Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority - [2009] NSWLEC 219

No judgment structure available for this case.

Reported Decision: 173 LGERA 155

Land and Environment Court

of New South Wales

CITATION: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWLEC 219

PARTIES:
APPLICANT:
Walker Corporation Pty Ltd
RESPONDENT:
Sydney Harbour Foreshore Authority

FILE NUMBER(S): 30024 of 2003

CORAM: Biscoe J

KEY ISSUES: COMPULSORY ACQUISITION OF LAND :- compensation - market value - industrial land - potential for residential use for older people or people with a disability under State Environmental Planning Policy No. 5 - potential for residential use on basis of existing use rights - potential for residential use on basis of the disregard in s 56(1)(a) Land Acquisition (Just Terms Compensation) Act 1991

LEGISLATION CITED: County of Cumberland Planning Scheme Ordinance 1951
Crown Lands Consolidation Act 1913
Environmental Planning and Assessment Act 1979, ss 53 – 72H, 94, 106, 107, 108, Part 3 division 4.
Environmental Planning and Assessment Regulation 2000, cll 41, 42, 45, Part 5
Frustrated Contracts Act 1978
Land Acquisition (Just Terms Compensation) Act 1991, ss 3(1)(a), 10(1), 54, 55, 56
Leichhardt Local Environmental Plan 2000
Leichhardt Planning Scheme Ordinance 1979
Public Works Act 1912, s 124
State Environmental Planning Policy No. 5 – Housing For Older People or People with a Disability 1998, cll 3, 4, 5, 9, 12, 13, 14, 25(f), Part 2
State Environmental Planning Policy No 56 – Sydney Harbour Foreshores and Tributaries, cll 2, 7, 11, 14, 21, Part 4, Schedule 1, Schedule 2
Sydney Harbour Foreshore Authority Act 1998

CASES CITED: A Woodbury v Wyong Shire Council [2006] NSWLEC 48
AMP Capital Investors Ltd v Transport Infrastructure Development Corporation [2008] NSWCA 325, (2008) 163 LGERA 245
Boland v Yates Property Corp Pty Ltd [1999] HCA 64, (1999) 74 ALJR 209
Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358
Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365, (2007) 156 LGERA 186
DEM (Aust) Pty Ltd v Pittwater Council [2004] NSWCA 434, (2004) 136 LGERA 187
Eaton and Sons Pty Ltd v Council of the Shire of Warringah (1972) 129 CLR 270
Georgakis v North Sydney Council [2004] NSWLEC 123, (2004) 140 LGERA 379
Housing Commission of NSW v San Sebastian Pty Ltd [1978] HCA 28, (1978) 140 CLR 196
Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353, (2006) 149 LGERA 439
Lemworth Pty Ltd v Liverpool City Council [2001] NSWCA 389, (2001) 53 NSWLR 371
Liverpool City Council v Commonwealth of Australia (1993) 81 LGERA 405
Maidment v Roads and Traffic Authority (NSW) [2006] NSWLEC 606, (2006) 153 LGERA 249
McDonald v Roads and Traffic Authority (NSW) [2009] NSWLEC 105
McRoss Developments Pty Ltd v Caltex Petroleum Pty Ltd [2004] NSWSC 183
Mona Vale Pty Ltd v Pittwater Council [2003] NSWLEC 74, (2003) 124 LGERA 449
Moore Development Group Pty Ltd v Pittwater City Council [2003] NSWLEC 130, (2003) 127 LGERA 27
Parramatta City Council v Brickworks Ltd (1971 - 1972) 128 CLR 1
Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565
Port Macquarie West Bowling Club Ltd v The Minister [1972] 2 NSWLR 63
Q & R Developments Pty Ltd v Sutherland Shire Council [2001] NSWLEC 250, (2001) 117 LGERA 438
Redeam Pty Ltd v South Australian Land Commission (1977) 17 SASR 508
Roads and Traffic Authority of New South Wales v Perry [2001] NSWCA 251, (2001) 52 NSWLR 222
Royal Agricultural Society of New South Wales v Sydney City Council (1987) 61 LGRA 305
Royal Sydney Golf Club v Federal Commissioner of Taxation (1954 - 1957) 97 CLR 379
Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243
Smith v Roads and Traffic Authority of New South Wales [2005] NSWLEC 438
Spencer v The Commonwealth (1907) 5 CLR 418
Spicer v Valuer-General (1963) 10 LGRA 319
Starray Pty Ltd v Sydney City Council [2002] NSWLEC 48
Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [2005] NSWCA 251, (2005) 63 NSWLR 407
Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [No 2] [2006] NSWCA 386, (2006) 68 NSWLR 487
Sydney Water Corporation v Caruso [2009] NSWCA 391
The Crown v Murphy [1990] HCA 42, (1990) 64 ALJR 593
The Minister v Stocks and Parkes Investments Pty Ltd (1973) 129 CLR 385
Trust Company of Australia Ltd v Valuer General [2007] NSWCA 181, (2007) 154 LGERA 437
Turner v Minister of Public Instruction (1955 - 1956) 95 CLR 245
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 315, (2004) 134 LGERA 195
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 535, (2004) 136 LGERA 164
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2006] NSWLEC 138
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5, (2008) 233 CLR 259
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] NSWLEC 247, (2008) 161 LGERA 86
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority Pty Ltd [2008] NSWLEC 282
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178, (2009) 168 LGERA 1
Wattle Park Pty Ltd v Commissioner of Highways (1973) 6 SASR 69
Wilson v Liverpool Corporation [1971] 1 WLR 302

DATES OF HEARING: 9 - 18, 20 November 2009

DATE OF JUDGMENT:
22 December 2009

LEGAL REPRESENTATIVES: APPLICANT:
Mr I. Jackman SC with
Mr R. Beasley and Ms J. Taylor
SOLICITORS:
Minter Ellison

RESPONDENT:
Mr B. Walker SC with
Mr A. Galasso SC and Mr E. Hyde
SOLICITORS:
Deacons

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

BISCOE J

22 December 2009

30024 of 2003

WALKER CORPORATION PTY LTD v SYDNEY HARBOUR FORESHORE AUTHORITY

CONTENTS

Paragraph

INTRODUCTION

1 HIS HONOUR: Walker Corporation Pty Ltd (Walker) claims compensation under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) for the compulsory acquisition on 26 September 2002 of land at Ballast Point, Birchgrove on Sydney Harbour (Land) by the Sydney Harbour Foreshore Authority (Authority). The Land was acquired for the purposes of the Sydney Harbour Foreshore Authority Act 1998, in particular to convert it into a new waterfront public park.

2 The proposed compulsory acquisition of the Land was announced by the Premier of NSW in a news release on 19 February 2002 under the heading “NSW GOVERNMENT RETURNS BALLAST POINT TO PUBLIC”:

“One of Sydney Harbour's most significant headlands – Ballast Point – is to be opened up to the public and preserved for future generations, under a plan announced by the State Government today...

The State Government will now commence negotiations to purchase Ballast Point on the Birchgrove Peninsula. Currently, Caltex Petroleum owns the 2.5 hectare site.

For some 80 years, Ballast Point has been used as a fuel depot, but the Government now intends to return the land to the public by creating a harbourside park.

The acquisition will neatly complete the work begun by former Premier Jack Lang who, in 1926 – directly opposite Ballast Point – returned Balls Head to public ownership. The two headlands will now form permanent green beacons on the western harbour corridor
...
To create the new Ballast Point park, it would be necessary for the State Government to take planning control for the land.

Ballast Point will be added to the list of state-significant sites with Planning Minister, Dr Refshauge as the consent authority.

3 Walker was formerly called McRoss Developments Pty Ltd. In 1997 Caltex entered into a call option agreement with a company related to Walker entitling that company or its nominee to purchase the Land for $16.5 million. Shortly before the Premier’s announcement that company nominated Walker as its nominee. On 19 April 2002, after the Premier’s announcement, Walker as nominee exercised the option. The next day it entered into a contract to purchase the Land. Although the sale was not completed at the acquisition date, compensation was payable to Walker for its interest in the Land under the Just Terms Act.

4 The contract of sale was frustrated by the compulsory acquisition and Caltex was obliged to refund the deposit to Walker pursuant to the Frustrated Contracts Act 1978: McRoss Developments Pty Ltd v Caltex Petroleum Pty Ltd [2004] NSWSC 183. Caltex was compensated under the Just Terms Act for the compulsory acquisition of its interest in the sum of $14,375,000. This was calculated by deducting from the purchase price the estimated cost of remediation of the Land which it was contractually obliged to carry out.

5 The Land is located at the eastern end of the Balmain peninsula on the southern side of Sydney Harbour. It is approximately two kilometres west of the Sydney Central Business District and the Sydney Harbour Bridge and about seven kilometres by road. It is strategically located opposite Balls Head, on the northern side of the Harbour. The Land is roughly triangular shaped, bound on its western boundary by the residential suburb of Birchgrove and on its northern and southern boundaries by the waters of Sydney Harbour. It comprises a fairly flat, sandstone central ridge or plateau, which falls dramatically by excavated cliffs to relatively narrow foreshores on its northern and southern boundaries. Access is by old, narrow roads through residential areas.

6 At the acquisition date the Land was zoned “Industrial” under the Leichhardt Local Environment Plan 2000 (LEP 2000). From 1928 it was used as a bulk terminal for the storage and distribution of petroleum products.

7 Walker’s claim for compensation is for the market value of the Land and disturbance loss. Only market value is in issue, as disturbance loss has been determined at an earlier stage of the proceedings.

8 Notwithstanding the Land’s industrial zoning at the acquisition date, Walker contends that its market value should be assessed on the basis of its residential development potential by the construction of 138 units, on three alternative bases:

SEPP 5

Just Terms Act

9 Alternatively, Walker contends that market value should be assessed at $33 million on the basis of its industrial use.

10 To determine compensation, there has to be deducted from the market value the purchase price of $16,500,000.

11 The Authority contends that:

(a) SEPP 5 and s 56(1)(a) were inapplicable and any existing use rights were too restricted in area to assist Walker’s proposed residential development;
(b) in any case, the chance of obtaining development consent was poor and, if consent could be obtained, the residential unit yield would be much lower than that propounded by Walker;

(c) the market value of the Land at the acquisition date was its industrial value of $15,500,000 plus any premium for the slight prospect of using the Land for a higher use on the basis of existing use rights or for SEPP 5 development;
(d) if SEPP 5 applied to the Land, market value should be assessed at $11,300,000. This is calculated on the basis of a yield of 40 units at the agreed rate of $700,000 per unit less a risk discount of 40 per cent.
(e) alternatively, if SEPP 5 applied to the Land, market value should be assessed at $30 million. This is calculated on the basis of 83 units at the agreed rate of $600,000 per unit less a risk discount of 40 per cent.

12 Walker’s proposed residential development is for 138 units of 150 m² each, with a floor space ratio of 0.8:1, in two, three or four storey buildings on the plateau as well as on the foreshore below the northern and southern cliffs, a large area of public open space on the eastern point, and public foreshore access ways on the northern and southern shores. This follows recommendations regarding the Land in a 1991 Commissioners of Inquiry report to the local council, Leichhardt Municipal Council (Council). The inquiry was held to consider public submissions with respect to four draft local environmental plans for several sites on the Balmain Peninsula, one of which related specifically to the Land. The main issues in the inquiry included land use and density of use.

13 Walker’s proposed 138 unit development proposed in these proceedings contrasts with Walker’s November 2001 development application for stage 1 of a staged development for 83 units in two storey buildings with an FSR of 0.55:1, to which the council did not consent. That application under the Environmental Planning and Assessment Act 1979 (EPA Act) was expressed to be based on existing use rights and also to be compliant with SEPP 5. Walker’s Class 1 merits appeal to this Court from the council’s deemed refusal, together with its Class 4 application for a declaration that there were existing use rights over the Land, were pending when the Minister, in February 2002, announced the Authority’s proposal to acquire the Land. The announcement made both those proceedings academic and they were discontinued.

14 Walker’s claimed market value of $60 million at the acquisition date in September 2002 contrasts with the purchase price of $16.5 million under Walker’s April 2002 sale contract. However, allowance has to be made for the fact that this price was struck some five years earlier pursuant to the 1997 option agreement, and the fact that market conditions for development of residential properties were heated at the acquisition date.

HISTORY OF THE PROCEEDINGS

15 The proceedings have had a remarkably long and active history, journeying thrice to the Court of Appeal and once to the High Court.

16 Initially, Walker contended that the market value of its interest was $81 million. Talbot J determined market value at $60 million on the basis that under s 56(1)(a) the Land should be taken to be zoned residential: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 315, 134 LGERA 195 (LEC 1). The resulting market value compensation was that amount less Walker’s purchase price of $16.5 million, that is, $43.5 million. The main steps in his Honour’s reasoning were that the Council would have rezoned the Land residential had it not been of the view that the Land would ultimately be rezoned open space; the rezoning of the land as industrial was a step in the resumption process; therefore, pursuant to s 56(1)(a), the industrial zoning should be ignored and the Land should be taken to be zoned residential.

17 His Honour then separately determined the quantum of disturbance loss at $55,138.50: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 535, 136 LGERA 164 (disturbance judgment). There was no appeal from that decision.

18 The Authority appealed successfully against LEC 1: Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [2005] NSWCA 251, 63 NSWLR 407 (CA 1) (Beazley, Basten and Stein JJA). Basten JA delivered the leading judgment. The Court of Appeal held that Talbot J had erred in law, set aside his orders and remitted the matter to this Court to be dealt with according to law. This Court was required to make findings as to what a hypothetical buyer and seller would have assessed as the chance of the Land being rezoned residential as at the acquisition date. The Court of Appeal identified the following errors in LEC 1:

(a) it was an error to start with the assumption that the Land had in fact been rezoned residential: at [77], [86];
(b) where the effect to be disregarded is the failure to change an existing zoning, rather than the imposition of a zoning consistent with the public purpose, the market value is likely to depend upon an assessment of the prospect of rezoning: in most cases it will be inappropriate to treat the land as having been rezoned on the basis that this would have happened on the probabilities: at [83];
(c) it is far from clear that s 56(1) operates so as to require a failure to act to be disregarded. It was an error to assume that the opposite of industrial zoning was the appropriate basis for valuation: at [87], [88].

19 On the remitter, Talbot J again assessed market value at $60 million on the basis that the chance that the Land would be zoned residential was 100 per cent: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2006] NSWLEC 138 (LEC 2).

20 The Authority appealed successfully against the decision in LEC 2: Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [No 2] [2006] NSWCA 386, 68 NSWLR 487 (CA 2) (Handley, Beazley and Basten JJA). The Court of Appeal in a joint judgment again found that his Honour had erred in law, set aside his orders and remitted the matter to this Court “for the market value of the land to be reassessed on the basis of the zoning which existed at the date of acquisition. The Court may also need to consider separate bases for valuation sought to be relied on by [Walker] and not yet addressed”: at [65]. The Court of Appeal held:

21 Walker appealed unsuccessfully to the High Court against both CA 1 and CA 2: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5, 233 CLR 259 (HCA). Dismissing the appeals, the High Court said that this “still leaves standing the remitter order made by the Court of Appeal on the second appeal”: at [8]. The High Court upheld the decision in CA 2 that “the proposal” to carry out the public purpose for the acquired Land was that of the Authority and not that of the Council or some aggregation over time of the policies of the Council and the State government: at [53] – [54].

22 Before the third hearing in this Court commenced, I decided claims of client legal privilege over certain documents: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] NSWLEC 247, 161 LGERA 86. I also declined to grant leave to Walker to make certain amendments and call certain further evidence: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority Pty Ltd [2008] NSWLEC 282. Walker’s appeal against the latter interlocutory decision was dismissed by the Court of Appeal: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178, 168 LGERA 1.

23 The first object of the Just Terms Act, in s 3(1)(a), contains a guarantee:

“ 3 Objects of Act

(a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition…”

24 Compensation has to be determined in accordance with ss 54, 55 and 56, which relevantly provide:

“ 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.

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,
…
(d) any loss attributable to disturbance,

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):

25 Because of the guarantee in s 3(1)(a), which is reiterated in s 10(1), the acquiring authority must pay at least the market value of the acquired land unaffected by the proposal: AMP Capital Investors Ltd v Transport Infrastructure Development Corporation [2008] NSWCA 325, 163 LGERA 245 at [63] and [72] per Hodgson JA; Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353, 149 LGERA 439 at [41] per Spigelman CJ; Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365, 156 LGERA 186 at [4] – [5] per Spigelman CJ; Smith v Roads and Traffic Authority (NSW) [2005] NSWLEC 438 at [65] per McClellan J; McDonald v Roads and Traffic Authority (NSW) [2009] NSWLEC 105 at [14] per myself.

26 There is a curious shift in language between ss 3(1)(a) and 10(1) (“a proposal for acquisition”) and s 56(1)(a) (“the proposal to carry out the public purpose for which the land was acquired”). The Court of Appeal criticised the primary judge for repeatedly referring to “the proposal to acquire the land” instead of focusing on the language of s 56(1)(a): CA 2 at [33].

27 The statutory definition of market value in the chapeau to s 56(1) reflects the classic test of market value in Spencer v The Commonwealth (1907) 5 CLR 418, while s 56(1)(a) reflects the principle in Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565. However, it is the terms of the legislation that are determinative: HCA at [47], CA 2 at [10]. The High Court said in HCA at [51] (omitting citations):

Spencer v The Commonwealth

Property for Public Purposes Acquisition Act

Spencer

Kenny & Good Pty Ltd v MGICA

Spencer v The Commonwealth

of a rise or fall for what reason soever

28 It has become conventional to say that resumed land is to be valued according to its “highest and best use”, although I do not think that “highest” adds anything to “best”: cf Turner v Minister of Public Instruction (1955 - 1956) 95 CLR 245 at 274, 282 (“best use”); Spicer v Valuer-General (1963) 10 LGRA 319 at 320 (“best or most profitable potential use”), cited in Trust Company of Australia Ltd v Valuer General [2007] NSWCA 181, 154 LGERA 437 at [32] (“highest and best use”); Boland v Yates Property Corp Pty Ltd [1999] HCA 64, 74 ALJR 209 at [271] (“highest and best use”).

VALUATION APPROACHES

29 As usual in this jurisdiction, there is a great range in the values reached by the expert valuation witnesses, largely because of the different assumptions upon which they relied.

30 Walker invokes the familiar general principle that in determining compensation to a dispossessed owner doubts should be resolved “in favour of a more liberal estimate”: Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358 at 374. The general principle should be understood in the way recently explained in Sydney Water Corporation v Caruso [2009] NSWCA 391 at [3] – [4]:

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

31 Walker and its valuers, as well as the Authority’s valuer at the LEC 1 hearing, adopted the “top down” valuation methodology whereby the Land was valued as though its potential residential use was certain and then, if appropriate, a deduction made for any risk that that potential would not occur.

32 The Authority submits that I should adopt, as did its valuer at the LEC 2 hearing, a “bottom up” valuation methodology whereby the Land is valued on the basis of its actual industrial zoning and a premium added for any chance of residential use. However, the Authority acknowledges that it is open to me as the judicial valuer to adopt a top down valuation and makes submissions as to top down value in the SEPP 5 scenario.

33 The convenient descriptions “bottom up” and “top down” were coined in Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243 at [74] – [75], followed in Maidment v Roads and Traffic Authority (NSW) [2006] NSWLEC 606, 153 LGERA 249 at [51] (both my decisions). In Sandhurst at [74] – [85] I reviewed the authorities relating to the two methodologies and observed that the choice between them depended on the circumstances. It is convenient to substantially repeat that review, as follows.

34 In Royal Sydney Golf Club v Federal Commissioner of Taxation (1954 - 1957) 97 CLR 379, the court was required, for the purpose of assessing land tax, to consider the unimproved value of land held by the golf club at Rose Bay, which was reserved for the purposes of parks and recreation areas under a planning ordinance. Consequently, residential development was prohibited. The owner of land restricted in this way could require the council to acquire the land. As the council had no funds to do so, the prohibition was suspended, allowing interim development to be carried out with the permission of the council. It was contrary to the council's policy to grant such permission, except in respect of very small areas of land. In the circumstances, Kitto J adopted the bottom up methodology as follows, at 391 (in a passage quoted in CA 1 at [45]):

“In the result my opinion is that a notional intending vendor and purchaser, treating about the appellant's land on 30th June 1951, and fully informed as to all relevant considerations, would have proceeded, in discussing price, on the footing that there was only a slender chance that it would ever become permissible to use any part of the land for other than recreational purposes. For that reason, I do not think that a method of valuation can be supported which aims first to ascertain what value the land would have had on the relevant date if it had been free from the restrictions of the Ordinance, and then to fix upon a deduction to be made from that value in order to reflect the depressive effect of the restrictions. That may be an acceptable method of allowing for restrictions which operate merely for a limited period; but it is not with restrictions of that kind that this case is concerned. I think the proper course is to inquire first what was the value of the land on the footing that there was no possibility of its ever being turned to other than recreational purposes, and then how much extra should be allowed for such chance as there was of securing permission for residential use at some future time.”

35 In applying the bottom up methodology, Kitto J assessed value by reference to the land's then current zoning, and added a premium of five percent for increased value referable to the slender chance that approval might be obtained for a higher residential use. His Honour observed that quantification of that chance at a five per cent increase was necessarily a matter of guesswork, at 395:

“How much should be allowed under that head is necessarily a matter of guesswork, for the hypothetical vendor and purchaser would have to engage in sheer speculation... I think they would more probably agree on the addition to the amount otherwise arrived at of a percentage of that amount. From what I have said it will be apparent that I regard the chance to be allowed for as one which negotiating parties would acknowledge but would not treat as more than a very speculative item in their deliberations. I think an increase of five percent is as near to the mark as one can get.”

36 In Redeam Pty Ltd v South Australian Land Commission (1977) 17 SASR 508 the top down methodology was considered. Jacobs J held that there was uncertainty in realising the development potential of compulsorily acquired land even though a proposed plan of subdivision had been approved by council and conditionally approved by the public authorities responsible for the provision of services. All that stood in the way of development of the land for residential purposes was rezoning (at 516). His Honour held, at 512:

while it remained so zoned

37 In Port Macquarie West Bowling Club Ltd v The Minister [1972] 2 NSWLR 63 the top down methodology was adopted. The holder of a special lease of land had applied under the Crown Lands Consolidation Act 1913 to convert the land to freehold. The restriction on the land resulting from its open space zoning was unlikely to remain in force for long. It was held to be appropriate to value the land on the basis of a virtually unrestricted zoning and then make deductions for the current zoning restriction and the possibility of a relaxation of that restriction.

38 There is a spectrum or notional scale along which land subject to development restrictions may be placed in order to decide whether the bottom up or top down valuation methodology is appropriate. The notional scale was described in Wattle Park Pty Ltd v Commissioner of Highways (1973) 6 SASR 69 at 94 – 95 by Wells J:

“It seems to me that the cases in which the land to be valued is subject to restrictions may be ranged along a notional scale within which they differ from one another in degree.

At the lower end of the scale, there would appear the sort of restrictions exemplified by those in the Royal Sydney Golf Club case, which are so far reaching and so securely entrenched in the structure of the relevant parts of our law, that the possibility of relaxation, although it exists, is remote. At the upper end of the scale, one would find the sort of restrictions that Else-Mitchell J was concerned with [in] the Port Macquarie West Bowling Club Case which, either because they are obviously intended to be temporary, or because, in the circumstances, they are unlikely to remain in force for long, may soon be relaxed, in whole or in part. Where land that is to be valued is subject to restrictions of the kind appearing towards the lower end, a reliable starting point for the valuer will probably be found in the value of the subject land in its unrestricted [sic] state and adjustment can then be made, with some reasonable assurance, to allow for the chances of relaxation. In such a case, the possibilities of error or of disagreement would be much greater if the land were first valued in its unrestricted state, and allowances were made in respect of the figure so arrived at.

39 In A Woodbury v Wyong Shire Council [2006] NSWLEC 48 the applicant's valuer adopted the top down methodology. He valued the land on the assumption that a rezoning had taken place and then applied a discount to allow for an anticipated delay in achieving the rezoning. Bignold J held that the bottom up methodology was more appropriate, at [49] - [50]:

“...an additional very significant discount for risk would need to be applied to [the applicant's] valuation. But the magnitude of the required discount to cover the risk of the subject land not being rezoned according to Mr Kettle's opinion, is so high - something like 50 percent would, in my judgment, be appropriate - as to undermine the reliability of employing [the applicant's] valuation methodology.

40 In Liverpool City Council v Commonwealth of Australia (1993) 81 LGERA 405 at 421 Wilcox J said:

“In a case where the task of assessing compensation comes down to the evaluation of a chance, it will rarely be possible to demonstrate that any particular figure is correct. I certainly cannot do so in this case. I can only consider all the relevant factors and make a judgment about them; a `best guess' perhaps.”

41 While accepting that the choice between the bottom up or top down methodologies is mine as the judicial valuer, the Authority suggests that there were indications in CA 1 favouring the bottom up methodology. Reference is made to CA 1 at [79] where it was said that, “if the land had been acquired compulsorily in 1991, it would have been appropriate to assess compensation by reference to the value of the site with its then current industrial zoning, but with an allowance for increased value referable to the prospect that approval might be obtained for residential use. That is the approach adopted by Kitto J in Royal Sydney Golf Club v Federal Commissioner of Taxation (at 391).” The Court of Appeal’s comments were made in the context of rejecting a construction of s 56(1)(a) which disregarded the industrial zoning and assumed a residential zoning. The Court of Appeal certainly did not exclude the use of the top down methodology and did not have to consider its use in the SEPP 5 and existing use rights valuation contexts. As Spigelman CJ said in Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365, 156 LGERA 186 at [3]: “There are a number of different ways in which the task of approaching valuation can be undertaken, each of which is perfectly rational. More than one means may be adopted for the purpose of checking the value arrived at by any other means. This Court should be very slow to interpret legislation so as to exclude a rational mode of valuing land, particularly in view of the difficulties that may attend any single mode of valuation”. In the present case, the parties accept that it is open to me to adopt the top down methodology and there was valuation evidence on both sides which adopted it.

PLANNING HISTORY

42 The planning history of the Land from the 1920’s is traced in some detail in LEC 1 at [81] – [105], as well as in CA 2 at [33] – [52]. The main milestones are briefly identified below.

43 In 1951 the Land was zoned “Waterfront Industrial” under the County of Cumberland Planning Scheme Ordinance 1951. In 1979 the Land was zoned “Waterfront Industrial” under the Leichhardt Planning Scheme Ordinance 1979 except for a sliver on its north western boundary that was zoned residential. Leichhardt Local Environmental Plan 2000, made on 22 December 2000, repealed the Ordinance and zoned the Land “Industrial”.

44 From 1928, the Land was used as a terminal for distribution of petroleum products. Later and until the early 1990’s, the use changed to a lubricants manufacturing facility. Thereafter, it was used for bulk storage of oils and to supply fuel to commercial vessels: LEC 1 [67].

45 In November 1989, the Land’s then owner, Caltex, demonstrated a wish to change the use to a residential use when an application was submitted on its behalf for the Land to be rezoned to permit residential development by the construction of 163 units. In December 1989 the Council resolved to prepare a draft local environmental plan in respect of the Land. In May 1990 the Council resolved to place a moratorium on the residential rezoning of the Land and four other sites on the Balmain Peninsula for which rezoning applications had been received, to enable the preparation of a comprehensive planning study for the Balmain Peninsula. In June 1990 the Minister for Local Government and Planning issued a statutory direction to the Council requiring it to submit a draft local environmental plan for the five sites. In August 1990 the Council resolved to exhibit a draft local environmental plan and hold a public hearing.

46 In August 1990 the Minister appointed a Planning Administrator to administer all the functions of the Council under the EPA Act within the Balmain Peninsula. The Administrator rescinded the August motion and resolved to exhibit draft local environmental plans. In February 1991 the Court of Appeal ruled invalid the appointment of the Planning Administrator.

47 In March 1991 Commissioners of Inquiry conducted public hearings. The main issues in the Inquiry included land use and land density. The Commissioners’ report of July 1991 addressed four draft local environmental plans, one of which related specifically to the Land. The report’s recommendations included recommendations in relation to the Land for residential development by the construction of 138 units of 150 m² each, with a floor space ratio of 0.8:1.

48 A statutory direction required the Council to submit the draft local environmental plan for the Land to the Department of Planning in September 1991. In November 1991 the Council decided not to adopt the draft local environmental plan for the Land and to reject State intervention into its affairs. In December 1991 the Council resolved to seek government funding to acquire the Land. On 6 February 1992 a Mayoral minute stated that council’s first priority for the Land was that it should all be open space and that letters to the Commonwealth and State governments seeking funds to acquire the site remained unanswered.

49 There followed two unsuccessful attempts by the State government to make regional environmental plans under which the Minister became the consent authority and the Land was zoned residential. Both plans were declared invalid by the Court of Appeal. The first plan was made and declared invalid in 1992. The second plan was made in 1993 and declared invalid in 1995.

50 Meanwhile, in October 1992 the Council resolved to advise the Minister in the strongest possible terms that the current development application for 157 dwellings at Ballast Point was contrary to the Council’s clearly stated position that it be purchased for inclusion in the Sydney Harbour National Park and for open space.

51 In 1995 Caltex obtained development consent from the Minister for the construction of 134 medium density dwellings with an FSR of 0.803:1 but it was rendered nugatory when the Court of Appeal subsequently declared the second regional environmental plan invalid.

52 Between 1995 and 1998 local environmental plans were made in respect of the other former industrial sites the subject of the Commissioners of Inquiry report.

53 In 1996 the Council wrote to the Prime Minister seeking funding support towards the purchase of the Land as part of Sydney Harbour National Park.

54 In 1998 a report by Council planners commented that given the different viewpoints of stakeholders, the Land should retain its industrial zoning.

55 On 21 August 1998 State Environmental Planning Policy No 56 – Sydney Harbour Foreshores and Tributaries (SEPP 56) was gazetted. Its aims include coordinating the planning and development of the foreshores of Sydney Harbour and its tributaries by establishing a clear set of guiding principles for the development of all land on those parts of the foreshores to which the policy applied, by requiring the preparation of master plans for strategic foreshore sites to ensure that the guiding principles are met, and by establishing clear consultation procedures for the planning and development of all strategic foreshore sites: cl 2. Those sites are identified in Schedules 1 and 2. Except with the approval of the Minister, development consent can only be granted if there is a master plan for the land, the consent authority has taken the master plan into consideration and the development is consistent with the master plan: cll 11, 14. The Minister is the appropriate authority for adoption of a master plan for land in Schedule 1 and the relevant council is the appropriate authority for Schedule 2 land: cl 21. The guiding principles require all decisions made in the administration of the EPA Act or an instrument under the EPA Act relating to the planning and development of land to which the policy applies to take into consideration (among other things) increasing public access to, and use of, land on the foreshore: cl 7. The Land was originally listed in Schedule 2 as a site of strategic significance. There it remained until 19 February 2002 when it was listed in Schedule 1.

56 In December 1998 the Department of Urban Affairs and Planning and the Council agreed on a co-ordinated approach to the preparation of a master plan. However the Council re-iterated its position to support retention of the industrial uses on the Land until such time as it became available for open space, a position maintained throughout 1999 while the master plan was being prepared. The Department identified the master planning process as involving an assessment of the land use potential of the Land and alternative land use options.

57 The Minister issued a “Sydney Harbour Regional Action Plan”. It identified “priority projects”, one of which was the Land. It required a “framework plan” for each site. By September 2000 the Department had developed a draft framework plan for the Land. It was non-committal as to the Land’s future land uses and development opportunities, except to say that any proposals should comprise a significant element of public open space and that an element should be retained for harbour uses to best utilise existing infrastructure. The plan noted that enabling development “could include a variety of uses, including industrial, business and/or residential”.

58 In a submission to the Minister for Urban Affairs and Planning on 18 October 2000 the Authority sought to have the Land incorporated within its area boundary by transferring it to Schedule 1 of SEPP 56, thereby making it a site of State significance and replacing the Council with the Minister as consent authority.

59 As stated earlier, on 22 December 2000 LEP 2000 was made.

CHARACTERISTICS OF THE LAND

60 In order to apply the well-understood principle of market value encapsulated in the chapeau to s 56(1), the relevant characteristics of the Land must be identified.

61 The Land is in an excellent harbour-front location and has fairly been described as a trophy site. A critical characteristic is the industrial zoning which imposed a legal constraint on possible development and hence market value: CA 2 at [11]. Other characteristics and constraints were listed in LEC 1 at [137] – [138]. Some of the supplementary comments offered by the Authority may be accepted as relevant considerations, as follows:

(a) any development proposal would have to substantially landscape the edges of the Land and carry through to the plateau;
(b) the importance of views from the waterway is primarily established by SEPP 56. New buildings might be required not to diminish the predominant character of natural landscape. It is likely that fingers of greenery would be required between buildings;
(c) development should not be out of context with development on the adjoining residential lands;
(d) there was an existing tree canopy on the plateau under which building form might be required to be located;
(e) the council’s foreshore building line was about 10 metres under LEP 2000 but some of the Authority’s experts considered that a foreshore building line in the order of 20 to 30 metres would be required having regard to the context of the site and adjoining residential development;
(f) any development would be required to ensure public access to the foreshore area;
(g) any development would have to provide for a significant degree of open space;
(h) the intervention into the sandstone form are significant heritage legacies which form a reminder of the previous activity that occurred on the site and therefore might have to be incorporated into any design;
(i) the provision of view corridors from within the site were likely to be required as part of any development;
(j) as a site identified as being of strategic importance in Schedule 2 of SEPP 56, any development application would be addressed by the Sydney Harbour Design Review Panel;
(k) there was a history and intensity of local opposition to redevelopment of the Land for anything other than open space;
(l) consideration of a development application should take into account the development form on the other four sites the subject of the Commissioners of Inquiry report. Common to both Walker’s and the Authority’s planning witnesses' evidence was an aversion to the densities, built form and location of the built form of these developments;
(m) the need for an internal access road;
(n) topography was relevant in terms of the degree of excavation required for the provision of basement parking commensurate with the intensity of development;
(o) the orientation of the promontory in terms of solar access was relevant to whether residences would be permissible on the southern portion of the Land, beneath the cliffs, where solar access is poor;
(p) traffic generation associated with the level of development should take into account that in the surrounding road network many of the streets are narrow .

62 Walker’s primary case is its SEPP 5 case that the hypothetical buyer and seller at the acquisition date would have considered that:

63 The Authority takes a very different position on all points, contending that the hypothetical buyer and seller at the acquisition date would have considered that:

Whether SEPP 5 applied to the Land

64 SEPP 5 commenced in 1998. If SEPP 5 is inconsistent with any other environmental planning instrument, it prevails to the extent of the inconsistency: cl 5.

65 One of SEPP 5’s three aims, which Walker emphasises, is to “increase the supply and diversity of housing that meets the needs of older people or people with a disability”: cl 3(1)(a). Consistently with that aim, the objective of Part 2 (cll 9 – 19) of SEPP 5, entitled “Development Criteria”, “is to create opportunities for the development of housing that is located and designed in a manner particularly suited to both those older people who are independent, mobile and active as well as those who are frailer, and other people with a disability regardless of their age”: cl 9. Another aim of SEPP 5, emphasised by the Authority, is to “make efficient use of existing infrastructure and services”: cl 3(1)(b). The relevant “existing infrastructure” in this case is public transport, as discussed below.

66 Clause 4 is at the heart of the argument as to whether SEPP 5 applied to the Land. The land to which SEPP 5 applies is described in cl 4 by reference to two criteria, both of which must be satisfied:

67 It is common ground that the Land and adjoining land were zoned primarily for urban purposes. The criterion in cl 4(1)(a) was therefore satisfied.

68 There is an issue as to whether the cl 4(1)(b) criterion was satisfied, which turns on the construction of cl 4(1)(b)(iv). Under LEP 2000, “educational establishments” were permissible with development consent in the Industrial Zone in which the Land was located. ”Educational establishments” were also permissible in the Public Purpose Zone and the Residential Zone (as was “SEPP 5 housing”). The only other zones in LEP 2000 were the Business Zone and the Open Space Zone. For reasons that will become apparent, it is relevant to note that, unusually, there was no zone called Special Uses Zone in LEP 2000.

69 As educational establishments were permissible with development consent on the Land at the acquisition date, Walker submits that the hypothetical buyer and seller would be in no doubt that the criterion in cl 4(1)(b)(iv) of SEPP 5 was satisfied because:

(a) of the construction of cl 4(1)(b)(iv) adopted before the acquisition date in Q & R Developments Pty Ltd v Sutherland Shire Council [2001] NSWLEC 250, 117 LGERA 438 at [27] – [32] (Pearlman J), later approved in DEM (Aust) Pty Ltd v Pittwater Council [2004] NSWCA 434, 136 LGERA 187 at [50] (per McColl JA);
(b) acting prudently, they would have obtained advice from a planner as to whether SEPP 5 applied and Walker’s planners, Professor Lyneham and Mr Ingham, did not think it was questionable;
(c) acting prudently, they may have obtained legal advice, such as the opinion (in evidence) from eminent senior counsel in July 2001 (shortly before Q & R Developments was decided) that SEPP 5 did apply to the Land.

70 The Authority submits that the hypothetical buyer and seller, properly advised, would consider that there was only a slender chance that SEPP 5 applied to the Land, such that that potential would attract no significant additional value, for the following reasons:

Q & R Developments

DEM

71 The Authority’s submission that cl 4(1)(b)(iv) is not satisfied draws strength from the fact that it had been amended in 2000, shortly before the acquisition date. In its previous form it did not refer to zoning and was in the following terms:

“(iv) Special uses including churches, convents, educational establishments, schools and seminaries.”

72 In its amended form, para (iv) refers to zoning “development of a kind identified in respect of land zoned for special uses, including (but not limited to) …educational establishments”. This is in contrast to the criteria in (b)(i), (ii) and (iii) which simply refer (without reference to zoning) to “dwelling houses”, “residential flat buildings” and “hospitals”. Therefore, the Authority argues, the intent was to introduce a zoning criterion; and since LEP 2000 has no Special Uses Zone, the criterion in cl 4(1)(b)(iv) could not be satisfied so far as the Land was concerned.

73 In Q & R Developments, which was not concerned with the Land, Pearlman J decided the construction of cl 4(1)(b)(iv) differently from that proposed by the Authority. Her Honour held that if development in cl 4(1)(b)(iv) is identified as permissible in respect of land zoned special uses under the relevant instrument, and is also development of a kind which is permissible in the particular zone in question, then the land falls within the description of land to which SEPP 5 applies: at [29]. Her Honour said that the whole matter (that is, the question of construction) was not free from doubt: at [30]. Although her Honour’s decision on this point was obiter, it was fully reasoned, as follows:

“[27] Mr Cole submitted that cl 4(1)(b)(iv) of the 2000 SEPP 5 is confined to land which is actually zoned for special uses. That follows, he submitted, from the language used, and by contrast with the language of the previous cl 4(1)(b)(iv) in the 1998 SEPP 5. The amendment made by Amendment No 1 was intended to limit the permissibility of SEPP 5 development. Mr Cole drew support for his submission from the explanatory notes, item 1 of which contains the following statement:

‘The land to which SEPP 5 applies is set out in clause 4. Under the new clause 4(1)(b)(iv), SEPP 5 may apply on land zoned for special uses, including such land where development for the purposes of churches, convents, educational establishments, schools and seminaries are permitted.’

[28] Mr Cole further submitted that the construction which he put forward is consistent with general planning principles. It is obvious, in his submission, that SEPP 5 would be appropriate in terms of both the physical environment and strategic land use control where that development is located on land zoned for special uses for churches, convents, educational establishments, schools and seminaries. Such a construction avoids the ambiguous position that SEPP 5 development might be permissible simply because, for example, development for the purpose of a church might be a permissible use in a zone.
[29] Mr Hemmings rejected that approach. He focussed on the language of the whole of cl 4(1), and pointed to the fact that, whilst subcl (a) is expressly concerned with zoning, subcl (b) is concerned with permissible development of specified kinds. The proper approach, in his submission, is to have regard to the permissibility of kinds of development in land zoned for special uses under the relevant instrument. If development of the kind specified (churches, convents etc) is identified as permissible in respect of land zoned special uses under the relevant instrument, and is also development of a kind which is permissible in the particular zone in question, then the land falls within the description of land to which SEPP 5 applies. Thus, under LEP 1993, development for the purpose of, for example, churches, is permissible under the special uses zone as being a purpose indicated by lettering on the zoning map. Development for the purpose of churches is therefore development of a kind identified in respect of land zoned for special uses and it is development which is permissible in the 4(a) General Industrial zone. Therefore, the site is amenable to SEPP 5 development, because it is land within New South Wales on which development for one of the specified purposes is permitted.
[30] This whole matter is not free from doubt . The language of cl 4(1)(b) is tortuous and leaves a lot to be desired. After anxious consideration, I have concluded that the submission of Mr Hemmings is correct. The construction which he proffered is based on the language used, and in particular, the reference in subcl (b) to ‘purpose’ which is ‘permitted’ being ‘development of a kind’. The reference point is land zoned special uses, but the determinative factor is the permissibility of development for specified purposes. According to cl 4(1)(b), the land to which SEPP 5 applies is land on which development for certain specified purposes is permitted. Those purposes are dwelling-houses, residential flat buildings, hospitals, and development for purposes of a kind identified in respect of land zoned for special uses, including churches, convents etc. If, on the land in question (here, the site) development for any of those purposes is permitted, it is land to which SEPP 5 applies.
[31] The scope and purpose of SEPP 5 does not, in my opinion, require a different conclusion. Clause 4 is concerned with land to which SEPP 5 may apply, that is, land upon which SEPP 5 development may be carried out. Whether it is appropriate to be carried out on that land, however, depends upon the application of the other provisions of SEPP 5 which include development criteria and design standards. The policy of providing housing for older people and people with a disability is met if land is available in accordance with the requirements in cl 4 and the other criteria and standards are satisfied. That seems to me to meet the objective, stated in cl 3(1)(a) of SEPP 5, of encouraging the provision of housing that will ‘increase the supply and diversity of housing that meets the needs of older people or people with a disability ...’.
[32] The explanatory notes only serve to reinforce the doubts. On the face of it, they seem to indicate that subcl (b)(iv) is confined to land zoned for special uses, but that, in my opinion, ignores the language used. As Mr Hemmings submitted, the explanatory notes may merely be widening the ambit of land to which SEPP 5 applies by including land which is zoned special uses as well as land where specified special uses are permitted. In any event, I do not regard the explanatory notes as determinative; they are merely an aid to construction under s 34 of the Interpretation Act .”

74 I consider that at the acquisition date the hypothetical parties, properly advised, would have placed considerable reliance on the decision in Q & R Developments, notwithstanding the statement therein that the whole matter is not free from doubt and the possibility that it might not be followed.

75 The Authority submits that even if Q & R Developments were properly decided, the hypothetical parties, properly advised, would regard it as distinguishable because in the present case development of the relevant kind, namely educational establishments, is not also identified as permissible in respect of land zoned for special uses as LEP 2000 did not have a Special Uses zone. The Authority submits that it is critical that the zone in question be called a “Special Uses” zone.

76 I disagree. It is true that, unusually (if not uniquely), LEP 2000 does not have a zone that is called “Special Uses”. It is not essential, in my view, that there be a zone actually called “Special Uses”. The phrase “special uses” is not a term of art. The question is whether the Public Purpose Zone in LEP 2000 zoned land “for special uses”, within the meaning of cl 4(1)(b)(iv) of SEPP 5. Upon consideration of LEP 2000 in its historical context and consideration of the text of cl 4(1)(b)(iv), in my view the question should be answered in the affirmative.

77 LEP 2000 repealed the Leichhardt Planning Scheme Ordinance 1979. The Ordinance had a Special Uses Zone, which was described by reference to a scheme map. There is a large congruence between the land in the Ordinance Special Uses Zone and in the LEP 2000 Public Purpose Zone. The mere change of name does not matter.

78 The Authority nevertheless submits that the uses referred to in the LEP 2000 Public Purpose Zone are not inherently “special” because many of them are also permissible in other zones. I think that this point is neither dispositive nor sufficiently weighty. A number of uses in the Special Uses zone in the Ordinance were similarly permissible in other zones yet the Authority does not suggest they were not special uses. For example, under the Ordinance, educational establishments, hospitals, places of public worship and generating works were permissible in certain Residential Zones but uses answering those general descriptions were also permissible in the Special Uses Zone.

79 The July 2001 opinion of senior counsel referred to in the parties’ submissions ([69 (c)] and [70 (e)] above) was that SEPP 5 applied to the Land. The reasoning was consistent with the reasoning in Q & R Developments, decided a few months later. The opinion was expressed in the following terms:

“McCross Developments Pty Limited (‘the Company’) has acquired the old Caltex site at Ballast Point (‘the site’). The site is zoned Industrial under Leichhardt Local Environmental Plan 2000 (‘the LEP’). Under that zoning various forms of development are permissible with consent including educational establishments.

State Environmental Planning Policy No 5 – Housing for Older People

I am instructed that under the LEP there is land zoned for special uses in which development for the purpose of educational establishments is permissible with consent.

Industrial

urban purposes

^rd

It is pertinent to note that the requirement of clause 4(1)(a) is not that the relevant land be zoned primarily for residential purposes: on the contrary, it need only be zoned for ‘urban’ purposes. Given the ordinary meaning of that word, it is clear, in my opinion, that the site is so zoned. In the second place, I am instructed that the land adjoining the site is zoned for residential purposes so that the site would in any event qualify under the second limb of clause 4(1)(a).

As to the provisions of clause 4(1)(b)(iv), in my opinion its requirements are also satisfied. The development control table to the special uses zonings under the LEP identify development for the purpose of educational establishments to be permissible use. That use is also permissible within the Industrial zone. Accordingly, it is clear, in my opinion, that this requirement is also satisfied.

In summary, therefore, I am of the opinion that

(a) the site is zoned primarily for urban purposes;

(b) alternatively or in addition, it adjoins land so zoned;

(d) accordingly, SEPP5 applies to the site.”

80 The passages I have emphasised in the above quotation suggest that senior counsel may have relied on instructions that “under the LEP there is land zoned for special uses in which development for the purpose of educational establishments is permissible with consent”. The Authority submits that the instructions (or senior counsel’s assessment if he was not relying on instructions) were incorrect because LEP 2000 contained no Special Uses Zone. In my view, senior counsel’s instructions (or his own assessment if he was not relying on instructions) were correct if (as I think is the case) the Public Purpose Zone is regarded as including land zoned for special uses in which development for the purpose of educational establishments is permitted.

81 In my opinion, the prudent hypothetical buyer and seller at the acquisition date, properly advised as to Q & R Developments, would have thought it likely that SEPP 5 applied to the Land, while allowing for some risk that it did not apply having regard to contrary arguments (as raised by the Authority).

SEPP 5 development consent

82 Given the history of opposition by the Council, in assessing the chance of obtaining any development consent and the extent of development for which consent could be obtained, the hypothetical buyer and seller at the acquisition date would be likely to regard this Court, on a merits appeal under the EPA Act, as ultimately deciding the fate of a development application.

83 Assuming that SEPP 5 applied to the Land at the acquisition date, the Authority submits that (a) the hypothetical buyer and seller at the acquisition date would have considered that constraints in cll 12 and 25(f) of SEPP 5 presented risks as to whether development consent could be obtained; and (b), at the very least, this consideration means that the value of a SEPP 5 development must be considered to be significantly less than for a residential development.

84 At the acquisition date, cll 12 and 25(f) of SEPP 5 relevantly provided:

“ 12 Matters for consideration

Location, facilities and support services

25 Design of residential development

Consent must not be granted for development to which this Part applies unless the consent authority is satisfied that the proposed development demonstrates that adequate regard has been given to the following principles:

Accessibility

85 Clause 12 as it stood at the acquisition date was in different terms from cl 12 when first gazetted, which required a consent authority to consider in relation to access to facilities and services:

“whether any relevant facility or service is or will be convenient to residents of the proposed housing in view of the walking distance and availability of public transport to and from the facility”.

86 It is significant that by the acquisition date the reference to “public” transport had been deleted from cl 12.

87 The SEPP 5 Guide provided in relation to transport:

“ Transport

Public transport is the preferable means of transport. In country areas that can include a community bus or even taxi service. The service should run at least once a week-day and should be a return service.

For larger developments on the urban edge which are:

not within walking distance of general facilities and
not on a regular bus route

88 Clause 12 restricts development consent being granted to a proposed SEPP 5 development unless the consent authority is satisfied that the residents of the proposed development have access to the facilities and support services in clause 12(1)(a), (b) and (c). Clause 12 establishes a development standard. If the standard is not met, consent cannot be granted to the development (unless a State Environmental Planning Policy No 1 objection is made and upheld, where the proponent would have to establish that compliance is unreasonable or unnecessary).

89 Residents will have access if the collection of facilities and support services are within 400 metres of the site or there is a transport service available within 400 metres of the site which will permit access to the collection of facilities and services: cl 12(2). The purpose of the clause is to ensure that aged and disabled people are not isolated by residing at an excessive distance from necessary facilities or transport to those facilities: Georgakis v North Sydney Council [2004] NSWLEC 123, 140 LGERA 379 at [17]. The maximum distance which the standard sets for a resident to be able to achieve independent access is 400 metres. The Land is located well in excess of that maximum distance. It is 1.2 kilometres to the nearest collection of facilities and services referred to in cl 12(1) and over 600 metres to the nearest transport service (a bus stop) by a generally poor quality pedestrian route for aged or disabled persons to negotiate.

90 Therefore the criterion in cl 12(2)(a) was not satisfied.

91 The issue between the parties is whether the alternative criterion in cl 12(2)(b) was satisfied. As the nearest public transport was at a bus stop more than 600 metres from the Land, reliance on public transport would not satisfy cl 12(2)(b).

92 Walker submits, however, that the provision of an on-site bus service operating at least once a day would satisfy cl 12(2)(b). The Authority submits that (a) the provision of an on-site bus service operating at least once a day does not satisfy the objective of cl 12, given that the Land is not in the country or urban fringe (places where the SEPP 5 Guide makes an exception), because it is restrictive on the residents' access to facilities and services; and (b) even though the SEPP 5 Guide is only a guide, it would remain as a hurdle to development consent, which serves to reduce the chance of any consent.

93 Ms Karen O’Donnell, Walker’s accessibility expert, prepared a report in support of Walker’s 2001 development application for 83 residential units, in which she expressed the opinion that cl 12(2)(b) would be satisfied by the provision of an on-site bus service available at least once per day, to link residents to public transport routes and the local shopping district. At the LEC 1 hearing, Ms O’Donnell expanded on the kind of on-site bus service she would expect for SEPP 5 residential development on the Land. She said it could go all the way to the local shopping centre, take people to their medical appointments and connect them to public transport. She envisaged a return service, possibly providing many more services than once a day.

94 Mr Mark Relf, the Authority’s accessibility expert, considered that the prospects of obtaining development consent under SEPP 5 for the Ballast Point Land were poor. Initially, his pessimism, as expressed, seems to have been based mainly on two matters:

95 Walker submits that no hypothetical prudent purchaser, willing to acquire the Land, would take Mr Relf’s concerns seriously.

96 I agree that Mr Relf’s cl 25(f) non-compliance point is insubstantial. As he said in cross-examination, it could be met by appropriate design.

97 As regards Mr Relf’s other point concerning an on-site bus service, Walker submits, and I accept, that the deletion, before the acquisition date, of any reference to “public” transport in cl 12 promoted greater flexibility when considering the mode of transport, and the SEPP 5 Guide’s expressed “preference” for public transport did not preclude other options.

189 In my view, there are several overlapping reasons why s 56(1)(a) is not enlivened in this case.

190 The first reason is that “[i]t is necessary to identify the content of any decision made by a statutory authority, which is relied upon as constituting ‘the proposal’ or part of ‘the proposal’”: CA 2 at [25]. This emphasis on the need for a decision is consistent with TheMinister v Stocks and Parkes Investments Pty Ltd (1973) 129 CLR 385. There the Education Department made a pre-resumption decision that it required certain land as a school site. The High Court characterised the decision as the “proposed” establishment of the school on the land that had to be disregarded under the expression of the Pointe Gourde principle in different legislation. That was because the Department’s decision could be ascertained by interested persons and would affect its market value (at 391 – 392).

191 In the present case, in my opinion, no such decision was made by the State until shortly before the Minister’s announcement in February 2002. A decision by a resuming authority constituting the statutory proposal can only be made, in my view, when someone with authority to bind the resuming authority to the proposal decides to make the proposal or to adopt it. In the present case, that was Cabinet. However, as Cabinet adopted the proposal, the continuity between its adoption and the decision of the responsible Minister to put the proposal to Cabinet would, I think, justify a finding that that decision by the Minister constituted the proposal. An antecedent, identical “proposal” to the Minister or to an officer of the resuming authority, whether by an officer of the resuming authority or anyone else, and whether put singly or as one of a number of options, is irrelevant because it was not yet the resuming authority’s proposal.

192 The State made no choice between the various options for the use of the Land until shortly before the Premier’s announcement in February 2002. It is clear that what the Premier announced was “the” proposal answering the statutory description.

193 The public proposal for which the Land was acquired was to convert it into a public park. Whether the Land should be the site for a public park depended upon the State. The possibility that residential development would not be permitted cannot be equated with “the proposal” to carry out the public purpose for which the Land was acquired. So much appears in the comment of the High Court at HCA [55] that: “Matters of debate or doubt as to the outcome of controversy respecting use of particular land might affect the perception of the willing but not anxious market participants well before there is ‘the proposal’ which is the means selected by the resuming authority to end the controversy”.

194 Secondly, in my view, there is insufficient causal connection between the industrial zoning in LEP 2000 and the subsequent resumption in 2002 to attract s 56(1)(a). One purpose of the principle in s 56(1)(a) is to ensure that a resuming authority does not employ planning restrictions, such as zoning, to destroy the development potential of land and then assess compensation for its resumption on the basis that the destroyed potential had never existed: The Crown v Murphy [1990] HCA 42, 64 ALJR 593 at 595, although that case was decided in the context of different resumption compensation legislation. The High Court also held at 595 that: “The principle applies in cases where there is a direct relationship between the planning restriction and the scheme of which resumption is a feature and extends to cases where there is merely an indirect relationship, provided that the planning restriction can properly be regarded as a step in the process of resumption: Housing Commission of NSW v San Sebastian Pty Ltd [1978] HCA 28, 140 CLR 196 at 206-207”. In the s 56(1)(a) context, this relationship statement has to be read as if the reference to “the scheme” was a reference to “the proposal”. San Sebastian was decided on the basis of a direct causal connection rather than an indirect one. In San Sebastian the statutory connection with the value disregard was identified by the words “arising from”. In CA 2 the Court of Appeal suggested that the words “caused by” in s 56(1) may require a more direct causal connection: at [15]; and left open whether the dicta in San Sebastian remains persuasive since the enactment of s 56(1)(a): at [43]. In CA 1 it was said that it was far from clear that s 56(1) operates so as to require that a failure to act be disregarded: at [87]. In HCA, the High Court appears to have held that an indirect relationship is insufficient under s 56(1)(a): HCA [53] proposition (iv) (quoted at [181] above).

195 In my opinion, there is neither a direct nor (if it be relevant) a sufficient indirect relationship between the Minister’s conduct in making LEP 2000 and the resumption of the Land by the Authority in 2002. If, for example, the State government had dictated the zoning of the Land as industrial in LEP 2000 with the intent that it should be resumed for the purpose of a public park and if it otherwise would have been zoned residential, s 56(1)(a) might well have work to do because that could be viewed as part of the carrying out of the public purpose for which the Land was acquired. That is not this case.

196 San Sebastian was concerned with land that was zoned commercial but which the resuming authority proposed to rezone residential for the public purpose of facilitating development of public housing. It was held that the residential zoning should be disregarded under s 124 of the Public Works Act 1912 (incorporating the Pointe Gourde principle but worded differently from s 56(1)(a)). In contrast, the present case is concerned with Land that was zoned industrial which, Walker contends, the State maintained in LEP 2000 for the public purpose of facilitating development of the Land as a public park. In my view, there is no evidence that that was the State’s purpose when LEP 2000 was made. As stated earlier, the State did not decide on that public purpose until shortly before the Premier’s February 2002 announcement.

197 Thirdly, the LEP 2000 argument elides the difference between a State government decision to make a proposal under s 56(1)(a) of the Just Terms Act and a Ministerial act under the EPA Act to make a local environmental plan. It was a local council that created a local environmental plan. The Minister’s response in making it was a response by a statutorily designated person, not the State government. All that the Minister could do within certain parameters was to make some changes: EPA Act Part 3 Division 4 (since amended). It was not the Minister’s policy document. That is why it was called a local environmental plan. I leave to one side that the Minister could direct a local council to make a local environmental plan (s 55 since repealed) because that did not happen in this case.

198 Fourthly, the question should be asked how maintenance of the zoning of the Land as industrial in LEP 2000 can be identified with the proposal to carry out the public purpose to use it as a park. The answer can only be because it was the Council’s ploy, as the planning authority, to maintain the status quo of the Land’s industrial zoning in order not to expose itself to liability to pay for a park if it were zoned open space while continuing to press for the State government to make a choice, not then made, to resume it as a park. There is no evidence of the State government making that choice at the time LEP 2000 was made, nor at any time until shortly before the Premier’s February 2002 announcement of the proposal. The Court of Appeal commented that, “at least until shortly before resumption, there seems to have been little prospect that any relevant State authority would succumb to pressure to resume the land for open space thus reducing its value for residential development”: CA 1 at [59].

199 Fifthly, it is necessary for Walker to prove that the making of LEP 2000 actually caused a decrease in the market value of the Land. That is the subject of the s 56(1)(a) disregard. Walker argues that except for the maintenance of the industrial zoning in LEP 2000, the Land would have been zoned residential and that the decrease in value caused by the proposal is simply the difference between the residential value of the Land and its industrial value. The valuation evidence did not specifically quantify such a difference at the time of making LEP 2000. Leaving aside that point, in my view, the proposition that the Land otherwise would have been zoned residential is not established on the evidence. All that the industrial zoning of the Land in LEP 2000 effected was a retention of the existing situation. The industrial zoning of the Land in LEP 2000 may well have occurred in any event because historically the Land had always been zoned industrial, the Land had from the 1920’s been used for industrial purposes, the attributes of the Land dictated a well considered approach to any rezoning and such an approach had not run its course.

200 In my view, as discussed at [176] above, to establish a decrease in market value, findings would have to be made that immediately before the making of LEP 2000 there was a premium for potential residential development for this industrial zoned land over and above its industrial value and that the making of LEP 2000 caused a decrease in the premium. I am not satisfied on the evidence that these findings should be made.

201 After the making of the controversial regional environmental plans by the State government and before they were invalidated in the 1990’s, there would have been optimism for those in the market who wished to see residential development of the Land. But after the Court of Appeal decisions that invalidated the regional environmental plans and after the change of government in 1995, a range of possibilities, sole or in combination, entered the mix. After 1995 when the master planning process commenced, which required a focus on strategic waterfront sites from the viewpoint of a range of sole or mixed uses (not only residential development), there is no evidence that the hypothetical market participants could have regarded full residential development as certain. Any market premium for residential development potential would have reflected risks, and might represent no more than a punting premium, say of 10 per cent. The possibility that the Land would be resumed for the purpose of a public park was one of a range of options that was under consideration by the State government, and was known to the market, including Walker. The Premier’s announcement in February 2002 administered the final quietus to any residential ambition for the Land.

202 For these reasons, I do not accept Walker’s s 56(1)(a) case.

INDUSTRIAL VALUE

203 Walker alternatively submits that the market value of the Land should be assessed at its industrial value. As I have held that the market value of the Land on the acquisition date included its SEPP 5 development potential, which I have assessed on a top down basis, it is unnecessary to address its necessarily lower industrial value. If it were necessary to address its industrial value, I would do so as follows.

204 Walker submits that the industrial market value at the acquisition date was $33 million. The Authority submits that it was $15.5 million. There were very large differences of opinion between the parties’ planners concerning industrial yield and between their valuers concerning industrial value.

Industrial Yield

205 The topography of the Land is unsuitable for many forms of industrial use where level footplates are required. Industrial uses traditionally require flat land of a scale that only exists on the plateau of the Land. Notwithstanding that Caltex had carried on heavy industrial activities on the Land for many years, the hypothetical buyer and seller would have considered it unlikely that development consent could be obtained for heavy industrial development given the importance of the location of the Land, the topography and the truck generation problems that such development would cause in narrow streets of the Balmain Peninsula.

206 However, Walker’s planner, Professor Lyneham, envisaged that the Land’s trophy location would be appealing to major hi-tech companies, and that hi-tech industrial development would be generally confined to similar heights as those that would be required in relation to residential (including SEPP 5) development. Such uses may operate over different levels. I accept that this is the kind of industrial development which would be achievable, in the estimate of the hypothetical buyer and seller at the acquisition date. The market would be small, but s 56(1) only requires one hypothetical buyer and one hypothetical seller.

207 LEP 2000 provides for a FSR of 1:1 for industrial development and a foreshore building line of 10 metres. Mr Shiels considered that given the importance of the Land in the context of Sydney Harbour there was a substantive argument for a 20 metre foreshore setback for any redevelopment. I agree with that way of putting it.

208 In her written report, Professor Lyneham considered that industrial development would be permissible over the whole site which, on an FSR of 1:1, yielded 25,880 m². Professor Lyneham noted that in the case of industrial development there was no s 94 EPA Act or other planning requirement to provide either on the site or monetary contribution for open space. Accordingly, she thought that, unlike residential development, there would be no requirement to accommodate an equivalent area for open space. However, in oral evidence Professor Lyneham indicated that she would have advised a prudent purchaser that the traffic generation associated with such a large bulk of industrial development would be problematic given the narrow streets of the Balmain Peninsula and that the FSR should be subdued to 0.75:1. This would equate to an area of 19,410 m².

209 Mr Shiels used a net FSR method to calculate industrial yield at 13,988 m², almost half Professor Lyneham’s original estimate. Mr Shiels assumed a 10 metre foreshore building line, an open space of 8,215 m² given the importance of the site, and an access road of 2,743 m².

210 Given the importance of the location of the Land and the long-standing local concern for open space on the Land, I consider that any industrial development consent would require not less than about 30 per cent public open space and a foreshore setback for public access of 10 to 20 metres. I think that is how the hypothetical buyer and seller would have seen it at the acquisition date.

211 Walker’s 1999 draft industrial masterplan provided for 13,920 m² of industrial use, 2098 m² of residential use, 7780 m² of public open space and 2100 m²of public road (apparently calculated on an incorrect site area of 25,898 m²). I think that this was a reasonably realistic estimate of the areas of use.

212 In my opinion, the prudent hypothetical buyer and seller at the acquisition date probably would have proceeded on the basis that the developable industrial areas of use for which development consent could be obtained would be in the order of 16,000 m².

Industrial Value

213 Mr Wood, the Authority’s valuer, assessed industrial value at $15.5 million (after I add back remediation costs erroneously deducted). In reply, Mr Egan, Walker’s valuer, assessed industrial value at $33 million.

214 Their values were derived by applying rates per square metre derived from comparable sales to the achievable floor space scenarios propounded by Professor Lyneham and Mr Shiels discussed above. The rates per square metre differed greatly. Mr Wood considered that the smaller the site the higher the rate per square metre. He applied a rate of $600/m² to Professor Lyneham’s achievable floor space area of 25,880 m² and applied a rate of $1100/m² to Mr Shiel’s achievable floor space area of 13,988 m². In each case, his calculation showed a value of $15.5 million.

215 Mr Egan, on the other hand, considered that the rate should be the same in the case of both those areas as they were both substantial areas. He applied a rate of $1345/m² to the area of 25,880 m² to show a value of $34.8 million, which he discounted for six months at 5.75 per cent to allow development consent, resulting in a market value of $33 million.

216 If Professor Lyneham’s view that the hypothetical purchaser would expect to get an FSR of 0.75:1 is correct (see [208] above), that would equate to an area of 19,410 m² which works out at a rate of $772/m² using Mr Wood’s industrial value of $15.5 million.

217 The price at which Walker would have purchased the Land in 2002 pursuant to the 1997 option agreement was $16.5 million. After making allowance for the fact that it was a future price struck five years earlier, that price is still so far below Mr Egan’s industrial value as to give rise to particular caution as to whether the latter is realistic.

218 The Authority invites an unflattering comparison between, on the one hand, Mr Egan’s valuation and, on the other hand, the Valuer General’s statutory assessment of market value and disturbance loss in the sum of $10.1 million (which formed the unaccepted statutory offer that led to these proceedings), and an industrial valuation (with a residential component) of $11.75 million obtained by Walker to assess future GST liability as at 1 July 2000. I take the view that no weight should be given to those two reports. Apart from the fact that the second appears to be for a limited purpose and was unsigned, the valuers were not called to give evidence. Consequently, they were not covered by the rigorous regime which applies to expert witnesses. They were not bound by the expert witness Code of Conduct prescribed in the Uniform Civil Procedure Rules 2005, they did not participate in the pre-trial joint experts conferencing and reports, they did not give evidence under oath and they were not liable to be tested by cross-examination.

219 Mr Wood determined his rate of $600/m² having regard to five comparable sales. However, in oral evidence he corrected, by increasing, the rates per square metre for those sales to allow for the period between the dates of sale and the date the Land was acquired. He called this period “market creep”.

220 Mr Wood’s analysis of comparable sales was as follows:

(a) 7 Cooper St, Balmain sold for $2 million on 27 June 2001. The area was 1,348 m ² excluding a Waterways lease of 750 m ² . On the basis of the area of 1,348 m ² , the rate was $1483/m ² . The corrected rate was $1691/m ² . If the Waterways lease area were to be included, the rate was $953/m ² . Mr Wood considered that the Waterways lease area should not be included. I agree. This site is located in reasonable proximity to the Land but was on a much smaller site. It had improvements.

(b) 30 and 30A Maddox St, Alexandria sold for $2.3 million on 8 November 2001. The area was 2423 m ² . The rate was $949/m ² . The corrected rate was $1044/m ² . It is in a superior industrial location on a smaller site than the Land.

(c) 21 Unwins Bridge Rd, Sydenham sold for $5.15 million on 21 June 2001. The area was 9547 m ² . The rate was $539/m ² . The corrected rate was $620/m ² . It is in close proximity to the Sydney CBD. A factory occupied 3000 m ² . The balance was hardstand or vacant land. It was used for the storage of containers.
(d) 102-108 Bourke Rd, Alexandria sold for $5.6 million on 12 March 2001. The area was 8093 m ² . The rate was $696/m ² . The corrected rate was $816/m ² . It is close to the Sydney CBD and Mascot Airport. It had an old warehouse which added no value.

(e) 53-57 Queens Rd, Five Dock sold for $14.6 million adjusted to $11.36 million on 2 July 2002. The area was 27,610 m ² . The rate was $411/m ² . The corrected rate was $468/m ² . The improvements comprised a number of older buildings which added no value and a modern building of approximately 5400 m ² .

221 The valuers agreed that sales of comparable waterfront land on an industrial basis are rare. Only 7 Cooper Street, Balmain is a waterfront site. All five comparable sites were subject to a 1:1 floor space ratio and were flat sites. I accept Mr Wood’s evidence that they were all capable of being developed to that ratio, unlike the Land.

222 Although Mr Wood’s report referred to five comparable sales, he indicated in oral evidence that the two that he regarded as being most relevant were 53-57 Queens Road, Five Dock and 7 Cooper Street, Balmain. He favoured the former because it was the only comparable whose size was relatively similar to the size of the Land. It did not have the same access difficulties as the Land. It was ideal for industrial purposes. Although it did not have harbour frontage, that was not particularly important for industrial uses. Mr Wood’s main reservation about 7 Cooper Street, Balmain appears to have been that the Land was some 18 times larger.

223 Mr Egan considered that the only truly comparable sale was 7 Cooper Street, Balmain. It is an industrial waterfront site with long term use for storage and maintenance of tugs. It has a small water frontage and a limited aspect over Mort Bay. Cooper Street is a narrow thoroughfare. On an industrial basis it has similar access and egress problems to the Land.

224 In my opinion, the two most comparable sales are 53/57 Queens Rd, Five Dock and 7 Cooper Street, Balmain. I consider that the remaining three comparables are so different from the Land in so many respects as to be of little assistance.

225 In reaching a rate of $1345/m² for the Land, Mr Egan discounted by about 10 per cent for size the uncorrected sale rate $1483/m²for 7 Cooper Street, Balmain. The area of the latter is 1,348 m² as compared with the Land’s 25,880 m². Mr Wood considered that the 10 per cent discount was totally inadequate. Mr Egan’s discount for size was tempered by a number of factors which in his view made the Land a far more attractive site than 7 Cooper Street, including the Land’s prize location surrounded by water on three sides. I agree that those factors should be taken into account, but after taking them into account, I agree with Mr Wood to the extent of concluding that 10 per cent is an inadequate discount from the 7 Cooper Street rate when adjusting it for the Land.

226 Equally, however, I consider that Mr Wood’s rates are too low. Having increased the rates per square metre of the comparable sales in oral evidence (see [219] above), his derived rates for the Land should have been, but were not, corrected. Also, Mr Wood appears to have regarded the LEP 2000 FSR of 1:1 and the foreshore building line of 10 metres as limiting factors for the Land when making a comparison with 7 Cooper Street, Balmain. However, those considerations were equally applicable to 7 Cooper Street. Mr Wood’s rate of $600/m² represents a discount in the order of 65 per cent from the 7 Cooper Street, Balmain rate. That seems too large, even allowing for the difference in areas. It also represents, I think, an insufficient premium on the 53-57 Queens Road, Five Dock rate given the superior location and amenity of the Land. There appears to be a suggestion in Mr Wood’s evidence that his rate was influenced by the perception that the demand for waterfront land for an industrial use is generally limited. While that may affect the intensity of competition for such sites, it overlooks that under the Just Terms Act it must be assumed that there is a willing but not anxious buyer and seller.

227 Accepting Mr Wood’s principle that the rate may increase with the developable area, nevertheless I think that his $1100/m² rate applied to the smaller area still represents too large a discount on 7 Cooper Street, Balmain and an insufficient premium on 53-57 Queens Road, Five Dock.

228 Mr Wood’s upper value of $1100/m²and Mr Egan’s value of $1345/m²lie at the ends of a narrower range. Both rates should have been increased when Mr Wood corrected the comparable rates in oral evidence. Within that increased range, in my view, lies the rate that should be adopted and applied to the developable floor space area of 16,000 m² that I have earlier determined. In my opinion, the hypothetical buyer and seller at the acquisition date probably would have settled on a rate of $1250/m². That yields an industrial market value, which I adopt, of $20 million.

CONCLUSION

229 I have determined that the market value of the Land at the acquisition date was $33,500,000: see [141] above. Compensation referable to market value should be assessed at $17,000,000 by deducting from that market value the purchase price of $16,500,000 representing the cost of completing the contract of sale. There should then be added disturbance loss which has been previously determined in the sum of $55,138.50. The total compensation to which Walker is entitled is therefore $17,055,138.50.

230 The parties are to bring in agreed or competing draft final orders to give effect to my decision. The matter will be listed before me at 10 am on 24 December 2009 to make final orders. Walker should be entitled to its costs of the proceedings in the second remitter without disturbing any existing costs order in that remitter. I will hear the parties on costs if they are not agreed. The exhibits may be returned.

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Citations

Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWLEC 219

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CITATION:	Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWLEC 219
PARTIES:	APPLICANT: Walker Corporation Pty Ltd RESPONDENT: Sydney Harbour Foreshore Authority
FILE NUMBER(S):	30024 of 2003
CORAM:	Biscoe J
KEY ISSUES:	COMPULSORY ACQUISITION OF LAND :- compensation - market value - industrial land - potential for residential use for older people or people with a disability under State Environmental Planning Policy No. 5 - potential for residential use on basis of existing use rights - potential for residential use on basis of the disregard in s 56(1)(a) Land Acquisition (Just Terms Compensation) Act 1991
LEGISLATION CITED:	County of Cumberland Planning Scheme Ordinance 1951 Crown Lands Consolidation Act 1913 Environmental Planning and Assessment Act 1979, ss 53 – 72H, 94, 106, 107, 108, Part 3 division 4. Environmental Planning and Assessment Regulation 2000, cll 41, 42, 45, Part 5 Frustrated Contracts Act 1978 Land Acquisition (Just Terms Compensation) Act 1991, ss 3(1)(a), 10(1), 54, 55, 56 Leichhardt Local Environmental Plan 2000 Leichhardt Planning Scheme Ordinance 1979 Public Works Act 1912, s 124 State Environmental Planning Policy No. 5 – Housing For Older People or People with a Disability 1998, cll 3, 4, 5, 9, 12, 13, 14, 25(f), Part 2 State Environmental Planning Policy No 56 – Sydney Harbour Foreshores and Tributaries, cll 2, 7, 11, 14, 21, Part 4, Schedule 1, Schedule 2 Sydney Harbour Foreshore Authority Act 1998
CASES CITED:	A Woodbury v Wyong Shire Council [2006] NSWLEC 48 AMP Capital Investors Ltd v Transport Infrastructure Development Corporation [2008] NSWCA 325, (2008) 163 LGERA 245 Boland v Yates Property Corp Pty Ltd [1999] HCA 64, (1999) 74 ALJR 209 Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358 Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365, (2007) 156 LGERA 186 DEM (Aust) Pty Ltd v Pittwater Council [2004] NSWCA 434, (2004) 136 LGERA 187 Eaton and Sons Pty Ltd v Council of the Shire of Warringah (1972) 129 CLR 270 Georgakis v North Sydney Council [2004] NSWLEC 123, (2004) 140 LGERA 379 Housing Commission of NSW v San Sebastian Pty Ltd [1978] HCA 28, (1978) 140 CLR 196 Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353, (2006) 149 LGERA 439 Lemworth Pty Ltd v Liverpool City Council [2001] NSWCA 389, (2001) 53 NSWLR 371 Liverpool City Council v Commonwealth of Australia (1993) 81 LGERA 405 Maidment v Roads and Traffic Authority (NSW) [2006] NSWLEC 606, (2006) 153 LGERA 249 McDonald v Roads and Traffic Authority (NSW) [2009] NSWLEC 105 McRoss Developments Pty Ltd v Caltex Petroleum Pty Ltd [2004] NSWSC 183 Mona Vale Pty Ltd v Pittwater Council [2003] NSWLEC 74, (2003) 124 LGERA 449 Moore Development Group Pty Ltd v Pittwater City Council [2003] NSWLEC 130, (2003) 127 LGERA 27 Parramatta City Council v Brickworks Ltd (1971 - 1972) 128 CLR 1 Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565 Port Macquarie West Bowling Club Ltd v The Minister [1972] 2 NSWLR 63 Q & R Developments Pty Ltd v Sutherland Shire Council [2001] NSWLEC 250, (2001) 117 LGERA 438 Redeam Pty Ltd v South Australian Land Commission (1977) 17 SASR 508 Roads and Traffic Authority of New South Wales v Perry [2001] NSWCA 251, (2001) 52 NSWLR 222 Royal Agricultural Society of New South Wales v Sydney City Council (1987) 61 LGRA 305 Royal Sydney Golf Club v Federal Commissioner of Taxation (1954 - 1957) 97 CLR 379 Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243 Smith v Roads and Traffic Authority of New South Wales [2005] NSWLEC 438 Spencer v The Commonwealth (1907) 5 CLR 418 Spicer v Valuer-General (1963) 10 LGRA 319 Starray Pty Ltd v Sydney City Council [2002] NSWLEC 48 Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [2005] NSWCA 251, (2005) 63 NSWLR 407 Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [No 2] [2006] NSWCA 386, (2006) 68 NSWLR 487 Sydney Water Corporation v Caruso [2009] NSWCA 391 The Crown v Murphy [1990] HCA 42, (1990) 64 ALJR 593 The Minister v Stocks and Parkes Investments Pty Ltd (1973) 129 CLR 385 Trust Company of Australia Ltd v Valuer General [2007] NSWCA 181, (2007) 154 LGERA 437 Turner v Minister of Public Instruction (1955 - 1956) 95 CLR 245 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 315, (2004) 134 LGERA 195 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 535, (2004) 136 LGERA 164 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2006] NSWLEC 138 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5, (2008) 233 CLR 259 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] NSWLEC 247, (2008) 161 LGERA 86 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority Pty Ltd [2008] NSWLEC 282 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178, (2009) 168 LGERA 1 Wattle Park Pty Ltd v Commissioner of Highways (1973) 6 SASR 69 Wilson v Liverpool Corporation [1971] 1 WLR 302
DATES OF HEARING:	9 - 18, 20 November 2009
DATE OF JUDGMENT:	22 December 2009
LEGAL REPRESENTATIVES:	APPLICANT: Mr I. Jackman SC with Mr R. Beasley and Ms J. Taylor SOLICITORS: Minter Ellison RESPONDENT: Mr B. Walker SC with Mr A. Galasso SC and Mr E. Hyde SOLICITORS: Deacons