Land and Environment Court New South Wales Medium Neutral Citation: Carlewie Pty Ltd v Roads and Maritime Services [2017] NSWLEC 78 Hearing dates: 3, 4, 5, 6, 10, 11, and 12 April, and 2 May, 2017, and Respondent's supplementary written submission on land tax 4 May 2017 Date of orders: 30 June 2017 Decision date: 30 June 2017 Jurisdiction: Class 3 Before: Sheahan J Maston AC Decision: (1) Compensation for the compulsory acquisition by the Respondent of the Applicant's property known as 53-55 Campbell Street and 33 Burrows Road, St Peters, being lot 101 in DP 845651 and lot 102 DP 871150, on 3 July 2015, is determined in the amount of $23,277,688.96, pursuant to the Land Acquisition (Just Terms Compensation) Act 1991; (2) Costs are reserved; (3) The exhibits may be returned. Catchwords: COMPULSORY ACQUISITION – compensation payable for acquisition of a general industrial use site in St Peters – capitalisation of market rent – heritage listed warehouses – contamination of site including underground storage tanks – fire safety order compliance – whether to include a land tax adjustment in the market value of the land – whether portions of the land were capable of future development – disturbance claims including replacement of land. Legislation Cited: Land Acquisition (Just Terms Compensation) Act 1991 Environmental Planning and Assessment Act 1979 State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 Sydney Local Environmental Plan 2012 Sydney Development Control Plan 2012 Cases Cited: Al Amanah College Inc v The Minister for Education Training (No 2) [2011] NSWLEC 254 Blacktown City Council v Fitzpatrick Investment Pty Ltd [2001] NSWCA 259 Caltex Oil (Australia) Pty Ltd v Chief Executive, Department of Lands (1996) 16 QLCR 435 Commissioner of Succession Duties (S.A.) v Executor Trustee and Agency Co. of South Australia Ltd (1947) 74 CLR 358 Coundrelis v Roads and Traffic Authority of NSW [2008] NSWLEC 72 G Suonaf Holdings Pty Ltd v RMS [2016] NSWLEC 116 Hatzivasiliou v RMS [2017] NSWLEC 9 Macarbell Pty Ltd v RTA; Michael Nasser v RTA (2006) 149 LGERA 217; [2006] NSWLEC 651 MacDonald v Roads and Traffic Authority of NSW [2009] NSWLEC 105 Maggiotto v Roads and Traffic Authority [2006] NSWLEC 54 Maidment v Roads and Traffic Authority of NSW [2006] NSWLEC 606, Nasser v Roads and Traffic Authority; Millstar Holdings Pty Limited v Roads and Traffic Authority (No 3) (2006) 149 LGERA 289; [2006] NSWLEC 562 Road and Traffic Authority of NSW v Mosca [2006] NSWCA 159 Rocco Fraietta v Roads and Maritime Services [2017] NSWLEC 11 Sebastian Cannavo and Busa v RTA [2004] NSWLEC 570 Speter v RMS [2016] NSWLEC 128 Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 Category: Principal judgment Parties: Carlewie Pty Ltd (Applicant) Roads and Maritime Services (Respondent) Representation: Counsel: Mr I Hemmings, SC with Mr M Seymour (Applicant) Mr R Lancaster, SC with Mr N Owens, SC (Respondent) Solicitors: Dibbs Barker (Applicant) Henry Davis York (Respondent) File Number(s): 2016/159288 Judgment A: Introduction 1. This case concerns the compensation to be paid, under the Land Acquisition (Just Terms Compensation) Act 1991 ("the JTC Act"), to the applicant company ("Carlewie"), for the compulsory acquisition, on 3 July 2015, of a major consolidated and improved site at St Peters, by the WestConnex Delivery Authority, later dissolved in favour of the Respondent ("RMS"), on 1 October 2015. 2. I gratefully acknowledge the great assistance I received from Acting Commissioner John Maston in the determination of this claim. 3. The public purpose of the acquisition is the construction of the St Peters Interchange component of the "WestConnex" motorway project. That work was well under way by the time the Court undertook its site inspection, on 5 April 2017. 4. However, the valuation exercise for the purpose of determining compensation requires analysis of the site as it was, in the context of its rental performance or its hypothetical sale as a development site, as at the date of acquisition. In this respect there are five "complications" to be considered: 1. the heritage aspects of the site; 2. an extant fire safety order affecting it, dated 19 March 2013; 3. town planning issues with obtaining development consent ("DC"); 4. contamination issues; and 5. costs of "replacing" the acquired land. 1. In terms of a relevant chronology of acquisition events: 1. from early 2014, discussions took place between WestConnex and the Applicant regarding possible need to acquire the subject lands; 2. the Proposed Acquisition Notice ("PAN") was received on 10 March 2015; 3. the acquisition occurred, and was gazetted, on 3 July 2015; 4. compensation was claimed on 17 July 2015, in the amounts of $47,291,979 for market value, and $3,486,122.67 for disturbance; 5. compensation was determined by the Valuer-General on 22 October 2015, in the amounts of $26,750,000 for market value, and $1,945,990 for disturbance; it is this "valuation" that is the subject of the application/objection in these proceedings; and 6. when the applicant company was dissatisfied with that determination, these proceedings were filed on 24 December 2015. 1. The structure of this judgment is as follows: ● In section B ([7] to [10]), we will summarize, as best we can, the contentions, which moved somewhat during the lengthy hearing, which we will describe in section C ([11] to [17]). ● In section D ([18] to [64]), we will describe in some detail the Acquired Land (and its ownership). ● In section E ([65]), we will set out the key provisions of the legislation. ● In section F ([66] to [207]), we will deal with the issues touching upon the valuation task, under the following headings – "Highest and Best Use" Approach to differing expert opinion evidence Comparable leases and sales Mr Lunney's industrial market evidence Sales Leases Mr Lunney's Valuation opinion Mr Blackwell's industrial market evidence Agreements Between the Valuers Matters Not Agreed Planning evidence related to the developable part of the acquired land Heritage Conservation Works Essential Works Long Term Works Costs of complying with the Fire Safety Order Contamination Costs Inclusion of land tax in the market value of the acquired land Value of identified yard areas ● In section G ([208] to [236]), we will deal with the disturbance claims, before coming to our determination of the compensation payable and the Court's orders, in section H ([237] to [239]). B: The Compensation Contentions 1. The Applicant sought, in Amended Points of Claim ("APOC") dated 14 March 2017, and its outline submissions, filed 30 March 2017 (par 1), "at least" $31.9M for market value, and "at least" $2,117,863.33 for disturbance, and the Respondent contended for compensation of $21.9M for market value, and $135,545.06 for disturbance. 2. In its final written submissions, the Applicant sought (annexure A) (i) $36,883,792 for market value (including a land tax claim of $73,735 – as a component of market value, and not as an item of disturbance – see Tp24, LL18 – 20, and p416, L27); (ii) $140,643.96 for agreed disturbance items; and (iii) the following three additional disturbance items, not agreed, claimed in anticipation of obtaining a replacement property: 1. Stamp Duty on market value; 2. conveyancing costs, estimated at $10,000; and 3. financial costs of $189,109. 1. In its closing oral submissions (Tp492, LL32 – 42), RMS accepted the agreed, higher amount for disturbance, $140,643.96, by allowing the inclusion of the cost of the heritage report by Urbis. RMS maintained its contention (final subs par 160) that the market value of the acquired land was $21,914,002. No allowance is made by the Respondent for adjustment of land tax, RMS having said in its written opening submissions (par 118 – addition mine): The statutory liability to pay land tax arises independently of the acquisition and the Just Terms Act. The land tax payable is determined by landholdings at 31 December and thus is not a cost incurred as a direct and natural consequence of the acquisition. Accordingly the Applicant is not entitled to any costs for land tax under s59(1)(f) [which deals with disturbance items]. 1. RMS also submitted (final subs pars 7 – 22) that the case argued by the Applicant at the hearing changed in fundamental respects from its APOC, "without explicit acknowledgment". RMS does not consent to that "departure from ... the pleaded case", and argues (par 18) that it is "contrary to authority and principle" (see [79] below). C: The Hearing and the Evidence 1. Carlewie was represented at the hearing by Mr Ian Hemmings SC, and Mr Mark Seymour of counsel. The RMS was represented by Mr Richard Lancaster SC, and Mr Nicholas Owens SC. 2. A Court Book of four volumes ("CB" – Exhibit A1), and a tender bundle ("TB" – Exhibit A7), were put before the Court, largely by agreement. It will be convenient, generally, to refer to the contents of the CB by reference to folio numbers (up to 1524), and to the contents of the TB by reference to tab numbers (up to 55). Additional documents intended for inclusion in the TB, at tabs 35 to 38, were separately tendered as Exhibit R6. 3. The most relevant planning documents are Sydney Local Environmental Plan 2012 ("the LEP" – extracts at TB, tabs 14 – 20), and Sydney Development Control Plan 2012 ("the DCP" – Exhibit R3, plus an extract at TB, tab 21). 4. Also relevant is the Building Code of Australia ("BCA" – now officially renamed the National Construction Code – TB tabs 22 – 23, and Exhibit A11), under which the significant warehouse improvements on the acquired land are classed as a "large isolated building". (We will continue to use the term "BCA".) 5. The Applicant relied on two lay witnesses, namely, its General Manager and in-house Counsel, Christopher Biggs, and its former "special projects" employee on the subject site, Ronald Foxe, and both were required for cross-examination. 6. The parties relied on expert evidence in the fields of town planning, valuation of land, heritage assessment, heritage architecture, fire measures, contamination, structural engineering, and quantity surveying: Expert category/field Applicant Respondent Valuation David Blackwell David Lunney Town Planning Paul Mitchell Julie Bindon Heritage Assessment Stephen Davies David Logan Heritage Architecture Robert Staas Jennifer Hill Fire Peter Gardner Will Marshall Contamination Philip Mulvey Jason Clay Quantity Surveyors Michael Dakhoul David Lawson Structural Engineering Massoud Shaban 1. All experts (other than the structural engineer) were required for cross-examination. D: The Acquired Land Features and Zoning 1. The subject land is located south west of the corner of Burrows Road and Campbell Street, St Peters, and comprises Lot 101 in DP845651 and Lot 102 in DP871150 (respectively "Lot 101" and "Lot 102" – see aerial photographs, videos, title searches, and deposited plans at TB 1 – 7, and also CB, fols 520 and 527). 2. Lot 101 has an area of 4190m², and Lot 102 an area of 16,330m², giving a total acquired land area of 20,520m². 3. The Alexandra Canal, completed in 1905 (fol 121), but sometimes erroneously referred to in documents as the Alexandria Canal, runs parallel to Burrows Road, to the south east ("SE") of that road, and, therefore, SE also of the subject site. Northwest ("NW") of the site, across Campbell Street, lies Sydney Park. 4. The acquired land has frontages to 33 Burrows Road (approximately 266m), 53 – 57 Campbell Street (approx. 132.6m), and the corner of Holland and Harber Streets (approx. 22.5m) to the NW (fol 519). It is "near level" in contour, but irregular in shape. It is included by the DCP (Exhibit R3, s 5.8) in what are called the "Southern Employment Lands", and it enjoyed a floorspace ratio ("FSR") of 1.5:1, and an 18m height control. 5. At the date of acquisition, the land was mainly zoned IN1 General Industrial under the LEP, but part of the north eastern ("NE") corner (near the Campbell/Burrows intersection) was zoned SP2 Infrastructure "classified road" (see Exhibit A3), and the DCP shows (on figure 5.182) a proposed local road affecting that part of the subject site. (CB fol 748 indicates that in 2013 the area of proposed SP2 land affecting the subject site was intended to be somewhat larger.) 6. Mr Hemmings noted, in respect of the special purpose zone in the LEP, and the road proposal in the DCP (Tp11, LL11 – 14): Everyone has agreed, the experts and the parties, that the actual zone in part is to be set aside for the purpose of the valuation exercise, the whole land is treated as industrial. and the Respondent noted (closing subs par 33) that: At the Date of Acquisition ... It is common ground between the parties that the underlying zoning of the whole of the Acquired Land was IN1 General Industrial. Relevant history 1. Both acquired lots had been purchased by Carlewie in 1999. 2. From the 1940s until 1960 they were occupied by interests and businesses associated with the well-known pioneering and innovative engineer, Ralph Symonds, who is credited with the rare structural features (the Symonds Truss System) of the major improvements featured on the land, until and at the date of acquisition. (More information on Mr Symonds, his business, and the truss technology can be found at CB fols 117 – 119.) 3. Heritage expert Jennifer Hill refers to the system (at CB fol 989) as a "glue laminated timber three-pin foundation arch structural system", and its application at the subject site is described in a 2015 heritage report commissioned by the Applicant, to inform its valuation and legal advice following the PAN, in these terms (CB Vol 1, fol 111): The warehouse complex features two perpendicular, single storey wings (east and west) that are supported by a series of three pin foundation arches. The larger wing consists of 32 bays and is 184 metres long, while the smaller is of 24 bays and is 146 metres long. The arches used throughout are generally identical (though some have been subject to repair/reinforcement work) and span 31 metres. Each arch is a 610 x 100 millimetre member of 29 laminations, fabricated with casein glues. The 24 arches to the west end of the long arcade are constructed of mixed hardwood, while the remainder of the arches are radiate (sic) pine or oregon. Secondary rafters run from the line of the arches to form aisles of varying widths throughout the building, and purlins are standardised trussed oregon members. These are propped above the arches on each side to form a longitudinal roof light. 1. The report went on to say (fol 131): The subject site has been identified to have aesthetic and associative significance, to have research potential, and to be both rare and representative. The warehouse complex is representative of Symonds' innovated laminated timber arch construction methods, and provides a substantially intact and relatively rare example of the technology. As the Homebush Bay factory is intended for removal to make way for redevelopment, the subject site will effectively be the only remaining example of Symonds' work in this format within NSW. In addition to this, the former Burge Bros factory in Victoria that demonstrates the technology has been identified as an item of state significance. It is acknowledged that the subject site has been subject to a degree of change over time including the removal of a large portion of the western wing prior to 1999 due to poor condition. It is also noted that the complex was constructed in phases from c.1946 to the late 1950s. However, all extant elements of the warehouse were constructed under the ownership of Symonds and within a relatively compacted timeframe, and on the basis of his laminate arch technology and overall design. All extant elements of the warehouse are therefore considered to contribute to the overall heritage significance of the complex, though the westernmost portion of the western wing has been identified as being representative of the earliest phase of construction. 1. The RMS heritage expert, David Logan, said of the Symonds Truss System in his primary report (CB Vol 3, tab 23, fol 892, par 3.6): The Rudders Bond Store buildings are constructed using a three-pin foundation arch structural system. The arches are 31m in span, built of curved members (600x100mm) which are glue-laminated timber bonded together, presumably using casein glue. They are made up of approximately 28 layers of 1 inch timber bound together with adjustable straps (situated at 400-500mm centres). Bays between arch pairs are approximately 6m. Arches rest on concrete shoes. Technical studies by others indicate that arches are tied with a reinforced concrete tie beam embedded under the slab. 1. That description was adopted by the RMS structural engineering expert, Massoud Shaban (CB tab 29, fol 1111, par 1.3), and his evidence was not challenged. 2. When the Symonds operations outgrew the subject site, it came into the ownership of "Rudders", and eventually "TNT" (see fols 932 – 933, 1123, and 1138 – 1139). 3. In 1999, the "large, single-storey post-war industrial warehouses" on the site were known and used as "Rudders Bond Store". The site layout 1. Many expert witnesses – and the Respondent in its closing submissions – used the following captioned aerial photograph of the site (fig 2 in the April 2016 report of David Logan, at CB fol 892) to particularise the acquired land: Development Consents 1. The following relevant DCs were granted in respect of the subject land by the Council of the City of Sydney ("the Council") (CB Vol 2 fol 529, pars 64 and 65, and TB tabs 26 – 28): 1. On 1 November 1999, No. U99-00436, for use of the land as "a waste transfer, recycling, and resource recovery facility, including crushing and screening". 2. In 2005, No. D20055297, for the use of the north west part of the site for panel beating, spray painting and mechanical repairs. 3. In 2008, No. D2008756, for the use of the north western section of the site as a taxi base in conjunction with panel beating, spray painting and mechanical repairs. Inclusions/Improvements 1. The Applicant noted (outline subs, par 2) that the site included: (a) An interconnecting warehouse structure, referred to as Rudders Bond Store Buildings extending over Lot 101 (referred to as Warehouse A) and over Lot 102 (referred to as Warehouse B); (b) A two-level open plan office building (Office); (c) A steel frame workshop building adjoining Warehouse B (Workshop); (d) A drive through car wash bay structure (Car Wash); and (e) A brick building with metal roof fronting Campbell Road (Brick Building). 1. The Respondent also noted which the acquired land contained (subs, par 29), adding the following information to what the Applicant had said (immediately above): (a) ... The "Warehouse "Rudders Bond Store" including interior" is a locally listed heritage item (Item No. I1450) in Schedule 5 of the [LEP]; ... (c) A steel frame single storey vehicle repair workshop with a ribbed metal roof and roller shutter doors extending along the front of the building adjoining Warehouse B; (d) A single storey brick dwelling with metal roof structure fronting Campbell Road; ... (f) Weighbridge facility located adjacent to the southern entry to the Rudders Bond Store; (g) Weighbridge located within Warehouse B of the Rudders Bond Store; (h) Various other structures including converted shipping containers and demountable office buildings; and (i) The remainder of the Acquired Land was hardstand area. 1. In some of the material before the Court, the titles "A" and "B" for the two warehouses are, unfortunately, reversed. 2. However, put correctly, warehouse "B" is the longer and larger of the two (approximately 5195m² c.f. 3695m² the areas accepted by the valuers – CB fol 636), and sits southwest ("SW") to NE on the irregularly shaped Lot 102, while warehouse "A" occupies most of the rectangular Lot 101, upon which it sits SE to NW, abutting warehouse "B". Together they occupy 43 to 44% of the area of the subject site (fol 782). 3. The T-shaped combination of warehouses A and B was "the dominant built feature" of the acquired land, and is agreed to be of at least local heritage significance, and, in some respects, possibly state, and even national, significance, and to have been "underachieving", in terms of the use of the airspace provided inside their "high span wide span" design (Tp9, LL44 – 48, and p15, LL1 – 8). 4. The combination is listed in both the LEP's Heritage Schedule and the State Heritage Inventory ("SHI"). The 2015 report to which we earlier referred ([26]) noted (CB fol 131) that the subject site had also been identified in the City of Sydney Industrial & Warehouse Buildings Heritage Study 2014, which recommended that the heritage listing for the warehouse buildings be maintained. 5. Warehouse A was apparently built in the period 1946 – 1949, and warehouse B 1950 – 1956. Approximately half of warehouse A (17 out of 31 bays) was demolished in 1995 (area D of the photograph in [32] above), and it is now 85m in length. Warehouse B comprises 24 bays, and is 146m in length. Both are 12m high. Leases 1. At the date of Acquisition, parts of the Site, especially Lot 102, generally east of warehouse B, had been leased and used for a variety of industrial and commercial purposes (see fig 6 on CB, fol 600). As the Respondent noted (opening subs pars 17 – 18): 17. The Acquired Land was largely leased at the Date of Acquisition to various tenants: (a) Dial-a-Dump Industries Pty Ltd [("DADI")] pursuant to an unregistered lease commencing on 1 January 2015; (b) SITA Industries Pty Ltd pursuant to an unregistered lease which commenced on 6 July 2009; (c) Taxi Central Pty Ltd pursuant to an informal, unwritten lease over the part of Lot 102 previously leased to Beydoun Insurance Group Pty Ltd and One Cab Group Pty Ltd (registered lease AG561193); 18. There was a vacant area that was previously leased to Yantang Pty Ltd pursuant to registered lease AC275722. 1. On 1 March 2016, Biggs deposed (fol 100, pars 13 to 15): 13 At the Date of Acquisition, the Properties were leased or licensed by Carlewie to various entities including: a. SITA Australia Pty Ltd of part Lot 102 since July 2009; b. Beydoun Insurance Group Pty Ltd and One Cab Group Pty Ltd of part Lot 102 since April 2011; c. Yantang Pty Ltd of part Lot 102 since December 2005; and d. SIMS Group Ltd of part Lot 102 and Lot 102 (sic – Lot 101?) since November 2003. 14 The Properties were leased until such time as they could be redeveloped. Each long term lease contained clauses about lessor improvements to or changing the Properties so that the redevelopment or resale intentions of Carlewie could be achieved. 15 [DADI] also leased part Lot 102 for a short time since December 2014 (because of the compulsory acquisition of Lot 2). (See also CB fol 600.) Environmental licences 1. The site also had the benefit of two Environmental Protection Licences ("EPL"s – TB tabs 24 – 25): • No 10350 to DADI for waste storage and waste processing (ELP10350); and • No. 13432 to Sita Alexandria Pty Ltd for waste processing and waste storage (EPL13432). Available land 1. The Applicant described the various "yard" areas within the Site (subs, par 3) in these terms: "(a) an area of approximately 530sqm north of warehouse B fronting Campbell Road (Yard A); (b) a bitumen paved area of approximately 6,826sqm previously used for vehicle storage extending south-east of warehouse B to the Burrows Road and Campbell Road frontage (Yard B); (c) a concrete paved area of approximately 454sqm south-west of warehouse B (Yard C); and (d) an area of approximately 454sqm north-east of warehouse A (Yard D)." but the Court has been particularly concerned with the development potential claimed in respect, generally, of the two triangular areas of undeveloped land at each end of the Burrows Road frontage of Lot 102 in the above photograph. The SW parcel (south of building B1) is approximately 900sqm, and the NE parcel (south and east of buildings E, G and C) could be as much as 4500sqm. 1. As noted by Mr Hemmings in his opening (Tp6, LL24 – 27): ... it is an agreed position between all of the experts that the site is under developed and has capacity for more development. There is a disagreement as to the area of land to be considered capable of redevelopment. 1. Parts at least of the alleged developable parcels of land fronting Burrows Road (one also fronting Campbell Street) form parts of the curtilage of the listed heritage item above. The Applicant and its associates 1. Carlewie's in-house counsel (Christopher Biggs) deposed, on 1 March 2016 (CB Vol 1, fol 99, pars 7 – 9); 7 Carlewie is a company whose principal business is property investment for future subdivision or resale. Carlewie does not operate waste facilities, landfills or waste transfer stations. 8 Carlewie's two shareholders are Larissa and Ian Malouf who are shareholders in other companies associated with the [DADI] or Alexandria landfill business. 9 At that time Carlewie purchased the Properties, it was to facilitate the temporary occupation of it by [DADI] as a waste transfer station. When Lot 2 was purchased by ALF in 2002, plans were made to transition [DADI] out of the Properties. 1. On 1 March 2017 (CB Vol 1, fol 289, par 6), Biggs referred to Carlewie's: ... using the [acquired] Properties by itself or in conjunction with other properties within the industrial area of St Peters and Alexandria for the purpose of rezoning, redevelopment and/or resale at a profit. The properties owned by Carlewie and companies related to Carlewie for this use formed its 'land bank'. but (fol 293, par 49): ... not acquiring properties with the intention of leasing [them] for consistent, sustainable long term income. 1. Some Westpac material (CB fol 92) refers to the "Malouf Property Group" (see also CB fol 289 at [9], and p87 of TB tab 52). Such a "group" certainly owns several properties on the western side of Alexandra Canal (fol 296), and there is evidence of potential being identified, from the early 2000s, for those properties to be developed as part of a site/portfolio, possibly as large as 185,000m² (fol 298). 2. Biggs deposed on 1 March 2017 (CB fols 289 – 290, pars 9 – 11, and 14): 9. Carlewie is part of a group of businesses that Ian Malouf is a common shareholder and/or common director. The other businesses being Good River Properties (GRP) and Alexandria Landfill Pty Ltd (ALF). 10. Carlewie, GRP and ALF owned multiple properties within the industrial area of St Peters and Alexandria that were adjacent properties or within close proximity. Carlewie was therefore in an advantageous position to seek to amalgamate parcels where necessary, rezone and/or redevelop a considerable area of land within the St Peters and Alexandria industrial area by also utilising the land it owned and/or the land owned by GRP and ALF. 11. As a result of the acquisition of the properties owned by ALF and by GRP and then also the Properties owned by it, Carlewie lost its strategic advantage to amalgamate the Properties with the large site owned by ALF and other large parcels of land owned by GRP for rezoning and large scale development within the St Peters and Alexandria industrial area. ... 14. The properties owned by Carlewie that were held from time to time in its 'land bank' were: (a) 76-82 Burrows Road, Alexandria; (b) 1 Holland Street, Alexandria; and (c) Properties (33 Burrows Road, Alexandria). 1. The Respondent does not accept a "land bank" characterisation of Carlewie's activities. 2. One of both of Carlewie's shareholders, Ian and Larissa Malouf, also hold(s) shares in companies engaged in various aspects of the waste industry, such as DADI and ALF, but waste is not Carlewie's business. Other companies in which Ian Malouf (or his wife) is relevantly involved include one now known as Good River Properties Pty Ltd, and another called Boiling Pty Ltd (see Exhibit R2, and ASIC searches in Exhibit A13). Heritage issues 1. The "Rudders Bond Store" is listed in the LEP heritage schedule (at TB tab 16) as item no I1405. 2. It seems clear that any changes to be made to the warehouses would trigger the need to obtain DC. 3. The LEP deals with Heritage Conservation in cl 5.10 (TB tab 14), and subclause (10), headed "Conservation incentives", provides: The consent authority may grant consent to development for any purpose of a building that is a heritage item or of the land on which such a building is erected, or for any purpose on an Aboriginal place of heritage significance, even though development for that purpose would otherwise not be allowed by this Plan, if the consent authority is satisfied that: (a) the conservation of the heritage item or Aboriginal place of heritage significance is facilitated by the granting of consent, and (b) the proposed development is in accordance with a heritage management document that has been approved by the consent authority, and (c) the consent to the proposed development would require that all necessary conservation work identified in the heritage management document is carried out, and (d) the proposed development would not adversely affect the heritage significance of the heritage item, including its setting, or the heritage significance of the Aboriginal place of heritage significance, and (e) the proposed development would not have any significant adverse effect on the amenity of the surrounding area. 1. Carlewie's expert planning witness, Paul Mitchell, observed (fol 816, par 72) that cl 5.10(10) broadens the range of permissible uses on a site, or part of a site. The valuers disagree on the breadth of its possible impact. Contamination issues 1. The rich industrial history of the subject site naturally invites consideration of its possible contamination. 2. Before the Court, among the evidence on this subject, is a 1997 report (TB tab 50), and a supplementary 1998 report (tab 51), both by Douglas Partners. 3. The 1997 investigation focused on heavy metals and underground storage tanks ("USTs") and concluded (tab 50, pp15 – 16 of 16) that: Provided that the site will continue to be used for industrial purposes, no further remediation action is considered necessary with respect to the heavy metal contaminants. ... Assuming that the current sealed surfaces will remain in place, the onsite impact associated with these exceedances is considered insignificant and the site is considered suitable of the continued industrial use. If, however, a more sensitive type of development, such as residential development is proposed, it is recommended that the contaminated filling identified downgradient of the vehicle repair workshop is removed and that the USTs are decommissioned and removed. 1. The 1998 report dealt with USTs, and noted (tab 51, p2 of 2) that: In general the condition of the refuelling area appears to have deteriorated in comparison to the previous investigation conducted in February 1997. 1. The latest expert advice disagrees on the extent of contamination, and its remediation cost, but agrees that further investigation is required (CB fols 1235 – 1239). 2. The Applicant's contamination expert (Philip Mulvey) noted in his primary report (at CB Vol 3, fol 1124): 11. Based on the site history as reported in Douglas Partner (sic) (1997), the potential for contamination at the site included the following: • petroleum hydrocarbon contamination due to USTs and fuel infrastructure and from historical leaks and/or spills; • contamination due to the presence of impacted fill material which may have been used to fill and/or level the site; and • contamination from historical and/or current site activities such as those associated with industrial processing and manufacturing. 12. Based on my review of the history, contamination would be expected to occur as a result of filling (metals and PAHs), use of oil, grease and fuels (TPH), use of solvents in the car repairs (TCE) and migration of landfill gas and chlorinated solvents from the adjoining sites (manufacturing and landfills). Contamination from manufacturing on site by Ralph Simmons (sic) and Rudder Bond Store is unlikely given the pavement and the nature of activities undertaken. Fire issues 1. The extant Fire Safety Order (CB Vol 4, tab 39, fols 1451 – 1463) was issued on 19 March 2013, but has never been satisfied. 2. It is very comprehensive, and also cognisant of the complications caused by the heritage status of the affected property. E: The JTC Act 1. While the valuation/compensation regime of the JTC Act is well-known, it is appropriate to set out now the following key provisions. 54 Entitlement to just compensation (1) The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land. (2) If the compensation that is payable under this Part to a person from whom native title rights and interests in relation to land have been acquired does not amount to compensation on just terms within the meaning of the Commonwealth Native Title Act, the person concerned is entitled to such additional compensation as is necessary to ensure that the compensation is paid on that basis. 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division): (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) the disadvantage resulting from relocation, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. 56 Market value (1) In this Act: market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid): (a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and (b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and (c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law. (2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition. (3) If: (a) the land is used for a particular purpose and there is no general market for land used for that purpose, and (b) the owner genuinely proposes to continue after the acquisition to use other land for that purpose, the market value of the land is taken, for the purpose of paying compensation, to be the reasonable cost to the owner of equivalent reinstatement in some other location. That cost is to be reduced by any costs for which compensation is payable for loss attributable to disturbance and by any likely improvement in the owner's financial position because of the relocation. ... 59 Loss attributable to disturbance (1) 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 of a qualified valuer reasonably incurred by those persons in connection with the compulsory acquisition of the land (but not fees calculated by reference to the value, as assessed by the valuer, 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. (2) Subject to the regulations, a reference in this section to a qualified valuer is a reference to a person who: (a) has membership of the Australian Valuers Institute (other than associate or student membership), or (b) has membership of the Australian Property Institute (other than student or provisional membership), acquired in connection with his or her occupation as a valuer, or (c) has membership of the Royal Institution of Chartered Surveyors as a chartered valuer, or (d) is of a class prescribed by the regulations. ... 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. ... 66 Objection against amount of compensation offered (1) A person who has claimed compensation under this Part may, within 90 days after receiving a compensation notice, lodge with the Land and Environment Court an objection to the amount of compensation offered by the authority of the State. (2) If any such objection is duly lodged, the Land and Environment Court is to hear and dispose of the person's claim for compensation. (3) A person who does not lodge an objection within the 90-day period and who is taken to have accepted the offer of compensation under section 45 may nevertheless lodge an objection under this section, but the Land and Environment Court is not to hear and dispose of the person's claim for compensation unless satisfied that there is good cause for the person's failure to lodge the objection within that period. (4) If the Land and Environment Court decides that the amount of compensation payable (without the addition of interest) does not exceed by more than 10% the amount of compensation offered by the authority of the State, the Court may cancel or reduce the amount of interest that has accrued under this Act in respect of the compensation since the institution of the proceedings. F: Consideration of the Valuation Issues 1. The issues in dispute between the parties were accurately summarized by the Respondent's closing submissions (par 34 – emphasis added) in these terms: The issues in dispute between the parties fall into three broad categories: what might be described as "valuation" issues, what might be described as "deduction" issues, and "disturbance" issues. (a) The "valuation" issues concern: (i) The market rent to be applied to various portions of the Acquired Land; (ii) The area of the potential developable portions of the Acquired Land and the permissible nature of any such development, in particular: (A) the limits on future development (both as to area and character) likely to be imposed by reason of the heritage significance of the warehouses; and (B) the nature and extent of the risk posed by the indication of a proposed local road across the top of the north-eastern portion of the Acquired Land in the [DCP];and (iii) The rate per square metre to be applied to potential developable portions of the Acquired Land. (b) The "deduction" issues concern: (i) The cost of essential and long term conservation works on the Warehouses that would be likely to be imposed as a condition of [DC] granted for different proposed uses of the Acquired Land; (ii) The costs of complying with a fire safety order issued to the Applicant by [Council]; (iii) The cost associated with investigating underground storage tanks; (c) The "disturbance" issues concern: (i) Pre-acquisition fees incurred by a heritage consultant; (ii) Stamp duty on the possible future purchase of a replacement property; (iii) Mortgage stamp duty; and (iv) Conveyancing on a replacement property. 1. Importantly, the respective well-credentialed valuers retained by the parties – David Blackwell for the Applicant (CV in Exhibit A10), and David Lunney for the Respondent (CV at CB fols 629 – 630) agreed on the "piecemeal" approach to be taken to the valuation of the acquired land – to consider separately the warehouse areas, the yard areas, and the developable areas, and to "value by reference to rate per square metre of developable land, not rate per square metre of potential gross floor area" (Tp10, LL12 – 14). Highest and Best Use 1. The Respondent argues that the highest and best use of the acquired land is its continued rental to various industrial tenants. 2. The Applicant submits (Applicant's outline subs pars 5 to 7): 5. The Court should find that the highest and best use of the Site at the Acquisition Date – as determined by the hypothetical parties to a sale transaction- would involve: (1) the continued use of warehouses A and B, including incidental yard area of 2,442sqm, for commercial and industrial purposes; (2) the potential for subdivision and redevelopment of a north-east corner portion of the Site, involving an area of 4,495sqm; and (3) the potential for subdivision and redevelopment of a south-west corner of the Site, involving an area of 909sqm. The areas under (2) and (3) above are shown in Tender Bundle Tab [2] 6. The determination of market value would then involve a combination of the following: (1) the value for the use of warehouse A and B, and the incidental yard areas, assessed by capitalising the net market rent likely to be achievable for those areas of the Site; and (2) the value of the development potential achievable for the north-east and south-west portions, derived from comparable sales. 7. In carrying out that process, appropriate adjustments should be made in order to allow for Site specific matters, being risks and costs likely to be incurred by a hypothetical purchaser in relation to: (a) heritage conservation works [not more than $3,718,963]; (b) fire safety works [not more than $747,726]; (c) contamination [not more than $75,000]; and (d) obtaining development approvals [not more than $110,000]. 1. The APOC added a third element – an allowance for adjustment of land tax for the remaining part of the land tax year from the date of acquisition, totalling $73,735.00. 2. In its closing written submissions the Respondent noted that the Applicant's case, as formulated on 14 March 2017, was that the correct valuation approach was to identify an initial value by reference to comparable market evidence (both rental and sales), and then make deductions from that initial value to allow for the risk that certain costs may be incurred. 3. However, in the Applicant's opening written submissions, filed on 30 March 2017, as well as in oral opening on 3 April 2017, and in closing submissions, the Applicant propounded a new and different approach to valuation. 4. The Applicant's "new" case differed in fundamental respects from that pleaded in the amended points of claim in that : 1. it was now contended that the correct approach does not involve the adjustment of the value indicated by reference to comparable market evidence, but rather that "in carrying out [the] process" (Applicant's outline subs, par 7) of determining value indicated by comparable market evidence "appropriate adjustments should be made in order to allow for site specific matters, being risks and costs likely to be incurred" and reference was made to the Applicant's opening submissions at [7], [21] – [22]; and 2. secondly, it was further contended that those adjustments should not be made by deducting the amount of the costs likely to be incurred, but rather should be accommodated in some more abstract and non-specific way. 1. Further, the Respondent noted that despite the Applicant's having submitted, in opening, that adjustments "should" be made in relation to the specified matters (Applicant's closing subs par 20), it was put that, as a general proposition, adjustments only "might be appropriate", and further that there should be "no negative adjustment for contamination", and that some unspecified, but apparently "minor", adjustments should be made for other necessary capital expenditures (Applicant's closing subs pars 21 and 42 respectively). 2. The Respondent recorded that it did not consent to this departure from the Applicant's pleaded case. Approach to differing expert opinion evidence 1. Another matter in relation to adjustments or deductions raised by the Respondent at the outset, and said to involve a fundamental error of principle was the treatment by the Applicant of competing expert opinion evidence. 2. The Applicant accepts that parties to the hypothetical sale of the acquired land would have obtained expert opinion advice on particular matters affecting the property. However, the Applicant appears to submit that, where there is competing evidence as to the advice that a hypothetical purchaser would be given on a particular topic, then, provided that each competing expert's view cannot be said to be unreasonable, the correct approach is to assume that: 1. there are multiple hypothetical purchasers; 2. each of whom would retain only one of the competing experts; 3. with the result that the hypothetical purchaser notionally in receipt of the advice most favourable to a higher value would "beat" the other hypothetical purchaser by offering the most for the property, thus establishing the market price. 1. The Respondent submits that, in practical terms, the effect of the Applicant's position on this issue is that, on any question between experts called by an applicant and a respondent, provided that the undemanding hurdle of reasonableness is overcome, the Court is required to proceed as a matter of law on the basis of the position that is most favourable to the Applicant. 2. The Respondent submits that this approach is contrary to authority, and to principle, and would result in the judicial valuer adopting a legally impermissible approach if it were followed. This is because: 1. it ignores the fact that the function of expert evidence in valuation proceedings, as to the advice that would be given to a hypothetical purchaser, is to enable the Court to make a determination as to the content of the advice that would be given. Where there is a contest, the proper function of the Court is to determine what the content of the advice provided to the hypothetical purchaser would be. 2. to the extent that the Court determines that a range of possible advice could have been given to a hypothetical purchaser, the Court must assume that the hypothetical purchaser is fully informed. That is to say, the Court does not assume that the hypothetical purchaser would be ignorant of the advice that the Court has determined could reasonably have been given to it. The Court must find, in such circumstances, that the hypothetical purchaser would be aware of the range of reasonable views on the topic. 3. the Court does not imagine a hypothetical competition between different hypothetical purchasers, each having different advice, and thus each being prepared to offer a different amount. That would distort the single hypothetical transaction envisaged by s 56 of the JTC Act. 1. The Respondent says that the adoption of the approach set out in the Applicant's closing submissions filed in Court on 11 April 2017 (pars 32 – 35) would be revolutionary, including because the practical effect of it would be to render irrelevant any expert evidence other than the most advantageous for the Applicant's claim. 2. The Applicant stated that it relied on the decision of the Court of Appeal in Sydney Water Corporation v Caruso ("Caruso") (2009) 170 LGERA 298; [2009] NSWCA 391, for the stance it adopted on this issue, as well as Commissioner of Succession Duties (S.A.) v Executor Trustee and Agency Co. of South Australia Ltd (1947) 74 CLR 358, at 374 per Dixon J, for the proposition that "In a case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate". 3. In reply, the Respondent submitted that a proper understanding of Caruso demonstrates that the Applicant is in error (Respondent's closing subs, pars 21 – 22): 21. In Caruso, Allsop P explained the principle at [3]-[4]. Sackville AJA may be taken to have agreed with the President, since at [191] he indicates agreement on the relevant point (that the trial judge had erred in her reasons at [81], a matter with which Tobias JA did not agree. As Allsop P said, the Court must engage with and evaluate evidence and competing witnesses. The evidence is assessed "in the usual way" (at [4]). Of course, that means that if there is a reason to prefer one expert's view to that of another the Court can and should act on that assessment. It is "not helpful" to examine the general principle in the abstract (at [4]), no doubt because asserting a general principle erroneously substitutes an abstract proposition for the requisite consideration of the evidence in the particular case. 22. Neither the decision in Caruso, nor any other authority, requires or permits an approach by which the Court identifies all the evidence that is not unreasonable or obviously wrong, and then applies the evidence that is most favourable to the applicant. The applicant's submissions in this case essentially advocate the abandonment of the process of engaging with and assessing the evidence, once it can be said that a particular opinion is not unreasonable or not clearly wrong. 1. In our opinion, the Respondent is right to criticize the Applicant's approach to resolving differences between advice that the expert witnesses would have given to the hypothetical parties. The approach adopted by the Applicant in the materials and submissions to which it referred is clearly wrong. Comparable leases and sales 1. The Court attended a view of the acquired land and the area surrounding it with the parties' representatives and relevant expert witnesses. 2. The view included comparable sale and lease properties in the vicinity of the acquired land. Mr Lunney's industrial market evidence 1. Mr Lunney's industrial market evidence initially included the following transactions (Annexure 1 to his report in CB Vol 2, tab 14 – see fols 613 – 620): Sales: * 546 – 548 Gardeners Road, Alexandria (sold 23 December 2015 for $35 million). Yield: 6.86% net * 134 Euston Road, Alexandria (sold 28 August 2015 for $18,500,000). Yield: 6.4% net. * 2 – 8 Baker Street, Banksmeadow (sold 11 December 2014 for $20,340,000) sold 3 December 2015 for $24 million. Yield: 7.63% net passing yield. * 298 – 300 Coward Street, Mascot (sold 31 October 2014 for $22,500,000). Yield: 6.43% net passing yield. * 202 – 212 Euston Road Alexandria (sold 3 December 2015 for $24 million) site area 16,866m². Sold with the lease-back to vendor for three years. Zoned IN1 – General Industrial; FSR: 1.5:1; Height: 18m. Leases: * 116 Rothschild Avenue, Rosebery (three year lease commencing 1 February 2015) Commencing rent: $228,052 per annum net plus GST ($146/m² per annum). Outgoings 100% payable by lessee. Modern office/warehouse building. * 26 Cranbrook Road, Botany (five-year lease commencing 1 May 2015). Commencing rent: $149,575 per annum net plus GST. ($155/m² per annum net of building area. Outgoings 100% payable by lessee. Office and factory yards. High clear span warehouse. * 202 – 212 Euston Road Alexandria (see above). Lease-back: land listed on the contaminated sites register. As part of contract for sale, the vendors liable to remediate the site to a level necessary for an independent auditor to issue an unconditional site audit statement prior to termination of the lease. Lease commencement: 22 December 2015 for three years with two options for further terms of six months duration. Commencing rent was $1,550,000 per annum net plus GST; lessee to pay all outgoings. Reviews annually to CPI. Located in a general industrial area with adjoining industrial use. Acquired as a land sale at $1,428/m² as described above. Mr Lunney's Valuation Opinion 1. In his first report dated July 2016, Mr Lunney reviewed the current and most recent leases of the Acquired Land, and determined that the net income from rent generated by the subject property as at the date of acquisition was equivalent to $1,737,000 per annum. Expressed as a rate per square metre the passing rental income was the equivalent of $165/m² per annum. 2. Applying the capitalisation of net rental method of valuation, Mr Lunney determined that the value of the subject property at the date of acquisition was $22,965,000. 3. Based on the comparable transactions Mr Lunney's adopted capitalization rate was 7%. Mr Blackwell subsequently agreed with that figure, and the Court is content to accept it (CB Vol 2, fol 638). Mr Blackwell's industrial market evidence 1. Mr Blackwell's comparable sales and leasing evidence was as set out in various detailed tables in his report of 21 July 2016. We have examined this material closely, but will not reproduce it here (see Tables 8 to 12, CB Vol 2, tab 13, fols 546, and 548 to 551). 2. A more detailed schedule of sales appeared in his Appendices A and B (fols 554 – 567). 3. On the basis of his analysis, he applied a land value rate of $2,300/m² (pars 135 and 136 on fol 550) to the development land at the corner of the site. 4. Mr Blackwell's report dated 21 July 2016 (CB Vol 2, tab 13, from fol 508) concluded with three alternative scenarios (fols 539 – 544): 5. Scenario 1A was based on a capitalisation of market rent of warehouses A and B, and cleared yard area (pars 104 – 111, and fig 13, in fols 539 – 540), and produced an assessed value rounded up to $34 million (table 5 on fol 541). 6. Scenario 1B applied some variations to 1A (adopting Mitchell's areas and a reduced yard area – par 113, and fig 14 on fols 541 – 542), and produced an assessed value rounded down to $35.7 million (table 6 on fol 543). 7. The third scenario ("Scenario 2") posited the retention and use of building A only, and removal of some other buildings to create development area, and it produced an assessed value rounded down to $29.5 million (table 7 on fol 544). 8. Mr Blackwell's report commented (CB Vol 2, tab 13, fol 551, par 137): In applying a land value rate to the development land area under Scenario 2 (Lot 101) land being an area of 16,330 square metres, I have had primary regard to the sale of 202 – 212 Euston Road. 1. This property has been described earlier in connection with Mr Lunney's use of the sale and its lease-back to the vendor ([86]). Mr Blackwell calculated the sale price to be equivalent to $1,429/m² of site area, and made a downward adjustment for increase in value between the date of acquisition and the date of the sale, to derive a land value rate of $1,350/m² at the date of acquisition. 2. He states (in par 137) that "the sale shows the underlying value associated with a large area site zoned IN1 in close proximity to" the acquired land. 3. At an annual net rent (plus GST) of $1,550,000, and with a gross floor area of 5,440m², the rental rate is $285/m² GFA. Mr Blackwell notes, in Appendix B to his first report ("Sale 6"at CB Vol 2, tab 13, fol 567), that the Euston Road site is "5.16 times the size of the acquired land" being "a substantially larger scale site". Agreements Between the Valuers 1. We have already referred to an agreement reached by the valuers on the "cap rate" of 7% ([89] above, and fol 638 of the valuers' first joint report). 2. Several other agreements are noted in their joint report dated 15 August 2016 (CB Vol 2, tab 15, see fols 635 – 638), including: 1. The areas of the warehouse buildings (the Bond Store) are: warehouse A – 3,695m², and warehouse B (including B1) – 5,195m². 1. The actual passing rents (gross) payable by each of the four tenants before the date of acquisition. 2. As to assessment of outgoings, it was agreed to adopt the actual outgoings in the valuation calculations. 3. As to the question of uses other than those permissible in the IN-1 zone, it was agreed that, as land valuation experts, the valuers regard the subject property including its location, design and surrounding development as not well suited for the use of bulky goods retail, and they were not aware of any objective market evidence which would indicate that a lessee contemplating a non-conforming use would be prepared to pay a premium rental value for a non-conforming use. On that basis Mr Blackwell considered that there would be a significantly wider range of prospective lessees to which the Bond Store would appeal and the greater competition would result in rental value of $170/m² per annum net. 4. A market rental rate of $80/m² should be adopted for the "surplus hardstand (yard area) area". Matters Not Agreed 1. Mr Lunney considered that the rental rate of $170/m² adopted by Mr Blackwell is well in excess of the market rental value, and cannot be supported by reference to relevant market evidence, particularly when one considers the age and functional limitations of the building and the fact that only small areas of hardstand are provided within each of the tenancy areas. 2. Mr Lunney stated that the Bond Store was physically inferior to the majority of the industrial buildings in the immediate and general locality because: * the warehouses are of unusual design, and less suitable for warehousing and stacking of goods because of the arched columns; * there are limited hardstand and storage areas for the three tenancy areas within the Bond store building, when market evidence indicates that the $/m² per annum rent (on a building area basis) increases when additional hardstand, storage car parking and manoeuvring areas are provided; and * the building is dated and has no office facilities. 1. Mr Blackwell referred to cl 5.10(10) of the LEP, which provides that the Council may grant consent to development on land that is otherwise not permissible if the property is a listed heritage item and (amongst other things) the conservation of the heritage item is facilitated by the granting of consent. On this basis, Mr Blackwell considered that the warehouses would support rental values "at the upper end of the range", and determined that the rental rate to apply to the warehouse areas should be $170/m² per annum net. 2. The Court considers that there is simply no evidence to support Mr Blackwell's contention that cl 5.10(10) of the LEP, and/or the existence of EPLs, would justify a market rental rate of $170/m² per annum for the Bond Store tenancy areas, or a rental rate greater than the general industrial rate derived from comparable industrial leases for the land. In this regard, we accept the evidence of Mr Lunney as to the physical inferiority of the premises, and note Mr Blackwell's inability to point to any evidence of comparable leases, when he apparently searched to find such evidence. In the August joint report (tab 15), Mr Lunney also stated that he had not been able to identify "any market of lessees contemplating a non-conforming use which would be prepared to pay a higher rent than 'industrial' rental values". 3. During joint conferencing, which resulted in the August joint report, Mr Lunney formed the opinion that the passing rental income under the SITA lease was at or slightly in excess of the market rental value for those premises as at the date of acquisition. His opinion was that the market rental value of the SITA premises was $140/m² per annum net. He decided, however, to adopt the actual passing rental of $144/m² per annum for the purposes of his capitalisation of income calculations, by resolving any doubt in favour of the Applicant. 4. As to the premises occupied by DADI, Mr Lunney noted that these were larger than the SITA premises. He considered them to be superior to the SITA premises by reason of the additional hardstand, access and manoeuvring areas associated with those premises, which he calculated to have an area of 2,250m². He adopted 10% greater rent for the DADI premises than the SITA premises on a dollar/m² basis; that is, the rental of the DADI premises should be $154/m² per annum net. This exceeds the actual passing income which is payable pursuant to the DADI lease ($132/m²) by $22/m² per annum. On this basis, Mr Lunney considered that to bring to account the "profit rental" which will be enjoyed by DADI for the remaining 4.5 years of the initial lease term, he should deduct the present value of $22/m² over that 4.5 year period. This equates to a capital adjustment of $460,000. The capital adjustment for the rent of the DADI lease reflects the cost for a purchaser not being able to achieve market rent for the DADI lease until its expiry in 4.5 years from the date of acquisition. 5. The area leased to DADI had been leased for many years, until December 2014, to Sims Group Limited. The DADI lease commenced on 1 January 2015, for a fixed term ending on 31 December 2019, with two options for renewal each of five years. Compulsory acquisition of the site occurred on 3 July 2015. At that date the rent was $733,861.80 per annum gross. Mr Blackwell said that this was equivalent to $129.38/m² per annum of gross lettable area ("GLA"). The area leased consisted of the whole of Lot 101 (warehouse A), part of warehouse B, and yard areas at the SW end of warehouse B. He stated that the leased premises, including the yard, comprised 2,649m². As mentioned, Mr Lunney had calculated the DADI premises to have an area of 2250m². The difference, we assume, is the area of the yard – 399m². 6. Mr Blackwell does not consider that the DADI rent represented a market based rent, because the DADI lease was between related parties, contained a three month notice relocation clause, and could be extinguished on short notice. Mr Blackwell also asserted that the DADI lease was created as a direct result of the acquisition of the adjoining ALF site in December 2014. To the extent that Mr Blackwell suggests that the existence of the DADI lease, or any increase in the value of the land attributable to it, are facts that must be disregarded for the purposes of determining market value under s 56 of the Act, the Court disagrees. There is no evidence (including that of Mr Biggs) which establishes a causative nexus between the carrying out of the public purpose of the road or the proposal for it, on the one hand, and the DADI lease, including the terms of it, on the other. 7. The relocation clause in the lease is a common type of clause found in commercial leases. The evidence of Mr Biggs was that the Applicant is a distinct corporation, which had independent directors in late 2014 and 2015. There is no basis to find that Carlewie Pty Ltd and DADI, as trustee of the Trust of the same name, were other than independent entities. Mr Lunney was correct, in our view, to pay no regard to it (see CB Vol 2, tab 15, fol 641, par 41). Planning evidence related to the developable part of the acquired land 1. There is a dispute as to whether the Applicant is correct to argue that a developable area of approximately 4,500m² was available in the north eastern corner of the acquired land, or whether, as the Respondent contends, an area of 3,000m². 2. This issue will involve consideration of the impact of an amendment to the DCP, which provides for the establishment of a local road via the Council in the north eastern corner of the site. Also, the likely planning restrictions on development will need to be considered to decide whether any proposed development would represent the highest and best use of the land. 3. The expert evidence relevant to this question must begin with the heritage experts Mr Steven Davies (Applicant) and Mr David Logan (Respondent). The experts agreed: 1. The Acquired Land is of State Heritage Significance and may be of National Heritage Significance; 2. Any development of the Acquired Land would almost certainly require the preparation of a Heritage Impact Statement, or preferably a Conservation Management Plan; 3. The ancillary buildings E, F and G may be removed; 4. It would be appropriate that both of the Warehouse buildings be retained and reused; 5. The distinctive character of the Warehouse buildings should be retained; 6. Given the significance of the Warehouse, it is preferable that they remain legible and visible from the public domain; and 7. There is the potential for the residential cottage (building C) to have heritage significance, a matter that would not be finally determined until after the preparation of a Conservation Management Plan. 1. Any new development would be required to leave the warehouses "legible" from the public domain, to enable the public to appreciate their overall scale, size, and form. This would lead to requirements for any new development to be set back a sufficient distance from the wall of warehouse B, and to ensure the side wall of warehouse B was not concealed by a new building. This would raise a serious question as to whether any area as large as 4,595m² might be available. 2. Building C is located in the NE corner of the site. Mr Logan's view was that it should be retained, as it pre-dated the warehouse buildings, and was incorporated within the complex of the Symonds factory as the headquarters. 3. The town planning constraints, which would apply to the NE corner, include a height limit of 18m. The Respondent submits that such a height would be unlikely to be approved in light of the heritage significance of the Bond Store, as a height of 18m would not be sympathetic to the form of the building. 4. Even if building C could be demolished, any development would have to step down in scale to respond to the height of the eaves of the warehouse. The Respondent, therefore, submits that the full FSR applicable to the acquired land could not be achieved. 5. In our view, the overwhelming constraint on development flows from the heritage aspects of the warehouse buildings, and their status as State Heritage Significant and possibly National Heritage Significant. We consider that a hypothetical purchaser of the acquired land would not assume that the full FSR could be achieved, and so we do not accept Mr Mitchell's opinion that the Court could assume that 4,595m² would be available for development in the NE corner. 6. During the hearing, the local road proposal, as identified by the Council in its DCP, was brought to the town planning experts' attention, and they agreed that it provided another factor for consideration, as well as another area of risk, that had not previously been factored in to their consideration. 7. Clause 5.8.3.2 of DCP provides: (2) "New development is not to be located where a new street … is proposed unless it is of a temporary nature." 1. The area that would be lost to the road would potentially be 1,726m², counting both the area for the road itself, and an isolated triangle of land in the corner, according to Mr Lunney. 2. The Respondent submitted that there would be an element of risk in relation to the subdivision and development of the area required for the road. The Applicant, in its reply, refers to the "Land and Reservation acquisition map", which depicts in yellow the area of the site (and beyond) dubbed "classified road" (SP2), and submits that the Court should consider "for all purposes" that the site is zoned IN1 industrial under the LEP. The acceptance, by both experts and parties, of the current SP2 zone affecting the subject land, is to be disregarded under s 56(1)(a) of the JTC Act. It is true that s 56(1)(a) would require the Court to disregard the public purpose zoning of the land, to the extent that it is influenced by the public purpose of the Respondent in these proceedings. If, however, the reservation in the map in Exhibit A3 is depicting the location of a local road proposed by the Council, as the local roads authority, this separate layer of influence should be treated separately from that of the Respondent. 3. Nevertheless, it is argued that there is a direct inconsistency between the DCP and the LEP zoning, with the result that the DCP provision has no effect (s 74C(5) Environmental Planning and Assessment Act 1979 ("EPA Act")). It is said that where the LEP provides for development for industrial purposes by zoning, the DCP has reserved a local road being a "more onerous" requirement contrary to s 79C(3A). This is by no means clearly the ultimate outcome. Section 79C(3A) provides that if a DCP contains provisions that relate to the development that is the subject of a development application ("DA"), the consent authority: 1. If those provisions set standards with respect to an aspect of the development and the DA complies with those standards – is not to require more onerous standards with respect to that aspect of the development; 2. If those provision set standards with respect to an aspect of the development and the DA does not comply with those standards – is to be flexible in applying those provisions and allow reasonable alternative solutions that achieve the objects of those standards for dealing with that aspect of the development; and 3. May consider those provisions only in connection with the assessment of that DA. In this subsection "standard" includes performance criteria. 1. This complication became the subject of supplementary submissions. 2. The Respondent submits that, although it is accurate that the SP2 zoning is to be disregarded and that the underlying zoning is IN1, this industrial land remains subject to all valid planning controls not caused by, or connected with, the public purpose of the acquisition. It is not inconsistent with the LEP zoning of land as industrial for the Council to publish a policy (e.g. DCP controls) identifying the proposed local road network in the industrial area, and setting out how the Council proposes to allow development and use of the land as industrial land. 3. The Respondent refutes the suggestion that s 79C(3A), and/or 74C(5), of the EPA Act requires the disregarding of DCP provisions, and maps showing the local road, involves a misreading of those provisions. The fact that land is zoned for industrial use does not create a right to develop or use every part of that land regardless of the content of any DCP. 4. Faced with the potential loss of 1726m² of land, by reason of the Council's local road proposal, a prudent hypothetical purchaser would assume that the available area for development could be significantly less than 3,000m². After making allowance for appropriate setbacks to account for the heritage constraints (e.g. that the warehouses must remain legible and visible from the public domain) the available area could be considerably less than 3,000m². Ms Bindon's suggestion of an available area of 3,000m² was qualified by the requirement of the preparation of a Conservation Management Plan for the whole site if a development proposal for the NE and/or SW area(s) of the site was put forward. This is because of the provisions of cl 7.19(a) of the LEP, which provides that DC must not be granted to development involving the demolition of a building, unless the consent authority is satisfied that: 1. any land affected by the demolition will be comprehensively redeveloped under the DC (if granted), or under an existing DC relating to the site, and 2. adequate measures will be taken to assist in mitigating any adverse visual impacts that may arise as a result of the demolition with regard to the streetscape and any special character area. The town planning experts agreed that DC cannot be granted for an application for demolition of a building alone, nor for demolition and subdivision together, where the application does not include the comprehensive redevelopment of the land. 1. The Respondent submits that any proposed subdivision and redevelopment of the acquired land would have to address the site as a whole and not simply the two triangular areas to the NE and SW of the site. The Applicant submitted that development of those portions is achievable, and likely, subject to the undertaking of work to conserve the heritage item. 2. In addition, the Applicant asserted that there was an option of carrying out uses on the areas in question as exempt development. This was in reliance on State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 ("the Codes SEPP"), cl 2.20A (Specified Development). This deals with a change of use of land from an existing use of particular types as listed in Column 1 of the table to the clause. Column 2 specifies "new uses". The uses in each column are grouped in numbered categories, and "exempt development" permits a change of use of one of the uses specified in Column 1 to a use specified in the corresponding category in Column 2. 3. The Respondent's submission on this issue is: 1. that the planners have agreed that "all… changes of use require [DC]"; 2. a necessary premise of the Applicant's argument is that the existing uses of the acquired land as at the date of acquisition must have fallen into one of the categories of use in Column 1 of cl 2.20A of the Codes SEPP. The presently approved uses fell within the definitions of "resource recovery facility", "vehicle body repair shop", "vehicle repair station", "transport depot" in the LEP, and were thus not uses identified in Column 1; 3. The warehouse is a class 8 building under (what used to be called) the BCA (see [14] above), and, by reason of the non-compliance with the fire order (discussed below – from [139]), did not comply with cl 1.16(2) of the Codes SEPP; 1. The Court accepts the joint opinion of the planners that all changes of use for the warehouse would trigger the requirement for a DA. 2. As to applications for DC generally, the town planners noted that (see generally their second joint report at CB Vol 3, tab 22, fols 881 – 882): 1. "It is unlikely any individual stage of development involving demolition would be approved unless accompanied by appropriate redevelopment"; 2. "All works (except minor maintenance works) … require [DC]"; 3. "Consent cannot be granted for an application for demolition of a building alone nor for demolition and subdivision together, where that application does not include comprehensive development of the land"; 4. "Subdivision alone… would be unlikely to be approved"; and 5. "Any incomplete or inadequate application would be unlikely to be approved and would most likely be refused". 1. Moreover, Ms Bindon pointed out that for development on the site of a listed heritage item, the more significant the item, the greater the risk of either DC being refused or more onerous conditions being attached. She was of the opinion that it would be most likely that the Council would require the preparation of a heritage management document or a Conservation Management Plan before granting any approval. Mr Mitchell did not dispute this evidence. Heritage Conservation Works Essential Works 1. The Respondent outlined the agreement reached by the valuers regarding the cost of works involved in carrying out the required "Essential Heritage Conservation Works" (Respondent's closing subs, at 90 – 92): 90. … the planners agree that "all works (except minor maintenance works) and changes of use require development consent". The heritage architects agree that approval for an industrial use would only trigger "Essential Conservation Works". Such an approval would be needed in order to rent any part of the Acquired Land for an industrial use, or to develop other portions of the Acquired Land within the bounds of the existing industrial zoning restrictions. 91. It is not necessary for the Court to resolve the differences between the scopes of work identified by Ms Hill and Mr Staas that would be involved in performing "Essential Conservation Works". That is because the quantity surveyors have assessed each such scope as involving nearly identical expenditure: (a) Mr Lawson assessed Ms Hill's scope as costing $2,991,939, and Mr Staas' scope as costing $2,846,060; (b) Mr Dakhoul assessed Ms Hill's scope as costing $2,579,721, and Mr Staas' scope as costing $2,446,590. 92. Given the uncertainties involved, the valuers have taken the pragmatic approach of adopting a mid-point of $2,700,000. That amount is then deducted in the valuations found in Mr Blackwell's Annexure 1B and Mr Lunney's Scenario 1 in Annexure 2. 1. The Court is prepared to accept the outcome agreed on by the planners, as well as the valuers, by adopting the "mid-point" figure of $2.7M. Long Term Works 1. The Respondent identified some error on behalf of both of the quantity surveyors (Respondent's closing subs, at 94 – 110): 94. The heritage architects agree that, where a development application seeks to rely upon clause 5.10(10), the expectation from the consent authority is that there would be a material benefit to the heritage item. Thus, if a hypothetical purchaser sought to rely upon clause 5.10(10), "Long Term Conservation Works" would be required 95. This scenario is reflected in Mr Blackwell's Annexure 1A and Mr Lunney's Scenarios 2 and 3 in Annexure 2 of the Valuation Experts' Second Joint Report dated 2 March 2017. 96. Although, initially, there had appeared to be a significant difference between the costs involved in the respective scopes of Ms Hill's and Mr Staas' Long Term Conservation works, it became clear in cross-examination that that was not the case. That is because the quantity surveyors had not appreciated how the joint report of the heritage architects should be read in order to ascertain the scope of works of each of Ms Hill and Mr Staas. In particular, the quantity surveyors had not included in the scope of works for an individual heritage architect an item identified by the other heritage architect (even if the two had agreed on that item). 97. However, as Mr Staas confirmed: OWENS: What I want to be clear about is, is what you both did, you indicated which items on each other's schedules you agreed with or disagreed with, but you didn't then incorporate the ones from the other person's schedule onto yours, notwithstanding that you'd agreed with it. Is that how we should read the report? WITNESS STAAS: Generally, yes. 98. As a result, it was apparent that: (a) The costing of Ms Hill's scope had not included the "desirable" work concerning "external paving" identified by Mr Staas; (b) The costing of Mr Staas' scope had not included Ms Hill's "desirable" work concerning: (i) the material with which the roof should be replaced; (ii) removing the topping of the slab; and (iii) repair work on arches. 99. Once those agreed matters were reflected in the scopes of both heritage architects, the differences between them largely fell away… … 108. The Applicant also appears to contend that the quantity surveyors have "double counted" some items (or, more accurately, costed some work that it contends would not be required if both Essential and Long Term works were performed. The extent of any such "double counting" will, as explained by Ms Hill, depend on the precise way in which a property owner proceeded with a redevelopment of the Acquired Land. That is to say, Ms Hill pointed out that it is entirely conceivable that a hypothetical purchaser would complete the "Essential Conservation Works" initially as a condition of consent for what Ms Hill terms a "standard DA" and then later complete the "Long Term Conservation Works" as a condition of consent for a development application seeking to rely upon clause 5.10 of the LEP. In those circumstances, there would be very little double counting. 109. The Respondent has asked Mr Lawson to calculate the amount of double counting in (a) a scenario where there is a staged development process and (b) a scenario where there is a single process. Further, taking into account all of the adjustments described above, and the related adjustments to project costs, the end result may be summarised as follows: (a) In a staged process: (i) Mr Lawson's costing of Ms Hill's scope would decrease to approximately $6.3 million, and his costing of Mr Staas' scope would increase to $6 million; (ii) Mr Dakhoul's costing of Ms Hill's scope would decrease to $5.7 million, and his costing of Mr Staas' scope would increase to $5.5 million. (b) In a single process: (i) Mr Lawson's costing of Ms Hill's scope would decrease to approximately $6 million, and his costing of Mr Staas' scope would increase to $5.25 million; (ii) Mr Dakhoul's costing of Ms Hill's scope would decrease to approximately $5.3 million, and his costing of Mr Stass' scope would increase to $4.75 million. 110. The valuers agree that, when faced with the competing opinions of Ms Hill and Mr Staas, a hypothetical purchaser would "almost certainly" the mid-point (sic) of costs based on Jennifer Hill's scope. This is consistent with the Court's decisions in Maidment v Roads and Traffic Authority of NSW [2006] NSWLEC 606, Coundrelis v Roads and Traffic Authority of NSW [2008] NSWLEC 72 and McDonald v Roads and Traffic Authority of NSW [2009] NSWLEC 105. It follows that the Court should deduct $6 million. 1. Again, we are satisfied that adopting the mid-point of the quantity surveyors' costs for the competing opinions of Ms Hill and Mr Staas is the appropriate method of valuation of the heritage scope of work. Costs of complying with the Fire Safety Order 1. Fire safety order SO79817/GS was issued to the Applicant by the Council in relation to the acquired land on 19 March 2013, under s 121B of the EPA Act (CB Vol 4, tab 39, fols 1451 – 1463). At the date of acquisition, the order had not been complied with, and the time limit for appealing, in order to achieve a change in the order, had expired. 2. Under s 121B, Order 6 is an order to do or refrain from doing such things as are specified in the order, so as to ensure or promote adequate fire safety or fire safety awareness. 3. The circumstances in which such an order may, relevantly, be issued are: (a) provisions for fire safety or fire safety awareness are not adequate to prevent fire, suppress fire, or prevent the spread of fire, or ensure or promote the safety of persons in the event of fire; and (b) maintenance or use of the premises constitutes a significant fire hazard. 4. The order in this case required certain works to be undertaken in stages, some within 14 days, some 120 days, some 180 days, and with the last stage of works to be completed within 365 days of the order, that is to say by 19 March 2014. 5. The valuers accept that the cost of complying with the order should be deducted from the amount that a hypothetical purchaser would be willing to pay for the acquired land. 6. However, there is an issue between the parties as to the scope of work required to comply with two elements of the order – namely, items 1.01 and 1.09. 7. Item 1.01 (fol 1455) required additional exits to be provided, to comply with the maximum exit travel distances and distance between alternative exits in accordance with section D of the BCA, and Item 1.09 (fol 1456) required provision of "suitable means of smoke exhausting/venting ... in accordance with the requirements for large isolated buildings within Table 2.2a of the BCA". 8. The BCA operates by specifying "performance requirements". These can be satisfied in one of two ways: either by showing that compliance with a "deemed to satisfy" provision of the BCA, or by an "alternative solution" that meets the functional aspects of the performance requirement. The majority of the order in this case required compliance with various "deemed-to-satisfy" provisions of the BCA. 9. The Applicant's fire expert, Mr Gardner, contended that item 1.01 in fact required only that the relevant performance requirement be met, with the result that it was open to the owner of the acquired land to choose either a deemed-to-satisfy solution or an alternative solution. 10. It appeared that there was no "performance requirement", in section D of the BCA, which contains a statement of a "maximum exit travel distance", or a "distance between alternative exits". Mr Gardner relied on DP4 of the BCA which provided (Respondent's subs par 117): "Exits must be provided from a building to allow occupant to evacuate safely with their number, location and dimensions being appropriate to [various factors]." 1. The Respondent submitted that DP4 did not specify any travel distance, or distance between exits, or a maximum distance. The Respondent's fire expert, Mr Marshall, stated that the only reference to maximum exit travel distances and distances between alternative exits in section D of the BCA were contained in the "deemed to satisfy" provisions. This meant that the order, on its proper construction, required compliance with the deemed-to-satisfy requirements concerning travel distances and distances between exits. 2. We do not accept that the provision relied on by Mr Gardner can be regarded as stipulating a maximum exit travel distance and a distance between alternative exits. 3. In respect of Item 1.09, table E2.2a is clearly directed to a "deemed-to-satisfy" provision. The Applicant pointed out that table E2.2a of the BCA does not apply in NSW. However, we agree with the Respondent's submission that the Council referred to it, in the order, by way of convenient shorthand, to indicate its requirements. 4. It being too late to appeal the order, the only avenue for having it changed is to have Council agree to a change, and signify that agreement in writing, and there is no evidence that there is some satisfactory basis for assessing the chance of persuading the Council to change the requirements of its order, or accept a hypothetical engineered solution. Mr Marshall also opined that the alternative solution proposed by Mr Gardner would not have been appropriate, given the limited vehicular access to the acquired land. 5. Mr Gardner provided no costing of the works necessary to comply with the order, if it required compliance with the "deemed to satisfy" provisions of the BCA, but the Respondent contended that the cost of compliance would be approximately $1.6m (on the advice of Marshall, Lawson and Lunney). Mr Gardner assumed that the hypothetical purchaser would manage such a project in-house, but it was put to him that the costs would still be incurred, and accounted for, by a purchaser. 6. The Respondent submitted that there was no proper basis for limiting the pool of prospective purchasers for this property to those who would have the internal capacity to manage such a significant project. 7. In terms of the costing of the works at $1.6M, the Respondent submitted that allowances for preliminaries, project management costs, and "contingencies", are standard practice for quantity surveyors estimating the total cost of a project, and that the magnitude of the fire safety works in this case, and the lack of a detailed design, meant that the hypothetical purchaser would allow a 20% contingency for cost and risk. Mr Gardner made no allowance for contingencies. 8. The Respondent submits that, if the Court found that a hypothetical purchaser would consider that an alternative fire engineering solution, to comply with the order, would be permitted by the Council, then the Lawson/Marshall estimate of $1,002,005.00 should be preferred over Mr Gardner's estimate of $799,868.00. Contamination Costs 1. The issue of contamination of the subject land was highly contested between the parties. 2. The contamination experts agreed that (Applicant subs, par 22): ● The Site is "not impacted by gross contamination and poses a low risk of harm to human health and/or surrounding sensitive receptors"; ● Groundwater analysis "did not identify the presence of any NAPL or other indication of significant leaks/spills from onsite fuel storage" ● There is "little contamination liability associated with on-going commercial use" of the Site. 1. The Applicant submits that no adjustment is necessary to accommodate what, it contends, is a positive attribute of the site (Applicant Reply subs, par 8). It relies on the evidence of Mr Foxe, who stated that all underground storage tanks (UST) were removed from the Site in 1999, while he was still working for the Applicant. The Applicant submits that in addition to the items agreed upon by the experts ([158]) Foxe's evidence should be accepted, and that a willing but not anxious buyer would be "comforted" by Mr Foxe's information (Applicant subs, par 22). 2. Mr Foxe conceded, however (Tp203, LL20 – 35), that he was not physically present when the USTs were removed. 3. The Respondent usefully laid out a summary of the contamination evidence, along with their response to the Applicant's submissions on this matter (Respondent closing subs, par 129-138): 129. The valuers agree that a hypothetical purchaser would make a deduction from the amount that they would otherwise be willing to pay for the land, by reason of costs that would be incurred in dealing with contamination on the site. 130. In their first joint report, the contamination experts agreed that $250,000 should be allowed for removing 5 underground storage tanks, resolving uncertainty in relation to the presence of other underground storage tanks, and related works. Furthermore Mr Clay, for the Respondent, considered that an additional $243,500 should be allowed for additional works that may be required (whereas Mr Mulvey considers that only an additional $20,000 should be allowed on this account). 131. Subsequent to the preparation of the first joint report, the Applicant obtained evidence from Mr Foxe, as a result of which it now asserts that an adjustment of not more than $75,000 should be made to the market value of the Acquired Land in relation to contamination. 132. The Respondent submits that the evidence of Mr Foxe is not definitive and would not give a hypothetical purchaser any certainty that the underground storage tanks identified by Mr Clay as possibly remaining on the Acquired Land had been appropriately decommissioned and removed as: (a) The photographs relied upon by Mr Foxe were not taken by him but were given to him by the Applicant's solicitors; (b) Mr Foxe could not recall seeing USTs being removed, or seeing USTs on the site after they had been removed; (c) Mr Foxe retired in December 2004 and hadn't given the Acquired Land must (sic) thought since then; and (d) Mr Foxe indicated that USTs 1, 2 and 18 had not been removed. 133. In addition, the Respondent submits that it is likely that a hypothetical purchaser would allow additional costs for the investigation, removal and remediation of USTs, as it appears that, if they were removed, they may have been removed by employees of [DADI] who are not appropriately qualified professionals. 134. Mr Mulvey considered that the evidence of Mr Foxe proved that a number of tanks had been removed as a result of concreting work completed in the north eastern portion of the Acquired Land. However, that was appropriately doubted by Mr Clay who suggested that there is nothing to prove that the USTs had been removed and if they had been removed, it would be likely that photographs would have been taken to document the removal. Given the widespread practice of development over USTs, most notably at service stations, the evidence of Mr Clay should be preferred. 135. The Court heard evidence from the contamination experts that there are physical signs of USTs remaining on the acquired land at the date of acquisition, including: (a) Photograph 32 from Mr Clay's statement of evidence (exhibit R4) which shows a UST dipping point which Mr Clay dipped and found approximately 1,000 litres of diesel; (b) Photograph 38 (CB 1230) which shows 4 riser pipes from USTs to vent fumes, suggesting at least 4 USTs, which Mr Mulvey considers are most likely tanks 1 to 4 identified on Mr Clay's figure 6 (CB 1200) and Mr Clay considers are most likely USTs 5 to 8; and (c) Photograph 41 (CB 1230) which shows a further 4 riser pipes that Mr Clay would be 85% to 90% certain were indicative of USTs, most likely USTs 1 to 4. 136. That evidence had not been taken into account by Mr Mulvey when preparing his written evidence. Mr Mulvey confirmed that he would advise caution when reviewing dangerous goods records about the number of USTs remaining on the acquired land. 137. Overall, Mr Mulvey's evidence that there was absolutely no risk or doubt that USTs 5, 6, 7, 8, 9, 10, 11, 12, 13, 16 and 17 had been removed cannot stand alongside the lack of evidence that those USTs had actually been removed, and the evidence of Mr Clay that USTs 5 to 8 most likely remained in situ. 138. A hypothetical purchaser, when faced with this evidence, would be guided by the agreed position of the contamination experts in their first joint report that $250,000 should be allowed for "resolving uncertainty of USTs". That is especially so, when it is recalled that that cost does not take into account the additional $243,500 that Mr Clay says would appropriately be reserved for dealing with possible other USTs. 1. Mr Clay, the contamination expert for the Respondent, disputed Mr Foxe's evidence, and provided evidence that he had, in fact, "dipped" one UST at the site when carrying out his investigations, and could smell diesel (Tp162, LL28 – 33). Mr Clay concluded that at least one UST was still present on the site. 2. Given the number of UST's which were reported to exist on the site at some time, and the rather adamant evidence provided by Mr Clay, we are not convinced by the Applicant's submissions that a hypothetical purchaser would be "comforted" by Mr Foxe's evidence, at least not to the extent of "accepting" that no USTs were present on the site at the date of acquisition. 3. The Applicant seeks to rely on the Queensland decision in Caltex Oil (Australia) Pty Ltd v Chief Executive, Department of Lands (1996) 16 QLCR 435 at [222] to submit that the significance of contamination of a site is considered only when a change in use to one which conflicts with an existing use is contemplated, and is most likely limited to a change to residential use (Applicant subs, par 21). 4. We reject any such contention. As Mr Clay noted (CB Vol 3 tab 31, fol 1188, par 134), NSW has its own statutory requirements to ensure USTs are removed if they are no longer being used. If they cannot be removed, they must be "appropriately decommissioned". 5. Mr Clay's evidence satisfies the Court that there is at least one non-decommissioned UST on the subject land. There remains some risk that there are others. 6. We prefer the Respondent's submission that a hypothetical purchaser would consider this risk to be real, and would deduct an amount from the price it would otherwise be willing to pay for the land, on account of the need to provide for resolution of such uncertainty. 7. We would allow $250,000 in this regard. Inclusion of land tax in the market value of the acquired land 1. Despite intransigent opposition by RMS to the Applicant's claim for land tax, the Applicant's final reply submissions filed 21 April 2017 persisted (pars 40ff) with the claim, to be met by continued strenuous opposition form RMS (supplementary written submission filed 4 May 2017. 2. There is no dispute about the underlying facts. The Applicant paid land tax on the subject land, referable to the liability which arose as at the effective date for the striking of the tax at midnight on the 31 December 2014, that is to say, prior to the date of compulsory acquisition of the land on the 6 July 2015. The tax was apparently paid by instalments, and the amounts actually paid in February and April 2015 totalled $73,735.00 3. Reliance is placed by the Applicant on the terms of the standard contract for sale, which was employed in several of the sales of allegedly comparable lands in this case. Clause 16.6 of the standard contract (Exhibit A9) is specifically identified: 16.6 If the purchaser serves a land tax certificate showing a charge on any of the land, on completion the vendor must give the purchaser a land tax certificate showing the charge is no longer effective against the land. 1. The Applicant argues (Applicant's Reply subs, pars 42 to 44): 42. There are multiple examples of the Standard Contract for the Sale of Land before the Court. Exhibit A9, to take an example, shows Land Tax being something capable of "adjustment" between the parties. However, clause 16.6 of the Standard Contract ensures that property is generally transferred free of any charge effective against the land arising from land tax. Accordingly, the Court can accept it as general practice that land tax will have been paid in advance by a vendor and recovered by way of an adjustment carried out at settlement and therefore either an express or implied component of the "amount that would have been paid for the land if it had been sold". 43. Accordingly, it is giving effect to the statutory direction in s 56(1) of the Just Terms Act to have the bargain encompass ordinary transactional processes such as an adjustment for land tax consistent with the standard contract. 44. If the Court were not to make that adjustment, this would result in a windfall gain to the State (or unjust enrichment at the expense of the taxpayer) and result in an "amount" that is not consistent with s 56(1) because it is not consistent with market practice. In addition, it would mean that the Applicant has not obtained market value for its land which would be contrary to the objects, particularly s 3(1)(a), of the Just Terms Act. 1. The Respondent contends that the Applicant is not entitled to compensation for the amount of land tax paid ($73,735.00), and its reasons are set out in the Respondent's final supplementary submission. Two main reasons are advanced for rejection of the claim (par 2): (a) As a matter of principle, compensation for the market value of the land is to be determined by reference to the purchase price of a notional sale of the land, not the purchase prices as subsequently adjusted by the parties to reflect whatever agreement they might come to about liability for land tax, council rates, utility charges and other comparable "adjustments"; (b) In any event it is not open on the evidence in this case to find that the prospective purchaser would have been willing to pay to the vendor as part of the market value of the land an "adjustment" amount of $73,735 as a notional repayment to the vendor of its previous payments of land tax. 1. The Respondent goes on to say (pars 3 to 7): 3. The market value of land under s 56 of the Just Terms Act is the purchase price that would be agreed between willing but not anxious hypothetical parties to a sale transaction on the date of acquisition. Market value does not turn on the particular position of the actual owner of the land, in that it does not turn on decisions made by the actual owner about payment of rates, taxes, utilities and other services in respect of the land. Whether or not the parties to a contract for the sale of land decide that the amount agreed between them (as the purchase price) should be adjusted for matters of that sort is a question for each individual transaction – what is clear, however, is that any such adjustment is to an adjustment to the purchase price for the land and it is the purchase price that shows the market value of the land. 4. The applicant has not referred to any decided case in which compensation for market value has been held to include as a component an amount that reflects repayment to the applicant of an amount of land tax previously paid by the applicant in respect of the land. The absence of such authority supports the contention made above that as a matter of principle the amount claimed is not encompassed within the market value of the land. 5. The respondent acknowledges that a vendor's previous payments of amounts as land tax may be one of many possible "settlement adjustments" that might be made upon completion under a contract for the sale of land. As the applicant says at ARS [42], Ex A9 is an "example" that "shows Land Tax being something capable of "adjustment" between the parties" (emphasis added). As clause 14.1 in Ex A9 notes, adjustments may be made for "rates, water, sewerage and drainage service and usage charges, land tax and all other periodic outgoings". So far as land tax is concerned, the effect of clause 14.4.1 of the standard contract is that the parties must adjust for land tax "only if land tax has been paid ... and this contract says that land tax is adjustable". It is also necessary to note that the provisions of the standard contract may be deleted or modified by special conditions and Ex A9 provides an example by its deletion in special condition 32(n) of standard clause 14.4.2. 6. Further to clause 14.4.1, there is on the first page of the standard contract for sale of land (and Ex A9 and Ex A8 are examples) a provision for the parties to indicate "yes" or "no" to the proposition "Land tax is adjustable". Accordingly, there is no default position under the standard contract for sale – in each case it is a matter for the parties to the transaction to nominate whether or not land tax will be an adjustment to the purchase price. 7. In this case, neither the evidence, nor the way the case was run, permit the conclusion that the market value of the land would have included an additional amount of $73,735 (or any other additional amount) on account of repayment of land tax payments previously made by the applicant, since: (a) There is no expert valuation evidence to that effect from either valuer; (b) The proposition was not put to either valuer; (c) There is no evidence that the price achieved for the comparable sales was influenced at all by the consideration of payment of land tax and/or the time of the tax year at which the transactions occurred; (d) There is no default position under the standard contract for sale of land, since in each case the parties must agree "yes" or "no" to the proposition that land tax is adjustable under the contract; (e) There is no evidence supporting the proposition that the parties to the hypothetical transaction would have agreed that the purchaser would be liable to pay an additional adjusted amount in respect of land tax; and (f) In particular, there is no evidence as to the general practice (if there is one) in sales of substantial industrial land, so far as payment of land tax is concerned. There is no evidence supporting the applicant's submission that "the players in the market place are just [scil adjust] the land tax" (T506.35). 1. The Applicant eschewed any reliance on any specific head of compensation, including s 59(1)(f) of the JTC Act. The definition of "market value" in s 56(1) provides that "market value" of any 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. 2. We agree with the Respondent that the adjustment of the purchase price for land tax is something negotiated between an actual vendor and the actual purchaser of a property, and that the purchase price indicates the market value of the land, upon which the tax would be levied. 3. Had there been any evidence that it is a consistent practice in the market, with respect to the sale of industrial property, that land tax is adjusted in a particular way, there might have been some basis for the Applicant's claim. 4. However, as the evidence stands, the Court must conclude that the Applicant has not made out a case for the inclusion of the amount of $73,735.00 in its claim for market value under s 55(a) of the JTC Act. Value of the NE and SW yard areas 1. Having determined that the maximum redevelopment area in the NE corner of the site would likely be less than 3000m², and noting that it was ultimately common ground that the area for development in the SW corner would be not more than 900m², it is necessary to determine whether development of those areas would be viable, and, if so, to find the value rate psm for that land. 2. As discussed earlier ([128](b)), the town planning experts agreed that a DC cannot be granted for demolition of a building alone, nor for demolition and subdivision together, where that application does not include comprehensive redevelopment of the land, as required by cl 7.19(a) of the LEP. 3. Thus, any proposed subdivision and redevelopment of the land would have to address the site as a whole. 4. The Respondent submits that the "exempt development" provisions of the Codes SEPP would not have applied to the land, as at the date of acquisition in July 2015. The Applicant claimed that changes from existing uses as at the date of acquisition from a waste transfer, recycling and resource recovery facility, panel beating, spray painting and mechanical repairs, and a taxi base to other prescribed uses, were "exempt development", under cl 2.20A of the Codes SEPP. 5. Changes to those existing uses in the NE and SW areas would not have fallen within cl 2.20A of the Codes SEPP as at the date of acquisition. Further, the reference to cl 5A.2 (alterations or additions to an existing building or construction of a new building), with respect to industrial or warehouse purposes, is heavily restricted by the standards relating to industrial buildings, setbacks, size limitations, and the like. 6. There was no comprehensive analysis of the operation of these provisions to demonstrate that any such development could take place without DC. 7. Mr Lunney pointed out that the SW area of approximately 900m² was very small, and an irregular, triangular shape, which would significantly impact the potential to undertake built form development. Also, at the date of acquisition, that area was subject to a five year lease (with a five year option) to DADI. He considered it unlikely that the area could be viably subdivided and developed. The Respondent submits that the costs involved in obtaining consent for any such development would probably outweigh the potential reward. Accordingly, development would not represent the highest and best use of the acquired land, and Mr Lunney noted (CB Vol 2, fol 673) that his agreement with Mr Blackwell, on the rate of $80/m2 ground rent for surplus NE and SW land, was in excess of the gross rental value for a similar area, which was leased by Beydoun (see [41] – [42] above). 8. In terms of the value rate to be applied to the NE and SW areas (assuming development of the latter to be viable), Mr Blackwell deduced a rate of $2,300.00/m² for the NE area, and $1,955.00/m² for the SW area (Annexure 1A, at CB Vol 2, fol 671). These rates were derived from his analysis of the sales in table 11 to his initial report (to which we referred at [90]). The five sales in each of his tables are the same, being various properties in Burrows Road, Alexandria. The sizes of these properties range from 923m² (No. 71), 1678m² (No. 90), 3914m² (No. 30), 4180m² (No. 28) and 7282m² (Nos. 84-88). These were each adjusted for size by Mr Blackwell, with adjustments ranging from minus 10% to plus 15%. The whole of the area of lots 101 and 102, comprising the acquired land, is over 20,000m². Mr Blackwell's approach was to treat the NE and SW areas as separate lots available for subdivision and development, in accordance with the development potential of the alleged comparable sales. He made no allowance for the cost and risk of subdivision of the acquired land, nor for the works that would be required by the Council with respect to heritage conservation, contamination and the outstanding fire safety order. 9. This led the Respondent to submit that a purchaser would not pay a "potential realisation" value for the two areas, but rather an "as is" value, which reflects the potential to realise value from the surplus areas, rather than assuming that the potential has already been realised. 10. The basic principle of compensation law is that "the land must be valued at the relevant date in its existing condition with all its potentialities as potentialities": Road and Traffic Authority of NSW v Mosca ("Mosca") [2006] NSWCA 159, at [15], per Handley JA (with whom Mason P and Bryson JA agreed). 11. The values derived from the small to medium sites in Burrows Road, which were improved, separately subdivided allotments, not comparable with the acquired land, which was in its raw un-subdivided state, with large outstanding liabilities, such that the NE and SW portions of the acquired land were incapable of being sold, on the date of acquisition, as small industrial sites. 12. Mr Lunney adopted a rate which reflected the potential for the NE and SW areas as part of a whole, being the acquired land. 13. His prime sale was 202 – 212 Euston Road, Alexandria. This sale has been described earlier, but, in brief, it has a site area of 16,866m², and sold on the 3 December 2015 for $24M. It is very near the acquired land, is in the same IN-1 General Industrial Zone, and was sold with a lease-back to the vendor, Australian Refined Alloys Pty Ltd, for three years (with two six months options). The commencement rental was $1,550,000 per annum net, plus GST. The lessee was to pay all outgoings, and there were to be rent reviews annually to CPI. 14. It was traded as a land sale, and the short term income was reflective of the purchaser's costs of capital. The lease term was designed to allow sufficient time for the vendor to procure the remediation of the site, to a standard necessary for an independent auditor to issue an unconditional site audit statement, prior to the termination of the lease. The sale and its terms match the assumptions that would have applied to the acquired land at the date of acquisition. The Euston Road lease-back terms required $1,500,000 to be placed in escrow, to be used for remediation at the end of the lease, if necessary. 15. Mr Blackwell agreed with Mr Lunney that there was no reason to think that the vendor/lessee would not be able to meet any cost required to be paid for remediation, the vendor/lessee being a major industrial land owner and developer. 16. Mr Lunney regarded the sale as being for full market value, and the best evidence available from which to determine the land value rate for the acquired land. The analysed and adjusted value rate was $1,214.00/m2. Mr Clay, the Respondent's contamination expert, regarded the terms of the Euston Road sale and lease as providing appropriate protection for the purchasers from contamination liability. 17. We reject Mr Blackwell's opinion to the contrary, and adopt Mr Lunney's rate of $1,214/m2. Our brief reasons are that Mr Blackwell, contrary to Mosca, failed to treat the future potentialities of the surplus land as potentialities. To realise any value from the surplus areas of the acquired land, an intending purchaser would need to acquire the whole of the acquired land, including payment of transaction costs, and obtain DC for development and subdivision. Such a DC would involve the imposition of conditions which we would expect to require the carrying out of the Fire Safety Order works, the heritage conservation works, and the necessary contamination remediation works. The costs of such works, i.e. carrying out such development prior to subdivision and sale, would be incurred during the period from initial acquisition until subsequent resale. In addition, the development would have to await the expiry of the DADI lease. We consider the Euston Road sale to be good evidence of the market value of the acquired land, and accept it as such, in respect of the NE area. 18. On behalf of RMS, Mr Lancaster's cross-examination of Mr Blackwell seriously dented the Applicant's case, which depended on some unsustainable valuation opinions, with which Mr Blackwell persisted in the valuers' joint reports. 19. As an example, we will now discuss the sales of 28 & 30 Burrows Road. 20. Mr Blackwell persisted with his opinion that they were good evidence of value, despite their unusual, irregular, or atypical features, which rendered them, in our view, unreliable as guides to the market value of the acquired land. The relevant contracts for sale were in evidence (Exhibits A8, and A9), and indicated: 1. A price of "$2,300.00 per square metre", which coincides with the rate applied by Mr Blackwell to the NE area of the acquired land; 2. An exchange date of 9 December 2015; with the completion date to be in December 2016; 3. A concession that the purchaser, Ganellan Infrastructure Company, pay only a concessional deposit of 5% of the price indicated on the contract, when the vendor had agreed to lend to the purchaser the sum required; 4. A concession that the purchaser was not required to pay the stamp duty on the contract for sale, because there was a provision that the vendor would lend to the purchaser the amount required for stamp duty; 5. That the loans in respect of the deposit and stamp duty were required to be paid out only on completion of the contract, while the purchaser had the right to rescind the contracts at any time prior to completion; 6. That Mr Ian Malouf was the registered proprietor and vendor of the two properties as trustee for a company effectively controlled in his group; 7. That the s 149 zoning certificates attached to the contracts were dated 20 January 2016, i.e. more than a month after the date for exchange (a fact Mr Blackwell noticed and found to be "totally inexplicable" – see Tp368, L44 – p369, L20, and p373, LL21 – 25); 1. Neither contract was completed. Both were rescinded by mutual agreement between Mr Malouf and the purchaser, but outside their terms. Apart from obtaining a search of directors, and trying, but failing, to get in touch with the company, Mr Blackwell did not investigate the purchaser company (Ganellan Infrastructure Pty Ltd) and its situation, to check whether it had any relationship with the vendor. 2. Mr Blackwell relied on an alleged "offer" made on the 24 January 2017, to purchase the properties after the rescission agreement had taken place. The offer was made some 18 months or more after the date of acquisition. The offer was fundamentally conditional upon due diligence being performed as at the 24 January 2017. 3. Mr Lancaster suggested that these transactions, advanced as the basis of a valuation of the acquired land, were "an unreliable guide to market value having regard to the unusual and atypical features of transactions" (Tp369, LL22 – 23). 4. Mr Blackwell ultimately conceded in cross-examination that the "offer" made after rescission on 24 January 2017 was evidence neither establishing the value of the land, nor explaining the circumstances of rescission of the 28 and 30 Burrows Road transactions, despite his having previously earlier relied on the offer as "evidence of value as to why Mr Malouf may have accepted the rescission (sic) process" (Tp371, LL30 – 50). 5. We do not accept Mr Blackwell's evidence so far as it relies upon the alleged "sales" of 28 and 30 Burrows Road. The evidence does not support a market value for the NE land of $2,300/m². 6. We conclude that it would not have been possible or viable to develop the NE or SW surplus areas on the date of acquisition, without obtaining DC, and incurring the costs of compliance and delay associated with the Fire Safety Order, the heritage works, and the contamination works. 7. Accordingly, we adopt the rental value agreed by the valuers, namely $80/m² per annum for the yard hardstand areas of the site, and apply it to the NE and SW surplus areas. 8. It is not clear to the Court where Mr Lunney draws final areas of hardstand to be leased, as a basis for the calculations he provides in Annexure 2 of the Further Joint Report (CB Vol 2, fol 673). His numbers do not appear to remain consistent throughout the scenarios he posited. We have, therefore, preferred the areas provided by Mr Blackwell in the same report, in which he adopts figures for the size of the NE and SW areas of the site from the Applicant's expert planner, Mr Mitchell. Further, we adopt the figures most likely to be leased out for the continued IN1 use, as opposed to figures used when considering development of these portions for other uses. 9. The total area of the hardstand available to be leased at the agreed $80/m² is calculated by adding to the area of existing hardstand (as agreed upon by the valuers at 2,442m²) the areas of the NE and SW portions (taken from Mr Blackwell and Mr Mitchell to be a total of 5,404m² being 4,495m² in the NE, and 909m² in the SW). Therefore, we adopt a total area of 7,846m² as land available to be leased as hardstand/yard area under the continued use of the site as IN1 – General Industrial. G: Claims for disturbance items 1. The Applicant claimed "disturbance" in respect of (a) legal costs, (b) valuation fees, (c) the cost of the early heritage report obtained from Urbis, (d) rent lost as a consequence of the acquisition, (e) stamp duty on the purchase of a replacement property, together with (f) associated conveyancing and financial costs. 2. Items (a) to (d) were ultimately agreed, but those costs in (e) and (f) were not. 3. Legal costs were agreed at $14,492.06. Valuation fees of $6,600.00 were agreed, on the basis that GST should be excluded, meaning that $6,000.00 will be allowed for that item. In addition, the Respondent accepted that the Applicant should also receive the cost of a heritage report by Urbis in the agreed sum of $5098.90, on the basis that it was a valuation expense. In respect of the rent claim, the Respondent conceded the amount of $115,053.00. 4. Claims (e) and (f), namely the replacement property costs, were claimed under s 59(1)(f) of the JTC Act. There are three elements to this claim, but, in argument, they were treated as standing or falling together, on the basis that the Respondent argues that they are not properly compensable under s 59(1)(f). 5. First, the Applicant claimed stamp duty costs in connection with the purchase of land for relocation pursuant to s 59(1)(d) of the JTC Act. It is not suggested that the Applicant has actually incurred any stamp duty costs of that kind. The acquired land was not owner-occupied at the date of acquisition. It was leased to various tenants, and there has been no relocation of the Applicant as a result of the acquisition. Stamp duty costs cannot be allowed under s 59(1)(d). 6. In so far as this claim is made, in the alternative, under s 59(1)(f) of the JTC Act, the Respondent submits that the Applicant did not prove that its actual use of the acquired land was such as to entitle the Applicant to compensation for stamp duty under this provision. 7. The courts have found that dispossessed land owners are entitled to compensation for stamp duty in only limited circumstances. 8. In Blacktown City Council v Fitzpatrick Investment Pty Ltd ("Fitzpatrick") [2001] NSWCA 259, it was held that the land owner was conducting the business of a land developer, and the acquired land was part of its stock-in-trade constituting its "land bank". Stamp duty was allowed on the basis that if the company wanted to continue its business it had to buy replacement land. 9. In Maggiotto v Roads and Traffic Authority ("Maggiotto") [2006] NSWLEC 54, it was decided that the land was held for the purposes of future development if the Court found that the actual use of the land was for the purposes of land banking by the Applicant. 10. The present Applicant relied on Macarbell Pty Ltd v RTA; Michael Nasser v RTA ("Macarbell") (2006) 149 LGERA 217; [2006] NSWLEC 651, where Jagot J was satisfied that the landowners were actively in the business of developing and disposing of land for profit, and, if they wished to remain in that business, they needed to buy land to replace the acquired land. 11. In Rocco Fraietta v Roads and Maritime Services ("Fraietta") [2017] NSWLEC 11, Robson J held that the landowner was more than a "passive investor". He had taken actual steps to construct a stone house on the acquired land, by depositing stones and managing weeds, which indicated that the proposal to construct the stone house was more than simply a "potential" or "future use". Stamp duty for the purchase of the dwelling was allowed. 12. The Applicant submits that the Court should not adopt any analysis that involves a "passive/active" investor approach, as these words are not used in the JTC Act. Mr Biggs's evidence is relied upon to argue that the applicant company is in the business of buying, improving, holding and disposing of land. The loss of the acquired land in the present case, therefore, means that the Applicant needs to acquire another parcel as part of its "stock in trade", and it is not unreasonable that the Applicant has not yet done so. 13. The Respondents also relied upon Nasser v Roads and Traffic Authority; Millstar Holdings Pty Limited v Roads and Traffic Authority (No 3) ("Nasser") (2006) 149 LGERA 289; [2006] NSWLEC 562, where brothers in the business of land development for subdivision, solely and with others, were awarded stamp duty. 14. If the claimant is held to be only a "passive investor", it will not be entitled to compensation for stamp duty: G Suonaf Holdings Pty Ltd v RMS [2016] NSWLEC 116; Speter v RMS [2016] NSWLEC 128; and Hatzivasiliou v RMS [2017] NSWLEC 9. 15. The Respondent submitted that in this case there was no "actual use" of the acquired land by the Applicant, on the date of acquisition, and it was solely a passive investment. There was nothing to suggest that there was anything beyond a "vague and unstructured proposal to develop the land", to adopt the words of Talbot J, in Sebastian Cannavo and Busa v RTA [2004] NSWLEC 570. 16. The Respondent points out that Mr Biggs conceded that the Applicant's use of the acquired land had changed by 2014 (Tp65, LL44 – 47), and that the Applicant's use of the land was instead to hold the premises vacant and do some works, so that DADI could use the property at a future date (Tp65, LL24 – 28). 17. Mr Biggs was cross-examined extensively on whether there were any documents or records which would reflect the Applicant's intention to develop the acquired land, and the Respondent submitted that Biggs could not have known the intention of the Applicant, and, accordingly, the Applicant had not demonstrated anything more than a "potential future use" of the acquired land. The Court of Appeal held in Fitzpatrick that a "potential future use" is not an "actual use" of the land. Also in Al Amanah College Inc v The Minister for Education Training (No 2) [2011] NSWLEC 254, Biscoe J distinguished "land simply held in reserve for some future activity", which was not an "actual use" of the land, and "land in respect of which work has been done preparatory to an intended use", which may be an actual use. 18. The Respondent's ultimate submission was that, at the date of acquisition, the Applicant was not conducting any "actual use" of the acquired land, for the purposes of the JTC Act. Any "actual use" was undertaken by the tenants who have been (or will be) compensated for disturbance costs separately. 19. We accept that submission. 20. As to s 59(1)(f), we are satisfied that there is no proof that the actual use of the acquired land was as part of a stock in trade of the Applicant as a "land banker". There is no evidence of a history of the Applicant's holding land for subdivision, and/or re-development and resale, even though assertions to the contrary were made by Mr Biggs. 21. The Respondent also submits that what Mr Biggs says about that issue should not be accepted as a reliable indication of the purposes of Carlewie Pty Ltd. Independent directors had been appointed to the Applicant, but Mr Biggs accepted in cross-examination that he had not spoken to them at the relevant time, about what, if any, plans they might have had for the acquired land. (Mr Steven Peter Grant was appointed sole director on 11 October 2014 and ceased on 2 September 2015, and a Mr Shim, was also the sole director of the Applicant from some date in 2014 to the date of acquisition) 22. To the extent that Mr Biggs makes a positive assertion as to the purposes of the applicant company, he had not spoken to the relevant director(s) about it. He admitted that there is no affidavit from any director of the company about the company's intentions as to the purchasing of a replacement property. He also admitted that the sole and independent directors did not tell him anything as to the intentions of the company. 23. Mr Biggs was also asked in cross examination about a letter signed by him as solicitor, on the letterhead of Carlewie Pty Ltd, and dated 28 July 2015, addressed to a Mr Hassett of Suez Environment concerning 33 Burrows Road, Alexandria (Exhibit A2). The letter is concerned with the continuous leasing of the property through the date of acquisition and afterwards, had there been no acquisition. The cross examination of Mr Biggs included the following exchange (Tp63, LL34 – 38): Q. What it comes down to, I suggest to you, is that Carlewie wasn't it's self (sic) a functioning business, it was a mere corporate shell that followed the decision of Mr Malouf as and when he decided to do something with its assets. A. As the managing director the company gave expressions to decision by Mr Malouf, yes. 1. Nor is there any evidence of the intentions of Mr Ian Malouf, who holds beneficially one of the two class A shares, that make up the capital of the applicant company, while his wife, Larissa Malouf, owns the other, but not beneficially, leaving some uncertainty about who actually owns it. Mr Biggs's assertions of the company's intentions at particular times are, on the evidence, without instructions from the relevant director, at the relevant time, in circumstances where it seems to be that the company is operating from instructions from only one of the two (main) shareholders. Mr Malouf gave no evidence in this case. 2. In these circumstances, the Court is unable to rely on Mr Biggs's assertion of the corporate intention of the Applicant. 3. The Applicant submitted that the circumstances in Macarbell were comparable to the present case, but, in the above circumstances, the Court is simply not in the position to draw the parallel that is sought to be drawn with the position of the director, Mr Nasser, in that case. Nasser was an applicant for compensation and Jagot J made findings of fact that he and the company were in the business of "buying, improving, holding and disposing of land for profit at the date of acquisition" (per Jagot J at [19]). Nasser used the company for that purpose. 4. Comparing the facts of the present case to those in Macarbell, the evidence shows that the Applicant here was a landlord holding the land effectively as a passive investor in receipt of the rental income. One of its shareholders leased property to lessees, some of whom were also companies in which Mr Malouf has an interest, and in which he carried out uses which were, if not complementary to, related to the ALF site on adjoining land, and other waste recycling and like uses in the vicinity. 5. We find that, as at the date of acquisition, the actual use of the acquired land by the Applicant was holding it and leasing it to tenants. 6. We accordingly, decline to allow any of the "replacement property costs" (set out in the table of disturbance items on page 24 of the Applicant's final written submissions), namely stamp duty, conveyancing costs, and other financial costs. H: Determination and Orders 1. For the reasons we have set out above, we find the appropriate calculation of the market value of the Acquired Land, pursuant to s 55(a) of the JTC Act, is as follows: Current Rental Market Assessment Area (m2) Rent Rate ($/m2 p.a.) Total Rent ($/year) Hardstand 7,846 80 627,680 DADI 5,572 154 858,088 SITA 2,200 145 319,000 Yantang 1,118 154 172,172 Total: 1,976,940 Capitalisation of that total Rent amount Net Market Income $1,976,940 Capitalised at 7.00% Capitalised Value $28,242,000 Less Capital Adjustments to that total Value Present value of $22 psqm profit rental (DADI lease) (Capitalised at 7.00%) $ 460,000 Essential heritage conservation works $ 2,700,000 Fire Order Compliance $ 1,600,000 Contamination Costs $ 250,000 Demolition costs of buildings E,F, and G as agreed by the valuers $ 94,955 Total: $ 5,104,955 Market Value thereby derived Capitalised Value $28,242,000 Less Capital Adjustments $5,104,955 Total: $23,137,045 1. To that amount must be added the following disturbance items: Legal Costs $14,492.06 Valuation fees $6,000.00 Urbis Heritage Report $5,098.90 Lost Rent $115,053.00 Total: $140,643.96 1. The Court, therefore, makes the following orders 1. Compensation for the compulsory acquisition by the Respondent of the Applicant's property known as 53-55 Campbell Street and 33 Burrows Road, St Peters, being lot 101 in DP 845651 and lot 102 DP 871150, on 3 July 2015, is determined in the amount of $23,277,688.96, pursuant to the Land Acquisition (Just Terms Compensation) Act 1991; 2. Costs are reserved; 3. The exhibits may be returned. ********** Amendments 30 June 2017 - Image added to paragraph [32] 03 July 2017 - Duplicate image removed from paragraph [32] 05 July 2017 - Paragraph [128] the word "not" has been removed from the first sentence and now reads: "Faced with the potential loss of 1726m² of land, by reason of the Council's local road proposal, a prudent hypothetical purchaser would assume that the available area for development could be significantly less than 3,000m²." 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: 05 July 2017