Land and Environment Court of New South Wales CITATION : Bakarich and Anor v Liverpool City Council [2001] NSWLEC 224 APPLICANTS Anthony George Bakarich and Allan John Bakarich PARTIES : RESPONDENT Liverpool City Council FILE NUMBER(S) : 30119 of 2000 CORAM: McEwen AJ KEY ISSUES: Compulsory Acquisition of Land :- resumption - highest and best use - amount of compensation LEGISLATION CITED: CASES CITED: DATES OF HEARING: 20/08/2001, 21/08/2001, 22/08/2001 EX TEMPORE JUDGMENT DATE : 08/22/2001 APPLICANTS Mr C Leggat (Barrister) SOLICITORS Bowring Stone LEGAL REPRESENTATIVES: RESPONDENT Mr P Clay (Barrister) SOLICITORS Abbott Tout JUDGMENT: IN THE LAND AND 30119 of 2000 ENVIRONMENT COURT McEwen AJ OF NEW SOUTH WALES 22 August 2001 Anthony George Bakarich and Allan John Bakarich Applicants v Liverpool City Council Respondent JUDGMENT 1. These proceedings concern the resumption of a block of land at Lennox Place, West Hoxton, to the west of Liverpool, being Lot 2 in DP 1012189; it is a block of some 5,300 square metres with a frontage of a little under 22 metres to Lennox Place ("the subject property"). The property was resumed by a notice published in the Government Gazette on 2 June 2000; formal notice of resumption was forwarded to the resumee on 26 June 2000. 2. The subject property is an elevated block of land on the top of a hill in a new residential subdivision area characterised in its immediate environs by substantial two storey and one storey dwellings on and further down the hill. Vehicular access to the site is via new roads built in the subdivision in West Hoxton leading off the old Cowpasture Road (which has been terminated at the entrance to this subdivision at Greenway Drive). 3. The resumed property in Lennox Place is accessed by a variety of roads that lead up to Lennox Place, which as I have said is at the top of a hill, giving the subject site a considerable elevation above its neighbouring lots of land; from it there are views across to the city and Chatswood to the north and north-east, and to the west and the south extensive, panoramic views of bushland. 4. The property is presently zoned 6(a) Public Recreation under the Liverpool LEP 1997, but the Council concedes that if it had not been resumed for public open space then it would have had a zoning similar to its neighbours, namely 2a Residential. That zoning permits multiple dwelling development. Reference was made to Council's DCP's 4 and 31 as to objectives and standards. 5. There was agreement between the experts retained on behalf of both the Council and the applicant that the highest and best use to which the subject land could be put would be for multiple dwellings. This has been agreed notwithstanding the fact that in the surrounding environs there are no examples of a similar multiple dwelling development, and also notwithstanding the fact that the resumees were the subdividers of land adjacent to the subject site which they developed for single detached houses on medium to large sites. Notwithstanding the resumees' recent opportunity to develop some of their land for multiple dwellings, they declined to do so. 6. The explanation put forward by Mr Anthony Bakarich for the choice of lots for single detached houses and not multiple dwellings was that at the time of the original subdivision he and his family were under considerable financial pressure, and advice to them was that the quickest way to realise sales was by way of ordinary subdivision, and that to pursue a multiple dwelling development would have taken considerably longer given the need for Council approval and the variety of additional matters that need to be given further consideration in that type of application. I accept his evidence in that regard. 7. Evidence was given by Mr Gary Rhodes, a planner for the applicant, and Mr Morris Higgins, a valuer. For the Council Mr Ron Smith gave evidence in his capacity as an expert planner, and Mr Nicholas Warden gave evidence on the Council's behalf as a valuer. There was also evidence from Mr Neskovski, a valuer who had been retained by the Council in late 1999 to value the subject site. Mr Bakarich gave evidence on the question of stamp duty and the choice of single lot subdivision. 8. Two issues arise in the matter. Firstly what number of lots in a multiple dwelling development could be obtained on the subject site; and secondly, the value to be ascribed to those lots. There was also an issue about stamp duty but the Council now accepts that the evidence of Mr Bakarich indicates that the resumee would be entitled to stamp duty on whatever figure is found in favour of the resumee. 9. As to the number of lots the applicant had architects Mosca Pserras prepare a conceptual plan showing a layout of 18 multiple dwelling units on the subject site. Mr Rhodes analysed the proposal and set out a lengthy comparison of the many and various DCP controls which would be relevant to an assessment of this conceptual plan. It is to be remembered that the exercise is indeed a conceptual one, this not being an application for consent per se, but rather a need to show that there is a reasonable probability that what is propounded by the applicant would in fact have obtained approval. 10. Mr Rhodes' analysis indicates that all of the numerical controls, bar a minor discrepancy in relation to separation distances for some units were all met. As to the need in the DCP for a multi dwelling development to have a 24 metre frontage the minor failure of the proposal to comply with that requirement was in his view susceptible to a SEPP 1 application which would be successful, and this was not challenged. In Mr Rhodes' view the character of the proposal would have fitted conformably and comfortably with the substantial two storey dwellings which one sees in the surrounding environs. 11. Mr Rhodes amplified his statement of evidence in oral testimony in a number of ways. Firstly, in dealing with the issue as to the prominence of any building on the site due to its elevation, particularly to the west and the south he opined, and I accept, that any building on this site will be prominent and will raise privacy issues. 12. Secondly, he was of the view that there was a greater capacity in relation to a multiple dwelling development to soften its impact by way of landscape requirements. Some 40 per cent of the site is available for landscaping in conformity with the DCP requirement, and in his view that amount of landscaping properly designed and implemented would have gone a long way to softening any impact by way of prominence or privacy concerns. 13. He was taken to the question of opposition from neighbours to such a development, that is to a multi dwelling development on the site. It was suggested that that type of development in the context of large single storey developments in the surrounding area would of their nature generate a degree of opposition. Again in his view the type of development if adequately designed and implemented with appropriate landscaping ought not be the subject of any intense opposition. 14. As to traffic being generated by the subject proposal, assuming there were 18 dwellings, the figures that Mr Rhodes deduced as to the number of traffic movements onto or off the site led him to conclude that the traffic impact would be in his words, "barely measurable". 15. And finally as to the bulk and scale of this proposal by way of comparison with its neighbours he was of the view that once constructed in the manner in which he had described it would not appear in any significant way different from the surrounding development and would be seen as being compatible with it. 16. He also drew attention to the fact that the proposal for 18 units was somewhat less than what one saw at the sites of the comparable sales including some which were visited. When the comparable sales were analysed they indicated a density which would allow 19.4 units on the subject site. He also had reference to the question of FSR, his analysis suggesting that the subject proposal came out at 0.42:1, whilst the immediate neighbours, on his assessment, came out at 0.5:1. This was not tested in evidence. 17. In relation to the proposal the Council called evidence from Mr Smith, an experienced town planner. He was critical of the proposed number of 18 units suggesting that the number ought be reduced to 14. He arrived initially at that figure by reference to DCP 31, in particular cl 1.5, which limits vehicular access on access places, which Lennox Place is, to less than 30. Observing there are already 15 sites for development off Lennox Place he deduced that this would allow a further 14, and hence contended for that number. This was somewhat arbitrary approach and he was criticised for it, but in a subsequent report in reply he adduced further evidence pointing to a variety of planning constraints which, in his view, still suggested that the appropriate number of units on the site was 14. 18. Reference was made in that context to the planning constraints appropriate to consideration of the proposal. Liverpool LEP 1997 in relation to residential zones, as to objectives, enjoin a consent authority as follows: - Consent may be granted for a building on land relevantly the 2A zone only if it would be compatible with the character and amenity of both the existing and likely future nearby residential areas in terms of (a) Scale, bulk, design, height, siting, et cetera (clause 40). 19. It then sets out a further seven subheadings in relation to other issues. Mr Smith's view was that the proposal could not be said to be compatible in the stated terms, with either existing or future nearby residential terms; he said one only had to look at the development in the area to answer such a proposition. 20. Reference was also made to DCP 31, and in particular cl 1.5 and cl 1.7 of that DCP. Clause 1.5 is the clause which Mr Smith had had regard to in arriving at his original calculation of the desirable number of 14. Clause 1.7 deals with development adjoining open space, and has various requirements as to the orientation towards open space. 21. DCP 4 was cited in relation to general objectives as to the maintenance of neighbourhood character in established residential areas (cl 1.2). The standards were cited for Site Planning (cl 2.2), in particular the Performance Criteria. As to building appearance and neighbourhood character, the objectives in paragraph 2.2 were relied upon by the Council with some degree of emphasis, in particular in relation to multiple dwelling developments. Performance Criteria number 2 says: Those types of developments situated among established single dwelling development is designed to respect and incorporate predominant building form characteristics of the neighbourhood. 22. The submission put by Council was that this proposal not only ignores that criteria, but is contrary to it. 23. Of relevance also in the DCP were setbacks (cl 2.5), visual and acoustic privacy (cl 2.9), and as to utilities the question of garbage (cl 2.14). Mr Smith dealt with these matters in his second report, and again in his oral testimony. 24. In relation to visual and acoustic privacy he identified various units in the proposed schematic diagram which in his view would suffer amenity wise in a number of ways. As to the garbage proposal he observed that only three 1,100 litre bins were provided for 18 residences of three bedrooms each, the suggestion being that this would be inadequate; as well it was being located at a point where it would in all probability be of nuisance to the neighbour on the northern boundary. 25. In relation to the site planning objectives he observed that the proposal did not address the street and had a gun barrel appearance. 26. And finally in relation to the character of the neighbourhood, he emphasised the failure to replicate the existing character. He concluded in this fashion: The proposal presents an unsympathetic elevation of Lennox Place contrary to the existing and likely future streetscape character. Additionally the proposal turns its back on the adjoining land presently being developed as public open space. In the context of locality the proposal occupies a prominent site being elevated above surrounding land. The bulk, scale and form of the proposed townhouses is not sympathetic to the character of the detached single dwellings. In the immediate context the proposal would be likely to have an adverse impact on the residential amenity of the immediately adjoining residential properties by way of overlooking and loss of acoustic privacy. Of major concern is the location and design of the driveway (Exhibit 6). 27. The task of the court in a matter of this nature (accepting that the highest and best use is development for detached houses of the type proposed) is to inquire as to what is the probable or likely approval an applicant in the position of the resumee would have obtained for this type of proposal. There seemed to me to be two determining factors; firstly the topography of the site and its environs, and by that I mean its prominence; and secondly, neighbourhood character. 28. A reduction from 18 to 14 units on this site, and reconfiguration of the layout of the dwellings (perhaps including an alteration to the position of the driveway) would allow for a marked reduction of the impacts as to visual prominence, privacy, and amenity of residents both within the proposed development, and the amenity of its neighbours. The proposed development for 18 units would, in my view, be in stark contrast and conflict with the existing and expected character of the neighbourhood. It would present to both the west and the south as a long rectangular mass of building with relatively little relief by way of alteration in form or setback. With a reduction to 14 units while some of these problems will not evaporate entirely there would be the capacity for them to be significantly ameliorated. For that reason I conclude that the most likely result in a proposal for a detached housing development application to the Council would result in an approval for 14 units. 29. I turn now to the question of value. Here the two competing figures were those of Mr Warden of $50,000 per multiple dwelling unit on the site, and Mr Higgins of $70,000. The task is to ascertain what is the appropriate figure per unit on the subject site given the conflict in this evidence. Both valuers had comparable sales of sites developed, or being developed, for multiple dwelling purposes. Each valuer agreed that of the six sales used by Mr Warden, and the nine used by Mr Higgins, that the two most proximate, and most comparable, were those at 34-36 First Avenue, Hoxton Park, and Lot 605 Warialda Way, Hinchinbrook. 30. The First Avenue, Hoxton Park sale was a site of some 2,535 square metres and sold for $594,000. It was to be developed for nine, three-bedroom townhouses. On straight analysis this represented $66,000 per townhouse, or per unit. For comparison sake it also showed density of one unit per 282 square metres. 31. When Mr Warden initially analysed this sale he made no inquiries as to what the developer had paid for in the sale price. This is not insignificant because Mr Warden relied upon the analysis which showed a sale price of $66,000 per dwelling to support his figure of $50,000 per dwelling at the subject site. Subsequent to that analysis Mr Warden was informed that the purchaser had in fact bought the block with both a development consent, and having paid s 94 contributions, which when taken into account reduced the rate for bare land, from $66,000 per unit to $52,000 per unit. When this was pointed out to him he said in effect that it did not alter the view he had originally espoused of that sale being one of his two preferred sales, nor the capacity he said he had to apply that sale and to adjust it sufficiently to take it across to the subject site. In my opinion he did not adequately explain how he did that. 32. The site at First Avenue is located some 400 metres from a school and a small shopping centre where there are some basic shops. It is in an area of level land where surrounding development is of single and two storey houses, but of a housing stock quality of a lesser type and attractiveness to that seen at West Hoxton in the environs of Lennox Place. 33. The property at First Avenue backs on to a reserve and has access it seems to open space to its rear, to the east. However, it is also in the flight path of aircraft taking off and landing on the Hoxton Park Aerodrome. Whilst this was mentioned in cross-examination no direct evidence was given as to the impact or relevance of the Aerodrome, but on the view it was obvious there were a number of planes landing and taking off, on and from the Hoxton Park Aerodrome. They could be heard clearly, such that one would expect them to detrimentally impact on the amenity of residents at the property. 34. I should also touch upon one other aspect of Mr Warden's evidence which leads me to question the reliability of the views he has expressed. Evidence was led from Mr Higgins as to the percentage which land value forms of an ultimate sale price of developments of this nature. It was put to Mr Warden that as land value increased from one area to another that in respect of similar developments land as a percentage of the ultimate sale price would form a greater percentage of the sale price; he disagreed with this. The experience generally of the market suggests that that proposition is correct. Given similar construction costs to erect a building say on a block in Paddington as it would at Lennox Place then the value of land as a component or percentage component of the ultimate price has to be greater in the inner city areas. This coupled with the earlier difficulty I had with Mr Warden's analysis of the First Avenue sale leads me to question the reliability of his opinion and ultimate conclusion. 35. The other sale which both valuers had recourse to and was a preferred sale was that of Lot 605 Warialda Place, Hinchinbrook. That was a sale of an area of some 2,340 square metres for $490,000, the site being developed for nine, three-bedroom townhouses. This analysed at some $54,444 per unit, each unit have an area of approximately 260 square metres. However the site is located backing on to Hoxton Park Road, which is a busy road, generating considerable noise. It also looks on to a drainage reserve, which whilst it may be attractive in time to come when more vegetation has grown, could be seen as detracting from the general amenity of the units. 36. It is also located in an area surrounded by single storey residences of a smaller nature and of generally less attractive appearance than those seen at Lennox Place. 37. Other sales which were referred to by the valuers were at Casula, Liverpool and Green Valley, and these sales showed rates for the land content per unit in similar developments ranging between $68,000 in Liverpool to $36,666 per unit in Green Valley. A number were around the $60,000 figure. 38. The argument for the adjustment of the two preferred sales to the subject site related to the weight to be given and value ascribed to the proximity to services and shops on the one hand, and on the other the amenity and attractiveness of the subject site and its environs. Mr Warden said that purchasers of units or townhouses in multi dwelling developments were prepared to accept lower general amenity in terms of noise, outlook and surrounding development in order to be close to schools, shops and services. Because of the purchasers' preference of that nature any perception of better amenity at Lennox Place, in his view, would not be reflected in any added value. He said that the further you were away from shops and services the less you would expect to pay. 39. However, Mr Warden's opinion is not borne out in relation to sales of vacant land for single residential developments as shown in exhibit E. That exhibit is an extensive list of sales of land to be developed for single residential development, which shows that in the Hoxton Park area standard blocks are from between about 450 or 470 square metres, going up to some 600 square metres, and range in sale price between $105,000 and $125,000. Yet similar blocks in the West Hoxton/Carnes Hill area, below Lennox Place and without views, sell in the range of $145,000 to $165,000. The blocks in Lennox Place, again for similar residential development, albeit a little larger, range between $175,000 and $205,000, those blocks though having views. 40. These figures suggest that the market has placed a premium for single residential blocks on amenity, not as Mr Warden says on proximity to shops and services. Mr Warden's "reduction as you go west" opinion is to the contrary, and again confounded by this evidence. Of course it is evidence which relates to blocks to be developed for single residential development, not for multi unit townhouses or units. Although the market for the two styles of housing, that is residential stand alone single dwelling, as against multi dwelling units, is different, in my view it is not so different that people in search of a multi dwelling unit would discount amenity in the way which Mr Warden contends for, and I reject that approach. 41. Some further assistance can be gained from exhibit E. This shows an approximate 25 to 30 per cent increase in prices for similar land between Hoxton Park and the lots of land in West Hoxton. That percentage increase when applied to the unit prices from the comparable sales at First Avenue and Warialda Way of $50,000 to $52,000, the two most comparable sales, gives a figure for similar lots at Lennox Place of approximately $65,000 per unit. 42. Mr Higgins did an exercise along these lines and arrived at a figure of $62,000, to which he said he added an amount for views and aspect (that is views to the city and the extensive panoramic views both to the west and the south which the subject site enjoys), to arrive at his figure of $70,000. 43. In the oral evidence a check method was pursued in analysing the sale at First Avenue, Hoxton Park. This was to inquire what percentage the land component was of an ultimate sale price, it being suggested that this was in the range of 17.5 to 22.5 per cent of ultimate sale price. Applying that approach if Mr Higgins $70,000 per unit at Lennox Place was correct one would expect a sale price for units in the multi dwelling development as proposed to be in the order of $350,000. That is plainly unrealistic because of the sale price of free standing houses in the area. Exhibit 9 is a list of Torrens title homes, two storey freestanding in the West Hoxton area, of premises with about 30 per cent more habitable space than those in the proposed development on the subject site, namely 200 square metres of living area, on blocks ranging between about 270 and 350 square metres. Those properties range in price between $260,000 and $270,000. One property for $296,000 seems to have commanded a premium because it is described as having good views of the Sydney skyline. Hence the argument runs that the market would not pay $350,000 for a multi dwelling unit at the subject site if the purchaser for some $265,000 or $275,000 can buy a free standing Torrens title larger house on its own block of land just around the corner. 44. Of course that analysis is only correct if one can assume the 17.5 per cent, or 22.5 per cent, or whatever per cent component of land as a percentage of the final figure is a fixed and reliable figure. Whilst the analysis of the First Avenue sale suggests it was, if that percentage was not 20, but 25, or 30 per cent, then major variation can occur with the final or ultimate price to be expected for the townhouse or unit in the development. 45. In my view this approach as a check method is inherently unreliable. It is not dissimilar to hypothetical subdivisions which valuers sometimes fall back upon to try to justify an ultimate view they have formed, but in which exercises it is commonly demonstrated that the analysis is dependent upon factors which require assumptions which are not borne out in the market place. In the present instance insufficient research has been done and put into evidence demonstrating what the appropriate percentage would be, and I think it is unreliable in the circumstances to take this approach as a check method. 46. Evidence was also provided to the Court from Mr Neskovski, the valuer retained in late 1999 by the Council for the purpose of placing a value on the subject site. Whilst he was not cross-examined on his report, it is plain that he is a well qualified and experienced valuer, and provided the Council with a detailed analysis of comparable sales in reaching his conclusion. It is of significance, however, that none of those sales relied upon by Mr Neskovski were sales relied upon either by Mr Higgins or Mr Warden. Be that as it may, Mr Neskovski was asked to provide a figure as at 2 December 1999, some six months before the date we are concerned with in these proceedings. He approached the task in a manner not dissimilar to that pursued here of assuming the highest and best use of the subject site was for development as a multiple dwelling site. In his view a medium density development of that type on the subject site would result in some 17 units being approved, and to those 17 units he applied a rate of $62,000 per unit, giving him a final figure without disturbance factors of some $1,050,000. 47. A further approach which was not advanced by either of the parties, but which is available on the material before the Court, is to look to see what the subject site would have generated by way of development for single detached houses for either medium lots or large lots. Medium lots in Mr Rhodes' report are identified as those of 600 square metres in size, and in his view seven of those lots would have fitted on the subject site. Large lots of 750 square metres would have numbered six. 48. Going to the figures available from the sales of vacant land in exhibit E, the seven medium lots, had they been sold at an average figure of $145,000, would have generated $1,015,000. Six large lots, had they sold at an average of $165,000, would have generated $990,000. Mr Higgins figure for the subject site of $70,000 per unit for 14 units allows a total $980,000. This is the figure I propose to adopt, as in my view it is appropriate in all the circumstances. I come to this conclusion paying regard to the arguments which were advanced as to discount for size, and the arguments which both Mr Higgins and Mr Warden advanced in relation to the adjustment of the figures from the two most comparable sales. 49. I also take comfort from the fact that in adopting relatively conservative figures for an ordinary subdivision of the subject site, for single detached houses one arrives at figures which approximate to the figure which Mr Higgins analysis contends for (albeit for 14 and not 18 units). I am also conscious of the need to ensure that any erring in analysis of this nature must be in favour of the resumee. 50. Finally, in relation to stamp duty, ultimately because of the evidence given by Mr Bakarich this was not contested, but presently I do not have the figure for stamp duty which would be applicable to a figure of $980,000. 51. Formally the finding I make is that the value of the subject land as at the date of resumption is the amount, of $980,000, to which needs to be added the appropriate amount for stamp duty. In addition to stamp duty it is agreed that there should be added a total amount of $5,000 in relation to legal and valuation fees incurred by the resumee. I make that order subject to it being finalised as a figure dependent upon what the stamp duty amount is for $980,000. 52. I give liberty, Mr Leggat, to your solicitor to draw up a formal order and inform the Registrar that judgement will be $980,000, plus the $5,000 for legal and valuation fees, plus the stamp duty. Statutory interest will flow under the relevant section and does not require to be included. Costs reserved. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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