Trevor Allan McBride v MidCoast Council

[2021] NSWLEC 100

Land and Environment Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Trevor Allan McBride v MidCoast Council [2021] NSWLEC 100

Hearing dates:

11 December, 14 – 18 December 2020 and 25 – 26 February 2021

Date of orders:

28 September 2021

Decision date:

21 September 2021

Jurisdiction:

Class 3

Before:

Robson J

Decision:

See orders at [266] and [268]

Catchwords:

VALUATION — Compulsory acquisition — Before and after valuation method — Highest and best use as a manufactured home estate — Hydrological and ecological constraints on development — Market value — Severance — Injurious affection — Disturbance

Legislation Cited:

Biodiversity Conservation Act 2016 (NSW), s 6.8

Biodiversity Conservation Regulation 2017 (NSW), cl 6.1

Environment Protection and Biodiversity Conservation Act 1999 (Cth)

Environmental Planning and Assessment Act 1979 (NSW), s 4.15

Great Lakes Development Control Plan 2014

Great Lakes Local Environmental Plan 2014, cl 2.3

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 54, 55, 56, 58, 59, 61, 64, 66

Land and Environment Court Act 1979 (NSW), s 37

Local Government Act 1993 (NSW)

Local Land Services Act 2013 (NSW), ss 60F, 60H

Roads Act 1993 (NSW)

State Environmental Planning Policy (Coastal Management) 2018

State Environmental Planning Policy No 36—Manufactured Home Estates, Sch 2, cll 2, 4, 6, 7, 9

Cases Cited:

Abret Pty Limited v Wingecarribee Shire Council [2011] NSWCA 107; (2011) 180 LGERA 343

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

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

Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170

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

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

De Ieso v Commissioner of Highways (1981) 27 SASR 248; (1981) 47 LGRA 412

Gosford Shire Council v Green (1980) 48 LGRA 201

Hastings Point Progress Association Inc v Tweed Shire Council [2008] NSWLEC 180; (2008) 160 LGERA 274

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

Housing Commission (NSW) v Falconer (1981) 1 NSWLR 547; (1981) 50 LGRA 334

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

Marrickville Council v Sydney Water Corporation [2013] NSWLEC 222

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

Mete v Warringah Council [2004] NSWLEC 273; (2004) 133 LGERA 420

Oxford Street Holdings Pty Ltd v Mid-Coast Council [2019] NSWLEC 1283

Roads and Traffic Authority of New South Wales v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251

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

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

Sydney Water Corporation v Marrickville Council [2014] NSWCA 438

Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367

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

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

Category:

Principal judgment

Parties:

Trevor Allan McBride (Applicant)
MidCoast Council (Respondent)

Representation:

Counsel:
I Hemmings SC with A Pearman (Applicant)
J McKelvey (Respondent)

Solicitors:
Stacks Law Firm (Applicant)
Local Government Legal (Respondent)

File Number(s):

2019/00391962

Publication restriction:

Nil

Judgment

1. Trevor Allan McBride (the ‘applicant’) brings these proceedings pursuant to s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (‘Just Terms Act’), seeking compensation as a result of the compulsory acquisition on 31 May 2019 (the ‘date of acquisition’) of 6.7632ha of land comprising Lots 305, 306 and 308 in DP 1240455 at Forster, NSW (‘Acquired Land’) by MidCoast Council (‘Council’).

2. The Valuer General of NSW determined the amount of compensation to be offered for the Acquired Land and based upon that valuation, Council offered the applicant total compensation in the sum of $494,500 comprising $467,000 for the market value of the Acquired Land (including injurious affection and severance) at the date of acquisition and $27,500 for disturbance. The applicant objected to the amount of compensation offered and commenced these Class 3 proceedings on 12 December 2019.

3. In his amended points of claim filed 29 January 2021, the applicant seeks total compensation in the sum of $7,432,255.94 comprising $6,356,000 for the market value of the Acquired Land (including injurious affection), $922,740 for severance, and $153,515.49 for disturbance.

4. In its amended points of defence filed 19 February 2021, Council contends for total compensation in the sum of $493,515.49 comprising $340,000 for the market value of the Acquired Land, no compensation for injurious affection or severance, and $153,515.49 for disturbance.

5. For the reasons that follow, I find that the applicant is entitled to total compensation in the sum of $1,036,630.49.

Background

6. An understanding of the background to the proceedings, including the factual matrix and the relevant regulatory framework, provides context for the issues joined between the parties. The background facts in this section, but not the legal implications thereof, are mostly undisputed.

7. For the purpose of valuation, it is relevant to note that prior to the acquisition, the Acquired Land formed part of a larger contiguous 33.5832ha area of land owned by the applicant being Lot 304 in DP 1099114 at Forster (‘Parent Parcel’). The Parent Parcel was subject to two encumbrances, being an easement 6m wide to drain sewage, and an easement 7m wide for sewerage pipelines.

8. On 31 May 2019, Council compulsorily acquired 6.7632ha comprising the three different parts of the Parent Parcel being Lots 305, 306 and 308 in DP 1240455 which had been discretely created for the purpose of acquisition.

9. Lot 305 is located in the southern part of the Parent Parcel and has an area of 0.8122ha. Lot 305 was acquired by Council for a “Public Road” under the Roads Act 1993 (NSW). Lot 306 is located in the northern part of the Parent Parcel and has an area of 1.1280ha. Lot 306 was acquired by Council for a drainage reserve under the Local Government Act 1993 (NSW) (‘LG Act’). Lot 308 is also located in the southern part of the Parent Parcel and has an area of 4.8230ha. Lot 308 is bisected by Lot 305 and was also acquired by Council for a drainage reserve under the LG Act.

10. The drainage public purpose relates to improving the water quality in Pipers Bay (which is a key objective of Great Lakes Council, Great Lakes Water Quality Improvement Plan: Wallis, Smiths and Myall Lakes, Forster, NSW, (2009)) by improving runoff quality from the Pipers Bay catchment, as illustrated in the BTM WBM Pty Ltd, Dunns Creek Catchment Water Management Strategy, (August 2015). The works proposed on Lot 308 involve the establishment of two wetlands being the “Western Wetland” and the “Eastern Wetland”. The works proposed on Lot 306 involve the establishment of the “Cape Hawke Drive Wetlands” and “Overland Flow Corridor”.

11. The public road purpose on Lot 305 relates to the construction of the “Southern Parkway Extension” which will connect The Lakes Way to land to the east of the Parent Parcel.

12. Lots 305, 306 and 308 (constituting the Acquired Land) have a total area of 6.7632ha being 20.13% of the Parent Parcel. Lot 307 is the residual land of the Parent Parcel remaining in the ownership of the applicant after the date of acquisition and has an area of 26.82ha (‘Residue Land’). For convenience, and where the context does not require a distinction to be made, the Parent Parcel and the Residue Land are referred to as the ‘subject land’. The applicant also owns land with an area of approximately 40ha immediately to the east and contiguous with the Parent Parcel.

13. An understanding of the physical relationship between the Parent Parcel, the Acquired Land, the Residue Land, and the surrounding area (including the areas of respective lots) is gleaned from the two following figures, and Annexure A to this judgment (being an aerial photograph taken in 2019 depicting the boundaries of the Parent Parcel, the Acquired Land, and the Residue Land).

The Parent Parcel

The Acquired Land

14. The above figure shows that the Acquired Land falls into two parts, described in the evidence as the “northern acquired land” (comprising solely Lot 306 with an area of 1.1280ha) and the “southern acquired land” (comprising Lots 305 and 308 with a combined area of 5.6352ha).

15. The Residue Land also falls into two parts, bisected by the northern acquired land. The Residue Land to the west of the northern acquired land has an area of 5.07ha (‘western residue land’) and the Residue Land to the east of the northern acquired land has an area of 21.75ha (‘eastern residue land’).

16. At the date of acquisition Lot 305 was zoned SP2 Infrastructure (Local Road) pursuant to the Great Lakes Local Environmental Plan 2014 (‘GLLEP’). Lot 306 and Lot 308 were zoned SP2 Infrastructure (Drainage) pursuant to the GLLEP. At the date of acquisition, the remainder of the Parent Parcel was zoned RU2 Rural Landscape (‘RU2’) under the GLLEP, subject to a small area of land zoned R2 Low Density Residential (‘R2’).

17. Despite this zoning, as it is accepted by the parties that the SP2 Infrastructure zoning of the Acquired Land is a result of the proposal to carry out the public purposes, which, pursuant to s 56(1)(a) of the Just Terms Act, is disregarded as an effect on the value of the Acquired Land, and, the Acquired Land is taken to be zoned RU2 under the GLLEP, being the zoning it would have had absent the public purposes. For the purpose of these proceedings, the whole of the Parent Parcel is taken to be zoned RU2 under the GLLEP.

18. A copy of an extract of the zoning map in the GLLEP (showing the zoning of the land within and around the Parent Parcel at the date of acquisition) is Annexure B to this judgment.

Statutory valuation task

19. Section 54 of the Just Terms Act sets out the amount of compensation to which a person whose land has been compulsorily acquired is entitled, as follows:

54   Entitlement to just compensation

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

…

20. Section 54 directs attention to compensating the owner of the land for the detriment arising as a result of the compulsory acquisition. Section 55 of the Just Terms Act sets out the relevant considerations when determining the amount of compensation:

55   Relevant matters to be considered in determining amount of compensation

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

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

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

(c)   any loss attributable to severance,

(d)   any loss attributable to disturbance,

(e)   the disadvantage resulting from relocation,

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

21. The Just Terms Act subsequently defines the “loss attributable to severance” of land in s 58, as follows:

58   Loss attributable to severance

In this Act—

loss attributable to severance of land means the amount of any reduction in the market value of any other land of the person entitled to compensation which is caused by that other land being severed from other land of that person.

22. Further, the “loss attributable to disturbance” of land is subsequently defined in s 59 of the Just Terms Act, as follows:

59   Loss attributable to disturbance

(1)   In this Act—

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

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

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

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

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

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

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

…

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

56   Market value

(1)   In this Act—

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

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

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

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

…

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

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

25. This illustrates that the statutory task the Court, acting as the “judicial valuer”, is to undertake is not to objectively determine the market value of the Acquired Land, but rather, in accordance with the terms of the legislation set out above, to determine the terms of a hypothetical transaction that would occur between a hypothetical purchaser and a hypothetical vendor of the Acquired Land at the date of acquisition: Apokis v Transport for NSW (2020) 101 NSWLR 844; [2020] NSWCA 39 (‘Apokis’) at [44].

26. A number of different valuation methods can be utilised when determining the market value of land. As noted in Apokis at [46] and [67], where no marketable parcel of land is acquired, the statutory test is not directly applied, and instead the conventional approach is to adopt the “before and after” valuation method, which involves applying the statutory test to the whole of the land as it existed before the acquisition (‘before scenario’) and then applying the same statutory test to the residual land after the acquisition (‘after scenario’), such that there is judicial consideration of two discrete hypothetical transactions. The value of the land acquired, and hence the compensation to which the dispossessed owner is entitled, is the difference between the two valuations resulting from the application of the statutory test. The before and after valuation method captures not only the market value of the land acquired at the date of acquisition, but also any increase or decrease in the market value of the residue land caused by the carrying out of the public purpose for which the land acquired was acquired. In these proceedings, the applicant contends that the before and after valuation method is appropriate, as only a portion of the applicant’s land has been acquired. However, the applicant also marshals expert evidence that utilises the “piecemeal” valuation method for comparison.

27. In contrast, Council contends that given the Acquired Land is physically distinguishable from the Residue Land due to its unique constrained nature, the piecemeal valuation method is more appropriate (while noting that, when applied properly, either valuation method should derive the same outcome). The piecemeal valuation method involves directly determining the market value of the land acquired, and then adding or deducting amounts for severance, injurious affection or enhancement of the remaining land and disturbance. For the purposes of these proceedings, Council also marshals expert evidence which considers and adopts the before and after valuation method. Further, Council accepts that issues with comparison directly with the Acquired Land (given its shape, size, and the fact its existence stems from the public purpose) may be a reason why, on one view, the piecemeal valuation method may, in some circumstances, not be appropriate.

28. It is convenient to come to a conclusion on the appropriate valuation method upfront, so that the further evidence and submissions can be considered in this context. While I accept that both the piecemeal and the before and after valuation methods are well-known and accepted, I find that in the present circumstances compensation is better able to be determined using the before and after valuation method than the piecemeal valuation method.

29. In coming to this conclusion, I accept that the before and after valuation method does not reflect the precise statutory language of the Just Terms Act. However, I find that this valuation method better reflects the current circumstances, where the Acquired Land comprises discrete lots, created to facilitate the public purpose, that would otherwise not have been marketable: Apokis at [46]; De Ieso v Commissioner of Highways (1981) 27 SASR 248; (1981) 47 LGRA 412 at 249; Gosford Shire Council v Green (1980) 48 LGRA 201 at 208. Further, I note in any event that both valuers implement a type of piecemeal approach when undertaking their valuations using the before and after valuation method, by attributing different rates to discrete areas of land.

State of knowledge

30. The knowledge that can be attributed to the parties to the hypothetical transaction when determining the terms of that transaction was adverted to by the High Court in Spencer, where Isaacs J at 441 indicated that the Court:

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

31. In Apokis at [36]-[48], Basten JA surveyed key cases since Spencer that engaged with the scope of knowledge that can be attributed to the parties to the hypothetical transaction. This included cases such as ISPT Pty Ltd v Valuer General (NSW) [2009] NSWCA 31; (2009) 165 LGERA 25 at [4], where Allsop P recorded his doubt as to the aptness of the phrase “perfectly acquainted”, a sentiment reflected by Basten J when he concluded, in terms which I consider are particularly apposite to these proceedings, that the reference to “perfectly acquainted” was unlikely to have been “intended to set a standard which would require an 11-day court hearing to determine the value of a largely undeveloped block of land of less than 80ha” and reiterated the need to focus on the statutory language: Apokis at [47].

Highest and best use

32. The Court considers the “highest and best use” of the land at the date of acquisition when assessing market value under s 56 of the Just Terms Act. While “highest and best use” does not appear in the text of s 56, it has been incorporated by reference to the terms on which the hypothetical transaction would occur, being, “…the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted”: Spencer at 440-441 (Isaacs J). Given this, the task for the Court is “to discover the value of the land to the dispossessed owner if put to its best use”: Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7 at 274.

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

Summary of issues

34. Although the parties agree that compensation for the acquisition of the Acquired Land is to be determined in accordance with the Just Terms Act, the parties disagree about a number of issues which impact the resulting amount of compensation that the applicant is entitled to. Relevantly, a claimant bears the onus of proof in compulsory acquisition matters: Roads and Traffic Authority of New South Wales v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 at [67].

35. The applicant submits that compensation would be based on a valuation using the before and after valuation method, while Council, through its valuer, submits that a piecemeal valuation method should be adopted. As noted above, I accept that the before and after valuation method is appropriate and proceed on this basis.

36. The applicant contends that the highest and best use of both the Parent Parcel and the Residue Land is the development of a Manufactured Home Estate (‘MHE’), such that the parties to the hypothetical transaction would include a MHE developer as the hypothetical purchaser. Considering the before and after valuation method, Council maintains that the highest and best use of both the Parent Parcel and the Residue Land is agriculture with a dwelling house, a potential for a second dwelling or attached dual occupancy (and the prospect of rezoning parts of the Parent Parcel, but not the Acquired Land, for low density residential purposes in the future), such that the hypothetical purchaser would be a rural purchaser.

37. The parties agree that the development of a MHE is permissible on the Parent Parcel notwithstanding its RU2 zoning (which would otherwise not permit a MHE development) by the operation of State Environmental Planning Policy No 36—Manufactured Home Estates (‘SEPP 36’). The applicant submits that a development consent is likely to be obtained for the development of a MHE, where a MHE market engages with high quality residential estates rather than some sort of “trailer park”, and at the date of acquisition the adjacent development at Follyfoot Farm, 223 The Lakes Way, Forster (‘Follyfoot Farm’) (south of the Parent Parcel across The Lakes Way) had recently been purchased for the development of a MHE, such that the parties to the hypothetical transaction would transact on the basis of a similar rate to that paid for Follyfoot Farm. In contrast, Council contends that there is no real prospect of a development consent for the development of a MHE being obtained for the Parent Parcel given its physical constraints and its RU2 zoning, and contends that MHE developers in the MHE market in the MidCoast region do not purchase properties for development without the benefit of a development consent, such that the parties to the hypothetical transaction would transact on the basis of a “rural” rate.

38. In the above circumstances, and accepting that when considering the outstanding issues, the Court, as judicial valuer, is to consider the terms upon which the parties to the hypothetical sale would transact, the following matters require consideration:

1. Whether the before and after, or piecemeal, valuation method should be adopted – noting I am satisfied that the before and after valuation method is appropriate;

2. The prospect of obtaining a development consent for a MHE on the Parent Parcel in the before scenario and the Residue Land in the after scenario having regard to SEPP 36, the RU2 zone objectives and physical constraints (including hydrological and ecological issues), the advice the parties to a hypothetical transaction would receive about these issues (and a consent authority’s approach to these issues), and the consequential impact on the likelihood of obtaining a development consent for a MHE;

3. If the development of a MHE would be likely, the impact of hydrological issues (flooding and stormwater management) and ecological issues (biodiversity and the cost of offset credits for loss of native vegetation) on the land available for that development;

4. If the development of a MHE would be likely, what would the market pay for that prospect at the date of acquisition, and in particular whether this amount would be above a rural rate;

5. As such, the market value of the Acquired Land at the date of acquisition (including any adjustment to be made to the valuation for the severance of the western residue land, and injurious affection); and

6. The approach to disturbance costs as a consequence of the acquisition of the Acquired Land.

Evidence

39. In a hearing extending over eight days, the Court received extensive written and oral evidence including expert evidence in the areas of hydrology, ecology, town planning, and valuation. The applicant relies upon the hydrological evidence of Daniel Martens; ecological evidence of Travis Peake; town planning evidence of Stephen Connelly; and valuation evidence of Owen Allsopp. Council relies upon the hydrological evidence of Darren Lyons; ecological evidence of David Robertson; town planning evidence of Robert Chambers; and valuation evidence of David Lunney. Each expert gave evidence of the advice that would be given to a vendor and a purchaser in the hypothetical transactions.

40. The applicant also read the affidavits of Digby Lyell Dunn affirmed 10 December 2020 and Trevor McBride affirmed 11 December 2020.

41. The Court undertook a site view of the Acquired Land, the surrounding area, and a number of comparable sales relied upon in the valuation evidence. I was assisted in hearing the proceedings by Acting Commissioner Knight in accordance with s 37 of the Land and Environment Court Act 1979 (NSW).

Town planning issues

42. The town planners, Mr Connelly, retained by the applicant, and Mr Chambers, retained by Council, considered the highest and best use of the Parent Parcel in the before scenario, the Residue Land in the after scenario, and the potential of the Acquired Land. This incorporated their consideration of the ecological and hydrological evidence marshalled by the parties. The town planners produced individual reports, and a joint report.

43. At the date of acquisition, the Parent Parcel was predominantly zoned RU2 under the GLLEP, but also had areas zoned SP2 Infrastructure (Drainage), and SP2 Infrastructure (Local Road and Drainage), and R2. As set out at [17] above, the parties agree that for the purposes of valuation the whole of the Parent Parcel is taken to be zoned RU2.

44. The town planners agree on the following matters in relation to the Parent Parcel in the before scenario: it had frontages to each of Cape Hawke Drive, The Southern Parkway and The Lakes Way; it enjoyed a dwelling entitlement pursuant to the GLLEP but there was no dwelling; the minimum lot size was taken to be 40ha (being the minimum lot size prior to a change associated with the acquisition of the Acquired Land for the public purposes); it was encumbered by an easement 6m wide to drain sewage, and by an easement 7m wide for sewerage pipelines; it was used as an agricultural/grazing property and was largely cleared with some parts containing native vegetation; the majority of the Parent Parcel was identified on the “Flood Planning Map” under the GLLEP as “Flood Planning Area”; most of it comprised Class 5 acid sulfate soils but the southern part comprised Class 3 acid sulfate soils under the “Acid Sulfate Soils Map”; part of it was identified as bushfire prone land buffer area on Council’s “Bushfire Prone Land Map”; pursuant to the State Environmental Planning Policy (Coastal Management) 2018 (‘Coastal SEPP’), the southern part (which included the southern acquired land) was in the “Coastal Environment Area” and the southernmost part (which included part of the southern acquired land) was in the “Coastal Use Area”; and a strip of vegetation along the eastern boundary of the Parent Parcel and coincident with Dunns Creek is identified on the “Biodiversity Values Map” under the Biodiversity Conservation Act 2016 (NSW) (‘BC Act’) and is mapped as “vulnerable regulated land” on the “Native Vegetation Regulatory Map” under the Local Land Services Act 2013 (NSW) (‘LLS Act’).

45. The town planners agree that the acquisition of the Acquired Land resulted in the following changes relevant to the Residue Land: it was then in two parts (being the western residue land and the eastern residue land) as described above at [15]; the western residue land now has a minimum lot size of 3ha and the eastern residue land now has a minimum lot size of 15ha; there was capacity for subdivision of the Residue Land into two lots each with a dwelling entitlement; and the Residue Land lost its extensive frontage to The Lakes Way.

46. The town planners agree that SEPP 36 applied to the Parent Parcel and the Residue Land, with the result that development of a MHE would be permissible with development consent. In this respect, cl 6 of SEPP 36 generally permits development for the purposes of a MHE to be carried out on any land on which development for the purposes of a “caravan park” may be carried out (unless the land is covered by an exception). As a result of the operation of various “carve-outs” to the exceptions, this would include the Parent Parcel and the Residue Land. The town planners agree that in the after scenario, the acquisition of the Acquired Land makes the site planning for a MHE more difficult, as a MHE would be precluded from accessing The Lakes Way, and the Acquired Land would be precluded from being used to deal with a number of hydrological and ecological matters associated with the development of a MHE.

47. While the town planners agree that a MHE would be permissible on the Parent Parcel in the before scenario and on the Residue Land in the after the scenario, they disagree as to the prospect of a development consent being obtained for a MHE in both scenarios.

48. Mr Chambers opines that he would advise a purchaser in the hypothetical transaction that they would be unlikely to obtain development consent for a MHE on the Parent Parcel in the before scenario for the following reasons:

1. Council would consider a MHE to be inconsistent with the stated objectives of the RU2 zone, primarily because it would be considered to not be maintaining the rural landscape character of the land. As agricultural lowland, the Parent Parcel contributes positively to the rural landscape character of the area, and Council would be unlikely to support the erosion of that character;

2. A MHE would be considered to be inconsistent with the character statement in the Great Lakes Development Control Plan 2014;

3. The Parent Parcel is subject to a number of physical constraints, particularly impacting the southern part, including: Class 3 acid sulfate soils in the southern part; flood affectation over most of the Parent Parcel; the southern part being subject to “Coastal Environment Area” and “Coastal Use Area” controls under the Coastal SEPP; bushfire risk in the southern part; stands of native vegetation of biodiversity value including endangered species in the southern part; easements; identification of “high level constraints” in the NSW Department of Planning Mid North Coast Regional Strategy; areas identified on the “Biodiversity Values Map” under the BC Act; and as “vulnerable regulated land” on the “Native Vegetation Regulatory Map” under the LLS Act (generally coincident with Dunns Creek);

4. Extensive parts of the Parent Parcel are subject to flooding and would require filling (which would not be expected on land zoned RU2);

5. The best process for dealing with constraints that impact on the Parent Parcel’s suitability for urban development (and where the Parent Parcel is not zoned to support urban development) is through strategic planning, not a development application for a MHE; and

6. There are no recent examples of Council granting consent for any MHE development on land zoned RU2, indicating Council does not support this development in this zone.

49. Mr Chambers further opines that the constraints referred to above on the Parent Parcel, although similar, are not comparable to those constraints impacting the Follyfoot Farm development (to the immediate south, the sale of which is heavily relied upon by Mr Allsopp in his valuations) because that land was already zoned for urban development (mostly R2 and R3 Medium Density Residential (‘R3’) and partly E3 Environmental Conservation), and as a result, presents a “quite different planning circumstance” to the Parent Parcel.

50. In these circumstances, Mr Chambers’ advice would be that the highest and best use of the Parent Parcel is agriculture with a dwelling house (and potentially a secondary dwelling or attached dual occupancy), with the possibility of parts of the Parent Parcel being rezoned for low density residential purposes (subject to a planning proposal).

51. Further, and notwithstanding the above, Mr Chambers notes that even if development consent was obtained for a MHE on the Parent Parcel, the northern and southern parts of the Acquired Land would be unlikely to be utilised for manufactured homes and related infrastructure because of their hydrological, riparian and ecological constraints.

52. Mr Chambers opines that he would provide the same advice in relation to the Residue Land in the after scenario, subject to the following amendments: the subdivision to create two lots is permissible with development consent in accordance with the changed “Lot Size Map”; the division of the Residue Land into the eastern residue land and the western residue land would restrict its practical use for agriculture until a residential subdivision occurred (without an easement or other crossing, which would likely be forthcoming); there would be no access to The Lakes Way (until The Southern Parkway Extension, see [11] above, was constructed); there would be adjoining new wetlands; and the Residual Land would be less prone to flooding, enhancing the prospect for a planning proposal to rezone the Residue Land for low density residential purposes.

53. In contrast, Mr Connelly opines that he would advise a purchaser or vendor in the hypothetical transaction that a development application for a well-designed and well-prepared MHE would be likely to obtain development consent. As such, development of a MHE is the highest and best use of the Parent Parcel in the before scenario, from a planning perspective.

54. Mr Connelly opines that none of the “constraints” applying to the Parent Parcel absolutely prohibit the development of a MHE, and instead fall within the category of “manageable” (in that constraints should not be ignored, however a well-prepared development application for a MHE would be able to comprehensively resolve each and every constraint). He refers to the nearby Follyfoot Farm receiving development consent for a MHE, and he notes that while the Follyfoot Farm zoning was different when development consent was obtained, the physical constraints of the land (including flooding, native vegetation, bushfire, and acid sulfate soils) were similar to those constraints on the Parent Parcel.

55. Mr Connelly states that Council has shown “systemic leniency” concerning compliance with zone objectives such that Council’s approach to such consideration has been “almost cavalier”, and provides details of a number of previous developments in support of this contention. Further, he refers to Council’s previous strategic planning for the area of land including the Parent Parcel, and characterises this as providing for residential development. In this respect, he considers that the current zoning of the Parent Parcel is effectively a “place holder” for the eventual development of the Parent Parcel for residential purposes.

56. Mr Connelly opines that Council would be supportive of the development of a MHE as a result of:

1. Strategic planning at a local and regional level that supports residential use of the Parent Parcel, and notes the “pressing need to expand residential land supply” in the area;

2. The Parent Parcel’s context supporting residential use, with land zoned for residential use to the east and the west;

3. The benefits of collector road connectivity that would be achieved; and

4. The direct representations made by Council over a period of time to the owners of the Parent Parcel and surrounding land regarding subdivision development.

57. Mr Connelly takes the same approach to the highest and best use of the Residue Land in the after scenario.

58. In addition to the above evidence, the town planners also consider the prospect of parts of the Parent Parcel and the Residue Land being rezoned to R2 (subject to the preparation of a planning proposal) as an alternative to the development of a MHE. They agree there is a prospect of the Parent Parcel and the Residue Land being rezoned to R2 in the future, but that this rezoning would likely not apply to the Acquired Land itself because of its natural constraints.

59. Finally, the town planners specifically consider the effect of a potential planning proposal on the Parent Parcel, where Mr Connelly opines that parts of the Parent Parcel would need to be set aside for drainage, zoned for biodiversity protection where endangered species occur, but not set aside for open space. In contrast Mr Chambers opines that the most constrained parts of the Parent Parcel would be zoned for open space, drainage and conservation.

Applicant’s position

60. The applicant submits that the Court would find that the highest and best use of the Parent Parcel in the before scenario, and the Residue Land in the after scenario, from a planning perspective, would be the development of a MHE. The applicant contends that Mr Chambers’ approach to how a consent authority would consider an application for the development of a MHE would be found to be fundamentally flawed, and that Mr Connelly’s evidence would be preferred, particularly in relation to the likelihood of a development consent being granted for the development of a MHE.

61. The applicant submits that, properly informed and advised at the date of acquisition, the parties to a hypothetical transaction would assume that the prospect of obtaining a development consent for a MHE was “highly likely”, having regard to the zoning of the land (where Council would take the same approach to a MHE development on land zoned R2 and RU2); the locational characteristics of the Parent Parcel and the Residue Land; the permissibility of a MHE pursuant to SEPP 36; and with the advantage of being able to view the construction of a MHE on the adjacent Follyfoot Farm development. Given this, the hypothetical purchaser of the Parent Parcel and the Residue Land would be a MHE developer who would outbid other purchasers.

60. The applicant submits that SEPP 36 is a “deliberate and targeted” policy, supporting the development of MHEs to provide affordable medium density housing. Clause 2(2)(a) of SEPP 36 provides that one of the strategies by which the aims of the policy are achieved is by allowing MHEs to be developed with development consent on certain land where caravan parks are permitted if “locational” criteria is met. Caravan parks are permitted in land zoned RU2 and R2 under the GLLEP. The applicant contends that the Parent Parcel and the Residue Land meet the criteria with a “perfect storm” of characteristics, such that development of a MHE would be permissible.

61. The applicant reviews the legislative scheme in SEPP 36 for the granting of development consent for a MHE, including the operative provision in cl 6, the requirement for development consent to be obtained in cl 7, and the matters for consideration in granting development consent in cl 9. The applicant contends that because a MHE is not a permissible development under the GLLEP, the development application for a MHE is made pursuant to SEPP 36 and must meet the requirements of that policy. As all the matters for consideration are met, there would be “high prospects of success” of development consent being granted for a MHE.

62. The applicant also takes comfort from the operation of the exceptions and carve-outs to the exceptions, in cl 6 of SEPP 36, which provides:

6   Where development for the purposes of a manufactured home estate may be carried out

Development for the purposes of a manufactured home estate may be carried out pursuant to this Policy on any land on which development for the purposes of a caravan park may be carried out, except—

(a) land within one or more of the categories described in Schedule 2, or

...

65. The applicant submits that the operation of the carve-outs from two relevant exceptions in Sch 2 are important because they identify that SEPP 36 is specifically and deliberately designed to facilitate the establishment of medium density housing on rural land, where that rural land has either been identified under relevant strategies as being suitable for urban development, or is rural land that is adjacent to or adjoining land zoned for urban use. In this respect, the parties agree that the subject land has been “identified as suitable for urban development under Coastal Urban Planning Strategies or Regional Strategies approved for the time being by the Director”, such that the carve-out from the non-urban use exception to SEPP 36 is satisfied. Additionally, as the Parent Parcel and the Residue Land is rural land that is adjacent to or adjoins land zoned for urban use, the carve-out to the general position on rural land applies. The applicant characterises this as not just permitting the development of MHEs, but positively encouraging their development.

66. The applicant contests the approach taken by Mr Chambers regarding the effect of the objectives of the RU2 zone in the GLLEP. First, the applicant submits that Mr Chambers misapplies cl 4 of SEPP 36, which provides that SEPP 36 prevails over other environmental planning instruments (such as the GLLEP) to the extent of any inconsistency. In this respect, while Mr Chambers considers that a MHE on the Parent Parcel or the Residue Land would be inconsistent with the objectives of the RU2 zone such that a development consent would not be granted for a MHE on the RU2 zoned land, the applicant submits the objectives would not apply due to inconsistency with SEPP 36. This is because the objectives of the RU2 zone do not and cannot stand in the way of the grant of development consent because they are inconsistent with SEPP 36: Mete v Warringah Council [2004] NSWLEC 273; (2004) 133 LGERA 420; Hastings Point Progress Association Inc v Tweed Shire Council [2008] NSWLEC 180; (2008) 160 LGERA 274 (‘Hastings Point LEC’), affirmed by Hastings Point Progress Association Inc v Tweed Shire Council [2009] NSWCA 285; (2009) 168 LGERA 99 (‘Hastings Point CCA’).

67. The applicant’s position is first, that if the application of a provision in a local environmental plan (‘LEP’) leads to the refusal of an application for development consent that would otherwise be permissible under a State environmental planning policy (‘SEPP’), that constitutes an inconsistency, and the SEPP prevails. In this respect, the LEP does not have to specifically prohibit the development, because, as noted by Pain J in Hastings Point LEC at [59], “[a] clause in a LEP which when applied to the SEPPSL [relevant SEPP] development could give rise to a refusal is inconsistent with the SEPPSL”. The applicant uses this argument to refute the Council’s characterisation of Mr Chamber’s approach as “merit assessment”, submitting that it nonetheless constitutes inconsistency.

68. Second, the applicant contends that Mr Chambers erroneously gives the objectives determinative status. The applicant submits that even if the RU2 zone objectives do not fall away due to the inconsistency provisions, the requirement of cl 2.3 of the GLLEP is merely to take the objectives into consideration and, in the circumstances and properly considered, there is no reason why the individual objectives of the GLLEP stand in the way of the grant of development consent for a MHE under SEPP 36.

69. Third, the applicant submits that the RU2 zone objectives themselves are not mutually consistent and that there is an inherent inconsistency in maintaining the rural landscape character of the subject land, minimising the fragmentation of rural land and, as one example, providing for a range of compatible land uses (where a caravan park is permitted in the RU2 zone with consent). The applicant relies on Abret Pty Limited v Wingecarribee Shire Council [2011] NSWCA 107; (2011) 180 LGERA 343 at [42], where the Court of Appeal noted that “the [relevant zoning table] objectives themselves are not necessarily consistent, but reflect the conflicting demands upon development within the particular Local Government Area.” In these circumstances, consistency with the RU2 zone objectives should not be given significant weight.

70. Finally, the applicant accepts that it is necessary to consider merit matters, which in the current circumstances would include the potential impact of hydrological and ecological issues. However, in contrast to Council, the applicant submits that these matters would not be seen as significant hurdles to the grant of development consent for a MHE under SEPP 36.

Council’s position

71. As an initial point Council agrees that the development of a MHE would be permissible on the Parent Parcel and the Residue Land. However, Council criticises the applicant’s approach to the operation of SEPP 36 and the merits assessment of any development application for a MHE that would need to be undertaken under s 4.15 of the Environmental Planning and Assessment Act 1979 (NSW) (‘EPA Act’) as “flawed”. Council contends that the applicant has conflated the permissibility of a MHE and the merit assessment that would be undertaken before approving any MHE development.

72. Council contends that the applicant’s inconsistency analysis in relation to the objectives of the RU2 zone is erroneous, as taking the applicant’s approach would mean “any control that would result in the refusal of a MHE on the Parent Parcel because of a merit consideration not contained in SEPP 36 would be inconsistent and, therefore, not apply”. Rather, Council submits that there is nothing in the R2 zone objectives that mandates a particular outcome which is inconsistent with SEPP 36, such that cl 4 of SEPP 36 would operate and the objectives of the R2 zone would not apply: Hastings Point CCA. In this respect, cl 4 of SEPP 36, by its own terms, does not preclude the operation of other environmental planning instruments – it only gives primacy to SEPP 36 if there is an inconsistency between environmental planning instruments and then only to the extent of that inconsistency.

73. Further, Council notes that Mr Connelly’s evidence was not that the objectives of the RU2 zone could be ignored, but rather that Council as a matter of practice had an “almost cavalier approach” to the consideration of the zone objectives. This confirms that the town planners acknowledge the continuing operation of the RU2 zone objectives, in contrast to the applicant’s position of setting aside the objectives on the basis of inconsistency.

74. Council submits that when Mr Chambers refers to “inconsistency” between the RU2 zone objectives and the development of a MHE, he is not using the term in a technical sense. Rather, Mr Chambers has had regard to the RU2 zone objectives when undertaking a merit assessment of the development of a MHE; identified that a MHE would not be consistent with the RU2 zone objectives; and has given this weight as a reason that a MHE would not be approved by a consent authority. In this respect, Mr Chambers was providing his opinion on the effect of the RU2 zone objectives on the grant of development consent for a MHE.

75. Council also submits that the issue of a proposed MHE development being incompatible with the RU2 zone objectives was considered by a Commissioner of this Court in Oxford Street Holdings Pty Ltd v Mid-Coast Council [2019] NSWLEC 1283 (‘Oxford Street’) at [105]-[156] (a matter which was being heard at the date of acquisition, with judgment handed down three weeks after the date of acquisition). The incompatibility of the proposed MHE development with the objectives of the RU2 zone was one of the reasons the Court upheld the refusal of the application. More generally, the Commissioner confirmed the importance of the merit assessment, noting that “[w]hilst SEPP 36 provides permissibility for a manufactured home estate which of itself may have a greater density than development permissible under the LEP, the appropriateness of such a use to a specific site or context will depend on the site design, planning and constraints of the location” at [152].

76. Council submits that the applicant’s approach ignores merit matters that SEPP 36 is otherwise silent on, but are nonetheless required by to be considered by Council when deciding whether to approve the development of a MHE – such as the terms of any environmental planning instrument, any development control plan, as well as site suitability. Council emphasises that it is Mr Chambers’ merit assessment that leads him to conclude that a MHE would not be approved on the Parent Parcel, not that it could not be approved.

77. Council characterises Mr Chambers’ evidence as “reasoned and sound”, in contrast to Mr Connelly’s evidence which consistently attributes more favourable weight to various merit considerations that would support the development of a MHE on the Parent Parcel (such as Council’s historical strategic planning). Council further criticises Mr Connelly’s approach on the basis that it overlooks the fact that the Parent Parcel is not zoned residential and is based on a residential outcome being appropriate (although Mr Connelly appropriately concedes that an approval of a MHE on the Parent Parcel would be more likely if it had a residential zone, as opposed to rural zoning).

78. Finally, Council also points to Mr Connelly’s evidence about the likelihood of the development of a MHE being granted development consent as being inconsistent with his evidence that the MHE development on Follyfoot Farm was “hard fought” (ending up in this Court as a contested matter) in circumstances where that application took two years to be determined even though Follyfoot Farm is zoned R2 and R3 (and those zones clearly contemplate residential uses). In the above circumstances, Council maintains that Mr Connelly’s advice would not be prudent and that it overstates the likelihood of a development consent for a MHE being granted on the subject land.

Consideration

79. Consideration of the town planning issues is not divorced from the ecological and hydrological matters considered in detail later in this judgment, and each of the town planning experts was aware of the expert ecological and hydrological evidence before the Court. As such, although I am considering certain matters under the rubric of town planning issues before I deal with the ecological and hydrological material, I have considered the expert evidence in relation to hydrological and ecological concerns and the separate evidence of each of the valuers, as detailed later in this judgment, in coming to my conclusion on the potential for a development of a MHE on the Parent Parcel and the Residue Land.

80. I accept, as the parties agree, that a development of a MHE would have been permissible on the Parent Parcel and the Residue Land at the date of acquisition, pursuant to SEPP 36. Given this, I consider a primary issue is the likelihood that a consent authority would grant development consent for a MHE such that this constitutes the highest and best use of the Parent Parcel and the Residue Land, or whether the significant constraints on the development of a MHE mean that the highest and best use would be the alternative scenario of the Parent Parcel and the Residue Land being rezoned to R2 to support residential development in the future. The resolution of these matters is to be considered from the perspective of the advice that the parties to the hypothetical transactions would receive, and thus the terms on which those parties would transact.

81. In summary, having carefully weighed the evidence and submissions, I find that the advice received by the parties to the hypothetical transactions would be that the highest and best use of the Parent Parcel and the Residue Land would be for a MHE, although the advice would reflect a real concern as to the management of the significant constraints on the development of a MHE and the weight that may be given to the objectives of the RU2 zone. These constraints import an element of risk as to whether Council would favourably entertain a development application for a MHE on the Parent Parcel and the Residue Land, and as I have considered later in this judgment, the parties would respond to this risk by reducing the amount payable for the Parent Parcel and the Residue Land, although ultimately they would proceed on the basis that there would be a prospect that Council would grant development consent for a MHE.

82. As a result, I find that the parties to the hypothetical transactions would pay more than that which would be paid for land classified as “rural”, but not such a high rate for the Parent Parcel and the Residue Land as would be paid for land which would be highly likely to be developed as a MHE. Adopting the spectrum of potential put forward by the applicant, ranging from highly likely, likely, unlikely, to no possibility, I find that the parties would transact on the basis that it would be “likely” to be developed as a MHE but a risk remains. My reasons for this finding follow.

83. I accept that the history and background to the planning context for the Parent Parcel and the Residue Land is indicative of a longer term strategy by Council of treating the Parent Parcel and the Residue Land as suitable for some form of residential, as opposed to rural, use. To this end, I accept the evidence of Mr Connelly that although the subject land is not zoned for future urban use (where there is no such zoning option in the standard LEP instrument), the current RU2 zone could be considered as a “place holder” for the eventual development of the subject land for residential purposes, such that the current rural landscape character of the locality should be seen as being in transition. Mr Connelly’s view is supported by the history of the zoning of the Parent Parcel and the Residue Land, as well as other Council strategic planning documents which identify the Parent Parcel and the Residue Land for future residential development, and the intercourse that has taken place between Council and local landholders. I consider that the parties to the hypothetical transactions would be aware of, and place weight on, this factor.

84. A further factor is the weight that would be given to SEPP 36. I accept the applicant’s submission that Council and the parties to the hypothetical transactions would place weight on the clear intention of SEPP 36 to facilitate the development of MHEs in areas of land where it applies. This suggests that development consent would be granted for a MHE.

85. The parties diverge in relation to the approach to the objectives of the R2 zoning under the GLLEP in circumstances where the application for development consent is being made under SEPP 36. I do not accept the applicant’s contention that the objectives of the RU2 zone would not apply to the consideration of whether to grant development consent, due to inconsistency with SEPP 36. The RU2 zone objectives do not mandate whether development consent may be granted, but rather regard must be had to the RU2 zone objectives when deciding whether to grant development consent: Hastings Point CCA at [7]-[8]. In this respect, the objectives of the RU2 zone cannot be said to “stand in the way” of the grant of a development consent for a MHE, such that an inconsistency arises.

86. I find that the RU2 zone objectives would be taken into account when undertaking the merit assessment of an application for the development of a MHE: s 4.15(a)(i) of the EPA Act; cl 2.3(2) of the GLLEP. I accept Mr Chambers’ evidence that there is a clear risk Council would place weight on the objectives and intent of the RU2 zone when considering whether to grant development consent for a MHE, where this generally militates against the grant of development consent given the focus of the objectives on the rural use and rural character of the subject land. However, in the circumstances, I consider that Council, or the parties to the hypothetical transactions, would give the RU2 zone objectives (which militate against the development of a MHE) some weight when considering whether a development consent would be granted, but that this is likely not to be determinative of Council’s consideration of an application for development consent for a MHE. The parties to the hypothetical transactions would transact with this in mind.

87. It follows, that I consider, that a consent authority would be more concerned with a MHE development on land zoned for rural landscape purposes (RU2) than would be the case with land zoned for residential purposes (such as R2 and R3) and this is relevant to my consideration of the valuation evidence.

88. Turning to other merit assessment matters, I consider that the existing rural zoning of the Parent Parcel and the Residue Land, while constituting a “place holder”, nonetheless is a distinguishing feature that would be viewed by the parties to the hypothetical transactions as relevant to obtaining a development consent for a MHE. In this respect, as considered later in this judgment, it cannot be said that the Parent Parcel and the Residue Land are, in that particular sense, comparable to the Follyfoot Farm development, because that land was already zoned for residential development. Further, the fact that there are no recent examples of Council granting development consent for a MHE on land zoned RU2 would be noted by the parties to the hypothetical transactions and give rise to a concern that Council does not support this form of development in this zone (as Mr Chambers opines), notwithstanding the scarcity of land to which SEPP 36 applies that is zoned RU2.

89. Finally, I also consider that the potential impact of hydrological and ecological issues (considered further below) would be viewed by the parties as significant matters when seeking to obtain a development consent for a MHE. These issues contribute to the risk as to whether Council would favourably entertain a development application for a MHE on the Parent Parcel and the Residue Land (referred to above) and as I have noted, would be reflected in the hypothetical transactions.

79. In conclusion, I consider that the parties to the hypothetical transactions would proceed on the basis that the highest and best use of the Parent Parcel and the Residue Land would be the development of a MHE, but that there would remain a risk as to whether Council would favourably entertain a development application for a MHE as a result of significant constraints present on the Parent Parcel and the Residue Land and the rural landscape zoning. This would result in a reduction to the amount paid for the Parent Parcel and the Residue Land.

80. In any event, and while I have made findings in relation to the highest and best use of the Parent Parcel and the Residue Land being the development of a MHE and the level of risk attendant upon an application for a development consent for a MHE likely to be considered by the parties to the hypothetical transactions, I accept the town planners’ evidence that the parties would also keep in mind (upon advice) the possibility of a future rezoning of at least parts of the Parent Parcel (but not the Acquired Land) for low density residential purposes, subject to a planning proposal. This supports my finding that the amount that the parties to the hypothetical transactions would pay would be a higher rate than that which would be paid for land classified as “rural”.

Hydrology issues

92. At the date of acquisition, the Parent Parcel and the Residue Land were subject to hydrological constraints, including flooding and stormwater management, which would have a consequential impact on the development of a MHE for the purposes of the hypothetical transactions, and accordingly the amount of compensation. Hydrological evidence was provided by Dr Martens, retained by the applicant, and Mr Lyons, retained by Council. Each expert provided evidence of the advice they would give to the parties to the hypothetical transactions in relation to flooding and stormwater management issues. While this advice is generally provided on the basis of the development of a MHE on the Parent Parcel, the experts also provide specific comments in relation to the Acquired Land and the Residue Land, which would inform the development of a MHE on the Residue Land in the after scenario.

93. Although the Parent Parcel (and thus the Residue Land) is identified as mostly “Flood Planning Area” on the “Flood Planning Map” under the GLLEP, Dr Martens and Mr Lyons agree that flooding concerns are capable of being managed through engineering works. In a similar manner, they agree that stormwater management measures can also resolve stormwater concerns. The outstanding issues, relevant to the statutory valuation task, relate to: first, the area of any necessary riparian zones; second, the area of any required onsite stormwater detention; third, the area of land (if any) which would remain impacted by flooding concerns; and fourth, following from the conclusions to the previous outstanding issues, the area of land which is accordingly available to be used for the development of a MHE.

94. Dr Martens and Mr Lyons each prepared a preliminary “conceptual” flood mitigation scheme for the Parent Parcel (and Dr Martens also provided details of changes when applied to the Residue Land in the after scenario). The conceptual flood mitigation schemes are similar in that the engineering works envisaged to be undertaken primarily consist of the “amplification” of the existing unnamed channel in the northern riparian corridor of the Parent Parcel (known as ‘channel E’) and the existing Dunns Creek channel in the southern riparian corridor (known as ‘channel A’ on the southern acquired land; ‘channel C’ on the Parent Parcel; and ‘channel B’ when extended further north from the existing Dunns Creek channel). An overview of the conceptual flood mitigation scheme of Dr Martens, highlighting the location of the channels, is shown in Annexure C to this judgment.

95. It is agreed that the NSW Department of Industry, Office of Water, Guidelines for controlled activities on waterfront land—Riparian corridors (‘Riparian Guidelines’), recommends widths for vegetated riparian zones based on the classification of watercourses under the “Strahler system” into an “order” (the system adopted in NSW as per the NSW Department of Industry, Determining stream order Fact sheet, and using “Hydro Line spatial data”). However, Dr Martens and Mr Lyons disagree as to the relevant “order” of channel A, channel C and channel E.

96. Key differences between the conceptual flood mitigation schemes and the approaches taken to riparian corridors by Dr Martens and Mr Lyons can be summarised as follows. In relation to channel E:

1. Dr Martens contends for a 200m long, 10m wide, and 1m deep channel (with a total riparian corridor width of 15m), on the basis that it is a first order watercourse and the Riparian Guidelines recommendations are not strictly applied. He utilises a connection to The Lakes Estate drainage reserve immediately to the south of the northern acquired land.

2. Mr Lyons contends for an integrated floodway and riparian corridor that is 200m long and 30m wide, on the basis that it is likely a second order watercourse (but could be a first order watercourse) and the Riparian Guidelines recommend a 40m wide riparian corridor (plus channel width) for a second order watercourse and a 20m wide riparian corridor (plus channel width) for a first order watercourse. He relies upon a 50m wide drainage reserve created within The Lakes Estate immediately to the south of the northern acquired land, and opines that this means a substantial corridor would be anticipated such that the constructed corridor on The Lakes Estate could be extended upstream to Cape Hawke Drive.

97. In relation to channel A, channel C and channel B:

1. Dr Martens contends for a 290m long, 20m wide and 1.5m to 2m deep channel for channel A (with a total riparian corridor width of 30m); a 320m long, 15m wide and 1.5m to 2m deep channel for channel C (where the total riparian corridor width could be reduced to 20m along the channel); and a 290m long, 10m wide and 0.5 to 1.0m deep channel for channel B (with a total riparian corridor width of 15m), on the basis that they are mostly third order watercourses but in parts second order watercourses. He utilises a connection to a culvert under The Lakes Way (which he opines would be reasonable and sufficient for the Dunns Creek corridor).

2. Mr Lyons contends for an integrated flooding and riparian corridor that is 290m long and 70m wide for channel A, on the basis that it is a third order watercourse, in accordance with the width recommendation within the Riparian Guidelines, and also consistent with the riparian corridor provided on the Follyfoot Farm downstream. Mr Lyons contends for an extension that is 320m long and 70m wide for channel C, which reduces to 20m wide for channel B.

98. Considering the whole of the Parent Parcel in the before scenario, Dr Martens concludes that after undertaking the engineering works in his conceptual flood mitigation scheme (and ignoring planning, riparian corridor requirements, and flora and fauna constraints), 1.4ha of the Parent Parcel (including 0.6ha in the Acquired Land) would remain flood liable; while Mr Lyons concludes that 3.5ha of the Parent Parcel would remain flood liable. Dr Martens opines that he would give advice to the parties to the hypothetical transactions that 2.0525ha of the Parent Parcel (and 1.035ha of the Acquired Land) would likely be required to be dedicated to integrated floodways and riparian corridors. Mr Lyons opines that he would give advice to the parties to the hypothetical transactions that 6.7ha of the Parent Parcel (and 1.51ha of the Acquired Land) would be used for “integrated water management” including drainage, stormwater management and riparian corridors.

99. Importantly, Dr Martens opines that after the acquisition of the Acquired Land, a further 6,000m² of developable land would likely be lost from the Residue Land. In contrast, Mr Lyons opines that the developable land lost on the Residue Land will be the same in the before scenario and in the after scenario.

100. In relation to stormwater management, Dr Martens opines that no onsite stormwater detention would be likely to be required, and thus there would be no material loss of developable land. This is because there is drainage to existing watercourses; stormwater impacts could be resolved as part of flooding issues; and no onsite stormwater detention was required for the Follyfoot Farm development. In contrast, Mr Lyons opines that onsite stormwater detention would be required to manage increased site runoff. He notes that the Fairview West Estate development required onsite detention, and distinguished between the Parent Parcel and the Follyfoot Farm development on the basis that the Follyfoot Farm development is the last development prior to final discharge. The hydrologists’ evidence appears to be directed to the Parent Parcel in the before scenario, but would seem to also apply to the Residue Land in the after scenario.

101. Dr Martens opines that stormwater quality management measures, such as “bio-filter swales”, could be integrated into the lots and roads of the development and drainage system to achieve water quality treatment targets, such that again, there would be no material loss of developable land. He notes that as the Parent Parcel currently generates rather than treats pollutants, water quality removal targets would be achievable. Mr Lyons agrees that stormwater quality management measures could be integrated into the development and drainage system, but notes that this may impact on the total development yield. Further, in order to retain the existing treatment provided by the Parent Parcel (through the existing channel and floodplain network) an additional 5% of the total developable land may be required for stormwater management measures.

102. Finally, Dr Martens and Mr Lyons differ in relation to groundwater management. At a high level, Dr Martens concludes that while groundwater management would need to be considered if excavation is proposed, it would not be a material constraint. In contrast, Mr Lyons concludes that deep excavation of engineered channels may represent a “significant constraint” with respect to potential groundwater impacts.

Applicant’s position

103. The applicant generally adopts the evidence of Dr Martens.

104. In relation to flooding management, the applicant notes that Dr Martens’ advice regarding channel E is that the upstream riparian corridor is of negligible quality and downstream is highly constrained so that while there would be a requirement for a riparian corridor, it would not be substantial. Dr Martens confirms that a riparian corridor width of 15m would be sufficient, and that this opinion is based on the recommended but “flexible” width of 20m for such streams (based on his assessment of many similar types of small first order streams). Dr Martens’ position also took into account the existing upstream and downstream channels, as well as the surrounding conveyance system. In contrast, the applicant submits that Mr Lyons’ corresponding 30m wide riparian corridor for channel E is out of character with the upstream and downstream channel, and notes that Mr Lyons has not done any of his own modelling to inform his opinion. Given this, the applicant contends that Dr Martens’ proposed channel E would be accepted by the parties to the hypothetical transactions as it would be acceptable to Council.

105. In relation to the southern riparian zone, the applicant submits that in circumstances where the existing channel is approximately 5m wide with no riparian zone, the parties to the hypothetical transaction would not accept Mr Lyons’ advice that channel A requires a 70m wide riparian zone (being more than double Dr Martens’ proposed width of 30m). The applicant further submits that the presence of an agreed 40m wide riparian corridor on Follyfoot Farm would give comfort to the hypothetical parties that it would be highly unlikely that anything more than the 30m riparian corridor proposed by Dr Martens would be required by Council. In addition, the applicant refers to Council’s requirements for riparian corridors for the public purpose drainage works to be undertaken on the Acquired Land, contending that riparian corridors of approximately 15m wide have been adopted. In these circumstances, the Court would prefer Dr Martens’ evidence, and find that the hypothetical parties would transact on the basis of his proposed riparian corridor. The applicant makes a similar submission in relation to the width of the riparian corridor for channel B, again contending that Dr Martens’ narrower corridor would be adopted by the parties to the hypothetical transactions.

106. The applicant rejects criticism of the depth of Dr Martens’ proposed channels, by reference to Dr Martens’ evidence of the depths of excavation undertaken in the neighbouring Follyfoot Farm development.

107. In relation to stormwater management measures, the applicant criticises Mr Lyons’ “guesstimate” that 5% of the total developable land should be dedicated to stormwater management measures, on the basis that he has not undertaken any specific calculations to support this contention. Rather, the applicant submits that Dr Martens’ position (that there would be no material loss of developable land due to stormwater management measures) should be preferred on the basis that it is consistent with the approach taken at Follyfoot Farm; it is informed by the requirements of Council’s Development Control Plan; and it avoids the risk of an onsite detention basin at the end of the catchment detaining and releasing flows at the same time as local flows.

108. In oral submissions, the applicant further submitted that the Court may not be able to resolve the stormwater management dispute on the basis that the standard of the advice given was pre-acquisition advice, and in any event the sales evidence is not sensitive enough to account for the difference in the loss of yield (Tcpt, 25 February 2021, p 385(30)-386(27)). In these circumstances, the Court would be satisfied with Dr Martens’ advice and would accept that the parties to the hypothetical transactions would transact on the basis that there would be no material loss of developable land due to stormwater management (in both the before scenario and the after scenario).

Council’s position

109. Council generally adopts the evidence of its expert, Mr Lyons.

110. Turning first to flooding management, Council submits that the parties to the hypothetical transaction would rely on advice put forward by Mr Lyons in relation to management measures through engineering works to channel E in the northern riparian zone, where that advice is in accordance with the Riparian Guidelines recommendations. Mr Lyons’ approach is also consistent with the large downstream drainage reserve already established in The Lakes Estate. In this respect, while a narrowing of the riparian corridor could be achieved (as appropriately conceded by Mr Lyons) this would not be the basis on which the hypothetical parties would transact.

111. In relation to channels A and C in the southern riparian zone, Council again submits that Mr Lyons’ evidence, based on the Riparian Guidelines should be relied on, where this is also “generally consistent” with the riparian corridor provided on the Follyfoot Farm downstream. Mr Lyons generally criticises Dr Martens’ conceptual flood mitigation scheme on the basis that it assumes “deep, linear engineered channels”, which he does not consider would be approved. He also considers that this approach is not compatible with works on neighbouring developments such as Follyfoot Farm, The Lakes Estate and Fairview West Estate. For example, channel A would not appropriately integrate with the downstream receiving channel on Follyfoot Farm, as the Dunns Creek channel would be required to be wider and shallower than proposed.

112. Council submits that Mr Lyons’ evidence is more realistic and prudent, including due to its consideration of works being carried out on neighbouring developments and the provisions of the Riparian Guidelines. Council submits that the Court should not accept Dr Martens’ approach because he fails to consider the restoration or rehabilitation objectives of the Riparian Guidelines.

113. Council also adopts Mr Lyons’ advice in relation to the developable land that would be lost as a result of stormwater management measures, which reflects the general “rule of thumb” for land take, and was appropriate in the context of conceptual, pre-acquisition advice. Council notes that Dr Martens, while disagreeing with Mr Lyons’ advice, was unable to “categorically say that he [Mr Lyons] was wrong”.

Consideration

114. The Court is considering the advice that the parties to the hypothetical transactions would receive in relation to hydrological issues including flooding and stormwater management (and in particular the advice that would have been received from experts at the date of acquisition, and the manner in which such advice would be considered by a consent authority, being Council) and confirms that it is not conducting a merits review of a development application. Having considered the evidence of Dr Martens and Mr Lyons, and the submissions of the parties, I am of the view that the parties to the hypothetical transactions would accept that the hydrological issues would require careful consideration and would be of some concern to Council (as noted in my consideration of the town planning evidence), but from an engineering perspective could be managed.

115. In relation to flooding concerns, I find that the parties to the hypothetical transactions would transact on the basis of Dr Martens’ advice as to the appropriate conceptual flood mitigation scheme to be implemented for the Parent Parcel, the engineering works that would be required to achieve the scheme, and the extent of the riparian corridors that would be incorporated in the scheme.

116. A key difference between Dr Martens and Mr Lyons was their treatment of the Riparian Guidelines when providing evidence as to the likely width of the riparian corridors associated with channels E, A, C and B that would be required. In short, Mr Lyons placed significant weight on compliance with the Riparian Guidelines, whereas Dr Martens took the view that the Riparian Guidelines were flexible and placed more weight on the actual characteristics of the Parent Parcel (on the basis of his previous experience). I accept the applicant’s contention that the approach that would be taken by the parties to the hypothetical transactions would be to start with the recommendations contained in the Riparian Guidelines, but then carry out a merit assessment that refers to the actual characteristics of the Parent Parcel to determine any necessary riparian corridors. This approach best utilises the extent of the information that would be available to the “perfectly acquainted” parties at the date of acquisition. Dr Martens’ evidence best reflects this approach to the appropriate riparian corridor.

117. Mr Lyons’ evidence was also informed by his views on the appropriate integration of integrated floodway and riparian corridors with the infrastructure present in downstream development and drainage system such as The Lakes Estate and Follyfoot Farm. I accept that the parties to the hypothetical transaction would look to surrounding developments for information about what Council is likely to require and consider integration issues when considering the management of flooding concerns. However, I consider that they would place more weight on the characteristics of the existing drainage system and riparian corridors that are present on the Parent Parcel (including the Residue Land), and expert evidence as to what would need to be modified to accommodate the development of a MHE on the subject land. Given this, I am satisfied that Dr Martens’ evidence would be accepted by the hypothetical parties as indicative of what would be acceptable to Council and other regulatory authorities.

Consideration

206. In considering the valuation evidence and submissions, I rely upon, but do not repeat, my consideration and findings in relation to the town planning, hydrological and ecological evidence above, which inform various matters that are to be considered in the determination of compensation that the applicant is entitled to for the acquisition of the Acquired Land.

207. Further, in light of the significant difference in approach by the valuers, I consider the comments of Wells J in Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170 (‘Brewarrana’) at 543, to be apposite, where, his Honour noted:

“The testimony given by the expert valuers called by the parties demonstrated once again the extraordinary differences in the opinions that, after serious and prolonged deliberation, may be advanced by experienced, professional men in respect of identical subject matter. … The process of valuing land, of course, has something of the character not only of a science but also of an art, in which knowledge, experience and judgment of people, commerce and fashion play integral parts, and it might be thought that the remarkable disparities between the values supported on each side were attributable solely, or at least mainly, to the skill with, and the manner in, which that art was exercised.”

208. In summary, apart from one significant matter, being my preference for the before and after valuation method over a piecemeal valuation method, and accepting that each of the valuers has extensive experience and produced extensive evidence to assist the Court, I generally prefer the valuation evidence of Mr Lunney over that of Mr Allsopp. My reasons follow.

209. I do not accept Mr Allsopp’s implicit assumption that the parties to the hypothetical transactions would engage on the basis that a purchaser contemplating the future development of RU2 zoned land as a MHE would be prepared to pay the same price as they would when contemplating the future development of land zoned R2 (or other zoning that facilitates residential purposes) as a MHE. Rather, parties to the hypothetical transactions would transact on the basis that a purchaser would pay more for land if it was zoned to facilitate residential purposes.

210. Both valuers (in particular Mr Lunney) undertook “extensive research” throughout the MidCoast region and beyond in an attempt to find sales that would indicate the market operates so that rurally and residentially zoned land with potential for future development of a MHE are valued equally. Both valuers undertook inquiries of local real estate agents and developers, and concluded that there were no sales that would reflect this assumption. As a result, I consider, as Mr Lunney opines, that there is no market evidence that supports Mr Allsopp’s assumption that the same price would be paid for land zoned RU2 and R2 with potential for the future development of a MHE.

211. Moreover, I accept the opinion of Mr Lunney that if englobo land be acquired for a development of a MHE, the purchaser of land zoned for residential use (either R2 or R3) would enjoy a “fall back” in the event that development consent of a MHE could not be obtained, as the land could otherwise be developed for conventional residential purposes or onsold to enable its development for such a purpose. This option is not available for land zoned for rural purposes.

212. As submitted by Council (and noted in Mr Lunney’s evidence), each of Mr Allsopp’s primary sales, with the exception of Sales 8 and 9, were sales of land that is primarily zoned residential (being predominantly R2 or R3). I do not accept the assumption in Mr Allsopp’s methodology, even assuming some potential for the development of a MHE, that the market (and thus the parties to the hypothetical transactions) would be prepared to pay the same rate for rurally zoned land as residentially zoned land, and thus place little reliance on those sales.

213. I also consider the valuation evidence, and in particular the inquiries of local real estate agents and developers undertaken by Mr Lunney, indicating that the market for development of MHEs in the MidCoast region is not prepared to enter into an unconditional sale for a “raw development site” without the benefit of a development consent for a MHE. In this respect, while I accept that Mr Lunney’s inquiries reveal a number of examples of prospective purchasers entering into conditional sales agreements (at least to enable the prospective purchaser to undertake due diligence), there is little evidence of such sales proceeding, on a basis of perceived risks of gaining development consent for a MHE.

214. As a result, I do not place reliance upon the Follyfoot Farm Sale, or the rate that was derived from that sale. Follyfoot Farm was predominantly zoned residential (R2 and R3) and, in addition, had the benefit of a (“hard fought”) development consent for a MHE development at the time it transacted. Aside from other adjustments, I find that the application of a −10% adjustment for the benefit of the development consent for a MHE does not, as sought to be contended by the applicant, “account for the risk of securing a MHE” (even if a top down method of valuing the risk of obtaining a development consent for a MHE was warranted).

215. Although Mr Allsopp places the most reliance upon the Follyfoot Farm Sale, some further comment in relation to his other sales is appropriate. Each of Sales 2, 3, 4, 5 and 6 are zoned for residential purposes and each is close, if not adjoining Follyfoot Farm, and all followed, and depended upon, the Follyfoot Farm Sale. Further, each sale was to the purchaser of Follyfoot Farm and it appears that the properties have been subsequently amalgamated. I do not consider these sales to be of assistance. In relation to his other sales, Mr Allsopp does not place significant reliance upon his Sales 7 and 8, and as noted by Council, Sales 9 and 10 were not “sales”. I am also not assisted by later sales relied upon by Mr Allsopp in the second joint report.

216. Despite this, I accept Mr Allsopp’s opinion, as the town planners accept in their joint report, that the Parent Parcel (and thus the Residue Land and the Acquired Land) has some characteristics, primarily locational, which would be attractive for the development of a MHE. I also accept Mr Allsopp’s evidence, as I understand his position, that the fact that there may be a “likely approval” for a MHE does not mean that hypothetical purchasers would not be prepared to buy the land on the basis that there is the potential to obtain a development consent for development of a MHE.

217. I also accept that at the date of acquisition the parties to the hypothetical transaction would have knowledge of the development consent having been obtained for a MHE on Follyfoot Farm (albeit after a contested hearing in this Court) and this would play some role in their consideration of the terms of the transaction. In a similar manner, the parties to the hypothetical transaction would have some knowledge of Council’s opposition to another MHE development in the MidCoast region, comprising 87 sites and associated facilities on land zoned RU2 at Green Point. That proposed development was refused by Council in July 2018 and subsequently proceeded to a contested hearing in this Court in early May 2019, with judgment reserved at the date of acquisition: Oxford Street.

218. As I have found above, while the parties to the hypothetical transactions would transact on the basis that the highest and best use of the Parent Parcel and the Residue Land would be for the development of a MHE, there would be a real concern as to the management of the significant constraints and the risk involved in obtaining a development consent for a MHE on the subject land. I consider that this risk is properly reflected in adopting a rate that is determined by taking into account a potential for future development possibly as a MHE in the manner Mr Lunney proposes.

219. Mr Lunney places weight on the Burrawan Drive Sales in deriving a rate for land with potential for development for a MHE. I consider and accept Mr Lunney’s analysis of the Burrawan Drive Sales (as well as the background to them). I note that each sale transacted in 2017; that the site was zoned RU2 (similar to the Parent Parcel); that the site was located between existing residential areas and was earlier identified in the 2007 South Forster Structure Plan for possible future rezoning. Of further relevance to comparability, as Mr Lunney notes, both sites (the Burrawan Drive Sales sites and the subject land) have drainage and ecological constraints, in the form of a gully/watercourse crossing each site and the “need” to allow for a biodiversity corridor (such that on Mr Lunney’s analysis, 30% of the site would be “lost” to drainage and biodiversity constraints). I also take into account, as Mr Lunney properly notes, that care must be taken in analysing and applying the Burrawan Drive Sales as their (small) size is such that they could reflect a “rural lifestyle” value rather than a “future development” value.

220. I further note that the Burrawan Drive Sales were purchased by an adjoining owner who subsequently took steps to progress a rezoning of the land. Mr Allsopp’s analysis of his “not a sale” Sale 9 (being land constituting the Burrawan Drive Sales), records that there was a later offer to purchase the consolidated Burrawan Drive Sales site made by a party who “wanted to establish a Manufactured Home Estate” on the site. As such, I accept that the Burrawan Drive Sales provide evidence of land with “potential” for development for a MHE.

221. In the circumstances and absent more compelling material, I find that the Burrawan Drive Sales and Mr Lunney’s analysis thereof (even taking into account the arithmetic error acknowledged by Mr Lunney) provides an appropriate and persuasive, although not ideal, basis for analysis of the Parent Parcel in the before scenario and the Residue Land in the after scenario. I accept that Mr Lunney properly adjusted for size, as well as for possible rezoning, and for the potential future development of a MHE. In placing significant weight on the Burrawan Drive Sales, and disregarding many of the other sales considered by the valuers as providing insight into the value of land with potential for development of a MHE, I accept the general proposition that whether a sale is sufficiently comparable is a question of fact and degree and while some adjustment is always necessary, too much adjustment will render it unsafe to use: Brewarrana at 551.

222. I am also conscious that it has on occasion been held that, although not ideal, that it is sufficient for one sale only to be truly comparable to justify the use of the direct comparison valuation method which is the approach each valuer takes to both the “before” and “after” valuations: Dan Wei Zheng v Roads and Maritime Services [2017] NSWLEC 77 at [129]; citing Toveno Pty Ltd v Roads and Maritime Services [2014] NSWLEC 1266 at [65], [94]; citing Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111; [2003] HCA 8, even in circumstances where there are “far from perfect” comparable sales available: Marrickville Council v Sydney Water Corporation [2013] NSWLEC 222 at [19]; Sydney Water Corporation v Marrickville Council [2014] NSWCA 438. Thus, despite my concern, to some extent also reflected in the evidence of the valuers, as to the lack of truly comparable sales, I am content to place weight upon the Burrawan Drive Sales and Mr Lunney’s analysis thereof.

223. Mr Lunney analyses the Burrawan Drive Sales to derive an adjusted rate for land with potential for development of a MHE, initially adopting a rate of $25/m² and subsequently, following detection of an arithmetic error, adopting $18/m². However, I accept Mr Lunney’s acknowledgment that the rate of $25/m² is appropriate and I find that this rate (being $7/m² above his properly considered derived rate) appropriately captures both the potential for future development of a MHE and possible rezoning of the subject land in taking into account all of my findings for both the Parent Parcel in the before scenario and the Residue Land in the after scenario. As such, I do not accept the applicant’s submission that a rate of $33/m² (or $25/m²) is the “starting point” which reflects rural land with a potential for rezoning and, thereafter, a further uplift being required to reflect the potential for development of a MHE.

224. For the above reasons, I find that at the date of acquisition, sales of rural land with “potential” for both rezoning and for future development of a MHE would reflect the rate of $25/m² (as Mr Lunney opines) and not $91/m² based upon the adjusted Follyfoot Farm Sale (as Mr Allsopp suggests).

225. Turning briefly to the appropriate rate to be applied to land which is zoned RU2 but constrained by hydrological or ecological issues (such that it is not part of the developable area for a MHE), I accept Mr Lunney’s evidence, and his analysis of three comparable sales using the DCA valuation methodology, such that the rate of $5/m² should be adopted for this land.

226. Mr Lunney closely examines all the expert evidence before the Court, including the evidence called on behalf of the applicant, and he carefully considers the competing opinions of the non-valuation experts, from an early juncture in the proceedings. As Mr Lunney expresses, and I accept that such an approach is necessary in order to consider the position of the parties to the hypothetical transactions, who are fully (if not perfectly) informed and who will have made all the proper enquiries before transacting.

227. Mr Lunney uses the expert evidence before the Court to prepare his alternative valuations using the before and after valuation method, which are recorded in the accompanying schedules in the second joint expert report. These schedules are included in, and commented upon, in the final written and oral submissions of each party. As will be clear, I am assisted by, and adopt in part, Mr Lunney’s third alternative valuation, which was prepared using his rates and much of the non-valuation evidence of experts retained by the applicant, as an appropriate template to determine the value of the Parent Parcel in the before scenario and the Residue Land in the after scenario using the before and after valuation method.

228. I consider the inputs to Mr Lunney’s third alternative valuation (as recorded in the schedule) to correspond with my findings regarding the town planning, hydrological and ecological evidence, and particularly my preference in a number of areas for the evidence called by the applicant’s experts. To the extent that the inputs do not precisely correspond with my findings, doing the best I can, I have slightly corrected them to reflect the evidence and my findings to ensure they are acceptable.

229. Although not on its own determinative in my consideration of the application of rates to discrete areas of the Parent Parcel and the Residue Land, I remain conscious of the general principle that, in the case of compensation, doubts are resolved in favour of the more liberal estimate (Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358; [1947] HCA 10 at 374; Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209; [1999] HCA 64 at [356]), although I am conscious that the principle has been refined over the years: Sydney Water Corporation v Caruso [2009] NSWCA 391; [2009] 170 LGERA 298 at [3]. Although the application of this general principle must be approached with some caution where the Court is adopting the before and after valuation method, and being aware that the principle does not detract from the need to engage with and evaluate the evidence of competing witnesses, I take the principle into account in relation to the approach to some of the differences between the experts, as I note previously.

230. As noted above, I am of the view that the rate of $25/m² for land with the potential for development of a MHE (being land that is unconstrained and can be cleared), and the rate of $5/m² for the constrained land (as derived by Mr Lunney) is appropriate. I also find that there is land in the south-western part of the southern acquired land which could be likely, but not certainly, able to be cleared (as a result of doubt as to the classification of polygon 4 as Category 1 land). I consider that there is a risk involved, and although Mr Lunney makes provision for a 25% reduction to the unconstrained rate of $25/m², I am of the view, doing the best I can, that the risk is better accounted for through a 10% reduction to the unconstrained rate, such that the rate I determine to be appropriate is $22.50/m².

231. It remains to determine the areas of the Parent Parcel in the before scenario and the Residue Land in the after scenario to which to apply those rates.

232. For the purposes of the before scenario, I find that there is little doubt that most of the northern acquired land is able to be cleared for the purposes of development of a MHE. However, an area would be constrained by that part of Dr Martens’ conceptual flood mitigation scheme on the northern acquired land, being channel E.

233. I find that the south-eastern part of the southern acquired land would be “lost” from the potential development area as a result of the ecological and drainage concerns and I accept Mr Lunney’s calculation of approximately 35,000m² in this regard (as graphically illustrated in the second joint valuers’ report). I note that this constitutes, without being exact, that area that the applicant agrees to be land able to be utilised as a biodiversity offset area, as well as the area constrained by that part of Dr Martens’ conceptual flood mitigation scheme on the southern acquired land, being channel A. I consider this a proper reflection of the evidence, and appropriate to be adopted in my consideration.

234. I find that clearing on the south-western part of the southern acquired land is likely but not certain, and I consider that the reduced rate of $22.50/m² reflects this concern (as I note above) such that it is appropriate to be applied for this area.

235. In the after scenario, I accept that an area of 6,000m² will be constrained as a drainage area on the Residue Land Dr Martens opines.

236. In the circumstances, adopting Mr Lunney’s schedule for his third alternative valuation as a template, and applying the rates I have derived in the manner I note below, I determine that the value of the Parent Parcel in the before scenario is $7,315,228 and the value of the Residue Land in the after scenario is $6,432,113, resulting in a diminution of $883,115 as a result of the acquisition of the Acquired Land.

237. More specifically, in the before scenario, my allocation of rates to discrete areas is as follows:

1. In relation to the constrained part of the northern acquired land, applying the rate of $5/m² to the area of 2,000m², on the basis of Dr Martens’ evidence regarding channel E (see above at [96(1)] and Annexure C to this judgment), (giving $10,000);

2. In relation to the balance of the northern acquired land, applying the rate of $25/m² to the area of 9,280m² (11,280m² less 2,000m², referred to above) (giving $232,000);

3. In relation to the constrained part of the southern acquired land, applying the rate of $5/m² to the area of 35,000m², on the basis of Mr Lunney’s calculation of land that would be “lost” due to ecology and drainage constraints in accordance with the expert evidence (giving $175,000);

4. In relation to the balance of the southern acquired land (likely but not certainly able to be cleared), applying the rate of $22.50/m² (being a 10% reduction to the unconstrained rate to account for this risk) to the area of 21,352m² (56,352m² less 35,000m², referred to above) (giving $480,420); and

5. In relation to the balance of the Parent Parcel (being the Residue Land), applying the rate of $25/m² to the area of 268,200m² (giving $6,705,000).

238. From the above, the biodiversity offset cost in the before scenario (agreed in the first and the third joint ecology report) in relation to polygons 6, 7(a), 7(b), 11, 12 and 13, being $287,192, is deducted. As noted above, this provides a total valuation of the Parent Parcel in the before scenario in the sum of $7,315,228.

239. In the after scenario, my allocation of rates to discrete areas is as follows:

1. In relation to the drainage area, applying the rate of $5/m² to the area of 6,000m² (giving $30,000); and

2. In relation to the balance of the Residue Land, applying the rate of $25/m² to the area of 262,200m² (being 268,200m² less 6,000m², referred to above) (giving $6,555,000).

240. From the above, the biodiversity offset cost in the after scenario (in accordance with the third joint ecology report) in relation to polygons 6, 7(b) and 13, being $152,887, is deducted. As noted above, this provides a total valuation of the Residue Land in the after scenario in the sum of $6,432,113.

Severance

241. The applicant claims loss due to severance in the amount of $922,740 pursuant to s 55(c) of the Just Terms Act, on the basis that the northern acquired land severs the Residue Land.

Applicant’s position

242. The applicant submits that the proposed public purpose works will create a “very significant physical impediment” between the western residue land and the eastern residue land, which will constitute either a complete barrier if there is no easement granted, or a barrier of inconvenience if an easement is granted. The applicant also suggests that the Court has the power to order an easement (pursuant to s 64 of the Just Terms Act, which provides that compensation may be provided wholly or partly in the form of land if agreed by the dispossessed owner and the acquiring authority) and submits that despite an earlier request made on behalf of the applicant, Council has not provided a form of an easement.

243. Mr Allsopp accounts for loss due to severance (as noted at [173] above) by applying a 20% reduction to the rate of $91/m² that he applies to the 5.07ha western residue land, being the amount of $922,740. The applicant characterises Mr Allsopp’s approach to the impact of the severance of the Residue Land as “conservative”, as he applies his 20% reduction to the western residue land, where arguably the impacts of severance apply across the whole of the Residue Land. The applicant submits that the Court would be satisfied with Mr Allsopp’s approach.

244. Given the position of the northern acquired land, the applicant also submits that access between the severed parts of the Residue Land is limited to a public road, resulting in a loss of flexibility and impact on the ability to develop the Residue Land, and accordingly a reduction in the value of the Residue Land (constituting injurious affection). Even in circumstances where an easement is utilised, the applicant submits that injurious affection has occurred due to first, additional constraints on future development; and second, additional costs associated with construction of some form of pedestrian and vehicular access between the two separated parts. The applicant does not make a separate claim for this injurious affection.

245. The applicant criticises Mr Lunney’s approach to severance when undertaking valuations using the before and after valuation method on the basis that it is logically flawed not to allow for a loss for severance in circumstances where the opportunity for development of the Residue Land as a single parcel has been lost, resulting in a consequent negative impact on value.

246. Further, the applicant submits that the change in minimum lot sizes upon which Mr Lunney relies is not part of the public purpose, such that the Court would not accept Mr Chambers’ opinion that Council has recognised (albeit by way of an earlier planning proposal) that rezoning of SP2 Infrastructure (Drainage) and SP2 Infrastructure (Local Road and Drainage) would fragment the Residue Land such that it is “…unable to be used as a single entity”, and that this triggered the reduction of the minimum lot sizes which now apply to the Residue Land. The applicant also submits that the Court did not receive any evidence relating to any suggested quantum of the “benefit” of the changed minimum lot sizes that could be offset against Mr Allsopp's “quantified severance”.

Council’s position

247. Mr Lunney’s view is that no allowance for severance is necessary as the diminution in value as a result of severing the Residue Land with the watercourse through the northern acquired land, if any, would be offset by the benefit to the Residue Land of the change in the minimum lot sizes for the Residue Land from a 40ha minimum to 3ha (for the western residue land) and a 15ha minimum (for the eastern residue land) as part of the public purpose. The reduced minimum lot size offers a fallback position for any purchaser in the event that development consent for a MHE is not obtained, by facilitating the future subdivision of the Residue Land. Council submits that the Court would accept Mr Lunney’s view.

248. Council criticises Mr Allsopp’s approach to severance, as he does not acknowledge that there is a benefit to the severed Residue Land following the change to the minimum size controls. Council also notes that Mr Allsopp’s selection of a 20% reduction is not founded by reference to market evidence, such that if the Court is minded to find there was a legal severance, a more modest adjustment would be appropriate. To the extent that the applicant seeks, in support of its severance claim, that the Court should order an easement as an alternative to monetary compensation, Council submits that the applicant’s overtures to Council in relation to an easement are “self-serving” and are in any event made particularly late.

249. Mr Lunney also considers the denial of access to The Lakes Way, the lost opportunity to offset environmental impacts on the Acquired Land, and the lost opportunity to use the Acquired Land for drainage, and concludes that these issues are unlikely to give rise to any injurious affection. Council submits that there remains easy physical access between the parts of the Residue Land via public roads and that access would not be an impediment if the Residue Land was to be developed for a future MHE.

Consideration

250. Given my finding that it is appropriate to adopt the before and after valuation method when valuing the Acquired Land, and further, where I adopt a rate when valuing the Residue Land that reflects the potential for future rezoning (and potential for a MHE), any loss due to severance is included along with market value in the difference between the value of the Parent Parcel in the before scenario and the Residue Land in the after scenario: Apokis at [28].

251. However, despite the above, to the extent necessary, I find that the reduction of the minimum lot size (and the creation of an additional dwelling entitlement) for the Residue Land may, as suggested by Council, in fact restore some planning flexibility to the western residue land which, in any event, as Council submits, retains substantial frontage to Cape Hawke Drive. I also accept that there also remains relatively easy physical access between those parts of the Residue Land via public roads which, as Council submits, would not be an impediment if the Residue Land is developed for a MHE.

252. To the extent that it is necessary, I draw the “clear inference” (as Council submits) that the planning proposal is effectively a result of, and cause of, the public purpose as I consider that this is agreed between the town planning experts (Ex A, E577) and is also considered by Mr Lunney and Mr Chambers. Given my adoption of the before and after valuation method, I accept that the town planners (and Mr Lunney) are clear that in the after scenario the town planners take into account the public purpose (Tcpt, 26 February 2021, p 442(40-50)). I accept Mr Lunney’s opinion, that, in all the circumstances, there is no separate allowance for severance called for.

Injurious affection

253. The applicant claims injurious affection in the amount of $546,000 in the after scenario, pursuant to s 55(f) of the Just Terms Act, on the basis that in the after scenario he has lost the ability to use the 6,000m² drainage area on the Residue Land in the future development of a MHE.

254. The applicant submits that, in accordance with Dr Martens’ evidence, in the after scenario 6,000m² of developable land will likely be lost from the Residue Land for the management of hydrology issues (being additional flood mitigation works to prevent offsite flood impacts, required as a result of the loss of direct drainage connection between the Residue Land and The Lakes Way). Applying Mr Allsopp’s rate of $91/m² to this area, the applicant claims injurious affection in the amount of $546,000 in the after scenario.

255. In relation to the applicant’s claim for injurious affection on the basis of the unavailability of the 6,000m² drainage area in the after scenario, Council submits that this would only arise if there is a prospect of a MHE development obtaining a development consent on the Parent Parcel, noting, in Council’s primary case, there is no such prospect. Further, where there is a prospect of developing a MHE, Mr Lyons’ conceptual flood mitigation scheme would be preferred such that there is no loss of land in the after scenario.

256. As I find above, I accept Dr Martens’ evidence and I consider in the after scenario a further 6,000m² of otherwise developable land would be lost. This is taken into account when adopting the before and after valuation method and no further entitlement arises.

Disturbance

257. Pursuant to s 55(d) of the Just Terms Act, in determining the amount of compensation that the applicant is entitled to, regard must be had to any loss attributable to disturbance. The definition of “loss attributable to disturbance” is set out at [22] above.

258. The applicant claims loss attributable to disturbance in the sum of $153,515.49 on three bases: first, the amount of $89,505.93 in legal costs pursuant to s 59(1)(a) of the Just Terms Act; second, the amount of $36,306.56 in valuation costs pursuant to s 59(1)(b); and third, the amount of $27,703 in other financial costs reasonably incurred relating to the actual use of the subject land, as a direct and natural consequence of the acquisition pursuant to s 59(1)(f) of the Just Terms Act.

259. The other financial costs that are particularised by the applicant are: the costs of connecting water to the western residue land; the delivery of a cattle trough to the western residue land; the costs of facilitating the agistment of horses on the western residue land; and maintenance of the boundary between the eastern residue land and the southern acquired land.

260. At the end of the proceedings, the parties agree as to all amounts, other than the circumstances in which the applicant is entitled to the other financial costs in the amount of $27,703 claimed pursuant to s 59(1)(f) of the Just Terms Act. In summary, Council contends that should its primary position (being that the highest and best use of the Parent Parcel and the Residue Land is agriculture) be accepted, then the applicant would be entitled to the other financial costs, however, where the highest and best use of the land is for the development of a MHE, then the other financial costs to the applicant would be captured in the amount allowed for severance, because the costs are “trying to correct the effect of the severance”.

261. In contrast, the applicant contends that where severance and disturbance are separate heads of compensation under the Just Terms Act, there is no opportunity to “offset” or “net” claims for severance and disturbance as Council appears to contend. In support of this submission, the applicant notes that the claims are “entirely different”, because an allowance for severance seeks to determine the impact of the acquisition on market value, whereas an allowance for disturbance addresses the costs incurred as a consequence of the acquisition.

262. Noting that Council does not rely upon any submission relating to s 61(b) of the Just Terms Act (as it earlier maintained), I am guided by the consideration in Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367 at [83], and I accept the submissions of the applicant and find that the applicant is entitled to disturbance for the financial costs which I find are a direct and natural consequence of the acquisition pursuant to s 59(1)(f), in the amount of $27,703.

Conclusion

263. For the above reasons, I find that the applicant is entitled to compensation in the sum of $1,036,630.49 which includes $153,515.49 (as claimed) for disturbance.

Costs of the proceedings

264. While I am of the view that, given my findings, the applicant is entitled to his costs as agreed or assessed, Council has requested some short time to consider its position in relation to costs. As such, I make no present order for costs.

Addendum 22 September 2021

265. The amount of compensation ordered by the Court at the time of handing down judgment ($1,036,180.49) contained an arithmetic error and did not reflect the reasoning. The orders have been amended pursuant to the “slip rule” in accordance with r 36.17 of the Uniform Civil Procedure Rules 2005 (NSW).

Orders

266. The Court orders that:

1. The amount of compensation payable to Trevor Allan McBride for the acquisition of land comprising Lots 305, 306 and 308 in DP 1240455 at Forster, NSW, is determined in the sum of $1,036,630.49.

2. Costs are reserved.

Addendum 28 September 2021

267. I gave judgment and made orders in these proceedings on 21 September 2021 and reserved costs. As the parties have now reached agreement in relation to costs, I make the following further orders.

Further Orders

268. By consent the Court orders that:

1. MidCoast Council is to pay Trevor Allan McBride's costs on a party party basis as agreed or assessed within 28 days of agreement or completion of assessment.

2. In the event of default of Order (1) above, s 101 of the Civil Procedure Act 2005 (NSW) applies.

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Annexure A (969214, pdf)

Annexure B (304954, pdf)

Annexure C (321765, pdf)

Annexure D (1271589, pdf)

Amendments

29 September 2021 - Addendum 28 September 2021 at [267]

Further Orders at [268]

Decision last updated: 29 September 2021