Land and Environment Court New South Wales Medium Neutral Citation: Chircop v Transport for NSW [2014] NSWLEC 63 Hearing dates: 14, 17, 18, 19, 20, 21 March, 7 April 2014 Decision date: 28 May 2014 Jurisdiction: Class 3 Before: Biscoe J Decision: Compensation determined in the amount of $3,947,083. Respondent is to pay the applicants' costs. Catchwords: COMPULSORY ACQUISITION - compensation under Land Acquisition (Just Terms Compensation) Act 1991 for resumption of rural residential land ripe for residential subdivision in Area 20 precinct of North West Growth Centre under State Environmental Planning Policy (Sydney Region Growth Centres) 2006 - determination of market value by selection of appropriate comparable sales and the making of appropriate adjustments - whether certain disturbance loss items not reasonably incurred or not a direct and natural consequence of the acquisition and therefore not recoverable under s 59 - whether compensation for any disturbance loss items barred by s 61. Legislation Cited: Environmental Planning and Assessment Regulation 2000 cl 276 Land Acquisition (Just Terms Compensation) Act 1991 s 34(3), Part 3 (ss 54-56, 59, 61) Land and Environment Court Act 1979 s 37(1) Metropolitan Strategy 2005 State Environmental Planning Policy (Sydney Region Growth Centres) 2006 cll 2, 3(1)) Transport Administration Act 1988 Cases Cited: Adams v Valuer-General [2014] NSWLEC 1005 Attard v Transport for NSW [2014] NSWLEC 44 Bonomo v Transport for NSW [2014] NSWLEC 25 De Battista v Transport for NSW [2014] NSWLEC 39 El Boustani v Minister Administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33, (2014) 199 LGERA 198 Roads and Traffic Authority of New South Wales v McDonald [2010] NSWCA 236, (2010) 79 NSWLR 155 Sydney Water Corporation v Caruso [2009] NSWCA 391, (2009) 170 LGERA 298 Category: Principal judgment Parties: John Chircop (First Applicant) Frances Chircop (Second Applicant) Transport for NSW (Respondent) Representation: COUNSEL: T F Robertson SC and J Lazarus (Applicants) C Norton (Respondent) SOLICITORS: Colin Biggers & Paisley (Applicants) Clayton Utz (Respondent) File Number(s): 31263/12 Judgment TABLE OF CONTENTS Paragraphs INTRODUCTION 1-8 DEVELOPMENT POTENTIAL AND PLANNING 9-32 MARKET VALUE 33-72 DISTURBANCE LOSS 73-83 ORDERS 84-85 INTRODUCTION 1This is a claim for compensation for the compulsory acquisition of land. The applicants contend for compensation of $4,691,287, comprising market value of $4,450,600 at $220/m², disturbance loss of $215,667 and solatium of $25,020. The respondent contends for compensation of $3,847,083, comprising $3,750,000 for market value at $185/m², disturbance loss of $72,063 and agreed solatium of $25,020. For the reasons that follow, I determine compensation in the sum of $3,947,083, comprising market value of $3,850,000 at $190/m², disturbance loss of $72,063 and solatium of $25,020. 2The claim is under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act). The applicants are John Chircop and Frances Chircop. The respondent acquiring authority is Transport for NSW. The compulsory acquisition date was 21 September 2012. The acquired land was the applicants' rural residential property at 79 Schofields Road, Rouse Hill, approximately 45 kilometres west of the Sydney CBD. It has an area of 20,230m2. The land was acquired for the purpose of the Transport Administration Act 1988, in particular for the construction of the North West Rail Link and specifically for the proposed Cudgegong Rail Station and associated commuter car park. 3The acquired land is located on the northern side of Schofields Road between Tallawong Road and Cudgegong Road. It is roughly rectangular and generally flat with an incline towards the rear where it is tree covered, and a lower lying portion to one corner. At the acquisition date, it was improved by a substantial five bedroom brick house with attached triple garage and ancillary buildings, being generally surrounded by residential uses. It is oriented north-south, drains to Second Ponds Creek to its east, and at the acquisition date was sewer serviced by the Second Ponds Creek carrier. 4The acquired land is located on the southern edge of the Area 20 precinct of the North West Growth Centre under State Environmental Planning Policy (Sydney Region Growth Centres) 2006 (Growth Centres SEPP). Area 20 precinct was zoned under the Growth Centres SEPP in October 2011. The intent of the Growth Centres SEPP is to make mostly rural residential land in the Sydney region available for denser residential subdivision. At the acquisition date, absent the public purpose, the acquired land would have been prime development land ripe for residential subdivision development under the Growth Centres SEPP. 5Annexed to this judgment is an aerial photograph on which has been marked the location of the acquired land, comparison sale properties to which the valuers had regard when assessing market value, and relevant precincts under the Growth Centres SEPP. 6The parties' valuers used the comparable sales method to determine market value. The main market value issues are: what are the directly comparable sales, what are the appropriate adjustments, and what is the adjusted rate to be derived for application to the acquired land? As regards the disturbance loss claim under ss 55(d) and 59 of the Just Terms Act, there are two main issues. First, there is an issue of principle as to whether, apart from valuation and legal costs under s 59(a) and (b), s 61 of the Just Terms Act prevents their recovery. Secondly, there is an issue as to whether in relation to some claimed items of disturbance loss s 59 is engaged because (the respondent says) they were not reasonably incurred or were not a direct and natural consequence of the acquisition. 7Two other cases of compensation for the compulsory acquisition for the same public purpose of land in Schofields Road in Area 20 precinct have recently been decided. Bonomo v Transport for NSW [2014] NSWLEC 25 (Sheahan J) was decided just before the conclusion of the hearing in the present matter. De Battista v Transport for NSW [2014] NSWLEC 39 (Pain J) was decided after I reserved judgment in the present matter. In addition, after I reserved judgment in the present matter, I decided eight claims for compensation for the compulsory acquisition for the same public purpose of lands on Schofields Road in the neighbouring Riverstone East precinct which, however, raised different considerations because that precinct has not yet been rezoned for urban development under the Growth Centres SEPP: Attard v Transport for NSW [2014] NSWLEC 44. The evidence in those cases differed in significant respects from the evidence in the present case. For example, in the present case: (a) the respondent's valuer opined that the market value was $185/m2, which is higher than that for which the respondent's different valuers opined in Bonomo and De Battista; (b) the valuers agreed that there was upward market movement in 2012; (c) there appears to have been more detailed evidence in respect of some of the comparable sale properties; and (d) there was ultimately an agreed position concerning the availability of interim sewerage in 2014 in Alex Avenue precinct where most of the comparable sale properties are located. I have decided the present case on the evidence before me. This largely explains why my market value of $190/m² is somewhat larger than the $180/m² adopted in Bonomo and the $175/m² adopted in De Battista. 8In hearing these proceedings, I have been assisted by Acting Commissioner Parker under s 37(1) of the Land and Environment Court Act 1979. DEVELOPMENT POTENTIAL AND PLANNING 9At the acquisition date, the acquired land was zoned SP2 Railway under the Growth Centres SEPP, reflecting the previously announced public purpose for which it was acquired. It is common ground that the whole of the acquired land should be valued on the basis that at the acquisition date disregarding the proposal to construct the North West Rail Link, it would have had a residential zoning. There was a minor, academic disagreement between the town planners, Mr Gary Rhodes for the applicants and Mr Anthony Rowan for the respondent, as to whether the residential zoning, absent the public purpose, would have been R2 Low Density Residential or R3 Medium Density Residential, or possibly a combination of the two. R2 requires relatively small 250m2 lots and a minimum of 15 dwellings per hectare. R3 requires a minimum of 25 dwellings per hectare but prohibits single dwelling-houses. Draft precinct planning documents prepared prior to the NSW government's formal commitment to the North West Rail Link in August 2010, showed the acquired land predominantly zoned R2. A bit at the rear was zoned for a public park and a sliver along the front was zoned for road widening, but they are irrelevant because the respondent does not contend that they should result in a discount. Ultimately, Mr Rhodes agreed that R2 was the more likely zoning of the acquired land. The market favoured R2 and it is likely that the owner, but for the carrying out of the public purpose, would have advocated R2. I conclude that, absent the public purpose, the zoning would probably have been R2. The debate is academic because the applicants do not contend that R3 would have resulted in a higher value than R2. 10In my opinion, at the acquisition date the acquired land was ripe for R2 residential subdivision development. The parties' planning experts agreed, and I accept, that this would occur 15-18 months thereafter. 11It is relevant to an assessment of market movement and confidence to consider the planning history, particularly the NSW government's plans announced in June 2012 to accelerate construction of essential infrastructure to support the release of housing in north-western Sydney. 12The NSW government created the North West and South West Growth Centres in metropolitan Sydney as areas which will accommodate 180,000 new dwellings and employment land for around half a million new residents through to 2030. The subject land is within the North West Growth Centre. The North West Growth Centre has approximately 10,000 hectares and is within the local government areas of Baulkham Hills, Blacktown and Hawkesbury. It will be supported by a Major Centre at Rouse Hill and will contain about 70,000 new dwellings plus employment land. It is made up of 16 "precincts", which are areas that will be progressively released by the Minister to 2030. 13The following precincts have been or are in the process of being rezoned for urban purposes under the Growth Centres SEPP: Precinct Planning Status as at August 2013 Projected Development Yield Box Hill Released October 2009 9,600 dwellings Rezoned April 2013 Marsden Park Release July 2011 10,000 dwellings Rezoned October 2013 Alex Avenue Rezoned May 2010 6,300 dwellings Riverstone Rezoned May 2010 9,000 dwellings Colebee Rezoned 2007 1,100 dwellings Area 20 Rezoned October 2011 2,500 dwellings Schofields Rezoned May 2012 2.950 dwellings Marsden park Industrial Precinct Rezoned November 2010 1,200 dwellings North Kellyville Rezoned December 2008 4,500 dwellings Vineyard Released March 2013 2,500 dwellings West Schofields Released March 2013 400 dwellings Riverstone East Released August 2013 5,300 dwellings Total 55,350 dwellings 14Clause 276 of the Environmental Planning and Assessment Regulation 2000 empowers the Minister, for the purposes of the Growth Centres SEPP, to release precincts for urban development and to arrange for a development code that provides guidelines (in conjunction with the Growth Centre Structure Plan) to assist environmental planning in released precincts. 15The Growth Centres SEPP is the initial environmental planning instrument component of the government's Metropolitan Strategy 2005 for the release of land for urban and employment development in areas suitable for growth in the Sydney region. Clause 2 states its aims, which include: to coordinate the release of land for residential, employment and other urban development in the North West and South West Growth Centres; to enable the Minister from time to time to designate land in these growth centres as ready for release for development; to provide for comprehensive planning for those growth centres; and to provide for the orderly and economic provision of infrastructure in and to those growth centres. The North West Growth Centre has the boundaries shown on the North West Growth Centre Precinct Boundary Map (cl 3(1)), which shows the 16 precincts. Zoning of a precinct follows release and detailed precinct planning and is effected by an amendment to the Growth Centres SEPP. 16On the western side of Area 20 precinct across Tallawong Road is Riverstone East precinct. To the south of Area 20 precinct, on the other side of Schofields Road, is a large, quite densely developed and attractive new suburb of large houses known as The Ponds. The Ponds is immediately east of Alex Avenue precinct except that its final stage (Stage 4), subdivided but with no houses as yet, is in Alex Avenue precinct. The Ponds was developed by Landcom, the NSW government's property developer. 17By 2011, it was well known that there was a severe shortage of housing in the Sydney region. A major bank's 2011 annual report indicated a shortfall of 110,000 homes in the Sydney region. By 2012, the NSW government had identified its objective of increasing housing supply. 18Services infrastructure is the trigger for urban development in the growth centres. At the acquisition date, Area 20 precinct was serviced by sewerage infrastructure known as the Second Ponds Creek carrier. Riverstone East precinct was not serviced by sewerage infrastructure. By 2012, part of Alex Avenue precinct (including the Mirvac development site in Alex Avenue) was serviced by sewerage infrastructure to the west. On the evidence, the market knew that the remainder of that precinct, to the extent of 400 new houses (net of Landcom's requirements), would have access to interim sewerage services from May 2014. Prior to June 2012, the latter part of Alex Avenue precinct together with Riverstone East and Riverstone precincts were due to be serviced by sewerage infrastructure via the future First Ponds Creek carrier, but it was not due to be completed until 2018. As was known to the market by the date of acquisition, the NSW government's infrastructure acceleration program announced in June 2012 (discussed below) caused this date to be brought forward to late 2014. 19In October 2011, Sydney Water, the authority responsible for delivering water and wastewater, announced that it does not build infrastructure before a precinct is rezoned because, operating as a successful business, it targets its capital expenditure to those areas that are more likely to develop first, otherwise its assets would be under-utilised. It stated that the process of obtaining development consent following rezoning is such that there is usually a gap of two years between rezoning of a precinct and the building of a new home in the precinct. 20On 12 December 2011, the NSW government announced that documents would be lodged with the Department of Planning for approval of the North West Rail Link, including eight stations and an extra 1,000 commuter car parks. It stated that the population of the North West is expected to grow by more than 200,000 to more than 600,000 over the next 40 years. 21By June 2012, the only significant activity in approving greenfield residential subdivisions in the Sydney basin was in Alex Avenue precinct. From July 2001 to March 2012, with the exception of The Ponds, there had been very few lots yielded by subdivision approvals in the Blacktown area, none in Area 20, two in Alex Avenue, and none in Riverstone. Then 300 lots were created in Alex Avenue precinct, 71 in Riverstone precinct and 37 at The Ponds between April and June 2012. In that quarter, only 1,546 lots were yielded from greenfield sites, of which 645 were in the Blacktown local government area. Twenty percent of all development activity in the Sydney region in greenfield areas was in Alex Avenue precinct. In the previous quarter, only 634 lots had been yielded throughout Sydney in greenfield areas. The yield from Alex Avenue precinct in the next quarter represented almost 50 percent of the previous quarter's total yield. 22From June 2012, there was a flurry of public announcements by the NSW government that it was accelerating and funding infrastructure to support housing, particularly in north-western Sydney. 23The most important was the first, on 12 June 2012. The government announced that more than half a billion dollars would be invested in new infrastructure to "unclog the arteries blocking housing development" across NSW, and that the 2012-13 budget delivered a comprehensive package to accelerate housing development, stimulate private sector development and restore confidence to the NSW housing market. The budget package included $481 million dedicated to a Housing Acceleration Fund to be invested in infrastructure needed to support housing across the State, particularly in greenfield areas; $50 million for a new Urban Activation Precinct Program to unlock infill development opportunities; and $30 million for a Local Infrastructure Renewal Fund to provide subsidised loans to local councils to unlock over $1 billion for local infrastructure projects. The Housing Acceleration fund would enable "an accelerated start" on 10 identified projects in major housing growth areas. Two of those 10 projects were indirectly relevant to the subject land. One was the construction of the First Ponds Creek carrier sewerage infrastructure to service Riverstone East precinct as well as much of Alex Avenue and Riverstone precincts. The other was the construction of upgrading of Schofields Road between Railway Terrace and Veron Road. This is a considerable distance west of Area 20 precinct, but is part of the upgrading of the whole of Schofields Road from a rural road to a sophisticated four-lane transit boulevard. Stage 1 of that upgrade between Windsor Road and Tallawong Road directly affected the subject property and, prior to the 12 June 2012 announcement, Stage 1 had either commenced or it was known it would soon commence. It was no surprise to the market that the 2012-2013 budget package allocated $25 million to the Stage 1 upgrade. 24That budget also referred to the following measures to unlock construction of new houses: more than doubling the first home owners grant to $15,000; extending the current first home buyer transfer duty exemption; and a new home grant of $5,000 to non-first home buyers of new properties (with qualifications). 25On 13 June 2012, the Premier of NSW announced that the government had brought forward the construction of essential infrastructure to support the release of up to 19,000 housing blocks and the creation of around 10,000 jobs in north-western Sydney. He stated: "7,000 housing lots will be on the market sooner due to fast-tracked sewerage connections at North Kellyville and First Ponds Creek...Both connections were due to begin in 2016/17. They will now start next financial year...The State package provides $481 million to fast track critical infrastructure." 26On 17 July 2012, the government announced that it would extend financial assistance to councils to help deliver essential infrastructure required to support new housing by continuing to provide for councils where the cost of delivering essential infrastructure was greater than the amount they could collect from capped s 94 contributions. Already, $18 million had been paid to Blacktown and Hills Shire Councils. 27On 6 August 2012, Sydney Water wrote letters advising that the Housing Acceleration Fund will allow delivery of the First Ponds Creek carrier to be brought forward from 2018 to 2014 to provide wastewater services to the remaining unserviced land in the Riverstone and Alex Avenue Precincts, "and will ultimately provide initial services to the Riverstone East precinct when rezoned". This acceleration of the First Ponds Creek carrier removed a significant constraint on development of the precincts that it was to service. 28On 29 August 2012, the government announced an additional $100 million project to provide water infrastructure to enable the development of 13,000 new homes in Sydney's north-west. It was said that these funds would enable 24 kilometres of water pipelines, two reservoirs, two pumping stations, and 10 kilometres of pipelines to service residential and land release areas in Box Hill and Schofields. This was on top of the $481 million committed in the budget to the Housing Acceleration Fund for infrastructure. 29On 6 September 2012, the government announced that a new government unit, the Housing and Infrastructure Delivery Office, would be established in the Department of Planning and Infrastructure to drive housing delivery in greenfield and urban renewal areas and report on housing supply. 30As noted earlier, the subject land was compulsorily acquired by the respondent on 21 September 2012. 31As regards the upgrading of Schofields Road, in May 2011 the government had published the "North West Growth Centre Road Framework". It identified three categories of major road. Schofields Road was included in the category of "Transit Boulevard", which was defined as "major roads that link with principal arterials and incorporate significant public transport facilities. They offer more of a balance between transport and local access functions, with moderate speeds around lower traffic volumes, are tree lined, give priority to buses, and are attractive and comfortable for pedestrians and cycle access". It stated that vehicular access onto this major road corridor is permitted only at major intersections, with potentially some left-in / left-out access. It stated that direct vehicular access to adjacent development is not permitted, and access to these developments is to be from the local road system, which can include service roads along the corridor boundary. 32In August 2012, a RMS community update stated that it was widening Schofields Road from a two-lane rural road to a four-lane divided road (a "transit boulevard") between Windsor Road, Rouse Hill, and Tallawong Road, and that construction would commence in late 2012. It stated that this was Stage 1 of the Schofields Road upgrade; that Stage 2 of the upgrade would be between Tallawong Road and Veron Road (for which a concept plan and review of environmental factors was planned for display in late 2012); and that Stage 3 would be between Veron Road and Richmond Road (for which a concept design was currently underway). The upgraded Schofields Road would constitute a major east-west connection between Windsor Road and Richmond Road. RMS identified features of Stage 1 including realignment of Tallawong Road to line up with Ridgeline Drive (on the other side of Schofields Road), a signalised intersection at their junction, a tree lined corridor, an off road shared path on both sides for cyclists and pedestrians, street lighting, and a generous central median strip to divide traffic and for pedestrians [at 846]. The Stage 1 upgrade would directly benefit the subject land. At the acquisition date, the market understood that Stage 1 would be completed in late 2014 and Stage 2 in 2017. Future urban redevelopment of properties on Schofields Road would no longer have direct access to Schofields Road. The subject property would then have to rely on new internal roads to connect with Tallawong Road. MARKET VALUE 33The following provisions of Part 3 of the Just Terms Act are relevant to the applicants' claim for compensation for the market value of the acquired land: 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. ... 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, ... 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... ... 34The respondent and its valuer, Mr Good, contend for a market value of $185/m² or $3,750,000. The applicants ultimately contend for a market value of $220/m² or $4,450,600. This is lower than that of their valuer, Mr Dobrow. Mr Dobrow's value in his first report was $235/m²; in a subsequent joint report it changed to $223/m²; and during the hearing it changed to $216/m² before finally settling at $225/m². At the hearing, the applicants withdrew a pleaded claim for a premium of 3 percent for which Mr Dobrow had contended for disposal in conjunction with the adjoining property. 35The valuers valued the acquired land on the direct comparison method. This may be considered to involve four steps. First, accumulation of a pool of potentially comparable sales. Secondly, analysis to convert them to a common basis of measurement such as a unitary rate (for example, per square metre) improved or unimproved (through allowance for existence or absence of improvements). Thirdly, adjustment to reflect identified differences between them and the subject property (eg size, location, use, and date). Too much adjustment may make it unsafe to use a sale. Fourthly, application of the adjusted unitary rates of the potentially comparable sales to the subject property in order to determine its value. This may involve attributing differing weight to the different comparable sales according to their degree of comparability (for example, direct, indirect or limited). See Attard at [66]-[69]; Adams v Valuer-General [2014] NSWLEC 1005. Market movement 36The valuers agreed that property prices in the North West Growth Centre rose in 2012 and 2013, in contrast to 2011 when there was little market activity. However, they disagreed on the rate of market movement. The applicants' valuer, Mr Dobrow, made a one per cent per month adjustment. The respondent's valuer, Mr Good, made an adjustment in the order of half a per cent per month. 37The valuers also disagreed on whether the market rose rapidly from June 2012 in response to the NSW government's announcements to accelerate housing provision and infrastructure and whether this warranted an additional, separate adjustment. Mr Dobrow considered that the market rose rapidly from June 2012, in response to government announcements in June and August 2012 to accelerate housing provision and infrastructure, but then plateaued through 2013. Consequently, Mr Dobrow made an additional, separate adjustment for "government commitment" of six per cent for the June 2012 housing acceleration announcement and a further two per cent adjustment (total eight percent) for the August 2012 water infrastructure announcement. Mr Good considered that the market rose consistently over 2012-13, more so post acquisition, and that an additional separate adjustment for "government commitment" was not warranted. Unlike Mr Dobrow, Mr Good incorporated the impact of the government's announcements into his single adjustment for market movement. 38In deriving his one percent per month adjustment for market movement, Mr Dobrow compared the sale of 84 Hambledon Road in November 2011 at $123/m² and resale in August 2012 at $178/m². They show an increase of 4.4 percent per month over that 10-month period. The applicants also submit that this is supported by comparison between 100 Hambledon Road at $223/m² in July 2012 and 92 Hambledon Road in September 2013 at $234/m². In the second joint valuers' report, Mr Dobrow adopted an adjustment rate of 0.5 to 1.0 percent per month for market movement. In oral evidence, he opined that a one to two percent per month adjustment was more realistic, and ultimately settled on a rate of one percent per month. 39Mr Good made an adjustment for market movement in the order of about half a percent per month, although he preferred not to express his adjustment on a per month basis, considering it too difficult to calculate a market movement rate for such small time scales. Mr Good based his adjustment rate on sales of two lots located in The Ponds in April and June 2012 with resale in October 2013 showing an average increase in value of about 1.3 and 1.0 percent per month respectively. However, those are sales of subdivided lots, not en globo parcels and include a period well beyond the acquisition date. 40In addition, since Mr Dobrow concluded that the market rose rapidly from June 2012 to the end of that year, he made an adjustment for "government commitment" to comparables transacted before June, comprising six percent for the government's June 2012 Housing Acceleration Fund budget announcement and two percent for the government's August 2012 announcement for water infrastructure in the North West Growth Centre. 41The respondent submits that there should be a single adjustment for market movement in the order of half a per cent per month that incorporates any general beneficial effect of the government's announcements on the market. The respondent argues that specific adjustments for the government's announcements would only be warranted if they delivered benefits to the subject property that were not already known to the market. Since the announcements did not directly benefit the subject property, but rather benefited properties outside Area 20 that were not already released and rezoned, the respondent submits that the effect of these announcements must be subsumed within general market movement. 42In my opinion, the NSW government's June and August 2012 announcements to accelerate housing provision and infrastructure would have increased market confidence and contributed to rising property prices in the North West Growth Centre. I consider that the positive impact of these announcements would be reflected in general market movement in 2012 and 2013, and that a single adjustment of one percent per month in the period preceding the acquisition date is appropriate. The school sales 43Mr Dobrow derived his market value from the sales of four adjoining properties in Alex Avenue precinct to the Minister for Education for a school (the school sales). They comprised the sale in July 2012 of 90, 98, and 100 Hambledon Road at an average rate of $201/m² (respectively, $192/m², $193/m² and $223/m²); and the sale in September 2012 of 102 Hambledon Road at $239/m². The applicants ultimately distance themselves from Mr Dobrow's analysis. Their final position is that their proposed rate of $220/m² is primarily to be derived from the first three school sales in July 2012 assuming they were not sold at a premium, and is supported by the sale of 28 Tallawong Road in Area 20 precinct. 44In my opinion, the school sales are not reliable comparables because they were out of line and were sold at a premium. A similar finding was made in Bonomo at [91], De Battista at [88]-[89] and Attard at [87]. Internal documents of the Department of Education during the process of acquiring the school properties evidence that the Minister was paying a premium over market value. According to valuation advice that the Department had received and accepted, the market range for the first three school properties was $150-$180/m². A more detailed analysis of these documents appears in Attard at [83], which I adopt. 45A table of potentially comparable sales, nearly all of which were in Alex Avenue precinct, set out below at [49] shows that the school sales represented a "spike". It includes sales to Mirvac in January 2012 of 69 Alex Avenue at a raw rate of $208/m² and in December 2012 of 85 Alex Avenue at a raw rate of $200/m² (the other six adjoining sales to Mirvac in December 2011 averaged $167/m²). However, they do not rebut the spike. Once one accepts, as I do, Mr Good's evidence that Mirvac acknowledged they paid a premium for 69 and 85 Alex Avenue, but justified or rationalised doing so by noting that the aggregate purchase price of the eight adjoining properties sold to Mirvac indicated an overall average raw rate of about $176/m², prior to adjustment for the terms and conditions of sale. In the latter respect, No 69 was a put and call option for 60 days and No 85 had a 23-month deferred settlement. Mr Dobrow also relied on four other sales between October and December 2013 to "rebut the spike" at raw rates (not adjusted for settlement) of $234/m², $173/m², $185/m² and $200/m² respectively. I do not think that it is reasonable to rely on them for this purpose. They are too late in time particularly having regard to market movement, three were to an acquiring authority in the shadow of resumption and, even if disregarding those considerations could be ignored, the two lowest are still well below the school sales. 46It is unnecessary to go further, but if on a contrary approach the first three school sales average of $201/m² were to be given weight, then Mr Good's adjusted rate of $186/m² would have force, subject to two matters. First, there should be an upward adjustment of 2.5 percent for market movement for the period from their sale date in July 2012 to the acquisition date (which he did not allow). This would suggest a rate of about $190/m² (services + 2.5 percent, topography + 2.5 percent, location + 2.5 percent, highly motivated purchaser - 15 percent, market movement + 2.5 percent: total adjustments - 5.0 percent). However, it may be, but it is unnecessary to decide whether, Mr Good's deduction of minus 15 percent for "highly motivated purchaser" is too small. 47In passing, I note an apparent error in the evidence of the respondent's different valuer in Bonomo that the Department of Education "paid a premium over market price, as it was required to acquire the properties after the location of the school had already been publicly announced, prior to commencement of sale negotiations": at [80]. On the basis of that evidence, the Court in Bonomo found that: "The purchases were driven by the designation of the properties by the Department of Education for a school site, prior to any form of acquisition": at [91]. That finding, in addition to a finding that the school sales were at a premium, led the Court to disregard them. That evidence by a valuer is absent in the present case where the objective evidence indicates that it was erroneous. In the present case there is evidence of the Premier's 12 June 2012 budget announcement which outlined a range of Western Sydney education projects to receive funding, including: "A new high school for The Ponds" and "a new school for specific purposes in The Ponds" (this announcement was not in evidence in Attard, although a media release of that date by a Minister was in evidence but did not refer to a new school). There is slight evidence (which, however, I am prepared to accept) that the eastern side of Hambledon Road where the school sites are located was intended to become part of The Ponds. The Premier's announcement is the only evidence of a public announcement of the location of new schools prior to acquisition of the school properties. It merely says that the schools will be in The Ponds - a very large area - not on the site of the school properties. Also in evidence in these proceedings (but not in Attard) is a briefing note to the Minister for Education in May 2012, which sought (and obtained) the Minister's approval to acquire the site for the school expected to open in Term 1, 2015. A briefing note is not a public announcement. 28 Tallawong Road 48In my opinion, the applicants' supporting sale at 28 Tallawong Road in April 2012 is also not a reliable comparable. A similar conclusion was reached in De Battista at [78]-[81] and Attard at [88]. This sale was not mentioned in Bonomo. It was not a sale in the open market but was to the respondent acquiring authority in the shadow of compulsory acquisition for the purpose of the North West Rail Link. No other party had the opportunity to purchase it. Its raw sale rate was $199/m². Mr Good thought it reflected an effective rate of $180/m² because of the improvements issue referred to below. Mr Dobrow adjusted to $238/m² and Mr Good adjusted to $185/m². Mr Good negotiated the sale with the dispossessed owner's valuer. The latter valued the improvements as nil on the basis that the underlying zoning was industrial, and thereby derived a raw rate of $199/m². To justify that rate, Mr Good gave the improvements a value of $375,000 on the different basis that the underlying zoning was residential, where the house may have added value. Given that the sale was in the shadow of compulsory acquisition and the perplexing sale negotiations, I conclude that it is not a reliable comparable. Other Potentially Comparable Sales Analysis and valuers adjustments 49Analysis of the raw rates (improved values) of other potentially comparable sales and the valuers' adjustments expressed as $/m² land value, may be summarised as follows: Address Area Sale Date Raw Rate Adjusted Dobrow Adjusted Good m² $/m² $/m² $/m² 31, 39, 47, 53, 55, & 79 Alex Avenue, Schofields (Mirvac) 123,880 23.12.11 167 215 177 69 Alex Avenue, Schofields (Mirvac) 20,660 31.1.12 208 238 186 67-69 Westminster Rd, Schofields 20,600 Mar & May 12 177 216 188 822 Windsor Road, Rouse Hill 20,300 Apr 12 163 209 183 114 Hambledon Road, Schofields 20,260 30.5.12 163 214 184 84 Hambledon Road, Schofields 20,260 7.8.12 178 210 183 97 Schofields Rd, Rouse Hill 20,210 24.8.12 176 205 185 34 Alex Avenue, Schofields 42,510 Dec 12 172 179 174 85 Alex Avenue, Schofields (Mirvac) 20,610 7.12.12 200 249 191 239 Railway Terrace, Schofields 20,260 Feb 13 187 179 182 44-46 Schofields Road, Schofields 41,260 Apr 13 170 188 178 44 Alex Avenue, Schofields 21,080 4.7.13 171 178 171 48-50 Schofields Road, Schofields 41,260 31.7.13 198 213 194 50It is unnecessary to give further consideration to 34 and 44 Alex Avenue because they were only relied on by Mr Dobrow to support his analysis of 28 Tallawong Road, which I have earlier concluded is not a reliable comparable. 51The valuers considered, and I accept, that the most likely purchasers for the potentially comparable properties were developers who would attribute neither value nor cost to existing improvements. Accordingly, their adjustments generally reflected an unimproved rate that attributed no value to improvements. Having originally made no adjustments for improvements, Mr Dobrow ultimately did make an adjustment of 1 or 2 percent in respect of three of the comparables. This was not explained persuasively and I am disinclined to accept them. 52Mr Dobrow's percentage adjustments were undertaken on three different bases in each of his first report, second report and second joint report, and further iterations of adjustments were made during the hearing. In his first report, Mr Dobrow made a range of adjustments for various issues including sewer services, Aboriginal site extent, government commitment, flooding, size, shape, improvements and reliance on adjoining developments. In his second report, adjustments for Aboriginal site extent were deleted, adjustments for topography and location were introduced, and adjustments for sewer services were significantly amended, among other changes made. In the second joint report and iterations of adjustments that followed therefrom, Mr Dobrow made further significant changes to adjustments including the alignment of sewer service adjustments with Mr Good, the introduction of adjustments for market movement, and significant amendment to adjustments for topography and location that, as was examined in oral evidence, had not physically changed since Mr Dobrow's first and second reports. In the final iteration, Mr Dobrow made total adjustments ranging from -4.5 percent to +31.5 percent. It is appropriate for valuers to make new adjustments as new information comes to hand, but there is force in the respondent's criticism of the number, extent, and nature of Mr Dobrow's adjustments, including the changing adjustments for relatively static matters such as topography and location. 53In his first and second reports, Mr Good did not adjust his potentially comparable sales explicitly, but rather simply identified the range and asserted a $/m² rate. However, in the second joint report Mr Good adjusted his potentially comparable sales explicitly to derive a hypothetical expression of value as a unitary rate, being $/m² land value and/or $ per dwelling site. Mr Good made a range of relatively small adjustments for various issues including sewer services, location, topography, and size, together with large adjustments for purchaser motivation, resulting in total adjustments ranging from -10.5 percent to +12.5 percent. Application 54In his first report, Mr Dobrow's market value was $4,754,050 ($235/m²). In the first joint report, Mr Dobrow then adopted a ranking comprising sales "of direct importance", "supporting sales", and "background sales" to indicate the relativity between the potentially comparable sales and the subject property. In his second report, Mr Dobrow adopted a ranking comprising a weighting out of five to indicate the relativity between the potentially comparable sales and the subject property. As mentioned earlier, during the course of the hearing Mr Dobrow's assessment of land value for the subject property changed several times, finally settling on $4,551,750 ($225/m²) in oral evidence. However, in closing submissions the applicants did not contend for this amount and instead contended for an amount of $$4,450,600 ($220/m²). 55In his first report, Mr Good simply asserted market value in the amount of $3,742,550 ($185/m²). In the first joint report, Mr Good adopted a ranking comprising sales "of direct importance", "supporting sales", and "background sales" to indicate the relativity between the potentially comparable sales and the subject property. In his second report, Mr Good reverted to an assertion of market value rate of $185/m² rounded to $3,750,000. While the process undertaken by Mr Good was not altogether transparent, he was consistent in his selection of $185/m². I prefer Mr Good's evidence in general except for his valuation conclusion. 56Assisted by my inspection of the potentially comparable sale properties, I assess comparability as follows. 5784 Hambledon Road, Schofields, transacted in August 2012 on a deferred settlement basis, is comparable to the subject property in terms of area but inferior in terms of topography and sewer servicing and significantly inferior in terms of location (being adjacent a sand and soil depot). I consider this sale to be of direct relevance. 58114 Hambledon Road, Schofields, transacted in May 2012, is comparable to the subject property in terms of area and topography, but inferior in terms of location (being further away from amenities) and sewer servicing. However, the transaction was undertaken off market without the benefit of exposure through a marketing campaign. I consider this sale to be of indirect relevance. 59I propose to consider collectively the sales to Mirvac on deferred settlement bases of 31, 39, 47, 53, 55, and 79 in December 2011, together with 69 and 85 Alex Avenue, Schofields in January and December 2012. Because on the evidence of Mr Good that I have accepted, Mirvac rationalised the aggregation premium for 69 and 85 on the basis that the average price for the eight properties was $176/m². They are comparable to the subject property in terms of area per lot, but inferior in terms of location (being further away from amenities), topography and sewer servicing. I consider them to be of direct relevance. 6097 Schofields Road, Rouse Hill, transacted in August 2012, is comparable to the subject property in terms of area and sewer servicing, but inferior in terms of location (due to the proximity of The Ponds intersection) and topography. The transaction was a negotiated acquisition with the respondent acquiring authority for the same public purpose. I consider this sale to be of limited relevance. 6167-69 Westminster Road, Schofields, transacted in March and May 2012, is comparable to the subject property in terms of topography, superior in terms of area (being significantly smaller), but inferior in terms of location (being further away from amenities) and sewer servicing. I consider this sale to be of direct relevance. 62239 Railway Terrace, Schofields, transacted in February 2013 (after the acquisition date), is comparable in terms of area, topography and sewer servicing, but superior in terms of location (being closer to amenities and a railway station). I consider this sale to be of indirect relevance. 63822 Windsor Road, Schofields, transacted in April 2012, is the only potentially comparable sale of a non-acquisition (sale to a developer) nature in Area 20 precinct. It is comparable to the subject property in terms of area and sewer servicing, but inferior in terms of location (due to the proximity of a leisure facility with high volume traffic) and topography. The sale was by tender by a deceased estate that accepted the highest tender without further negotiation: the valuers agreed that this would require an upward adjustment. The applicants suggest that it suffered from proximity to a hotel which it is said had an unsavoury reputation, but there is no evidence of this. I consider this sale to be of direct relevance. 6444-46 Schofields Road, Schofields, transacted in April 2013 (after the acquisition date), on a deferred settlement basis is inferior to the subject property in terms of area (being very significantly larger), location, topography and sewer servicing. I consider the sale to be of indirect relevance. 6548-50 Schofields Road, Schofields, transacted in June 2013 (after the acquisition date), on a deferred settlement basis is also inferior to the subject property in terms of area (being very significantly larger), location, topography and sewer servicing. I consider this sale to be of indirect relevance. 66Accordingly, I consider the following to be directly relevant comparable sales: 84 Hambledon Road, Schofields 31, 39, 47, 53, 55, 69, 79, and 85 Alex Avenue, Schofields 67-69 Westminster Road, Schofields 822 Windsor Road, Schofields Adjustment 67Adjustment of those directly comparable sales for differences with the subject property is required for area, location, topography, sewer servicing (which was agreed between the valuers), market movement (for which I adopt 1 percent per month for en globo land, above at [42]), settlement basis, and (in one case) absence of negotiation in the sale process. 68The raw rate of $178/m² for 84 Hambledon Road, Schofields requires upward adjustment for topography, sewer servicing and market movement and significant upward adjustment for location relative to the subject property with downward adjustment for settlement basis, which I consider will support a modest increase approximating $193/m² for application to the subject property. 69The raw rate of $176/m² average for the eight Mirvac properties (31, 39, 47, 53, 55 and 79 coupled with 69 and 85 Alex Avenue, Schofields) requires upward adjustment for location, topography and sewer servicing, significant upward adjustment for market movement, with downward adjustment for the one transacted after the acquisition date, with downward adjustment for settlement basis, which I consider will result in a modest increase approximating $186/m² for application to the subject property. 70The raw rate of $177/m² for 67-69 Westminster Road, Schofields requires upward adjustment for location, sewer servicing and market movement, with downward adjustment for area, which I consider will result in a minor increase approximating $185/m² for application to the subject property. 71The raw rate of $163/m² for 822 Windsor Road Schofields requires upward adjustment for location, topography, market movement and the absence of negotiation following the highest tender (see above), which I consider will support an increase approximating $185/m² for application to the subject property. 72Having regard to the evidence, I consider the appropriate market value rate for the subject property to be within the range of $185/m² to $195/m², and I adopt $190/m². As it has an area of 20,230m², this results in an assessment of $3,843,700, which I round up to $3,850,000. DISTURBANCE LOSS 73The following provisions of the Just Terms Act are relevant to the applicants' claim for loss attributable to disturbance: 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): ... (d) any loss attributable to disturbance, 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. 74The applicants claim loss attributable to disturbance totalling $215,677. The respondent submits that: (a)the applicants are entitled to recover disturbance loss claimed under s 59(a) and (b) for legal costs, valuation fees and planning fees totalling $72,063; (b)all other items - which are claimed under s 59(c), (d) or (f) - are barred by s 61 (assuming they are all otherwise recoverable under s 59, which is disputed under (c) below); (c)alternatively, if they are not barred by s 61, they are not recoverable because they were not "reasonably incurred" and, in the case of s 59(f) are not "a direct and natural consequence of the acquisition"; (d)alternatively, there is a small dispute as to quantum of a couple of items. 75For the reasons that follow, I accept the respondent's submissions (a) and (b), it is therefore unnecessary to address submission (c), and I do not accept submission (d). Facts 76The disturbance loss issues are informed by the following facts: (a)The applicants purchased a property at Nelson in a sale that settled in May 2013. The property has no improvements and they are seeking development consent to build on the property. (b)Their development application was lodged on 19 February 2014. Approval is expected in April 2014 and a construction period of 11 months is expected. (c)The applicants have rented a property in The Ponds since 19 June 2013. The owners of that property do not intend to renew that lease and the applicants will have to leave by 19 June 2014. They intend to rent other premises until their new home at Nelson is ready to move into in about April 2015. Section 61 77The parties accept that the market value of the acquired 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 (that is, for residential subdivision) and therefore the chapeau of s 61 is engaged. The land was ripe for redevelopment: El Boustani v The Minister Administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33, (2014) 199 LGERA 198 at [99], [110]; Attard at [149]-[153]. 78The applicants accept that the initial costs of moving from the acquired land are not recoverable by reason of s 61. However, they claim that s 61 does not bar their claims for the following: (a)Rent for 32 months until their new home at Nelson is ready. The amount claimed is $106,550 comprising (i) rent paid to the respondent for the acquired property under s 34(3) of the Just Terms Act $22,550; (ii) rent for the current property $39,000, and (iii) rent for the future property $45,000. I do not accept the respondent's discrete submission that rent paid under s 34(3) to an acquiring authority is not recoverable under s 59, for the reasons I gave in Attard at [124]-[129]. (b)Land tax of $2,961. This was an adjustment to the purchase price on settlement of the Nelson property to reflect the pro rata proportion of land tax which should have already been paid by the vendors for the calendar year 2013 arising from the fact that the Nelson property was not used by the vendors as their principal place of residence (it was vacant land). The applicants will not themselves be liable to pay land tax because land tax is not payable on a principal place of residence. I consider this should be regarded merely for what it is: an adjustment to the purchase price and not colourably within s 59. Alternatively, I would in any case hold that it is not a direct and natural consequence of the acquisition under s 59(f). (c)Expenses for a second and third move (removalists fees $10,690 (split equally between those two moves), redirection of mail $170, change of address notifications $65, and reconnection of telephone and internet $298). The respondent discretely disputes the quantum or reasonableness of the removalist fees and mail redirection costs, but in my view they are supported by the evidence and are reasonable. (d)Stamp duty of $22,780, being the difference in stamp duty between the $49,860 stamp duty paid on the Nelson property with a value of $1,170,000 and that payable on a rural residential lot with similar characteristics to the acquired property with a value said to be about $700,000. That is, the difference between the cost said to be reasonably incurred and that which it is said would have been necessary. 79The applicant's argument is that s 61 does not apply because none of these costs were in fact "necessarily" or "inevitably" incurred within the meaning of s 61(b). For example, it is said, they need not have rented and moved multiple times - they could have simply bought a new property without renting and made only one move; and in relation to stamp duty they need not have bought a more expensive property such as that at Nelson but could have bought a cheaper rural-residential property similar to the acquired land, and thus the stamp duty "necessarily" incurred would have been only that on the latter. 80In El Boustani Preston CJ of LEC (Beazley P and Gleeson JA agreeing) made a number of points about s 61(b), relevantly including the following at [110]-[115]: 110 Fourthly, the financial loss must be a loss that would "necessarily have been incurred" in realising that potential. The adverb "necessarily" means: "1. by or of necessity; 2. as a necessary result". The word "necessity", in turn, means: "1. something necessary or indispensable": Macquarie Dictionary (4th ed, 2005). Hence, the financial loss must be incurred inevitably or as a necessary result in realising the potential to use the land for a purpose other than that for which it is currently used: see also Roads and Traffic Authority of New South Wales v McDonald at [94]. 111 If the financial loss is incurred for reasons other than realising the potential to use the land for that other purpose, it will not satisfy the requirement of being necessarily incurred to realise that potential. For example, legal costs or valuation fees incurred by the persons entitled to compensation in connection with a compulsory acquisition of the land (within s 59(a) and (b) of the Act) will not satisfy the requirement of being necessarily incurred in realising that potential: Sydney Water Corporation v Caruso at [185]. 112 Whether and when a financial loss will be incurred inevitably or as a necessary result in realising that potential will depend in part on the temporal proximity or conversely remoteness of the potential. 113 As the potential to use the land for a purpose other than the purpose for which it is currently used becomes more remote, it will become more difficult to satisfy the requirement of necessity or inevitability. For example, if the potential is that the land is unlikely to be developed for a purpose other than the purpose for which it is currently used for another 10 years, then the land is likely to continue to be used for its current use for those next 10 years. A sale of the land now would not realise the potential to be used for the purpose other than the purpose for which the land is currently used - such realisation will not occur for 10 years. The land will continue to be used for the purpose for which it is currently used after the sale, although still having the potential to be used for that other purpose, some 10 years in the future. 114 On the other hand, if the land is ripe for redevelopment for the other purpose, the sale of the land now will realise the potential to be developed for that other purpose. 115 A financial loss, such as relocation costs, incurred in connection with the sale of the land could be said to be necessarily incurred in realising the potential in the case of the land that is ripe for development for the other purpose but not in the case of the land where the potential for development for that other purpose is some 10 years away. 81Where stamp duty is incurred by a person entitled to compensation in connection with the purchase of land for relocation where that relocation is necessary to enable the potential to which s 61 refers to be realised (as in the present case), then s 61 denies a claim for stamp duty under s 59(d): Sydney Water Corporation v Caruso [2009] NSWCA 391, (2009) 170 LGERA 298 at [185]-[188]; Roads and Traffic Authority of New South Wales v McDonald [2010] NSWCA 236, (2010) 79 NSWLR 155, at [92]; Attard at [130]. Stamp duty on a new property is not recoverable at all under s 59(d) to the extent it exceeds the stamp duty on the purchase of land of equivalent value to the acquired land. 82In my opinion, the applicants' argument places too narrow a construction on the term "financial loss that would necessarily have been incurred" in s 61(b). On that construction, almost no specific loss would have been "necessarily" incurred as there is always likely to have been another option. For example, a dispossessed owner may buy no replacement property at all but might move in with friends or relatives rent free incurring no costs; or might choose to perpetually rent, incurring higher costs over a lifetime than if they chose to purchase a replacement property; or might move overseas at large expense and argue that they only "necessarily" had to move a short distance so the balance of the relocation costs were not "necessary". I do not accept the applicants' "option" argument. Once that argument fails, the applicants do not resist the conclusion, which I reach, that the costs in issue constitute "financial loss that would necessarily have been incurred" within the meaning of s 61(b). 83Accordingly, I allow the applicants' disturbance loss claim under s 59(a) and (b) in the total amount of $72,063, and disallow the balance of their disturbance loss claim. ORDERS 84For these reasons, I assess compensation in the sum of $3,947,083 comprising market value of $3,850,000, disturbance loss of $72,063 and solatium of $25,020. 85The orders of the Court are as follows: (1)Compensation is determined in the sum of $3,947,083. (2)The respondent is to pay the applicants' costs. (3)The exhibits may be returned. ANNEXURE 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: 02 June 2014