of the lease plus a value for the reversionary interest.
Although I note the applicants' concerns with that method of calculation, I must agree with the valuers' approach.
J:Filling the land for future development
A question confronting a hypothetical purchaser would be the appropriate level of confidence to have that a substantial proportion of the holding, which is presently unfilled, could be filled for the purpose of extending the use to exploit its valuable potential as a MSP. Mr Ayling decided that, as all the experts regard it as an "all or nothing" situation, rather than exploring whether the land could be filled to an intermediate level, the applicants would lead evidence on the filling question.
Warren Frederick Cole is a registered surveyor of 40 years standing. He prepared surveys for the case on the basis of certain assumptions and some sketches prepared by the planning witnesses (a marked up Exhibit R6, and fig 1 from Exhibit A7). He arrived at areas of 18,467m² for scenario 1, 11,048m² for scenario 2, and 19,589m² for scenario 3. Mr Maston did not contest Mr Cole's areas, and he was not required for cross-examination.
Neil Broderick Groat is managing director of MCS Earthmoving Pty Ltd, a company specialising in earthmoving for land filling projects. On the assumption that fill material is supplied and delivered free of charge to the land owner, he estimated the costs of filling the land in each of three alternate filling scenarios (as distinct from valuation scenarios), to depths of 10m, 12m, 14m, and 16m AHD. His estimated costs are as follows:
Filling Scenario 1 (18,467m3)
to 10m $57,567
12m $99,977
14m $143,387
16m $184,797
Filling Scenario 2 (11,048m3)
to 10m $28,787
12m $53,487
14m $80,187
16m $109,247
Filling Scenario 3 (19,589m3)
to 10m $24,494
12m $75,894
14m $129,564
16m $179,874
Stuart Lindsay Muir is a construction manager employed by Mainland Civil Pty Ltd. He has a civil engineering degree, and specialises in bulk earthworks and pavement construction on major projects. In 2009 he would have to negotiate with a buyer to take excavated material for use as fill. It would be delivered at the excavator's expense. The truckers charged, according to Mr Groat, approximately $200 per 30 tonne load.
Lunney and Cooper agreed that filling of the property at the date of acquisition would be at no cost (Exhibit R9, p3), but Lunney is of the opinion that "an intending purchaser would not assume that this situation will remain indefinitely" (Exhibit R9, p8). He notes that landfill costs in the future "may be significant".
I conclude that, if the lease is considered valid, the option is exercised, and the arrangement is enforced, and the development is, therefore, deferred for 18 years, it could not be assumed that there would be no costs incurred to fill the land.
K:The claim for special value
The first applicants base their claim for special value on their "use" of the land, either directly or through the "medium of entities controlled by them". They submit that the claim does not rely on "subjective affection, sentiment or long attachment to the site", but is based on the applicants' "peculiar capacity" to obtain economic benefit from the site, and is, therefore, in line with the principle laid down by Callinan J in Boland v Yates Property Corporation Pty Limited [1999] HCA 64; (1999) 167 ALR 575 ('Boland'), at [292], namely:
"Disturbance and special value to the owner
I group these two topics together because although they are separate they are related concepts. The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps most exclusively to exploit it. None of the examples given by the Full Federal Court are true examples of special value. There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a racetrack on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use. Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no one else."
The first applicants' submit that the special quality required by Callinan J in Boland exists in their case due to the their "constant personal effort" (applicants' outline submissions, par 7) to ensure a reduction in the plant's adverse environmental impacts so that it can continue and expand in a market where other mushroom compost manufacturers have ceased operation. According to Mr Tolson, special value exists as a result of the increasing demand for mushrooms, and, therefore, mushroom substrate, in the Sydney market, which, prior to the acquisition, could have been satisfied by Mr Tolson's plant. The acquisition is said to limit the extent of expansion of the Tolson's plant in a "way in which it was previously not limited" (par 9), resulting in a decreased ability to meet the market demand. This will lead to a loss in market share.
Special value is also said to arise as a result of the plant's physical proximity to the three mushroom farms that it supports, and which are owned/operated by the applicants' sons. The Tolson operation is also now the only substrate production facility in the Sydney Metropolitan Area (Ex A16, par 25).
To the Tolsons, the land is irreplaceable, and Mr Tolson deposes (affidavit 12 November 2010, par 17) that he "would certainly have been prepared to pay considerably more than its market value as farm land, or even as industrial land", to persuade the respondent either not to acquire such developable land, or to sell it back to him The applicants submit (par 11) that the court should accept this unchallenged evidence.
The respondent argues that there cannot be any claim for the special value, because: (1) there was no relevant use of the land by the first applicants, and (2) any attributes supporting the claim (for example, that they would pay a higher amount than the market value) are already considered in the calculation of market value, and are not in addition to it: Roads and Traffic Authority of New South Wales v Hurstville City Council [2001] NSWCA 11; (2001) 112 LGERA 223 ('RTA v Hurstville') (at [35]ff).
The respondent submits that the right to operate a MSF on the land would not be lost on a transfer of ownership, because any financial advantage in operating the facility could be enjoyed by any owner of the land, and, if market demand is as described by the Tolsons, then it is expected that there would be a significant market for the acquisition of the land for that purpose. In contrast to the circumstances in Boland, there is, in the present case, no higher planning use which can only be exploited by one or two purchasers in the market, nor is there any specialised skill or qualification needed to enter the industry. The potential for expansion is dependent on planning laws which govern all owners. Operating a MSP is an elementary process which does not require any personal licence or qualifications for entry into the market, and, therefore, does not possess the exclusivity required by Callinan J's reasoning in Boland.
The respondent also challenges Cooper's calculation of special value, arguing that any advantage in addition to market value must be represented by a quantifiable financial value. Cooper was questioned on her approach to s 57, and her calculation of "financial advantage" (at T22.06.11, pp172-173), and she conceded that "there is no formula" (p173, L5).
In Hurstville City Council v Road and Traffic Authority [1999] NSWLEC 100, Talbot J found (at [47]) that "there would be an element of special value to the council in that the council would pay a higher rent than market rent in order to retain the use of the land rather than lose it", but His Honour's decision was reversed on appeal in RTA v Hurstville, his approach being considered to be "circular".
However, Spigelman CJ has acknowledged that there may be circumstances where an "advantage ... in addition to market value" is not captured by the "before and after method": Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWCA 314 ('Mir Bros'), at [71]ff.
Accordingly, the respondent submits that, as Cooper approached special value without reference to some formula to guide calculation of quantum, and raised elements properly included in assessment of market value, Lunney's evidence should be preferred.
I have concluded that the respondent's submissions on this matter are to be preferred. While I acknowledge their past leadership role in the industry, the Tolson interests cannot be said to be uniquely placed to continue to exploit the land. A hypothetical purchaser would be able to continue to operate the MSF.
Accordingly, the claim for special value fails.
L:Betterment/Injurious Affection
The respondent argues that there has been betterment of the land, regardless of which town planning evidence is accepted (see Exhibit R11, and [143]-[145] above).
The applicants argue that the land has suffered injurious affection, rather than betterment, but submit that betterment, even if established, should not be applied so as to disentitle the dispossessed owner of compensation, and, therefore, if the "before and after method" is found to yield a negative or nil result, compensation must be paid on an alternative basis.
The court was referred to the Court of Appeal decision in AMP, where the appellant unsuccessfully attempted to argue that Pain J had erred at first instance in allowing compensation to be reduced to nil as a result of betterment of the land.
Although all three judges hearing the AMP appeal (Hodgson, Bell, and Gyles JJA) declined to entertain the argument in question, as the issue had not been raised before Pain J, Hodgson JA was of the opinion (at [72]-[74]), that it would be an error of law to find "that wherever betterment exceeds other heads of compensation, nil compensation is payable". (See also his Honour's comments at [62]-[63]). The applicants submit that, "had the appellant not been shut out from relying on the argument for technical reasons, the argument would have succeeded" (applicants' submission filed 29 April 2011, par 34).
The applicants drew attention to the "just compensation" guarantee found in s 54, and referred the court to Hodgson JA's obiter comment, indicating that the objects of the JTC Act included ensuring the "proper conduct on the part of State authorities acquiring land" (quoted by His Honour from Leichhardt 2006, at [40]). His Honour commented (at [63]) on the consequence of applying betterment so as to deny compensation to a dispossessed owner, whilst at the same time allowing others to enjoy the benefits flowing from the public work at no cost. The applicants assert (par 25) that, "this manifest wrong might be righted" by adopting the guarantee provided in s 54.
The applicants also drew the court's attention to the concept of "compensation for acquisition" rather than compensation "for the deprivation of the ownership of land", found in Spigelman CJ's judgment in Leichhardt 2006 (at [39]), and his Honour's view ([62] in AMP) that, in a case of compulsory acquisition, the amount of compensation to which a dispossessed owner is entitled is not to be less than the market value of the land at the date of the acquisition.
The applicants also submit that the only reference to betterment in the JTC Act is in s 55(f), which, as a freestanding provision, is intended to operate only within the context of a claim for injurious affection. The effect of the statute is to ensure that where claims for injurious affection are made, they do not succeed in so far as the effect of the taking of the land has increased the value of adjoining or severed land. Further, there is nothing, textually or in s 55, justifying or requiring the use of methods for the calculation of compensation, which import concepts of betterment having the effect of entirely defeating the claimant's entitlement to just compensation. Relying on Griffith CJ's judgment in The Railway Commissioners of New South Wales v The Perpetual Trustee Company Limited [1905] HCA 38; (1905) 3 CLR 27 (at 39), it is submitted that it is inappropriate to take such a course of action, in the absence of "express enactment".
The respondent argues that, following the acquisition, as a result of the public purpose, the residue land enjoyed the benefit of an increase in value, which exceeded any loss caused by the acquisition, and, therefore, nil compensation should be awarded.
The respondent submits that the compensation to which a dispossessed owner is entitled is an amount calculated after consideration of all (and only) those matters set out in s 55, and, in determining the final figure of the compensation payable, the court must have regard to any potential increase in land value as a consequence of the public purpose being carried out. Accordingly, just compensation may, pursuant to s 55, be an amount that is less than the separately determined market value of the acquired land.
Reference was made to Mir Bros (at [45]-[47]), where Spigelman CJ found that: s 55 does not provide a mathematical formula, but provides an exhaustive list to which regard must be had; the "before and after" approach does not separately address each s 55 matter; and the aim of s 55 is to place a person in the same position they would have been had the acquisition not occurred. His Honour also noted that, if the application of the "before and after" method leads to a failure of the valuer to consider all relevant considerations as provided in s 55, then the application of that approach would be considered to be inconsistent with the Act.
The respondent submits that s 3 ("the objects clause") cannot "change the meaning of intractable words in the operative provisions of the statute", and that s 10 merely relates to the notices to be provided in relation to acquisitions, rather than the assessment to be undertaken by the court. In addition, in contrast to Part 3, ss 3 and 10 specifically state that "[n]othing in this section gives rise to, or can be taken into account in, any civil cause of action" (see ss 3(2) and 10(3)). Relying on Re Commercial Bank of Australia Ltd (1893) 19 VLR 333 at 375, the respondent submits that the requirement to read the Act as a whole is qualified where, as here, the Act is divided into parts. Further, where there is inconsistency between the sections of a statute, the specific provision, such as s 55(f), prevails over the general, such as ss 3 and 10. Alternatively, the provision inserted later is to prevail over those included earlier (see Salemi v Minister for Immigration and Ethnic Affairs (No 2) (1977) 14 ALR 1; Eastman v Commissioner for Superannuation (1987) 74 ALR 221; Mt Isa Mines Ltd v Federal Commissioner of Taxation (1976) 10 ALR 629 at 639).
The respondent submits that, as the cases endorsing the proposition that compensation should be at least equal to the market value of the land rely on ss 3 and 10 for their authority, and are based on obiter only, they should not be accepted. Further, relying on Pain J's decision in Vilro Pty Ltd (in voluntary liquidation) v Roads and Traffic Authority (NSW) [2010] NSWLEC 234; (2010) 179 LGERA 47 at [35], it submits that the s 54 requirement for just compensation "does not override the clear wording in s 55" (Closing Submissions, par 185). The respondent submits there is no indication in Part 3 that any of the matters outlined in s 55 are to have priority in the assessment of compensation, nor is there an express requirement, other than s 37, that a dispossessed owner be "paid" as opposed to "compensated". The "guarantee" suggested by the provision of the JTC Act does not guarantee payment of the market value of the acquired land, but of compensation equivalent to that amount.
In support, the respondent referred to various cases (some relating to different statutory schemes) where the courts have provided nil compensation, including High Court cases such as Springfield Land Corporation (No 2) Pty Ltd v State of Queensland [2011] HCA 15; (2011) 242 CLR 632, Boxall v Sly [1911] HCA 6; (1911) 12 CLR 63, The Adelaide Fruit and Produce Exchange Company Limited v The Corporation of the City of Adelaide [1961] HCA 20; (1961) 106 CLR 85 (at [5]), and Smith v The Minister for Home and Territories [1920] HCA 1; (1920) 28 CLR 513 ('Smith'). In WG & C Nominees Pty Ltd v Sydney Water Corporation Ltd [1996] NSWLEC 165, Talbot J found the residue land exceeded its market value before the acquisition, and, therefore, nil compensation was awarded under s 55 (a), (b), (e) or (f) of the JTC Act. Particular reliance was placed on Smith, and on Everest.
M: Market Value Compensation
As I have found (1) that the lease cannot be disregarded, and (2) that Montgomery's town planning evidence is generally to be preferred, the court is faced with the competing valuation evidence of Lunney, who says that there has been overall betterment of approximately $140,000, and Cooper, who finds an overall diminution in value of about $340,000 (Exhibit R11).
I do not accept the Tolson land has suffered injurious affection, and, in that regard, I prefer Lunney's valuation evidence, and find that the land has enjoyed substantial betterment.
The question which then arises is whether nil compensation for market value is "just" in the circumstances of this case, as it was in AMP, and, if not, what amount should be awarded.
"Just" compensation must be determined in accordance with the scheme in the JTC Act, and is not a strict mathematical exercise. Justice must be done to all parties. When the court comes to "reality test" an emerging outcome, it must apply "common sense"; Roads and Traffic Authority (NSW) v Collex Pty Ltd [2009] NSWCA 101; 165 LGERA 419, per Hodgson JA (quoted in Everest at [64], [65], and [220]). While an award of "nil" compensation is not lightly decided by the court, and means there is no pecuniary compensation, usually there is, nevertheless, valuable "compensation" flowing from the acquisition, in the form of betterment, and a "just" result is achieved.
Although the factual circumstances were very different, and there was no betterment, Everest was a case where the JTC Act has been followed to its limit, and I had to apply the "just compensation override" in s 54 of the JTC Act. (See Everest at [51], [187], and [208]-[224]).
Having arrived at a nil valuation, I turned to all the material before the court, much of it disputed, for guidance towards a "just" result. A case could be made for the acquired land to have a value attributed to it as a single lot, albeit that its highest and best use was for road. Counsel for the RTA and the respondent Minister in that case, and their valuer, acknowledged that the dispossessed landholder was entitled to "nominal" compensation, and a figure of $200,000 was put forward, with a fallback position of $445,000. The rationale for neither figure proposed was accepted by the court ([219]), and I did not accept the submission that any figure chosen should have an agreed remediation expense deducted from it. Determining that "nominal" was not "just", I came to the conclusion that I should award $500,000 for market value.
As in Everest, the acquisition in this case imposes a constraint on the use of the residue land, but there was no concession by the respondent or its counsel that even "nominal" compensation should be paid for market value. As I said in Everest (at [187]), it is not the role of this court "to assess and award some form of 'damages' for the loss of profit or development potential sustained by the dispossessed owner..., but to determine appropriate compensation according to the regime of the JTC Act".
As in AMP, that regime dictates a "nil" result, so I have decided that no compensation should be awarded to the first applicants under s 55(a) of the JTC Act.
N: Disturbance
The RTA accepts the quantum of the first applicants' claims for relevant legal costs ($9,233.62), and valuation fees ($5,500.00), but denies that they should be compensated, given the finding of betterment. (See [9] above).
No argument was developed to support that submission, and no relevant authority drawn to the court's attention.
In my view, a dispossessed owner must be entitled to obtain relevant advice, and I propose to allow the first applicants to recover those amounts.
The RTA accepts the second applicant's disturbance claim for $18,131.85, and notes that the town planning fees were invoiced to that company. The first applicants have not provided any evidence of their having personally paid them, or of their incurring a debt for that expense.
In relation to the claims for market value and special value, I have found that the first and second applicants must be treated as separate legal entities. Accordingly, the claims for disturbance must be treated in a similar fashion.
I will, therefore, award the second applicant $2,870.45 for the town planning fees, and add it to the amount already agreed for its disturbance claim.
O: Conclusion and Orders
The formal orders of the court are:
(1)The first applicants' claims for market value, special value, and injurious affection compensation for the respondent's acquisition of lots 19 and 20 of deposited plan 1138749 are dismissed.
(2)The first applicants' claim for disturbance is determined at an amount of $14,733.62
(3)The second applicant's claim for disturbance is determined at an amount of $21,002.30
(4)Costs are reserved.
(5)All exhibits are returned to the parties.
Decision last updated: 25 July 2012
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