Land and Environment Court New South Wales Medium Neutral Citation: De Battista v Transport for New South Wales [2014] NSWLEC 39 Hearing dates: 17 - 21 March 2014 Decision date: 15 April 2014 Jurisdiction: Class 3 Before: Pain J Decision: 1. The compensation payable for the Applicants' land the subject of the present appeal is determined at $3,766,053.02. 2. Exhibits may be returned. 3. The question of costs is reserved. Catchwords: COMPULSORY ACQUISITION - comparable sales approach to market valuation - large adjustment for availability of sewerage services not appropriate - no application of s 61 to disturbance claim - compensation payable Legislation Cited: Blacktown Local Environmental Plan 1988 Land Acquisition (Just Terms Compensation) Act 1991 s 3, s 37, s 55, s 56, s 59, s 61, s 66 State Environmental Planning Policy (Sydney Region Growth Centres) 2006 Transport Administration Act 1988 Cases Cited: Bonomo v Transport for New South Wales [2014] NSWLEC 25 Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170 Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; (2007) 151 LGERA 400 Chaudry v Liverpool City Council [2008] NSWLEC 251 Dooralong Residents Action Group Pty Limited v Wyong Shire Council [2011] NSWLEC 251; (2011) 186 LGERA 274 El Boustani v The Minister Administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33 Koutsouras v State Rail Authority of New South Wales (unreported, NSW Court of Appeal, Meagher JA, 29 November 1991) McDonald v Roads and Traffic Authority of NSW [2009] NSWLEC 105; (2009) 169 LGERA 352 Roads and Traffic Authority (NSW) v McDonald [2010] NSWCA 236; (2010) 79 NSWLR 155 Spencer v Commonwealth [1907] HCA 82; (1907) CLR 418 Category: Principal judgment Parties: Mr and Mrs De Battista (Applicants) Transport for New South Wales (Respondent) Representation: Mr A Galasso SC with Mr L Waterson (Applicants) Mr I Hemmings SC (Respondent) Slater & Gordon Lawyers (Applicants) Hunt & Hunt Lawyers (Respondent) File Number(s): 30122 of 2013 Judgment Valuation of land following compulsory acquisition 1On 21 September 2012 the Respondent Transport for NSW compulsorily acquired the whole of 71 Schofields Road, Rouse Hill (the acquired land). The Applicants Mr and Mrs Battista have appealed against the Notice of Compensation as provided by s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act). The public purpose of the acquisition was pursuant to the Transport Administration Act 1988 being for the North West Railway corridor. 2I thank Acting Commissioner Cowell for his assistance in this matter. The Court undertook a view of the acquired land and the comparable sales sites referred to in evidence. The Court's role is to act as judicial valuer, arriving at its own conclusion on the appropriate level of compensation assisted by the parties' experts. Just Terms Act 3The objects of the Just Terms Act are defined in s 3: 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 ... 4Market value is defined in s 56 of the Just Terms Act. Other relevant sections of the Just Terms Act also follow: 37 Right to compensation if land compulsorily acquired An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land. 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, ... (d) any loss attributable to disturbance, ... 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. 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. 61 Special provision relating to market value assessed on potential of land If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of: (a) any financial advantage that would necessarily have been forgone in realising that potential, and (b) any financial loss that would necessarily have been incurred in realising that potential. 5The Applicants are claiming compensation under s 55 in relation to market value of the acquired land, subsection (a), and loss attributable to disturbance, subsection (d). Market value 6Market value must be assessed in accordance with the definition in s 56(1) of the Just Terms Act. Evidence 7The Applicants tendered the court book (exhibit A), Mr Dempsey's amended schedule of comparable sales (exhibit B), a composite table by Mr Dempsey and Mr Dyson of comparable sales (exhibit C), a NSW Government announcement on 12 June 2012 of the acceleration of the First Ponds Creek Carrier (FPCC) (exhibit D), two valuations prepared for the vendor (by Mr Furney of R.G Furney Projects Pty Limited) and the purchaser (by Mr Good of Jones Lang Lasalle) respectively and the contract for sale of 28 Tallawong Road, Rouse Hill with a completion date of 26 April 2012 (exhibit E), and a section of the statement of environmental effects on waste disposal and utility services for 44 to 46 Schofields Road, Schofields (exhibit F). 8The court book (exhibit A) contains the affidavit of Mrs De Battista dated 28 March 2013 (tab 10). It also contains the town planning evidence including the statement of evidence by Mr Brindle, town planner (tab 11), for the Applicants, Mr Shiels, town planner (tab 12), for the Respondent, and their joint report dated 15 July 2013 (tab 13). The valuers' evidence included is the statement of evidence of Mr Dempsey, for the Applicants, dated 30 August 2013 (tab 14), Mr Dyson, for the Respondent, dated 2 September 2013 (tab 15) and their joint report dated 17 September 2013 (tab 16). The engineers' evidence included is the statement of evidence of Dr Martens, for the Applicants, dated 13 June 2013 (tab 17), Mr Green, for the Respondent, dated 23 July 2013 (tab 18), and their joint report dated 12 August 2013 (tab 19). Mr Green prepared a supplementary statement of evidence dated 13 March 2013 attaching the Halmarrick plan (tab 21) and Dr Martens and Mr Green prepared a further joint report dated 18 March 2014 (tab 22). 9The Respondent tendered a bundle of documents obtained on subpoena concerning the Department of Education and Communities (Department of Education) sales at 90, 98, 100 and 102 Hambledon Road, Schofields (exhibit 1), Mr Dyson's amended schedule of comparable sales (exhibit 2), a chronology of sales in Alex Avenue (exhibit 3) and a schedule of disturbance (exhibit 4). 10Exhibit 1 includes in tab A an expression of interest (EOI) for the sale of 90, 98 and 100 Hambledon Road, Schofields, showing 17.79 acres of residential land. Tab B is a letter from Laing & Simmons real estate agents to Mr Attard dated 23 April 2012 regarding the progress of the EOI campaign for 90, 98 and 100 Hambledon Road. Tab C is a letter dated 30 April 2012 from Mr Greenhalgh, registered valuer, Corporeal Pty Ltd, to Mr Flanders, Department of Education containing valuation advice for 90, 98 and 100 Hambledon Road. Mr Greenhalgh refers to sales at 84 Hambledon Road, Schofields, 249 Railway Terrace, Schofields, 53 Alex Avenue, Schofields, 55 Alex Avenue, Schofields, 77 Schofields Road, Schofields and 112 Hambledon Road, Schofields. Mr Greenhalgh states that the large site area and location of the land adjacent to an existing subdivision with services in place would be particularly attractive to developers and it is anticipated there will be considerable interest in the sale of the land. The lower end of market value range is $150/sqm ($10,800,000) and the upper end is $180/sqm ($12,960,000). 11Tab D is the offer made by the Department of Education to purchase 90, 98 and 100 Hambledon Road in the amount of $12,960,000 on 30 April 2012. Tab E is a table and schedule containing details of offers received for 90, 98 and 100 Hambledon Road. Tab F is a letter dated 3 May 2012 from Laing & Simmons rejecting the Department of Education's offer and advising that the owners would accept an offer of $14,500,000. Tab G is a briefing note to the relevant Minister seeking approval for purchase of the land dated 4 May 2012. It states that the site is required for a primary and a high school which are expected to open in term 1, 2015. The Department is negotiating the purchase of three lots. These have been offered for sale by expression of interest at $14.5 million with an expression of interest lodged by the Department of Education. 12Tab H is a letter dated 9 May 2012 from Mr Greenhalgh to the Department of Education containing further valuation advice for 90, 98 and 100 Hambledon Road. Mr Greenhalgh states that he has conducted further investigations and has been unable to confirm any sales which support the contended value of $14,500,000. He states that there have been rumoured transactions at prices around that being sought but no evidence of such. He also states that "there are times such as this when a particular purchaser has compelling reasons to pay a premium or special value over and above market value to secure a property. Special value has been described as the financial advantage, in addition to market value, which is incidental to the person's use of the land." Mr Greenhalgh adds a premium of 10 and 20 per cent to the market value of $12,960,000 to obtain $14,256,000 (10 per cent) and $15,552,000 (20 per cent) exclusive of GST. 13Tab I is a letter dated 10 May 2012 from the Department of Education to Laing & Simmons offering $14,500,000 for 90, 98 and 100 Hambledon Road. Tab J is a letter dated 11 May 2012 from Laing & Simmons to the Department of Education confirming agreement and enclosing the terms of sale. Tab K is a submission dated 5 July 2012 to the Acting Deputy Director-General seeking approval of the contract for sale. Tab L is a media release dated 12 June 2012 by the Department of Education announcing the new school/s at the Ponds. Tab M is a media release dated 15 June 2012 by the Department of Education confirming that a new school/s will be built at the Ponds. 14Tab N is a letter dated 14 June 2012 from the Department of Education to GG Property Consulting, the vendor's real estate agent, offering $4,790,000 for 102 Hambledon Road, Schofields. Tab O is letter from Mr Greenhalgh dated 9 August 2012 to the Department of Education containing valuation advice for 102 Hambledon Road. He notes that the asking price is $5,700,000. Mr Greenhalgh refers to sales at 114 Hambledon Road, Schofields, 90, 98 and 100 Hambledon Road, Schofields, 53 Alex Avenue, Schofields, 55 Alex Avenue, Schofields, 77 Schofields Road, Schofields and 28 Tallawong Road, Schofields. Mr Greenhalgh states that "the real estate market in Schofields and neighbouring suburbs for properties with underlying development potential for residential subdivisions appears quite buoyant, particularly in the last six months with a noticeable rise in value levels being achieved. The location of the acquired land adjacent to an existing subdivision with services in place would be particularly attractive to developers and it is anticipated there would be considerable interest in the sale of the land." Mr Greenhalgh makes the same observation as in his earlier advice concerning 90, 98 and 100 Hambledon Road about premium or special value and adds a premium of 10 and 20 per cent with the resultant values of $5,269,000 (10 per cent) and $5,748,000 (20 per cent). 15Tab P is a letter dated 14 August 2012 from the Department of Education to GG Property Consulting offering $5,500,000 for 102 Hambledon Road. Tab Q is a briefing note to the Minister and approval for purchase of the land dated 28 August 2012. It states that in negotiations with the owner of lot 41 it has become apparent that the total cost of the acquisition will exceed the previously approved budget with negotiations having been undertaken since May 2012. The owner made a final offer of $5.8 million. The submission states that this asking price is above the sales range for the area. It also states that: "however, the vendor is aware of the Department's ownership of the adjoining lots and the intent for the site. The Valuer has acknowledged this interest in his assessment and advised up to 20 per cent above the current market is not uncommon in these circumstances...this additional amount is a special value by definition." The submission also states that the valuer advised that the upper end of the market value range for lot 41 is $200/sqm and goes on to state that "however, the market value theory of willing buyer, willing seller, arm's length transaction after proper marketing where parties act knowledgeable [sic], prudently and without compulsion does not apply in the Department's proposed acquisition of Lot 41." 16Tab R is a letter dated 4 September 2012 from GG Property Consulting to the Department of Education advising that the owners would accept an offer of $5,730,000. Tab S is a letter dated 4 September 2012 from the Department of Education to GG Property Consulting accepting the offer of $5,730,000. Description of acquired land 17Mr Dempsey and Mr Dyson agreed the following: (a)the legal description for the acquired land is lot 21 DP27220. The value of the land is assessed on the basis it is free of encumbrances; (b)the area of lot 21 DP27220 is 2.023 ha being 20,230 sqm; (c)the acquired land is located on the northern side of Schofields Road approximately 75m east of Tallawong Road, at Rouse Hill, to the north west of the Sydney CBD; (d)the topography of the acquired land appears level and with a gentle slope and a moderate cross fall from west to east and also from the rear to the front boundary of the site; (e)the acquired land is elevated above Schofields Road ranging from RL60 to RL65 metres Australian Height Datum (RL: reduced level); (f)the improvements on the acquired land comprise a large brick clad cottage with attached double garage, swimming pool, tennis court and two machinery sheds. The valuers agreed the improvements have no value; (g)the acquired land is not flood affected; (h)the basis of the valuation of the land is fee simple with vacant possession; and (i)the valuation should proceed on the basis that the acquired land is free of any contamination. Planning for Rouse Hill and the acquired land 18Under the Blacktown Local Environmental Plan 1988 the acquired land was zoned 1(a) General Rural. It was occupied by a single storey brick veneer dwelling with carport and swimming pool at the date of acquisition. The State Environmental Planning Policy (Sydney Region Growth Centres) 2006 (Growth Centres SEPP) was gazetted on 28 July 2006 and applied to the general area in which acquired land is located. The acquired land sits within a precinct known as Area 20 in the Rouse Hill development area, a precinct identified under the Growth Centres SEPP. The purpose of the Growth Centres SEPP is to make land available, on a precinct by precinct basis, for development. One adjoining precinct is the Alex Avenue precinct. A number of the comparable sales referred to by the valuers are in this area. Area 20 was originally released for precinct planning in June 2006. At that date the acquired land was not within Area 20. In January 2009 the precinct boundary was adjusted and the acquired land was moved from the Riverstone East precinct into the Area 20 precinct. The acquired land within Area 20 was rezoned in October 2011 to SP2 Infrastructure (Railway), SP2 Infrastructure (Classified Road) and IN2 light Industrial. 19To assess compensation for the acquired land it is usually necessary to determine the zoning of the property absent the public purpose (the underlying zoning). The planners agreed that the acquired land was zoned a combination of SP2 Infrastructure (Railway), IN2 Light Industrial, and SP2 Infrastructure (Classified Road). They did not agree on the underlying zoning. Mr Brindle for the Applicants opined that the underlying zoning was R3 Medium Density Residential. Mr Shiels for the Respondent opined that the underlying zoning was R2 Low Density Residential. It is not necessary for the Court to determine the underlying zoning beyond identifying that the underlying zoning would allow low to medium density residential development as the valuers agreed in their joint report at par 16 "that based on the available sales evidence there is no material difference in market value between R2 zoned land and R3 zoned land". 20In Bonomo v Transport for New South Wales [2014] NSWLEC 25 a helpful history of the North West Railway corridor is identified at [17]-[26]. I adopt those paragraphs and do not need to include them here. Landcom is undertaking a large residential subdivision in stages in an area known as the Ponds on the other side of Schofields Road to Area 20 and the acquired land. Availability of services 21The reports of engineers Mr Green called by the Respondent and Dr Martens called by the Applicants considered all service types. The only issues of dispute are the provision of sewerage services and, to a lesser extent, water services. The first joint report of the engineers related to the provision of services to the acquired land. The supplementary joint report related to the provision of services to the comparable sales at 822 Windsor Road, Rouse Hill and in the Alex Avenue precinct. Water services at acquired land 22As contained in Dr Martens' evidence, by letter of 16 May 2013 Sydney Water (exhibit A p 414) advised Dr Martens (with the advice back dated six months) that "properties above RL60 would not be able to receive adequate pressure. Area 20 is supplied by Parklea Reservoir which has both in fill and green field development that covers a vast area. As a result, it is not the development or lack of development in Area 20 that is creating a lack of pressure above RL60. Rather it is the size of the area that the system services. Sydney Water's current plan is to service areas above RL60 within Alex Avenue, Area 20 and Riverstone as part of our Package 3 project in 2020." 23The acquired land is all above RL60. Mr Green opined that this situation created a risk to the potential subdivision of the acquired land. Dr Martens had Sydney Water provide a "Statement of Available Pressure and Flow" (exhibit A p 415). From his analysis of this advice he concluded that adequate pressure was available to service a potential subdivision of the acquired land. 24While the engineers did not agree on whether water services provided by Sydney Water would be immediately available to the acquired land, they agreed that if there was insufficient pressure there are, subject to Sydney Water's approval, ways to overcome that problem. The cheapest solution was the installation of a private pressure boosting pump at an estimated cost of $40,000 - $50,000. However this solution would require the subdivision to be community title rather than normal freehold title. I do not need to resolve these differences between the engineers because the valuers agreed that this is a relatively minor cost consideration in the overall servicing cost for any proposed subdivision, and that a separate adjustment in relation to water services availability was not justified. Water services at comparable sales 25In their second joint report the engineers agreed that water mains are available fronting lots in the Alex Avenue precinct. These may require some upgrade to service allotments, which would be a normal requirement of development. The engineers agreed that water services are available in Windsor Road. Sewerage services at acquired land 26The engineers agreed that sewerage services would be available to the acquired land with a lead-in across the front of several intervening properties required to connect to a Sydney Water main, most probably to the Second Ponds Creek Carrier (SPCC). Sewerage services at comparable sales 27In relation to 822 Windsor Road (within Area 20) the engineers considered access to sewer would be through two privately held allotments to reach the SPCC, as identified in the Halmarrick plan attached to Mr Green's supplementary report. In order for access to the sewer to occur, negotiations with the affected property owners would be required which is standard practice in developing areas. 28Mr Green's supplementary report refers to Landcom, which was developing properties in the Alex Avenue precinct adjoining its Ponds development, proposing an "interim solution" to Sydney Water in September 2011 based on a pumping station and associated rising main that would pump sewage into the existing SPCC main to the east of Ridgeline Drive (that services, inter alia, the Ponds development and the acquired land) (exhibit A tab 21 p 3). That proposal was varied in May 2012 to comprise the "wet well" (WW) solution outlined in the supplementary joint report (exhibit A tab 22 p 2). An announcement that the FPCC was to be accelerated was made by the NSW government in June 2012 (exhibit D). 29In relation to the timeline of delivery of sewerage services in the Alex Avenue precinct, they agreed that: (i)September 2011: application for interim sewage pumping station (SPS) was made to Sydney Water. This involved a pumping station and a rising main that would deliver sewage to the east, connecting into the SPCC. (ii)May 2012: Interim SPS solution was amended to a wet well (WW) when it was known that Sydney Water funding for the FPCC was brought forward to a start date of July 2013 and completion early 2015. The WW interim solution would capture sewage for a maximum of 200 lots and the upstream school. Any sewage captured would be removed by pump-out tanker and trucked to the nearest sewage treatment plant. (iii)21 September 2012: date of acquisition of acquired land. (iv)Interim WW solution approved by Sydney Water early March 2014 and is due for completion in May 2014. (v)Sewage inflows to the WW could possibly begin around end of 2014/early 2015. The proposed school may take an additional year, being the end of 2015/early 2016. (vi)FPCC due to be completed in early 2015. 30Dr Martens noted that he relied on information provided by Mr Green in relation to the SPS or WW interim proposed solutions, having not had the opportunity to review the design and documentation details in relation to these matters. 31In relation to whether a purchaser would have known about the interim solution at the date of acquisition or some time before to enable due diligence, the engineers disagreed. Mr Green stated it was likely that a purchaser would have known about the proposed interim solution by making enquiries of Sydney Water. Further details would then have been established by enquiry to the Water Servicing Coordinator responsible for the application of the interim solution. He referred to a document known as the Halmarrick Plan. This was provided to him by the Respondent's solicitors not long before the hearing. He spoke to Mr Halmarrick at Landcom about the plan. The plan showed when it was intended that various subdivisions in the Alex Avenue precinct, inter alia, would have connection to sewerage services. Dr Martens said there is no guarantee that a purchaser would have had access to the details of the interim solution. This would depend on the resources of the purchaser and their contacts within the industry. 32If a purchaser had known about the interim solution, the engineers agreed that there is no guarantee that a property could access the interim solution as there is a cap of 200 lots plus the school. A developer would take on board this risk in valuing a property. In relation to whether a purchaser would have considered the interim solution was likely to be approved, the engineers agreed that the interim solution is not a standard infrastructure solution and carries with it more risk in the approval and in the timing of the approval than a standard solution. However, this solution has been accepted before by Sydney Water, albeit when proponents are large developers such as Lend Lease, Mirvac and Urban Growth NSW. 33The engineers gave oral evidence and were asked their opinion as to the presumed knowledge in the market for residential land in Area 20 and Alex Avenue precincts of the Landcom interim solution which largely confirmed their joint report. Valuers' evidence 34The valuers Mr Dempsey and Mr Dyson applied the comparable sales approach deriving different rates per square metre for the acquired land after a limited number of adjustments to several (some overlapping) comparable sales. Mr Dempsey contends for $220/sqm and Mr Dyson for $170/sqm for the acquired land. 35Mr Dempsey considered the following comparable sales. In the Area 20 precinct, 28 Tallawong Road, Rouse Hill, an acquisition of an adjoining property by the same acquiring authority. In the Alex Avenue precinct, sales of 44-46 Schofields Rd Schofields, 48-50 Schofields Road Schofields, 90 -100 Hambledon Road, Schofields,102 Hambledon Road, Schofields and 114 Hambledon Road, Schofields. Ten sales at Kellyville referred to in his report were not relied on by Mr Dempsey during the hearing. 36Mr Dyson considered the following comparable sales. In the Area 20 precinct, 822 Windsor Road Rouse Hill. Sales at 51 Terry Road Rouse Hill, a sale two years prior to acquisition was discarded during the hearing and 54 Terry Road Rouse Hill (for sale, was discarded during the hearing). 37In the Alex Avenue precinct Mr Dyson relied on sales at 44-46 Schofields Road Schofields, 31-85 Alex Avenue, Schofields, 114 Hambledon Road Schofields, 84 Hambledon Road, Schofields, 239 Railway Terrace, Schofields, 90, 98 and 100 Hambledon Road, Schofields and 102 Hambledon Road, Schofields. 38All the sales are of land ripe for residential development and were summarised in a table in exhibit C. The valuers' adjustments for each respective sale when applied to the acquired land were incorporated in the table in exhibit C tendered on day four of the hearing. Exhibit C provided amongst other details, the valuers' assessment of the purchase price adjusted for delayed settlement. This figure is agreed for all properties except 28 Tallawong Road. This discrepancy will be discussed later. The exhibit C table provides the adjustments the valuers have made to compare the sales with the acquired land and concludes with adjusted land value applying to the acquired land. The valuers disagreed about the adjustments required for comparability to the acquired land. 39Both valuers in the joint report made no adjustment on account of restricted access from Schofields Road to a residential subdivision of the acquired land on the basis that it was likely access via Tallawong Road would ultimately be obtained (TS 212-214). 40The valuers agreed that the acquired land is upstream from the existing SPCC, and that subject to installing the required lead-in main, a sewerage connection is immediately available to the acquired land. Extent of knowledge of sewerage services in Alex Avenue precinct 41The valuers' major disagreement is whether an allowance is required for the application of comparable sales given the assumption of availability of a sewerage connection at the acquired land. Mr Dempsey generally made an upward adjustment of 25 per cent to the acquired land, compared to the comparable sales in the Alex Avenue precinct. Mr Dyson considered that no adjustment was required. 42They agreed that the property at 31 - 85 Alex Avenue, purchased by Mirvac on 23 December 2011, had immediate access to sewerage services, subject to installing a lead-in main. 43Both valuers were cross-examined. It is not necessary to set out this evidence in much detail. Mr Dyson was asked about his approach to sewerage services and the Halmarrick plan on the basis that this was unlikely to be widely known. Mr Dyson was unaware of it until it was provided by the Respondent's solicitors shortly before this hearing. Mr Dempsey was asked to justify his adjustment of 25 per cent for the acquired land in relation to sewerage services in the absence of any market sales to support that adjustment. Whether amenity and views across the acquired land would be maintained once development occurred was also put to Mr Dempsey. 44The following table identifies in chronological order the relevant events and sales, the latter based on exhibit C, which is the distillation of the essential evidence before the Court. DATE ADDRESS/EVENT $/sqm September/October 2011 Interim solution/WW proposed by Landcom October 2011 84 Hambledon Road (first sale) $122 December 2011 Mirvac, Alex Avenue (sewerage services) $163 April 2012 822 Windsor Road 11 May 2012 90, 98,100 Hambledon Road (Department of Education) $201 30 May 2012 114 Hambledon Road (Landcom) no sewerage services $163 June 2012 FPCC acceleration announced by NSW Government 7 August 2012 84 Hambledon Road (second sale) no sewerage services $164 21 September 2012 Subject acquisition 28 September 2012 102 Hambledon Road (Department of Education) $239 6 December 2012 44-46 Schofields Road (Rawson Homes) no sewerage services $158 February 2013 239 Railway Terrace $187 3 June 2013 48-50 Schofields Road (JLF Investments) $173 Applicants' submissions Alex Avenue precinct sales 45Significant adjustment in relation to the acquired land should be made for unavailability of sewerage services for the Alex Avenue comparable sales except the Mirvac sale. It is not in dispute that properties in the Alex Avenue precinct to the west of Ridgeline Drive and to the east of Alex Avenue cannot access existing sewer mains and, but for the WW system, developers of those properties would need to await the construction of the proposed FPCC main in order to provide actual sewerage services to any residential development. A limited number of properties can discharge effluent into the WW which is then collected by tanker truck for disposal. It is not in dispute that the "cap" is 200 lots plus the Department of Education sites located on Hambledon Road (exhibit A tab 22 p 3). This is consistent with the thrust of the advice provided to Mr Dempsey by Dr Martens which was the catalyst for Mr Dempsey's adjustments. 46The supplementary joint report and cross-examination of the engineering experts (particularly Mr Green) revealed a number of fundamental flaws with Mr Green's conclusions in his supplementary report about access to the WW. They are: (a)Sydney Water only approved the WW system in early March 2014 (exhibit A tab 22 p 2): that was actually the week commencing 10 March 2014; (b)In May 2012, it was announced that construction of the FPCC main was due to begin in July 2013 with completion expected in early 2015 (exhibit A tab 22 p 2): the timing of this announcement occurred in June 2012 (exhibit D Government Announcement of 12 June 2012); (c)Mr Green agreed that the critical time for delivery of sewerage services for residential development is when the residences are to be made available for human habitation (so that people can "press the button on the toilet" and have sewage transported away) (TS123.16-19); (d)Mr Green agreed that, prior the approval of the WW proposal in March 2014, the earliest time that a developer could have expected to provide sewerage services of this "press the button" nature was early March 2015 being the expected time for completion of the construction of the FPCC main (TS 145.50-146.08); (e)Mr Green agreed that the best information that a person making enquiries of Sydney Water about the WW proposal prior to its approval in March 2014 could have obtained was that approval for the proposal had been sought but was yet to be granted (TS 120.34-45); (f)Mr Green agreed that a person making enquiries would have known: (i)the cap for the proposed WW was 200 lots plus the Department of Education site (TS 121.21-23); (ii)that Landcom was more advanced in developing properties in the area and that it was likely that most of the cap would be taken up by Landcom developed lots (TS 121.32-122.02). 47In light of this evidence, a purchaser in the Alex Avenue precinct comparable properties, except for the Mirvac sale, would not have proceeded on the basis that access to the (unapproved and capacity capped) WW was available to provide sewerage services to those properties and that there was risk attached to this outcome. No access was guaranteed to the WW system as asserted by Mr Dyson (TS 196.19-42). To the contrary, the only cogent evidence was that purchasers were proceeding on the basis that their properties would access the FPCC main when it was completed (exhibit F Statement of Environmental Effects for 44-46 Schofields Road). This, in Mr Dempsey's view, carried a level of risk (compared to development of the acquired land) and forms the basis of his adjustments. 48The only inference that can be drawn from the evidence is that a purchaser of the Alex Avenue sales would have concluded there was no sewer availability. Even if they knew of the application for approval of the WW proposal there was a high risk of not being able to access the WW system because of the cap and lack of approval. Sewerage services would therefore not become available until the completion of the FPCC main in early 2015. The "interim solution" did not change the situation with respect to sewerage services. 49The lead-in to sewer for 822 Windsor Road as identified by Mr Green is less achievable than for the acquired land as there is greater impact of the lead-in on the development potential of the adjoining lands. The lead-in for the acquired land will be along the road frontage of intervening lots and will not affect their development potential. 50The Court should adopt Mr Dempsey's analysis in exhibit C. Adjustment of Alex Avenue precinct sales for sewerage services due to uncertainty about availability in that precinct by Mr Dempsey is justified. Department of Education sales (90, 98, 100 and 102 Hambledon Road) 51The Department of Education sales at 90, 98, 100 Hambledon Road should be considered as Mr Dempsey did. When the history of the negotiation of the sale of these sites in exhibit 1 is considered, the vendors had received a number of offers in response to the EOI and, in subsequent negotiations with the Department of Education, the Department of Education decided to make a higher offer to secure the property for its own purposes. This is the operation of a market par excellence. It is the very result an EOI process is designed to achieve. To highlight that the Department of Education had a strong desire to purchase the property does not turn it into an anxious purchaser anymore than any other purchaser who ultimately acquires a property in a competitive process. No rational person buys a property without a desire to own it. 52The vendor ultimately sold 102 Hambledon Road to the Department of Education for $239/sqm. While the Applicants accept that this price reflects a level of anxiety on the part of the Department because the construction of the school had already been announced, the other circumstances surrounding the sale confirm the prices agreed for 90, 98 and 100 Hambledon Road were not anxious and were at market. The evidence as a whole supports the proposition that the true market price for this property was $200/sqm and confirms that $200/sqm was a market price for 90, 98 and 100 Hambledon Road. At the very least, the market price was $180/sqm which was the price first offered by the Department of Education in the EOI. This rate is for properties in an area with the sewer servicing issues discussed above requiring adjustment. 53After applying Mr Dempsey's adjustment for service availability of 25 per cent these sales at an unadjusted rate of either $200/sqm or $180/sqm clearly support the Applicants' contended value for the acquired land of $220/sqm. 54The fact that in May 2012, prior to the acceleration announcement, the Department of Education expected the school to open in 2015 (which would have required active sewerage services) (exhibit 1 tab g) does not alter this. Even if the Department of Education had inside knowledge of the acceleration announcement, which is not far-fetched as, after all, it is a portfolio within the same Government as the one which announced the infrastructure acceleration just the next month and presumably Cabinet had discussed both matters (being not insignificant) well before the ultimate decision and/or announcement - it did not become publicly known until June 2012 (exhibit D). 84 Hambledon Road 55Mr Dyson applied a 35 per cent adjustment to the initial sale of 84 Hambledon Road which occurred in October 2011. Like the sales of 90, 98 and 100 Hambledon Road, this first sale of 84 Hambledon Road occurred before the Government's announcement in June 2012 of the acceleration of the construction of the FPCC main. Once the WW proposal is disregarded (as it must be for the reasons set out above), prospective developers of these properties were in the same position in terms of the availability of sewerage services for residential development, and they would have expected these services to become available in 2020 when the FPCC main was then due for completion. 44-46 Schofields Road 56The sale of 44-46 Schofields Road shows that the market was not reacting to the provision of services. Mr Dyson justified making no adjustment for this property (and in relation to the resale of 84 Hambledon Road) on account of sewerage services because the purchasers would have proceeded on the basis that they must have some form of guarantee of access to the WW proposal (TS 196.19-42). As set out above, this assertion is contradicted by the statement of environmental effects lodged by the purchaser which stated that sewer reticulation was to be provided by lead-in to the FPCC main when constructed (exhibit F). His assertion about the "guarantee" for 84 Hambledon Road must also be rejected. 57Mr Dempsey's 25 per cent adjustment for service availability for this sale and the resale of 84 Hambledon Road should be accepted, if not increased. On the view, the low lying and flood affected nature of this property compared to the elevated position of the acquired land was plain to see. Accordingly, Mr Dempsey's adjustment of 20 per cent for this factor should be accepted. 48-50 Schofields Road 58Mr Dempsey's adjustment for location of 20 per cent in relation to 48-50 Schofields Road should be accepted. 114 Hambledon Road 59Despite being acquired by Landcom (the proponent of the WW system), the Court will have observed on the view that this land remains undeveloped. Mr Dyson offered no adequate explanation for this (TS 279-280). Its undeveloped state reflects an uncertainty regarding sewerage services (even for Landcom) and Mr Dempsey's 25 per cent adjustment is correct. Indeed, for the reasons set out above, because this property sold in May 2012 (before the FPCC acceleration announcement in June 2012), Mr Dyson should have applied his 35 per cent services adjustment to this sale as he did for the initial sale of 84 Hambledon Road (and should have done for 90, 98 and 100 Hambledon Road). 28 Tallawong Road 60The evidence adduced about this sale (exhibit E) supports Mr Dempsey's position. The Respondent was presented with two conflicting valuations for the market value of the property, its own at $180/sqm and the vendor's at $199/sqm. It ultimately agreed to purchase the property in accordance with the vendor's valuation. This is not dissimilar to the scenario considered in McDonald v Roads and Traffic Authority of NSW [2009] NSWLEC 105; (2009) 169 LGERA 352 where Biscoe J (at [52]-[56]) rejected the acquiring authority's claim that a sale to it of the property adjoining the acquired land should be disregarded because the authority had agreed to pay an amount very close to the vendor's valuation which was more than its own valuation and was therefore an anxious purchaser. 822 Windsor Road 61In his supplementary report, Mr Green proposes a sewer lead in to the Second Ponds Creek Carrier main that traverses the entire length of two adjoining properties (exhibit A tab 21 p. 5). This can be compared to one of the potential sewer lead-ins for the acquired land which traverses a number of adjoining properties to the east but at the road frontage of these properties (exhibit A p 368). Mr Green agreed that the lead-in at the acquired land would be placed as close to these road frontages as possible (TS 103.29-32). 62While the construction of the sewer lead-ins would require consent of the adjoining land owners in both cases, it is obvious that this is a potentially more difficult exercise or 822 Windsor Road than for the acquired land because the impact of the lead-in on the development potential of the adjoining lands to 822 Windsor Road is more significant. As Dr Martens put it, the "level of anxiety" with these adjoining owners could be expected to be higher than with the adjoining owners of the acquired land (TS 150.37-43). 63Further, the character of the area along very busy Windsor Road is clearly inferior to the acquired land. Other sales 64The Mirvac sale is not reliable for the reasons given by Mr Dempsey, namely that it was an older sale, 23 December 2011, in a poorer market and difficult to analyse due to the existence of separate contracts. Further, 239 Railway Terrace is in an inferior location to the acquired land and also not comparable as Mr Dempsey stated in evidence. Respondent's submissions 65The most comparable sale is 822 Windsor Road because it is: (a)proximate in time, the date being 16 April 2012; (b)in the same precinct; (c)proximate in location; (d)almost exactly the same size, 20,360 sqm; (e)on an access denied road. The relevant indicative layout plan shows that each of the sale and acquired land will need to rely upon agreement with others for road access. 66The property has access to sewer, by the construction of lead-ins. Both the sale and the acquired land will require agreement, or use of statutory powers, to construct the lead-ins under neighbouring lands and roads, as necessary. 6728 Tallawong Road should be disregarded as that was an acquisition by the Respondent for the same public purpose and not reflective of an arms length negotiation as required under the Spencer v Commonwealth [1907] HCA 82; (1907) CLR 418 test. 68The Respondent submitted there was no need to look further at other sales but if this was done then 2011/2012 Alex Avenue precinct sales were transacted with the expectation of sewerage connection being available. These support Mr Dyson's approach. The relevant sales are Mirvac at 31-85 Alex Avenue, 114 Hambledon Road, 84 Hambledon Road (second sale), 44-46 Schofields Road, showing rates of $158 - $163/sqm. The 2013 Alex Avenue precinct sales at 239 Railway Terrace and 48-50 Schofields Road also support Mr Dyson's approach, but also do not need to be considered given the other earlier comparable sales. Mr Dyson adjusted 48-50 Schofields Road by 10 per cent for time given the nine months after the date of acquisition in a rising market. 69The evidence does not support Mr Dempsey's approach as identified in par of 135 his original report at tab 14 folio 230 of $220/sqm. No reliance is now placed by him on Kellyville and North Kellyville sales referred to as two reasons for his conclusion. The third (and final) reason was reliance on the second Department of Education site sale at $239/sqm. That sale is out of line given the circumstance that the Department of Education purchased the three neighbouring lots for a school site and was prepared to pay a premium for the further lot next door. 70The addition of 20 per cent by Mr Dempsey for location, a large adjustment, in the exhibit C table for 44-46 Schofields Road for the first time was unsatisfactory. The reason identified in the table was that fill was needed in low lying areas although the valuers had agreed that any impact on development costs did not need to be considered. In oral evidence Mr Dempsey said for the first time that the 20 per cent adjustment was due to differences in views and amenity. This evidence was unconvincing and such changes in evidence in the course of a hearing given the extent of preparation and that sites were well known to him should not occur. Determination of Market Value 71The Court acts as judicial valuer in resolving this matter and is not bound by the Valuer-General's determination of market value at the time of the compulsory acquisition in 2012. The Valuer-General determined market value at $3,540,000. The Applicants have contended for a higher value of $4,450,000 and the Respondent for a lower value of $3,450,000. 72Under general valuation principles the comparable sales approach adopted by the valuers in this case should be applied to sales of properties which have fewer adjustments and the smaller the adjustment the better, per Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170. All the comparable sales considered are for properties with potential for small lot residential subdivision, consistent with the town planners' evidence identified at par 19 that low to medium density residential zoning is the underlying zoning which I apply as underpinning market value. 73A key issue identified in these proceedings is the availability of sewerage services to various comparable sales. The valuers agreed that the acquired land is upstream from the existing SPCC, and that subject to installing the required lead-in main, a sewerage connection is immediately available to the acquired land. Comparability of Area 20 precinct sales 74Adopting Brewarrana, physically closer sales transacted in similar time frames are preferable to those more geographically and temporally distant from the acquired land. Consequently I will first consider the sales in Area 20. These are the closest to the acquired land, being in the same planning precinct with the same underlying zoning potential for low to medium density residential development and with similar purchase dates. 822 Windsor Road 75This sale had similar access to sewerage services and similar land area to the acquired land and was transacted in April 2012. It is directly comparable to the acquired land. Mr Dyson has made no adjustments to this sale as he considers it to be directly comparable and adopts a rate of $162/sqm. Mr Dempsey has adjusted the sale in relation to the acquired land up by 20 per cent for its superior position and topography. This property is on busy Windsor Road, suggesting a slightly inferior location but not a reason to ignore the sale as Mr Dempsey did in his report. The property is opposite the Mean Fiddler Hotel and there was some suggestion on the view that this was not a desirable neighbour, but the Court has no evidence about this matter. I note that it has superior access to shopping facilities at the Rouse Hill Town Centre. Mr Dempsey also criticised the location as being low-lying with no district views. I do not consider there is much difference between the two properties based on views from the acquired land. These would only be available to the outer houses of any subdivision of the acquired land and would be largely lost over time with similar development on the surrounding land as could be seen on the Court view. On balance I would allow a five per cent upward adjustment to reflect the slightly superior position of the acquired land. 76In exhibit C Mr Dempsey also adjusted this sale by a further 25 per cent in relation to access to sewerage services. No basis for this size of adjustment was provided by him. Availability at this property is similar to the acquired land as it also drains to the existing SPCC and only requires installation of a lead-in main. The installation for this property may be marginally more difficult to negotiate with two neighbouring lot owners than for the acquired land, due to the requirement to traverse two undeveloped properties which may impact on their development potential according to the plan attached to Mr Green's report. The acquired land can be connected to a main by a lead-in on the street frontage of adjoining properties and will not affect their development potential to any marked extent. I consider an adjustment upward of 2.5 per cent is warranted. A total adjustment of 7.5 per cent results in an adjusted rate for the acquired land of $174/sqm, say $175/sqm. 28 Tallawong Road 77This is an adjoining property purchased on 19 April 2012. It was not the only sale in Area 20 relied on by Mr Dempsey in his report and was a compulsory acquisition by the same acquiring authority. In Chaudry v Liverpool City Council [2008] NSWLEC 251 I considered a number of cases including the Court of Appeal in Koutsouras v State Rail Authority of New South Wales (unreported, NSW Court of Appeal, Meagher JA, 29 November 1991) concluding at [24]-[28] that: 24 My conclusion on this issue is as follows. The parties relied on similar authorities to suggest that sales to public authorities should be treated with caution but that such sales are admissible; see Koutsouras v State Rail Authority per Meagher JA in obiter. 25 This point was considered in Redeam v South Australian Land Commission per Jacobs J who, citing Woollams v The Minister, determined that "there is no principle of law which requires the Court to reject completely the evidence of sales to the acquiring authority" (at 158). In this case, the only comparable sales evidence available to the valuers were previous sales to the respondent acquiring authority, and so his Honour acknowledged that he had to take account of it "with all its difficulties". 26 In this case the public authority has not entered the open market to purchase land as referred to in E M Power v Department of Education (unreported, NSWLEC, Hemmings J, 29 August 1989). 27 In other cases in this Court such as E M Powers v Department of Education and Roulston v Roads and Traffic Authority such sales have been taken into account noting the need for caution in their application. 78In McDonald v Roads and Traffic Authority of Biscoe J held at [56] that he was not satisfied that the RTA was an anxious buyer such as to negate or diminish the usefulness of the comparison with the relevant sale in that case. 79Each case must be determined on its own facts. In my view this sale does not meet the Spencer test as found in s 6(1) for a comparable sale as it was not a sale conducted in the open market, and my finding in Chaudry that such sales can be considered but should receive a lower order of reliance, applies. 80A further consideration arises in relation to this sale. The contract for sale and the respective parties' valuation reports were tendered in exhibit E. The vendor's valuer's report assessed the value of the improvements to be nil as the underlying zoning was assessed as industrial. The acquiring authority's valuer assessed the improvements to be worth $310,000 as he assessed the underlying zoning to be a mixture of low and medium density residential, where the house may have added value. The property was acquired based on an industrial use, which utilised a higher land value and no value for improvements. When analysing this sale we should adopt this basis, given that the way the price was calculated. In his report Mr Dempsey made an allowance of $300,000 for the improvements (exhibit A p 219). However in the table in exhibit C he removed this allowance without explanation for the change. I consider I should adopt an analysis which provides nil value for improvements. This is consistent with the analysis of all the other sales. 81On further reflection after the hearing, another substantial problem with relying on this sale is that the assumed zoning underlying the purchase price being the vendor's valuation was industrial, unlike the acquired land. This suggests this sale cannot be comparable. 82Given several limitations in applying the sale of 28 Tallawong Road, the comparable single sale in the Area 20 precinct at 822 Windsor Road indicates a value of $175/sqm when applied to the acquired land. Comparability of Alex Avenue precinct sales 83Eight sales and one resale in the Alex Avenue precinct were referred to by the valuers. Department of Education sales not comparable sales 84The Department of Education purchased 90, 98 and 100 Hambledon Road, in one line, following a public call for EOIs. The documents relating to this sale in exhibit 1 were identified in some detail above at par 10-16. In its EOI the Department of Education originally bid $12,960,000 being a rate of $180/sqm (exhibit 1 tab D). This was at the top of the range, ($150-$180) according to the advice of the Department's valuer, Corporeal Pty Ltd in advice dated 30 April 2012 (exhibit 1 tab C). When this bid was not accepted, further advice from Corporeal Pty Ltd dated 9 May 2012 (exhibit 1 tab H) indicated that: The Department has identified the subject properties as being ideally suited for a future school site, the opportunity to purchase a site on the open market rather than acquiring several smaller properties, not for sale, under the Land Acquisition (Just Terms Act), is preferred. 85The Department's valuer advised that a premium or special value of 10-20 per cent may be justified (exhibit 1 tab H). The Department of Education increased its offer to $14,500,000 ($201/sqm) and purchased the three lots. 86Documents in evidence identify that the underbidders, Rawson Homes and JLF Investments bid respectively, on a terms adjusted basis, $154 and $166/sqm for the three properties. Of particular note is the fact that both these underbidders succeeded in purchasing respectively, 84 Hambledon Road in May 2012 for $163/sqm and 48-50 Schofields Road in June 2013 for $173/sqm. Both sales are relatively close to their original bids for 90, 98 and 100 Hambledon Road and were considerably below the rate paid by the Department of Education for those properties. 87The Department of Education then purchased 102 Hambledon Road, adjoining the above properties, for $239/sqm in September 2012. According to the correspondence in exhibit 1, the Department's valuer again noted that paying a premium may be appropriate for the special value to the Department as the adjoining owner (exhibit 1 tab O). The need to pay well above the market was identified in the departmental briefing note to the Minister dated 28 August 2012 (exhibit 1 tab Q). 88I conclude that the sale of 90, 98 and 100 Hambledon Road is out of line with the general sales in the area and represents payment of a premium by the Department. The second sale to the Department of Education shows its preparedness to pay an adjoining owner a premium rate on top of an existing premium rate. 89These Department of Education sales do not satisfy the approach required for the determination of market value, where there is an assumption of a hypothetical sale between a willing, but not anxious, vendor and a willing but not anxious, purchaser, s 56(1) Just Terms Act. As is clear from the internal departmental memorandum and the Department's valuers' advice in exhibit 1, these purchases were driven by the Department's requirement to obtain a site where a school could be operational by Term 1 in 2015 as identified in internal departmental memoranda (exhibit 1 tab G). The first purchase by the Department of 90, 98 and 100 Hambledon Road included a premium given the rate of $201/sqm. While the advice of the Department's valuer was that the top range was then $180/sqm the other sales evidence does not support that figure as being the top of the range in that market, as I identify above in par 86. It is straightforward to conclude that, as already identified, the second purchase of 102 Hambledon Road was based on payment of a further premium price. There seems little option but to disregard these sales as they are not comparable given their circumstances. 90The following sales, which occurred in December 2011 and throughout 2012 remain, December 2011 Mirvac 31-85 Alex Avenue $163/sqm, May 2012 Landcom 114 Hambledon Road $163/sqm, August 2012 Rawson Homes 84 Hambledon Road $164/sqm, and September 2012 JLF 44-46 Schofields Road $158/sqm. It is striking that these four sales in 2011/2012, in close proximity to the acquired land in both location and date, reveal such a consistent rate. Mirvac sale 91Chronologically the Mirvac purchase of 31-85 Alex Avenue was the first sale to be considered in Alex Avenue (the contract was struck in December 2011). Neither valuer made an adjustment for time in exhibit C suggesting there was no perceived difference in the market from the time of acquisition. The valuers agreed that the property at 31-85 Alex Avenue, purchased by Mirvac on 23 December 2011 was in a similar situation to the acquired land in having immediate access to a sewer carrier subject to installing a lead-in main. Contrary to Mr Dempsey's view that this sale is unreliable because it was one sale of several individual lots, I consider the sale can be reliably analysed as Mr Dyson did. It is not too old. 92Eight adjoining owners combined and offered their property to the market in one line (exhibit C p 4 Mr Dempsey comment). Mr Dempsey analysed this transaction as eight individual sales whereas Mr Dyson treated it as one sale. As Mirvac did not have the option of dealing separately with the eight owners it should be analysed as one sale. For the purpose of the Court's task the manner in which the owners allocated the Mirvac purchase price as between them is irrelevant. There is no reason to regard the Mirvac sales as an outlier, contrary to the Applicants' submissions. This sale indicates a rate of $163/sqm, as Mr Dyson identified. Mr Dempsey despite his reservations about the applicability of the sale derived a rate of $162/sqm. I consider this sale is comparable to the acquired land, without adjustment, and supports a rate of $163/sqm for land with access to a sewer carrier. 114 Hambledon Road (Landcom), 84 Hambledon Road and 44-46 Schofields Road (2012 sales) 93The valuers' major disagreement in relation to 114 Hambledon Road, 84 Hambledon Road and 44-46 Schofields Road sales is whether an allowance is required for the availability of a sewerage connection at the acquired land and if so the quantum of that allowance. Mr Dempsey made an upward adjustment of 25 per cent to the acquired land, compared to these sales in the Alex Avenue precinct. Mr Dyson made no adjustment to the three sales at 114 Hambledon Road, 84 Hambledon Road and 44-46 Schofields Road on the basis of sewerage services. 94The engineers were asked their opinion regarding when there was likely to have been market knowledge of the proposed interim WW solution for 200 lots and whether it had capacity for properties other than Landcom's Ponds Estate and the Department of Education, and of the June 2012 announcement. The engineers were asked to give their opinion on the effect the Government announcement of the $481 million allocation to expedite construction of services in June 2012, had on developers' expectations of when utility services would become available. That opinion evidence is of limited relevance given the sales evidence. While Mr Dempsey in particular adopted the view of Dr Martens that the interim solution would not have been widely known and was not certain being limited to 200 lots, the relevance of the engineers' opinions on an issue that is more usually and appropriately considered as part of a valuer's inquiry process eludes me. 95As noted in the valuers' oral evidence, it normally takes about eighteen months to two years for developers to gain development approvals and to construct a residential subdivision and that it may take another nine months to build a house, before a flushing toilet is required. It is for this reason that developers will purchase land before sewerage services are immediately available. In other words whether sewerage services are immediately available for a property at the time of sale is not essential for a developer, provided that there is likelihood of such services being available by the time they are needed approximately two years after purchase. In this case the sales evidence is the most relevant and useful evidence before the Court. 96The first Hambledon Road sale at No 84 occurred before there was knowledge of the interim solution or the acceleration of sewerage service delivery made in June 2012 and demonstrates a rate of $122/sqm. The first sale of 84 Hambledon Road in October 2011, then its resale in August 2012 for a premium of 35 per cent illustrates the change in the developer's expectation of when the FPCC main, or an alternative, would be available. 97There is no evidence as to why Landcom has not proceeded with development of that land. The Appellants' submission that this must be due to lack of sewerage services is not supported by any evidence. By contrast subdivision of 84 Hambledon Road has proceeded, as seen on the view. 98The Appellants' counsel relied on the extract from a statement of environmental effects (exhibit F) provided for the sale of 44-46 Schofields Road which stated that sewer reticulation would be provided by lead-in to the FPCC under construction by Sydney Water for delivery by June 2014. Given the agreed timeframe for the requirement to have sewerage services operational two years after purchase this does not suggest the purchaser saw any difficulty with sewerage service provision at the time of that sale. 99The sales in 2012 of 114 Hambledon Road, 84 Hambledon Road, (second sale), and 44-46 Schofields Road, reveal rates from $158 to $163/sqm. These sales occurred in a short period, and all had no access to sewerage services at the time of sale. These sales when compared to the Mirvac sale which did have sewerage services available provide compelling evidence that all developer purchasers in this market during 2012 were prepared to pay a similar rate for properties with immediate access to sewerage services compared to properties that either may have access to the interim solution or the FPCC main, when constructed. This evidence explicitly confirms that the market does not differentiate between properties with immediate access to sewer mains and those where an interim solution may be available, or those where a carrier is anticipated to be available within two to three years. 100I determine that no adjustment for sewerage services availability is required when comparing the Alex Avenue precinct sales to the acquired land. The market does not pay more for sewerage services being immediately available. I do not accept Mr Dempsey's evidence on the need for the large adjustment of 25 per cent and do not consider he could point to any sales evidence which supported his adjustment. Other adjustments of 2012 sales not warranted 101Mr Dempsey did not originally consider the Rawson Homes sale at 84 Hambledon Road. In exhibit C he made a 10 per cent adjustment in favour of the acquired land because "More lots were possible but for the need for a detention tank reducing the lot yield." Mr Dyson advised and it is accepted that the requirement for detention tanks is a normal condition of approval in this district and consequently this sale is no more affected that all the other sales. This 10 per cent adjustment is not warranted. 102In relation to the sale of 44-46 Schofields Road, Mr Dempsey originally made no allowance for location and topography in his report or the valuers' joint report. However by the time exhibit C was prepared he included an adjustment of 20 per cent for these factors because according to his notes in that table this land falls below the road to a dam and lagoon, then rises to the rear. The site must be filled in the low-lying area and engineered to allow a subdivision. Mr Dempsey allowed 20 per cent for these considerations. In his oral evidence he stated this adjustment was due to visual impact and amenity. I found his explanation for this very late and large adjustment unconvincing. This 20 per cent adjustment is not supported by Mr Dempsey's evidence. 103Mr Dempsey contended for a rate of $220/sqm in his report and throughout the hearing. Three bases for this figure were given in his report. As the Respondent submitted, two bases were in reliance on sales in Kellyville and North Kellyville which Mr Dempsey did not rely on at the hearing. The other basis cited in his report was the second purchase in the Alex Avenue precinct of 102 Hambledon Road by the Department of Education at $239/sqm which I have found should not be relied upon. The new evidence of Mr Dempsey as found in exhibit C at the hearing does not support the amount of $220/sqm. 104The valuers effectively agreed in exhibit C that there was no market change from December 2011 to the date of acquisition (September 2012) because no adjustment for time was made in that period on any of the Alex Avenue sales. 105The above sales indicate that the rate paid for land suitable for subdivision in 2012 in Alex Avenue and Hambledon Road was in the range of $158 to $164/sqm. The valuers made no other adjustments in the table in exhibit C in relation to the acquired land and the Court is unaware of any other factor which would warrant an adjustment. 2013 sales 106This range is further confirmed by more recent sales in 2013. The sale of 239 Railway Terrace, a superior property to the acquired land because it is very close to Schofields station, proposed sub regional shopping facilities, and its location in a new residential area which will soon be covered with houses. This showed a rate of $187/sqm in February 2013. The sale of 48-50 Schofields Road in June 2013, in a possibly rising market from late 2012 given Mr Dyson's adjustment for time, shows a rate of $175/sqm allowing for the 10 per cent adjustment for time made by Mr Dyson. Conclusion on market value 107The primary sale evidence in Area 20 indicates a value of $175/sqm. The secondary sales evidence in the Alex Avenue precinct which indicates a range from $158 to $164/sqm does not indicate a higher rate is warranted. Placing the most weight on the Area 20 sale of 822 Windsor Road, I conclude that the market value of the acquired land under s 55(a) of the Just Terms Act is to be calculated at the rate of $175/sqm. 108The acquired land has an area of 20,230 sq m. The rate of $175/sqm equates to a market value of $3,540,250. Disturbance 109Loss attributable to disturbance is payable by the Respondent under s 55(d) and is defined in s 59 of the Just Terms Act. Some amounts are agreed to be payable by the Respondent. Under s 59(a) legal fees are agreed at $17,688.75; under s 59(b) valuation costs are agreed at $4,950 for Independent Property Valuations (R G Furney) and $3,756.50 for DFP Planning Consultants, a total of $26,395.25. Whether disturbance is payable under s 59(c) and (d) depends upon whether s 61 applies. The parties disagree about whether s 61 of the Just Terms Act applies. Application of s 61 of the Just Terms Act 110The Applicants claim $11,096.77 for financial costs reasonably incurred in connection with their relocation from the acquired land under s 59(c) and stamp duty costs in connection with the purchase of land for relocation under s 59(d). The Respondent submitted that these sums are not payable because s 61 of the Just Terms Act applies to prevent this claim. That section set out above contains a chapeau which must be satisfied in order for the section to apply, namely where the market value of land is assessed on the basis that the land had potential to be used for a purpose other than its current purpose. In this case s 61(b) must also be satisfied, namely that the financial loss claimed was necessarily incurred in realising that potential. 111As recorded above in par 18, the acquired land was zoned 1(a) General Rural under the Blacktown Local Environmental Plan 1988 and was occupied as a rural residential lot up to the time of acquisition. The underlying zoning whether R2 Low Density Residential or R3 Medium Density Residential which underpins the calculation of market value by the Court is a more valuable use in property development terms than the rural residential use. The chapeau of s 61 requires the Court to determine whether that uplift in zoning (and therefore development potential of the land) is for a purpose different to the purpose of the use for rural residential. 112The Respondent submitted that the Applicants are not entitled to these amounts claimed under s 59(c) and(d) as the Applicants have obtained a significant uplift in market value because of the valuation being conducted on the basis of the underlying zoning of low to medium density residential applied by the valuers. The special provision in s 61 operates as the amounts claimed under s 59(c) and (d) are incurred in order to realise the greater potential of the acquired land for the purpose of small lot residential subdivision. 113The Applicants submitted that in order for s 61(b) to operate the Court must be satisfied that the costs claimed would necessarily have been incurred in realising the potential of the acquired land to be used for the purpose of residential subdivision. "Necessarily" is a high threshold and requires a finding that relocation costs would have been inevitably incurred if the potential subdivision was to be realised per Roads and Traffic Authority (NSW) v McDonald [2010] NSWCA 236; (2010) 79 NSWLR 155 at [94]. Firstly, the Applicants would have been entitled to continue in residence. Secondly, the sale at 9 Balmoral Road, Kellyville visited on the view shows a subdivision developed on the basis that the original house remained. Thirdly, Mrs De Battista attests to her close links with the area. The use of the acquired land for rural residential had the purpose of residential. The acquired land has been valued for a small lot subdivision which is still a residential purpose as well as use. These different uses serve the same purpose of residential. 114The chapeau of s 61 does not apply. To characterise the "purpose" of the use of the acquired land under the residential subdivision scenario as "medium density residential" or "low density residential" is too narrow. This would impermissibly describe the purpose in terms of the detailed activities, transactions or processes to be carried out on the land (see El Boustani v The Minister Administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33 at [130]). On the other hand, a classification of "residential development" or "residential" embraces uses which are the same in nature, kind and extent and which impart the same overall character on the land (see El Boustani at [131]). Section 61 not applicable 115The construction of s 61 was recently considered by the Court of Appeal in El Boustani, the chapeau at [88]-[105], and subsection (b) at [106]-[115]. The construction of the chapeau requires the determination of the purpose of the use of the acquired land under its rural zoning and rural residential use, and the purpose of the use of the same land under the low to medium density residential zoning which is the basis of market value. The market value which I have found above was assessed on a basis other than its (current) use at the date of acquisition. 116The characterisation of the purpose of the use of land has received much judicial consideration including in Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; (2007) 151 LGERA 400 inter alia. I summarised these principles in Dooralong Residents Action Group Pty Limited v Wyong Shire Council [2011] NSWLEC 251; (2011) 186 LGERA 274 at [99]: The parties were not in disagreement with the principles relevant to characterisation extracted in Chamwell at [27] - [50] and adopted in Abret at [49] - [54]. Characterisation must be done in a commonsense and practical way: Chamwell at [45]. The principles were correctly summarised in the Salvation Army's submissions. Firstly, a use must be for a purpose, being the end to which the use of the land can be seen to be put: O'Keefe at 535. The use of land involves no more than the "physical acts by which the land is made to serve some purpose": Council of the City of Newcastle v Royal Newcastle Hospital [1957] HCA 15; (1957) 96 CLR 493 at 508. Secondly, the nature of the use needs to be distinguished from the purpose of the use: O'Keefe at 534 - 535 and Warringah Shire Council v Raffles [1979] 2 NSWLR 299. Thirdly, in determining whether land was used for a particular purpose, an inquiry into how that purpose could be achieved is necessary: Council of the City of Newcastle at 499 - 500. Fourthly, the characterisation of the purpose should be done "at a level of generality which is necessary and sufficient to cover the individual activities, transactions or processes carried on", not "in terms of the detailed activities or processes" but not so general as to "embrace activities, transactions or processes which differ in kind from the use which the activities etc, as a class have made of the land": Royal Agricultural Society of New South Wales at 310. The construction is for town planning purposes: Boyts Radio and Electrical at 59 per Kirby P and Grace at [88] - [90]. 117In El Boustani several of these principles were identified and applied at [130]-[132]. It was held that the analysis of the principles required that the character of different uses imparted to land must be considered and that consideration included that they would lead to different market values. 118For the chapeau to apply, use for a purpose other than its current use at the date of acquisition must be for a purpose which is different in nature and kind, El Boustani at [94] citing the Macquarie Dictionary. The purpose of the use of the acquired land regardless of which zoning is considered is argued by the Applicants to be residential, a very broad purpose which would encompass many different kinds of land development, as in this case. I consider the nature of the wide range of residential development would vary substantially. I consider that the purpose of the acquired land at the date of acquisition should be described as rural residential and that description happens to accord with the description of its use on this occasion. The purpose of the use applied in the determination of market value should be described as low to medium residential development. The two purposes impart different character to the acquired land. They also result in different market values. 119According to El Boustani at [95], [97]-[99] the chapeau to s 61 also requires that the potential for use of the acquired land for a different purpose must be assessed as to whether that potential is able to be realised temporally close to the date of acquisition. If ripe for development for the different purpose it is temporally very proximate. In this case the potential development for low to medium density residential housing was temporally proximate according to the valuation evidence (par 38) and in light of the planning evidence. The chapeau of s 61 applies. 120Whether subsection (b) of s 61 applies arises separately for determination; El Boustani at [140]. I adopt the reasoning in [107]-[115] of El Boustani. In particular I note that financial loss includes a financial cost: El Boustani [107]. Whether the costs claimed by the Applicants would be necessarily incurred in realising that market value potential requires determination. I agree with the Applicants' submission that the word necessarily implies a high threshold which must be met if the subsection is to apply adopting [110]-[111] of El Boustani. The disturbance costs claimed are stamp duty on the purchase of another property and relocation costs to another residential property. I am not satisfied that these costs would be necessarily (inevitably) incurred in order to realise the potential for the acquired land to be used for the purpose of low to medium residential development. As the Applicants identified in reliance on the sale at 9 Balmoral Road, Kellyville the realisation of the low to medium density housing in that location would not automatically require removal and replacement of the original home occupied by the Applicants. Mrs De Battista's evidence in her affidavit dated 28 March 2013 is that she would prefer to remain in that location given her ties to the area. That evidence suggests the Applicants may well have sought to remain in their original house were their land to be redeveloped for low to medium density housing. I do not consider that subsection (b) applies as these costs are not necessarily incurred by the Applicants in order to realise the purpose with higher development potential. Accordingly, s 61 does not apply to prevent the Applicants' claim in relation to s 59(c) and (d) and those costs are payable as part of their disturbance claim. 121In conclusion I find that market value should be determined at $3,540,250 and disturbance in the amount of $225,803.02. These two figures total $3,766,053.02 as the amount of compensation to be awarded in this matter. Orders 122The orders of the Court are: (1)The compensation payable for the Applicants' land the subject of the present appeal is determined at $3,766,053.02. (2)Exhibits may be returned. (3)The question of costs is reserved ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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: 15 April 2014