Land and Environment Court New South Wales Medium Neutral Citation: Big Country Developments Pty Ltd v Transport for New South Wales [2021] NSWLEC 86 Hearing dates: 26-29 July 2021 Decision date: 20 August 2021 Jurisdiction: Class 3 Before: Pain J Decision: See [74] of judgment Catchwords: COMPULSORY ACQUISITION – compensation for partial acquisition of business zoned land – piecemeal approach to valuation based on comparable sales agreed methodology of valuers – adjustment for protected trees on acquired land warranted – adjustments for location, vehicle access considered Legislation Cited: Biodiversity Conservation Act 2016 (NSW) Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ss 54, 55, 56, 66 Land and Environment Court Act 1979 (NSW) s 19 Penrith Development Control Plan 2014 (NSW) Penrith Local Environmental Plan 2008 (NSW) Cases Cited: Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209; [1999] HCA 64 Cassidy v Sydney Water Corporation [2008] NSWLEC 223 Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358; [1947] HCA 10 Croghan v Blacktown City Council (2019) 237 LGERA 227; [2019] NSWLEC 2 Denshire v Roads and Maritime Services (2017) 229 LGERA 118; [2017] NSWLEC 181 Roads and Traffic Authority (NSW) v Mosca (2006) 146 LGERA 335; [2006] NSWCA 159 Roads and Traffic Authority of New South Wales v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 Sebastian Cannavo and Alfia Jennifer Busa v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570 Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 The Trust Company Ltd v Minister Administering the Crown Lands Act 1989 (2012) 211 LGERA 158; [2012] NSWLEC 73 Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 Category: Principal judgment Parties: Big Country Developments Pty Ltd (Applicant) Transport for New South Wales (Respondent) Representation: COUNSEL: N Eastman (Applicant) J McKelvey (Respondent) SOLICITORS: Project Lawyers (Applicant) Hunt and Hunt (Respondent) File Number(s): 20/302817 Judgment 1. The Applicant Big Country Developments Pty Ltd seeks a determination of the compensation payable for the compulsory acquisition on 4 September 2020 of part of its land at Mulgoa Road Jaminsontown. The appeal is enabled by s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act). The land was acquired for the public purpose of upgrading Mulgoa Road. 2. The Court has jurisdiction to determine this matter pursuant to s 19(e) of the Land and Environment Court Act 1979 (NSW). The Court is acting as the judicial valuer in this case: Denshire v Roads and Maritime Services (2017) 229 LGERA 118; [2017] NSWLEC 181 at [4] citing Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 (Caruso) and Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156. A claimant bears the onus of proof in compulsory acquisition matters: Roads and Traffic Authority of New South Wales v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 at [67] per Handley JA (Powell and Hodgson JJA agreeing). 3. Prior to the acquisition the Applicant was the registered proprietor of the whole of the land in Lot 1 in DP 884114 (the Parent Parcel). That land was described with the street address 261-268 Mulgoa Road Jaminsontown. Prior to the acquisition the Parent Parcel measured 19,945 m2. It was then generally an "L shaped" lot. It had primary frontage to Mulgoa Road and secondary frontage to Blaikie Road. Constructed on the Parent Parcel prior to and at the time of the acquisition were a range of separate buildings and other improvements, which were: 1. a motel called the "Quality Inn Motel" which comprised 55 rooms, and associated car parking; 2. a hotel or pub called the "Grey Gums Hotel" which also comprised a separate take-away liquor establishment being a "Bottlemart"; 3. two free-standing buildings being restaurants which were: 1. "Hungry Jacks" drive-thru takeaway restaurant; 2. "Hooters" restaurant and bar; 1. three pylon signs on Mulgoa Road frontage; 2. one pylon sign to Blaikie Road; and 3. car parking for approximately 320 cars. 1. At the date of acquisition the Hooters restaurant was vacant. The Quality Inn Motel and Grey Gums Hotel were on month-to-month leases. The Hungry Jacks was the only ongoing fixed term leasehold interest operating at the property (with a lease expiring in February 2024 and a further option to renew for 10 years). 2. The land acquired is a strip about 11.5-12 m wide along Mulgoa Road (the Acquired Land). It has an area of 1,975 m2. After acquisition the Parent Parcel was reduced to 17,970 m2 (the Residue Land). The Residue Land retains frontage and access to Mulgoa Road and Blaikie Road. At the date of acquisition the Acquired Land was a landscaped setback providing a buffer between Mulgoa Road and the Residue Land. The improvements on the Acquired Land comprised eight parking spaces and three pylon signs, providing advertising for the businesses operating from the Residue Land. An entry only driveway from Mulgoa Road across the Acquired Land providing access to the Quality Inn Motel also existed and will be provided for as part of carrying out the public purpose being the upgrade of Mulgoa Road. The existing two access points off Blaikie Road continue in the "before" and "after" scenarios. Land Acquisition (Just Terms Compensation) Act 1991 1. Relevant sections of the Just Terms Act provide: Part 3 Compensation for acquisition of land … Division 4 Determination of amount of compensation 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, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) the disadvantage resulting from relocation, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. 56 Market value (1) In this Act— market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid)— (a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and (b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and (c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law. … 1. The Applicant is claiming market value of $2,370,000. The Respondent contends market value should be $1,115,000. Disbursements of $129,398.53 are now agreed. Evidence 1. The Applicant tendered an agreed court book (Ex A), an agreed evidence book (Ex B) and a letter dated 6 July 2018 sent by Stephen Skipper, director of S J Skipper & Associates Pty Limited, to the Roads and Marine Services, raising the issue of professional costs payable in relation to the proposed acquisition (Ex C). S J Skipper & Associates Pty Limited manages the Applicant's real estate portfolio. Mr Skipper swore an affidavit dated 16 July 2021 identifying leases on the Parent Parcel, an approach by Kaufland Australia Pty Ltd in November 2019 to purchase and develop the Parent Parcel (subsequently withdrawn), and a chronology of events associated with the acquisition. 2. In relation to disbursements, Mr Skipper swore a second affidavit dated 27 July 2021 and gave brief oral evidence on legal, valuation and town planning costs incurred by the Applicant. Anthony Perkins, solicitor for the Applicant, affirmed an affidavit dated 28 July 2021 in support of the Applicant's claim for legal costs. This evidence is unnecessary to set out as the question of disbursements was subsequently agreed by the parties. 3. The Respondent tendered three volumes of an agreed tender bundle (Ex 2). Town planning evidence 1. Town planning evidence was provided by Ian Stewart (Applicant's expert) and Anthony Rowan (Respondent's expert). Mr Stewart's report was dated 30 April 2021 and Mr Rowan's report was dated 13 May 2021. Their joint report was dated 7 June 2021. There was disagreement about the future subdivision potential of the Parent Parcel in the "after" scenario, but it is unnecessary to consider this due to the approach of the valuers to the highest and best use, essentially the current use. No additional oral evidence of the town planners was called. Facts agreed from a town planning perspective were as follows: 1. At the date of acquisition, the Parent Parcel was zoned B5 – Business Development pursuant to the Penrith Local Environmental Plan 2010 (NSW) (Penrith LEP). 2. It had a maximum building height of 12 m under the Penrith LEP. 3. No floor space ratio (FSR) control is adopted in the Penrith LEP. The acquisition does not alter the building height potential in the "before" and "after" scenarios. 4. A large part of the vegetation on the Acquired Land is mapped as "Natural Resources Sensitivity Land" under the Penrith LEP, being endangered Forest Red Gum trees. The Parent Parcel is identified as land with "Scenic and Landscape Values" under the Penrith LEP. 5. A 10 m building setback to both Mulgoa Road and Blaikie Road under the Penrith Development Control Plan 2014 (NSW) (Penrith DCP) applies. 6. Permissible uses under the Penrith LEP are, inter alia, "food and drink premises", "hotel and motel accommodation", "industrial retail premises", "specialised retail premises", "warehouse and distribution centres" and "restaurant and café". 1. Apart from the Parent Parcel, according to the Natural Resources Sensitivity Land Map made under the Penrith LEP there is one other site in this local government area (LGA) designated as Natural Resources Sensitivity Land. 2. The town planners agreed that in the assessment of any proposed development it is highly likely the Forest Red Gum trees on the Parent Parcel would continue to be retained. The following matters are agreed between the town planners in their joint report: 1. The Forest Red Gum trees have the potential to be commensurate with the River-Flat Eucalyptus Forest on Coastal Woodlands Threatened Ecological Community, which is listed as endangered in the Biodiversity Conservation Act 2016 (NSW). 2. In the "before" and "after" scenarios, no additional development (excluding the approved driveway, signage and services) is likely to be approved in the area affected by the Forest Red Gum trees. 3. In the absence of any FSR standard in the Penrith LEP to determine the potential gross floor area (GFA) of future development on the Parent Parcel, the primary controls to control development are the maximum 12 m height control, setback controls and landscaping and car parking generation rates. GFA is not the determinant of the highest and best development potential of the Parent Parcel in this instance. 4. The acquisition does not alter the potential location of development proximate to the Forest Red Gum trees compared with that in the "before" scenario. In both "before" and "after" scenarios, development would be required to be set back the same minimum distance sufficient to maintain the long-term conservation of the Forest Red Gum trees. 5. On a comparative basis, the acquisition (reducing the width of the Forest Red Gum landscaped area) will increase the existing level of exposure of the Residue Land to traffic passing along Mulgoa Road. 6. There will be an initial loss of eight car parking spaces in the current car parking layout, with three replacement spaces to be provided. This results in a net loss of five car parking spaces. The signs on the Acquired Land will be relocated as part of carrying out the public purpose. Valuation evidence 1. The valuers Phil Rennie (Applicant's expert) and Grahame Hollinshead (Respondent's expert) produced individual reports dated 7 July 2021 and 5 July 2021 respectively. A joint report dated 20 July 2021 and a supplementary joint report dated 27 July 2021 were produced during the course of the hearing dated 27 July 2021 (Ex 1). The valuers also gave oral evidence. Mr Rennie undertook a piecemeal valuation based on comparable sales in his individual report. In his individual report, Mr Hollinshead undertook a capitalisation of rent in the "before" and "after" which yielded nil value. As compensation should be paid to the Applicant given the loss of land, he then undertook a piecemeal valuation based on comparable sales. Both valuers agreed that a piecemeal valuation based on comparable sales should be undertaken. 2. In relation to the highest and best use, Mr Rennie stated in the joint report dated 20 July 2021 at par 91: The highest and best use of the subject land is the existing use WITH CAPACITY OF further development exceeding the existing GFA/FSR of .25 to 1, of up to potentially 1 to 1. Mr Hollinshead considered the highest and best use was the existing use, namely the return on rent from the various businesses located on the Parent Parcel and the Residue Land. 1. In their joint report dated 20 July 2021 the valuers agreed three comparable sales could be applied to derive a land value rate per square metre for the Acquired Land. Annexure 1 to the joint report sets out the three agreed comparable sales in Jamisontown and identifies the adjustments made in relation to the Parent Parcel as follows: 1. Sale 1 (34-36 Preston Street) is a small corner allotment zoned B5 (Business Development) improved with a modest cottage. It is situated in an inferior location compared to the Parent Parcel. Sale 1 sold in October 2019. 2. Sale 2 (49 Regentville Road) is also zoned B5 (Business Development) and is smaller than the Parent Parcel. Sale 2 has some exposure to traffic on Mulgoa Road, although it is well set back and screened by other buildings. Improvements comprise two warehouses. Sale 2 sold in April 2020. 3. Sale 3 (128 Blaikie Road) sold in January 2018. It is zoned B5 (Business Development) and is smaller than the Parent Parcel. A slightly irregular shaped site with basic improvements comprising an older style metal deck shed with internal amenity fittings. 4. The same page enlarged shows the adjustments: 1. I note that Mr Rennie also considered a number of secondary sales from Minchinbury and Marsden Park in his report. Four sales in 2014 for the purpose of consolidation of land to establish a large site for a Masters hardware store at Part 72 Mulgoa Road Jaminsontown were also relied on. I observe that the secondary sales required very large adjustments to render them comparable to the Parent Parcel, in excess of 100%, suggesting their reliability is questionable, The Trust Company Ltd v Minister Administering the Crown Lands Act 1989 (2012) 211 LGERA 158; [2012] NSWLEC 73 at [99]. No reliance was placed on these sales by the Applicant's counsel in closing submissions. 2. Given that the sales above in [21] were relied on in large part to inform the appropriate adjustment for market movement and the parties ultimately largely agreed on what that figure should be, I consider that I do not need to further refer to these sales. 3. The adjustments of the agreed comparable sales by the valuers are seen in the above table in [16] and enlarged in [20]. Both valuers adjusted for exposure/frontage/corner by 20%. Mr Rennie also separately adjusted for vehicle access and location. In his report dated 7 July 2021 Mr Rennie stated at par 25 that he applied the following adjustments: … (c) Location to reflect the proximity of the comparable sales to existing and future infrastructure (unrelated to the public purpose), including shopping precincts, schools and transport infrastructure, and the parent parcel's prime location within the centre of the large format retail strip on Mulgoa Road. … (f) Exposure/frontage/corner to reflect the corner block status and frontage of the acquired land on a classified Main Road, exposure to passing and queued intersection traffic, associated site branding and signage prominence. (g) Vehicle access to reflect the number of access points available to the parent parcel. 1. Mr Hollinshead considered location and vehicle access were incorporated into the exposure/frontage/corner adjustment of 20%. 2. In relation to market movement Mr Rennie considered 1.6% per month was justified, later changing to 1.4% per month. Mr Hollinshead applied a paired sale of 80-82 Mulgoa Rd Jamisontown, his case study 3, which showed 0.9% per month. He undertook other case studies 1, 2 and 4, not of paired sales, to respectively derive 0.5%, nil and 0.7% market adjustment per month. As both parties both submitted in closing that the paired sale in case study 3 should be used, as seems reasonable, I will not consider this matter further and do not need to set out all the evidence adduced in this regard. 3. Mr Rennie considered that the presence of the Forest Red Gum trees did not warrant any change in valuation of the Acquired Land. In Mr Rennie's view, whether the highest and best use of the Parent Parcel is as a development site in 15 years' time or as the current use (the pub and restaurants identified above in [3]), the presence of the Forest Red Gum trees makes no difference to the underlying land value of the Parent Parcel. 4. In addition to adjustments to comparable sales, Mr Hollinshead applied a constrained land rate and an unconstrained land rate to the area of the Acquired Land based on the presence of Forest Red Gum trees. Mr Hollinshead adopted an unconstrained land rate of $1,000/m2. The constrained land rate (50% of the unconstrained rate, being $500/m2) was applied to the area of the Acquired Land covered by the Forest Red Gum trees agreed to be 87% (1,720 m2). Mr Hollinshead considered based on his experience that such an adjustment was warranted. No market sales directly informed his approach because there were no other sales of land with the Natural Resources Sensitivity Land designation under the Penrith LEP to consider. The unconstrained rate of $1,000/m2 was applied to the remaining portion (13% or 255 m2) of the Acquired Land. 5. As a result of their different approaches Mr Rennie adopts a land value rate of $1,200/m2 from a range of $1,012/m2-$1,201/m2 and Mr Hollinshead adopts $1,000/m2 from a range of $867/m2-$1,010/m2. 6. In cross-examination, Mr Rennie stated that the Parent Parcel's capacity for development in the future, which he considered as part of the highest and best use, was in about 15 years' time. While Mr Rennie did not consider any adjustment for the presence of Forest Red Gum trees was warranted, he did agree that if such an adjustment was to be made Mr Hollinshead's approach of adjusting the land value rate only for the part of the Acquired Land with Forest Red Gum trees was the correct approach. 7. Mr Hollinshead was cross-examined about his discount for the Forest Red Gum trees, agreeing that there was no market evidence to support his 50% reduction. This was informed by his experience as a valuer. When asked about whether the Forest Red Gum trees were a constraint because of their existence on Natural Resources Sensitivity Land, the constraints nominated by Mr Hollinshead were built form development, hard stand and carparking. He agreed that there was no difference in constraint from the Forest Red Gum trees in relation to built form because of the 10 m setback in the Penrith DCP applying in any event. In terms of carparking, he agreed that there was a surplus of carparking on the Parent Parcel. He did not agree that this meant there would be no impact on land value from the Forest Red Gum trees as that would require consideration of potential for development. He considered any prospective purchaser would prefer to have the ability to be able to use the Natural Resources Sensitivity Land area. He did not place nil value on the Acquired Land because the existing driveway from Mulgoa Road across the Acquired Land would be maintained by the Respondent. 8. Mr Hollinshead agreed that he did not have any sales evidence for this type of land designation. None of the comparable sales are of similar land type. He considered that the Acquired Land with the Forest Red Gum trees could be considered similarly to land affected by an easement. 9. The remaining valuation issues are: 1. whether there should be any diminution in value of the Acquired Land because of the Forest Red Gum trees located on it; and 2. what the appropriate adjustments of the comparable sales in relation to location and vehicle access are. Applicant's submissions Trees 1. Mr Hollinshead's capitalisation approach which derived no difference in value in the "before" and "after" scenarios shows that the Forest Red Gum trees have no adverse impact on land value. That finding must also apply in the piecemeal valuation approach. 2. Mr Hollinshead's approach does not take into account the statutory disregard of the public purpose required by the Just Terms Act. He has carried out his valuation by envisaging a sale of the Acquired Land only, which could not have occurred at the date of acquisition. He envisages a sale of land which is very small compared to the Parent Parcel, has shape, size and planning restrictions meaning it could not be used for any real use and which therefore does not accord with what the town planners consider to be the highest and best use. Importantly, it is the portion which contains vegetation described by the town planners as commensurate with the River-Flat Eucalyptus Forest on Coastal Woodlands Threatened Ecological Community. Mr Hollinshead is therefore envisaging a sale of land that would only occur and which only exists by dint of the public purpose itself. The downward adjustment of 50% is only warranted because Mr Hollinshead has adopted a methodology to envisage a sale of that sliver of land that contains the Forest Red Gum trees, and that exists solely by reason of the carrying out of the public purpose. There is abundant authority to the effect that the approach adopted by Mr Hollinshead in this case offends that statutory disregard in s 56(1)(a): Sebastian Cannavo and Alfia Jennifer Busa v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570 at [7]-[12]; Croghan v Blacktown City Council (2019) 237 LGERA 227; [2019] NSWLEC 2 at [109]-[110]. 3. Clearly the 50% deduction is not warranted and has been applied in a manner which is legally incorrect. It is correct not to disregard the existence of the Forest Red Gum trees themselves, but their existence has no impact on the value of the Parent Parcel being a 19,945 m2 area of land (which is the proper approach to take, as the creation of the Acquired Land is a step in the resumption process and its existence and size is to be disregarded). 4. The market would not view the existence of the Forest Red Gum trees as a constraint. The Applicant contends: 1. the existence of the Forest Red Gum trees makes no difference to any purchaser who would continue in the short-to-medium term (meaning the next 15 years) with the Parent Parcel in its existing state, an asset generating rental income which could provide for future development opportunities; 2. the existence of the Forest Red Gum trees makes no real difference to any purchaser who would wish to develop the Parent Parcel, because they are wholly within a 10 m building setback required by the Penrith DCP. There is already plenty of hardstand and parking on the Parent Parcel, and there is already built form and improvements within the area comprising the Acquired Land where the Forest Red Gum trees are including driveways, signage, hardstand and servicing. 1. There is no market evidence to justify a reduction of 50% for the Forest Red Gum trees. Mr Hollinshead has not identified any sales in and around Jamisontown of vacant land that is similarly constrained. 2. Differential rates for land have been recognised in relation to, for example, flood-affected land in Croghan v Blacktown Council at [111] where the Court considered three different rates for flood-free land, flood-liable land capable of being rendered flood-free and flood-liable non-developable land, based on comparable sales evidence. Mr Hollinshead can only speculate in the absence of market evidence. There is no justification for separate rates, let alone an adjustment of 50%. Adjustments 1. In relation to market movement, accepting that there is room for different judgments on matters of adjustment, Mr Rennie has adopted 1.4%, reduced from 1.6%. The market movement adjustment should be 1% per month rounding up the paired sale (case study 3) relied on by Mr Hollinshead. 2. Mr Rennie identified that there should be a separate adjustment for both location and vehicle access in addition to exposure/frontage/corner as he identifies in his individual report dated 7 July 2021. 3. The principles in relation to the assessment of compensation, and the resolution of real doubts in favour of the dispossessed, are well known and often described. In Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358; [1947] HCA 10 (Commissioner of Succession Duties) at 374, Dixon J observed: "[i]n a case of compensation doubts are resolved in favour of a more liberal estimate" cited in Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209; [1999] HCA 64 at [356] (Callinan J). See also Cassidy v Sydney Water Corporation [2008] NSWLEC 223 at [89] (Jagot J). 4. That principle has developed and cannot be stated without qualification. It has been refined in cases where there is expert evidence before the judicial valuer that might need to be resolved. If the Court can resolve the differences because one valuer can be preferred for their reasoning, then that can be done. But where there are two equally valid valuation methodologies open to the judicial valuer the methodology that favours the dispossessed owner is to be preferred: Caruso at [3]. The Court is not to abandon the task of weighing up the expert evidence. It is only when both methods are equally valid and reasonable minds might differ that the principle set out above can be applied. President Allsop said at [3] in Caruso: The general principle that in determining compensation to a dispossessed owner doubts should be resolved in favour of a more liberal estimate is well-known: see generally A Hyam The Law Affecting Valuation of Land in Australia (4th Ed 2009 Federation Press) at 316-318. That does not, however, detract from the need to engage with and evaluate evidence and competing witnesses. If, however, upon engagement and assessment, the judicial valuer finds, for example, as Anderson J did in Cook and Edwards v City of Sterling (1991) 4 WAR 469, that the reasoning of both valuers was not fallacious, that their respective capitalisation rates were open, that none took into account irrelevant considerations and no errors otherwise appeared, the proper conclusion might be that there are simply two open views on the relevant issue – as there can be in ascribing a value: cf Fenton Nominees Pty Ltd v Valuer-General (1981) 47 LGRA 71 at 76-77. In such circumstances, applying the general principle would be uncontentious. 1. Mr Rennie's evidence should be preferred as there is no obvious error in his approach. Respondent's submissions 1. It is agreed by the valuers that the market value of the Acquired Land is to be assessed via the piecemeal approach. It is also agreed that the value of the Acquired Land is to be determined as though it were a component part of the Parent Parcel and that it would be incorrect as a matter of principle to determine the market value of the Acquired Land as a discrete and separately saleable parcel of land. This is because the creation of the Acquired Land as a separate parcel has only occurred because of the proposal to carry out the public purpose – it could not have occurred if not for the public purpose. In adopting this approach the valuers are giving effect to the requirement in s 56(1)(a) of the Just Terms Act. Trees 1. No authority was provided to support the Applicant's submission that as Mr Hollinshead's capitalisation approach found no change in the "before" and "after" scenarios, the Forest Red Gum trees had no adverse impact, and that must inform the agreed piecemeal approach. That submission ignores the fundamental matter that under the capitalisation rate method there was no value for the Acquired Land. That approach says nothing about the trees. 2. It was put to Mr Hollinshead that because of his agreement that the highest and best use of the Parent Parcel was its current use, and he had conceded that the presence of the Forest Red Gum trees would not have a valuation consequence to someone looking to purchase the property for its current use, that he was wrong to make an adjustment for the presence of the Forest Red Gum trees. 3. The clear evidence of Mr Hollinshead is that whether the highest and best use of the Parent Parcel is as a development site or as the current use (the pub and restaurants), in his view the presence of the Forest Red Gum trees does make a difference to the underlying land value of the Parent Parcel. 4. Mr Rennie did not discount the rate per square metre to be applied to the land affected by the Forest Red Gum trees. His approach ignores the town planning evidence concerning the effect of presence of the Forest Red Gum trees. 5. The issue raised by the Applicant regarding the application of the s 56(1)(a) disregard simply does not arise given how the valuers have approached the valuation task. Perhaps more critically, if the Applicant is correct in its criticism of the approach taken, such criticism can be levelled equally at Mr Rennie and Mr Hollinshead as they have adopted precisely the same approach to the valuation task. The rates derived and applied are different, but the approach to the task is identical. 6. The dispute comes down to how the market is likely to treat the Forest Red Gum trees – whether they will be seen as a positive, negative or neutral feature of the land. 7. To derive the value for the Acquired Land, Mr Hollinshead determined the value of the land component of the Parent Parcel based on the three agreed comparable sales adopted by the experts (see above in [17]-[19]). He then applied the piecemeal method and in doing so applied a constrained land rate and an unconstrained land rate to the area of the Acquired Land. The constrained land rate (50% of the unconstrained rate: $500/m2) is applied to that area of the Acquired Land covered by the Forest Red Gum trees. The unconstrained rate of $1,000/m2 is applied to the remaining portion of the Acquired Land. 8. Mr Hollinshead applied a discount to that part of the Acquired Land affected by the Forest Red Gum trees because: 1. none of the comparable sales contain a similar stand of Forest Red Gum trees; 2. none of the comparable sales are subject to the Natural Resources Sensitivity Land designation under the Penrith LEP which coincides with the location of the Forest Red Gum trees; 3. none of the comparable sales are subject to the Scenic and Landscape Values designation under the Penrith LEP; 4. the evidence of the town planners is that no further development would be permitted in the Forest Red Gum trees area; 5. the Forest Red Gum trees would have to be retained if the Parent Parcel was ever re-developed in the future; 6. an adjustment is appropriate because the Forest Red Gum trees are like an encumbrance on the land, such as an easement, where there is typically a differential in value between encumbered and unencumbered land. 1. Mr Hollinshead appropriately acknowledges that his determination that the appropriate discount is 50% of the unconstrained rate is subjective. He denied that the application of the 50% was based on "guesswork" or "speculation" but rather that it was based on his experience and professional judgement. Under cross-examination, Mr Rennie agreed that valuation was an art not a science and a consistent theme of his oral evidence was that valuers make judgements based on a range of market data and their experience. This is especially the case in the absence of market evidence. 2. The absence of market evidence should not be taken as evidence that the market would not make the adjustment for the Forest Red Gum trees contended for by Mr Hollinshead. The presence of the Forest Red Gum trees and the Natural Resources Sensitivity Land designation under the Penrith LEP are a very uncommon attribute of the Parent Parcel within this LGA. It is not surprising there are no sales of such restricted land to support Mr Hollinshead's view. 3. Mr Rennie in not considering the Forest Red Gum trees have any impact on land value of the Acquired Land ignores the town planning evidence. 4. Mr Rennie did accept that if a discount were to be applied because of the trees, the approach adopted by Mr Hollinshead to only apply the discount to the land affected by the Forest Red Gum trees was the correct approach. If the Court accepts the evidence of Mr Hollinshead that a discount to the land affected by the Forest Red Gum trees is warranted, it is agreed between the valuers that 1,720 m2 (87%) of the Acquired Land is affected by the Forest Red Gum trees. The remaining 255 m2 (13%) of the Acquired Land has been developed for car parking, display and landscaping. 5. Mr Rennie further agreed that it would be wrong to make an adjustment for the presence of the trees when analysing the comparable sales and then to apply the derived rate to all of the Parent Parcel and, in turn, the Acquired Land. In essence that would be because even the land unaffected by the Forest Red Gum trees would then be valued as though it had Forest Red Gum trees on it. Adjustments 1. In relation to an adjustment for market movement, Mr Hollinshead's case study 3 would be the safest place to start given the use of a truly paired sales analysis. Case study 3 derives a rate of 0.9% per month for market movement. The only difference between the transactions in case study 3, which is a sale and resale of the same property, is the difference in time. It is evident from that sale (in which all other things are equal) that the only reason for the change in value is a function of market movement. 2. Mr Hollinshead's view that location and vehicle access are included in exposure/frontage/corner and no separate amount is warranted should be accepted. 3. The Court as judicial valuer can choose the midpoint between the two valuers, prefer the evidence of one valuer over the other or, if after weighing up the expert evidence and having no reason to prefer the evidence of one valuer over the other, then the principle in Commissioner of Succession Duties would apply and the Court would find in favour of the Applicant. Consideration 1. The valuation principles underpinning the valuers' approaches applying s 56(1)(a) of the Just Terms Act are well understood. Section 56(1)(a) states that market value means the amount that a willing but not anxious seller would sell to a willing but not anxious buyer disregarding the public purpose. 2. As emphasised by the Applicant the land is to be valued in light of its highest and best use: Roads and Traffic Authority (NSW) v Mosca (2006) 146 LGERA 335; [2006] NSWCA 159 at [15] Handley JA (Mason P and Bryson JA agreeing). While written submissions from the Applicant stated that use as being medium-term commercial development, that was not pressed in final oral submissions which focussed on Mr Rennie's statement of the highest and best use set out above in [15]. Given that the future development timeframe Mr Rennie had in mind was 15 years according to his oral evidence, I do not consider there is any substantial difference between the two valuers to the effect that the highest and best use is the current existing use, namely the rental of the existing businesses on the Parent Parcel. 3. In undertaking their piecemeal valuation, the valuers undertook the orthodox approach of accumulation, analysis, adjustment and application of comparable sales to adopt a range for a rate per square metre for the Parent Parcel. 4. There are otherwise very few remaining issues requiring determination. Whether the area of Forest Red Gum trees on the Acquired Land should have a reduced rate from the rest of the Acquired Land, and whether an extra adjustment for location and vehicle access is warranted remain in issue. As already noted, the parties effectively made the same submission with slightly different figures (1.0% v 0.9% per month) for the adjustment of the three comparable sales for market movement. I will adopt the figure of 1% per month. Trees 1. There is no principle of valuation law I am aware of that requires that the consequences arising in one methodology must apply when an entirely different methodology applies. Here the Applicant has submitted that the capitalisation method undertaken by Mr Hollinshead resulted in no value being attributed to the Forest Red Gum trees and that must also apply in the entirely different application of the piecemeal approach relying on comparable sales. No authority supporting such an approach as a matter of valuation principle has been provided and in that absence I do not accept that submission as a matter of correct principle. The two valuation approaches have quite different work to do. 2. In any event, as the Respondent submitted, the capitalisation of rent approach undertaken by Mr Hollinshead in his individual report does not show that the Forest Red Gum trees have no impact on land value. That method as applied by Mr Hollinshead found that the land had the same value in the "before" and "after" scenarios, as none of the business operations on the Parent Parcel are affected by the acquisition. As the Respondent submitted, that method has nothing to say about the presence of the Forest Red Gum trees, it simply confirms that the absence of the Acquired Land does not impact on the existing business operations. 3. The next issue is whether Mr Hollinshead's approach impermissibly ignores the statutory disregard of the public purpose required by s 56(1)(a) of the Just Terms Act. As the Respondent submitted, the valuers have adopted the same approach to the valuation of the Acquired Land applying a piecemeal approach. There is no notional sale of that land as if it existed by Mr Hollinshead, contrary to the Applicant's submissions. Nor does Mr Hollinshead adjust the value of the whole of the Parent Parcel as if affected by the Forest Red Gum trees. As the Respondent submitted, he is looking simply at whether the market would consider the presence of the trees to be negative in terms of development potential. The evidence of the town planners suggests that it would be, as summarised above in [13]. The Applicant did not refer to this evidence in its final submissions. 4. Mr Rennie simply asserted that the Forest Red Gum trees would not be any impediment, which does not accord with the town planning evidence. 5. I consider the approach of Mr Hollinshead in this regard is sound for the reasons given by the Respondent. The Forest Red Gum trees represent a potential impediment to development over and above the 10 m setback otherwise required by the Penrith DCP. That reflects the town planners' agreed evidence. 6. The next issue to consider therefore is whether a constrained value of 50% discount should apply to the area of Forest Red Gum trees given the absence of any market sales to guide selection of the amount of any discount. Mr Hollinshead is an experienced valuer and is able to apply matters of judgement to such issues in the absence of market evidence. That there is no market evidence does not mean that the Forest Red Gum trees do not have a negative impact on development potential. That circumstance reflects the fact that such land is scarce in this LGA. I accept Mr Hollinshead's evidence that a 50% reduction in the value of the area of Forest Red Gum trees should be applied. Consequently, 87% (1,720 m2) of the Acquired Land should have its rate reduced by 50%. Adjustments for location and vehicle access 1. Turning to Mr Rennie's separate allowance for location compared to exposure/frontage/corner, the description in his evidence set out above in [23] is that this is "to reflect the proximity of the comparable sales to existing and future infrastructure (unrelated to the public purpose), including shopping precincts, schools and transport infrastructure, and the parent parcel's prime location within the centre of the large format retail strip on Mulgoa Road". Only the last part of that sentence relating to the Parent Parcel's prime location on Mulgoa Road is relevant to the highest and best use agreed by the valuers. That statement overlaps entirely with considerations relevant to exposure. No separate basis for an adjustment for location is established. 2. The Parent Parcel in the "before" and "after" scenarios does enjoy good vehicle access with three access points, the one off Mulgoa Road being particularly valuable given that is a designated entry road to the Quality Inn Motel, and two access points off Blaikie Road. I consider that vehicle access is a justified adjustment that should be made in relation to comparable sales when being applied to the Parent Parcel. I accept Mr Rennie's opinion that a 5% adjustment for vehicle access is warranted for sale 2 (49 Regentville Road) and sale 3 (128 Blaikie Road). 3. It is unnecessary to apply Commissioner of Succession Duties and subsequent authorities such as Caruso in reaching these conclusions. 4. In conclusion, the adjustment for market movement is 1% per month, 87% of the Acquired Land has a constrained rate of 50% and an adjustment of 5% for vehicle access should be made. The parties are to provide an agreed sum for the compensation payable which the Court can order within a timeframe to be agreed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 August 2021