Land and Environment Court of New South Wales CITATION : Stephen Anthony Horton and Kay Elizabeth Horton v Wyong Shire Council [2004] NSWLEC 571 APPLICANT Stephen Anthony Horton and Kay Elizabeth Horton PARTIES : RESPONDENT Wyong Shire Council FILE NUMBER(S) : 31582 of 2003 CORAM: Talbot J KEY ISSUES: Compulsory Acquisition of Land :- determination of underlying zoning and potential for rezoning. Compensation :- dispute between valuers resolved by determining where bargain would be reached. Land Acquisition (Just Terms Compensation) Act 1991 Rivers and Foreshores Improvement Act 1948 LEGISLATION CITED: Draft Sydney Regional Environmental Plan - Wyong Development Areas and Coal Mining 1987 Wyong Development Control Plan 49 - Warnervale East/Wadalba Development Control Plan Wyong Local Environmental Plan 1991 CASES CITED: DATES OF HEARING: 14/09/04, 15/09/04, 16/09/04 (site inspection), 17/09/04, 20/09/04 DATE OF JUDGMENT: 10/15/2004 APPLICANT Mr J J Webster SC with M/s M Carpenter (Barrister) SOLICITORS Taperell Rutledge Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr P C Tomasetti (Barrister) SOLICITORS Colin Biggers & Paisley JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Talbot J 15 October 2004 31582 of 2003 Stephen Anthony Horton and Kay Elizabeth Horton v Wyong Shire Council JUDGMENT 1 Talbot J: By Notice of Compulsory Acquisition of Land published in the NSW Government Gazette on 29 August 2003 Wyong Shire Council ("the Council") acquired by compulsory process under the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 ("the Just Terms Act") land owned by the applicant being Lot 2 DP 369486, No. 593 Pacific Highway Wadalba located on the south side of the Pacific Highway at its intersection with Louisiana Road ("the site"). The land is rectangular in shape with an area of 2.558 hectares having a frontage of 114.7m to Louisiana Road and a frontage of approximately 223m to Pacific Highway. 2 At the date of acquisition the subject land was zoned (1)(c) (Rural Holding Zone) under Wyong Local Environmental Plan 1991 (as amended) ("LEP 1991"). 3 The applicant's case is that if not required for a public purpose, the subject site would have been rezoned Residential 2(b) in July 1993, or alternatively, if it remained zoned 1(c) as at the date of acquisition the subject site would have been rezoned within three years. The respondent disagrees and considers that the land would have remained in the 1(c) zone at the relevant date with an expectation that the land could have been released between 5 and 10 years after that date. 4 There is a dispute about the extent of the area of remnant vegetation that would have been retained if development had proceeded. There is also a dispute between experts in relation to the significance of an existing flow path through the property. The applicant's expert evidence is that the flow path is minor and unlikely to be constrained by the need for a riparian corridor, whereas it is the respondent's case that it would be classified as a first order stream falling within the definition of protected lands under the Rivers and Foreshores Improvement Act 1948 ("the RFI Act"). 5 The applicant's evidence is that sewer infrastructure was planned, costed, programmed and designed to be made available to the site prior to acquisition and that infrastructure was constructed to the north of the site with provision for extension to the site. Conversely, the respondent's position is that the development potential of the site was severely constrained by the lack of sewer and that a rezoning would not occur until all of the required infrastructure was in place. 6 The valuers have conferred pursuant to the Expert Witness Practice Direction ("the EWPD") and provided a joint report that deals with each of the potential scenarios for the development of the land. There is disparity between the valuers in respect of the value of the land in the circumstances of some of the separate scenarios but significant agreement in others. Accordingly, the Court has to determine firstly when the land would have been rezoned in the ordinary course and when that occurred, what constraints would have been taken into account in determining a purchase price for the land on the basis that both the vendor and purchaser were willing but not anxious parties to the transaction. Zoning history 7 Draft Sydney Regional Environmental Plan – Wyong Development Areas and Coal Mining 1987 identified the subject land as being located within "Medium to Long Term Urban Development Area No. 8." 8 LEP 1991 was gazetted on 15 February 1991 when the subject land, together with most of the land in the Wadalba area north and south of the Pacific Highway, east and west of Louisiana Road was included in the 1(c) Rural Holding Zone. The stated objective of the 1(c) zone included the conservation of suitable rural land for future urban development and related objectives. 9 On 4 July 1993 LEP 1991 (Amendment No.2) was gazetted. Following Amendment No. 2 the subject land remained in the 1(c) zone. The boundary of the Residential 2(b) (Multiple Dwelling Residential Zone) was located west of the subject land, north and south of the Pacific Highway. The zoning of the subject land remained 1(c) under LEP 1991 at the date of resumption. 10 In late 1993 the first applicant obtained a copy of Draft Development Concept Plan 50 from the head of Strategic Planning at the Council. The plan depicted a residential cul de sac road plan within the subject site. Mr Horton was told by the Council officer at that time that the land was "scheduled for rezoning in 2003." 11 The Council introduced Wyong Development Control Plan 49 – Warnervale East/Wadalba Development Control Plan ("DCP 49") on 13 April 1994. The development concept plan for the Wadalba release area in DCP 49 showed the subject land as part of a future high school site. The roads depicted on the plan handed to Mr Horton about 6 months earlier were no longer evident. 12 During 1997 and 1998 when the Council considered Amendment 96 to LEP 1991, it was proposed to relocate the future school to an alternative site. However the Council resolved that a proposed rezoning to 5(a) Special Uses – School be excluded and left as a "deferred matter". It is not in dispute that under the 1(c) zoning, schools and playing fields are permissible with the consent of the Council and that the subject land did not require the preparation of an amendment to LEP 1991 to enable the development of the land for those purposes. 13 The Council prepared a Development Concept Plan for the Wadalba Release area in October 1998 whereby the subject land was included in Neighbourhood No.2 in Wadalba North West. The development concept was amended to show the subject land as playing fields and the actual school site had been moved into the 2(b) zone to the west. 14 The western section of Neighbourhood 2 has since been developed by residential subdivision and the building of a high school. There has been no redevelopment in the eastern section of Neighbourhood 2 where the subject land is situated. 15 A November 1999 development concept plan for the Wadalba release area identified a Potentially Significant Habitat Area on the subject site. At the date of resumption there was no amendment to DCP 49 that had effect on the subject land. It remained identified as an Environmental Corridor-Open Space, notwithstanding amendments otherwise made to the development concept in March 2002. 16 Pursuant to the EWPD the town planning experts have conferred and agree on the following matters:- 3.3 That the subject land is physically capable of residential development, subject to determination of the level of ecological constraint which may, or may not, affect part of the land and the effect of any riparian zone that may be required; 3.4 That the determination of whether or not a riparian/drainage corridor is required to be provided through the land is not an impediment to the rezoning of the subject land for residential development. It is noted that other land within Wyong urban release areas crossed by drainage lines indicated on the 1:25000 topographical map have been zoned for residential purposes; 3.6 That services such as reticulated sewerage do not have to be physically present as a prerequisite for land to be rezoned for residential development as part of a programmed urban release/planning process. Timing of the release of the subject land for residential development 17 In 1989 the Planning and Co-ord Engineer recommended that development at Wadalba be confined to three identified sewer sub-catchments to be served by two major pump stations. The eastern most catchment extended to the ridge line immediately west of the subject land. Although there is no record of a formal adoption of the recommendation by the Council, nevertheless, the report supporting the recommendation assists with an explanation of how land was selected for release at that time. 18 The zone boundary adopted in 1993 immediately west of the subject site is consistent with cadastral boundaries. The making of Amendment No.2 in that year had been deferred until arrangements for financing engineering services (notably water and sewer) had been resolved. Although the concept for the development of Wadalba persistently included the subject land as either a school site or playing fields, the zone boundaries adopted in 1993 do nothing to distinguish the designation of the areas for those public purposes. 19 A review of current zoning boundaries undertaken on behalf of Council in March 1997 recognised the constraint on the subject land as a consequence of its designation as future public school/high school. At the same time the Council pursued the rezoning of land north of Wyong Hospital to provide land for future release in order to overcome difficulties identified at that time, in implementing development within the southern limits of the existing urban release area. 20 A proposal to relocate the school site off the subject land and to the west in order facilitate integration with proposed residential development was recommended in a review of Wadalba North West Urban Release Area in May 1998. It is clear from the review document that the primary purpose of the relocation was to bring the school into another sub-catchment that could be serviced more readily with sewerage and drainage structure. 21 The review also relevantly noted that although the Wadalba North West Urban Release Area had been rezoned for urban purposes in 1993 and DCP 49 was also adopted, no residential development had occurred up to that time in the Wadalba North West area. It was considered premature to rezone additional land within Wadalba North West until such time as adequate development had occurred to justify the rezoning of further land. In any case, the Council had resolved not to rezone additional residential land in new urban release areas until the NSW State Government provided adequately serviced industrial land. 22 In the light of the evidence in relation to the release and take up of land at Wadalba and the history of rezoning in the area taking account of the planning for and availability of services, I reject the submission that but for the setting aside of the subject site for the purpose of a school, the land would have been included in the 2(b) zone in 1993. 23 By the date of acquisition the extension of sewerage reticulation north of the Pacific Highway in an easterly direction adjacent to the site provided a realistic opportunity for the subject land to be serviced thereby eliminating the previous constraints in that respect. At that point the remaining issue becomes one of timing for the expected release, as the other physical constraints are not considered to prohibit development. Timing for the future 24 Evidence provided (only in the days immediately leading up to the hearing) by Donna Slater the Senior Strategic Planner at Wyong Shire Council is that the Council would be unlikely to consider a rezoning to residential in the short term because resources are currently concentrated on the planning and release of the proposed Warnervale Town Centre and that until that was complete and the land substantially developed, other areas would not be considered for rezoning. 25 Prior to hearing that evidence the Council's consultant Harvey Sanders had formed a view that the prospect of a rezoning to 2(b) (Multiple Dwelling Residential Zone) was a reasonable likelihood within the medium term, which he said would be within three to five years of the acquisition date. Despite having earlier relied on actual enquiries made at the Council on his behalf to give his original opinion, Mr Sanders revised his estimate in his oral evidence to estimate release within five to ten years 26 When asked by Mr Webster SC, who appears for the applicant, to assume that in August 2003 the land was zoned 1(c) (contrary to his conviction that it would have been so zoned in 1993) and that it was available for sale at that date, Mr Sneddon the applicant's consultant town planner, estimated the time for rezoning would in his opinion be three years at that time, provided infrastructure was funded by the developer. 27 Not only does Mr Sanders agree that the immediate availability of sewer connection is not necessarily a prerequisite to rezoning, he accepts that the sewer line constructed at the northern side of the Pacific Highway meant there was no impediment to development of the subject site on that account. 28 The flaw in the argument lately propounded on behalf of the Council lies within its own Residential Development Strategy December 2002 which states at 7.4 as follows:- 7.4 OTHER REZONINGS There will continue to be proposals for minor rezonings on the fringes of existing release areas or in other locations outside the primary focus on Warnervale District Centre. In order to ensure the orderly and economic release of land, a set of clear criteria for assessment of these proposals is required to ensure that only proposals that have merit on social, economic and environmental grounds are considered within the context of this Residential Strategy. Assessment criteria includes all of the following: · Coal mining being complete or no longer considered by authorities as a major constraint; · The land is serviced or can be serviced within Council's program for water and sewer services without the need for short term throwaway infrastructure works, · The area is contiguous with an existing urban area and will increase the population to an extent which will significantly improve the viability of public transport services, general community services (eg local GP) and local convenience retail services, · The rezoning of the land will make a significant contribution to increasing housing types over and above what is currently available. · The rezoning of the land will significantly contribute to improving access to public transport, local convenience retail and community services (health, education, community support services) and employment opportunities and would not require the extension of services (eg sufficient capacity in local schools to accommodate additional students), · The land can be accessed without the provision of temporary structures or roads which may compromise the development of adjacent areas or create a maintenance problem for residents and Council, · The proposal would not lead to fragmented development of part of an area which would otherwise be released at a future stage as part of a much larger stage release under the UDP, · Council has the staff resources to undertake and supervise the necessary studies and preparation of documents to facilitate the rezoning. In considering future release areas Council will also apply differential residential zoning to permit less than 15 dwellings per hectare where mine subsidence or ecological or water quality constraints to require this and at least 15 dwellings per hectare where constraints do not preclude higher densities. 29 Notwithstanding conflicting submissions about the fit of the subject land within the listed assessment criteria I am satisfied that the prospective purchaser would have recognised the above points in relation to services, contiguity, access and fragmentation as positive elements that could be applied to the subject land. The proposal could have been reasonably regarded on the fringe of an existing release area. There is evidence of Council cooperating with investigation of rezoning proposals from developers on the basis that the developer carries out and funds the necessary studies. Furthermore Mr Sneddon makes the significant observation that the Warnervale Town Centre is not directly related to the Wadalba Release Area. 30 Although Mr Tomasetti has been able to demonstrate that there is a significant bank of residential lots which may well serve the demand for development within the Shire beyond a three year period, even up to ten years, I nevertheless agree that the release of the subject land would have only a marginal impact on the overall picture. It is my opinion that the hypothetical prospective purchaser would have regarded the land in this way and acquired it in August 2003 with an expectation that rezoning and release could be achieved within five years. Constraints 31 It is Council's contention that a prospective purchaser would have been told that the prescribed stream across the property would demand that any development that impacts on it be regarded as integrated development and require consent from the Department of Planning Infrastructure and Natural Resources ("DIPNR"). Furthermore there would be advice that sensitive vegetation may constrain the ability to clear the land for residential development. 32 Robert Staniland, a consulting engineer retained by the applicant, would have advised the hypothetical purchaser that the site is unlikely to be constrained by a riparian corridor over the flow path and that as the area of the site needed for control of runoff quality and peak flow rates resulting from development is less that 4%, it could be developed for residential land utilising standard engineering design practices similar to existing nearby new release residential areas. 33 The Council's consultant engineer Mark Tooker says that DIPNR would classify the flow path as a first order stream because it is designated on topographic maps and has banks. He concludes that a 20m riparian corridor from top of bank on either side of the stream would be required in the lower portion. Only 10m would be required in the upper section. Mr Tooker also thinks that compensatory flood storage would be needed after the site is filled to alleviate the increase in flood flows in lesser events than the 100 year ARI storm. The critical flood storage extends over the lower portion of the site and in Mr Tooker's opinion would require capacity for 2,440m3. 34 It would have been reasonable for the purchaser to conclude on the basis of the advice available from the engineers that 4% of the developable areas could be required for runoff detention and water quality control. 35 As I have just said, I have inspected the site and although the stream or flow path is clearly intermittent and not highly significant, particularly in the upper reaches, it is nevertheless of sufficient order lower down to justify a purchaser paying careful attention to the advice of Mr Tooker. The prudent purchaser would assume a realistic prospect that DIPNR would follow the Tooker line. 36 The issue in respect of the extent of constraints posed by the vegetation in the site is confined to the extent of area to be retained. Phillip Conacher says that the western section only is an appropriate area of vegetation retention, whereas Dr AnneMarie Clements contends a larger area should be conserved and enhanced in any future development. Mr Conacher opines that the less disturbed and degraded vegetation could be retained within a drainage reserve. Subtle differences between the experts regarding the significance of the ecological community do not need to be resolved for present purposes. 37 I have inspected the site in a way similar to that the theoretical purchaser would have done and had regard to the advice from Mr Conacher and Dr Clements whilst doing so. As a prospective purchaser I would have regarded the eastern parts of vegetation as more disturbed and fragmented than the vegetation along the western boundary and entertained a realistic expectation the eastern section would have been made available for residential development. 38 I agree with the submission made by Mr Tomasetti that in the process of forging an agreement, the prudent purchaser would identify every defect or constraint that has an effect on price, whereas the prudent vendor would concentrate on the positive aspects. 39 The consequence of my conclusions in relation to the impacts of the vegetation and drainage flow, particularly through the site, is that the advice of Mr Tooker and Mr Conacher would have persuaded the prospective purchaser to take their respective advice more or less at face value and assess the purchase price to be paid on that basis. Valuation 40 After conferring in accordance with directions given pursuant to the EWPD the valuers provided a schedule of values that could be adopted depending on the determination by the Court of issues between the other experts. After Mr Shaw gave oral evidence to clarify his position regarding the advice received from Mr Tooker it was apparent to me that the valuers were eventually in agreement that if the purchaser acted on the advice of Mr Tooker and Mr Conacher and on the basis that the land would be released in five years from the date of acquisition, the price to be paid by a willing but not anxious purchaser to a willing but not anxious vendor would have been $1,260,000. 41 Originally Mr Shaw had maintained a figure of $2,000,000 irrespective of the advice from Mr Tooker because he said the purchaser would have ignored the watercourse as just part of the landscape. Ultimately when questioned by me he appeared to understand what he was being asked, namely to assume that the advice of Mr Tooker would be taken into account by the parties. He then agreed that his figure of $2,000,000 in that circumstance should be reduced to the $1,260,000 assessed by Mr Jones. 42 However it then became apparent from a close examination of the table provided that as a consequence of that agreement one of the valuers had placed a higher value on the land in the event that the opinion of Dr Clements was preferred over the opinion of Mr Conacher. Because this had the prospect of creating an anomaly I directed the valuers to confer further after the hearing and if appropriate to provide an amended joint statement. 43 The valuers have conferred further and provided me with an explanation. Any potential anomaly has been resolved to my satisfaction. In their opinion the Dr Clements constraint provides the opportunity for a single dwelling within the buffer zone, whereas given its size and lack of buffer area, the area designated by Mr Conacher was considered significantly inferior and therefore value was determined assuming no single homesite potential but rather the added value of this land is only as attached to a standard residential lot. The comparative agreed values determined by the valuers in conference are $1,260,000 if the area determined by Mr Conacher is accepted and $1,415,000 if the scheme propounded by Dr Clements is implemented. I recognise that superficially the purchaser may have regarded the Conacher advice as potentially providing the opportunity for a greater yield, but nevertheless upon receiving the total advice that I now have the contiguity between a hypothetical vendor and purchaser would have been achieved somewhere in between as a consequence of the process referred to earlier at [38]. By exercising my own judgement based upon the whole of the evidence including the final joint statement by the valuers, I determine the amount of compensation payable as the amount of $1,350,000. 44 Questions relating to claims for solatium and disturbance are reserved at the request of the parties. Orders 45 Pursuant to s 66 of the Just Terms Act I determine that the amount of compensation in respect of the market value of the subject land on 29 August 2003 was $1,350,000. The determination of compensation for solatium and disturbance and costs of the proceedings is reserved. The matter will be listed for mention at a time convenient to the parties taking account of the time for an opportunity to read these reasons for judgment. 46 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.