Land and Environment Court of New South Wales CITATION : A Woodbury and Ors v Wyong Shire Council [2006] NSWLEC 48 APPLICANTS: A Woodbury and Ors PARTIES : RESPONDENT: Wyong Shire Council FILE NUMBER(S) : 30898 of 2004 CORAM: Bignold J KEY ISSUES: Compulsory Acquisition of Land :- compensation—acquired land situate in proposed Town Centre— highest and best use—development potentialities of the land. LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991, s 66(1) Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575; Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541; CASES CITED: Damjanovic v Roads and Traffic Authority of NSW (No 2) (2005) NSWLEC 371; Gosford Shire Council v Green (1980) 48 LGRA 201; Housing Commission of NSW v Falconer (1981) 1 NSWLR 547 DATES OF HEARING: 22-24/08/2005, 11/10/2005, 05/11/2005, 19/12/2005 DATE OF JUDGMENT: 02/10/2006 APPLICANTS: Mr I Hemmings, Barrister SOLICITORS LEGAL REPRESENTATIVES: Low Doherty and Stratford RESPONDENT: Mr P Tomasetti, Barrister SOLICITORS Colin Biggers and Paisley JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES BIGNOLD J 10 February 2006 30898 of 2004 A. AND F. AND C. AND J. WOODBURY v WYONG SHIRE COUNCIL JUDGMENT HIS HONOUR: A. INTRODUCTION 1 This is an objection pursuant to s 66(1) of the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act) against the amount of compensation offered to the Applicants ($2,281,205) in the Compensation Notice given to them under the Act in respect of the compulsory acquisition by the Respondent of their land being lot 51 in Deposited Plan 561032 and known as No 103 Sparks Road, Woongarrah and comprising an area of 2.144 hectares by Notice published under that Act in Government Gazette No 95 of 11 June 2004. 2 The purpose of the acquisition as stated in that Notice was "for the purposes of an aquatic centre and carpark". 3 According to their Amended Points of Claim, the Applicants claimed the following amounts of compensation pursuant to the Just Terms Act, s 55— (a) market value $6 million (d) disturbance $339,120 (e) solatium $19,655 4 According to its Amended Points of Defence, the Respondent asserted that the market value was $2.144 million (being the amount that had been determined by the Valuer General) and that the Applicants were not entitled to compensation for disturbance but they were entitled to compensation for solatium. 5 The Applicants' claim to compensation in the sum of $6 million in respect of the market value of the compulsorily acquired land is supported by the valuation evidence of Mr Bruce Shaw, a very experienced valuer. His valuation evidence is contained in his Valuation Report, his Report in Reply, his participation in a conference with Mr Jones, the valuer called by the Respondent resulting in the preparation of a Joint Report and in his oral evidence. The Respondent's case was founded on the evidence of Mr Jones, valuer, given in the same form and manner as was Mr Shaw's evidence. 6 In addition to the evidence of the Valuers, the Court received a large body of town planning evidence. Three of those experts (Mr Kettle, Ms Slater, Mr Lester) participated in a conference of experts and prepared a Joint Report recording their agreements and disagreements (the details of which will be later referred to). The principal matter not agreed to concerns the probable or likely future rezoning of the subject land. As will later be seen, that issue is particularly relevant to the future development potentialities of the subject land and hence very relevant to the price that would be struck between the hypothetical parties to the hypothetical sale at the date of compulsory acquisition in mutual recognition of the development potentialities of the land. 7 After the hearing had been concluded and judgment had been reserved, the Applicants, by Notice of Motion filed on 30 September 2005 applied to re-open the proceedings for the purpose of tendering further evidence. The Motion was supported by an affidavit sworn by the Applicants' Solicitor Mr Doherty which stated that the Applicants had come into possession of (i) a letter from the Respondent notifying the public of "an information session on the draft Master Plan for the Warnervale Town Centre on Monday 12 September 2005" and (ii) "a Site Master Plan and a Master Plan Town Centre prepared by B N Consultants for the Respondent". Par 4 of the affidavit states: The Site Master Plan indicates that lot 51, the subject of these proceedings, is within area 17 ( 6 storey residential) and area 26 ( commercial base and 5 storey residential) . 8 Following the filing of the Notice of Motion, directions were given by the Assistant Registrar to the parties for filing written submissions after she had been informed that the Respondent opposed the Motion. 9 In its written submissions filed on 3 November 2005, the Respondent argued that the Court should refuse the application to re-open the case because the evidence sought to be tendered by the Applicants was inadmissible. In advancing this submission, the Respondent relied upon the decisions of the Court of Appeal in Housing Commission of NSW v Falconer (1981) 1 NSWLR 547 (and in particular upon the judgment of Mahoney JA) and in Gosford Shire Council v Green (1980) 48 LGRA 201 concerning the admissibility in compensation proceedings in respect of the compulsory acquisition of land, of events occurring after the date of compulsory acquisition. 10 In their written submissions filed on 19 December 2005, the Applicants maintained that the matters sought to be tendered in their case (if leave to reopen were granted) were admissible inasmuch as they confirmed matters that existed at the date of compulsory acquisition, namely that at that date, the uncompleted master planning being undertaken in respect of the proposed Warnervale Town Centre recognised the potentiality of the subject land for commercial development within the context of the Town Centre. However, the Applicants, faced with the Respondent's opposition to any reopening and the prospect, if the case were reopened, for there to be the need to adduce further valuation (and possibly town planning) evidence withdrew their application to reopen and asked the Court to determine their compensation claim on the evidence that had been presented at the hearing. I shall proceed to judgment on this basis, but in leaving the matter, I would merely note that according to the content of the Town Centre Master Plan (which the Applicants were seeking to tender in the reopened case) the subject land is no longer affected by the proposed aquatic centre which is shown to be relocated to the west of the subject land, much closer to the proposed Bus/Rail interchange (a pivotal feature of the Town Centre proposal). These are only some of the significant changes in the developing content of the Master Plan since the first version of that Master Plan appeared in August 2004 (just two months after the date of compulsory acquisition) which had depicted the subject land as the site (together with adjoining land) of the proposed aquatic centre. 11 These post acquisition developments in the ongoing master planning process in respect of the Town Centre proposal might be thought to be more relevant to the question whether the compulsory acquisition of the subject land for the purpose of the aquatic centre continues to be necessary (as was apparently the case when it occurred in June 2004): see the Just Terms Act, s 31. B. THE COMPULSORILY ACQUIRED LAND 12 The subject land is a rectangular shaped lot having a frontage of some 60 metres to the northern side of Sparks Road and a depth of some 355 metres with an area of 2.144 hectares. 13 The subject land rises gently from Sparks Road, but the slope becomes more steep from mid depth to the rear of the lot. The gradient of the steepest section (15 percent of the lot situate at the rear) is 1:5. 14 Sparks Road is a main arterial road linking the Pacific Highway at Kanwal to the F3 Freeway at Warnervale (situate to the west of the subject land). 15 Vehicular access is obtained via a service road running parallel to Sparks Road up to the intersection of Sparks Road and Minnesota Road 600 metres to the east of the subject land. 16 Future access to development from Sparks Road is proposed to be prohibited so that access will be via the development of land situate to the east and west of the subject land. 17 Services of electricity, town water and telephone are available to the subject land, but the sewer is not currently available and is anticipated to be available in 2007. 18 At the date of compulsory acquisition there was a dwelling-house erected on the subject land. It came into existence about 1970 and was occupied by Mr Austin Woodbury (one of the Applicants) as his residence after he acquired the property in 1987 until its compulsory acquisition in 2004. (In 2000 Mr Woodbury transferred a share in the property to each of his two brothers, who are co-Applicants in the present proceedings). 19 The suburban location of the subject land is known as Woongarrah and is situate some 12 kilometres north of the township of Wyong on the Central Coast of the State. 20 The Central Coast (comprising the local government areas of Gosford and Wyong) is one of the fastest growing regions in Australia with a combined population according to the 2000 Census of 285,000. 21 Woongarrah and Hamlyn Terrace (formerly known as Warnervale) and Wadalba have been identified as a major growth area since the release in 1968 of the Sydney Regional Outline Plan. 22 The zoning of the subject land, in common with a considerable area of adjacent and neighbouring lands under the Wyong Local Environmental Plan 1991 (the LEP) is Zone "10(a) Investigation and Precinct Zone", that zoning having been created in November 2003 and generally replaced the erstwhile rural zoning of much of the lands now included in Zone No 10(a). 23 The subject land is included in that part of the 10(a) Zone at Woongarrah that is included in the proposed site of the Warnervale Town Centre. That site embraces an overall land area of some 120 hectares, with much of it owned by public authorities eg Landcom, DIPNR and the Council. Other major land owners within the proposed Town Centre site include the Catholic Church (which has already developed a school on a 4 hectare lot situate some 200 metres east of the subject land) and Woolworths and a land developer, Stannic Securities. 24 In 2002, the Respondent adopted the Warnervale District Planning Strategy prepared by planning consultants, Woods Bagot, which Strategy included a Concept Plan for the proposed Town Centre. That Concept Plan showed the subject land as part of the site of a proposed Aquatic Centre. Following the Respondent's adoption of the Planning Strategy it , in conjunction with Landcom, engaged another planning consultant (LFA (Pacific) Pty Ltd) to undertake more detailed master plan investigations. The draft master plan prepared by the Consultants came into public existence in August 2004 (a short time after the date of compulsory acquisition). It continued to show the subject land as part of the site of the aquatic/recreation centre. It additionally showed the higher land as part of a medical centre of 2000 square metres floorspace. At the hearing the Respondent had objected to the admissibility of this draft master plan because it was not physically and publicly in existence at the date of compulsory acquisition. However, doubtless it was in some form of existence at the date of compulsory acquisition and that fact was public information. (It is to be recalled that it was the Applicants' application to re-open the proceedings to tender further evidence as to the most recent version of the draft master plan for the Town Centre that I have earlier noted). C. THE COMPETING VALUATION EVIDENCE 25 Although the key to appreciating the very disparate values proffered by Mr Shaw ($6 million) and Mr Jones (2.15 million) substantially lies in their radically different opinions concerning the future development potentialities of the subject land (which opinions are essentially based upon the competing town planning advices they have received and acted upon) there is an additional factor explaining their very disparate valuations, namely the different valuation methodology employed. Mr Shaw's methodology is to assume that an urban zoning of the subject land (some 60 percent of the site area zoned commercial and some 40 percent zoned 2(c) residential permitting residential flat development) already exists and that the land is ready for such development to take place. On the basis of these assumptions, he values the land by reference to comparable sales evidence of lands, appropriately zoned before applying a discount factor of 12 1/2 percent to make allowance for an anticipated one year's delay in rezoning for interest and risk. 26 Mr Jones' valuation methodology is to value the subject land by comparison with sales of comparable lands, ie zoned 10(a) under the LEP (as is the subject land) and situate within the same locality as the subject land (some within and some outside the Town Centre site). 27 Whereas Mr Shaw's valuation methodology is open to the obvious criticism that he has assumed a particular future rezoning outcome, Mr Jones' valuation methodology is open to the criticism that it assumes comparability in the development potentialities of the subject land and of other lands having the same 10(a) zoning as the subject land but physically distant from the subject land. 28 Both these criticisms highlight the difficulty in the present case of establishing precisely how the hypothetical parties to the hypothetical sale would regard the development potentialities of the subject land (compared with the development potentialities of the suggested comparable sales) as at the date of compulsory acquisition. The present case has proceeded upon the common basis that the question of the relative development potentialities of the subject and the sales lands is largely to be determined by the reference to the content of the various rezonings likely to be given to lands within Zone No 10(a) under the LEP (and especially those lands situate within the proposed Warnervale Town Centre). The problem exists, not only because of the competing town planning opinions that have been given in the case, seeking to reflect what the hypothetical parties to the hypothetical sale of the subject land would have been advised by competent town planners, but because of the indeterminate stage in the planning processes under the EP&A Act that had been reached at the date of compulsory acquisition. In other words, the task of prognosticating the probable future rezonings of the lands situate within Zone No 10(a) and in particular within the Town Centre (itself comprising an area of some 120 hectares) was at the date of compulsory acquisition inherently problematic. 29 However, as at that date, the planning process had yielded the Council's adoption in 2002 of the Woods Bagot Concept Plan for the Town Centre and there was soon to be publicly released the more detailed draft Master Plan for the Town Centre. The Woods Bagot Concept Plan had illustrated detailed structural components of the Town Centre concept including the spatial allocation throughout the entire 120 hectares of those different components. A key or cornerstone structural element was the provision in the Western sector of the Town Centre of a new railway station on the main Northern line together with a transport interchange providing the hub for the creation of the main street and the agglomeration in close proximity of the commercial, retail and residential apartments and community development components of the Town Centre. The subject land is situate about mid section in the overall site of the Town Centre, a little less than 600 metres radially distant from the proposed new railway station. If the Town Centre were notionally divided into two sectors—western and eastern, the subject land is clearly within the confines of the western sector which sector is most proximate to the railway/transport interchange hub and is shown on the Concept Plan to be the location for the commercial, retail and residential apartments and community developments with the Town Centre, whereas the eastern sector, being more distant from the proposed new railway station/transport interchange (ranging between 600 and 1200 metres radially distant from that hub) is shown on the Concept Plan to be predominantly earmarked for "residential village" style development. 30 Although, having regard to all of the evidence (documentary and expert opinion) I am satisfied that the hypothetical prudent parties to the hypothetical sale would not have struck their bargain on the basis that the subject land was likely to be re-zoned commercial for 60 percent of its area and residential 2(c) for 40 percent of its area (reflecting the opinion of Mr Kettle who gave evidence for the Applicants on the agreed assumption that the aquatic centre designation is to be ignored) I am satisfied that they would have struck their bargain recognising that the subject land in common with other lands within the western sector enjoyed a clearly higher development potentiality than did the lands situate in the eastern sector of the Town Centre. (Although the ongoing master planning exercises may have demonstrated the flexibility in the content of the Town Centre planning, that very emphatic difference between the planning outcomes for the western and eastern sectors has remained a constant feature). 31 The consequence of this holding is that I do not think that either valuer made the proper assumption concerning the development potentialities of the subject land. In particular, I think that Mr Shaw's assumption was over-optimistic. But I also think that Mr Jones' assumption failed to recognise at least the degree of higher potentiality of the subject land over the potentiality of other sale lands situate in the eastern sector of the Town Centre. This overall conclusion relevantly results in my not being able to accept either of the competing valuation opinions proffered in the case. 32 In the Joint Report of the Town Planning Experts' Conference there was agreement reached on a number of planning matters, including the following: (i) the subject land forms part of the Warnervale Town Centre Site but not part of the core retail centre component of the centre; (ii) development of the subject land would not be constrained by any ecological issues; and (iii) access for the development of the subject land would not be obtained from Sparks Road but would be via the adjoining sites (when they were developed) or from the proposed Main Street which traversed the northern (rear) section of the subject land. 33 The two principal matters where the experts did not agree concern— (i) the timing of the rezoning of the subject land (as part of the overall rezoning of the Town Centre site); and (ii) the nature and content of the rezoning of the subject land in particular. 34 Mr Kettle, Town Planning Consultant, for the Applicant and Ms Slater, the Respondent's former employed Town Planner agreed that rezoning was expected by June 2005. Mr Lester, Town Planning Consultant retained by the Council (who had been commissioned to undertake the master plan preparation for the Town Centre) was of the opinion that rezoning might take three or four years from the date of compulsory acquisition (June 2004). 35 Concerning the future rezoning of the subject land Mr Kettle maintained his opinion (expressed in his original Report) that the likely rezoning would be approximately two thirds commercial and approximately one third residential 2(c) permitting flats. Ms Slater and Mr Lester maintained their original opinions that the subject land would probably have been re-zoned residential 2(b) (permitting a lesser residential density than the 2(c) zoning). 36 An additional town planning opinion on these disputed matters was given by Ms McKenzie who has been employed by the Respondent since April 2001 as its Manager Land Use Planning within the Strategic Planning Department. 37 Her opinions were proffered in the context of her providing a peer review of the evidence of Ms Slater (who because of serious illness, was not available as a witness at the hearing of the proceedings). 38 Ms McKenzie's opinion on the likely future rezoning of the subject land was expressed as follows in her written report: In keeping with one of the primary design principles for Warnervale, the Town Centre Area was to be an integrated centre with strong links between the main street functions and the railway station/transport interchange. Hence although the subject land was part of the land currently being investigated for the Town Centre Area, it would not have been part of the core main street retail and commercial heart of the town centre. Therefore it was anticipated that the site would be zoned for residential uses in the future, not commercial, retail or the like. Council's masterplanning consultants, based on their professional knowledge and experience, were designing the main street area on a base length of 350-400 metres. The subject site is just outside this main street Town Centre Area. The anticipated residential zoning would be 2(b) (Multiple Dwelling Zone) as the higher density 2(c) (Medium Density Residential Zone) would located closest to the railway station and transport interchange and densities would be stepped down as development moved away from the station and from immediately around the main street. A 2(b) zone would be likely to yield between 20-25 dwellings per hectare but any prospective purchaser would need to engage a qualified person to fully assess the eventual yield as there are some site specific issues such as slope, access and locally significant vegetation which may constrain development yield. 39 Ms McKenzie's opinion on the likely timing of the rezoning was expressed as follows in her written report: I disagree with Ms Slater on the issue of the timing of the rezoning of the land. At the date of acquisition, I would have advised a prospective purchaser that: (a) Council staff wanted to progress the statutory rezoning of the town centre in parallel with the proposed date of the opening of the railway station (being early 2007). However, the detailed masterplanning of the land uses within the town centre was taking longer than expected. at the time, finalisation of a number of key consultancies and issues vital to the design of the final plan had yet to be finalised. These included but were not limited to the Traffic Movement Study, Water Cycle Management, Flora and Fauna. (b) Any rezoning would be at least two years to two and a half years away or late 2006 at the earliest. (c) The draft Wyong Conservation Strategy was recently rejected by Council. There was a need to perform a merit based assessment of the flora and fauna issues within and around the town centre. This was based on preliminary indications from the Department of Environment and Conservation that they were disappointed with Council's decision and each project had to be considered individually as they could not longer be confident in Council working towards a strategic solution to the issue of biodiversity within the Shire. (d) The subject land was not currently serviced. The servicing program for the town centre was to be carried out at the same time as planning for servicing of proposed employment-generating land to the west of the town centre—Precincts 11 and 13—was being considered. (e) The Movement Study dealing with traffic, transport and access issues to the town centre was progressing slower than expected and was vital to the planning of the centre. 40 The parties' Counsel mutually agreed that the town planning experts were not required to be cross-examined. 41 This course adopted at the hearing was in my opinion, a perfectly reasonable course to adopt. The experts (except for Ms McKenzie who came into the case late and only because Ms Slater was unavailable at the hearing on account of serious illness) had met in conference and had produced the Joint Report, the contents of which I have summarised. 42 The differences in expert opinion on the two disputed issues concerning the likely rezoning of the subject land and the timing of that rezoning are in my opinion largely to be explained by virtue of the intrinsic nature of their evidence, namely as experts called by each of the parties in this case, essentially giving expert advice to their respective clients and mediating that advice to the Court as expert evidence. 43 So to understand the town planning evidence is to recognise the inherent limitations of that evidence on the all important question of the sale price that the hypothetical prudent parties to the hypothetical sale of the subject land would strike. This is because the determination of that price is (to adopt the words of Wells J in Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541 at 578 cited in Brown's "Land Acquisition" 5th ed at p 122): The judicial task is to see the combined results of the valuers' work not as another valuer would see them, but as material fit to be used in the course of applying the principle laid down in Spencer ; the two roles of buyer and seller must….finally merge in the court. I must bear in mind the conclusions of the valuers, and try to accord to each the sort of bearing and weight that would be accorded to them in the normal transaction of sale and purchase propounded by Spencer . 44 That passage from the judgment in Brewarrana is cited in support of the following passage in Brown's text at 122: In practice the evidence of the hypothetical transaction is given by valuers who are experts. They almost have to imagine that they are acting as prudent buyers and sellers. To put it another way: they have to imagine that they are observing a prudent buyer and a prudent seller reaching an agreement on the price that other prudent buyers and sellers would also agree with. They have to estimate what sale price reasonable buyers and sellers would arrive at. 45 I would respectfully adopt that passage and apply it equally to the town planning evidence which was adopted by the valuers in this case, in their competing assumptions as to the development potentialities of the subject land. 46 When the town planning evidence, given in the present case, is tested by that criterion, it results in my firm conclusion that the hypothetical prudent parties in striking their agreed price for the hypothetical sale would not give effect to either of the competing town planning opinions concerning the development potentialities of the subject land but, cognisant of those differing opinions, would agree upon a price that recognised that the subject land within the context of the Town Centre site had greater advantages and potentialities by dint of proximity to the hub of the Town Centre over lands (which had been sold) situate in what I have described as the eastern sector of the Town Centre, while recognising that the subject land was just outside the "core" of the location within the Centre of the commercial/retail/community structural elements. 47 It follows that what I have held to be the probable basis (concerning the development potentialities of the subject land) upon which the hypothetical prudent parties would strike their bargain as to price that Mr Shaw's valuation based upon Mr Kettle's very precise and particular opinion concerning the likely rezoning of the subject land must be wholly rejected because that opinion far transcends the potentialities that the hypothetical parties would mutually recognise in their bargain. 48 Mr Shaw's valuation had assumed that Mr Kettle's prognosticated rezoning of the subject land was already in place and that the subject land was ripe for development (this assumption being qualified by his allowance of a discount of 12 ½ percent to allow carrying costs for one year being the anticipated delay in the rezoning). In assigning his value of $6 million he adopted a value reflecting a rate of $280 per square metre based upon his analysis and application of two sales of lands in the suburb of Wadalba, where the sale properties were already zoned for the respective purposes for which they were purchased—in the one case for the development of a large retail supermarket and in the other for a medium density residential development at the intensity of one dwelling per 200 square metres of site area. (In applying his analyses of the sales to the subject land he regarded the subject land as more valuable than the sale properties. As earlier noted, he discounted by 12 ½ percent the value he assigned to the subject land to reflect the carrying costs of the purchase for one year pending the anticipated rezoning). 49 If there were no alternative valuation approach to that adopted by Mr Shaw and it became necessary to employ his valuation methodology, an additional very significant discount for risk would need to be applied to Mr Shaw's valuation. But the magnitude of the required discount to cover the risk of the subject land not being rezoned according to Mr Kettle's opinion, is so high—something like 50 percent would, in my judgment, be appropriate—as to undermine the reliability of employing Mr Shaw's valuation methodology. 50 However, Mr Jones' valuation methodology of direct comparison with sales of lands situate either within the Town Centre site or within a short distance of the Town Centre site on the opposite side of Sparks Road, in my opinion, offers a more reliable basis for valuing the subject land subject to some significant upwards adjustment in favour of the subject land reflecting its higher development potentialities compared with the sales lands by virtue of the subject land's superior location in relation to the new railway station and the proposed bus/train interchange as I have earlier described those additional potentialities of the subject land. 51 Mr Jones' Valuation Report records some 13 sales of lands situate in what was to become known as the Warnervale Town Centre site commencing with sales occurring in 2000. (At that stage, the Town Centre site had not been identified, although it was in 2000 that the Respondent commissioned Woods Bagot to prepare a planning Strategy for Warnervale. It was not until 2002 that the strategy was completed by Woods Bagot and was adopted by the Council). 52 His Valuation Report provides basic details of each of these sales but notes that "the majority of this evidence is not comparable in that it is too dated for application". 53 The Report then identifies the four most recent sales (where contracts were exchanged in 2003) as being more relevant, but then proceeds to discount all but one of those sales. That was a sale of lot 8 in Deposited Plan 7738 (85 Sparks Road, situate some 300 metres to the east of the subject land) comprising 4.047 hectares (twice the size of the subject land) contracted in October 2003 at a price of $4.5 million showing an unadjusted rate of $112 per square metres. The purchaser was the Catholic Church (the owner of the adjoining lot 7 upon which was being developed the existing Church school) and the vendor was the Toukley RSL Club. The Report states "The property was sold via public tender with two adjoining owners (the Catholic Church and Stannic Securities) demonstrating strong interest". Mr Jones' Report states "subject to adjustment, this sale is considered comparable". 54 In addition to this sale Mr Jones' Report refers to four other sales of lands located outside the Town Centre site "but within the Warnervale Planning Strategy Area which are considered comparable". These four sales are referred to as sales 2, 3, 4 and 5 in the following table that is included at p 10 of Mr Jones' valuation Report: Address Sale Date Sale Price Land Area Unadjusted Rate/ha Adjusted Rate/ha at Val. Date Comments 1. 85 Sparks Rd, Oct 2003 $4,500,000 4.047 ha $1,111,935 $940,000 Rezoning anticipated 2005 Future residential Woongarrah 2. 36-58 Virginia Rd, Hamlyn Terrace Apr 2003 $6,000,000 6.025 ha $ 995,851 $970,000 Rezoning anticipated 2008 Future medium density 3. 139 Warnervale Rd, Jan 2003 $3,600,000 4.047 ha $ 889,548 $950,000 Rezoning anticipated 2008 Future residential Hamlyn Terrace 4. 86 Sparks Rd, Oct 2003 $3,575,000 4.625 ha $ 772,973 $735,000 Designated school site with value agreed on a future residential basis Potential flora and fauna issues Hamlyn Terrace 5. 90 Sparks Rd, Hamlyn Terrace Dec 2003 $1,550,000 1.844 ha $ 840,564 $800,000 Designated school site with value agreed on a future residential basis Potential flora and fauna issues 55 Mr Jones' Valuation Report provides the following analysis of the sales evidence (that he has relied upon) and application of that evidence to the subject land resulting in his valuation of $2.15 million in respect of the market value of that land: The primary valuation evidence is considered to be sales 1 to 3. Sales 4 and 5 (designated school sites) are considered secondary evidence given the circumstances involving the transactions, that is the Department of Education being the purchaser. The primary valuation evidence shows a narrow range of values from $940,000 to $970,000 per hectare. These three primary sales share a number of common characteristics with the subject 1) All are located at Warnervale and are zoned 10(a) Investigation 2) All are identified for future residential use in the Planning Strategy 3) All have no significant environmental or flora and fauna constraints I note that the topography of the subject is steeper than all of the sales evidence including the secondary sales 4 and 5. Sale 1 (85 Sparks Road) is considered the most comparable. This sale has a further similarity with the subject in that it is located within the designated town centre area. Sale 1, however, does have an existing sewer capability. The narrow range of values of the primary evidence also demonstrates that where there has been no resolution to prepare a draft Local Environmental Plan for rezoning, ie no real certainty as to timing, then buyers are not prepared to pay identifiable premiums for land regardless of any anticipated or expected timing. The primary evidence also demonstrates that designation of medium density in the Planning Strategy produces a negligible difference in the value per hectare from the lower density designation. In particular, sale 2 (36 – 48 Virginia Road) shows a difference of $20,000 per hectare of 2% over sale 3 (139 Warnervale Road). This difference reflects not only the medium density designation, but also sale 2's slightly closer proximity to the town centre and the better aspect and view from this land. I note both sales 2 and 3 are outside the town centre and further from proposed facilities. I do not consider this negligible relationship would be held when comparing sale 1 to the subject, both of which are in the town centre area and closer to proposed facilities. The subject, but for the acquisition, would have medium density potential whereas sale 1 would not. Accordingly, I have made an allowance for medium density potential of the subject greater than the 2% demonstrated between sales 2 and 3. As mentioned, sales 4 and 5 are considered secondary evidence. Notwithstanding this, the subject is considered superior given the vegetation cover constraints existing on the sales evidence. After careful consideration of the primary evidence and to a lesser extent, the secondary evidence, I have adopted a rate of $1,000,000 per hectare for the subject. Calculations are as follows: 2.144 hectares x $1,000,000 $2,144,000 Say $2,150,000 56 Annexure "C" to Mr Jones' Valuation Report explains the reasons for his adopted adjusted rates for each of the five sales that he has relied upon. In respect of sale 1 (85 Sparks Road) which is his most comparable sale (because of its inclusion within the Town Centre) he makes two adjustments— (i) a deduction of $500,000 from the purchase price of $4.5 million on account of the fact that the purchaser was an adjoining owner; and (ii) a reduction of 5 percent reflecting Mr Jones' assessment of the negative effect on values at the date of compulsory acquisition caused by the public exhibition in May and June 2004 of the Respondent's draft Contributions Plan under s 94 of the Environmental Planning and Assessment Act increasing the rates of contributions for each newly created lot in the Woongarrah location from $28,100 (being the contribution rate being the applicable in October 2003) to $49,500 (being the contribution rate applicable in July 2004). 57 In application of his 10 percent discount for "adjoining owners" influence, Mr Jones' Valuation Report states the following: Allowance for Adjoining Owner Purchase Sale 1 (85 Sparks Road) was purchased by the adjoining owner. The adjoining owner was the Trustees of the Roman Catholic Church for the Diocese of Broken Bay. The church were developing a secondary school on the adjoining parcel and were seeking to acquire sale 1 to expand their operation. Another adjoining owner was also part of the tender process for sale 1. Stannic Securities Pty Limited have interests in adjoining properties to the north and east. Stannic Securities is a local residential property developer. As part of my investigations, I had discussions with representatives from both parties. Both advised that each party negotiated hard and that ultimately a Dutch auction transpired. Both representatives considered an adjoining owner premium was paid by the purchaser. In addition to this, I also prepared independent valuation advice on sale 1 (85 Sparks Road) prior to the tender for the then vendor, being Toukley RSL Sub-Branch Club Limited. Having regard to all of the above, I consider an adjoining owner premium of $500,000 was paid by the purchaser in excess of the market value. I have therefore made an allowance of $500,000 on the contract price. 58 In his Report in reply, Mr Shaw, while maintaining his original opinion (based upon Mr Kettle's opinion) as to the likely rezoning of the subject land provided "for the Court's assistance" an alternative valuation based upon the assumption (that had been adopted by Mr Jones who had relied upon Ms Slater's opinion) that the rezoning of the subject land would be Residential 2(b). 59 His valuation on this assumption was originally in the amount of $4.2 million, being based upon a sale at Wadalba of lot 196 Deposited Plan 1006789, comprising an area of 5818 square metres, zoned Residential 2(b). 60 His analysis of that sale (as significantly adjusted for time) showed a rate of $224 per square metre which he applied directly to the subject land producing a value of $4.8 million which he discounted by 12 1/2 percent, reflecting his allowance for delay in rezoning following acquisition. 61 In the Joint Report prepared by the valuers, Mr Shaw reduced his valuation to $3.8 million after he had factored into his valuation an allowance for a greater delay involving the anticipated time for the provision of sewer infrastructure to the subject land and the obtaining of access to the subject land via the development of adjoining lands. 62 Thus, upon the competing valuation based upon the common assumption made by the valuers as to the likely future zoning of the subject land as Residential 2(b), the valuations were: (i) $3.8 million (Shaw) and (ii) $2.15 million (Jones) 63 For reasons that I have already given, I do not think that the price to be struck by the hypothetical parties would have been based upon an assumed future zoning of the subject land as Residential 2(b). Accordingly, I do not stay to consider this aspect of the competing valuations, other than to observe that the competing valuations are based upon entirely different valuation methodologies, or if not that, upon entirely different comparable sales. 64 If the assumption of a Residential 2(b) zoning had been the correct assumption to make, I think that the sales of the two properties situate in Woongarrah, each zoned Residential 2(b) (which were included in Mr Shaw's list of sales) would be more comparable than the Wadalba sale. One of these sales was of land situate a very short distance from the subject land at the corner of Minnesota and Rudd Roads, Hamlyn Terrace. It comprised 15,110 square metres and sold for $2.4 million on 1 May 2004 reflecting a rate of $159 per square metre. 65 The other sale property was situate at 33 Mataran Road, Woongarrah (situate a greater distance from the Town Centre than the Minnesota Road sale). It comprised an area of 13,350 square metres and sold in June 2003 for $1.92 million (which, according to Mr Shaw's analysis, required a 7 percent adjustment for time and so adjusted, showed a rate of $144 per square metre). 66 These sale properties are geographically much more proximate to the subject land than the sale at Wadalba and are also far more contemporaneous in terms of the respective dates of sale. The rates of $144 and $159 per square metre for the Woongarrah sales are very much below the adjusted rate of $224 per square metre analysed by Mr Shaw for the Wadalba sale. If these Woongarrah sales were directly applied to the subject land in preference to the direct application of the analysed sale price for the Wadalba land, Mr Shaw's valuation of $3.8 million would be substantially reduced to a figure in the order of 2.8 million. 67 Before considering in greater detail the basis of Mr Jones' valuation based upon his analysis and application of the sales that he regarded as comparable, I should mention Mr Jones' Valuation in Reply which he undertook (as foreshadowed in the Joint Report of the Valuers) upon the assumption that the subject land would be rezoned in the manner opined by Mr Kettle namely two thirds commercially zoned and one third residentially zoned 2(c) permitting that development (at a higher intensity than permitted by Residential 2(b) zone). This exercise was undertaken by Mr Jones for completeness so that the Court had the benefit of competing valuations based upon the same planning assumptions as to future rezonings and development potentialities of the subject land. As such, it was a counterpart to Mr Shaw's Valuation Report in Reply so that the end result was that the Court had valuation evidence from the two experts upon precisely the same bases. Thus, Mr Jones' valuation based upon a mixed use zoning (combining a commercial component with a residential component) of $1.95 million is to be compared with Mr Shaw's valuation of $6 million (which I have wholly rejected for the reasons I have earlier given). The curious and unexplained feature of Mr Jones' valuation assuming a mixed use zoning of the subject land, was that it was entirely based upon two sales to Landcom transacted in 2002, namely lots 2 and 3 in Deposited Plan 7738 (being situate 300 and 150 metres respectively distant to the west of the subject land), that were included in the 13 sales within the Town Centre detailed in his Original Valuation Report and included in the sales evidence which that Report concluded were not comparable sales because the sales were "too dated". 68 Since I have already rejected Mr Shaw's primary valuation I need not consider in any depth Mr Jones' valuation based upon his assumption of a mixed use future rezoning of the subject land other than to say that I do not accept the valuation as being reliable either in the result or in its foundation. 69 Because I do not regard the valuation as sound in result or reliable in its foundation (relying on two "outdated" sales to Landcom) I do not accept Mr Jones' further opinions based upon his valuation that "sales reflecting potential commercial and mixed uses produce a value similar to that given to sales of lands valued on a residential basis" and that "the anticipated specific future usage of the land did not have a significant effect on value at the date of acquisition given its conceptual planning strategy status only". 70 For similar reasons I am unable to accept Mr Jones' opinion that the best evidence (to apply in valuing the subject land) are sales occurring within the Planning Strategy Area, and more precisely those located in the Town Centre area, "regardless of the specific future zoning and anticipated timing of the rezoning". 71 The valuation flaw in this last mentioned opinion of Mr Jones is the very serious risk that the resulting value does not capture the highest and best use of the subject land and does not recognise the full development potentialities of the land. As the High Court of Australia stated in Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575 "dispossessed owners should be compensated for the value of their land on the basis of its highest and best use": see Brown at p 130 et seq. 72 In my judgment the best and fairest means of capturing the full value of the development potentialities of the subject land which at the very least represent the advantages of the subject land in its very close proximity to the commercial/retail/community hub of the Town Centre compared with the only comparable sale within the Town Centre, namely the purchase by the Catholic Church of the lot some 300 metres further to the east of the subject land along Sparks Road and located in the eastern sector of the Town Centre which in the Woods Bagot Concept Plan (2002) is clearly differentiated from the western sector in the latter of which are to be contained the higher uses (commercial retail community residential flats) forming the essential structure of the Town Centre, is to ask how much more than the sale land price would the hypothetical parties pay for the subject land, recognising its comparative advantages over the sale land. 73 In this respect, it is to be recalled that in his application to the subject land of his analysis of the sale to the Catholic Church, Mr Jones made one upwards adjustment in favour of the subject land over the sale land, namely a percentage increase in the order of 6 percent recognising that the subject land had a medium residential density potential (which did not exist in the case of the sale land). In my judgment, a far greater adjustment is justified to recognise the greater development potentialities of the subject land over the sale land within the overall context of their respective places in the Town Centre. In my judgment, the price to be struck by the hypothetical parties would recognise that the subject land was in the order of 33 1/3 percent more valuable than the sale land because of the locational advantages of the subject land within the context of the Town Centre as reflected by the radical difference in nature and kind and degree in the spatial disposition of structural development elements of the Town Centre between the western and eastern sectors illustrated in the Woods Bagot Concept Plan (2002) (and maintained in the subsequent master planning). 74 I start with the simple analysis of sale property showing a rate of $112 per square metre. Mr Jones' two downwards adjustments (10 percent for adjoining owner's influence and 5 percent for the increased s 94 contributions) produce an adjusted rate of $94 per square metre (being less than his adjusted analysed rate of $97 per square metre for his sale 2 situate outside the Town Centre). 75 In my judgment, comparison of these two sales (as adjusted by Mr Jones in his analysis of the sales) indicates that his adjustment of this principal sale from $112 per square metre to $94 per square metre is unjustified. Moreover, I am of the opinion that the adjustments are not justified as a matter of valuation principle. Accordingly, I would reject Mr Jones' adjusted rate, and hold that for the purposes of comparison with the subject property, the sale should be applied on an unadjusted basis. This suggests that the price that the hypothetical parties would adopt for the subject land by comparison with the sale land is one that represents a 33 1/3 percent increase on the sale price. That would yield a price of $3.216 million reflecting the rate of $150 per square metre. 76 The adopted rate of $150 per square metre for the subject land is supported by the sale prices paid in the two Woongarrah sales that I have earlier referred to—the Minnesota Road site ($159 per square metre) and the Mataram Road sale ($144 per square metre). 77 Both the sale lands were already zoned Residential 2(b) which reflects a lower development potentiality than I have found the subject land to possess. 78 However, because the higher potentiality of the subject land cannot be realised until rezoning occurs in two or two and a half years time to compare the subject with the sale lands requires adjustment on that account. 79 The adopted rate of $150 per square metre (compared with the sale rates of $159 per square metre and $144 per square) is equivalent to a present value of the subject lands at the rate of $180 per square but deferred for 2 to 2 1//2 years at the rate equivalent to the requisite carrying costs. That margin of difference ($30-$35 per square metre) in my opinion reflects the higher development potentiality of the subject land over the potentialities of the two sale lands reflecting their zoning as Residential 2(b). 80 In my judgment, the amount of $3.216 million fairly reflects the market value of the subject land and I adopt it. D. APPLICANTS' FURTHER CLAIMS TO COMPENSATION 81 As earlier mentioned, the Applicants also claim compensation for (i) disturbance and (ii) solatium. 82 The Respondent concedes that solatium is payable in respect of Mr Austin Woodbury's claim. 83 The Applicants' claim to disturbance is founded on the fact that following the compulsory acquisition Mr Austin Woodbury purchased a replacement property at Lake Haven to provide him his residence (he had continuously lived in the dwelling-house erected on the compulsorily acquired land after he had acquired it in 1987). 84 Although, according to the Amended Points of Claim, the Applicants had claimed an amount of $339,120 for disturbance, at the hearing the claim to disturbance was drastically reduced. As detailed in the affidavit of Mr Austin Woodbury sworn 24 August 2005, he claimed compensation for the following amounts— (a) Stamp duty on new purchase $14,840.00 (b) Legal fees on purchase $ 2,017.00 (c) Legal fees on negotiations with Wyong Council prior to Court proceedings $ 4,400.00 (d) Removalist Expenses ($1500 for the removal of shed and contents) $ 2,100.00 (e) Valuation fees $ 5,000.00 _________ Total $28,357.00 85 In addition to the disturbance claim made by Mr Austin Woodbury, the following claims are made by each of his two brothers (who are co-Applicants in these proceedings) on the assumption that each will incur the following expenses when each purchases "an alternative property for $550,000": (a) Stamp duty on purchase $17,000.00 (b) Legal fees on new purchase $ 2,000.00 (c) Building, pest and Survey reports $ 1,100.00 86 The Respondent disputes the Applicants' claims to compensation for disturbance and relies upon my decision in Damjanovic v Roads and Traffic Authority of NSW (No 2) (2005) NSWLEC 371. The Applicants submit that the facts of that case are very different from the facts of the present case. In any event, the Applicants submit that my decision in Damjanovic was wrong and that I should not follow it in the present case. 87 Although the facts of the present case are different from the facts in Damjanovic, the following passages from my judgment in that case would appear to be equally applicable to the present case where the market value compensation that I have assessed is based upon the "the potential of the land to be used for a purpose other than that for which it is currently used" (being a relevant phrase in the Just Terms Act, s 61): But even if the alternative property had been acquired by the Applicants merely to relocate their places of residence I do not consider that the compensation claimed for disturbance is recoverable in the present case. This is because of the operation of s61 of the Just Terms Act in the present case where the market value of the compulsorily acquired land was determined in my earlier judgment upon the basis that the land had potential to be used for a purpose other that that for which it is currently used and where in realising that potential (both in respect of the compulsorily acquired land and the residue land) the financial advantage of continuing the existing development (i.e. the poultry egg production business and the ancillary dwelling places) would reasonably have been foregone i n the same way that any financial loss of having to relocate that business and those dwelling places would reasonably have been incurred in realising that potential. In so holding I would refer to and apply my exposition of the effect of s61 of the Just Terms Act in Peter-Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30 at 36 to 43 inclusive. That extended passage includes at 43 citation of the following extract from the judgment of the High Court of Australia in Crisp & Gunn Co-Operative Ltd v Hobart Corporation (1963) 110 CLR 538 at 547-548 which in my opinion illumines the effect of s 61 and is particularly apposite to the Applicants' disturbance claim: Further we are of the opinion that the requirement of the statute that regard should be had in assessing compensation to a number of factors including disturbance and any other matter not directly based on the value of the land does not justify the award of any amount for disturbance in addition to the market value of the land where, as here, that value exceeds the 'present use' value by an amount in excess of any loss resulting from disturbance. 88 For similar reasons, I would reject the Applicants' claims to compensation for disturbance. In my judgment the Just Terms Act, s 61 denies the compensation claimed as disturbance. E. CONCLUSIONS AND ORDERS 89 For all the foregoing reasons, I determine compensation in the sum of $3,235,665 comprising— (a) market value $3,216,000 (b) solatium $ 19,665 90 Since the Applicants have succeeded in obtaining an award of compensation substantially in excess of the Respondent's offer (albeit substantially less than they had claimed) they should receive their costs of the proceedings but such costs should exclude all costs incurred in respect of their application to reopen the case. Such an order will be subject to the Respondent having the opportunity to seek a different order by filing a Notice of Motion in that behalf within 14 days. 91 Accordingly, I make the following orders— 1. Compensation is determined in the sum of $3,235,665 comprising— (a) market value $3,216,000 (b) solatium $ 19,665 2. The Respondent shall pay the Applicants' costs in the sum agreed, or failing agreement, as assessed (excluding all costs incurred in respect of the Applicants' application to reopen the case) unless within 14 days of today the Respondent files a Notice of Motion seeking a different order in which event costs are reserved. 3. Exhibits 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.