Land and Environment Court New South Wales Medium Neutral Citation: Marroun v Roads and Maritime Services [2012] NSWLEC 199 Decision date: 30 August 2012 Jurisdiction: Class 3 Before: Sheahan J and Parker AC Decision: (1) The applicants are awarded $1,270,000, pursuant to s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991, for the market value of the subject property acquired by the respondent. (2) The applicants are awarded $104,792.57 for disturbance, under s 55(d) of the Land Acquisition (Just Terms Compensation) Act 1991. (3) Costs are reserved. (4) All exhibits and the Court Book are returned to the parties. Catchwords: COMPLUSORY ACQUISITION OF LAND - compensation - development consent - offer to purchase - economic loss - agreement to lease - market value - value of the consent - disturbance items disputed Legislation Cited: Civil Procedure Act 2005 Corporations Act 2001 (Cth) Expropriation Act P.S.O. 1980 (Ont.) Land Acquisition (Just Terms Compensation) Act 1991 Liverpool City Centre Local Environmental Plan 2007 Liverpool Local Environmental Plan 2008 Cases Cited: Almona Pty Ltd v Roads and Traffic Authority (NSW) [2008] NSWLEC 112; (2008) 160 LGERA 375 Beale v Trinkler [2008] NSWSC 347 Bingham v Cumberland County Council (1954) 20 LGR (NSW) 1 Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259 BMP Manufacturing Pty Ltd v Roads and Traffic Authority of New South Wales [2008] NSWLEC 298 Brewarrana v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170 Caruana v Port Macquarie-Hastings Council [2007] NSWLEC 109 Commonwealth v Arklay [1952] ALR 640; (1952) 87 CLR 159 Dell Holdings Ltd v Toronto Area Transit Operating Authority [1997] 1 SCR 32 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Canada (Federal District Commission) v Leahy [1940] Ex CR 115 Fitzgerald v Masters (1956) 95 CLR 420 Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547; (1981) 50 LGRA 334 Fitzpatrick Investments Pty Limited v Blacktown City Council (No. 2) [2000] NSWLEC 139; (2000) 108 LGERA 417 Goold & Rootsey v Commonwealth of Australia (1993) 42 FCR 51 Graham Trilby Pty Limited v Valuer-General [2008] NSWLEC 217 Graham Trilby Pty Ltd v Valuer General [2009] NSWLEC 1087 Gregory v Commissioner of Taxation of the Commonwealth of Australia [1971] HCA 2; (1971) 123 CLR 547 Holcim (Australia) Pty Ltd v Valuer-General [2009] NSWLEC 225 Jessica Investments Pty Ltd v Valuer General [2008] NSWLEC 1375 Kennedy Street Pty Ltd v The Minister [1963] NSWR 1252; (1962) 8 LGRA 221 Leichhardt Municipal Council v Seatainer Terminals (1981) 48 LGRA 409 Marroun v Liverpool City Council [2008] NSWLEC 1172 Maurici v Chief Commissioner of State Revenue (2003) HCA 8; [2003] 212 CLR 111 McDonald v The Deputy Federal Commissioner of Land Tax for New South Wales [1915] HCA 54; (1915) 20 CLR 231 McMahon v Sydney County Council (1940) 40 SR (NSW) 427 Mir Bros Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales [2006] NSWCA 314 Mitchell v Roads and Traffic Authority (NSW) [2008] NSWLEC 258; (2008) 164 LGERA 375 MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 Purdy v Nova Scotia (1973) 6 LCR 70 Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151 River Bank Pty Ltd v Commonwealth of Australia (1974) 31 LGRA 244 Rivers and Rivers v Minister of Education (1975) 36 LGRA 124 Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66 Rosenbaum v The Minister [1965] HCA 65; (1965) 114 CLR 424 Rummery v Dorsman (1996) NSW ConvR 55-780 Southern Highland Quarries Pty Ltd v Gunning Shire Council [1992] NSWLEC 58 Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418 Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [2005] NSWCA 251; (2005) 141 LGERA 243 The Trust Company Limited v Minister Administering the Crown Lands Act 1989 [2012] NSWLEC 73 Tolson v Roads and Traffic Authority of NSW [2012] NSWLEC 170 Tomago Aluminium Company Pty Limited v Valuer General [2010] NSWLEC 4 Warner v Ulysius International Trading Pty Ltd [2011] NSWSC 329; (2011) 91 IPR 570 Category: Principal judgment Parties: Michael Marroun and Kaokab Marroun (Applicants) Roads and Maritime Services (Respondent) Representation: Mr J Webster SC, with Ms V McWilliam (Applicants) Mr R Lancaster SC, with Mr N Eastman (Respondent) Fay Rose Legal (Applicants) Henry Davis York (Respondent) File Number(s): 30983 of 2010 Judgment Introduction 1This case concerns the compulsory acquisition, on 10 September 2010, of a vacated Pizza Hut site at 304-308 Hume Highway, Liverpool (Lot 100 DP 1028926 - 'the property' or 'the subject site'), being a block slightly irregular in shape, and having an area of 1268.6m2, located on the fringe of the Liverpool commercial centre, approximately 35 kilometres south west of Sydney (Exhibit R1, vol 1, tabs 1 and 2, and Exhibit R3). 2At the acquisition date, the site relevantly enjoyed a development consent ('DC'), granted by this court on 15 May 2008, for a six-storey commercial building. The evidence suggests that the applicants were planning to sell the subject site with the benefit of the DC, or, failing that, to build the project themselves (Tp145), and it was being used by them only as a development site. 3There is no dispute between the parties regarding town planning matters, nor about the likely construction cost of the approved commercial building, which cost has been settled by a "single expert" (Jeff Hughes - Exhibit R2) as $18M (rounded). 4I gratefully acknowledge the assistance of Acting Commissioner Dr David Parker in the determination of this matter. Quantum Issues 5The report prepared by the Valuer General ('VG') led to the making of a statutory offer of compensation of $1.525M for market value, plus disturbance of $95,765. 6The Points of Claim in the applicants' objection to that offer went through several amendments, culminating in Second Further Amended Points of Claim ('SFAPOC'), filed on 12 August 2011, to which the respondent (at the time the Roads and Traffic Authority ('RTA'), now known as Roads and Maritime Services) replied in Amended Points of Defence ('APOD'), filed on 15 August 2011. Their respective contentions may be summarized as follows. 7The applicants have claimed market value under s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991 ('JTC Act') of $4.2M, or, alternatively, market value of $2.725M, plus economic loss under s 59(f) of $1.475M, making the same total claim ($4.2M). 8They claim that (1) they had been offered $4.2M for the purchase of the site, by interests associated with one Michael Kordek (see [27] below), (2) Kordek's offer was indicative of the site's market value, regardless of market sales, and (3) the loss of the sale to Kordek's interests constitutes an economic loss compensable as a disturbance item. 9The applicants' fallback market value position of $2.725M is based on either (a) a gross floor space area ('FSA') of 5,453m2, valued at a discounted rate of $500/m2, arrived at by the "comparable sales" method, or (b) a site area of 1268.6m2, valued at $2,150/m2, in either case rounded down to $2,725m (Exhibit M1, par 1.07.2, and Exhibit M2, p3). 10The respondent identified six areas of dispute, and examined each area as a separate question (submissions 24 August 2011, par 19): (a)Can or should the purported 'offer' of $4,200,000 be taken into account in assessing market value for the purpose of ss 55(a) and 56 of the Acquisition Act? (b)Can the fact that any proposed sale did not proceed in 2009 mean that any resultant difference between the alleged 'offer' and an award for market value in these proceedings, be characterised as 'loss attributable to disturbance' for the purposes of s 59(f)? (c)What is the correct valuation methodology, including whether the value of the subject land should be calculated on a rate $/m² of site area, or of maximum potential FSA? (d)What is the best approach to comparable sales? (e)What, if any, value does the development consent add to the land? (f)Are the other claimed disturbance costs legitimately treated as loss attributable to disturbance for the purposes of s 59? 11There is also some dispute as to whether this case concerns the "equitable interest held by a prospective purchaser", the respondent arguing that a prospective purchaser is not one of the applicants in this case (see reply submissions, par 7). 12The respondent claims that the appropriate amount of market value compensation, under s 55(a), is approximately $1.4M (i.e. the subject site was not worth more than $1,100/m² with a floor space area of 1,268.6m2 - Exhibit R3, par 6.3.14 and Exhibit M2, par 4.1), as there was no real "offer" from Kordek, capable of acceptance, only some form of "invitation to treat", and, in any event, there is a real doubt that he, and those associated with him, could have found the necessary money to make the purchase at the quoted price. The valuation of $1.4M includes a 10% allowance for the value of having development consent. If the court were to reject that allowance, the respondent would contend for a market value of $1.27M. 13The applicants complained that the respondent's case in regard to the "offer" should not be entertained, because it was not pleaded in accordance with the Rules, and the applicants were, therefore, denied procedural fairness. 14Lengthy written submissions were made on both sides of this argument, but the applicants bear the onus of proving their claim, which they articulated in final form only on the third day of the hearing, and I can see no unfairness caused to them, given the respondent's complete denial of SFAPOC 4 and 5 in APOD 4. 15I am fortified in this conclusion by the decisions of Bannon J in Southern Highland Quarries Pty Ltd v Gunning Shire Council [1992] NSWLEC 58, and Pain J in The Trust Company Limited v Minister Administering the Crown Lands Act 1989 [2012] NSWLEC 73 ('Trust Company'). Other Disturbance Claims 16Apart from their contingent claim for economic loss, the applicants also claim (in the SFAPOC), by way of disturbance, amounts totalling $110,265.95, under s 59 of the JTC Act, for various legal expenses and valuation fees. (A claim mooted in early submissions, in the sum of $9,500 by way of "relocation costs", was not pressed). 17The respondent allows the applicants reasonable legal and valuation costs incurred in connection with the acquisition. The quantum moved during the case, with the respondent eventually conceding only $54,816.52 of the amounts claimed by way of disturbance. 18I will return to deal with these matters in detail later in this judgment (see [135]ff, and [220]ff). The 'JTC' Legislation 19The relevant piece of legislation for the determination of this matter, is the JTC Act, the pertinent provisions of which are set out below: "3 Objects of Act (1) The objects of this Act are: (a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and (b) to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and (c) to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and (d) to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and (e) to encourage the acquisition of land by agreement instead of compulsory process. (2) Nothing in this section gives rise to, or can be taken into account in, any civil cause of action. ... 5 Acquisition of land to which Act applies (1) This Act applies to the acquisition of land (by agreement or compulsory process) by an authority of the State which is authorised to acquire the land by compulsory process. (2) This Act does not apply to any such acquisition if the land is available for public sale and the land is acquired by agreement. (3) Land is available for public sale if: (a) the land is advertised by the owner as being available for sale, or (b) the land is listed by the owner with a real estate agent as being available for sale, or (c) the land is otherwise held out by the owner as being available for sale. ... 54 Entitlement to just compensation (1) The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land. (2) If the compensation that is payable under this Part to a person from whom native title rights and interests in relation to land have been acquired does not amount to compensation on just terms within the meaning of the Commonwealth Native Title Act, the person concerned is entitled to such additional compensation as is necessary to ensure that the compensation is paid on that basis. 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division): (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) solatium, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. 56 Market value (1) In this Act: market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid): (a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and (b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and (c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law. (2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition. 57 Special value In this Act: special value of land means the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person's use of the land. ... 59 Loss attributable to disturbance In this Act: loss attributable to disturbance of land means any of the following: (a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land, (b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land, (c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs), (d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired), (e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage), (f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition. ... 66 Objection against amount of compensation offered (1) A person who has claimed compensation under this Part may, within 90 days after receiving a compensation notice, lodge with the Land and Environment Court an objection to the amount of compensation offered by the authority of the State. (2) If any such objection is duly lodged, the Land and Environment Court is to hear and dispose of the person's claim for compensation. (3) A person who does not lodge an objection within the 90-day period and who is taken to have accepted the offer of compensation under section 45 may nevertheless lodge an objection under this section, but the Land and Environment Court is not to hear and dispose of the person's claim for compensation unless satisfied that there is good cause for the person's failure to lodge the objection within that period. (4) If the Land and Environment Court decides that the amount of compensation payable (without the addition of interest) does not exceed by more than 10% the amount of compensation offered by the authority of the State, the Court may cancel or reduce the amount of interest that has accrued under this Act in respect of the compensation since the institution of the proceedings. 67 Appeal against failure to entertain claim for compensation (1) A person who has not been given a compensation notice and whose claim for compensation under this Part is rejected (or taken to be rejected) may appeal to the Land and Environment Court against the rejection of the claim. (2) Any such appeal must be lodged within 90 days after the rejection of the claim. (3) If any such appeal is duly lodged, the Land and Environment Court is to hear and dispose of the person's claim for compensation. (4) A person who does not lodge an appeal within the 90-day period may nevertheless lodge an appeal under this section, but the Land and Environment Court is not to hear and dispose of the person's claim for compensation unless satisfied that there is good cause for the person's failure to lodge the appeal within that period. ... 71 Claims for compensation under this Part (1) A person who wishes to claim compensation under this Part must lodge a claim for compensation in accordance with this section with the authority of the State liable to pay the compensation. (2) A claim for compensation must be in the form prescribed by the regulations or (if no such form is prescribed) in the form approved by the Minister. (3) A claim for compensation may be withdrawn by the claimant. (4) The authority of the State may accept a claim for compensation (in whole or in part) or reject any such claim. (5) A claim for compensation is taken to have been rejected if the authority of the State has not dealt with the claim within 60 days after receiving the claim. However, the authority of the State is not precluded from accepting the claim after that time. (6) A person whose claim for compensation is rejected (or taken to be rejected) or is accepted in part only may appeal to the Land and Environment Court against that decision. Section 67 applies to any such appeal in the same way as it applies to an appeal under that section. (7) The regulations may apply any of the provisions of Part 3 relating to claims for compensation under that Part (with or without modifications) to claims for compensation under this Part." The zoning of the land 20Prior to the grant of the relevant DC, the subject land was governed by the Local Environmental Plan 1997 ('1997 LEP'), and was zoned "3(a) - Business". On 7 December 2007, Liverpool Council ('Council') re-zoned the subject site and the adjacent land "B4 Mixed Use", with the commencement of the Liverpool City Centre Local Environmental Plan 2007 ('2007 LEP', see Exhibit R1, vol 1, tab 8). 21On 29 August 2008, the Council re-zoned the adjacent land as "SP2 Infrastructure", with the commencement of the Liverpool Local Environmental Plan 2008 ('2008 LEP'), currently in force. The 2008 LEP repealed both the 2007 LEP and the 1997 LEP. The subject site remained zoned "B4 Mixed Use". 22As at the date of acquisition (10 September 2010), the subject site was zoned "SP2 - Infrastructure (Classified Road)", pursuant to the 2008 LEP, but it is agreed that, absent the public purpose, the land would have been zoned "B6 - Enterprise Corridor" under the 2008 LEP (see Exhibit M1, par 10 and Exhibit R3, par 3.6). 23It is agreed among the valuers and the parties' legal representatives that, absent the public purpose, the land would have been zoned "B6 - Enterprise Corridor" under the 2008 LEP (see Exhibit M1, par 10 and Exhibit R3, par 3.6) and the adjoining land within that zone has a maximum floor space ratio ('FSR') of 2.5:1 (Exhibit M2, par 2.3). Overview of the Sources of Evidence The lay evidence 24The applicants relied on affidavit evidence from the first applicant Michael Marroun (12 July 2011), and from Jardine Jordan (12 July 2011), and Frank Fiorenza (17 March 2011). 25Jordan is the son of the second applicant, Kaokab Marroun, and of Michael Marroun's brother, Khalil Marroun. He has acted as a translator, negotiator, and general assistant, for the applicants in their dealings related to the subject property (Marroun affidavit, par 2, and Jordan affidavit, par 4), sometimes with input from his cousin Sam Marroun (a real estate agent at Merrylands). He insists, however, that the major decisions were made by the senior family members. He introduced the applicants to Fiorenza around 2005. The court found Jordan's evidence unsatisfactory in many respects - his memory for details and relative timings, and his record keeping, were poor. He relevantly had no personal dealings with Michael Kordek. 26Fiorenza is a real estate agent, operating in partnership with Christine Fiorenza under the name "F & C Realty". He deposes to having been engaged in May 2008 to sell the subject site on behalf of the applicants. He was unsuccessful, but did not offer it to Kordek at that time. The land was then rezoned, and he was approached again in April 2009. On that occasion he did introduce the property to Kordek, whom he knew as "a big developer in the South West". He says (Tp214, LL14-16) that he thought the property was "worth" $3.5-$4.5M at that "very hot" time (Tp214, L14). When he introduced the land to Kordek, he knew of the then RTA's interest in it, but did not tell him. Throughout his oral evidence, Fiorenza stressed the importance of any purchasers he finds making their own inquiries. 27Kordek swore a detailed affidavit (dated 14 July 2011 - see [8] above) in which he said (par 11) that he had "caused an offer to purchase" to be made to the Marrouns, in the relevant amount ($4.2M), on or about 12 August 2009, and (par 12) that it had been "accepted". The court agreed not to read too much legal significance into his use of those words, "offer" and "accepted", and we have closely reviewed his affidavit evidence in light of his oral evidence. Kordek and his family, and the then very elderly Dr Alexander Morven Dan (who is understood to have died since the hearing), and members of the Dan family, notably Dr Dan's young grandsons, Jonathan and Simon, operate through companies known as Kordan Pty Ltd (registered in 1988) and Kordan (Aust) Pty Ltd (registered in 2003). Members of both the Kordek and Dan families are directors, and/or (in the case of Kordan (Aust) Pty Ltd) alternative directors. For simplicity, I will refer to one or both of these companies as "Kordan". In all of his communications among the evidence, Kordek signs off on behalf of both Kordan companies, and a third company, K & K Real Estate Pty Ltd. Kordek has known and dealt with Fiorenza over a period of now more than twenty years. 28The applicants also rely on three affidavits from their solicitor, Fouadi (Faye) Khalil (also known as Fay, or Faye, Rose), dated 18 March, 19 July, and 16 August 2011. I will refer to her, in this judgment, as Fay Rose, that being the name she used for her firm. Rose has acted for the Marroun family since she opened her practice in January 2007, and they brought to her their then solicitor's current file concerning the subject property. The first of her affidavits deals with the proposed sale of the subject property, the second provides various invoices and draft invoices detailing Rose's work on the applicants' behalf, some relevant to their disturbance claims, and the third reviews filenotes etc regarding a relevant leasing arrangement. (The writing on those filenotes was "translated" for the court by Rose, at Tpp435ff. Many of them were written by Kelly Pahuta, a solicitor employed by her - see Tp435, LL13-23). 29Jordan, Fiorenza, Kordek, and Rose all gave oral evidence - in Rose's case, twice. Some quite significant deficiencies in and between their respective affidavit and oral evidence were exposed during cross-examination. Submissions on both sides shifted during the hearing to accommodate these peculiarities. Michael Marroun was not required for cross-examination. The expert evidence 30The applicants relied on a valuation report dated 20 July 2011 prepared by Frank Carrapetta (Exhibit M1), an "assessment of compensation" report, prepared by the real estate valuers and property consultant firm, Kenny & Good Pty Ltd (Exhibit M9), for the RTA, covering adjacent properties at 300 and 302 Hume Highway, Liverpool, dated 19 December 2007, and a report by BEM Property Consultants Pty Ltd (Exhibit M10), prepared 8 January 2008, also concerning 300 and 302 Hume Highway, Liverpool. Exhibit M10 is clearly labelled "DRAFT". 31The respondent relied on a valuation report prepared by David Lunney, dated 16 June 2011. (Exhibit R3). 32A joint report by Carrapetta and Lunney, dated 9 August, was tendered on 11 August 2011, the second day of the hearing, but was found to be erroneous, and was, therefore, re-tendered on 12 August, the third day of the hearing. After further errors were found, it was re-tendered on 15 August, day 4 of the hearing, in its final form (Exhibit M2). Despite its being a joint report, Mr Lancaster (senior counsel appearing, with Mr N Eastman of counsel, for the respondent) objected to parts of Mr Carrapetta's evidence therein. 33Carrapetta and Lunney also gave lengthy concurrent oral evidence (Tpp216-401). Their extensive credentials as experts in valuation were included in their written materials (Carrapetta in Exhibit M1, tab 7, and Lunney in Exhibit R3, Annexure 1). 34Jeff Hughes was nominated as the parties' single expert to prepare a report on the relevant quantity surveying issues. That was tendered as Exhibit R2, and was dated 20 May 2011. The valuers agree that they are not qualified to express an opinion on Hughes's assessment that the project's cost would be approximately $18M (Exhibit R3, p25), but they both doubt (Carrapetta further qualifying his opinion at Exhibit M2, par 2.9) that the project would be economically viable at that cost, largely on their assessment of achievable rentals. Other documentary evidence 35Various maps and items of correspondence were also tendered, and I will refer to them below, insofar as they are relevant. Background to the Dispute 36Two chronologies of key events were also provided to the court, one by each party, in addition to a 7-page chronology appearing as Annexure "A" of Jordan's affidavit. That was an aide memoir to the court, but I note that, in cross-examination, Mr Lancaster, for the respondent, elicited from Mr Jordan an admission that his chronology was only as reliable as the documents themselves, and, in absence of the documents, Mr Jordan's memories (Tp103, LL36-38). The respondent, therefore, objected to certain parts of that chronology, and, in the summary which follows, I include, for the sake of giving background to these proceedings, only those events which are not in dispute, or which are in evidence. The chronological history of the use of the site 37The subject site changed hands for $630,000, sold by Tricon Restaurants Australia Pty Limited, on 19 June 2000. The contracted purchaser was Alessor Marroun, Jordan's sister, but the registered transfer lists, as the site's purchasers, Alessor Marroun, Khalil Marroun and Kaokab Marroun, as tenants in common, holding equal shares of the property (Exhibit M3, and Exhibit R6). 38At the time of that purchase the site was being used as an outlet of the Pizza Hut franchise, but that use ceased after the purchase. 39In December 2000, development approval was sought, and granted, for the use of the site for a service station facility. A construction certificate was issued for that purpose in 2001, with construction due to commence shortly after the certificate was issued. That consent lapsed in December of 2002. 40The site was thereafter used only for the sale, by the applicants, of holiday-related paraphernalia, at or around holiday periods such as Easter and Christmas (see affidavits of Marroun, par 5, Jordan, par 14, and Fiorenza, par 3). 41However, Jordan says (Tp103) that, sometime shortly after the 2000 purchase, he was approached by a representative of Colliers, and offered $2M-$2.5M for the subject site. He opined in his oral evidence that such an offer might have been influenced by a major casino project proposed for the area. The Marroun family interests decided not to sell, but to remain open to offers, to see if they "could do better" (Tp112). 42Sometime before August 2006, there was a Marroun "family rearrangement", under which Michael Marroun took over the one-third interests held by each of Alessor and Khalil Marroun in the subject site. As Rose testified (Tp87, LL8-9), such are the "dynamics of a Lebanese family". (See also Jordan at Tp130). Michael and Kaokab Marroun are tenants-in-common of the subject land in the proportions two shares to one, respectively. 43On 3 February 2003, a concept plan was submitted to Council for a nine-storey mixed development building on the site. 44On 5 February 2003, a pre-development application ('DA') meeting was held regarding the concept plan. 45On 11 June 2004, a concept plan was submitted to the Council for a six-storey residential building plus basement. 46On 25 August 2004, another pre-DA meeting was held regarding the then proposed six-storey development. 47On 15 December 2004, the applicants lodged a DA (No 973/05) for a six-storey commercial development, plus basement (see Exhibit R1, vol 1, at tab 20). 48Between 2004 and early 2006, the applicants provided Council with information, as requested, regarding certain particulars of the DA. 49On 21 April 2006, the respondent wrote to the Council, requesting that consideration of the DA be deferred, pending their investigation as to whether proposed public works would likely affect the site (Exhibit R1, vol 2, tab 28). The Council relayed this information to the applicants, by letter on 3 May 2006 (Exhibit R1, vol 2, tab 29). 50On 10 May 2006, the respondent wrote to the Council, advising that it would not support the DA, because it was not consistent with plans for the proposed road works (Exhibit R1, vol 2, tab 30). The potential to lease the site, once it was developed 51On 15 August 2006, the applicants entered into an agreement for lease with Ezehire (Qld) Pty Ltd ('Ezehire') for the use of the site as a 24-hour medical centre. However, the company was not registered until 13 October 2006, and it was apparently deregistered by August 2011 (Tp91). 52The agreement was negotiated - by Jordan, with the assistance of his brother-in-law, Fadi (Fred) Khalil - with John Corrick of Ezehire. It was subject to the attainment of DC (cl 2.1), and required the lessor to construct certain improvements. The agreement was apparently drawn up by the Marrouns' then solicitor (query one "Sid Hawash" (Tp138)). It included, in favour of the lessee (in cls 2.6 and 2.16), a right of first refusal if the building were to be sold (see also Tp94). The agreement came to Rose's attention shortly after she came into the matter in early 2007, and she reviewed it in detail on 13 March 2007 (her affidavit 19 July 2011, Annexure 'A', p1). 53Pursuant to cl 3.3, described in the evidence as an "endeavours clause, not even a best endeavours clause" (Tp89, L25, and p440, LL42-50), all building work was to be completed on or before 1 April 2008 (cl 3.3), and the lease was to commence once the improvements were completed (see Exhibit R1, vol 2, tab 39). The lease was (cl 2.4) to be for a period of ten years (plus two five-year options), commencing from 1 July 2008, or upon "practical completion, whichever is the latter". 54The agreement did not contain any specific clause conferring a right of termination (Tpp89-90). 55Jordan (at Tpp135-136) described the lease deal with Ezehire as "too good to be true" for the Marroun interests. In the event, however, consent was obtained for the works (from this court) only on 22 April 2008, i.e. after the date nominated, in the agreement for lease, for completion of the works. 56A Fay Rose Legal filenote of 9 May 2008 (Rose, 16 August 11, fol 7) records a client conference where the "clients" raised the question of Ezehire's "interest in proceeding with the lease - valuer inquiry". The "client will chase up", but asked that the firm "also write .... - will need written conf[irmation] that proceeding". On 19 May 2008, Rose wrote to Ezehire seeking "written confirmation whether you remain interested in proceeding with the Agreement to Lease and consider yourself bound by its terms" (fol 6). No response appears among the evidence, and the letter sent by Rose has endorsed upon it, an instruction, apparently to Ms Pahuta: "Have you chased this up ???". Someone from Fay Rose Legal phoned Ezehire on 3 June 2008, but Corrick was then on an extended trip to Malaysia and would consider the Rose letter on his return (fol 4). "Peter" at Ezehire had actually called the firm on 23 May 2008 to say that Corrick was "handling matter" and "nobody to assist in absence" (fol 5). 57Rose conceded in her evidence (Tp438, LL42-44) that "there was nothing valuable to the court on the file between 3 June 2008 and 9 June 2009 ... in relation to the lease". Her clients told her during 2008 that the lease deal was not proceeding (Tp439), and that was clearly the case by 9 June 2009. A filenote dated 9 June 2009 (fol 3) records advice/instructions to the firm that Jordan had heard from John Corrick, who was "upset that in two years nothing has happened - building not even commenced, very unhappy - will not proceed", and Jordan "could not give him a date or timeframe for when building can be ready or start". It is clear from that evidence that Jordan/the Marrouns were also not "interested in proceeding with the agreement to lease" (Tp439, LL20-36). 58Rose failed to so inform Rumore, she says, because the document spoke for itself, and he would know that there was no building work on the site (Tp440). Had Rose considered it to be binding on the applicants, she would have attached a copy of it to the draft contract of sale. Mr Lancaster asked her about this (Tp443, LL1-8), viz: "Q. And that fact I suggest to you is entirely consistent with the answer you gave me the other day, namely that Mr Jordan was happy for it to be sent across as an effective agreement, isn't it? A. No, I disagree because had it been an effective or binding agreement it would have been attached to the contract of sale. The contract of sale would have been marked that it was subject to either a pre-lease or an agreement to lease or anything like that and when the contract of sale was sent over that deed would have been attached to it." 59Kordek was advised, in early August 2009, of the existence of this agreement (Khalil, affidavit 18 March 2011, fol 8). Rose says Jordan was happy for it to be passed on to the prospective purchaser "as an effective agreement" (Tp88, LL16-18), but, by the time a copy of it was provided to Kordek's advisors, in August/September 2009, neither Jordan or Rose considered it binding on the applicants (Jordan at Tpp132 and 134; and Rose at Tp88, LL30-37; pp92-96; 436; 438-440; and 442-3), as there was a "can pull out" clause in it (Tp88, L30-p89, L27). The Council refuses the DA, and the applicants bring a Class 1 appeal 60On 11 October 2006, Council refused to grant DC (Exhibit R1, vol 2, tab 36), and, just on 12 months later, in October 2007, the applicants commenced Class 1 proceedings in this court to appeal the Council's rejection of the DA (No 973/05). Rose's firm acted for the Marrouns in those proceedings, and dealt mainly with Jordan. 61The court's decision on that appeal was handed down on 15 May 2008 (see Marroun v Liverpool City Council [2008] NSWLEC 1172), Bly C finding in favour of the applicants. 62Bly C noted (at [2]) that the "application was refused by the respondent Council for reasons including advice from the [RTA] that it did not support the application for reasons relating to the widening of the Hume Highway", and that the respondent to these present proceedings had been notified of the Class 1 appeal, but had not responded to a letter which provided it with an opportunity to comment. 63Bly C opined (at [10]), that "any granting of consent will not affect the RTA's ability to proceed, if it so decides, with the Road Widening Order". 64The FSR approved by the court was 4.3:1 (Exhibit M2, par 2.5). The applicants try to sell the site 65Having obtained their consent, Michael Marroun asked Jordan to approach Fiorenza to find a buyer for the site, and marketing commenced on 26 May 2008. 66On 18 August 2008, Fiorenza confirmed in a letter to Michael Marroun (Marroun's affidavit, fol 7) that he was "of the opinion that we will be unable to sell the property as long as the [RTA] has an interest in it". The writ 67On 2 October 2008, Computers Direct Pty Ltd made an application to record a writ on Michael Marroun's share of the property (Exhibit R1, vol 1, tab 15), and, on 19 May 2008, the Bankstown Local Court entered a judgment against Technology Leasing Limited (formerly known as Marroun Developments Pty Ltd), in the sum of $7,815.17 (Exhibit R1, vol 1, tab 16), with a writ of levy entered on the subject land as a consequence (Exhibit R1, vol 1, tab 18). Rose testified that she was confident it would be removed on settlement of any sale (Tp96, LL46-49), and she advised solicitor Chris Rumore, of Colin Biggers & Paisley, who acted for Kordek and Kordan, on 1 September 2009, that it "will be removed at settlement" (affidavit 18 March 2011, fol 66, par 4). Some neighbouring properties are sold 68On 2 May 2009, the applicants signed a new exclusive agency agreement with Fiorenza, nothing further having been heard from the RTA. The expected sale price was estimated in the agreement as "$3.5M to $4.5M", and the exclusive period was 1 May to 1 November 2009 (Marroun affidavit, fols 9-12) 69In May/June 2009, Peter Warren Nominees Pty Ltd sold Nos.300 and 302 Hume Highway to the respondent. The sale price of No.300 was $1.5M, and of No.302 was $637,000 (see Exhibits R5 and R6). Annexure 'A' to the applicants' SFAPOC refers to these properties as having a total market value of $1.91M, representing $644/m² of a permissible FSA based, on a FSR of 2.5:1. Dealings with Kordek, and the alleged "offer" 70Between May and August of 2009, the applicants' agent, F&C Realty, introduced the subject site to Kordek, representing Kordan. Fiorenza admits that he had told Marroun in August 2008 that the RTA was interested, but he denies mentioning to Kordek the agreement for lease, which he thought had "gone" by that time (Tp196). He says that the vendors had told him so. 71Michael Marroun deposes (par 17) that, on or about 12 August 2009, Jordan told the applicants that "an offer of $4.2M had been made for the property", and they "agreed on the offer". 72During his cross-examination of Kordek, Mr Lancaster (for the respondent) asked him about an exchange of emails, including, particularly, one Kordek sent to F&C Realty on 12 August 2009 to have them send to Rumore, "a contract for sale for $4.2M, for final scrutiny and approval by the board of directors". The transcript records the following exchanges between Mr Lancaster and Kordek (Tp160, L50-p162, L1): "Q. By your use of the words "for final scrutiny and approval by the board of directors" you were saying that whatever happened in the future in this negotiation was for the future decision of the board of directors. Correct? A. Yes, the final decision as to whether we purchase, yes. Q. Yes, and you didn't regard this email as an offer for $4.2 million purchase, did you? A. I did. Q. You didn't regard it as an offer in the sense that if they came back and said "yes" then you would be contractually obliged to buy the property, did you? A. I don't understand. Q. You did not regard this email as putting forward an offer that if they came back and said "yes" you would have a contractual obligation to purchase the property, did you? A. That we were actually in contract if they came back and said "yes"? Q. Yes. A. Well of course not. Had to still be - the contract had to be scrutinised and all the different odds and ends that went with it and then the final meeting with my partners. Q. Yes. A. There's a hierarchy. Q. And they weren't just matters of detail, were they? There had to be a careful consideration by your partners about whether to buy this property. Correct? A. Of course, of course. Q. This email from your perspective was a step in the negotiation and not any sort of offer to buy the property that could create a contract. Is that right? A. Providing - it was an offer to buy the property at the price, providing everything that I had in my head, as to how I perceived the deal, was in place. Q. Could I suggest to you, providing that your partners agreed to it as well? A. Of course. Could I add something sir? Q. If you need to complete that answer, yes. A. The full dynamics of the relationship is-- Q. Which relationship? A. Between me and my partners, now the young ones, the grandsons and previously the grandfather and the late son who we buried six years ago, I - my function in the system was to sort out the properties, bring them to the table and I can't think of any properties that I recommended that they didn't proceed with. Q. But you weren't the one who signed on the dotted line, you were the ones who brought the opportunity to the table for consideration, is that fair? A. Of course that's fair." 73On 13 August 2009, F&C Realty wrote to Rumore, advising that a "purchasing vehicle to be advised", of 8 Kintyre Street, Cecil Hills (Kordek's usual address), had agreed to buy the subject site for a "sale price" of "$4.2 Million" (Exhibit R1, vol 2, tab 63). When Rumore asked Rose, next day, for a draft contract of sale, he asked her to leave blank the details of the purchaser. 74Kordek testified that the agreement for lease "meant absolutely nothing" to him in his exploring, and then declining to pursue, the purchase of the subject site, and/or settling upon the "price" - the vendor would have to "sort" any complication caused by the agreement to lease, as Kordan was not buying the property to lease it out. It was a "very strategically located property", and Kordan wanted vacant possession and a clear title, as it proposed to establish and co-locate its various corporate headquarters on the site, and retain it for perhaps "50 years into the future" (Tpp172-175). The draft contract of sale, which Rose submitted to Rumore in August 2009, provided for "vacant possession" (Khalil, affidavit 18 March 2011, fol 10; Tp92, LL17-18; and Tp94, LL4-8). Kordek testified that he would be happy to negotiate with Council any necessary modification of the consent (Tp176). 75Kordek arrived at the figure $4.2M following a "very rough"/"informal" feasibility study (Tp170, LL20-38), informed at least partly by his experience with, among other projects, a site at 24-26 Bigge Street, Liverpool, which Kordan bought (for $2.6M) and then sold (for $3M). 76On 28 August 2009, Rumore wrote to Kordek and Jonathan Dan, advising that the "other solicitor" had provided a complete contract for the negotiated sale (Exhibit R1, vol 2, tab 70). Rose considered the contract as a draft only, and as one step, but neither the first nor the last step, in reaching a firm and binding agreement for a sale. Her firm inserted "Kordan" as the purchaser, but Rose herself was not sure that the identity of the purchaser had been "determined" at that time (Tpp83-84). 77Kordek testified that he did not agree that he had made an offer of $4.2M. Agreement on a price was just one step in a series of negotiations which might lead to a contract of sale, which he might then recommend to the Dan interests for signature. He called for a contract, so that any issues with the property would be identified, and so that he could be sure that "all the paperwork is correct", before he made his recommendation to the Kordan board. He was somewhat "suspicious" of the applicants as vendors (Tp164, L24). 78Kordek also gave oral evidence about his knowledge of a possible RTA acquisition (Tpp162ff). He testified (Tp163, L32, then L46-p164, L30) that "another property owner a few doors up" from the subject site: "... raised the issue of road widening occurring, that the RTA were seeking to do road widening. Now over the years, in the capacity of Kordan, we've had a lot of experience with the RTA, we've sold them strips of land along Camden Valley Way, along Cowpasture Road and the dynamics with dealing with the RTA were such that they invariably pay a high price, a very high price as they did for us back then for strips, they're only narrow strips, 10 or something metres wide, and my thinking was that if they're showing an interest that would actually enhance the value because I worked on the assumption they're only after a strip. Later on it came out that they were after the whole property and that's why I raised the question with the solicitor for him to check all these things out. LANCASTER Q. You say that's what you meant by the reference to "The paperwork is not correct"? A. Well the reference to the - you know the road widening, the RTA issues. I know some paperwork ended up turning up at different times and I can't recollect when things turned up but at one point in time I knew nothing about the RTA only that like, I got like a tip-off on it and then subsequent to that I think I saw some correspondence on it, a letter or something, some reference to it or something. I just can't remember exactly the chronological sequence of events and when I saw what when. But at this point in time I was made suspicious of the fact that there was something - something not quite right and it actually made me suspicious even of the vendors, you know you think - because you think all sorts of things right, Q. I'm sorry, what did you say? A. It make me even suspicious of the vendors, right, because if I'm not being declared everything and they knew a lot of things, right, you know what I mean and the agent's not telling me everything, right, so naturally you're sort of, you're suspicions sort of start to - you want to find out what's going on. But I was big time hoping that when the issue of the RTA was raised that it was only raised on the basis of a strip, a bit of road widening to straighten up that road there." 79The kernel of Kordek's statement of Kordan's position at that time is put in the following Lancaster question and Kordek answer (Tp166, LL9-13): "Q. Well there was never a position in relation to this property where your partners said make an offer that will result in a binding contract of $4.2 million was there? A. That's correct. What you just said is correct, yeah. We had not reached that point yet." 80In his affidavit he relevantly deposed as follows: "45. Had the RTA not indicated their intention to acquire the whole Hume Highway property, and assuming that the paperwork was correct, I would have proceeded with exchanging the contract for sale of the Hume Highway property. ... 53. To this day I remain interested in purchasing the Hume Highway property, provided of course, that there is an adequate portion of land available. A smaller boutique building on the site would still be of great interest to me." Kordek withdraws from negotiations 81On 24 September 2009, Rumore communicated, by email with a letter attached, addressed to Eddie Khalil of Fay Rose Legal, that Kordan would no longer proceed with the sale, due to "significant issues", including the agreement to lease, but particularly "the RTA proposal with respect to the property" (Exhibit R1, vol 2, tab 73; Rose affidavit 18 March, fol 143; and Kordek affidavit, fol 137). 82Michael Marroun deposes (par 21) that, on or about 24 September 2009, Jordan told the applicants that "the purchaser has pulled out of the sale ... because ... of the RTA's interest in the property ... [T]hey have a letter from the RTA saying that they (sic) definitely want the property". 83Rumore's 24 September letter became controversial during Kordek's oral evidence, and, therefore, I set out its material terms (with most emphasis added by me): "Our client will not be proceeding with this purchase by virtue of the zoning of the property and the RTA proposal with respect to the property. The zoning of the property under the zoning certificate is shown as SP2 infrastructure - classified road. Further, our enquiries have revealed that the RTA intends to resume this property. On this basis, purchasing the property for redevelopment is of no interest to our client. We also attach a copy of the letter from the RTA which clearly states that the RTA proposal for widening of the Hume Highway at Liverpool requires the whole of the subject property to be resumed. There are other significant issues with the documentation provided but these are the major issues which have led to our client's decision to not to proceed in this matter. In the circumstances, our client is not in a position to proceed with the purchase." 84None of the three copies of that letter among the evidence is shown as having been signed by Rumore. The RTA letter to which they refer (Kordek, fol 138) was dated 23 September 2009. 85In his oral evidence, under cross-examination by Mr Lancaster, Kordek testified (Tpp185-189) that he "specifically asked" Rumore to remove from the draft the paragraph I have highlighted above. Kordek said that Rumore was "clearly instructed by me - I was very objectionable (sic) to Chris putting that in" (Tp188, LL7, and 23-24). Kordek did not "pick up on" the inclusion of the defective version as an annexure to his affidavit - " I did not read the attachments ... in detail" (Tp188, LL29-38). 86In his affidavit (pars 46-50), Kordek says: "46. On or around early November 2009, I received a phone call from Frank Fiorenza. He said to me words to the following effect: 'The vendors on the Hume Highway property need a letter confirming your reasons for pulling out of the sale'. 47. I said to him words to the following effect: 'Draft me a pro forma to consider'. 48. I reviewed a copy of a letter sent to me by my solicitors, a true copy of which is annexed and marked 'Q'. 49. There was one clause in the draft provided to me which stated: 'There are other issues with the documentation provided but these are the major issues which have led to our client's decision not to proceed in this matter'. 50. I thought this clause was too vague and I asked for it to be deleted. The main issue for me was the RTA telling me that it wanted to acquire the whole of the Hume Highway property. If there was just a strip involved in the acquisition, I would have still proceeded to negotiate with the vendors. I had negotiated successfully with the RTA to sell strips of land many times in the past, and I was not concerned about doing so again. My fundamental concern was that the RTA wanted the entirety of the land, which would leave nothing for me." 87Immediately after Kordek conceded to the court that he did not "pick up on" some of the contents of, and attachments to, his affidavit when he signed it ([27] above), he had the following exchange with me (Tp188, L42 - p189, L8): "Q. The discussion is not about your view about it, the discussion is what instructions were given because in 49 you clearly say or in 50 you say I thought that clause was too vague and asked it to be deleted. I'm not attacking you for doing something wrong, I'm just asking why when you talk about subsequent correspondence you annex a letter to your affidavit which it appears, on your evidence was not or should not have been sent? A. Yes, sir, it should not have attached to this. The other letter without that there should have been attached. That is an error on somebody's part, not my part, sir, because I clearly raised that issue and I clearly - we clearly talked about it and the very fact that that was added there and at the time I said, Chris, what's all that about, you know. I said, look, just keep it simple, will you, the reason is - and I had to repeat myself to him - I said, Chris, for God's sake, we're not going ahead with it because the RTA want it, full stop. Q. And you did have a look, did you, at 140? A. Sorry, sir, 140? Well, "there are other issues with the document provided but these are major" - well, again, see, where did that come from?" 88Annexure "Q" to his affidavit (fols 140-141) is a draft letter (unsigned) from Rumore to Rose dated 3 December 2009, in similar terms to the September letter quoted above, but the paragraph I highlighted, and the last paragraph of that letter, were replaced by the following two paragraphs: "There were other issues with the documentation provided but these are the major issues which have led to our client's decision to not to proceed in this matter. In the circumstances, our client is not in a position to proceed with the purchase as our client was to acquire the property for redevelopment and the property, by virtue of the matters referred to above, is of no interest to our client." 89Kordek deposes (affidavit par 51): "On or around 7 December 2009, my solicitors sent the letter to the solicitors for the vendor. A true copy of the version which I approved is annexed and marked 'R'." 90Annexure "R" to his affidavit (at fol 143) relevantly omitted both the highlighted paragraph, and the suggested alternative formulation, and, after the paragraph referring to the enclosure of the copy of the RTA letter, the "approved version" concluded: "In the circumstances, our client is not in a position to proceed with the purchase as our client was to acquire the property for redevelopment and the property, by virtue of the matters referred to above, is of no interest to our client". 91That letter, duly signed by Rumore, and bearing date 3 December 2009 was sent, and can be found at fol 148 of Rose's affidavit 18 March. Relevantly she deposes: "14. On or about 24 September 2009 correspondence was received from the purchaser's solicitors. Annexed hereto and marked with the letter 'J' is a copy of that correspondence. 15. On or about 24 September 2009 I contacted Mr Jardine Jordan to advise that the sale had fallen through. I confirmed my advice to him in writing. Annexed hereto and marked with the letter 'K' is a copy of my letter to the Applicants dated 24 September 2009. 16. On or about 3 December 2009 correspondence was received from the purchaser's solicitors. Annexed hereto and marked with the letter 'L' is a copy of that correspondence." 92Her letter to the applicants, dated 24 September (her affidavit, fol 146) said: "We confirm our advice that he prospective purchaser of the property at 304-308 Hume Highway, Liverpool shall no longer be proceeding with the purchase. As contracts have not been exchanged the prospective purchaser is entitled to do so. Please find attached correspondence received today from the purchaser's solicitors which clearly indicates the reasons why the purchaser will not be proceeding." 93Kordek was closely cross-examined on these issues by Mr Lancaster, and in respect of the draft dated 3 December 2009 (his fol 140) regarding "other issues with the documentation..." (see also [70]ff above), and the following exchanges occurred (Tp189, L12-Tp190, L18): "Q. Was that against your instructions as well, was it? A. Well, sir, absolutely. There are other issues, you know, he refers to other issues. I said, well, Chris, what other issues, I'm asking you to write to the people saying we're not proceeding on the basis that the RTA want the property. Now, at the time my clear recollections with Chris - because I was a little bit annoyed, right, because Chris was adding something there, like, well, you know, he had his reasons as a solicitor I suppose, you know what I mean, but the fact was that I specifically asked him just to simply send the letter on the basis that the RTA wanted the property. I said, keep it simple, what you want all this stuff for, I don't even know what he was talking about. Q. Mr Kordek, I want to suggest to you that the explanation you've just given in relation to these paragraphs was not a frank attempt to describe truthfully to the Court your recollection of events in September through to December 2009. What do you say about that? A. Was not an Q. Not a frank and honest attempt to describe to the Court your involvement in this proposed transaction in 2009? A. I'm sorry, sir, but I am being very frank in my recollections and what happened during that period. Q. The position was, I suggest to you, that your solicitor had advised you in a number of respects that there were significant issues with the documentation provided and that you were of that belief in 2009. That's right, isn't it? A. No. Q. And they included the agreement for lease and its dubious nature according to Mr Rumore? A. No. Q. And they included the writ on the property that had been identified? A. No. Q. And that Mr Rumore, rather than proceeding against your instructions sent these letters in accordance with your instructions in September 2009 and thereafter? A. No. No. Q. Mr Kordek, when you were describing the preparation of this affidavit you said that you relied on your own team to put the annexures together, didn't you? A. Yes. Q. And you regard yourself as part of the applicant's team, don't you? A. Sorry? Q. You regard yourself as part of the applicant's team, don't you? A. No. Q. And your evidence has been tailored to try and advance their interests, hasn't it? A. No. LANCASTER: Nothing further, your Honour. WITNESS: I've never met the people." (Kordek had deposed (par 52): "I have never met the vendors"; Michael Marroun deposed (par 18): "I do not know Mr Kordek"; and Jordan testified (Tp133, LL38-40) that he had never seen or spoken to Kordek). 94Jordan testified (par 40, and Tp141, LL34-40) that he was "very cross" when the expected sale of the site collapsed. The property is compulsorily acquired 95On 10 September 2010, a Notice of Compulsory Acquisition was published in the Government Gazette for the whole of the subject site (Exhibit R1, vol 1, tab 1). 96On 2 November 2010, the VG found the appropriate compensation for the subject site to be $1,620,765, where the market value amounted to $1,525,000, and disturbance $95,765 (Exhibit R1, vol 1, tab 4). 97On 6 December 2010, the applicants submitted a claim form regarding the compulsory acquisition of their land for the sum of $4,557,896, where the market value amounted to $4,200,000, and disturbance $357,896 (Exhibit R1, vol 1, tab 6). Commencement and preparation of these current Class 3 proceedings 98On 7 December 2010, the applicants commenced the present Class 3 proceedings. There was a pre-trial mention on 29 July 2011, and they came on for hearing on 10 August 2011. 99There was a flurry of subpoena activity in the period February-June 2011, but, following Kordek's second affidavit in July, there was a further flurry of eleven subpoenas filed on 28 July and/or 1 August 2011. They were served on 1 August, and were returnable on 9 August, the day before the scheduled commencement of the substantive hearing. 100On 5 August 2011, the applicants filed a Notice of Motion to set aside eight of those subpoenas (those addressed to Kordek personally, and to seven of his company interests). 101Those subpoenas sought from each addressee any and all tax returns for the financial year to 30 June 2010, any document indicating assets and their value as at 12 August 2009, and any and all bank statements as at 12 August 2009. 102Khalil's supporting affidavit of 4 August 2011 set out the grounds upon which those subpoenas should be set aside, namely: 1. that the documents sought were of no relevance to any factual issue in dispute regarding the court's valuation exercise; 2. that the subpoenas constituted "fishing" among or against non-parties; 3. that the subpoenas were oppressive; and 4. that the subpoenas offended the principles in ss 56 and 57 of the Civil Procedure Act 2005, namely the just, quick and cheap resolution of real issues in dispute and the efficient disposal of business before the court. 103The Notice of Motion was set down to be heard on 9 August 2011, but was stood over to the date appointed to be the second day of the substantive hearing, namely 11 August 2011. On that date the court was informed that there had been informal production of some of the information sought, and that the remainder was not pressed. Mr Gor, who appeared for the subpoena'd parties, told the court that "we're not producing anything because we've been told to stand down", and, should the documents be sought later, that "our answer is will be [sic] nothing to produce for the very reason that's been indicated, that we're not required to produce" (Tp69, LL40-44). The Notice of Motion was formally set aside. 104What was produced informally was some information sought from Kordan, but access to it was confined to legal representatives only, due to its confidential nature. The applicants' submissions on Market Value Compensation 105The applicants submit that the market value of the subject land is $4.2M, being the amount of an "offer" made by a "genuine purchaser" in a negotiation, which would have proceeded to a contract of sale, but for the respondent's interest in the land, i.e. the public purpose, and its subsequent acquisition of it. Comparable sales put the market value at $2.725M (but see [165] below), according to Carrapetta, so, if the court does not award compensation of $4.2M for market value, the applicants would be entitled to the difference between $2.725M and $4.2M ($1.475M) as a separate "disturbance" item, referred to in the SFAPOC as "economic loss". 106The applicants rely on the definition of "compensation" in Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547; (1981) 50 LGRA 334, drawn from the English authorities (at 569-570, 355-356, per Mahoney JA): "The important words in these sections are 'compensation' and 'value'. Under the relevant English legislation, 'compensation' has been said to be 'the right to be put, so far as money can do it, in the same position as if his land had not been taken from him': Horn v Sunderland Corporation [1941] 2 KB 26, at p 42, per Scott LJ; cited by Lord Reid in Birmingham Corporation v West Midland Baptist (Trust) Association (Inc) [1970] AC 874, at pp 895, 896. See also Nelungaloo Pty Ltd v Commonwealth (1948) 75 CLR 495, at p 569 ('full money equivalence', p 571. In general, I think that that is the meaning of 'compensation' applicable in the interpretation of s 124 and that this meaning of the term goes some way towards explaining how the cost of reinstatement may be adopted as the measure of compensation under these sections. 'Value' is a word not free from ambiguity: cf Grace Bros Pty Ltd vCommonwealth (1946) 72 CLR 269, at p 280. For various purposes, the law requires that a money equivalent be fixed for a particular asset and, in this sense, the word 'value' is used to indicate how that is to be done. What is to be the money equivalent denoted by the term and the method of arriving at it will not necessarily be the same in the field of compensation for the resumption of property as it is in the fields of, eg, rating or income tax: cf Gollan v Randwick Municipal Council [1961] AC 82, at p 96, per Lord Radcliffe. Within the present field, compensation for the resumption of property, the tests or verbal formulae whereby the money equivalent is determined take different forms depending upon, inter alia, the nature of the asset, its relation to the owner's activities, and the context in which it is taken. The reinstatement formula is merely one of those available to be used, to be applied when and in so far as the circumstances require: Cook v Commissioner of Railways (1954) 19 LGR 226, at p 229, per Sugerman J." 107In order to come to a conclusion about compensation, the court is required to look to the definition of "market value" to apply to the facts of this case. 108The "oft cited passage" from Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418 ('Spencer'), at 418, says: "...the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?' It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together." 109In Commonwealth v Arklay [1952] ALR 640; (1952) 87 CLR 159 ('Arklay'), the court stated (at 169-170), that: "...what is required is "an estimate of the price which would have been agreed upon in a voluntary bargain between a vendor and purchaser each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business considerations": Commissioner of Succession Duties (SA) v Executor Trustee & Agency Co of South Australia Ltd (1947) 74 CLR 358, at p 367." 110The application of the above passages must satisfy the actual provisions of the JTC Act, namely ss 55 and 56. Those provisions are interpreted such that their operation can "only be understood...in the context of the identification of a 'market value' by reference to a hypothetical value, on the assumption that there has been a sale between two parties": per Basten JA in Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd [2005] NSWCA 251; (2005) 141 LGERA 243 ('Walker'). In that same case, Spigelman CJ reiterated that the purpose of the JTC Act, and those sections, was to "justly compensate" the person from whom the land was acquired. 111The applicants submit that the court should pay particular attention to the term "not anxious", and not equate it to "prudent". The applicants submit there is no reference in the JTC Act to a requirement for prudence. An anxious purchaser would be "someone who would buy at any price", and in doing so would "overlook any ordinary business considerations" (applicants' submissions, par 9, and submissions in reply, pars 70-73). 112Kordek was an "actual" offeror, rather than a "hypothetical" purchaser, such that the amount that would have been paid to the applicants was $4.2M. The reasoning in Rosenbaum v The Minister [1965] HCA 65; (1965) 114 CLR 424 ('Rosenbaum') was, as the applicants submit (par 13), that: "[i]n such circumstances, there is no necessity for the contract sum to represent the 'market value' of the land acquired". 113Rosenbaum was followed by Jacobs J in Rivers and Rivers v Minister of Education (1975) 36 LGRA 124 ('Rivers'). His Honour said (at 128): "In the face of a binding contract, which it is conceded could and would have been performed on both sides, but for the acquisition, it seems unrealistic to approach the question of compensation by embarking upon an inquiry into the market value of the subject land, that is to say by inquiring what a hypothetical purchaser might be prepared to pay..." 114The applicants submit that Rivers applies to the Kordek-Marroun negotiations, despite the absence of a "true contract", because a purchase price had been negotiated with an actual purchaser, and it is, therefore, unnecessary to look at what a hypothetical purchaser would pay. They rely on Spigelman CJ's interpretation of the authorities, leading him to conclude, in MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 ('MMAL'), (at [100]): "...[t]he offer was not merely admissible, it was cogent evidence of, at least, a minimum value to the purchaser with a special interest and, accordingly, probative evidence of at least a minimum price for Mr Bruning's shareholdings. Indeed, as I have said, it is difficult to conceive, in the particular circumstances of the present case, what better evidence of the minimum value there could be." 115The applicants also rely on Beale v Trinkler [2008] NSWSC 347 ('Beale'), Rummery v Dorsman (1996) NSW ConvR 55-780, and Caruana v Port Macquarie-Hastings Council [2007] NSWLEC 109 ('Caruana') as prescribing a test of "whether the offer was genuine, not whether the offer was prudent" (submissions par 22), but they also argue (reply submissions, par 74) that, in any event, Kordek was clearly "prudent" in making his offer of $4.2M, so, that offered amount should be accepted as the true market value of the land. 116The applicants understood the respondent's position to be that, on the basis of Kordek's evidence, no sale occurred in favour of Kordan for a range of reasons, including, but not limited to, the compulsory acquisition. In response, the applicants submitted that such additional reasons as were advanced - e.g. the writ, the lease arrangement, some question of Kordek's authority, and uncertainty as to the identify of the purchaser - were not of such a nature as to prevent the sale proceeding. 117On the subject of the lease, Ms McWilliam for the applicants submitted (Tp474, LL23-26): "...the court should not be distracted by this lease in any way. There is no evidence that any of the key players thought that this was a binding lease or prelease. Mr [Jordan]'s evidence in the witness box was that it did not" (see also [59] above, and Tp475, LL43 ff). In the applicants' written submissions the court was taken to Jordan's oral evidence, and Rose's 16 August affidavit. There is no evidence that Ezehire was interested in pursuing a lease, after the April 2008 target date had passed. Where both parties consider the contract between them as at an end, that contract must be considered to be discharged, and such an attitude could be inferred where "...an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them": DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; see also Fitzgerald v Masters (1956) 95 CLR 420. 118Had the negotiation survived the "paperwork in order" test, a purchasing vehicle would clearly have been identified to Rose by Kordek, and the writ removed by Rose, leaving in dispute only the question of Kordek's authority, which the applicants say is clearly established by the evidence. 119Kordek stated in cross-examination that "...my function in the system was to sort out the properties, bring them to the table and I can't think of any properties that I recommended that they didn't proceed with" (Tp161, LL44-47). In the applicants' submission, it was normal practice for Mr Kordek to set up a proposed purchase such that "everything was 100% in place" so that all that remained was for the other partners to agree with his endorsement of a particular purchase (see Tp165, L38). The applicants submitted (par 43) that "[t]here is no suggestion that the Dan family did not agree" to the negotiated proposed terms of sale. In any event, the applicants submit (par 53), Kordek's authority was irrelevant for the purpose of dealing with a vendor, under ss 128 and 129(3) of the Corporations Act 2001 (Cth). 120The applicants submit that the reason the proposed sale of the subject site did not go ahead, was because Kordek became aware of the RTA's proposal for acquisition of the whole site. Kordek was an "independent witness", acting and testifying in good faith, and rather well qualified to speak about land values. He had the ability to take the negotiation to fruition, and his evidence demonstrated that the negotiated purchase price of $4.2M represented the amount that Kordek/Dan interests would have paid for the property, absent the public purpose. 121The applicants acknowledge that an offer may not carry as much weight as a concluded contract, but relying on Canada (Federal District Commission) v Leahy [1940] Ex CR 115, cited with approval in Purdy v Nova Scotia (1973) 6 LCR 70 at 74-75, they submit that, in considering the balancing exercise to be undertaken by the court, the offer made in the present case by Kordek ought to carry weight almost akin to the weight accorded to exchanged contracts. To ignore it, the court would have to find that Kordek was not a bona fide, fully informed purchaser (applicants' submissions in reply, par 53). 122The applicants submit that, if the court were to find that $4.2M did not represent the market value, and then examine what offer would be made by a hypothetical purchaser, Kordek is the type of purchaser that the court would in fact consider appropriate to be regarded as a hypothetical purchaser, because of his knowledge of the market, his knowledge of the cost of property development, his intentions in purchasing the particular property involved, and his knowledge of leases. 123They submit that the evidence given by Kordek and Fiorenza of Kordek's relevant credentials was not challenged. His evidence regarding profit-motivated developments in Bigge Street, Liverpool, and in Ipswich, Queensland, was also not challenged, nor was his evidence that he sought and relied upon expert advice regarding property sales. The evidence established him to be "someone who was acutely aware of changing market conditions", and "a prudent businessman" (submissions, par 63(d)). He did not need a feasibility study. He informed the court of the various considerations he took into account - the tendering for the cost of building, the expected revenue from a development, and the potential of the investment (pars 66-67; see alsoTpp182-183). His decision to sell the Bigge Street property for less than his predicted price ($3M c.f. $5M), a decision he explained in his evidence, could be relevant to the court only if it would be relevant to a hypothetical purchaser. Although in his actual dealings with the Marrouns, he ignored the agreement for lease, he gave evidence that the income one would expect to receive from a lessee would be a material factor in setting the price a purchaser would pay for the property. His knowledge of potential revenue from leases on the subject site was based on what was said to him "by everybody around town" (par 74, see also Tp171, L20), and his evidence was unchallenged in cross-examination. The court should accept it. 124Although disputing the necessity for "prudence" in the hypothetical sale, the applicants argue that Kordek cannot be described as "anxious", and that his approach demonstrated a person acting prudently (reply submissions, pars 75-77). 125The site's "great potential" was demonstrated by the sales inquiry made by Peter Warren, the former owner of the adjoining site, and its potential for development, under the proposed zoning, as a "quite distinct" entry point for the Liverpool CBD. The respondent's submissions on Market Value Compensation 126The respondent submitted, based on the expert valuation evidence, that a market value in the order of $1.4M would be appropriate, because the claimed sum of $4.2M was not based upon a concluded transaction, nor an offer that could be accepted; and, any value that the applicants attribute to the development potential of the subject site would not be considered because it was not economically viable, and only a 10% premium, if any, could be added. 127The respondent submits that, despite the court's having in other matters considered offers to purchase or rent in determining compensation, the present proceedings are to be distinguished on the basis that: "[t]he alleged 'offer' in this case is entirely different in character from the offers considered in those authorities" (par 29). The amount agreed between the applicants and Kordek did not constitute a relevant offer. There was no actual contract or offer, and the available evidence does not suggest an agreement would have been reached for that amount, nor that the sale would have proceeded, if the RTA acquisition did not. Kordek did not indicate in his evidence that he had made any "offer", capable of acceptance. 128The respondent rejected the applicants' suggestions that Kordek had a "special interest" in the subject site, that the sale would have proceeded, and that the value Kordek attributed to the property should be accepted over demonstrated market value, of which there was evidence available. See MMAL at [102], cited in Mir Bros Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales [2006] NSWCA 314 ('Mir Bros') at [18]. The respondent submits that Rosenbaum ([112] above) does not apply to these proceedings. 129The respondent submitted (par 28) that "evidence of a price offered for the property in question, in the course of negotiations which do not result in a concluded contract, is not admissible": Spencer, Gregory v Commissioner of Taxation of the Commonwealth of Australia [1971] HCA 2; (1971) 123 CLR 547 ('Gregory'), and McDonald v The Deputy Federal Commissioner of Land Tax for New South Wales [1915] HCA 54; (1915) 20 CLR 231. 130In Gregory, it was stated (at 562) that the evidence of the offer of a sale was admissible "because the offer was followed by a concluded contract and the fact that it was made throws some light on the extent to which the price finally arrived at may be regarded as an indication of the real value of the shares". 131The judgments in Spencer contain the following: (a) Griffith CJ (at 432): "In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring "What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?" It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together. This is not, as I understand the evidence and the decision of the learned Justice, the test which was applied by him or by the witnesses upon whose testimony he relied. On this ground I think that his assessment of the value is open to be reviewed." (b) Barton J (at 436-437): "Of course, the price for which land would sell to a willing purchaser is there intended by Grove J. to be the test, whether there are special advantages or contingencies to be valued or not. And I should say, in view of the many authorities cited and upon the sense of the matter, that a claimant is entitled to have for his land what it is worth to a man of ordinary prudence and foresight, not holding his land for merely speculative purposes, nor, on the other hand, anxious to sell for any compelling or private reason, but willing to sell as a business man would be to another such person, both of them alike uninfluenced by any consideration of sentiment or need." (c) Isaacs J (at 440-441): "The facts existing on 1st January 1905 are the only relevant facts, and the all important fact on that day is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted. The plaintiff is to be compensated; therefore he is to receive the money equivalent to the loss he has sustained by deprivation of his land, and that loss, apart from special damage not here claimed, cannot exceed what such a prudent purchaser would be prepared to give him. To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property." 132The court was also taken to Tamberlin AJ's recent judgment in Warner v Ulysius International Trading Pty Ltd [2011] NSWSC 329; (2011) 91 IPR 570, where his Honour said (at [39]): "Where offers are taken into account it is appropriate to consider the relevance of matters such as whether the offer was genuine; whether it was made at arm's length; when it was made; and the terms and conditions of the offer. These matters may be of central importance. In some cases an offer may be simple, direct and unconditional. In other cases the conditions of the agreement proposed may be complex and onerous on the purchaser. Other relevant considerations in assessing the relevance and weight to be attributed to an offer include equality of bargaining power; the experience of the person making the offer for the property in question; the ability of the offeror to pay; the consideration for the purchase, namely as to whether it is for cash, shares, credit or by way of exchange; whether there was any objective valuation exercise carried out to support the price offered or whether it was to supply a special need of the purchaser or to confer a particular unique benefit on the offeror. In the case of share valuation there may be special factors involved, for example, an acquisition of an additional parcel may confer control of the company which gives the shares an additional value over and above that which would otherwise be attributed to the shares." 133The test is not an "anxious" purchaser, but "prudent hypothetical purchaser": Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66. Kordek's proposition did not demonstrate the requisite level of prudence. 134The respondent detailed eleven reasons that a sale would not have proceeded for the amount of $4.2M: (i)the market value was not $4.2M; (ii)there was no consent from Kordek's business partners to proceed with the sale; (iii)there was no evidence to suggest Kordek's partners would accept his recommendation to purchase the subject site for that amount; (iv)there was no evidence provided by Kordek's partners to assist the court in these proceedings; (v)Kordek's evidence was that he was suspicious of the applicants as vendors; (vi)Rumore raised several concerns about the property, such as the lease with Ezehire that was in place at the time. It was submitted that the lease agreement "raises more questions than it answers" because it is an agreement with a company that did not exist at the date of the agreement, and the rental rate was highly favourable to the lessee (see Tp501-502); (vii)Kordek referred to "significant issues" with the documentation as being one of the reasons that he did not proceed with the purchase; (viii)Kordek was an anxious, not prudent, purchaser, because he was willing to secure the property irrespective of the price, he did not conduct due diligence, and he did not consider the rights of the lessee in relation to the existing lease as significant; (ix)Kordek's judgment on the value of properties is unreliable, evidenced by the Bigge Street property sale; (x)Kordek's evidence should be given little weight because he was unfamiliar with the content of his affidavit and its annexures; he suggested his solicitor sent correspondence on Kordek's behalf without his authorisation; his explanations of feasibility calculations and the required floor space for his "headquarters" in Liverpool were "unsatisfactory"; and he behaved as if he were part of the applicants' "team" and tailored his evidence accordingly; and (xi)Lunney had identified a mathematical error in Kordek's calculations (see Exhibit M2, p 17). The Claims for Disturbance 135The statutory offer made to the applicants included an amount of $95,765 for Disturbance (under s 55(d)). 136In their SFAPOC (par 6, and particulars on p3) the applicants claim, on a rather conditional basis, disturbance of $88,265.95 for legal fees and $22,000 for valuation fees (the latter under s 59(b)), making a total of $110,265.95. The legal fees comprise $49,976.05 for the Class 1 proceedings in this court (s 59(f)) and $5,473.38 for the "proposed sale to Kordan" (also s 59(f)), plus $32,816.52 for legal expenses "leading up to these proceedings" (s 59(a)). 137In addition, an amount of $1,475,000 is claimed (under s 59(f), in par 5, and Annexure 'A' of the SFAPOC) in respect of "economic loss" caused by the "loss of offer to purchase at" $4.2M. 138In its APOD (pars 4 and 10), the respondent denies the disturbance claims made, and contends that the applicants' dealings with Kordek, as particularised, give rise to no claimable economic loss or disturbance. In its final submissions the respondent accepts the claims for $22,000 and $32,816.52, detailed above, making a total of $54,816.52 for disturbance. 139Of the particular expense items claimed, the APOD says: "(a) The claim for legal expenses for [the Class 1] proceedings in the Land and Environment Court pursuant to s.59(f), (i) Is not a direct and natural consequence of the acquisition (ii) Does not arise out of an actual use of the land. (b) The claim for legal expenses for 'proposed sale to Kordan' pursuant to s.59(f), (i) Is not a direct and natural consequence of the acquisition (ii) Does not arise out of an actual use of the land. (c) The Applicant is entitled to some legal costs under s.59(a) for legal expenses in connection with the compulsory acquisition of the land, but does not admit the amount claim (sic) for 'legal expenses leading up to these proceedings' as claimed; (d) The Applicant is entitled to some valuation costs under s.59(b) for valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land, but does not admit the amount claim for 'valuation fees' as claimed." 140As the applicants purchased the site for the purpose of developing it for profit, they submit that the court would construe s 59(f) broadly, so as to include the costs reasonably incurred in that regard before its acquisition (par 26, citing Fitzpatrick Investments Pty Limited v Blacktown City Council (No. 2) [2000] NSWLEC 139; (2000) 108 LGERA 417 ('Fitzpatrick 2000'), affirmed in Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259 ('Fitzpatrick CA'). 141They also rely on the Canadian case Dell Holdings Ltd v Toronto Area Transit Operating Authority [1997] 1 SCR 32 ('Dell'), in which a developer's business was delayed for two years as a result of the expropriation proceedings, and it brought an action under s 13(2)(b) of the Expropriation Act P.S.O. 1980 (Ont.), a statute relevantly similar to the JTC Act, which provides for compensation attributable to disturbance, where land has been expropriated. At [28] Cory J. stated (with five other judges concurring): "If damages are to be awarded they must be the natural and reasonable consequence of the expropriation. The Authority argued before the Ontario Municipal Board, though not before this Court, that the delay was occasioned not by the expropriation but by the municipality's decision to delay the necessary approvals for Dell's proposed development. I cannot agree with that submission. When the Authority determined that some portion of Dell's 40 acres might be required for a GO Station, that entire parcel of land was frozen. The municipality could not grant zoning approval for the development of any part of the property within the 40 acres. It was impossible for the municipality to consider a development whose borders were undefined and whose size was yet to be determined. The municipality had no alternative but to wait until the Authority decided how much and what portion of the land it required for the GO Station. It follows that it was the expropriation which caused the delay. Damages resulting from the delay in the development are therefore the natural and reasonable consequences of the expropriation." 142They also submit (par 120) that it is clear, from Bly C's judgment in the Class 1 proceedings, that the respondent to the present proceedings intended to acquire the subject site, and had communicated to the council to this effect. The costs of those proceedings should be claimable under s 59(f), if not s 59(a), on the basis that the costs were a "direct and reasonable result of the actual use of the land" (par 122 and Dell), not merely a potential future use, "both as to the consent granted, and to the use as a development site for commercial purposes" (reply submissions, par 65). It was also submitted (par 123), that because these figures were unchallenged, the court would accept them, there being, contrary to the respondent's submission, no "double dipping" involved. 143The respondent submits that as the court would find that there was no offer capable of acceptance, the amount sought by the applicants for the loss of the offer (being the difference between the correct market value and $4.2M, namely $1.475M) cannot be claimed under s 59(f), or any other part of the JTC Act. If it is found to be an offer, it would not amount to "use" of the land, and could not, therefore, be claimed under s 59(f). Any future use could not be considered an "actual" use. As there is no offer and no claimable loss, no associated legal costs could be claimed either. 144The respondent further submitted that the evidence suggested that if there were a sale, it would have been for an amount less than $4.2M, and that, contrary to Kordek's evidence, the acquisition would not have been the sole reason the sale did not proceed. The claimed loss is not a direct and natural consequence of the acquisition itself - of which both the Marrouns and Kordek had some 9-12 months advance notice (i.e. prior to September 2010) - rather than some effect of the carrying out of the public purpose which led to the acquisition. Almona Pty Ltd v Roads and Traffic Authority (NSW) [2008] NSWLEC 112; (2008) 160 LGERA 375 ('Almona'); Mitchell v Roads and Traffic Authority (NSW) [2008 NSWLEC 258; (2008) 164 LGERA 375, BMP Manufacturing Pty Ltd v Roads and Traffic Authority of New South Wales [2008] NSWLEC 298 ('BMP') (submissions par 58). 145In BMP, I stated the relevant principle as follows (at [52]): "To be claimable under s.59(f), costs must relate to the actual use of the acquired land by the dispossessed owner - or of the residue land, if its use "is so intimately connected with the actual use of the acquired land so (sic) that the use of one is dependent on use of the other ..." (Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66 ("Peak") at [71]). The cost claimed must also relate to the acquisition itself, rather than to the public works which motivated it (Almona ... at [55]-[61])." The Valuation Evidence 146The parameters of the competing (and some other) valuation evidence were briefly introduced above (at [5]-[12]). 147The court was greatly assisted by a comprehensive "view" of the subject site and other relevant properties, conducted on the morning of the third hearing day (Exhibit M5). 148The principal valuers involved in the matter (Carrapetta and Lunney - see [30]-[33] above) summarised the issues upon which they disagreed (Exhibit M2, par 3) as follows: The market value of the Subject Property on the assumption that the property did not enjoy Development Consent. The extent to which the Development Consent represents a value benefit to the Subject Property. The correct approach to determine the market value of the Subject Property. Whether it is appropriate to take into consideration the conclusions drawn by the parties' single quantity surveying expert, Mr Hughes, for the purpose of considering the feasibility of the approved development. Whether it is reasonable to assume that because the Kordek Offer was made, the sale of the Subject Property would have proceeded to completion at a sale price of $4,200,000. The likely net rental value the completed development on the Subject Property would likely attract. The analysis and application of the comparable sales. 149Although they reached agreement on some issues (e.g. zoning matters - [23] above), some of these agreements were qualified in their joint report (e.g. the cost of development - [34] above). They gave extensive concurrent oral evidence. 150I will now briefly summarise the evidence on various issues addressed by the valuers. The Kordek offer 151On the applicants' behalf, Carrapetta initially opined that the Kordek offer of $4.2M represented the market value of the property (Exhibit M1), but he later revised his opinion to state that it "represented the sum of both the market value of the Subject Property and also Special Value of the property..." (Exhibit M2, par 2.7-2.8. See also Tp265, L31). In his oral evidence, Carrapetta conceded that "this so-called offer ... [is] out of line with the available sales evidence as analysed by David Lunney and myself" (Tp278, LL1-18), but opined also that Kordek is "very prudent" (LL20-27). 152In their joint report, the valuers state their agreement that the offer did not represent the market value of the subject property. (See also Tp265, L31). They also note that there is no documentary evidence to suggest the offer was not genuine. Carrapetta considers that the offer would have proceeded to a sale of the property for $4.2M (plus GST), had the proposed acquisition not been "a factor at the time of the sale negotiations" (Exhibit M2, par 4.5). Lunney notes that it is not uncommon for sales negotiations in relation to commercial properties to fall short of a completed contract, with various reasons leading a purchaser to a change of mind. He also notes (par 4.5) there were "a number of unusual aspects" in respect of the "offer", and opines that Kordek may have made a "significant arithmetic error" when calculating his $4.2M (Exhibit M2, p17). The Development Consent 153The valuers agree that council had initially refused to grant DC for the construction of a six-storey commercial office building, due to advice it had received from the RTA regarding the widening of the Hume Highway. 154They also agree that the subject property now enjoys DC for the construction of that building, comprising a gross floor space area of about 5,453m2, with a net lettable area of 5,040m2 and a FSR of 4.3:1 ([64] above). The DC also provides for a total of 53 car parking spaces, and requires the development to provide vehicular access via an unmade laneway to the rear. (Exhibit M2, par 2.5) 155There is disagreement, however, in relation to the value, if any, that should be attributed to the DC. 156Considering the subject property had DC at the date of acquisition, Carrapetta considered it unnecessary and "not appropriate" to consider the value of the property on the assumption that there was no DC (Exhibit M2, par 4.1). He was of the opinion (par 4.2) that the DC represents a "value benefit" to the subject property, as it permitted development to a FSR which exceeds the prescribed maximum under the current planning controls. He notes that developers aim to maximise the development potential of a site, and although "the permitted FSR may not always be achievable", this does not support the approach of abandoning a DA which provides for a greater FSR (Exhibit M2, p 11). Carrapetta rejects the example adopted in Lunney's evidence (as his Sale 1) where the maximum FSR was not exploited - the effect of the building height on that development had to be considered, as it was heritage listed. He also notes comments from Kordek that the DA was an important consideration. 157Lunney was of the opinion (Exhibit M2, par 4.2, p5) that the DC held by the subject property did "not add any significant value to the land", but "only a minimal value benefit to it", as the approved development was not economically viable, would remain unviable for a number of years, and a potential reconfiguration would result in a significant reduction in the FSR, and additional costs. To determine economic non-viability he compared the value of the development on completion ($11M) with the probable cost of completion, as determined by the parties' single quantity surveying expert ($18M - Exhibit R3, p 25). 158While Lunney accepted that the DC for the subject property permitted more intensive development than may now be permitted under existing planning controls, a factor which may be of value to a purchaser as the basis upon which to seek variation to the existing consent (as Kordek indicated he might), Lunney opined that seeking such variation was risky, the outcome could not be reliably ascertained, and a variation may result in a reduced permitted developable area or refusal of the application (Exhibit R3, p 26). He noted Kordek's opinion that there may be scope for a smaller building on the subject property, and referred to other development sites where DCs have been abandoned. He decided, however, to adopt a conservative approach in favour of the applicants, and so applied a 10% premium in respect of the DC (Exhibit M2, par 4. See also Exhibit R3, p 27). 159The respondent submits that, should the court wish to attribute value to the consent, the court would follow Lunney's approach, estimating a possible addition of 10% to the market value of the subject site (which Lunney found to be $1.27M). In contrast, Carrapetta formed his opinion on the value of the subject site by applying the maximum FSR that is permitted by the DC, an approach the respondent submits (Exhibit M2, pp9-10) is erroneous, on the available sales evidence. The analysis and application of comparable sales 160Carrapetta assessed the market value of the land to be $2,837,500, as at 10 September 2010, based on the application of a unit value of $500/m² to an approved gross FSA of 5,675 m² under the existing DC. He considers that, as the FSR indicates the potential yield of a development, not knowing the FSR makes comparison of sites, and determination of the cost of the development, and its yield, on which to base the resale values, impossible (Exhibit M2, p13). 161The court's tour of inspection covered 12 properties (Exhibit M5). Carrapetta's evidence in chief nominated seven (FC 1 to 7), and Lunney's report eight (DL 1 to 8), culled from an original eleven. There was a late nomination (which became "DL 12"), about the relevance and potential of which there was some dispute. There were four properties in common to both valuers' lists. 162For convenience, the twelve sites were inspected in a particular order, and were then, and afterwards, referred to as "Red 1" and so on, reflecting that order of inspection. The four properties common to the two valuations were Red 4 (FC7/DL4), Red 6 (FC2/DL2), Red 8 (FC4/DL5), and Red 11 (FC3/DL8). All twelve sites are in Liverpool, mostly very close to the subject site: Red 1 and Red 2, together, comprise the Peter Warren site adjacent to the subject site, and are, respectively, 300 and 302 Hume Highway. That double site has been used for a car sales business since the 1950s. Red 3 is 311 Hume Highway, a corner site opposite the subject and Warren sites. Red 4, numerically the first of the four sites common to both lists, is a corner site at 324 Hume Highway, further west of the subject. Red 5 is the Tokyo Imports site at 420-446 Macquarie Street, across Mill Road from the Warren site. Red 6, the second of the sites common to both lists, is 357-361 Macquarie Street, and hosts a Chinese Restaurant some distance towards Liverpool CBD. Red 7 (Carrapetta's prime sale) is an ophthalmology medical centre site at 57-59 Memorial Avenue. Red 8 is the third common site, being a cottage converted for use as a Ray White office, at 67 Bathurst Street. Red 9 (Lunney's prime sale) is the site of an old car repair business opposite Memorial Park, at 54-56 Macquarie Street. Red 10 is the extra site nominated late in the piece by Lunney (as DL12), an office rental building at 50 Macquarie Street. Red 11, the last of the four common sites, is the former Kordan site at 24-26 Bigge Street. Red 12 is the former fire station, now used for church-related purposes, at 70-78 Terminus Street. 163Red 9, 10 and 11 are furthest away from the subject site. Most of the rest are quite close to it. 164Carrapetta analysed his seven comparable sales to derive a common basis for his expression of a unitary rate, as follows: * by disregarding any value attaching to improvements, other than for Red 1 and 2; * by dividing the sale price for each potentially comparable sale by its site area, to derive a rate/m2 of site area ('site area rate'), except for Red 1 and 2; * by deriving a site area rate for Red 1 on the basis of his understanding that "the consultant property valuers apportioned the value of land component to be in the order of $1,250/m2" (Exhibit M1, p45); * by deriving a site area rate for Red 2 "on the basis of the market value being ascertained at $610,000" (Exhibit M1, p 47); and * by dividing the sale price for each potentially comparable sale by his understanding of its developable floor area, to derive a rate per/m2 FSA (Exhibit M1, p22). 165This "comparable sales" exercise resulted in a site area rate range of $1,105-$2,089/m², and a FSA rate range of $395-$695/m². He did not adjust the seven potentially comparable sales to derive a hypothetical expression of value as a unitary rate in the context of the subject property, but focused his analysis on Red 1 and 2, from which he derived a rate of $500/m² FSA (Exhibit M1, par 15.30). Applying that rate to an "approved development consent floor space...of 5,675m2", Carrapetta calculated the market value of the subject property to be $2,837,500. (Exhibit M1, par 15.32). The agreed gross FSA was, however, 5,453m² under the DC, so counsel for the applicants subsequently amended the claim from $2,837,500 to $2,725,000, being the application of $500/m² to the agreed gross FSA. (See SFAPOC, and Exhibit M2, par 2.5(i)). 166The respondent submitted that the court would value the subject land by reference to its site area, as Mr Lunney did, rather than by adopting Carrapetta's approach of valuing the property based on the maximum FSA permitted in the DC (respondent's submissions, par 64). It submits that Lunney's approach showed that the market considers economic viability ahead of FSA; and that there is a close relationship between market value and site area, rather than between market value and actual or potential FSA. 167Lunney approached the valuation of the subject property on the basis of a rate/m2, applied to the site area of the subject property (the 'site area' approach), and assessed the market value of the property to be $1,270,000 as at 10 September 2010 (Exhibit R3, p 23). Alternatively, taking the DC into account, he calculated the market value to be $1,400,000 (p 27). 168Lunney's eight potentially comparable sales were analysed, to derive a common basis of expression as a unitary rate, as follows: (a)by deducting an allowance for value attaching to improvements at Red 6, 12 and 8 to derive a common basis of expression as land value; (b)by dividing the sale price for each potentially comparable sale, after allowance for value attaching to improvements, by the site area to derive a rate/m2 of site area; and (c)by dividing the sale price for each potentially comparable sale, after allowance for value attaching to improvements, by his understanding of the developable floor area, to derive a rate/m2 FSA (Exhibit R3, p19). 169Lunney's analysis of the eight potentially comparable sales resulted in a site area rate range of $545-$2,089/m², and an FSA rate range of $123-$577/m². (Exhibit R3, p 19) This was then adjusted to derive a hypothetical expression of value as a unitary rate in the context of the subject property, by making a specified percentage adjustment for the sum of differences with the subject property in terms of location, size, use, access, street frontages and heritage (Exhibit R3, pp21-23). Of the eight potentially comparable sales he analysed, he found: (a)Red 9 "of the most assistance"; (b)Red 12, 7 and 8 "of assistance"; (c)Red 4 of "some assistance"; and (d)Red 6 and 3 were also considered; but (e)Red 4 was found "not relevantly comparable", due to its location in a medical precinct, and its acquisition by the adjoining private hospital. (It is to be remembered that Lunney had in common with Carrapetta only Red 4, 6, 8 and 11, so only two of Carrapetta's sales were "of assistance" to Lunney, Red 4 and 8). 170Lunney determined the appropriate site area rate to be $1,000/m², and applied it to the site area of 1,268.6m², to derive a value of $1,268,600, rounded to $1,270,000 (par 6.3.14). To this he added his 10% premium for the DC, leading to a value of $1,395,460 rounded to $1,400,000. (Exhibit R3, p 27) 171Lunney did not place any weight on the agreement for lease, and based his valuation on a "Fee Simple in Possession Interest" (Exhibit R3, par 3.3.3). He was of the opinion that the rent payable exceeded market rent, the lease was not binding or enforceable, and the proposed lessee did not have experience in operating medical practices. He also noted that the annual rent, if capitalised, would be approximately the amount estimated for the cost of construction (Exhibit R3, par 6.6). Discussion of the Valuation evidence 172The comparable sales method of valuation, the applicants submit, is not reliable in this case because of the impact of the "Global Crisis", and also should be rejected, because the circumstances of those sales could not be appropriately compared to the subject site (applicants' written submissions, par 84). 173The applicants submit that the two RTA acquisitions adjacent to the subject site - Red 1 and 2 - were truly comparable, in that they establish the "bottom price" for the value of the subject site (par 88). That land sold for $1.9M plus disturbance, despite the fact that "it is recognised" that the purchase price paid was $2.14M (see Exhibit R5 and Exhibit R6). That sale was conducted on an FSR of 2.5:1. 174The second comparable sale - Red 4 - sold for $1.75M plus disturbance, and was also conducted on an FSR of 2.5:1. 175The applicants' written submissions then went on to analyse each comparable sale, and concluded that Red 9, 6, 8, 11 and 7 were the most comparable sales, based on an FSA analysis. They submitted that that is the "norm", i.e. sites are valued according to their development potential based on floor space. The FSR approved in the Class 1 proceedings, say 4.25:1, well exceeded that of the comparable sales, namely Red 11 and 7, and the subject site, therefore, had a higher value than those other properties (pars 84-85). 176The applicants, therefore, submit that, should the court use a comparable sales basis to determine the value of the subject site, the compensation would come to market value of $2.725M, plus disturbance. 177The respondent submits that Carrapetta's analysis was "ipse dixit", and, therefore, not acceptable as expert evidence, because "[t]here is no analysis that properly and logically supports his position" (par 69). It also identified "unsatisfactory aspects of Mr Carrapetta's opinion evidence", and submitted that the court should treat his evidence with caution (par 71). Those unsatisfactory aspects were described as follows (pars 72ff): (1)Carrapetta made "direct and indirect attempts to go behind the opinion of the parties' single expert"; (2)He stated that, at present, the development of the subject site was unfeasible, but he speculated that it may become feasible, and attributed value to the subject site on the basis of this hypothetical assumption; (3)Although Carrapetta denied it, the respondent submitted that he directed the applicants' solicitor to send a copy of the Ezehire lease agreement to the VG, so that the VG would consider it a binding agreement, and add value to the subject site; (4)In assuming that the development would have gone ahead, Carrapetta estimated rental revenue that he did not substantiate, justify or explain; and (5)Carrapetta "shows he has little grasp of the responsible and independent analysis and application of comparable sales information" when assessing a sale at Red 6, and applying a 75% adjustment to that sale. 178The applicants counter that Carrapetta did not ignore the evidence of the joint consultation report, but brought to the exercise his own knowledge of the cost of erection of buildings, and his own opinion as to what a hypothetical purchaser would have accepted. Further, his opinion was based on his comparison of relevant sales, reliance upon the FSA, and an analysis of each sale, and cannot be considered irrelevant (applicants' reply submissions). 179The respondent submitted that the court should adopt Lunney's analysis of the four "common sales" (Red 6, 4, 8 and 11), and went on to discuss those sales upon which Lunney relies, but which Carrapetta disregarded (Red 9, 12, 3, and 5). The sales Red 5, 9, and 12 are examples of where the market does not seek to maximise potential floor space, and Red 3, across the road from the subject site, demonstrates that the existence of a DC may not add value, being an "overdevelopment" of the site. Following Lunney's analysis, the additional sites relied upon by Carrapetta - Red 7, 1 and 2 - are not development sites, and, therefore, do not assist the court with the valuation of the subject site. 180The respondent submitted that the court would accept Lunney's approach because: (a)the approved development is not economically viable, and, if there is no incentive to maximise the potential yield, no value should be attributed to the site's potential; (b)surrounding buildings do not make use of the maximum floor space, before or after the introduction of the 2008 LEP; and (c)sales evidence does not show a direct relationship between the value of a property and its FSA. It is further submitted that there are only 5 or 6 commercial buildings in Liverpool that are 6 or more storeys, and they are in the Liverpool CBD. 181The applicants submit that Lunney's valuation method was erroneous because a sale should be analysed on the basis of the use for which it was purchased, rather than its potential. The applicants further assert that Lunney's valuation evidence would be rejected by the court, because it was based on the zoning of the land as mixed use, rather than "the real value of the consent and the plan of the Council for these 'corridors'" (par 126). 182The applicants also challenge Lunney's analysis of Red 12, noting that no adjustment was made to reflect its heritage status. The Market Value of the Subject Property - Consideration The relevance of the offer 183It is generally supported that, in the face of an actual binding (or "concluded") contract for sale, frustrated only as a result of an acquisition, it may be unnecessary or even "unrealistic to approach the question of compensation by ... inquiring what a hypothetical purchaser might be prepared to pay" (see Rivers, Gregory at 562, McMahon v Sydney County Council (1940) 40 SR (NSW) 427, and Kennedy Street Pty Ltd v The Minister [1963] NSWR 1252; (1962) 8 LGRA 221). 184Kordek's was not the kind of offer referred to in those cases. It was not equivalent to a concluded contract. However, that does not necessarily mean that the offer is completely irrelevant to the court's consideration. 185Cases such as Federal District Commission v Leahy, MMAL, Rummery v Dorsman, and Caruana give some support to the proposition that a genuine offer of purchase may be afforded "considerable importance", or at least "admitted as evidence" as to the value of the land, where completion of the contract has not proceeded, due to a compulsory acquisition. However, the claimant must show that the offer was genuine, as in capable of proceeding, and intended to proceed, to a completed contract. I also believe that prudence, indicated by care in making the offer, is a relevant consideration, and, where demonstrated on the facts, may lead to the offer being given greater weight. 186Further, in Goold & Rootsey v Commonwealth of Australia (1993) 42 FCR 51, Wilcox J thought it would be wrong for "courts to adopt a blanket rule excluding offer evidence", and in Beale his Honour stated: "... once the court is satisfied about genuineness, an offer by an arm's length party to purchase the land under valuation is something that the judicial valuer ought to take into account in considering the possibility of a sale at a price different from that indicated by conventional evidence, such as an analysis of comparable sales, or of a hypothetical development, or a calculation of the capitalised value of the rental return. How much weight should be given to such an offer is a question to be determined by reference to the facts of the particular case. In some cases, the appropriate weight may be minimal; in others considerable." 187Biscoe J's comments in Caruana at ([22]-[34]) are also relevant. At [33] his Honour stated: "In my opinion, in a resumption case where a genuine offer to rent relates to the very land in issue and the offeror does not proceed because of the impending resumption, that offer should be admitted as evidence of rental value, even though its weight may not be as great as if a contract had been concluded. McDonald is not authority against that proposition because it is distinguishable for the reasons discussed earlier. No contrary authority is binding on me. The doors opened in MMAL, I think, permit the proposition and Mir is consistent with it. Further, if there be a general rule that offers to rent are not admissible as direct evidence of value, then I consider that this is an exception which is consistent with the interests of justice. 34 In the present case, there is no suggestion that the offer by Mr Holland to rent Mr Caruana's shop 2 was not genuine, nor that it was not at arm's length. He did not proceed beyond the offer because of the shadow of the respondent's known intention to compulsorily acquire the Ritz Arcade. Mr Holland's statement of evidence as to the offer was tendered in evidence and he was available for cross-examination. Mr Caruana was also available for cross-examination on his evidence as to that offer. In these circumstances, I admit evidence of the offer as evidence of the market rental and give it weight, albeit not as much weight as if it had been a concluded contract (my emphasis)." 188The weight to be attributed to an offer depends on matters such as those identified by Tamberlin AJ in Warner v Ulysius International Trading Pty Ltd (see [132] above). 189In the current matter, there was no concluded contract. Although there is some evidence that the acquisition and/or the RTA proposal were matters significant to Kordek's decision not to proceed any further with his proposed purchase of the subject property, there were other matters, some perhaps "significant", that may have prevented the offer from proceeding as it currently stood, to a completed and binding contract (see above at [81]-[94]). Kordek had experience of the property market, and expressed genuine interest in the purchase of the applicants' property. He was not troubled by the prospect that some of the site might be required by the RTA, but, when it became clear the whole was to be taken, he declined to proceed. 190The court cannot ignore the absence of a binding contract, nor the uncertainty of the status of Kordek's "offer" in the preliminary form in which he put it to his solicitor for further investigation. 191We, therefore, intend to adopt the approach taken by Biscoe J in Caruana. The "offer" of $4.2M should be considered in determining the value of the property, but it cannot be relied on as the sole determinant of value - other valuation evidence is available in this case, and must also be carefully considered. The lease 192The applicants assert that the lease agreement with Ezehire should not be given any weight, it having been effectively abandoned by the parties to it (see above at [56]-[59]). The respondent argues that it cannot be considered irrelevant, but refers to it as another factor supporting the proposition that Kordek's offer should not be treated as equivalent to a concluded contract. 193As already noted (at [171]), Lunney did not consider the lease as binding or enforceable, and he did not place any weight on it when undertaking his market value calculation. 194In cases of compulsory acquisition, the valuation task can be complicated if the relevant land is the subject of a lease agreement. Recently, in Tolson v Roads and Traffic Authority of NSW [2012] NSWLEC 170, I held that a binding and enforceable lease must be considered in the determination of the value of land acquired, and could not be merely disregarded (see, specifically, my comments at [201]-[207]. 195Although noting the relevance of binding and enforceable lease agreements, given the limited weight placed on the lease agreement by the parties in this case, and the issues relating to whether it actually remained on foot, we do not think it should be given any weight in the consideration of the value to attribute to the subject site. Valuation according to comparable sales 196It is well established that, if comparable sales are available, their direct comparison should provide the conventional method of valuation (Graham Trilby Pty Ltd v Valuer General [2009] NSWLEC 1087 at 41 ('Trilby 2009'); Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151 at 156; River Bank Pty Ltd v Commonwealth of Australia (1974) 31 LGRA 244 at 484). 197Such a direct comparison process requires the accumulation, analysis, adjustment, and application, to the subject site, of genuinely comparable sales. A court depends upon the established expertise of valuer witnesses called on both sides of the case. As Sugerman J said in Bingham v Cumberland County Council (1954) 20 LGR (NSW) 1, at 18-19: "The valuer, in arriving at his opinion in these difficult matters may have to draw upon his general knowledge and experience, including perhaps experience in other situations which, although lacking in complete comparability, may yet provide an experienced valuer with guidance and suggestions as to the general approach which may be made and as to considerations which may become relevant." 198The valuation experts, firstly, seek to accumulate a pool of relevant comparable sales, from which information and evidence may be deduced concerning the value of the subject property. Generally the competing parties produce lists which the court must sift to identify some which are "truly comparable", or a "reasonably representative" sample, and "relevant and sufficient in volume" (Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 212 CLR 111, at 121). Where the comparable sales differ in substantial ways from the subject property, a process of reasoning is required to establish their utility or otherwise (Leichhardt Municipal Council v Seatainer Terminals (1981) 48 LGRA 409, at 414). 199Wells J said in Brewarrana v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170 ('Brewarrana') (at p551): "there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not. ... The evidence in this case suggests strongly to my mind that, at the initial stages, a valuer will almost certainly look at all known sales in potentially relevant areas, if for no other reason than to discern patterns of prices and changes in price levels over important periods. ... It is, in my view, all a matter of degree: some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method." 200Relevantly, in Trust Company (at [115-119]), Pain J declined to give any weight to a valuation report in a situation where the valuer's facts and assumptions could not be scrutinised, due to his failure to set out a clear stepwise process. 201The sales chosen as potentially comparable are analysed to provide a common basis of measurement and comparison, for example a unitary rate (rate per square metre, rate per hectare, etc), or notation whether improved or unimproved (through allowance for the absence or existence of improvements, etc), and so on. 202No two properties are truly identical, and adjustments are made to find a basis for practical comparison, for example, by hypothesising a unitary rate to reflect differences (such as size, location, use, date, etc) between a respective potentially comparable sale and the subject property (see Trust Company, at [112]). Too much adjustment potentially renders the comparable sale unsafe to use (see Trilby 2009, at 36, and Brewarrana). It is a matter of degree, which must be carefully considered in each case. 203Making appropriate explicit or implicit adjustments for differences, such as in location, area, and time, is accepted valuation practice, and enables valuers to produce, in their evidence, comparable values for the court to assess. Such adjustment is a deductive process generally based on reasoning which draws on the expertise, skill and experience of the valuer (Trilby 2009 at 35, see also Holcim (Australia) Pty Ltd v Valuer-General [2009] NSWLEC 225). 204Bly C said in Jessica Investments Pty Ltd v Valuer General [2008] NSWLEC 1375 (at [6]): "Also, in my opinion, if a valuer does not have a final land value in mind, the detailed percentage adjustment approach could be utilised and revealed in an attempt to provide transparency. Otherwise the valuer's less transparent approach would be to identify a range of factors that distinguish in one way or another, the comparable sale from the subject property and, based on the valuers own judgment simply assert the land value." 205Explicit adjustment was preferred by Pepper J in Tomago Aluminium Company Pty Limited v Valuer General [2010] NSWLEC 4, at [45]: "... it is necessary to make explicit adjustments for differences so that the adjustment process is sufficiently logical. An implicit process comprising a single adjustment, rather than separately itemised and reasoned adjustments, risks rejection for want of transparency." 206A transparent process of explicit adjustment, leading to an explicable assessment of value, is to be preferred to an opaque process of implicit adjustment, leading to an assertion of value. 207Furthermore, the adjustment process should work forwards from the comparable sales to derive an opinion of value, rather than working backwards to justify an opinion of value previously formed (per Jagot J in Graham Trilby Pty Limited v Valuer-General [2008] NSWLEC 217, at [25]). 208Application of appropriately adjusted, potentially comparable sales to the subject property seeks to determine the value of the subject property through a consideration of the relevance (being limited, indirect or direct) of the unitary rate derived from those adjusted comparable sales relative to the subject (Trust Company, at [114]). While all comparable sales evidence may be considered relevant, and so cannot be disregarded, the level of relevance of different comparable sales to the subject property may vary, leading to the valuer attributing differing weight to different comparable sales. Is the best approach FSA or site area? 209Lunney gave evidence that, in his opinion, while FSA was a relevant consideration for purchasers in the local market, it was not the primary determinant of value because: (a)a number of mixed use development sites in the local market had not been developed in a manner which exploited the maximum available floor space area; (b)the comparable sales, when analysed on an FSA basis, do not show a consistent linear relationship between value and floor space, indicating that the local market does not rely upon such a determinant of value; and (c)the approved development for the subject property was not economically viable as at the relevant date, such that an intending purchaser would not consider the value of the subject property to be a function of the floor space developable under the existing DC. (Exhibit R3, pp18, 33, 34) 210We accept this opinion and, therefore, have considerable concern with the use in this matter of a valuation approach based on FSA rate. Accordingly, we prefer the use of a valuation approach based on site area. 211Carrapetta identified seven potentially comparable sales, and relied primarily on Red 1 and Red 2, but we find his analysis was not thorough, logical, or transparent. His application of potentially comparable sales evidence to the subject property was based on only one potentially comparable sale, and by assertion only. Further, he accepted, without testing it, third party advice of the analysed land value of Red 1, and of the developable floor area of the subject property, multiplying the two numbers together to arrive at market value. 212Lunney, in his valuation evidence, identified matters for which adjustment was made, and specified a percentage adjustment, but greater transparency may have been afforded by a consideration of each matter for adjustment in the context of each property, and the resulting basis for the percentage adjustment adopted. However, his accumulation, analysis, adjustment, and application of comparable sales, for the valuation of the subject property, was clearly and sequentially stated as a logical decision making process. 213We prefer Lunney's evidence and opinions, to those of Carrapetta. We accept Lunney's reasoning for finding many of the twelve sales to be of limited relevance (namely Red 1, 3, 5, 6, 8, and 11), e.g. Red 3 was a sale by a mortgagee in possession, and Red 6 may have involved a vendor in financial distress. 214We, therefore, find only sales Red 4 (324 Hume Highway), Red 9 (54-56 Macquarie Street), and Red 12 (70-78 Terminus Street) directly relevant. Red 4 occurred after the relevant date, is slightly larger, has a suggestion of the potential for duress, and is almost adjacent to the subject property. Red 9 occurred around a year before the relevant date, and is slightly larger than the subject property, though in a superior location closer to central Liverpool. Red 12 occurred around a year before the relevant date, and is of a similar size to the subject property, though in a superior location closer to central Liverpool. 215Lunney analysed the comparable sales to indicate site area rates in the range of $799 to $1160/m2 before adjustment, with the comparable transaction after the relevant date showing $1,105/m2 before adjustment. He clearly explained why he adjusted Red 4's and Red 9's site area rate downwards, and Red 12's upwards, to bring him to his $1,000/m2 site area rate for the subject property. 216The relevance of Kordek's offer does not outweigh the strength of Lunney's expert arguments. The respondent cannot pay, in JTC Act proceedings, any form of "damages" to the applicants because it required more of their land than Kordek had expected. It must pay only "compensation" determined in accordance with the code in the JTC Act, and, in this case, that code dictates a decision in line with Lunney's evidence. 217Neither side tendered any analysis of comparable sales evidence to support the existence or the quantum of either a premium or a discount in the market for properties sold with DC attached, compared to those sold without it. Lunney determined that the site's approved development was not viable, but "made a conservative assessment in favour of the applicants in applying a 10% premium in value" because of the DC (Exhibit R3, p25). 218However, no convincing argument was advanced to support it. Accordingly, we do not consider that the existing development approval adds to the market value of the subject site. Finding on Market Value 219The court finds that the subject property had, at the date of acquisition, a market value of $1,270,000, for the purposes of section 55(a) of the JTC Act. The Disturbance claims - Consideration and Findings 220The applicants' claim for disturbance under s 55(d) and s 59 is effectively made up of: (1) costs incurred in relation to the "offer"/proposed sale (including as a result of its loss), (2) legal expenses in relation to the Class 1 proceedings, (3) legal expenses related to these proceedings, and (4) valuation fees. (See [136]ff above). 221In Fitzpatrick 2000, Lloyd J stated, in relation to claims for disturbance, (at [20]): "Para (f) of s59 is wider than the preceding paragraphs. It is a "catch-all" provision: "any other financial costs reasonably incurred (or that might reasonably be incurred) relating to the actual use of the land, as a direct and natural consequence of the acquisition". As a "catch-all" provision, the words "any other financial costs" should not, in my opinion, be read down. This does not mean, however, that this paragraph opens the flood-gates. The costs must be "reasonably incurred" and must relate to the actual use of the land, as a direct and natural consequence of the acquisition." (emphasis mine) 222On appeal in Fitzpatrick CA, the Court of Appeal accepted the need to distinguish between a "future use" and an "actual use" of the land, and Stein JA stated (at [5]) that "while physical use is not required, something which is only a potential future use would fall short of 'actual use'." 223In the same case Brownie AJA said (at [26]ff): "26 The respondent submitted that the word "actual" had been inserted to emphasise to the reader that the use had to exist in fact, and to distinguish such a use from a future use, or a potential use, and pointed out that if the question had to be decided independently of the Just Terms Act, a future use or potential use might have been the subject of compensation for disturbance: Brewarrana Pty Ltd v Commissioner of Highways [No 2] (1973) 32 LGRA 240 at 247. 27 Although at first blush this gives the word "actual" little apparent work to do, I think it is correct... 28 The appellant contended that the costs incurred in buying the replacement land did not relate to the actual use of the acquired land. However the expression "relating to" is of wide import, and the findings of fact of Lloyd J, set out above, lead to the conclusion that the respondent purchased the replacement land, in order to replace one parcel of developable land with another for the purposes of its business. This seems to me to be correct. In the circumstances of this case, both the need and the occasion for the purchase of the replacement land related to the actual use of the acquired land, that is, to conduct its business the respondent needed to acquire and then hold the replacement land for later subdivision and resale." (See also Spigelman CJ's comments in Mir Bros, at [88]ff). 224In Almona, Jagot J gave an extensive analysis of the case law relating to disturbance costs claimable under s 59(f), and I have earlier quoted my statement of principles in BMP (at [52]), viz: "To be claimable under s.59(f), costs must relate to the actual use of the acquired land by the dispossessed owner - or of the residue land, if its use "is so intimately connected with the actual use of the acquired land so (sic) that the use of one is dependent on use of the other ..." (Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66 ("Peak") at [71]). The cost claimed must also relate to the acquisition itself, rather than to the public works which motivated it (Almona ... at [55]-[61])." (1) The Kordek "offer" and section 59 225As is clear from what I have earlier written, a possible sale to Kordek/Kordan at a price of $4.2M did not proceed to a binding contract for various reasons, not limited to the RTA acquisition. The notional "loss", therefore, did not occur directly and naturally as a result of the acquisition, and so cannot be claimed under s 59, as it does not relate to the applicants' "actual use" of the land. Such a sale was, at best, a potential or future use, and, therefore, the loss of that sale is not sufficient for a claim under s 59. 226The applicants' claims for "economic loss", and for their "wasted" legal expenses in respect of the proposed sale, are, therefore, rejected. (2) Legal expenses related to the Class 1 proceedings 227Although the applicants used the land for the sale of retail items at Christmas and Easter, it is evident that, from at least early 2003, their intentions were to further develop the subject property. 228Although I note that there were serious questions whether the proposed development was economically viable, that does not necessarily mean the applicants' use of the land for development purposes should be rejected as an "actual use". 229Accordingly, I agree that the costs of the Class 1 proceedings in relation to that development are compensable on the acquisition. 230The applicants are, therefore, awarded $49,976.05, pursuant to s 59(f) of the JTC Act, on that account. (3) and (4) Valuation expenses and other legal costs 231The claimed valuation expenses of $22,000, under s 59(b), and legal expenses of $32,816.52 related to these proceedings, under s 59(a), were conceded (respondent submissions, par 18), and will be awarded. Conclusion and Orders 232The formal orders of the court are as follows: (1) The applicants are awarded $1,270,000, pursuant to s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991, for the market value of the subject property acquired by the respondent. (2) The applicants are awarded $104,792.57 for disturbance, under s 55(d) of the Land Acquisition (Just Terms Compensation) Act 1991. (3) Costs are reserved. (4) All exhibits and the Court Book are returned to the parties. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 January 2013