> Land and Environment Court of New South Wales CITATION : Goodwin and Others v Roads and Traffic Authority of New South Wales [2003] NSWLEC 133 APPLICANTS Clive Benson Goodwin Joan Edith Cutler PARTIES : Margaret Goodwin Jones RESPONDENT Roads and Traffic Authority New South Wales FILE NUMBER(S) : 30090 of 2001 CORAM: Talbot J KEY ISSUES: Compulsory Acquisition of Land :- compensation - before and after method - modest premium for nominal residential development potential LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991 s 55(a) CASES CITED: DATES OF HEARING: 05/08/2002, 06/08/2002, 07/08/2002, 08/08/2002, 09/08/2002, 12/08/2002, 28/04/2003, 29/04/2003, 30/04/2003, 01/05/2003, 02/05/2003, 03/05/2003, 04/05/2003, 05/05/2003 DATE OF JUDGMENT: 05/30/2003 APPLICANTS Mr J J Webster SC with Ms H Irish (Barrister) SOLICITORS Kearns & Garside LEGAL REPRESENTATIVES: RESPONDENT Mr R P L Lancaster (Barrister) SOLICITORS Corrs Chambers Westgarth JUDGMENT: IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES 30090 of 2001 Talbot J Decision Date: 30 May 2003 Clive Benson Goodwin Joan Edith Cutler Margaret Goodwin Jones Applicants v Roads and Traffic Authority of New South Wales Respondent Judgment Introduction 1 On 1 June 2001 the Roads and Traffic Authority of New South Wales ("the RTA") acquired Lot 52 and Lot 54 in DP 1013688 for the purposes of re-alignment of the Princes Highway by Notice of Compulsory Acquisition of Land published in the New South Wales Government Gazette No. 93 Folio 3382. The acquired land comprises 15.902 hectares, which forms part of a holding of 61.66 hectares owned by the applicants. The holding comprises 26.476 hectares to the west of the existing Princes Highway ("the western parcel") and 35.178 hectares situated between the Princes Highway and the South Coast Railway Line ("the eastern parcel"). 2 On 14 June 2001 the Valuer-General determined compensation in the sum of $367,000, including $360,000 for market value under s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991 ("the Just Terms Act"). 3 These class 3 proceedings are an objection to the amount of compensation offered by the respondent in respect of the compulsory acquisition. 4 At the date of acquisition the eastern parcel was zoned Rural 1(a) pursuant to Shellharbour Local Environmental Plan 2000 ("LEP 2000") gazetted on 2 June 2000 whereas the western parcel was included in the 7(d) Environmental Protection (Scenic) zone. The land acquired has been zoned 9(b) Arterial Roads Reservation. 5 It is the applicants' case that, but for the proposal to realign the Princes Highway through the eastern parcel, that area of land had deferred potential for residential development whereas after the acquisition there was no residential potential. Furthermore, the value of the western parcel will be adversely affected by the construction of a four-lane highway and major intersection with Shellharbour Road as a consequence of the impact on the amenity of that land in terms of noise and visual degradation. 6 The respondent denies that the eastern parcel has ever had any potential to be developed for urban purposes and that accordingly compensation should be assessed on the basis that the value of the land is determined having regard to rural purposes as the highest and best use before and after the acquisition. 7 The applicants' valuer, Frank Egan, has calculated compensation payable in the sum of $1,216,430 assuming that the eastern parcel was capable of being developed for 282 lots deferred for ten years and that there was no potential for residential development after acquisition. Moreover, the value of the western parcel has, in his opinion, been diminished at the rate of $2,500 per hectare. If the Court finds that there has been no impact on the value of the western parcel then Mr Egan's opinion is that compensation should be assessed at $1,150,240 for the diminished value of the eastern parcel. Consistent with his opinion that there would be no residential development potential in the eastern parcel after acquisition, Mr Egan did not carry out a formal assessment of the after value of the eastern parcel, taking account of any residential potential. 8 On the other hand, Bruce Martin, the valuer retained by the respondent, has also carried out exercises to determine the value of the land before and after acquisition on the basis that there was potential for residential development in each case. He has also made an assessment of compensation based upon the assumption that the land was suitable only for rural purposes before and after 1 June 2001. Relevant Planning Studies 9 In 1981 Dr Richard Cardew prepared the Illawarra Land Market Study ("the Cardew study") for the Land Commission of New South Wales. The stated objective of the Cardew study was to provide an independent assessment of the residential land market in the Wollongong Plains sub-region, including the urban areas of Wollongong, Shellharbour and Kiama Local Government Areas. The aim of the study was to assess the demand and supply of residential lots in the area and to identify the pattern and timing of urban extension that minimised public and private development costs. 10 The solution to the problem of calculating total lot yield from the rural land with development potential involved generalisation of the developable land into 12 large tracts or areas which could be treated as single units for planning and infrastructure design. Dr Cardew expected a total lot yield of between 2,300 – 2,600 lots out of a total hazard free area of 230 hectares (10 – 11 lots per hectare). The eastern parcel was considered in the Cardew study. It was classified, along with other land, as being within Area 11. Dr Cardew made the following observations in respect of Area 11:- Area 11 is a very attractive development proposition offering magnificent views and settings, with most probably moderate development costs…Services may be extended to the Area after completion of most of Project 84 indicating possible release of this Area in the mid-1980's. 11 Specific reference is made to some steeper land situated between the railway line and the Princes Highway, which may be less suitable for development. 12 The first Illawarra Urban Development Program ("IUDP") was produced in 1981. It adopted, generally, the urban land release areas identified in the Cardew study. The IUDP is updated annually to review population growth and the rate of lot release. 13 A detailed environmental study of Area 11 was undertaken in July 1986. 14 Between 1996 and 2000 Shellharbour Council ("the council") prepared baseline studies providing comprehensive information of the existing planning framework and the physical characteristics of all rural land. The council also examined land use and social economic characteristics of the study area. The subject land is classified as having a very high visual importance. The Shellharbour Draft Rural Strategy was prepared in 1997 following on from the baseline studies. It provided base material for the preparation of the draft Shellharbour Rural Local Environmental Plan 2001 ("the draft LEP 2001"). Statutory Controls 15 The Illawarra Planning Scheme ("the IPS") was gazetted on 19 January 1968. The subject land was zoned 1(b) Non-Urban. By amendment No. 3 on 8 June 1979 an Arterial Roads reservation was created outside the subject land on the eastern side of the railway line. 16 Shellharbour Local Environmental Plan No. 16 ("LEP 16") was gazetted on 30 September 1983. The western parcel was zoned 7(d) Environmental Protection (Scenic) while the eastern parcel retained its 1(b) Rural zoning. The Arterial Roads reservation previously shown in the IPS was deleted by LEP 16. 17 A draft Regional Environmental Plan was published in August 1979. The Illawarra Regional Environmental Plan ("the Illawarra REP") was gazetted on 11 April 1986. Clause 26 provides that land shall not be re-zoned for urban purposes unless:- (a) such action is justified by an environmental study; (b) the draft local environmental plan is for land identified on the map as potentially suitable for urban use; or (c) the rezoning is of relatively minor significance. 18 Furthermore, cl 62 dictates that a draft Local Environmental Plan providing for the development of land for residential purposes shall be prepared only when:- (a) adequate water, electricity and sewage disposal facilities can be provided; and (b) the appropriate public authorities are satisfied that adequate community services and facilities, including schools and health services to cater for demand which will, or is likely to be, generated by the development, can be provided. 19 Shellharbour Local Environmental Plan No. 24 ("LEP 24") was gazetted early in 1991. The draft LEP 24 had been under consideration since 1986. It contemplated a re-alignment of the Princes Highway through the subject land and created a reserve for Arterial Road purposes. LEP 24 made the first formal zoning for an Arterial Road Reservation through the subject land. Otherwise, the respective zonings of 7(d) Environmental Protection (Scenic) and 1(b) Rural were maintained. 20 Shellharbour Local Environmental Plan No. 75 ("LEP 75") re-zoned the area subsequently acquired by the RTA in June 2001 as 9(b) Road Reserves. This had the effect of taking into account amendments made to the route of the proposed highway re-alignment since 1991. 21 When LEP 2000 was gazetted on 2 June 2000 the residue of the eastern parcel of the subject land was zoned Rural 1(a). The western parcel was included in the 7(d) Environmental Protection (Scenic) zone. The land acquired was zoned 9(b) Arterial Roads Reservation. LEP 2000 provides that in any subdivision of land in the rural zone each allotment must have an area not less than 40 hectares and the council may not consent to the erection of a dwelling house on an allotment that has an area of less than 40 hectares, unless conditions are satisfied. Similar constraints apply to the land within the 7(d) zone. The objectives of the Rural 1(a) zone are stated in cl 11(2) of LEP 2000 as follows:- (a) To protect the agricultural potential of rural land and to prevent the fragmentation of rural holdings. (b) To prevent premature and sporadic subdivisions and to ensure consolidation of urban areas, thus enhancing the prospect of the economic provisions of public services. (c) To prevent, on the fringe of urban areas, the subdivision of land into small lots which would prejudice the proper layout of additional urban areas as a result of natural growth. 22 On 24 January 2001 draft LEP 2001 was placed on exhibition. This plan reflected the action foreshadowed in the Shellharbour Rural Land Study 1996. Pursuant to the provisions of the draft LEP 2001 the acquired land will be zoned 9(b) Arterial Roads Reservation. The balance of land will be within zone 1(L) Rural Landscape. The general aim of the Rural Landscape 1(L) zone is to preserve and enhance the visual rural landscape. Included in development allowed with the consent of council is a house on a lot 40 hectares or greater in size and subdivision to create lots 40 hectares or greater in size. Subdivision will be permitted only after the council has regard to, inter alia, the agricultural capacity of the land, the ability to site a house, access, water usage, building control and landscape management. The Town Planning Evidence in support of the applicant's case 23 Michael Neustein, a Town Planner, has given evidence on behalf of the applicants. He was the author of the Shellharbour Area 11 Environmental Study completed in July 1986 ("the 1986 study"). The following observation is made in the 1986 study:- That section of the study area between the Princes Highway and the railway line has not been designated for urban development though some limited residential use may be possible. The area has a high scenic value from the highway at present though this may be changed when the highway is widened and realigned and the new road junction constructed. Because of its generally steep slopes and visual importance, consideration of its specific development would need to be based on detailed proposals formulated in the full knowledge of the road impact noted above. 24 The 1986 study made a further observation as follows:- No specific development is proposed for the area west of the railway line. Highway access will prove difficult because of the grades and the proposed new road formation, the land is too steep for normal residential subdivision and it has a very high scenic value (though this will be adversely affected by the proposed roadworks). Alternatively, this land could remain in rural use in conjunction with the land uses on the other side of the highway. 25 Mr Neustein does not accept that the natural boundary for planning purposes is the railway line. In his opinion, a widened Princes Highway is a more significant barrier than a twin track railway line. In his view, it is easier to traverse a railway line than to cross a wide freeway structure. Furthermore, he said that when he compiled the 1986 study the council had nominated the Princes Highway as the western edge of the study area rather than the railway line. He explained that the reason for nominating the highway as the western edge of the study area was that there needed to be a buffer zone to the Dunmore Quarry situated south west of the subject land. He recognises that the zoning of the land west of the highway as 7(d) Environmental Protection (Scenic) in LEP 2000 is again a reflection of a coincidence of the boundaries to the buffer zone to the quarry and the existing site conditions. 26 The 1986 study noted (as quoted above) that no specific development was proposed for the area west of the railway line as highway access would prove difficult because of the grades and the proposed new road formation. Moreover, the land was considered to be too steep for normal residential subdivision. It was also identified as having a very high scenic value. The strategy plan prepared for the purpose of the 1986 study specifically identified that part of the subject land between the Princes Highway and the railway, the eastern parcel, as being "non-urban/possible future limited residential". 27 Alternatively, the 1986 study speculated that this land could remain in rural use in conjunction with the land uses on the other side of the highway. In Mr Neustein's opinion, the council would have been unlikely to request removal of the eastern parcel from Area 11 of the IUDP. The IUDP was, in part, a response to the Cardew study. The Cardew study investigated the residential land market in the Wollongong Plains sub-region and assessed the demand for and supply of residential sites. As already mentioned, it was the Cardew study that classified the land east of the existing Princes Highway as being within Area 11. Dr Cardew had determined that the whole of Area 11 had a probable yield of 10 to 11 lots per hectare and suggested a release date after 1985. 28 The IUDP divided Area 11 into Areas 11A and 11B to allow development of land within Area 11A to proceed ahead of the remainder of Area 11. The eastern parcel of the subject land is in Area 11B. 29 To meet the urban development targets for residential land development, the 1986 study proposed residential development in all areas under 55 AHD, of slopes less than 15 per cent, of suitable footing conditions, not subject to flooding or inundation, not covered with vegetation of height above about two metres and not specially required for other uses. A secondary zone suitable for limited residential development was designated for areas with slopes greater than 15 per cent. According to Mr Neustein, the level of 55 AHD was set as the recognised level up to which water supply could be made available at that time. Thus, in order to develop those parts of the land above 55 AHD and where slopes were more than 15 per cent, a developer would need to make specific proposals to deal with the limited water supply capacity. 30 In the opinion of Mr Neustein, prior to the Princes Highway re-alignment proposal there was no evidence to suggest that the site was considered inappropriate for future residential development. It would have been available for use in 9 to 10 years from acquisition, say about 2010. He said 370 lots may have been developable on the site prior to the compulsory acquisition. Mr Neustein recalls that the identification of the eastern parcel as having only limited residential potential reflects the fact that slopes on some parts of the site were greater than others. He went on to suggest that residential development was not impossible on the steeper slopes but rather that special consideration would have to be given to design in those areas. His estimate of 370 lots was extrapolated from the general estimates in the Cardew study of 10 to 11 dwellings per hectare using gross areas. 31 In cross-examination Mr Neustein said that when he received instructions to carry out the environmental study in 1985 the material provided by the council did not identify the land between the railway line and the Princes Highway as having any of the constraints referred to in the Cardew study such as flooding, drainage problems and slip. He recognised, nevertheless, that it would be imperative to carry out a detailed investigation as part of any subdivision design even though no evidence of constraints is apparent from inspection of the land. At the time Mr Neustein first gave his evidence in August 2002 no such detailed investigation had been carried out. He then conceded that the prospect of a yield of 10 or 11 lots per hectare in the area between the highway and the railway in 1986 was "less than likely but not remote or inconceivable". He also recognised that the high scenic value of the land between the highway and the railway line as identified by him in 1986 would be one of the factors which the council would take into account in assessing any application for development of the land. 32 Mr Neustein also acknowledged that in 1985, during the course of preparation of the 1986 study, he identified the land between the highway and the railway line as open space because it was the view of the council that permission would not be granted for the land to be developed. Following discussions between Mr Neustein and the council, and a submission made by Mr Goodwin, it was decided that some residential development could be allowed on the land, which resulted in its identification for possible future limited residential purposes in the final strategy plan. Mr Neustein agreed that he had no evidence to show that since he completed the 1986 study and following the building of considerable infrastructure, the water supply authority has changed its policy to permit water supply at a height above 55 AHD. 33 Mr Neustein conceded that the making of LEP 16 in 1983 is significant because the two parcels of the applicants' land were zoned either 7(d) Environmental Protection (Scenic) or zone 1(b) Rural at a time when there was no arterial road reservation. However, he would not agree that any reasonable observer of the way the council was dealing with this area of land in 1983 could not reasonably have expected any future urban or residential development on the original eastern parcel. His explanation for this view is that land on the fringe of urban areas is generally zoned non-urban in order to prevent premature subdivision ahead of the provision of services. Rather than, as suggested to him in cross-examination, the prospect of urban residential development occurring on the land being a remote possibility, if not a forlorn hope, at that time, Mr Neustein's view is that it was quite obvious the land was going to become urban land. 34 Mr Neustein does not see the introduction of the Illawarra REP in 1986 as posing any constraint or restriction upon the ultimate potential for the development of the land between the highway and the railway line for residential purposes simply because various inquiries and conditions need to be met under the terms of the Illawarra REP before re-zoning can take place. The latter, he says, are no more than part of the normal consideration which would take place before the conversion of non-urban land to urban land. 35 Mr Neustein agrees that following the making of LEP 24 in 1991, even if part of the land had not been designated for the arterial road, it would have remained zoned as 1(b) Rural. However, he could not agree that any reasonable observer in 1991 would have no reason whatsoever to hold any realistic prospect that the original land parcel had any potential at all for future urban or residential use. Again, he reiterated that maintaining the zoning of the land as Rural or Environmental Protection (Scenic) was the method by which the council reserved the land for future urban use by controlling fragmentation in the meantime. Any informed observer holding the land for any purpose would know that this is a process by which local authorities and the State move to provide urban residential land by preventing piece meal development and the leap-frogging of development on fringe land. He further explained an opinion that in a capitalist society any area that is on the fringe of existing urban areas and which does not have substantial and significant environmental constraints to development may well go the way of urban development. One would only have to look, he says, at the planning history and the way land has been developed in Sydney and in the Illawarra urban development area to say that the land in question would become urban-residential at some time in the future. The question is when. 36 The zoning approach adopted in 1991 was maintained by LEP 2000 when the eastern parcel of the applicants' land, apart from the arterial road reservation, was zoned Rural 1(a). Pointing to the objective of the rural zoning in cl 11(2) of LEP 2000, inter alia, to prevent the premature and sporadic subdivision and to ensure the consolidation of urban areas, Mr Neustein says that one could only look at this land and say, clearly this is land marked for future urban development. 37 Mr Neustein agreed that a one kilometre buffer around the extractive industry to the west of the subject land would touch both the western and eastern parcels of the original land accounting for about 20 – 25 per cent of the eastern parcel. However, he would not discount the possibility that because the line of the buffer zone is on the fringe of the buffer it may have been possible to adopt the highway as a reasonable boundary. Nevertheless, he confessed he had not undertaken any detailed analysis of the nature of effects flowing from the extractive industry site. 38 When the draft LEP 2001 was prepared Mr Neustein claims that, in moving away from a zoning designed to prevent fragmentation of fringe or potential fringe urban land, the object of the proposed zoning in the draft LEP 2001 was to preserve the visual quality of the land. By doing so it took land that previously was zoned to be maintained in essentially single parcels to a purely rural use with no urban future. In his opinion the only time the council has come to a view that it does not recognise any future urban use for the eastern parcel is in the draft LEP 2001. Up until that time he considers that everything done by the council in terms of zoning and planning for the land is consistent with the maintenance of the land in a single ownership pending a decision on its urban future. 39 Mr Neustein agreed with Mr Lancaster, who appears on behalf of the respondent, during cross-examination in August 2002 that the underlying zoning of the eastern parcel (if the road re-alignment is to be disregarded) would have been the same in early 2001 and in the period after June 2001. However, he criticised the provisions of the draft LEP 2001 and the study underlying it because of the identified intention throughout the whole investigation that all the lands the subject of the study would be zoned rural thereby overriding more regional considerations and economic and social issues, including accommodation of population growth. Furthermore, Mr Neustein does not believe that the eastern parcel would have been zoned Rural Landscape 1(L) if it were not for the re-aligned Princes Highway. If the road had not been proposed Mr Neustein says that in accordance with good planning practice the eastern parcel would have been zoned for urban development and would have been taken out of the rural study. That is, the eastern parcel would not have been considered as part of the rural study. He maintained his regard for the eastern parcel as being within a zone which is a reserve zone for future urban development. The reason for the recommendation that the land be zoned as rural as a consequence of the scenic quality identified in the visual study within the rural land study is, according to Mr Neustein, the existence of the proposed freeway. 40 Acknowledging that the IUDP report in June 2000 nominated Area 11B as having a potential lot yield of 900 with no stated release date is in contrast to the 1996 IUDB projection that estimated 10 to 15 years of lead time before release might occur, Mr Neustein recognises that it is more likely than not that the failure to set a release date in the 2000 report indicates there was a prospect the 10 to 15 year range was not regarded as sustainable. Moreover, the 2000 report states that the expected lot take-up over the next five years would be zero. It transpired in cross-examination that Mr Neustein had based his estimate of release of the land for urban development within 9 to 10 years after the date of acquisition upon anecdotal evidence gleaned from discussions with developers that took place in 2002. This, Mr Neustein agrees, was an estimate made with the benefit of hindsight in so far as the potential of the land in June 2001 is concerned. 41 In answer to challenges put to Mr Neustein by Mr Lancaster in respect of the lack of assessment of constraints on the development of the subject land at the relevant date he confirmed his view that it was premature for any work to be done in that regard as at June 2001. Even so, although the documentation available at that date provided some information in a generalised sense, according to Mr Neustein there is no need in considering the general re-zoning of an area to prepare the type of site-specific studies which would be part of a more detailed investigation for the purpose of subdivision. He said that traffic impacts, points of access, drainage, provision of water and sewage services to the property, the slope of the land, required set-backs from the highway, the visual significance of the site, the requisite buffer between the site and the extractive industry site to the west, the extent of the site above 55 AHD, hazard assessment and investigation of the agricultural potential and value of the land would all be matters that need to be taken into account before a final assessment of the future potential urban development of the site could be made. Thus, in the early stages of the hearing in August 2002 Mr Neustein maintained that each of those matters would need to be investigated before the precise number of allotments to be yielded from the site could be determined. 42 Subsequently, when the hearing resumed in April 2003 Mr Neustein gave further evidence in response to a report in reply by Ian (Jock) Moreau Palmer, Town Planner and Landscape Architect retained by the respondent, and a supplementary report in reply by the respondent's valuer, Mr Martin. The further evidence by Mr Palmer and Mr Martin was prompted by the applicant's reliance upon the new evidence of Mr Egan, a valuer consulted by the applicant. Previously the applicant had relied upon the expert valuation evidence of Warwick G Bramall. Mr Bramall became seriously ill in the course of the hearing and was unable to provide any further assistance to the parties or the Court after the site inspection on 8 August 2002. 43 Mr Egan has adopted a proposed subdivision design prepared by Forbes Rigby Pty Limited ("the Forbes Rigby proposal") to provide in excess of 281 lots on the eastern parcel prior to acquisition. Mr Neustein considers that his postulation of the yield of about nine allotments per hectare in his earlier evidence is supported by the Forbes Rigby proposal with a yield of 8.7 allotments per hectare. In his opinion, the Forbes Rigby proposal of 309 allotments is workable and appropriate. 44 During further cross-examination on 30 April 2003, Mr Neustein could not be persuaded that it would be unrealistic, in both a planning and marketability sense, to put forward a subdivision plan with many of the subdivided lots well under 600m2 in area, as the Forbes Rigby proposal appears to have done. Moreover, he maintained his previously expressed view that, in his opinion, it is very likely that the boundary of the buffer to the extractive industry would be accepted as the highway. 45 He disagrees with Mr Palmer's assertion that the development potential of the subject site after acquisition could be for 164 lots. This, he says, is because Mr Palmer's opinion takes no notice of the zoning context. In the after acquisition situation, Mr Neustein relies on the draft LEP 2001 adopted by the council in December 2000 and placed on public exhibition between January and March 2001 whereby the land is to be zoned Rural Landscape 1(L). This instrument, when it comes into force, will restrict development and stifle the use of State Environmental Planning Policy No. 1 objections to vary its provisions. It is Mr Neustein's view that the subject site will no longer be able to be subdivided and that the "after acquisition" development will be as a single allotment. He makes the same comments in regard to the possibility of a rural residential development in the "after acquisition" stage. 46 Mr Neustein finally explained that the loss of any urban potential after the date of acquisition was not affected by the unaltered zoning regime. The fact is that the situation before the date of acquisition is to be considered, absent a proposal for the road. In other words, absent the proposal for the road, the underlying zoning would have been for urban development. Once the road proposal is taken into account, in his view, the whole planning context changed and at that point it can no longer be assumed there will be development potential. Mr Neustein summarised his position at the end of his cross-examination with the following response to Mr Lancaster:- The planning context was up until some time in the early nineties, and one in which one could expect for this land an urban development potential. It was zoned non-urban, it was specifically zoned non-urban to avoid its fragmentation, and an allowance of the urban land to the developers a singular suburb, not as a series of small lot subdivisions which might have occurred if there'd been a rural residential subdivision, for example, permitted. At a point at which the road proposal is fixed, and the council sees it as fixed, it undertakes a rural land study the large component of which is a visual study which I think was probably in evidence here, it's a very large document in the end, and that study, amongst other reasons, zoned some of this land for scenic protection because of the view that will be afforded of it from the proposed freeway, and at that point it quashes any residential potential of it. So that in that scenario what happens is absent the road proposal the land has always had, in my view, a very good prospect for urban development, once the road proposal is activated and the acquisitions starts, and serious planning gets underway, that removes that, and then taking on board that information the council produces a study with a potentially – with a rural focus which says, for example, we want to enhance the rural values of this area. Now you may recall on the last occasion you asked me, I think the term was, "Was this study not an example of best practice planning?" And I think I took you to task at the time for saying that because I thought it wasn't good practice planning at the time even so. But nevertheless that planning has so far been activated and it results in the situation described…which has been to slowly choke off any possibility of residential use of that land. Town Planning evidence in support of the respondent's case 47 The respondent's consultant town planner, Mr Palmer, says, in his opinion it is clear from the detailed investigations and environmental studies conducted that the eastern parcel of land is significantly constrained for all forms of residential development and that the proposed rural land use adopted by the draft LEP 2001 represents a responsible and ecologically sustainable land use for this land. He is also of the opinion that had the RTA not acquired the land for highway re-alignment purposes it would have been zoned rural in a similar manner to the balance of the original land parcel, which it adjoins. It is his view that the underlying zoning of the eastern parcel would have been rural from the date of the 1968 IPS through to the current LEP 2000 and the draft LEP 2001. This is because the eastern parcel has been consistently identified in the various historical planning instruments as being nominated for rural zoning. He considers that up until about 1981 the physical characteristics of the land, the constraints imposed by the railway line and the lack of any significant urban development pressure for this area would have created a situation where the residential or urban development of the subject land and surrounding land would not have been contemplated. 48 Mr Palmer reiterates that the only documentation that is relevant in regard to the potential for urban development is the 1981 Cardew study and the various IUDP updates. He states that the Cardew study was not a definitive study with respect to the suitably of land for urban development. It is, in his view, unfortunate that the IUDP updates continued to identify Area 11 as having possible medium to long term urban development potential despite the vast array of contrary planning documentation. 49 Mr Palmer does not regard the identification of the eastern parcel in Area 11 as possibly being suitable as an urban expansion area in the Cardew study as raising an automatic presumption that the land would be re-zoned and developed for residential purposes. He concedes nevertheless that the strategic plan contained within the 1986 study indicated that the eastern parcel could have possible future residential potential. Nevertheless, he says, one could only come to one conclusion from reading the 1986 study, namely that the land was not suited for conventional residential development and that in the short to medium term the appropriate zoning and land use would be that applicable to a non-urban/environmental protection zone. The provisions of the Illawarra REP, he says, reinforce his opinion. 50 Furthermore, between 1986 and 1990 there was clearly no environmental justification or land use planning support for the re-zoning of the land for urban purposes. This was confirmed, he says, by the rural land study and associated baseline studies, which resulted in the land and adjoining land being zoned rural. 51 Therefore, in his view, between 1986 when the Area 11 Environmental Study was prepared and 2001 when the rural land study and draft LEP 2001 was exhibited there was clearly no justification or rightful expectation by the owner of the eastern parcel that, had the land not been acquired for arterial road purposes, it would have been zoned and, in fact, developed for residential purposes. Accordingly, he concludes that a rural zone would have applied to the land had the subject land not been acquired for road reservation purposes. The only expectation that the owner could have had with respect to residential development of the land would be that found within the Cardew study. However, as Mr Palmer said, the identification of Area 11 was not conclusive in its assessment of future urban development potential but required the carrying out of further detailed investigations. Those detailed investigations, in fact, occurred in 1986, 1990 and between 1996 and 2000 and, according to Mr Palmer, established, in his opinion, that residential development was inappropriate. Having regard to those investigations, he says, it could only be concluded that the underlying zoning of the eastern parcel could not be anything other than rural/non-urban and, accordingly, the original land parcel had no potential for subdivision at the time of acquisition and no realistic likelihood that any further dwellings would be approved on that land. 52 In reply to the evidence of Mr Neustein, Mr Palmer says there is nothing which supports the view that without the highway route change the land would have been considered appropriate for urban release. The hypothetical residential development yield adopted by Mr Neustein does not take into account the extensive constraints which Mr Palmer says would apply to any development of the subject land. 53 In his first report in reply Mr Palmer concurred with Mr Neustein that if the land was removed from the IUDP then it is highly unlikely that any development other than rural usage would be currently possible. Furthermore, he agreed that the 1(L) Rural Landscape zoning would generally prevent any urban or urban related land uses occurring on the land. 54 Mr Palmer ultimately provided a further statement of evidence by way of a report in reply following the production of the Forbes Rigby proposal. Notwithstanding maintaining his opinion that any urban re-zoning of the subject land would not have been supported by the council or Planning New South Wales and that at the date of acquisition the subject land had no future urban development potential, Mr Palmer responded to the proposal with an alternative design for residential development of the eastern parcel taking account of constraints, including the one kilometre quarry buffer to produce a hypothetical yield of approximately 228 residential allotments. If the one kilometre quarry buffer is to be disregarded, then his resultant yield would, on a hypothetical basis, be increased to 251 residential allotments. 55 The applicants' witnesses do not accept there can be any residential development potential after acquisition. In Mr Palmer's opinion, if it is accepted by the Court that there is some future development potential before the date of acquisition in the circumstances of the subject land, it must also be accepted that there is such potential after the date of acquisition. The reasoning is not fully explored but seems to be based upon an assumption that the construction of the highway would not foreclose the potential for urban development in the event the Court accepts there was such a potential prior to acquisition. An after acquisition scenario subdivision plan prepared by GHD, upon Mr Palmer's instructions, provides for approximately 132 residential lots on the residue land. 56 In the event that the Court considers that a rural residential subdivision would be an appropriate land use in the after acquisition scenario, Mr Palmer considers that eight rural residential allotments could be achieved. 57 It became clear in cross-examination of Mr Palmer by Mr Webster SC, who appears on behalf of the applicants, that there is conflicting evidence as to what an enquiry from Sydney Water would have revealed in respect of the capacity of the authority to supply water to the subject land at the date of acquisition. Later information suggests that earlier advice given to Mr Palmer was incorrect or that Sydney Water has subsequently changed its mind. In any event, Mr Palmer gave no consideration to the availability of water in his initial report. In the circumstances he was considering at that time, the availability of water for residential subdivision was not an issue. 58 Despite a long and sustained attack upon his evidence in this respect Mr Palmer maintained that the question of the buffer from the extractive industry would be a matter that an informed purchaser would take into account irrespective of whether advice as to its effect was obtained from the Department of Planning, the council or the Department of Mineral Resources. In his opinion, at least 28 of the lots shown in the Forbes Rigby proposal would be excluded. In addition to the potential loss of lots Mr Palmer also considers that it would become necessary to re-configure the subdivision suggested in the Forbes Rigby proposal in order to accommodate the buffer. 59 Mr Palmer's proposition regarding residential potential after the resumption is solely as a response to the applicants' case that there was residential subdivision potential before the highway proposal. Fundamentally, he does not accept that there is residential subdivision potential in either scenario. If the land is considered to have residential development potential after the resumption the yield could be in the order of 164 lots after taking account of the extent of the road reservation and the benefit of landscaping and noise attenuation structures, beautification and amelioration measures within the actual RTA reservation. This suggests that if Mr Palmer is right the effect of the acquisition has been to reduce the available lot yield of the subject land by approximately 150 urban lots based on the original Forbes Rigby proposal. 60 Mr Palmer also holds the view that it would be essential to construct a bridge over the railway line to allow access to the existing and proposed residential and urban development on the eastern side of the railway line. As this, in his opinion, would be the sole purpose of the bridge the estimated cost of somewhere between $2 million and $3 million would become the responsibility of the developer. The Valuers - the highest and best use of the land at the date of acquisition 61 The principal difference between the positions of the parties is in relation to the potential of the use of the eastern parcel for residential development albeit sometime in the future. 62 The views of the expert consultant town planners have been reported above in some detail because once the issues raised between them are resolved by the Court the valuers have respectively provided the basis for a calculation of value which can be adjusted according to the Court's finding. 63 It is appropriate to make a special mention of the outcome of a process undertaken between the valuers, Mr Egan and Mr Martin, pursuant to the Expert Witness Practice Direction. Eventually the Court was provided with a joint statement that led to a clear and concise explanation of how compensation could be calculated in accordance with any one or more of the potential findings by the Court in relation to the underlying zoning of the land and determination of the highest and best use. The application of the Practice Direction and the co-operation of the valuers in this respect resulted in a significant shortening of the hearing time already beset with difficulties and delays that were unfortunate and, in most respects, beyond the control of the parties. 64 It is apparent from the 1986 study that there were already perceived restraints on development of the land for urban purposes, in part, as a consequence of proposals for the Princes Highway. However, the proposed highway works were not the only constraint as the 1986 study also identified difficulties for access because of the grades, the steep slopes and visual importance giving the land a high scenic value. Absent the road proposal, therefore, a prospective purchaser would have been aware of the identified constraints which could operate as a disincentive to purchase the land with any ultimate aim of carrying out residential development. 65 The only evidence that suggests the RTA was involved in the 1986 study comes from Mr Neustein. He attributes the decision for the eastern parcel to remain in the rural zone partly as a result of representations made by the RTA prior to 1986. Mr Neustein's assertion is the only evidence of this representation. Accordingly, for a prospective purchaser to be informed of this fact it had to be fortuitous enough to speak with Mr Neustein himself. The Court is not prepared to accept Mr Neustein's evidence in this respect as the sole basis for concluding that the land would have been regarded in 1986 as eventually suitable for residential development if it had not been for the intervention of the RTA. 66 Even if the Court accepts Mr Neustein's view that a purpose of a rural zone is in the nature of a "holding zone" for future residential land release, it is equally plausible that the objective of the zone is, in addition to protecting rural land, to ensure consolidation of existing urban areas and to prevent fringe development around urban areas. 67 The Court does not agree, having regard to the faint possibility and remote prospect of residential development being permitted in the future, that a prospective purchaser would have undertaken a study in the nature of the Forbes Rigby exercise to determine specific lot yield. However, if it had done so the prospective purchaser would have taken a conservative view of the impact of the extractive industry buffer and the impact of the steep slopes as well as of the delivery of services such as water and the construction of an access from the east across the railway line. All of these matters would have weighed heavily upon even the most optimistic purchaser. 68 The Court agrees with Mr Webster's argument, supported by Mr Neustein, that but for the arterial road reservation, identified formerly for the first time in LEP 24, the eastern parcel would not have been proposed as zone 1(L) Rural Landscape Environment Protection because it was the re-location of the arterial road reservation which will create the main viewing platform from which the scenic qualities of the landscape can be enjoyed. However, that is not to say that prior to the intervention of the road proposal the land would have been regarded as suitable for urban release. 69 In a report to the council on 3 September 1990 the eastern parcel was identified as being within an area that has a reduced suitability for some form of residential development, having regard to the eroding water courses to the north and south combined with the close proximity to, and severance from, future residential areas by the railway line, main road and high visibility from surrounding land. Slopes were identified as being within the upper limit of capability for residential development. The report stated that if residential development was to be permitted on the site it would be preferable to exclude building on the very prominent crest of the hill and also on land fronting the railway and highway. Significantly, the report says further that the site could be seen as providing a future transition zone between conventional detached housing and areas set aside for environmental protection and quarry buffer purposes. It concludes with the statement that the majority of the site appears potentially capable of supporting standard residential development. 70 The report on 3 September 1990 was primarily in response to an application for re-zoning of the adjoining Rosemont Farm to permit rural small holdings and partly in response to an increasing level of inquiry regarding the suitability of various lands in the municipality for large lot residential development. After having regard to responses from various government departments and authorities it was recommended that the council not proceed further with the application. The subject land was not the subject of the application for re-zoning. However, its future capabilities were examined in that context. 71 Mr Neustein agreed in cross-examination on 6 August 2002 that each time the council had come to consider the planning future for the eastern parcel since 1982 it has concluded that there should be no residential or urban development under the then present circumstances. Accordingly, if a prudent purchaser had made enquiries from the council as to the considerations it had given to the future planning for the eastern parcel it would not have been encouraged to contemplate a positive response to any application for re-zoning in the foreseeable future. 72 Nevertheless, the Court is not prepared to summarily dismiss the circumstance that a prudent purchaser properly advised, after full inquiries, may have entertained some expectation that in the future, without specificity as to time, there was a vague and remote possibility at the date of acquisition that limited residential development might occur. The purchaser would have understood that the underlying zoning of the land as rural land would need to be changed for that expectation to be realised and that, even so, it could not be anticipated that the land would yield the lot potential achieved by other land on the eastern side of the railway line at, say, Flinders and Shellharbour. Doubts about the availability of water, access over the railway line and the uncertain prospect of a railway station nearby would not be matters about which the purchaser would be able to form a final opinion as at the date of acquisition. Such factors nevertheless would have had a bearing on a determination of the price to be paid. 73 The Court determines that the highest and best use of the land at the date of acquisition was consistent with the underlying zoning to permit a use for rural purposes with a remote and indeterminate prospect of residential development in the eastern parcel. Assessment of Compensation 74 As the land is to be treated as having a rural value only, even with limited residential potential, the Court must determine whether an existing water supply to the western parcel obtained from a Sydney water main is to be regarded as a legal connection to the extent that a purchaser could accept supply is available to the whole of the land. Although there is evidence that the water supply to the farm is not metered and has not been the subject of charges for approximately 30 years, there is no evidence that Sydney Water does not recognise the connection and that it cannot be maintained, albeit subject to future conditions. Furthermore, a prospective purchaser would be entitled to hold a reasonable expectation that the water supply could be used for the purposes of the eastern parcel if required. 75 The valuers agree that the en globo value of the land for rural purposes comprising 61.66 hectares before acquisition was $1,387, 350 calculated at the rate of $22, 500 per hectare. The agreed valuation takes no account of any residential development potential. Having regard to the whole of the evidence, the Court has made its own estimate of a modest premium that might be paid by a purchaser for the nominal residential potential. The additional amount is based solely on the Court's estimate of a notional premium that a purchaser would pay for the land, taking into account an informed and realistic prospect for urban development. The agreement reached by the valuers pursuant to the Expert Witness Practice Direction did not contemplate the prospect of a urban use in this context. 76 The Court, therefore, determines that a potential purchaser would have paid $1,450,000 for the total property at the date of acquisition if the proposal for the highway deviation and widening had not been in place. 77 The valuers agree that the rural value of the residue areas of 16.53 hectares ($198,360) and 2.746 hectares ($5,000) in the eastern parcel have a total value after acquisition of $203,360. The Court adopts this figure without adjustment. 78 With respect to the 26.476 west of the highway Mr Martin believes that rather than there being a detrimental effect from the highway works on the amenity on this land, it could just as easily be enhanced. Accordingly, he maintains that its after acquisition value is unchanged at $22,500 per hectare. 79 On the other hand, Mr Egan contends that there should be an allowance for the detrimental impact of the proximity of a four lane highway adjacent to the land, notwithstanding that it will be at a greater distance than the existing highway and to some extent sheltered by the large hill on the eastern parcel. 80 The construction of a major intersection with Shellharbour Road will change the aspect from the western parcel by interposing significant roadworks into the foreground of the attractive scenic views towards the south and south east. The Court, therefore, agrees with Mr Egan that an allowance should be made for the reduced visual amenity and the perceived prospect of disturbance caused by the traffic flows in terms of access to the property and possibly noise. Rather than maintaining its value of $22,500 per hectare the value of the western parcel should, in the Court's view, be reduced by $2,500 per hectare thus resulting in an en globo market value of $529,520 after the date of acquisition. 81 The compensation payable to the applicants is assessed on the basis of a market value before acquisition of $1,450,000 against a market value of $732,880 after acquisition. The Court assesses compensation pursuant to the Just Terms Act in the sum of $717,120. 82 The determination is made on the basis that there is no question of the land retaining any potential for development for residential purposes after the date of acquisition. 83 Compensation payable for disturbance has been agreed at $15,000. Costs 84 Following the unfortunate illness befalling Mr Bramall in August 2002, Mr Egan was instructed by the applicants to prepare a Statement of Evidence. This he did on 5 September 2002 and it became exhibit Z. This Statement of Evidence was filed pursuant to a direction made by the Court on 14 August 2002. In a report in reply Mr Martin disagreed with the conclusions reached by Mr Egan in respect of the residential subdivision potential of the land. 85 Pursuant to a report in reply filed on 19 November 2002 and which ultimately became exhibit AA, Mr Egan reinforced his evidence by adopting the Forbes Rigby proposal. 86 The service of the Egan report in reply caused the respondent to file a notice of motion returnable on 21 November 2002 seeking an order that the Egan report in reply be excluded from the evidence or, alternatively, that the further hearing dates then appointed for 25, 26 and 28 November 2002 be vacated. The respondent seeks its costs of the notice of motion dated 19 November 2002, including costs of the vacated hearing dates thrown away. Otherwise, no submissions are made by the respondent as to the costs of the proceedings. 87 The respondent was given the opportunity to file and serve any further expert evidence by 14 February 2003 with consequential orders for the filing of further evidence on behalf of the applicants and meetings of the experts pursuant to the Expert Witness Practice Direction. The hearing dates of 25, 26 and 28 November 2002 were vacated and the matter set down for five days commencing 28 April 2003 with 5 and 6 May 2003 held in reserve. 88 When the respondent's notice of motion was argued on 25 November 2002 the applicants contended that the Forbes Rigby proposal came into existence only to meet an argument raised by Mr Martin for the first time in October 2002. The Statement of Evidence by Mr Martin containing the new information was filed two weeks out of time. 89 The parties agreed that the respondent should be allowed sufficient time to respond to the Forbes Rigby proposal but nevertheless accepted that the evidence of the valuers would proceed on 25 November 2002 as planned. Unfortunately, by the time that agreement had been reached Mr Martin had cause to leave the precincts of the court as a consequence of personal circumstances relating to the critical ill health of a close relative, namely his son. 90 Having regard to the whole of the circumstances, including the personal difficulties encountered by Mr Bramall and Mr Martin, the filing of reports out of time and the raising of new issues by both parties in reply it is appropriate in the circumstances that both parties pay their own costs in relation to the hearings on 21 November 2002 and 25 November 2002, together with any costs thrown away as a consequence of the vacation of the hearing dates 25, 26 and 28 November 2002. 91 Apart from those costs, the Court agrees there is no reason why the respondent should not pay the costs of the applicants in respect of the proceedings. The respondent has acted in a proper and appropriate manner in this respect by not making any submission on the issue of costs generally. Orders 92 The Court makes the following orders:- (1) Compensation payable by the respondent to the applicants consequent upon the acquisition of part of the applicants' land pursuant to the Notice of Compulsory Acquisition of Land published on 1 June 2001 is assessed in the sum of $717,120. (2) The respondent is ordered to pay the applicants' costs of the proceedings except costs in relation to the respondent's notice of motion dated 19 November 2002, appearances on 21 November 2002 and 25 November 2002 and any costs thrown away as a consequence of the vacation of hearing dates 25 November, 26 November and 28 November 2002. (3) The exhibits may be returned. 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.