Land and Environment Court New South Wales Medium Neutral Citation: Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 6) [2019] NSWLEC 98 Hearing dates: 16 October 2017; 3, 7, 13, 20, 23, 28, 29, and 30 November 2017; 1, 4, 5, 6, 7, 8, 11,12, 13, 15, and 20 December 2017; 29, 31 (view) January 2018; 1, 2, 23, and 28 February 2018; 5, 6, 7, 8,12, 13, 15, 16, 19, 20, 21, 26, 27, and 28 March 2018; 4, 9, 10, 11, 16, 17, 18, 19, and 30 April 2018; 8 April 2019; further written material 6 and 7 May 2019 Date of orders: 18 July 2019 Decision date: 18 July 2019 Jurisdiction: Class 3 Before: Sheahan J Decision: See pars [860] and [861] Catchwords: COMPULSORY ACQUISITION: compensation payable for acquisition of two lots in St Peters – site used for landfilling and waste operations – hypothetical development concepts for highest and best use of Lot 2 – Discounted Cash Flow valuation methodology employed – claims for losses attributable to disturbance – claims for special value - claims based on agency – construction of s 59(1) Land Acquisition (Just Terms Compensation) Act. Legislation Cited: Conveyancing Act 1919 Environmental Planning and Assessment Act 1979 Land Acquisition (Just Terms Compensation) Act 1991 Marrickville Local Environmental Plan 2011 Protection of the Environment Operations Act 1997 Real Property Act 1900 State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 Sydney Local Environmental Plan 2012 Cases Cited: 1643 Pittwater Road Pty Ltd v Pittwater Council 11 Elvina Avenue Pty Ltd v Pittwater Council Doering v Pittwater Council 1643 Pittwater Road Pty Ltd v Pittwater Council [2004] NSWLEC 685 195 Crown St Pty Limited v Hoare [1969] 1 NSWR 193 Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 Alexandria Landfill Pty Limited v Sydney City Council; Alexandria Landfill Pty Limited v Marrickville Council [2004] NSWLEC 639 Alexandria Landfill Pty Ltd and Boiling Pty Ltd v Roads and Maritime Services [2017] NSWLEC 148 Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 2) [2017] NSWLEC 175 Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 3) [2017] NSWLEC 183 Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 4) [2018] NSWLEC 31 Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 5) [2018] NSWLEC 37 Almona Pty Ltd v Roads and Traffic Authority of NSW [2008] NSWLEC 112 Baringa Enterprises Pty Limited v Manly Municipal Council (1965) 15 LGRA 201 Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259 Boland v Yates Property Corporation Pty Limited (1999) 74 ALJR 209; [1999] HCA 64 Bronzel v State Planning Authority (1979) 44 LGRA 34 Carlewie Pty Ltd v Roads and Maritime Services [2017] NSWLEC 78 Carlewie Pty Ltd v Roads and Maritime Services [2018] NSWCA 181 Cedar Rapids Manufacturing and Power Co v Lacoste [1914] AC 569 Commonwealth Custodial Services Ltd v Valuer General (NSW) (2006) 148 LGERA 38; [2006] NSWLEC 400 Commonwealth v Arklay (1952) 87 CLR 159 Cook and Edwards v City of Sterling (1991) 4 WAR 469 De Ieso v Commissioner of Highways (1981) 27 SASR 248 Denshire v Roads and Maritime Services (NSW) (2017) 229 LGERA 118; [2017] NSWLEC 181 Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2017] HCASL 236 Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2016] NSWLEC 39 Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2017] NSWCA 73 Dial a Dump Industries Pty Ltd v Roads and Maritime Services [2015] NSWLEC 172 Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328 El Boustani v Minister Administering the Environmental Planning and Assessment Act 1979 [2012] NSWLEC 266 El Boustani v The Minister administering the Environmental Planning and Assessment Act 1979 (2014) 199 LGERA 198; [2014] NSWCA 33 Elmon Pty Ltd v Roads and Maritime Services [2016] NSWLEC 168 Estate of the late Costanzo Melino v Roads and Maritime Services [2017] NSWLEC 118 Fenton Nominees Pty Ltd v Valuer-General (1981) 47 LGRA 71 G Capital Corporation Pty Ltd; Gertos Holdings Pty Ltd; Marsden Developments Ltd v Roads and Maritime Services [2019] NSWLEC 12 George D Angus Pty Limited v Health Administration Corporation (2013) 205 LGERA 357; [2013] NSWLEC 212 Gerraty v McGavin (1914) 18 CLR 152; (1914) 20 ALR 182 Hatzivasiliou v Roads and Maritime Services [2017] NSWLEC 9 Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352 Housing Commissioner of NSW v Falconer [1981] 1 NSWLR 547 ISPT v Valuer General (2009) 165 LGERA 25 Jameson v Rail Corporation NSW [2014] NSWLEC 83 John Bridge Ltd (in liq) v Commonwealth (1951) 11 The Valuer 375 Kelly v Western Australian Planning Commission [2006] WASC 208 Konduru T/as Warringah Road Family Medical Centre v Roads and Maritime Services [2017] NSWLEC 36 Macarbell Pty Ltd v RTA; Nasser v RTA [2006] NSWLEC 366 Melino v Roads and Maritime Services [2018] NSWCA 251 Michele Melino and three others in their capacity as executors of the Estate of the late Costanzo Melino v Roads and Maritime Services [2017] NSWLEC 118 Mir Bros Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales [2006] NSWCA 314 Moloney v Roads and Maritime Services [2018] NSWCA 252 Moloney v Roads and Maritime Services (No 2) [2017] NSWLEC 68 Monti v Roads and Maritime Services (No 4) [2019] NSWLEC 11 Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 136 LGERA 16 Newbury DC v Secretary of State for the Environment [1981] AC 578 Park v Allied Mortgage Corporation Ltd (FCA, 5 July 1995, unreported) Raja's case [1939] AC 302 Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2016] NSWCA 7 Roads and Maritime Services v United Petroleum Pty Ltd [2019] NSWCA 41 Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236 Roads and Traffic Authority (NSW) v Peak [2007] NSWCA 66 Roads and Traffic Authority of New South Wales v Mosca (2006) 146 LGERA 335; [2006] NSWCA 159 Roads and Traffic Authority v Hurstville City Council (2001) 112 LGERA 223; [2001] NSWCA 11 Service Design Pty Limited v Commissioner of Highways (No 2) (1986) 59 LGRA 176 Smith and Hannaford v Zhang and Zhou [2011] NSWLEC 29 Spencer v The Commonwealth (1907) 5 CLR 418 Speter v Roads and Maritime Services [2016] NSWLEC 128 Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 The Minister v The New South Wales Aerated Water and Confectionary Company Ltd (1916) 22 CLR 56; (1916) 23 ALR 10 Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367 Turner v Minister of Public Instruction (1956) 95 CLR 245 United Petroleum Pty Limited v Roads and Maritime Services [2018] NSWLEC 35 United Petroleum Pty Limited v Roads and Maritime Services (No 2) [2018] NSWLEC 64 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259 Willoughby City Council v Transport Infrastructure Development Corporation (No 2) [2008] NSWLEC 238 Yates Property Corporation Pty Ltd v Darling Harbour Authority (1991) 24 NSWLR 156 Texts Cited: A Hyam The Law Affecting Valuation of Land in Australia (4th ed. 2009, Federation Press) A Hyam The Law Affecting Valuation of Land in Australia (5th ed. 2014, Federation Press) Dr David Parker, DC F4 Theory and Practice the State of Play (Australian Property Journal August 2005) International Valuation Guidance No. 9 International Valuation Standard (6th ed.) IPart NSW. "WACC Biannual update" (February 2015), pp.1-6 Law of Agency, (3rd ed, 2014, LexisNexis) Wayne Lonergan, The Valuation of Business, Shares and Other Equity (4th ed. 2003, Allen and Unwin) Category: Principal judgment Parties: Alexandria Landfill Pty Ltd (Applicant) Boiling Pty Ltd (Applicant) Roads and Maritime Services (Respondent) Representation: Counsel: Mr I Hemmings, SC with Mr M Seymour, Ms K Lindeman, and Ms R Khalilizadeh (17 February only), barristers (Applicants) Mr R Lancaster, SC with Mr N Eastman, and Mr M Astill, barristers (Respondent) Solicitors: Addisons (Applicants) Norton Rose Fulbright (Respondents) File Number(s): 2016/155678, 2016/155930 JUDGMENT Contents Judgment Contents Section 1: Introduction 1.1 General 1.2 The subject land and its valuation 1.3 The Hearing and some relevant external events United Some other decisions The United Appeal Reopening 1.4 The Evidence Section 2: The Structure of this Judgment Section 3: The Principal Statutory Provisions Section 4: Background 4.1 The Evolution of the Claims now before the Court 4.2 The Acquired and other relevant Lands 4.3 The Malouf Companies and their lands 4.4 Land Titles 4.5 Development consents 4.6 The Boiling Lease: Section 5: Methods of valuation 5.1 History of Valuation Scenarios 5.2 Final valuation scenario for Lot 2 Sections 6 to 14: Expert Evidence Section 6: Town planning experts Section 7: Traffic experts Section 8: Geotechnical experts Section 9: Waste operations experts 9.1 The options and site arrangements 9.2 Location of the temporary shed 9.3 Deferral of recycling income for 18 months 9.4 Gate fee for waste soils 9.5 Recovery rates 9.6 Receivable tonnage 9.7 Gate fee for mixed dry waste 9.8 Wages and salaries 9.9 Discount rates Section 10: Environment and contamination evidence 10.1 The Competing Experts 10.2 Environmental protection licences 10.3 EPL Compliance Issues 10.4 The evidence in detail Section 11: Environment management experts 11.1 Introduction 11.2 Experts' Qualifications and Experience 11.3 Leachate management 11.4 Landfill gas management Section 12: Quantity surveying experts Section 13: Land valuation evidence re Lot 2 13.1 Proposed subdivision of land 13.2 Terminal value of land 13.3 Land discount rate 13.4 The Boiling lease Section 14: Business valuation evidence 14.1 Discount rate for business related cash flows 14.2 Discount rate for initial stockpile remediation cost 14.3 Valuation of Area E based on cash flow of future business Section 15: Highest and best use of Lot 2 15.1 The principles 15.2 Applicant's submissions 15.3 Respondent's submissions 15.4 Applicant's submissions in reply 15.5 Consideration – highest and best use 15.6 Conclusion – highest and best use Section 16: Arriving at the Market Value of Lot 2 16.1 Introduction 16.2 Contamination Considerations 16.3 Quantity Surveying 16.4 Geotechnical Considerations 16.5 Environmental Management (Leachate and Landfill Gas) 16.6 Waste Operations 16.7 Land Valuation 16.8 Business Valuation Section 17: Market Value for Lot 1 17.1 Introduction 17.2 Evidence 17.3 Consideration Section 18: ALF's Disturbance Claims 18.1 The Principles 18.2 The Claims 18.3 Applicant's submissions in more detail 18.4 Submissions in reply by RMS 18.5 ALF's claim based on Agency 18.6 Recent decisions 18.7 Conclusions on Disturbance Section 19: Special Value Section 20: Costs Section 21: Conclusion Section 22: Determinations and Orders Section 1: Introduction 1.1 General 1. The Applicants in these two matters, and some related entities, asserted interests in various lands acquired by the WestConnex Delivery Authority ("WDA", later dissolved in favour of Roads and Maritime Services ("RMS")) for the major infrastructure development "WestConnex", and sought compensation pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 ("the JTC Act"). 2. The various parcels of land were located at St Peters, south west of Sydney Central Business District ("CBD"), within an area bounded by Princes Highway, Canal Road, Burrows Road and Campbell Street/Road. They sit generally north-west of Alexandra Canal, south-west of Sydney Park, and across Canal Road from Cooks River Rail Terminal. On the north-west side of the Highway is suburban St Peters and Sydenham. Most of the lands were in the Marrickville Local Government Area ("LGA"), but some were in the City of Sydney LGA. Some have a history of quarrying, mostly for historic brick-making industries, and/or waste-related operations. 1.2 The subject land and its valuation 1. This judgment determines compensation in respect of the acquisition, gazetted on 19 December 2014, of Lot 1 in Deposited Plan ("DP") 1010128 ("Lot 1") and Lot 2 in DP1168612 ("Lot 2"), both owned at the date of acquisition ("DOA") by Alexandria Landfill Pty Ltd ("ALF"), with Boiling Pty Limited ("Boiling") a lessee of Lot 2, from 1 January 2014, under an unregistered lease dated 7 February 2014. It was common ground that ALF did not occupy and/or actually use Lot 2 as at the DOA. 2. The area of Lot 1 was 2,410m² whereas Lot 2 occupied an area of 15.71ha. Lots 1 and 2 were located on opposite sides of Albert Street, within the area described in [2] above. 3. The valuation methodology engaged for Lot 1 of the acquired land was described by the Applicants (subs par 451) as "entirely conventional", and by the Respondent (Tp2721, L1) as "orthodox", as a purchaser would "use it for industrial purposes outside the conceptual use of Lot 2". 4. However, the valuation of Lot 2 relied upon the employment, by both sides, despite some reservations on the part of the Respondent's experts (e.g. in Court Book, item 60, and [471] below), of "discounted cash flow" methodology ("DCF"), on the basis that, on the Applicant's case, the highest and best use of the land involved the sale of parts of Lot 2 as they became "surplus" to a waste industry use over a period of years. 5. By arrangement between the parties and their experts, the individual line items which make up the DCF spreadsheets were built up electronically when input items emerged from the evidence. The court provided a monitor which was able to display the spreadsheets in open Court, and "USB memory sticks" were tendered, and used by the parties and the Court to access the spreadsheet information. A column was provided for each party, and the respective contentions for each input issue were set out as line items. In this way many matters of agreement became clear, and the differences in quantum between differing inputs also became evident. The spreadsheets contained total values for costs and expected revenue, and this evidence was also divided into sections matching the assumptions made by the parties as to the highest and best use of lot 2 in particular. A comprehensive hard copy of the spreadsheet information in its electronic form was provided to the Court by the parties, reflecting all scenarios. 6. All witnesses referred to a "development concept" for Lot 2, involving its staged filling, development and subdivision. That development scheme was formulated by the Applicants and their experts, then drawn up by one of those experts (Mr Anthony McLansborough), and depicted on a plan identified throughout the evidence and the hearing as "SKC23". 7. While the Applicants relied heavily on this scheme, the Respondent did not accept it at all, contending for a "highest and best use" of Lot 2 which did not involve any subdivision of Lot 2, but saw it remain as a "passive industrial investment", for landfill purposes, until sold eight years after the DOA. 1.3 The Hearing and some relevant external events 1. The hearing was fixed on 17 February 2017, to occupy some 35 hearing days, commencing, after some pre-trial case management mentions and directions hearings, on 20 November 2017. 2. I gratefully acknowledge the assistance I have received from Acting Commissioner Maston throughout the matter. However, each finding made in this judgment represents my view, albeit formed with the benefit of the advice given by the learned Acting Commissioner. 3. The actual hearing of evidence and submissions eventually commenced on 28 November 2017. Oral evidence occupied more than thirty days, and the competing oral submissions in chief of both parties concluded on 19 April 2018. 4. The matter was then stood over to 30 April for Mr Ian Hemmings SC, senior counsel for the Applicants, to reply, with judgment reserved on that date. 5. During that hearing I delivered five interlocutory judgments: (1) Alexandria Landfill Pty Ltd v Roads and Maritime Services [2017] NSWLEC 148 (application for recusal); (2) judgment (No 2) [2017] NSWLEC 175 (admission of a late expert report); (3) judgment (No 3) [2017] NSWLEC 183 (width of subpoena to Mr Lunney); (4) judgment (No 4) [2018] NSWLEC 31 (strike out application in respect of Points of Defence); and (5) judgment (No 5) [2018] NSWLEC 37 (reasons sought for a ruling on evidence). United 1. On 23 March 2018, before oral evidence in this present matter had concluded, Robson J delivered his primary judgment in United Petroleum Pty Limited v Roads and Maritime Services ("United No 1") [2018] NSWLEC 35. His Honour made a series of findings and directed the parties (at [327]) to "calculate the quantum accordingly", on the basis of his finding "that the amount of compensation to which United is entitled should be determined having regard to the financial costs reasonably incurred as a natural consequence of the acquisition pursuant to s 59(f). ...". 2. The parties could not agree, and His Honour conducted a further hearing on 23 April 2018, at which the finding at [327] was debated. He delivered his second judgment, and made final orders on 27 April 2018: United Petroleum Pty Limited v Roads and Maritime Services (No 2) ("United No 2") [2018] NSWLEC 64. 3. United Nos 1 and 2 were eventually appealed to the Court of Appeal ("C of A"), but Robson J's analysis and reasoning had been relied upon by both parties to the present case, in both their written and oral submissions, but to differing effects (see, e.g., T11.04.18 pp2529-2530, T19.04.18 pp2785-2786, and T30.04.18 p2864; Applicant subs in chief pars 457 to 464; Respondent subs pars 1244, 1398-1400, and 1426-1430; and Applicant reply subs p75, par (e)). 4. As United questioned the appropriate characterisation of commonly occurring elements of compensation claims, it seemed to me that it would be at least difficult, and probably undesirable, to finalize this judgment until the law was hopefully settled by the C of A decision in the United appeal. 5. While this judgment was being prepared, other decisions raised further "doubts" in my mind about the correct principles to apply in deciding the significant claims made by ALF. I will briefly introduce all these decisions now, and return to them in more detail later (section 18.6, commencing at [772]). Some other decisions 1. Pain J decided Moloney v Roads and Maritime Services (No 2) [2017] NSWLEC 68, on 13 June 2017, and Moore J Michele Melino and three others in their capacity as executors of the Estate of the late Costanzo Melino v Roads and Maritime Services [2017] NSWLEC 118, on 14 September 2017, and both decisions were appealed to the C of A, where the appeals were heard together on 6-7 June 2018, with both judgments handed down on 2 November 2018 – Melino v Roads and Maritime Services ("Melino") [2018] NSWCA 251, and Moloney v Roads and Maritime Services ("Moloney") [2018] NSWCA 252. 2. Pepper J relied on both Melino and Moloney when deciding Monti v Roads and Maritime Services (No 4) ("Monti") [2019] NSWLEC 11 on 13 February 2019, but the Court need also have regard to Pain J's decisions in Denshire v Roads and Maritime Services (NSW) ("Denshire") (2017) 229 LGERA 118; [2017] NSWLEC 181, and G Capital Corporation Pty Ltd; Gertos Holdings Pty Ltd; Marsden Developments Ltd v Roads and Maritime Services ("GCapital") [2019] NSWLEC 12. The United Appeal 1. The United appeal was heard by a bench of five judges of the C of A, on 30 November 2018, and the judgment of the Court was handed down on 6 March 2019: Roads and Maritime Services v United Petroleum Pty Ltd ("United CA") [2019] NSWCA 41. I shall return to the decision in due course ([795]). Reopening 1. The parties to this present case having agreed that it was appropriate for them to notify me of the decision of the C of A in United, and for the Applicants to seek leave to reopen their case to amend their Points of Claim ("POC"), the parties effectively then made a joint approach to the Court on 1 April 2019 for leave to amend both the POC and the Points of Defence ("POD"). 2. Leave was granted, at a short hearing on 9 April 2019, and the amended documents were filed, with short explanatory submissions from each side, on 8 April ("APOC") and 12 April ("APOD"), respectively. 3. On 1 May 2019, I sought, by email, some clarification from the parties regarding the contents of those documents, and the parties responded on 6 May 2019. An amended schedule of disturbance items, as at 1 May 2019, was filed on 7 May 2019. 4. I shall return to set out the effects of these amended "pleadings" ([55]-[59]). 1.4 The Evidence 1. I have already noted that Mr Ian Hemmings SC led the Applicants' legal team, and I here note that Mr Richard Lancaster SC led the Respondent's team. 2. The hearing was conducted largely on a "paperless" basis, with many hundreds of documents being placed in evidence by their electronic inclusion in a Court Book ("CB" – numbered Exhibit A1), or a Tender Bundle ("TB" – numbered Exhibit R1). 3. Various documents additional to those in the CB and TB were also tendered, and numbered, in the usual way. 4. The Court has heard from many experts on either side of the proceedings, across eleven fields of expertise: Area of Expertise ALF retained Expert RMS retained Expert Non-Valuation Experts 1. Town Planning Paul Mitchell (EMM Consulting) Julie Bindon (JBA Urban Planning) 2. Environment/ Bill Ryall (Ryall Environmental Pty Ltd) Jason Clay (Senversa) Contamination Daniel Martens (Martens Consulting Engineers) 3. Geotechnical Garry Mostyn (Pells Sullivan Meynink – "PSM") Bryn Thomas (GHD) Waste management/ David Gamble (GHD) with assistance/advice by way of annexure from 4. environment Paul Fridell (ERM) Anthony Dixon (GHD) Alison Horlyck (GHD) Paul Fridell (ERM) 5. Leachate Gareth Swarbrick (PSM) David Gamble (GHD) with assistance/advice by way of annexure from Bill Ryall (Ryall Environmental Pty Ltd) Anthony Dixon (GHD) Geoffrey Webster (WN Waste & Management Services) Paul Fridell (ERM) 6. Landfill gas Geoffrey Webster (WN Waste & Management Services) David Gamble (GHD) with assistance/advice by way of annexure from Gareth Swarbrick (PSM) Matthew Welsh (GHD) Bill Ryall (Ryall Environmental Pty Ltd) 7. Traffic Graham Pinder (Traffix) Philip Brogan (Urbanhorizon) Mike Haywood (Sustainable Resource Solutions) Chris Berkefeld (Lindfield Associates) with assistance/advice by way of annexures from 8. Waste operations Geoffrey Webster (WN Waste & Management Services) Rod Ferrier (Ferriers) Julie Bindon (JBA Urban Planning) Phil Brogan (Urbanhorizon) David Lawson (Infrasol Group) 9. Quantity Surveying Anthony McLandsborough (AT&L) with assistance/advice by way of annexure from Bryn Thomas (GHD) Valuation Experts 10. Land valuation Michael Dyson (Knight Frank) David Lunney (Lunney Watt) 11. Business valuation Tony Samuel (Sapere Research Group) Rod Ferrier (Ferriers) 1. The Applicants also relied on many affidavits, and on oral evidence, from three of their senior managers – Christopher Biggs (CEO), Darin Marks (CFO), and Rodney Johnson (Group Operations Manager). 2. RMS relied on affidavit and oral evidence from Damien Vella, CEO of "Breen Group", Eric Le Provost, a waste facilities consultant, who was formerly a senior executive with "Enviroguard", and Kenneth Reid, construction manager of the M5 Asset Corporation, which is part of the Sydney Motorway Corporation. Section 2: The Structure of this Judgment 1. The structure of the rest of this judgment is as follows: 1. Section 3 (par [34]) sets out those provisions of the JTC Act most relevant to the adjudication of this compensation claim; 2. Section 4 (pars [35]-[124]) outlines the relevant background to the claim and the acquired lots; 3. Section 5 (pars [125]-[144]) summarises the methods of valuation for determining the market value of Lots 1 and 2; 4. Sections 6 to 14 (pars [145]-[471]) summarise the relevant expert evidence for two key components of the valuation task for Lot 2: firstly, the highest and best use, and secondly, the appropriate DCF inputs to determine the market value; 5. Section 15 (pars [472]-[553]) summarises the parties' submissions, in relation to the highest and best use, and the Court's determination on the appropriate highest and best use; 6. Section 16 (pars [554]-[681]) resolves the remaining disputes between the parties on the DCF inputs for the market value of Lot 2, identifying any outstanding issues, which may require further input from the parties; 7. Section 17 (pars [682]-[715]) determines the market value of Lot 1, in accordance with the expert valuation evidence and the parties' submissions; 8. Section 18 (pars [716]-[822]) deals with ALF's disturbance claim; 9. Section 19 (pars [823]-[847]) addresses ALF's special value claim, in accordance with the expert evidence and parties' submissions; 10. Section 20 (pars [848]-[850]) deals with costs. 11. Section 21 (pars [851]-[859) draws the Court's conclusion; and 12. In Section 22 (pars [860]-[861]) the Court makes its determination and orders. Section 3: The Principal Statutory Provisions 1. The sections of the JTC Act most relevant to these proceedings are set out below: 4 Definitions ... interest in land means: (a) a legal or equitable estate or interest in the land, or (b) an easement, right, charge, power or privilege over, or in connection with, the land. land includes any interest in land. ... 37 Right to compensation if land compulsorily acquired An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land. ... 54 Entitlement to just compensation (1) The amount of compensation to which a person is entitled under this [Part 3] is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land. 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division): (a) the market value of the land on the date of its acquisition, (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 [DOA] 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. 57 Special value In this Act: special value of land means the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person's use of the land. ... 59 Loss attributable to disturbance (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. Section 4: Background 4.1 The Evolution of the Claims now before the Court 1. When acquisition was proposed, Dial A Dump Industries Pty Ltd ("DADI"), joined with the present Applicants, ALF and Boiling, in a combined claim for compensation, and each of the three companies also made separate claims. 2. On 22 May 2015, DADI claimed $195,192,542, ALF $218,488,218, and Boiling $10,000. In its separate claim, DADI signified its interest in the land as "licensee" and "other", and said that Boiling as lessee had permitted DADI "to operate a waste and landfill business" on Lot 2. In its own claim, Boiling said it held the lease from ALF, and an Environment Protection Licence, on trust for the DADI trust, and "permit[ted]" DADI to "operate the landfill and waste business on that land". 3. The Valuer-General ("VG") determined ALF's compensation in the amount of $70,019,285, being $56,900,000 for market value, plus $13,119,285 for disturbance, and Boiling's in the amount of $11,000. 4. The DADI claim was rejected by the VG, on the basis that, in terms of the JTC Act regime, DADI had only a "bare permission" in relation to, and could not establish an "interest" in, the land acquired. 5. DADI and ALF brought Class 3 proceedings in this Court, under s 67 and s 66 of the JTC Act, respectively, on 14 August 2015. 6. On 29 October 2015, Pepper J ordered the separate determination of the question whether DADI "had an interest in land as at the [DOA]", for the purposes of ss 4 and 5 of the JTC Act, in respect of Lot 2: Dial a Dump Industries Pty Ltd v Roads and Maritime Services [2015] NSWLEC 172. 7. Preston ChJ dismissed the DADI proceedings after determining that separate or preliminary question in favour of RMS and against DADI: Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2016] NSWLEC 39. 8. Preston ChJ's decision was upheld by the C of A: Dial A Dump Industries Pty Ltd v Roads and Maritime Services ("DADI CA") [2017] NSWCA 73. The High Court refused special leave to appeal: Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2017] HCASL 236. 9. The Respondent submits (closing subs par 17) that: ... from the ashes of DADI's claim that it had an interest in land and was entitled to an award of compensation in the amount of $195,192,542, rises the phoenix of ALF's claim for compensation for loss attributable to disturbance in a comparable amount, calculated by reference only to DADI's business operations on Lot 2. 1. I might add here, for completeness, that, during the period 2015-2017, I also dealt with a claim made by a related company in respect of the compulsory acquisition of nearby land: Carlewie Pty Ltd v Road and Maritime Service ("Carlewie") [2017] NSWLEC 78. That decision was overturned on appeal – Carlewie Pty Ltd v Roads and Maritime Services [2018] NSWCA 181 – and the matter was remitted to this Court for a further hearing yet to take place. 2. Returning now to the present proceedings, Boiling sought no order in respect of the acquisition of its interest, beyond the amount of $11,000 determined by the VG. 3. The Boiling lease proceedings are separate from the ALF proceedings, and I will deal with the Boiling matter in sec 4.6 below (from [99]). 4. However, an order was made, by consent, that both the present proceedings (by ALF, and Boiling) should be heard together, and that evidence in one should be evidence in the other. 5. Compensation will be required to be determined separately for each proceeding, and for the different parties, referable to their respective interests. 6. In this judgment the word "Applicant" or "Applicants" will normally refer only to ALF (and its claims). 7. The claims made in ALF's name moved on markedly from the initial claims made in May 2015, and continued to move during the hearing. 8. The amounts claimed in ALF's "draft" POC, dated 23 November 2017, and "revised draft" POC dated 28 November 2017, totalled $409,889,000, comprising the following amounts: As to Lot 1: $5,500,000 for market value; As to Lot 2: $343,638,000 for market value; and $60,751,000 for Special Value. Their Disturbance claim was "To Be Advised". 1. In ALF's final submissions (p8, par 7), as amended by an errata notice dated 12 April 2018, it particularized its claims in these terms (omitting footnote references): 7. The Applicant's claim for compensation is comprised of several elements under s 55 of the [JTC Act], being: a. A market value for Lot 1 based upon comparable sales analysis supporting a rate of $2,300/m(2) (ie $5,550,000). b. Market value for Lot 2 based upon Tony Samuel's Scenario 2 involving a [DCF] analysis applied to future earnings that could be derived from the use of Lot 2. Such earnings flow from the continued use by the hypothetical purchaser [sometimes "HP"] of Lot 2 for landfilling and waste recycling allowing for the potential sale of land that is surplus to those operations. It is only by looking at several different scenarios that Mr Samuel has been able to discern the highest and best use. In doing so, Mr Samuel has determined that value to be $267.7million c. Special value for Lot 2 of $60.7million in addition to the market value. d. Disturbance comprising: i. Lost profits $173,753,000 ii. Loss of 19 December 2014 $2,620,000 iii. Business disruption $1,486,000 iv. Relocation costs $1,308,000 v. Legal and valuation fees $424,910.68 1. By way of footnotes, ALF added the following: 1. In respect of Samuel's "Scenario 2" (7b in [52] above): This scenario itself employs two alternative possibilities looking forward. Alternative 1 involves the on-going use of Lot 2 after land filling activity had ceased. Alternative 2 looks at the value of Lot 2 if all of Lot 2 was sold at the time that landfilling activity ceased ... (see CB 65 at 7 and 9) 1. In respect of the disturbance claim(s) (7d in [52] above): These figures may depend on a finding by the Court as to whether the award of any specific amount for disturbance ought to be given on a pre- or post-tax basis ... (see CB 130 at [8]) 1. The Respondent's position was set out in its draft Points of Defence ("POD"), dated 27 November 2017, and, in its final submissions, it contended for compensation in the following amounts: As to Lot 1: $3,920,000 for market value; As to Lot 2: $18,700,000 for market value; Special value: $NIL; plus only the finally claimed amount of $424,910.68 for legal and valuation fees, in respect of disturbance. 1. The APOC which were ultimately filed in Court on 8 April 2019 dealt primarily with disturbance matters, but retained a claim (APOC par 36) for Special Value of Lot 2 – $60,751,000 (under Scenario 1, or Alternative 1 in Scenario 2), or $23,451,000 (under Alternative 2 of Scenario 2). 2. In terms of disturbance, the APOC claim the following: 1. $426,710.68 (now revised down to and agreed at $424,910.68) for legal and valuation costs (APOC par 38 – ss 59(1)(a) & (b)); 2. $1,288,557 for the financial costs "reasonably incurred" in relocating to 76 Burrows Road, and rehousing some plant and equipment to Eastern Creek, and $19,650 for financial costs "reasonably incurred" in preparing 33 Burrows Road for waste transfer operations, and relocating plant and equipment (APOC pars 40-44 – ss 55(d) by way of s 59(1)(c)). 3. By way of "relocation losses" (APOC pars 43 to 46 – claimed "pursuant to s 55(d) by way of s 59(1)(c) or, in the alternative, s 59(1)(f)"): "(a) The losses it incurred by reason of not being able to relocate all aspects of it (sic) business of $173,753,000; (b) The losses incurred leading up to the relocation of $2,620,000; (c) 76 Burrows establishment and 33 Burrows aborted costs of $1,308,207; (d) The losses incurred in being unable to pursue Bradshaw Hill upon the relocation in $1,486,000, ..." (As to "Bradshaw Hill", see [63] below.) 1. For the "purchase of replacement property", ALF claims (pursuant to s 55(d) by way of s 59(1)(d)) financial costs the amount of which "depends on the market value determination" (APOC pars 47 to 49). 1. The APOC conclude with pars 50 and 51 in these terms: "Compensation Payable and Orders Sought 50. ALF claims compensation in the following amount (plus interest): 55(a) $343,638,000 55(b) $60,751,000 55(d) $179,593,918 (plus amounts unable to be specified) 51. ALF seeks an order that the Respondent pay its costs of the proceedings." 1. The APOD filed on 12 April 2019 refer extensively to the Respondent's closing submissions, but nominate only the following amounts to be awarded to ALF: 1. market value Lot 1 $3,920,000 (par 19); 2. market value Lot 2 $45,762,720 (par 20(c)); 3. nil for Special Value (pars 9 and 21); 4. disturbance, in terms of legal and valuation costs, of $424,910.68, as agreed (par 22, and see par [56](1) above). 1. The APOD conclude with the following summary: 1. Boiling Pty Ltd is entitled to $11,000 (par 26 – s 55(d)) 2. ALF is entitled to (par 27): Market value: s 55(a) (a) Lot 1: $3,920,000 (b) Lot 2: $45,742,467 $49,662,467 Disturbance: s 55(d) (c) $424,910.68 Total $50,089,177.70 1. Included in the supplementary material provided by the Applicants on 6 May 2019, and filed next day, but dated "1 May 2019", was the following amended schedule, said to reflect the APOC, and particularising "losses attributable to disturbance pursuant to section 55(d) by way of section 59(1)(c) or in the alternative section 59(1)(f)" (i.e. other than legal and valuation costs): " Disturbance claim Sub-Category Source Amount Losses incurred by reason of not being able to relocate all aspects of the business Third Joint Report CB 145 (2/4/18) includes a Table at p9. $173,753,000* Losses incurred leading up to relocation Third Joint Report CB 145 (2/4/18) includes a Table at p9; Samuel Report CB 130 at [20] and [142]-[143] $2,620,000 Losses incurred in being unable to pursue Bradshaw Hill upon relocation Bradshaw Hill Third Joint Report CB 145 (2/4/18) includes a Table at p9; Samuel Report CB 130 at [21] and [277] $1,486,000 Relocation costs Third Joint Report CB 145 (2/4/18) includes a Table at p9; Samuel Report CB 130 at [22] and Table 28 at [263]] (sic) 76 Burrows Road – set up costs by landlord Carlewie for relocation Samuel Report CB 130 at para [257-263]; Marks September affidavit CB 82 at [75-89] $1,101,475 76 Burrows – DADI relocation cost Samuel Report CB 130 at para [261-263]; Marks September affidavit CB 82 at [87-89] and Tab 22 $187,082 33 Burrows Road – aborted set up costs Samuel Report CB 130 at para [263]; Marks September affidavit CB 82 at [72]. $19,650 TOTAL Samuel Report CB 130 at para [263]. $1,308,207 TOTAL Disturbance (excluding GST and legal and valuation fees) $179,167,207 *Note this figure is derived from the Third Joint Report CB145 (2/4/18) table 9 by subtracting from Mr Samuel's Total (at unlimited tonnes) Loss to 19 December 2014; Bradshaw Hill and Relocation costs as set out in the table at page 9. ALF intends to purchase replacement property and will incur costs associated with that purchase. The financial costs are claimed pursuant to section 55(d) by way of section 59(1)(d). The amount depends on the market value determination." 1. The Applicants' solicitors explained (email to my associate from Kate Blunden, 3.51pm Monday 6 May 2019): ... the amount claimed for disturbance (excluding legal and valuation costs) is $179,167,207 ... [which] is different because the relocation costs should be $1,308,207 as per Mr Samuel's report CB 130 at paragraph [263]. But you will note that Mr Samuel's amount for relocation costs set out in the Third Joint Report CB145 (2/4/18) in table 9 (at unlimited tonnes) he has rounded the numbers to the closest thousand. The amount for relocation costs in the table at page 9 should be $1,308,207 and the Total should be $179,167,207. This error however does not change the amount claimed for losses incurred by reason of not being able to relocate all aspects of the business (previously loss profits) which is still $173,753,000. 4.2 The Acquired and other relevant Lands 1. As stated in ALF's POC, at par 1(b), Lot 1 is known as 4-16 Campbell Road, St Peters, and Lot 2 as 10-16 Albert Street, 314 Princes Highway, and 9 Canal Road, St Peters. Lot 1 had an area of 2,410m², and Lot 2 15.71ha. Both are irregular in shape, and are separated by Albert Street. 2. On the Albert Street side, part of the north-eastern boundary of Lot 2 bordered, indeed "surrounded", a triangular area of land owned by the RMS at the DOA. It was called "Bradshaw Hill"; and the Court notes that: 1. it straddled the local government boundary; 2. from 9 November 2009, it was leased to Concrete Recyclers (Group) Pty Ltd ("CRG") for 5 years, with an option to renew for a further five; 3. the lease permitted that company to remove, and/or to crush, screen, and sell, sandstone stockpiled upon it; 4. CRG had subleased the land to ALF on 1 October 2013 (not executed until 15 may 2014), to 30 September 2018, with a five year option, for the winning of the sandstone (estimated at 400,000 tonnes); and 5. Project Approval 11-0086, for "St Peters Materials Recycling Facility", covered such operations (and the sublessee ALF was obliged by cl 18 to comply, as if it were the proponent). 1. Most attention during this case has been paid to Lot 2, which, for many years from 1880, included a brick shale quarry and, later, the Austral-Radford brick pits. 2. Brick shale extraction declined in 1930, and ceased in 1980. Sometime between 1952 and 1960, the filling of the "older northern brickpits with domestic garbage began" (CB 32, p5). It was acquired by the City of Sydney and used by Council as a landfill, becoming known from about 1987 as City of Sydney "Waste Transfer Station" ("WTS"), and sometimes, later, as "Alexandria Recycling Centre". 3. The City Council operation was predominantly for non-putrescible waste – it was described by the Applicant's present CEO as a "public landfill for non-putrescible construction and demolition waste and for Council clean up waste" (Christopher Biggs, "site information" affidavit 22 November 2017, par 9). It appears also to have accepted incinerator ash, asbestos containing material ("ACM", until 1996), incinerated green waste, and industrial and commercial waste (CB 22, p10, par 6.4, and Applicant subs par 44). 4. It was, from about 2002, owned and operated by the Applicant ALF, which sought, through its wholly owned subsidiary, DADI, to continue the landfill operation, but also to expand it to include waste transfer, recycling, and recovery (Exhibit R19, p3). The address of the WTS is recorded in much of the material as 10-16 Albert Street, St Peters, or as 1 Holland Street, St Peters, and most of it is located, along with the whole of Lot 1, within the Marrickville LGA. 5. Lot 1, accessed via Holland Street, was, at the DOA, largely vacant, but "leased out by ALF to various persons for predominantly storage purposes" (Exhibit R19, p4). Its improvements were considered to have no value. 4.3 The Malouf Companies and their lands 1. ALF, DADI, and Boiling are members of what might here be called, for convenience, the/a "Malouf Group" of companies (see Carlewie, at [50]). In Carlewie, I also noted (at [49]) references by Westpac to the/a "Malouf Property group". The internal arrangements and relationships within the "group" assumed some importance at various stages of the proceedings. 2. The Malouf Group of companies has undergone a number of restructures over the years – since Ian Malouf apparently commenced "Dial a Dump" in 1984 (The Australian, 1 March 2019) – as the various Malouf businesses, to some of which the evidence in this case refers, evolved, prior to the conclusion of the hearing (Biggs, "Relationships" affidavit 22 November 2017, pars 10 to 26, 32 to 35, 62 to 92, and 128 to 144). (Although it appears that the group may now have merged, or be in the process of merging, with another company or group in the waste management industry, what follows is drawn from the evidence before the Court at the hearing of the present matter.) 3. CFO Marks deposed (26 September 2017, pars 5 and 6) that he "acts as CFO for Dial A Dump Industries Trust", and that he "or [his] team" also prepare the financial accounts for Good River Properties Pty Ltd and Carlewie Pty Ltd, which are also Malouf companies, but sit outside what he calls the ALF Group, to which he referred (par 4) as: ...consisting of ALF and companies 100% owned or controlled by ALF ... being: a. Dial A Dump Industries Pty Ltd (ACN 131565583) (DADI); b. Tradies Heaven Pty Ltd; c. IRM Property Group No 2 Pty Ltd; d. Dial a Dump (EC) Pty Ltd; e. The Next Generation (NSW) Pty Ltd; and f. ThaQuarry Unit Trust 1. The Court notes that Boiling is not a member of that group, and is neither the parent, nor a subsidiary, of either ALF or DADI. 2. In a later affidavit (7 March 2018, pars 1, 5, 6, 11, 59, 60 and 61), Marks provided more fulsome information, deposing: 1. [At] all relevant times both before and after the acquisition of Lots 1 and 2, I was employed by Dial A Dump Industries Trust which provided my services as Chief Financial Officer (CFO) to [ALF] and its subsidiaries and associates. ... 5. ALF, DADI and DAD(EC) are part of a Tax Consolidated Group with ALF as the ultimate holding company. Exhibited at Tab 1 is a copy of a letter from the Australian Taxation Office confirming the Alexandria Landfill tax consolidated group. 6. The ALF Group for accounting purposes consists of: • [DADI] which carries out the waste related commercial activities on behalf of the Group; • Tradies Heaven Pty Ltd; which is an entity which has never traded i.e. dormant; • IRM Property Group No 2 Pty Ltd; is a landholding entity with no other commercial function; • [DAD(EC)]; is the owner of the land at Eastern Creek upon which the Genesis waste recycling and landfill are located; • The Next Generation (NSW) ... Pty Ltd [("TNG")]; is the applicant for planning approval for the construction of a power station near Genesis; and • ThaQuarry Unit Trust formerly owner of a parcel of land at Eastern Creek comprising part of the "Genesis" landholding. ... 11. When Genesis Recycling became operative in June 2012 and Genesis Landfill in December 2012, financial reporting continued to be issued on an activity basis though data was identifiable also by location if required for landfilling and recycling. ... 59. ... As a result of DADI operating the commercial business, available cash was transferred from DADI to ALF via a loan account. ... 60.} .... As ALF was the holding company and only shareholder of DADI the 61.} dividend was paid to ALF and the payment of the dividend offset the loan account between DADI and ALF. ... 1. The business valuation experts, accountants Dr Rodney Ferrier and Tony Samuel, were asked about the concept of "groups" (including "tax consolidated groups", as mentioned above). They said (Tp2378, LL10-25): MR SAMUEL: Your Honour, consolidated accounts take the financial results of the entire group, which comprises generally a holding company and various subsidiaries, and it adds them up. In doing that, it then eliminates the transactions between them, so that it's reflecting, in effect, the whole - results as if it is one entity. So on a consolidated basis, the ALF results will include the results of DADI and DAD(EC), including the revenue and expenses incurred by DADI and DAD(EC). MR HEMMINGS: Dr Ferrier, do you agree with that description? DR FERRIER: In general terms, yes. The group is what we call an economic entity, made up of separate and distinct legal entities, all of which are under common control. 1. The Managing Director and principal shareholder of relevant group(s) and companies is Mr Ian Malouf, and his key lieutenant is Christopher Biggs. Biggs is a solicitor of more than 30 years' standing, his legal career from 1986 having largely been as in-house counsel. He joined the Malouf group, apparently in about 2001 ("site" affidavit, par 4). At least as late as 2011, Biggs corresponded with State Government regulators as "Christopher Biggs, Solicitors and Attorneys of 32 Burrows Road", while his email contact was "@DADI ...". 2. At the time Carlewie was decided, Biggs was General Manager and in-house counsel of much if not all of the Malouf group, which he described as "the ALF group". In the present hearing, he sometimes (e.g. at Tp1020, L27) referred to the "DADI Group". In any event, in July 2017, he became the Chief Executive Officer of ALF "and its subsidiaries" (Tp1020, LL30-33). He swore affidavits in the present matter, both before and since that change in his role. 3. In 2001-2002, ALF was formed to purchase, from the City of Sydney, its landfill located adjacent to the Carlewie land (Biggs, "Relationships" affidavit, par 23). 4. In June 2008, as part of a restructure of the ALF business, "a wholly owned and controlled subsidiary" of ALF was formed to operate the landfill etc. – it was originally "Dial-A-Dump Industries Pty Ltd", but was renamed "DADI" in June/July 2008. 5. DADI commenced commercial operations on Lot 2 on 1 July 2008, "consistently with the consent or authority given by Boiling" ("relationships", par 83). The then current Environment Protection Licences ("EPLs") remained in the names of ALF and Boiling (Exhibit R19, p3). Boiling had relevantly been the trustee of the "DADI Trust", but had also been trustee of the Dial A Dump Employment Services Trust ("DEST" – Biggs, "stamp duty" affidavit, par 24, and "relationships" affidavit, par 32). 6. The Malouf company Good River Properties Pty Ltd ("GRP"), had been, until 12 May 2009, "Dial A Dump Pty Ltd" ("DAD"). GRP is not a subsidiary of ALF, nor a "related corporation", nor a member of the "DADI" group (Tp1033, LL33-47). Nor does it have any interest in Lot 2 (Tp1034, LL2-4). 7. Biggs deposed on 22 November 2017 ("Relationships" affidavit, pars 112-113): 112 ALF is the ultimate holding company of a tax consolidated group of which DADI is the major commercial operating entity. Financial accounts are prepared on a consolidated basis as if ALF and its wholly owned subsidiaries including DADI are one entity. 113 On or about 1 September 2011 the class of beneficiaries of DADI Trust was attenuated and became confined to ALF and its wholly owned subsidiaries. At the [DOA], DADI Trust, had only two beneficiaries which were ALF and DADI. Payment of rent by DADI to DADI Trust would be shown as income to DADI Trust and distributed in turn to ALF. 1. Biggs also deposed on 22 November 2017 ("Stamp duty" affidavit, pars 29-31): 29. The properties beneficially owned by GRP at the Date of Resumption were: (a) 28 Burrows Road, St Peters purchased July 1994; (b) 30 Burrows Road, St Peters, purchased July 1994; (c) 34 Burrows Road, St Peters, purchased June 1989. 30. The properties owned by Carlewie were at the Date of Resumption: (a) 76-82 Bur rows (sic) Road, Alexandria, purchased in March 2001; (b) 33 Burrows Road, Alexandria, purchased April 1999. 31. The properties owned by ALF were at the Date of Resumption: (a) 10 – 16 Albert Street, St Peters, purchased in January 2002 (Lot 2) and (b) 4-16 Campbell Road, St Peters in January 2002 (Lot 1). 1. All of those nominated properties were in close proximity to one another (see also Carlewie, at [50]). Malouf's "Dial A Dump" business operated (from about 2004) from/at 33 Burrows Road. 2. In 2006-7, ALF, through a wholly owned subsidiary, other than DADI, acquired a significant quarry site in Eastern Creek (114ha), used since the 1950s for stockpiling soils (Biggs' affidavit 29 January 2018, par 40). Dial A Dump (EC) Pty Ltd (DADEC) was formed. 3. In 2009-2012, ALF commenced developing a landfill and recycling centre there, now called "Genesis", and operated by DADI – recycling commenced in June 2012, and landfilling in December 2012. 4. As Biggs deposes ("Relationships" affidavit, par 144), "up to the [DOA] ... DADI operations at Lot 2 seamlessly integrated with the operations at the Eastern Creek site". (The Court visited and inspected the Genesis site, during its View.) 5. Biggs deposed (29 January 2018, par 7): In my various roles for the Dial A Dump group I (among other things): a. directed the acquisition of the Alexandria Landfill site at St Peters in 2002; b. directed the acquisition of the Eastern Creek site in 2006-7; and c Was intimately involved in the preparation of the environmental impact statement and planning approvals obtained for Genesis in 2009/2007 (sic). 1. He also deposed (pars 8-11): 8 In 2002 when ALF acquired Lot 2 the site had been classified as an inert and solid waste landfill. Waste which was received in bulk for landfilling was accompanied by a certification provided by an appropriately qualified consultant indicating that the waste was "inert". With receipt of this certification the receiver, ALF, knew that the waste was not hazardous, clinical waste restricted waste or waste such as putrescible waste which the EPL did not permit. In the case of Lot 2 EPL 4296 permitted the receipt for landfilling of asbestos waste. ... 9 EPL 12594 was issued to Boiling in 2007 and this permitted the receipt of materials for recycling and resource recovery. Those materials continued to be in the "inert" category and certification to that effect was required. ... ... 11 Beginning in or about October 2007 the NSW [Environment Protection Authority ("EPA")] first introduced the "Three Fs" policy which contemplated that for recovered/recycled products to be sold, a testing regime would be required to be carried out. ... 1. He attached (CB 121, at Tab 3) an internal memo he received (dated 10 October 2007), regarding the so-called "Three F's" policy. That advising was headed "3 or 4 fs", and referred to a then proposed new legislative provision he called "the 4Fs gateway", but did not explain further. 2. As at the DOA, no final land use had been determined for Lot 2 after the closure of the landfill. After Lot 2 and the Carlewie site (33 Burrows Road) were resumed, the ALF operations moved, so far as feasible, to the premises at 76 Burrows Road (the waste transfer operations) and 84-88 Burrows Road (the collections operations), as well as to "Genesis" at Eastern Creek. 4.4 Land Titles 1. ALF completed its original claim for compensation in the statutory form on 22 May 2015. This correctly notes that there are endorsements on the land title for Lot 2. These include notation of two registered easements affecting the land, both numbered AG600007, six metres wide and eight metres wide respectively, marked "C" and "D" respectively. These areas are depicted on the DP, and consist of a strip of land crossing the whole of Lot 2 generally from east to west in its southern part. The easements in each case are for water supply purposes. They are depicted on DP1168612 by dashed lines. 2. Also, land below a depth from the surface of Lot 2 of 15.2m is affected by a reservation marked "(P)" in the title diagram. This appears to be a relatively small triangular area which overlaps the easement for water supply purposes close to the southeast area of the site. 3. There is also an easement to drain water created by instrument registered E88840, marked "F" on DP1168612, affecting the whole of Lot 2. 4. There is also an exception of the reservations and conditions contained in the crown grant (which includes a reservation of all minerals). 4.5 Development consents 1. Development consents ("DC") under the Environmental Planning and Assessment Act 1979 ("EPA Act") relevant to these proceedings include: 1. Consent granted on 23 February 1987 by Sydney City Council to itself approving the use of Lot 2 as "a solid waste landfill depot". 2. Consent granted on 20 Mar 1987 by Marrickville Council to Sydney City Council approving the use of Lot 2 as a "non-putrescible waste land-fill depot and for carrying out associated engineering works and the erection of associated amenities, weighbridge and office buildings". 3. A DC over Lot 2, numbered D2003/635, granted by the Sydney City Council, and a DC, numbered 2003/00514, granted by Marrickville Council, to ALF, to use the premises for a waste transfer, recycling and resource recovery facility, being designated and integrated development. (A third party appeal in the Land and Environment Court against each of these consents was instituted by Tallina Pty Limited whose land adjoined Lot 2. Both appeals were upheld by the Court making orders by consent to grant conditional DC: see judgment in Alexandria Landfill Pty Limited v Sydney City Council; Alexandria Landfill Pty Limited v Marrickville Council [2004] NSWLEC 639, and consent orders made in matters 10079 and 11646 of 2004, on 28 September 2006.) 1. Both consents in par [95](3) above were time limited, but were modified in 2012 and 2013. The amendments included extending the operation of the waste recovery facility by an additional five years, until 2 April 2018, in relation to the City of Sydney Council consent, and 7 November 2017, for the Marrickville Council consent. An existing limit to processing, namely 240,000 tonnes per annum of waste through the recovery facility, was continued, and a condition required cessation of the use within six months of the cessation of the then current solid waste landfill operation, if it ceased prior to the five year limit contained in the consents. 2. Also, ALF was required to (1) provide the Council and the EPA with a map indicating land filled areas, and the location of intermittent cover or capping, in accordance with certain hydraulic conductivity requirements, (2) maintain a trade waste agreement with Sydney Water for discharge of leachate to sewer, and (3) prepare a report relating to potentially offensive odour emissions and removing conditions relating to 1 Holland Street, "to reflect the subdivision of the site and removal of the property known as 1 Holland St from the site". 3. Under Marrickville Council consent number 2003/00514 only, a condition required that within 12 months of the approval date (or a later date agreed between the person acting on the consent and Marrickville Council), all mixed waste was to be dealt with within a structure constructed pursuant to and in accordance with DC numbered 2007/00278, issued by Marrickville Council on 28 February 2008, and modified on 7 November 2012. 4.6 The Boiling Lease: 1. The Boiling lease, dated 7 February 2014 (TB 455), governed the relationship between Boiling and ALF with respect to Lot 2, as at the DOA. It was executed by "Larissa Malouf – sole director/secretary", on behalf of Boiling Pty Limited. 2. Under it, exclusive possession of Lot 2 had been given to Boiling. The terms of the lease forbade Boiling transferring its interest under the lease or parting with possession without ALF's consent (cls 10.1, and 10.7). The business being conducted on the land at the DOA required the use of the respective environment protection licences held by ALF and Boiling, because each person who is an occupier of premises at which scheduled activities are carried out is required to be a holder of a licence authorised for that activity, under s 258 of the Protection of the Environment Operations Act 1997 ("POEO Act"). 3. The term of the lease was one year from 1 January 2014 to 31 December 2014. Item 12 of the schedule to Annexure A to the lease provides for three one-year options for renewal. The maximum period of the tenancy under the lease, and its permitted renewals, was four years. The lease subsisted on the DOA of Lot 2. 4. The compulsory acquisition of the lease took place 12 days prior to the expiry date of the initial term nominated in it. The first day on which the first option for renewal could have been exercised was three months prior to the commencement of the first option period, i.e. by 30 September 2014, and the last day for its exercise was one day prior to commencement of the relevant option period, i.e. by 31 December 2014: lease item 12. There is no evidence as to the exercise of the first option period of one year, which would have commenced on 1 January 2015. The lease would have been capable of renewal for the first option term if it had been exercised on, before or after the DOA, within these constraints. 5. The rent payable was a fixed $100,000 per annum, plus GST, payable by equal monthly instalments. It was the tenant's obligation to pay 100% of outgoings including local rates, taxes and building insurance. Item 17 of the lease sets out the permitted use of the land as: [W]aste management, waste transfer, waste collection, waste transportation, waste disposal, landfilling, waste recycling and resource recovery involving sorting, crushing, shredding, screening, processing or stockpiling of materials of any type or any one or combination of such activities or activities of a similar nature. 1. The lease refers to EPLs and various environmental matters. It records that the lessor is the licence holder of EPL 4627, "authorising landfilling on the property", and that the lessee was the licence holder of EPL 12594, authorising resource recovery on the property. 2. The lease also provides that the lessor and lessee must each maintain and renew the respective EPLs for the duration of the lease including any renewal periods. Neither party was entitled to make any claim against the other relating to the past and present uses of the property, any breach of the terms and conditions of EPLs, the POEO Act and the EPA Act. Nor could either party cause or tend to cause any government authority to take action, or to require the owner or occupier of the property to take any action, or serve any notice or order in respect of any of them. This includes any matter disclosed in the public register under s.308 of the POEO Act. Environmental matters, including contamination, pollution or hazardous substances, or any other environmental harm suffered by the property or by other land, were also included in the inter partes liability to the other. 3. Clause 1 of Annexure B provides that the lease is a deed, even if it is not registered. The deed includes the schedule of items commencing at item 1 on the lease form and ending with item 20 in Annexure A, as well as Annexure B. Clause 7 of the lease prohibits any structural alterations to the property and any other alterations require the lessor's consent in writing (but the lessor cannot withhold consent unreasonably). 4. Clause 9 in Annexure B deals with the lessor's rights of access to the property. Access was to be available at any reasonable time: 1. for the purpose of inspecting the property; or 2. how it is being used; or 3. doing anything that the lessor can or must do under this lease or must do by law. The lessor must give the lessee at least two days written notice for access (except in an emergency). The lessor must promptly make good any damage caused to the property and to any of the lessee's belongings which result from exercising the access rights under cl 9. 1. RMS admitted the claim in ALF's POC dated 28 November 2017 that the sale of each Applicant's interest (lease and freehold) "should be treated as separate and distinct components of the one bargain": see par 29 of those POC. This suggests that the hypothetical purchaser acquired both the freehold estate together with the leasehold estate of Boiling (i.e. two distinct components) in one bargain. However, this pleading was not repeated in subsequent amending POC and POD. 2. In any event, a hypothetical bargain in these terms would be contrary to s 56 of the JTC Act in which there is a hypothetical seller and hypothetical purchaser for each interest acquired, and the assumed sale is effectively unconditional. The two sales could be joined only by assuming that that sale was conditioned to require the purchaser to be not hypothetical (and in that sense unknowable) and that the bargain contain a special condition specifying the identity of the purchaser. 3. On these two bases, even if the parties to the respective proceedings made the pleaded assumptions, and that agreement had not been supplanted by subsequent amended proceedings (which is not the case) the purported agreement on the pleadings could not be implemented. 4. The Boiling lease proceedings relate inter alia to the market value of the leasehold interest under s 55(a) of the JTC Act. Generally, the factors to be taken into account in such circumstances include the actual rental payable (here, $100,000 plus GST per annum) in comparison to the market rental value of the leased land; favourable and onerous covenants and conditions in the document creating the leasehold interest; the unexpired term of the lease; and the right of the holder to an extension(s) of the terms. Relevant to the last of these factors are the options for renewal for the period 1 January 2015 to 31 December 2018 (or three years from expiry of the initial one year term), subject to the lessee giving notice of exercise of the options within the prescribed periods. The agreement in the deed of lease for the option terms is binding. 5. The lease for one year does not require registration under s 53(1) of the Real Property Act 1900, and the presence of the options for renewal for three one-year terms does not alter that position: see 195 Crown St Pty Limited v Hoare [1969] 1 NSWR 193 at 199, in which Asprey JA (with whose conclusion on this point Walsh JA, at 198, and Hardie A-JA, at 207, agreed) stated that the exercise of an option for the renewal of a lease is a grant of a fresh lease for a new term; see also Gerraty v McGavin (1914) 18 CLR 152; (1914) 20 ALR 182, where Isaacs J stated of a "lease obtained by the exercise of an option to renew" that "clearly it is a new lease, a new demise". Isaacs J reiterated this view in The Minister v The New South Wales Aerated Water and Confectionary Company Ltd (1916) 22 CLR 56; (1916) 23 ALR 10, concluding that "a renewal is a new lease". 6. Prior to the DOA the options for renewal in the Boiling lease were available at the times and on the terms set out in the lease. On page 3 of Mr Lunney's joint valuation report with Dr R Ferrier, with respect to Lot 2 (CB 60), he states: "given that Boiling had breached an essential term of the lease as at the [DOA]", on advice [from others], it would be possible for a hypothetical purchaser of the reversionary interest of the registered proprietor of Lot 2 "to terminate the lease and achieve vacant possession". Nevertheless, he opines that if the Court holds that the options for renewal were or would have been available to Boiling his valuation would need to reflect this fact. 7. I have difficulty in accepting the advice that had been given to Mr Lunney. Part 8 Div 4 of the Conveyancing Act 1919 ("CAct") deals with options in leases, and its provisions have effect notwithstanding any stipulation to the contrary. Section 133E of the CAct states: 133E Breach of certain obligations not to preclude option except in certain circumstances (1) This section applies to a lease that contains: (a) an option exercisable by the lessee, and (b) provision by which the lessee's entitlement to the option is made to depend on performance by the lessee of any specified obligation, whether such performance is required before, or after, or before and after, the giving of any notice by which the option is exercised. (2) Despite any provision of the kind referred to in subsection (1) (b), no breach by the lessee of any relevant obligation precludes the lessee's entitlement to the option unless: (a) the prescribed notice has been served on the lessee in respect of the breach, and (b) the lessee's rights are extinguished in relation to the notice. (3) In subsection (2): breach of an obligation includes, where the obligation requires any thing to be done, any neglect or failure to do the thing concerned. obligation includes any agreement, covenant, condition or stipulation by which the lessee is required to do or refrain from doing any thing. prescribed notice means a notice in writing: (a) specifying the lessee's breach of the relevant obligation and served on the lessee: (i) within 14 days after the giving of a notice by which the option is exercised, if the breach occurred before the giving of that notice, or (ii) within 14 days after the breach, if the breach occurred after the giving of that notice, and (b) states that, subject to any order of the court under section 133F, the lessor proposes to treat the breach as precluding the lessee from entitlement to the option. (4) For the purposes of subsection (2) (b), the lessee's rights are extinguished in relation to a prescribed notice: (a) if an order for relief against the effect of the breach in relation to the lessee's entitlement to the option is not sought from the court within one month after service of the prescribed notice, or (b) if proceedings in which such relief is sought are disposed of, in so far as they relate to that relief, otherwise than by granting relief, or (c) if such relief is granted on terms to be complied with by the lessee before compliance by the lessor with the order granting relief, and the lessee fails to comply with those terms within the time stipulated by the court for the purpose. 1. There is no evidence that a prescribed notice under s 133E, or a notice under s 129 of the CAct, had been given, or that the lessor had terminated the lease for repudiation or breach of an essential term, prior to the DOA. 2. Moreover, the period during which the lessee was entitled to exercise the first option for renewal had not expired. Accordingly, there is no evidence before the Court of any impediment to the right of the lessee under the Boiling lease to exercise the options for renewal. 3. The right of entry to the land in Lot 2, by ALF, under the provisions of the lease, can only occur during the lease or option terms, and in accordance with the covenants in the lease. 4. If the market value of the Boiling lease interest is determined in this way, and in accordance with s 56 of the JTC Act, the identities of the lessee and lessor at the DOA are purely hypothetical, and do not involve any consideration of the actual parties to the lease. 5. For that reason the highest and best use of the Boiling leasehold interest may have been constrained to a more or less extensive use than the legally permissible uses allowed to Boiling by its EPL 12594, namely, for "resource recovery and waste storage", with acceptable waste being limited to: • Foundry sands • Soils that meet the criteria for general solid waste • Garden waste • Wood waste • Metal waste • Glass • Plastic • Building and demolition waste (maximum 180,000 tonnes per annum) The maximum amount of waste per annum permitted to be accepted is 240,000 tonnes per annum; The maximum wood waste for reuse is 2,000 tonnes per annum, as is also shredded wood and garden waste; Maximum metal is 500 tonnes per annum; Maximum glass or plastic - 500 tonnes per annum each; 1. Section 56(1) of the JTC Act requires the market value of interests such as Boiling's leasehold to be determined "disregarding (for the purpose of determining the amount that would have been paid [in the hypothetical transaction]): ... (c) any increase in the value of the [acquired] land caused by its use in a manner or for a purpose contrary to law". 2. Use of the leased land beyond the limitations of the EPL 12594 would be "contrary to law", and any consequential contribution to the value of the leasehold interest must be disregarded. This can readily be quantified by deducting any value referable to income from the forbidden use. 3. During final submissions, the Applicant submitted (at Tp2555, LL4-13 and LL21-23): ... We seek no compensation for market value. [As to] The disturbance claim, the Valuer-General gave us $11,000, but in the context of these proceedings we haven't even sought to put on evidence to justify that $11,000 that the Valuer-General was otherwise willing to award us. There being no market value claim and there being no separate disturbance claim, that was just for some legal and valuation costs that they anticipated we would have incurred. ... if it is $11,000, so be it, subject to a normal order for costs would be the only matter that would be happening in relation to the position of Boiling. ... 1. The parties have agreed upon the amount the Respondent will pay to the Applicants on account of their legal and valuation costs (disturbance items) in respect of the lodging of the claim for compensation. 2. There will also be an order that the Respondent pay to the Applicant the sum of $11,000 as total compensation to the Applicant in proceedings now numbered 2016/00155930 – Boiling Pty Limited v Roads and Maritime Services. Section 5: Methods of valuation 1. Given that the whole of the land in Lot 1 and Lot 2 was acquired, and that there is no residue land left with the Applicants, the market value should be determined in accordance with the definition of that term in s 56 of the JTC Act. 2. For this purpose the highest and best use of each of Lot 1 and Lot 2 ought to be separately identified, and, in this regard, it is necessary for the land to be valued in the condition it was in on the DOA, with all its potentialities as potentialities: Roads and Traffic Authority of New South Wales v Mosca ("Mosca") (2006) 146 LGERA 335; [2006] NSWCA 159, at [15]. (See [478] below.) 3. With respect to Lot 1, both parties have approached the valuation task by the method of direct comparison with comparable sales. On this basis the Applicant's valuer, Mr Dyson, determined the amount to be $5,500,000, and the Respondent's valuer, Mr Lunney, $3,920,000. 4. With respect to Lot 2, the highest and best use can be either (i) its existing use or (ii) a higher and more valuable use for which the land possesses the potential, and for which it is advantageously adapted: see Sydney Water Corporation v Caruso ("Caruso") (2009) 170 LGERA 298; [2009] NSWCA 391 at [174]. 5.1 History of Valuation Scenarios 1. The Applicants opened their case by reference to the development plan called the Functional Layout Option Plan in Appendix A to the Civil Engineering report of Mr A McLandsborough (CB 52), the staging plan which I earlier identified as "SKC23" ([8]). 2. Further, the parties agreed to employ DCF methodology ([6] above), by which the valuation of Lot 2 is to be calculated by forecasting future revenue, risks and costs, and applying an appropriate discount rate to the cash flow so determined. 3. In this case the identification of the revenue, costs and expenses was also checked against direct comparison of comparable sales for similar businesses and land. 4. The Applicant's opening address identified the highest and best use of Lot 2, as at the DOA, by reference to SKC23. The area of the whole of Lot 2 is 157,100m². 5. The approach that would be taken by a hypothetical purchaser and vendor of the land, as suggested by the Applicants, was to proceed with development of Lot 2 to confine "waste facilities" to an area of 57,500m² of the site. That development would comprise the following stages: Stage 1 – immediate development of an area of 27,000m², and construction of an internal road from Albert Street to the area designated "A" in SKC23, with construction to commence on the DOA. Stage 2 – the construction of the road to occur "within 12 months", and involve the relocation of the weighbridge to the Canal Road entry/exit. Stage 3 – the construction of a temporary processing centre, with a lightweight cover, in areas "C" and "D" on SKC23, movement of existing waste operations to areas "C" and "D", and completion of an/the internal road to Canal Road. Stage 4 – construction of proposed, more permanent, waste facilities, and removal of the temporary facilities from areas "C" and "D", so that there would be a "fully operational waste facility on area C" within ten years from the DOA, occupying 28,500m² of Lot 2. 1. The result would be that areas A, B, C, and D would be developed for the purposes of subdivision and staged sale over the period of from one to eight years after the DOA. 2. Following the completion of the expert reports for the Applicant, by Mr McLandsborough and Mr Webster, in November 2016, Mr Webster proposed an "Option 4", which contemplated the redevelopment of a 5.75ha portion of the acquired Lot 2, following the completion of landfill activities, for a "Resource Recovery and Waste Transfer Facility" ("RRWTF", sometimes called a/the "resource recovery facility"). This portion of land is identified in SKC23, which shows the remainder of the acquired land as being redeveloped for other "mixed use" (sic), referred to by the engineers as "industrial" purposes. He proposed as "surplus land" an area in the north east portion identified as areas A-D (9.96ha) to be used for industrial development. 3. Mr Webster also proposed the construction of three adjoining sheds within the proposed waste management facility site above the former void area that would be the first to be filled. This waste processing facility would include both waste transfer and resource recovery facilities. Mr Webster proposed a significant increase in the total annual tonnage of material which would then be brought onto the site for waste processing, namely 500,000 tonnes per annum, compared with the limit of 240,000 tonnes under existing waste recycling consents. 4. The expert town planning witnesses, Ms Bindon (RMS) and Mr Mitchell (ALF), addressed Mr Webster's Option 4 in an addendum to their joint planning report for Lot 2 of 21 June 2017. Mr Mitchell opined that Mr Webster's specified development schedule was realistic, while Ms Bindon believed that Option 4 was unrealistic, as the time frames provided on the staging plan did not take into account the time required to obtain all necessary approvals, and undertake the geotechnical and contaminant remediation activities that would need to be undertaken to make the land suitable for redevelopment. 5. The part of Lot 2 that falls within the Marrickville LGA is zoned "IN1 – General Industrial" under the Marrickville Local Environmental Plan 2011 ("MLEP"); and that part of Lot 2 that falls within the City of Sydney area is in part zoned "IN1 – General Industrial" under the Sydney Local Environmental Plan 2012 ("SLEP"); and partly "SP2 – Special Infrastructure – Classified Road" under the SLEP. It is common ground that the existence of the SP2 zone is directly attributable to the proposal to carry out the public purpose of the present acquisition, and is to be disregarded when determining the market value of the land, as required by s 56 of the JTC Act. 6. Lot 1 is zoned "IN2 – Light Industrial" under the MLEP, and is reserved in part or whole for acquisition by a public authority. It is affected by road widening/realignment under the Roads Act 1993, an environmental planning instrument, or a resolution of Council. These provisions of the LEPs, as well as the carrying out of the public purpose of the acquisition, are also to be disregarded when considering the market value of the land, consistently with the definition of market value in s 56. It is common ground that both Lot 1 and Lot 2 are to be treated as though wholly zoned "IN1 – General Industrial" under the MLEP and the SLEP. 5.2 Final valuation scenario for Lot 2 1. Throughout the proceedings, ALF considered several valuation scenarios for Lot 2, posed by its respective experts. Its suggested valuation scenario, for highest and best use, comprises: 1. Landfilling for 8 years by importation of waste soils; 2. Operation of a recycling business (on various parts of the land) in years 1 to 8; 3. Subdivision of "surplus" land; and 4. Operation of a new RRWTF building in years 9 to 29. 1. The Respondent accepted only the first component of that valuation scenario, and disputed the physical, regulatory and/or financial feasibility of the others. 2. Taking into consideration the components of the valuation scenario, the parties agreed that a table of integers should be prepared identifying and quantifying each item of revenue and cost. Both parties have retained expert witnesses to provide inputs into the DCF model, where the risks are potentially fundamental, or would encumber the proposed development or use of the land. Experts were retained with expertise in the following fields: 1. Town planning 2. Traffic 3. Geotechnical engineering 4. Contamination 5. Environmental management (specifically leachate and landfill gas management) 6. Waste operations 7. Quantity surveying 8. Land valuation 9. Business valuation 1. For other issues, the parties identified and quantified values, by taking into account the lay evidence, conditions of consent, and the likely costs, expressed in dollar terms. These categories of opinion form part of the Court's decision as to the highest and best use, as well as the market value of Lot 2. 2. Accordingly, the Court has considered the relevant DCF inputs, and the feasibility of the valuation scenario, having regard to these aspects of the evidence. Sections 6 to 14: Expert Evidence 1. I will now attempt to summarize, as concisely as I can, the voluminous and very complex expert evidence before the Court, looking at it mainly from the point of view of the case mounted by the Applicant: Section 6 deals with town planning evidence (from [147]) Section 7 deals with traffic evidence (from [161]) Section 8 deals with geotechnical evidence (from [190]) Section 9 deals with waste operations evidence (from [211]) Section 10 deals with environmental and contamination evidence (from [280]) Section 11 deals with environmental management evidence (from [329]) Section 12 deals with quantity surveying evidence (from [386]) Section 13 – deals with land valuation evidence (from [397]) Section 14 – deals with business valuation evidence (from [430]) 1. In Section 15 (from [472]) I will commence my consideration of the parties' competing cases, dealing firstly with the "highest and best use" of Lot 2. Section 6: Town planning experts 1. As already noted, Paul Mitchell gave expert town planning evidence on behalf of the Applicant, and Julie Bindon on behalf of the Respondent. Both of these experts are well qualified and experienced in their field. 2. They agreed: * That the underlying zoning of the land would have been IN1; * Upon the likely uses that would have been approved under the relevant planning instruments, absent the public purpose of the acquisition; * Upon the DCs that applied; * That the landfill consents are not time limited, but are practically limited by the volume of the remaining void, in respect of which they defer to other experts; * That a further five-year extension to the waste recycling consents could be achieved by a s 96 modification application. As a condition or pre-condition of this extension the waste enclosure structure, required to be erected pursuant to the 2012 Marrickville consent, would indeed be required; * That the figure 7 option identified by Mr Mitchell (CB 2, p28), which would concentrate the fill and recycling activities to the southwest corner of the site, with new access from Canal Rd, could be logical, but this would be subject to resolution of issues, including access to Canal Rd; remediation, including on-going leachate and gas management; geotechnical requirements for buildings and uses; and otherwise managing potential land use conflicts with other new uses. They further agreed that this would require a concept approval, with staged developments; * That there would be "fair to reasonable" prospects of achieving a rezoning of part of the acquired land fronting Princes Highway, to the B6-Enterprise Corridor zone, to allow bulky goods retail. However, this would be at least 12 years from the DOA (five years further landfill minimum, then seven years settlement minimum), or up to 35 years depending which expert geotechnical advice is accepted). Council would consider any application for rezoning only when the owner could demonstrate the land would be suitable for redevelopment – the planners say not "less than" (by which they clearly mean not more than) two years prior to that date. They disagree in certain respects on the detail of this including; 1. Whether access to Princes Highway would be permitted, 2. The extent to which a rezoning to allow broader retail uses would be consistent with the Marrickville Employment Lands Study 2014 ("MELS 2014"). 1. The planners disagreed in certain respects, concerning Lot 2, including: 1. The extent to which additional conditions would be imposed on the five year extension of the waste recycling consents – 1. Mr Mitchell says "limited scope". He relies on Newbury DC v Secretary of State for the Environment [1981] AC 578, and 1643 Pittwater Road Pty Ltd v Pittwater Council 11 Elvina Avenue Pty Ltd v Pittwater Council Doering v Pittwater Council 1643 Pittwater Road Pty Ltd v Pittwater Council [2004] NSWLEC 685 (per McClellan ChJ at [52]), and says that no new impacts could be envisaged. 2. Ms Bindon notes that the Land and Environment Court orders of 2012, with respect to the property (granting the previous extension), imposed additional environmental management conditions arising out of submissions from the EPA and adjoining owners; 1. The extent to which new conditions might be substantially different from the existing conditions – they agree that an EPA licence would be required (to be obtained or transferred), and, that the EPA could impose new conditions. 2. The likelihood of any third party appeal to this Court: 1. Mr Mitchell says there is a low chance only; 2. Ms Bindon relies on the history of land use conflicts, objections, and the fact that there was a third party appeal commenced by Tallina, with respect to a neighbouring property, regarding the 2004 consents. 1. The planning approval pathway for waste recycling to continue after landfill complete: 1. Mr Mitchell says that a s 96 modification is not a radical transformation, and there are no new uses, so physical changes and impacts are minimal; 2. Ms Bindon says the current recycling operation relies on landfill to dispose of excess waste that cannot be recycled, reducing environmental impacts (especially truck movements), compared to recycling onsite without landfill; 1. They do, however, agree that, if a new DA is required, it would be for State Significant Development ("SSD"), and an Environmental Impact Statement ("EIS") would be required. 2. Mitchell and Bindon provided, as an addendum, a joint report for the purpose of addressing SKC23. As to the proposal generally, including its staging, they noted that the proposal doubles the annual tonnage of material to be received, and that it will include putrescible waste, raising additional potential environmental impacts. 3. Area A in the staging plan SKC23 is identified for immediate development, but it could not be commenced until a planning approval issued, and all necessary conditions are satisfied. 4. Area B, identified as being "developable within 12 months", would also require planning approval. 5. The staging plan suggests for areas C and D a "temporary light weight cover". However, the planning experts would advise a purchaser that the waste facility is required to be constructed under the existing DC, and that some enclosure of any existing or proposed centre would be required, at least a temporary one. 6. Ms Bindon thinks the time frames on the staging plan do not take into account the time needed to secure approvals, but Mr Mitchell says they do, as areas C and D are proposed for development in 5 to 8 years. 7. The addendum report states that it is incorrect to assume that a new and expanded waste management facility, handling additional types of waste, would receive planning approval in the modern regulatory environment for this tonnage. Mr Mitchell agrees a proper assessment would be required, and "approval should not be assumed". 8. They then set out what they termed "concluding advice", which included: 1. Ms Bindon thinks there are a number of "significant unresolved issues" that would need to be addressed. 2. Mr Mitchell has "little doubt" that an application for a properly designed facility would gain DC. 3. They agree that any approval would depend on "amongst other things, whether acceptable traffic, odour, dust and air quality outcomes could be demonstrated". 1. The assessment will also need to take into account: 1. Geotechnical considerations, including structures, civil works, and settling periods; 2. Timeframes and measures required to complete post closure requirements, and make the land suitable for development; and 3. Ongoing measures for gas and leachate management, and any limitations this may impose. 1. They would have advised a purchaser that the timeframes and staging plan were unrealistic. Approvals alone would take at least 12 months, and possibly more than two years, based on comparable applications such as Veolia on land at Camelia, which was still awaiting determination 2.5 years after SEARs issued. They agree that there is the prospect of further delay in the event of further information or requirements for mitigation issues, and that there is the risk of refusal, or of conditions limiting operations, or requiring further mitigation measures. 2. Redevelopment could not occur until at least 12 years after the DOA. Section 7: Traffic experts 1. Mr Graham Pindar was the traffic expert for the Applicant. He is a traffic and transport consultant with 35 years' experience, and his report in chief is dated 3 November 2016. 2. Mr Philip Brogan is a traffic and transport consultant with 30 years' experience, and his report in chief for the Respondent is dated February 2017. 3. Both consultants formerly occupied senior positions with what is now RMS, and they prepared a joint report dealing separately with Lots 1 and 2. 4. They agreed that, at the DOA, vehicular access to Lot 1 was available via both Albert Street and Campbell Street, and that the access driveway on Campbell Street could accommodate left-in and left-out vehicle access for light vehicles and occasional small rigid vehicles. Mr Brogan considered that a consent authority would prohibit access to Lot 1 via Albert Street in order to protect resident amenity. Consequently, the driveway would have accommodated only left turns out of Lot 1. Mr Pindar considered that the optimal outcome for Lot 1 would be to achieve a low traffic generating use. Mr Brogan opined that access to Lot 1 via Campbell Street was inadequate to support the use of Lot 1. 5. Mr Pindar took the view that the access to Lot 2, at the DOA, was clearly appropriate to support the landfill use which had been occurring for years under the consents that applied. This involved reliance on the main access onto Campbell Street. 6. Mr Brogan considered that the access to Lot 2 at the DOA was inadequate to support the use of Lot 2, for the geometric and safety reasons outlined in his statement of evidence of February 2017. Nevertheless he acknowledged the existence of the approvals for use at that time. He considered that the six conditions placed on the approval granted by the Land and Environment Court, on 28 September 2006, reaffirmed the concerns of the consent authorities and the Court in relation to vehicle access and activity associated with the use. 7. Neither expert presented any records of traffic accidents in the vicinity of the site. 8. With regard to access to Lot 2, to support future alternate uses, without any improvements, Mr Pindar could not see any reason the current consent would not be extended beyond 2018. Mr Brogan's view was that a consent authority would be inclined to maintain the access arrangement through at least one more five-year extension of the recycling use approval. He stated that the accesses to Lot 2 were inadequate for the site distance, amenity and other reasons outlined in his February 2017 statement. 9. If access to Lot 2 to support future or alternate uses was to occur, but with improvements, Mr Pindar was of the view that there were several possible improvements, including a new signal-controlled access onto Canal Road (a new connection to the existing traffic signals), and an improved Campbell Street access. 10. With respect to the Princes Highway as a means of access, Mr Pindar stated that a new access (the western access) would be necessary to serve this frontage, as the land is otherwise effectively "landlocked" due to the severe escarpment that forms its eastern boundary. However, he considered there would be a good prospect of achieving approval from RMS for a left-in/left-out access, for vehicles up to and including a large rigid truck, subject to detailed design and assessment. 11. Mr Brogan agreed that a left-in/left-out access intersection, on the Princes Highway to Lot 2, would have been unlikely to be approved by RMS, as a point of access to Lot 2, when the principal point of access could be located on Canal Road for reasons he outlined in his February statement. The grade of the Highway would be an issue with respect to point of access, along with the cumulative effect of having multiple accesses along this section of highway. 12. With respect to Campbell Road, it was agreed that a consent authority would have been amenable to the physical improvement of the existing access arrangement via a stub road connecting Campbell Road to Albert Street – Campbell Lane – but more intense traffic generating land uses would trigger the need for additional site access. Mr Pindar was of the view that the signals would provide a safe and efficient access point. 13. With respect to the Campbell Road access (the northern access), there was, in Mr Pindar's opinion, a range of options for the existing sub-optimal arrangement. Mr Brogan considered that a consent authority in consultation with RMS would be unlikely to approve a development of Lot 2 that relied only on site access A (Holland Street) and site access B (Campbell Street), even if these accesses were modified/enhanced. 14. The experts agree that a new point of access to Canal Road, as described, would accommodate increased traffic generation to and from the site, while potentially taking traffic pressure off the eastern accesses. It was also agreed that a collector, spine or perimeter road through Lot 2 could accommodate the increased traffic generated by a redeveloped Lot 2, provided it was linked to the Canal Road traffic signals. 15. Mr Brogan stated, with respect to road network performance associated with improved access for future uses, that a consent authority would have agreed to a more intensive redevelopment of Lot 2 only if it were satisfied additional access could be achieved via Canal Road or other frontage roads, and would have been keen to ensure that access was possible via Canal Road, which is a higher order road, designed to accommodate industrial traffic. He considered that a consent authority, in consultation with RMS, would have approved, subject to appropriate master planning and traffic analyses, the introduction of a collector road to provide access to the redeveloped Lot 2, via Canal Road, whilst eliminating or reducing the volume of traffic using eastern accesses. 16. Mr Pindar's ultimate view was that, for the overall site, the full range of improvement options discussed in the joint report involved three access locations: two new and one improved, all onto classified main roads. In his opinion, that would release significant traffic capacity to serve Lot 2. 17. The traffic experts subsequently prepared a further joint report, dated 12 September 2017, having been instructed to consider Webster's Option 4, a RRWTF (see [135] above). 18. Mr Brogan had prepared a memorandum, dated 17 August 2017, entitled "Canal Rd intersection operation and heavy vehicle throughput", to deal with an error he had made in recording the traffic count/traffic volumes, associated with the RRWTF component of the development option, and Mr Pindar needed to assess the evidence. 19. The traffic experts now agree that a signalised intersection is likely to operate satisfactorily, based on the peak truck volumes derived by Mr Brogan for the RRWTF, which was 126 vehicles per hour – 63 in, 63 out, between 6:30am and 7:30am on weekdays. The experts agree that the amended signal-controlled intersection can readily accommodate the traffic associated with the RRWTF component of the Option 4 development. Indeed, spare peak hourly capacity would be available, but the experts were unable to determine what level of mixed use development this spare capacity would support, because the land uses and associated peak generation are presently unknown. The experts agreed that Canal Road, Burrows Road and Princes Highway are all approved B Double routes (vehicles up to 26m in length). 20. Mr Brogan stated that, in the case of a longer term arrangement, his view remained that RMS would insist that any access point created as a fourth leg to the existing signalised intersection not be offset. Mr Brogan remains of the view that the RMS would be unlikely to support a left-in/left-out access on the Princes Highway, for reasons of road safety and traffic flow efficiency. Also it would not permit a left-in point of access via the Princes Highway, in the absence of a dedicated left turn deceleration lane. Mr Pindar again (see [170] above) considered that, due to the escarpment at the rear of the site frontage to the Princes Highway, a future development site fronting the Highway is effectively "landlocked" from the point of view of vehicle access, other than to the Highway. Mr Pindar considered that the internal road could be readily constructed in the available 40m road frontage. 21. The traffic experts' first joint report, dated 26 May 2017 (CB 19), and their further joint expert report dated 12 September 2017 (CB 20) gave rise to extensive cross-examination. 22. The topics covered by the second joint report included the intersection at Canal Road, its operation and heavy vehicle throughput. The experts agreed that the amended signal controlled intersection can readily accommodate the traffic associated with the RRWTF component of the "option 4" hypothetical development. Spare peak hourly intersection capacity would be available. However, they were unable to determine what level of mixed use development this spare capacity would support. 23. In terms of the first joint report, it was agreed that the access arrangements to Lot 2 at the DOA would continue – the existing uses on Lot 2 would extend beyond the current consent (5 years renewable consent granted in 2013, expiring in 2018). 24. Mr Pindar considered that access to Lot 2 at the DOA was clearly appropriate, as a continuation of the pre-existing use. This involved reliance on the main access onto Campbell Street which he referred to as "sub-optimal, but not precluding the use". On that basis, he was of the view that, from a traffic perspective, there was no reason the current consent would not be extended, beyond 2018. He assumed that any development which resulted in increased traffic volumes during the peak periods would need to be carefully assessed, and carry an associated potential risk. 25. Mr Brogan noted some inadequacy in the existing arrangements, and pointed to conditions 14.1 to 14.7, and 18.3, placed on the Court approval for the site, dated 28 September 2006, which he considered reaffirmed the concerns that the consent authorities and the Court had at that time in relation to vehicle access and vehicle activity associated with the use. 26. The conditions imposed limited all deliveries to and from the site by trucks of 2 tonne or greater capacity being restricted to using nominated streets, which included only Canal Road and Campbell Road, with signs to facilitate movements to be erected at the weighbridge and front gate. Access to the site was restricted to 7am to 6pm Mondays to Fridays and 7:30am to 5pm Saturdays. Departing trucks of greater than 2 tonne capacity were prohibited from using Campbell Road, east of Barwon Park Road, and at no time was any truck to arrive or depart the site via Albert Street or Campbell Lane. Semi-trailers and trucks with dog trailers were prohibited on Sundays. No access was to be had to and from the site, via Albert Street, from the Princes Highway. Access was permitted to the site via No 1 Holland Street and access to it was subject to special conditions as to times and trucks. 27. Both Sydney and Marrickville Councils permitted extension of operations to 2018 (Sydney) and 2017 (Marrickville). 28. As to the issue of access to Lot 2 to support future or alternate uses, without any improvements, Mr Pindar could not see any reason the current consent would not be extended beyond 2018. Mr Brogan considered that, having regard to the history and the existing conditions imposed, a consent authority would be inclined to maintain the access arrangement through at least one more five-year recycling use extension. He also stated that, at the DOA, the accesses were inadequate for the site distance, amenity and other reasons outlined in his February 2017 statement. 29. As to the scenario of alternate uses with improvements, Mr Pindar proposed a number of alternative strategies. Section 8: Geotechnical experts 1. Mr Garry Mostyn was the geotechnical expert for the Applicant. He is the Principal at "PSM", and has expertise in foundation engineering, deep fills, earthworks and embankments, slope engineering, rock mechanics, pavement engineering, geotechnical risk analysis and forensic engineering. 2. Dr Bryn Thomas was the geotechnical engineer for the Respondent. He is Senior Principal Geotechnical Engineer at GHD, and has geotechnical and geo-environmental experience on projects including roads, railways, earthworks, landfills, quarries, and land renewal. 3. The experts each prepared individual reports dated November 2017 (CB 12 and 13), a joint expert report dated 22 May 2017 (CB 14), and a supplementary joint report dated 3 October 2017 (CB 15). 4. The primary point of disagreement related to the magnitude and timing of settlement on Lot 2, and its consequential effect on the Applicant's proposed "highest and best use". 5. Mr Mostyn contended that settlement of the landfill at the site, post-placement, is approximately 1% to 2% of the fill depth, and that most settlement occurs rapidly, and is virtually complete within one year of filling being complete. 6. In particular, Mr Mostyn observed (CB 14, par 38(h)(i)) that: At the Site post placement settlement of the Landfill is approximately 1% to 2% of the fill depth, most occurs rapidly and is virtually complete within one year of filling being complete. A typical industrial building with a life of 30 years, constructed 10 years after completion of filling might experience up to 0.2% of fill depth settlement in addition to that due to superimposed loading that had not been reduced by surcharging. Additional surcharging would reduce the creep component of this time dependent settlement but not any component due to decomposition. 1. Dr Thomas described Mr Mostyn's chronology of settlement as only a "snapshot", in comparison with the landfill sites' potential period of settlement. As a starting point, Dr Thomas observed that landfills are among the least desirable sites for redevelopment of foundations for buildings and associated infrastructure with the potential for major foundation problems. Landfills are more traditionally rehabilitated for low level amenity use, such as sports facilities, open-ground and parkland. 2. One of the main reasons for this is the uncertainty of the geotechnical sub-surface ground conditions. Dr Thomas said that landfill sites are impossible to characterise using "normal" soil sampling and in-situ testing and design approaches, with inherent geotechnical and geo-environmental issues, and constraints which will impact on development. Landfills are usually in-filled in an uncontrolled manner, where re-development of the landfill site is rarely considered at the time of infilling. Consequently, conditions exist in the landfill which are not conducive to redevelopment. 3. Prediction of long-term settlement is an important factor in planning any type of built form. Dr Thomas says that settlement of the solid waste landfill material is generally considered to occur in three stages: immediate settlement, consolidation (primary) settlement, and long-term (secondary) settlement (or "creep"). 4. Dr Thomas relies on academic studies which are considered representative of Lot 2. According to Dr Thomas (CB 13, par 81): Settlements can be very large as reported by Qian Figure 6.9. (2012), reproduced below in Figure 7-3, where landfill compression strain can range from around 10% to 30% for old landfills to over 40% for wood waste landfills (of which the ALF site was one). The time for compression can also be significant and is typically measured in years or tens of years." 1. In support of these conclusions, Dr Thomas applied the academic studies to the significant body of evidence of landfill biodegradation occurring on the ALF site: 1. Firstly, the borehole logs indicated significant wood waste; 2. Secondly, there was evidence of "tip fires" – which Mr Mostyn accepted in his oral evidence was an indicia of decomposition – in a location under Area D (although later Mr Mostyn contended that there might have been only smoke, but no fire); 3. Thirdly, there was past evidence of Municipal Solid Waste being deposited; and 4. Fourthly, there was evidence of serious landfill gas issues; 1. Mr Mostyn was cross-examined on the academic studies, upon which Dr Thomas relied to determine Lot 2's settlement. 2. Of particular importance, Mr Mostyn did not accept the academic positions on primary settlement (stress dependent settlement) and secondary settlement (the non-stress dependent long-term creeping settlement): see Tpp423-424. 3. Taking into consideration the magnitude and timing of settlement, the experts differed regarding the costs of geotechnical investigations and structural foundations involved in any future development of Lot 2. 4. For the geotechnical investigations, Mr Mostyn prepared his advice for a "potential purchaser", considered "to be a willing but not anxious purchaser with experience in developing large sites for industrial/commercial uses". In informing the hypothetical purchaser, he relied upon the historical surveys, aerial imagery of both sites, and AECOM's geotechnical investigation reports, dated 3 November 2014 and 6 May 2015. 5. In contrast, Dr Thomas prepared his advice for a "hypothetical purchaser". Further, he prepared a due diligence approach including: a desk top study, geotechnical site investigations, and a risk-based assessment for any development or redevelopment of the former landfill site. Further, a comprehensive geotechnical site investigation and risk analysis would be necessary to address any geotechnical risks arising from the desktop study. 6. Applying their geotechnical assessments, Dr Thomas prepared a division of the site into two "Potential development areas" ("PDA1" and "PDA2"), and Mr Mostyn planned the division of the site into Areas "A" to "E". The experts jointly prepared their site assessment, by dividing their analysis into: 1. Residual portions – Areas C and B 2. Areas A, B and C 3. Areas D and E 1. For the residual areas B and C, the experts generally agree on the type of developments which are suitable. As I earlier noted, the experts' key point of difference related to the timing and magnitude of settlement. 2. For Areas A, B and C, the experts differed on the foundations required to accommodate negative skin fractions induced by fill settlements. Mr Mostyn accepted that settlement would be taken into account within the routine design. Dr Thomas would advise the hypothetical purchaser that significant construction risks are likely to arise from obstructions in the fill. Therefore, these areas would require considerable piling foundations and geotechnical investigations. 3. In relation to Areas D and E, the experts differed on the capital cost to construct the RRWTF building. According to Mr Mostyn, development may involve delays of 5 to 10 years after placing the surcharge on Areas D and E. He does not deny that there could be an extended period of settlement, but he is of the view that the magnitude of settlement over an extended period is so minimal as to render it unimportant to a hypothetical purchaser of a landfill site, who intends to sell and develop the land in accordance with the industrial zoning applicable to Lot 2. For Areas D and E, Mr Mostyn concluded that he would "tell a Potential Purchaser to allow for 7 years (given that some will be available in less than 5 years)". 4. Dr Thomas raised serious concerns with the area's settlement and calculated significant costs associated with the number of piles required to stabilise Area D and E's structural foundations. In particular, Dr Thomas estimates the RRWTF will require 65% to 80% pile coverage. This amounts to range of between 940 and 1160 piles. Dr Thomas noted the difference in calculated costs was due to further piling being required to support the new RRWTF buildings, crusher, conveyors, and the waste receiving and truck turning areas. In particular, Dr Thomas observed that such piling foundations were required to minimise differential settlement and undulations. Accordingly, the hypothetical purchaser would be advised to relocate the RRWTF building to an area with fewer, and/or less serious, geotechnical risks. Section 9: Waste operations experts 1. Mr Geoffrey Webster was the waste operations expert for the Applicant. He holds a Bachelor of Engineering (Honours) and a Masters of Business Administration. He is also the Director of WN Waste and Management Services, having more than 15 years of experience in waste management services. 2. Messrs Haywood and Berkefeld were the waste operations experts for the Respondent. Mr Haywood is the Director of Mike Haywood Sustainable Resource Solutions Pty Ltd, and has more than 25 years of experience in the waste and landfill operations. Mr Berkefeld was the former CEO of Cleanaway Australia, and former Director of Brambles Australia Ltd. He has more than 30 years' experience in waste and landfill operations. 3. In the first instance, the experts each prepared individual reports dated 8 November 2016 (CB 43), and June 2017 (CB 44). Between July 2017 and September 2017, the experts prepared reports in reply (CB 45, 46 and 47), and a joint report (CB 48). They engaged in further joint conferencing with the business valuation experts, and prepared a joint report dated 12 September 2017 (CB 49 and 49A). The experts each prepared further supplementary expert reports, dated 6 November 2017 (CB 50), and 11 November 2017 (CB 51). 4. After the commencement of the hearing (on 28 November 2017), the experts each prepared further supplementary reports dated 13 December 2017 (CB 112), and 25 January 2018 (CB 117 and 118). The three operations experts then engaged in joint conferencing with the contamination and stockpile experts (Ryall and Clay), and contributed to their second joint report, dated 13 February 2018 (CB 123), and they conferenced, and prepared a further joint report, also dated 13 February 2018 (CB 125), on the construction of the shed. 5. The key operational issues to be addressed for the DCF valuation include: 1. The options and site arrangements; 2. Location of the temporary shed; 3. Deferral of recycling operations for 18 months; 4. Gate fee for waste soils; 5. Recovery rates for plastics and timber; 6. Receivable tonnages of waste at the site; 7. Gate for mixed dry waste; 8. Wages and salaries; and 9. Discount rate for recycling and landfill operations. 1. These issues each factor into the parties' respective positions on the four components of the valuation scenario for Lot 2. In particular, they assist in determining the timing of the site operations, the feasibility of mixed waste recycling activities, and the costings for the landfilling of the site. Further, and importantly, the resolution of these issues enables the determination of the feasibility of the RRWTF operations, not only in years 1 to 8, but also, on the Applicant's case, in years 9 to 29. 2. I shall now deal with each of these nine matters, in turn. 9.1 The options and site arrangements 1. In his initial report, Mr Webster outlined four options, in which Lot 2 could be operated in order to "maximise the value of the existing [landfill] airspace": CB 43, p23. He proposed the following options: 1. Option 1 – Maintain the status quo, with minimal residual materials from recycling activities being disposed of to landfill on site. 2. Option 2 – Undertake recycling activities on site, with all residual material being disposed of within the Alexandria landfill. 3. Option 3 – Filling the landfill void, within eight years from the DOA, and operating a recycling facility, concurrently. 4. Option 4 – Filling the site as rapidly as possible, and erecting a new RRWTF to operate on the land from years 9 to 29. 1. On the other hand, Mr Berkefeld suggested three elements to the proposed business (CB 44, par 27): 1. Operation of a Mixed Waste Recycling Facility and the disposal of residuals offsite; 2. Operation of a landfill by filling the site with waste soils; and 3. Operation of a temporary crushing operation to crush existing concrete stockpiles for re-use on site. 1. The experts responded to each other's suggested uses of the site. As a result, Mr Webster's Options 3 and 4 were utilised in the Applicant's proposed modelling, and in its submissions for the proposed business. 2. For Option 4, Mr Haywood raised serious concerns for the viability of the Applicant's model, as it would require a SSD application, and would present a real and substantial risk to the costs associated with operating a new RRWTF business in the years 9 to 29: CB 46, p25, par 119. 3. Mr Haywood accepted that Option 3 was "the most similar to the advice [he] would have given to a hypothetical purchaser": CB 46, p22, par 105. 4. For the purpose of developing a common model for the DCF, Messrs Haywood and Berkefeld accepted that Mr Webster was to use Option 3, together with the Respondent's "eight year plan", as points of comparison: CB 48, p13, par 52. 9.2 Location of the temporary shed 1. I have earlier noted that the site is subject to DCs, which require all recycling activities to be conducted within an undercover facility. The town planning experts also agree that the consent condition applied to area B within SKC23: Tp208, LL30-35. Further, both town planning experts agreed that this condition had not yet been complied with by the site operator, DADI: Tp206, L41-p207, L8. 2. Accordingly, the shed would need to be built on area B for the hypothetical purchaser to operate in compliance with this condition. 3. The experts' further joint report, dated 13 February 2018 (CB 125), dealt with managing the requirements for the construction of a mixed waste recycling facility. Mr Webster observed (pars 30, 32 and 33): 30. It is my understanding that the HP has been advised by property experts that it is in their best interest to sell area B as soon as practicable. In order to achieve this I would advise the HP to construct the 8 year processing facility in area D as soon as practicable. … 32. I would advise the HP that Area D would not need to be filled in its entirety, but only to an extent that would facilitate the establishment of site operations in a time frame that enables the sale of land parcels in other areas of the site as soon as practicable. 33. Mr Haywood's assumption above is that all of Area D needs to be filled before the construction of the recycling facility on Area D can occur. In my opinion, and as stated above, this is not the case. The time frames assumed by Mr Haywood (based on the modelling work done by Mr Gamble) work from a base of significant volume of material being required to be imported and in my opinion this is not required. 1. Messrs Haywood and Berkefeld observed (CB 125, par 26) that their understanding of Mr Webster's advice was as follows: We understand that Mr Webster would advise the Hypothetical Purchaser that in order to undertake compliant recycling and allow for the sale of the area defined as area B he would advise the HP that they should construct the mixed Waste facility in area D at the RL at the [DOA] and prepare a pad to construct the facility. 1. Based on further inquiries, Messrs Haywood and Berkefeld contemplated a scenario where the hypothetical purchaser may choose to construct a shed on Area B (CB 125, par 48.1): If the HP chose to construct the shed on area B while they quick-fill area D and then build on area D and move to that area this will effectively require the construction of 2 buildings, Ms Bindon advised us that the 2nd building in Area D will require a new development application ([SSD] /EIS) approval for at least the waste facility and could trigger a new development application for a masterplan (sic) for the whole site). 1. In response to this hypothetical scenario, Mr Webster observed (CB 125, pars 49-51): "49. In providing advice to HP, my preferred option would be to not construct a building on area B, but rather relocate the facility to area D. Based on the advice of Mr Paul Mitchell from the court transcripts (page 296 line 33) I understand that if the incoming purchaser had in mind a change to the location of the construction of this facility, an application to modify the existing approval could be made. In the (sic) undertaking this process, the HP must demonstrate that the impacts that were found to be appropriate or acceptable from the initial application must be maintained for the alternative facility. I believe this would be readily demonstrable. 50. Should the relocation of the building be deemed to be non-achievable, I would advise the HP to contemplate the establishment of the building on area B whilst the appropriate process was followed to gain approval for the construction of the building on area D. 51. By following the approach described in either of the two paragraphs above, my advice to the HP would result in the establishment of a building on the site for the processing of mixed recyclables well before the next Development Approval extension date of November 2017. 1. During the cross-examination, Mr Eastman asked Mr Webster about the construction of the undercover facility. In contrast to his earlier opinion, he conceded that the undercover facility would have to be built three times. Firstly, the resource recovery facility would be built within 8 to 12 months on Area B. Further, Areas C and D would be filled over three to four years: Tp1285, LL36-39. Secondly, it would be constructed on area D at the beginning of year 4: Tp1286, LL4-10. Thirdly, it would be constructed on Area E at the beginning of year 9, and operate there from years 9 to 29: Tp1292, LL44-47. 9.3 Deferral of recycling income for 18 months 1. Taking into consideration the timeframes for the resource recovery facility, and the consent conditions, the experts differed on whether the hypothetical purchaser should delay its recycling operations. In their joint report dated 13 February 2018 (CB 125), the experts discussed the operations during the eight-year period, and any delays resulting from the construction of a temporary shed. 2. On the advice of Messrs McLandsborough and Webster, the hypothetical purchaser would allow 8 to 12 months for the shed to be built: CB 125, p8, par 21. The hypothetical purchaser would then enter into negotiations with the regulator, in order to continue recycling operations while the shed was being constructed: CB 125, p3. In Webster's experience, the regulator would be amenable to such a request (CB 125, p4, par 18). Accordingly, he indicated in the DCF model that an income could be derived from Day 1: CB 125, Table 3. 3. In accordance with Mr Lawson's advice, Messrs Haywood and Berkefeld accepted that shed construction would require 15 to 18 months: CB 125, p3, par 15. They agreed that the hypothetical purchaser should enter into negotiations with the regulator, but they would advise the hypothetical purchaser that the time for recycling operations would need to be delayed for 15 to 18 months. In particular, they suggested that "in order to be compliant on the DOA we would cease mixed waste recycling activity until such time as … an undercover recycling facility has been constructed": CB 125, par 7. In the DCF model, they include a cash flow projection for recycling activities, commencing 15 months after the DOA. 9.4 Gate fee for waste soils 1. The importation of waste soils to fill the entire site, is a feature of both the Applicant's and the Respondent's highest and best use for Lot 2. In both valuation scenarios, soils are to be imported in order to, firstly, fill the void space, in preparation for the site to be capped prior to development, and, secondly, generate income for the operator. 2. During cross-examination, Mr Webster outlined the scope of materials included within the definition: Tp1326, LL31-33: ... materials that can't be used for… land developments and also comply with the criteria within the EPL for the site. 1. The experts agreed upon the definition of "waste soils" and accepted that "waste soils" included both General Solid Waste (GSW) and General Solid Waste Asbestos (GSW(A)). 2. The term "gate fee" in the DCF model refers to the price which an operator would charge a customer to deposit waste at a facility. The experts agreed that advertised or publicly available gate fees are not the correct point of comparison. Rather, the experts pointed out that "deals are done to attract tonnes to the site", and often result in reduced fees to a customer: Tp1328, LL7-8; LL37-40. 3. In defining the DCF inputs for waste soils, the primary differences relate to: 1. The price at which waste soils could be brought on to the site by the hypothetical purchaser; and 2. The tonnage or volume required to be transported on to the site, in order to fill the entire site (including the landfill void). 1. In the DCF model, the experts' positions, in relation to gate fees for waste soils, are reflected in the following table: Mr Webster Messrs Haywood and Berkefeld $195/tonne $165/tonne $195 minus $120.90 (levy at DOA) = $74.10 net revenue per tonne $165 minus $120.90 (levy at DOA) = $44.10 net revenue per tonne Indicative difference Indicative difference Based on Applicant's tonnes (per Line Item 22): Based on Applicant's tonnes (per Line Item 22): 1,677,224t x $74.10 = $124,282,298.40 1,677,224t x $44.10 = $73,965,578.40 Based on Respondent's tonnes (per Line Item 22): Based on Respondent's tonnes (per Line Item 22): 1,393,200t x $74.10 = $103,236,120 1,393,200t x $44.10 = $61,440,120 1. In the joint report dated September 2017, Mr Webster justifies his position on the grounds that (CB 48, pp19-20, par 90): "I am aware that around the time of the acquisition, materials of this nature were going to landfill [at] a rate in the order of $185-$200/tonne… Based on the above, it is believed that an appropriate average rate for the receipt of soils at the site would be in the order of $195/tonne." 1. When asked by Mr Eastman about the components of his proposed gate fee, Mr Webster opined that the hypothetical purchaser would import Excavated Natural Material ("ENM") (with no levy component), in order to increase the potential profit: Tp1270, L2. However, Mr Webster had not "gone to the point of separating out the ENM material" in the reporting process: Tp1270, LL12-13. 2. Mr Eastman requested Mr Webster to provide examples of gate fees in the range of $195 per tonne, being charged during the relevant time period, and the following relevant exchange occurred (Tp1340, LL6-12): MR EASTMAN: No, I'm asking you that you would tell a purchaser on a potential $23 million question to go with your advice, despite the fact that there is no objective market evidence that you advance to support it. That is correct, isn't it? MR WEBSTER: Yes. 1. The Haywood/Berkefeld estimate of $165 per tonne was derived from their discussions with people in the waste operations industry, but those discussions were not documented. Further, they recommended the application of a 2.5%pa inflation rate, reflected in the annual increases in gate fee. 2. The Respondent provided affidavit evidence from two lay witnesses, and two other documents, regarding gate fees charged by recycling companies: 1. Affidavit of Mr Damien Vella, dated 9 November 2017 (CB 86); 2. Affidavit of Mr Eric Le Provost, dated 13 November 2017 (CB 87); 3. Exhibit R16 – Letter on DADI letterhead, to its customers, dated September 2016 (CB 182); and 4. Exhibit R18 – Enviroguard's subpoena'd documents (CB 185). 1. Mr Vella is CEO of the Breen Group of Companies, including Breen Resources Pty Ltd and Breen Holdings Pty Ltd. Currently, Breen Resources Pty Ltd is the holder of EPL 4068, which authorises the operation of a landfill and resource recovery facility. He deposed (affidavit 9 November 2017, par 7): Based on the records of Breen Holdings Pty Ltd, the average gate fee charged for customers delivering contaminated soils comprising General Solid Waste to the Facility was $146.07 per tonne (including GST) for the period of 1 July 2014 to 31 December 2014. 1. Mr Le Provost is the Principal of Waste Facilities Support Services. From 2013 to 2015, he was the NSW Regional Manager at Transpacific. He was involved in setting the gate fees for different types of waste received at Erskine Park Landfill. At Annexure A to his affidavit, he provided a copy of Transpacific's internal price list for the 2013-2014 financial year. At par 6 of his affidavit, he particularised: ... Based on the internal price list for FY 2013/14, the range for: a. asbestos soils was $136/tonne (ex GST) to $167/tonne (ex GST); and b. solid waste (soils)/low level contaminated soils was $135.20/tonne (ex GST) to $167/tonne (ex GST). 1. Mr Hemmings asked Mr Haywood whether he had asked Vella or Le Provost about gate fees, in support of his estimate of $165.00 per tonne, but he had not: Tp1348, LL21-25. 2. Exhibit R18 included two documents prepared by Enviroguard Pty Ltd, which were subpoena'd by the Respondent. Relevantly, Exhibit R18 included a tax invoice from Enviroguard to Ward Civil & Environmental Engineering Pty Ltd, specifying the gate fee applied to waste soils received from Stockpile 21 on Lot 2 of the ALF Site, i.e. $156.00 per tonne. 3. Mr Webster told Mr Eastman that Mr Le Provost's affidavit and Exhibit R18 would not change his opinion on the gate fee. 4. The letter in Exhibit R16 details that the current gate fee for large GSW jobs was $185.00 per tonne. As the gate fee included a levy of $135.70, the net revenue was $49.30 per tonne. During cross-examination, Exhibit R16 was put to Mr Webster by Mr Eastman as an example of gate fees charged by the Genesis facility at Eastern Creek. 9.5 Recovery rates 1. As a component of the recycling operation, the experts agreed that the hypothetical purchaser would require information as to the likely recycling revenue streams, and their comparative profitability. In order to retain a profit from the receipt of materials, the operator charges a gate fee (which attracts a waste levy). As recyclable material is diverted from landfill, and separately recycled, the operator does not pay the levy on it, but requires additional airspace in the landfill void, and may further profit from the recycled material (minus any processing costs). Any recyclable material diverted from landfill is known as "recovered material", and the rate at which a facility can divert material is the "recovery rate". 2. The experts each provided an estimate of the annual recovery rate, and receivable annual tonnages, in the recycling industry. Mr Webster estimated 168,000 tonnes of material receivable annually, and a 65% recovery rate: CB 48, pp15-16, pars 64-65, and 70; while Messrs Haywood and Berkefeld estimated 134,000 tonnes, and a recovery rate of 51%: CB 48, pp13-14, par 56. 3. Two key diverted components, which affect the overall recovery rate, are plastics and timber. 4. The experts differ on the recovery rate of plastics diverted from the landfill. In Mr Webster's opinion, 7% of his 168,000 tonnes pa constitutes recycled plastics. Messrs Haywood and Berkefeld project a recovery rate of 0%. Upon review of the DCF model, the Respondent submitted that this results in an approximate difference of $14 million between Mr Webster and the other two experts. 5. Mr Webster could not give Mr Eastman an example of a potential purchaser in NSW for the recycled plastics: Tp1373, LL3-6. Mr Eastman also asked him about the operational feasibility of a 7% recovery rate (Tp1376, LL29-33): EASTMAN: One would need to extrapolate the ability to sell nearly $900,000 worth of plastic to local, national and international sources? WITNESS WEBSTER: Correct. 1. During cross-examination, Mr Eastman also tendered Exhibit R17 (CB 184), which was a subpoena'd document detailing the monthly reports to the EPA from the DADI operated facility at Eastern Creek (Genesis). During the period September 2015 to July 2016, an estimated 12.16 tonnes of the total 154,684 tonnes diverted from landfill was recycled plastics. The Respondent estimated that this represented a recovery rate for plastics of 0.0078%. The following exchange occurred (Tp1380, LL4-33): WITNESS WEBSTER: I'm trying to understand it, because from my understanding the DADI site does a diversion rate of over 80-odd per cent, so the numbers that you've presented here to me are significantly less than that. There is a disparity between what DADI put on their website versus what you presented. EASTMAN: In other words, what you have been told by the Genesis entity and what they have actually reported to the EPA; is that what you are saying? WITNESS WEBSTER: No, I'm saying what I've seen on their website. EASTMAN: So, are you saying that someone is being misled, either the public or the EPA? WITNESS WEBSTER: No, not necessarily. I'm saying I can't comment effectively. EASTMAN: There is a discrepancy between what's being told to the public and the EPA, is that right? WITNESS WEBSTER: I'm saying there's a discrepancy, but I can't explain it. EASTMAN: You would assume Genesis would report faithfully to the EPA; correct? WITNESS WEBSTER: I would. 1. The experts also differed on the recovery rate on the diversion of timber. Mr Webster opined that 25% of the 168,000 tonnes pa would be recovered timbers, while Mr Haywood suggested that 18% of the 134,400 tonnes pa would constitute timbers. Upon review of the DCF model, the Respondent suggests that this makes a $7 million difference to the valuation. 2. In the joint report dated September 2017 (CB 48), Mr Webster included an identified timber waste stream in the projected cash flow. Mr Eastman asked Mr Webster if he had explained this calculation in the report (Tp1381, LL6-15): MR EASTMAN: Again, if we go back to the same line of questioning, you didn't raise this at all in your report in chief; correct? MR WEBSTER: As an individual, no. MR EASTMAN: It first rears its head in the appendix to the joint report that we looked at before? MR WEBSTER: Correct. 1. In support of his suggested 18%, Mr Haywood opined that much of incoming timber would "not be suitable for recycling and recovery due to its treatment": CB 50, p7. 2. Further, Exhibit R17 indicated that the Eastern Creek facility had diverted 6,093.88 tonnes of timber, and processed 154,684 tonnes of mixed waste, in the period September 2015 to July 2016. 3. A further consideration for the Court is the price at which timber would be disposed of to a third party (as operator costs). Mr Webster opined $30 per tonne. Mr Haywood was not aware of any facility accepting timber for $30 per tonne, and concluded that $75 per tonne was appropriate: CB 50, p8. Mr Webster accepted, during cross-examination, that his projected figure was based on the Adelaide market (Tp1383, LL8-17): EASTMAN: You also have a disposal cost of $30 a tonne. Those are Adelaide, not Sydney numbers, aren't they? WITNESS WEBSTER: I have spoken to one group locally who could do that. EASTMAN: Who? WITNESS WEBSTER: My pricing primarily is around Adelaide based. 1. Taking into consideration the above recovery rates, Mr Webster's overall recovery in the joint report (CB 48, p16) is primarily modelled on the findings of the Skip Bin Waste Composition Audit undertaken at the Mugga Lane Landfill on behalf of 'ACT No Waste' in May 2011. In particular, Mr Webster suggests that "these figures are a good representation what we could expect to see coming into a facility at the ALF site": CB 48, p16, par 69. Mr Haywood disagrees with this market data, as the Mugga Lane Landfill generates and receives waste from different types of development, cf., the proximate Sydney market: CB 50, p8. 2. Mr Eastman cross-examined Mr Webster on his reasons for using the data from the Mugga Lane facility (Tp1381, L40-p1382, L24): MR EASTMAN: Have you relied, again, on the analysis from the Mugga Lane facility in Canberra? MR WEBSTER: I have. MR EASTMAN: Do you accept that the waste streams that would be accepted there are different to what you would have in an area like Alexandria? MR WEBSTER: I think they'd still be fairly representative. MR EASTMAN: The waste streams coming to Alexandria will be a lot of demolition waste from building works that are being carried out in an urban infill area? MR WEBSTER: I understand that. MR EASTMAN: In Canberra, there will be significant greenfield sites being developed, houses, and so on being built for the first time, and that would generate different streams of waste? MR WEBSTER: It will be different. MR EASTMAN: So for every, I don't know, pallet that you would have, I don't know, with tiles or something delivered to a building site in Canberra, you are not likely to get the same in Alexandria? MR WEBSTER: You'd still have a high percentage. There's still plenty of construction work going on that requires the same pallets. 1. In support of his 51% recovery rate, Mr Haywood has primarily focused on two waste sources: firstly, the small to medium enterprise demolition or building companies, and, secondly, skip bin operators. Mr Haywood suggests this market because (CB 50, p8): ... these sources will likely contain a higher level of material that could be recovered … [and are] less likely to have been pre-sorted (meaning that the recoverable material would not have been removed). 1. Mr Haywood relied on three reports and audits, in order to support his position: 1. NSW DECCW (2010) 'Disposal Based Survey of the Commercial & Industrial Waste stream in Sydney' (TB 391); 2. State of NSW (2013) 'Waste Less Recycle More' (TB 392); and 3. NSW EPA (2015) 'Disposal-based audit – Commercial & Industrial Waste Stream in the regulated areas of NSW' (TB 394). 9.6 Receivable tonnage 1. In considering all the operational evidence in this section, a major contention between the experts relates to their projection of annual intake for the recycling business. Currently, the EPL prescribes that a maximum of 240,000 tonnes per annum can be processed at Lot 2, but the experts were required to consider the tonnages which may be achievable by a new business conducted by a hypothetical purchaser. As previously noted, Messrs Haywood and Berkefeld project 134,400 tonnes per annum, and Mr Webster projects 168,000 tonnes per annum. 2. Mr Eastman asked Mr Webster the basis for his projection (Tp1404, LL1-10): EASTMAN: ... Let's deal first with the 168. Why that number? WITNESS WEBSTER: That is representative of how much they were receiving at the time of the acquisition. EASTMAN: So you've based that number on DADI's operation? WITNESS WEBSTER: On the materials that were being received at the site at the time of acquisition. 1. Mr Eastman also queried whether a hypothetical purchaser could project tonnages similar to DADI from Day 1 of operations (Tp1405, LL28-46): EASTMAN: And it would be incorrect for a hypothetical purchaser to assume that they would be able to mirror DADI from day one? WITNESS WEBSTER: Not necessarily, no. EASTMAN: Why? WITNESS WEBSTER: You could go out and start negotiations with people before day one. Just because that's the [DOA] wouldn't necessarily mean they would not be in the market procuring customers. EASTMAN: I want you to assume an unconditional sale – no pre-conditions at all – if you do that, the answer to my question must be yes, it is incorrect? WITNESS WEBSTER: I don't know. I would need to get clarity on the unconditional sale definition, I suppose. 1. Mr Haywood disagreed with Mr Webster's views, on the basis that "a new operator of this site would likely not have an established customer base in the area and may therefore, struggle to achieve the volumes achieved by the previous operator": CB 50, p3. In particular, Mr Haywood observed, during his cross-examination, that "there is only a certain amount of material in the marketplace", and "there is a certain amount that could be attracted to the Alexandria site": Tp1418, LL33-36. 2. In addition to 168,000 tonnes per annum of mixed dry waste, Mr Webster opined that the hypothetical purchaser could also generate gate fees from 72,000 tonnes per annum of inert materials: Tp1408, LL5-10; cf., 70,000 in CB 48, Appendix 3. The inert material would constitute "clean streams" or "dedicated streams" of materials, including brick, asphalt, green waste, mixed organics and sand or soils: CB 48, at 15; Tp1403, LL41-45. 3. Mr Eastman asked Mr Webster if this advice was contingent upon the hypothetical purchaser operating exactly as DADI had operated, and Mr Webster responded that "it's based on receiving the same tonnages and waste streams that they were receiving previously, excluding the amounts I reduced to bring it back to the compliant level": Tp1409, LL10-16. 4. Mr Eastman and Mr Webster had the following exchange about the practicalities of processing further inert materials on the site (Tp1410, L43-p1411, L23): EASTMAN: Where am I processing my brick and why? WITNESS WEBSTER: That could be done outside. EASTMAN: Does that have to be done below RL11? WITNESS WEBSTER: There are other requirements. I would have to check exactly what the requirements are. Yes, RL11, yes. EASTMAN: If I can get you to make an assumption that it can't be done inside the shed in area B and it must be done below RL11, that figure is incorrect? You wouldn't do it because you have nowhere to do it. The figure for brick, I should say, is incorrect? WITNESS WEBSTER: There are areas on area B that are below RL11. EASTMAN: I thought we were filling to RL11 on area B and building our shed? WITNESS WEBSTER: Yes. EASTMAN: Now you have nowhere to process your brick? WITNESS WEBSTER: No, because I could still be processing the brick within the void within area D. 1. Mr Eastman also questioned Mr Webster about the effect of processing inert materials on Area D, during the filling and construction stage, in years 1 to 4 after acquisition (Tp1412, LL5-21): EASTMAN: ... This must interfere with your staged plan for filling area D – I found on the transcript you saying four, but you say three years? WITNESS WEBSTER: Three years, yes. EASTMAN: If you are processing other material within area D, that impacts on your ability to fill in the time period that you suggested yesterday? WITNESS WEBSTER: Not at all. EASTMAN: Why? WITNESS WEBSTER: Because these materials can be moved around in area D. You have to plan and schedule your filling operations. 9.7 Gate fee for mixed dry waste 1. In their joint report dated September 2017 (CB 48), the operational experts provided differing opinions as to the gate fee for mixed dry waste. Mr Webster suggested a gate fee of $130 per tonne, set, in his opinion, "in order to maintain current volumes of materials received at the site and to ensure loads of a suitable product mix are maintained ...": CB 48, p17, par 73. 2. Mr Haywood estimated $149.50 per tonne. He relied on a document which was prepared by Mr Biggs, on behalf of DADI, for the purpose of briefing PWC (Pricewaterhousecoopers) regarding the DADI operation at Lot 2. The document estimated "average actual gate fee" of $129.70 per tonne for General Waste: CB 44, p17. Accordingly, Mr Haywood added to this price the levy increase of $12, and a small percentage for inflation, to arrive at his gate fee of $149.50 per tonne. 9.8 Wages and salaries 1. The experts differed on the employee wages and salaries which the hypothetical purchaser would be required to pay to operate the business. The experts adopted the same methodology, which involved the overall wage or salary cost being divided by the total number of tonnes to be processed at the site, to arrive at a cost per tonne. Mr Webster opined that the appropriate input was $11.58 per tonne, while Messrs Haywood and Berkefeld estimated it at $17.06 per tonne. 2. Mr Webster also revised the input tonnage to 240,000 tonnes per annum (Tp1402, LL14-25), and increased his expenditure figure by $200,000 (Tp1426, LL42-47), in order to cover costs of processing and handling the additional 70,000 (?72,000) tonnes of inert material: CB 44, p17. Accordingly, the processing of the additional 70,000 (?72,000) tonnes of inert material is calculated as a cost of $2.86 per tonne (Respondent subs par 946). 9.9 Discount rates 1. In their joint report dated September 2017 (CB 48, par 107), the experts agreed on an after-tax discount rate of 13% for the recycling and landfill operations: Mr Berkefeld and Mr Webster agree that a discount rate of approximately 13% is a standard rate that they have seen used in the waste industry, however they would defer to the experts in this area when determining the appropriate figure. 1. The experts ultimately deferred to the business valuers to arrive at the discount rate. Section 10: Environment and contamination evidence 10.1 The Competing Experts 1. Dr Bill Ryall, of Ryall Environmental Pty Ltd, was the contamination and stockpile expert for the Applicant. He holds degrees from the University of Sydney, and has more than 25 years' experience in investigating and remediating contaminated land (including contamination of soil, groundwater, surface water and soil vapour). 2. Mr Jason Clay, of Senversa Pty Ltd, was the contamination and stockpile expert for the Respondent. He holds degrees from the University of Lancaster and Bournemouth University, and has more than 20 years' international and national experience as a contaminated sites auditor, principal environmental auditor, and field scientist. Mr Clay specialises in risk-based assessment and remediation of contaminated soil and groundwater, and also has expertise in assessing the impact of chemicals on health and the environment. 3. The experts each prepared individual reports dated 2 November 2016 (CB 21) and 11 December 2017 (CB 22). They then conferred, and each prepared individual reports in reply dated 15 May 2017 (CB 29) and 16 May 2017 (CB 30). They engaged in further joint conferencing in May 2017, and prepared a joint report dated 26 May 2017 (CB 31). 4. After the joint conferencing, Mr Clay revised his cost estimates, and produced a revised statement of evidence, dated 11 December 2017 (CB 111). This report took into consideration the letter from Christopher Biggs dated 10 October 2011. 5. Dr Ryall and Mr Webster each prepared reports in reply, dated 24 January 2018 (CB 116), and January 2018 (CB 117). 6. Dr Daniel Martens was introduced as a further contamination and stockpile expert for the Applicant. He has expertise as a civil and environmental engineer, and was briefed to respond to Mr Clay's "Updated Table 7" Letter, and the application of the EPA's recycling standards. His report is dated 29 January 2018 (CB 119). 7. The experts (except for Dr Martens) engaged in joint conferencing with the waste operations experts, Mr Berkefeld, Mr Haywood and Mr Webster, in February 2018, and prepared a joint report dated 13 February 2018 (CB 31). Dr Martens also provided comments on the joint conferencing, in a report dated 14 February 2018 (CB 124). 10.2 Environmental protection licences 1. At the DOA, Lot 2 was subject to two EPLs, No. 4627 having been granted to ALF (TB 148), and No. 12594 granted to Boiling Pty Ltd (TB 161), but Lot 1 was not subject to any EPLs. 2. Lot 2 operated solely under EPL 4627 until 21 June 2007, when Lot 2 was divided into two separately licensed premises, being the "Landfill Premises" (EPL 4627) and the "Recycling Premises" (EPL 12594). 3. EPL 4627 authorised the carrying out of "Waste Disposal (application to land)", permitting the placement in landfill of general solid waste (non-putrescible), building and construction waste, asbestos waste and used tyres. EPL 4627 specifically prohibited the acceptance of garden waste and wood wastes. 4. EPL 12594 authorised the carrying out of "Resource Recovery and Waste Storage". This licence recorded that a portion of Lot 2 was authorised to accept foundry sands (which produce heavy metals), garden waste and wood waste, amongst other materials. 5. Jason Clay summarised the key information relating to the EPLs in Table 1 to his first expert report (CB 22, p13): Table 1 Summary of current EPLs as at the date of acquisition Item EPL 4627 EPL 12594 Address 10 Albert St, St Peters (Lot 100 DP 845651, Part Lot 11 DP 1013168) as shown as "landfill premises" (now comprised in Lot 2 in DP 1168612) 10-16 Albert St, St Peters (Lot 100 DP 845651, Part Lot 11 DP 1013168) as shown as "recycling premises" (now comprised in Lot 2 in DP 1168612) Licensee Alexandria Landfill Pty Ltd Boiling Pty Ltd (Alexandria Recycling Centre) Scheduled Activity Waste disposal (application to land) Resource recovery and waste storage Scale Any annual capacity Resource recovery > 0T recovered Waste storage > 0T stored s.55 Licence Transfer POEO License Transfer 18 June 2001 21 June 2007 or Approval date POEO License Issued 19 June 2001 s.58 License 13 variations between 31 May 2002 and 3 August 2012 6 variations between 31 October 2008 and 8 August 2012 Variations s.91 Clean-Up Notice 6 clean-up notices between 31 May 2002 and 21 June 2011 2 notices - 1128662 (8 June 2011) and 1500750 (2 September 2011) s.110 Variation to Clean-Up Notice 3 variations to clean-up notices from 21 April 2011 to 3 May 2011 2 variations to clean-up notices - 1502233 (2 November 2011) and 1520084 (3 July 2014) Pollution Studies (PS) and Reduction Programs(PRP) Improvement to design of active cell (16 July 2012) Improvements to Stormwater System (25 July 2012) Annual Returns 14 Annual Returns (2000 to 2013) 4 Annual returns (2010 to 2014) Penalty Notices Nil 1 penalty notice dated 5 April 2012 • foundry sands • soils that meet the criteria for general solid waste (NSW EPA, 2014) with the exception of the other limits column • General solid waste (non-putrescible, no garden or wood waste is to be accepted) • garden waste Acceptable Waste • Waste tyres (must have a diameter >1.2 metres, must not be delivered in a load of more than 5 whole tyres, must not have been waste in the Sydney metropolitan area), • wood waste • asbestos waste • metal waste • glass • plastic • building and demolition waste Annual Volume Limits • no limit specified Maximum of 240,000 tonnes of waste per annum. Stockpiles of waste or recovered material must not exceed Stockpiled tyres must: the following limits at any time: • not exceed 50 tonnes at any time • wood waste for reuse - 2,000 tonnes Maximum Stockpile • be located in a defined area away from the tipping face • shredded wood waste and garden waste - 2,000 tonnes Storage Volumes • be managed to control vermin • metal - 500 tonnes • be managed to prevent any tyres catching fire • glass - 500 tonnes • plastic - 500 tonnes • building and demolition waste - 180,000 tonnes 10.3 EPL Compliance Issues 1. Section 56 of the JTC Act would mandate that the hypothetical purchaser apply for a new EPL, or the transfer of the existing EPLs, if it were to continue as a landfill operator. The application process requires the hypothetical purchaser to demonstrate that it is a "fit and proper person": see s 85 of the POEO Act. 2. Moreover, the hypothetical purchaser would arguably be required to conduct an audit of Lot 2's environmental compliance. The scope of the audit would depend on relevant information and advice available to the hypothetical purchaser. In order to confirm the scope of the due diligence required, it is necessary to examine the compliance history and operations of the holders of EPLs 4627 and 12594. 3. Mr Clay summarised the licences at Tables 2 and 3 of his first expert report (CB 22, p14): Table 2 EPL 4627 Non-Compliance Records EPL No. Notice Summary of Notice 1017904 4627 31 May 2002 • Clean-up notice regarding removal of pooled leachate in the waste disposal area of the facility through off-Site disposal to a licenced waste facility to accept liquid waste. 6 June 2002 4627 1017963 • Clean-up notice regarding removal of pooled leachate through off-Site disposal to a licenced waste facility to accept liquid waste and all practical measures to be taken into prevent emission of hydrogen sulphide from the premises. 6 June 2002 4627 1018247 • Clean-up notice regarding removal of 540,000 litres of pooled leachate through off-Site disposal to a licenced waste facility to accept liquid waste and all practical measures to be taken to prevent emission of hydrogen sulphide from the premises. 18 June 2002 4627 1018386 • Clean-up notice regarding removal of 1,000,000 litres of pooled leachate through off-Site disposal to a licenced waste facility to accept liquid waste and all practical measures to be taken to prevent emission of hydrogen sulphide from the premises. 21 June 2002 4627 1127043 • Clean-up notice relating to immediately cease disposing of leachate to stormwater drains. Remove vegetation from the leachate dam, dispose of leachate to a lawful facility and remove all partially composted garden waste and odorous sediment from the garden waste platform and leachate dam. 15 April 2011 4627 1127407 • Clean-up notice - variation to notice 1127043 21 April 2011 4627 1127781 • Clean-up notice - variation to notice 1127407 28 April 2011 4627 1128035 • Clean-up notice - variation to notice 1127043 30 May 2011 • EPA officers observed several areas where the landfill was smouldering and had no daily cover applied. • EPA officers observed two stockpiles of demolition and soil waste on the landfill. Officers were advised by staff of the Licensee that the waste came from the clean-up of a site known as TF Group Pty Limited ("in liquidation") located at 5A Canal Road, St Peters which adjoins the Premises. EPA authorised officers observed that that (sic) the waste from the stockpiles had been processed and the soil from the stockpile applied as daily cover over the landfill. Employees of the Licensee also advised EPA officers that the soil from the stockpiles was used and applied as daily cover over the landfill. • On 21 April 2011, one asbestos fragment of cement sheeting was found by EPA officers in the TF Group Pty Limited ("in liquidation") waste that was used as daily cover. Asbestos is classified as "special waste" as defined under the POEO Act. Clause 42 (4)(d) of the Protection of the Environment Operations (Waste) Regulation, 2005, (NSW) requires "asbestos waste disposed at a landfill site must be covered with virgin excavated natural material or other material as approved in the facility's environment protection licence." In addition, clause 42(5) Protection of the Environment Operations (Waste) Regulation, 2005 (NSW) states "that a person must not cause or permit asbestos waste in any form to be reused or recycled". 4627 1128694 • On 18 and 19 April 2011, EPA officers told employees of the Licensee to stop applying the TF Group Pty Limited ("in liquidation") waste as cover material as it was not appropriate daily or intermediate cover. An employee of the Licensee advised the EPA officers while sampling the asbestos pieces "that's what happens when you apply that waste as daily cover" pointing to the TF Group Pty Limited ("in liquidation") waste. 21 June 2011 • In May and June 2011 EPA officers observed that shredded garden and wood waste was being used as daily cover. • The EPA stated in the background to the notice: "U. The EPA considers that a pollution incident has occurred at the Landfill. The absence of suitable cover over the landfill waste has resulted in smoldering within the waste mass and elevated levels of carbon monoxide and carbon dioxide gases indicating internal combustion of waste (fire), elevated concentrations of methane gas on the surface of the landfill and the potential for excess infiltration and leachate generation, odour and litter generation. Further the very steep slope of the landfill batters is likely to be problematic for the application and stabilisation of cover material. V. The EPA reasonably suspects that Alexandria Landfill Pty Ltd has caused the pollution incident referred to in Paragraph U above, in that it has repeatedly failed to comply with the direction of the EPA and the requirements of the Licence to apply appropriate alternate daily cover or intermediate cover on the landfill." Table 3 EPL 12594 Non-Compliance Records EPL No. Notice Summary of Notice • On 19 May 2011, EPA officers undertook an inspection of the premises and observed several large stockpiles near the western boundary of the premises. Visual inspections of two stockpile areas (Area 1 and Area 2) identified fragments of suspected asbestos sheeting. Results for the samples taken in Area 1 and 2 confirmed the presence of asbestos in 11 out of 12 samples. During the inspection on 20 May 2011, EPA identified that one of the stockpiles from Area 2 had been moved. An employee advised that the material had been moved to the landfill. • On 20 May 2011, EPA officers identified a large stockpile (Area 3) comprising soil, bricks, tiles and concrete. Asbestos was identified within two of the three samples collected from this area. During an inspection on 3 June 2011, EPA offers (sic) were advised that further material had been added to the stockpile in Area 3. • On 20 May 2011, EPA officers observed approximately eight stockpiles of orange brown-black sandy material containing black sludge (Area 4). An oily sheen was observed in the leachate surrounding the stockpile. Representatives of the Licensee advised EPA officers that the stockpiles comprised foundry sands. EPA officers were advised by representatives of the Licensee that the foundry sands were processed with waste soil, shredded wood waste and garden waste. Preliminary results indicated that this material may represent Restricted Solid Waste. • Asbestos is classified as "special waste" and cannot lawfully be stored or transferred or recovered by ways or separating or processing at the premises. 12594 1128662 • Foundry sands are classified as general solid waste however preliminary results indicated that the foundry sands may be Restricted Solid Waste, which are not permitted to be accepted at the premises. 8 June 2011 • The EPA ordered the following activities to be completed by the Licensee: • Immediately cease stockpiling, applying, removing or disposing of any waste from Areas 1 to 4. • Immediately secure Areas 1 to 4 and any other areas where asbestos waste has been applied to restricted areas. • By no later than 4pm, 29 June 2011 provide the Manager of Waste Operations with an Asbestos Report. The Asbestos Report must contain details of the nature and extent of asbestos and asbestos contaminated material (including friable and bonded asbestos) in Areas 1 to 3. • By no later than 4pm, 29 June 2011 provide the Manager of Waste Operations with a report on the movement, blending or processing that has occurred in Areas 1 to 4 prior to the issue of this Clean-Up Notice. • On 28 June 2011, EPA officers conducted further sampling of a waste stockpile (Stockpile A in Clean-Up Notice 1128662) and skip bins at the premises. Sampling of the stockpile (Area 1 in Clean-Up Notice 1128662) identified further asbestos fragments. Results for the samples confirmed the presence of asbestos in 39 out of 54 samples. • On 1 July 2011, the EPA received a letter dated 29 June 2011 and a report prepared by SLR Global Environmental Solutions titled "Asbestos Walkover Inspection Report Alexandria Recycling Centre" in response to Clean-Up Notice 1128662. • On 7 July 2011, the EPA issues draft Clean-Up Notice 11229991 for comment in relation to the asbestos found in Area A and the skip bin on 28 June 2011. • On 7 July 2011 and 29 July 2011, the EPA received a letter and a report titled "Technical Scope of Works Report Alexandria Recycling Centre St Peters NSW (Report No. 610.10547.00200)" dated 14 July 2011 from the Licensee regarding the draft Clean-Up Notice (1129991). • On 1 August 2011, the EPA received a volumetric survey prepared by Vekta Pty Ltd on behalf of the Licensee. Based on the review of the volumetric survey and information provided by the Licensee, the EPA decided not to issue Clean-Up Notice 11229991. • Based on the volumetric survey prepared by Vekta Pty Ltd, the EPA drafted a new map. 12594 1500750 • Stockpile 1 (identified as Stockpile 21 and Stockpile 298 on the volumetric survey dated 22 June 2011 and Areas 1 and 2 on Map 1 of Clean-Up Notice 1128662) contained 164,995 m³ of waste. 2 September 2011 • Stockpile 2 (identified as Stockpile 246 and Stockpile 247 on the volumetric survey dated 22 June 2011 and Area 3 on Map 1 of Clean-Up Notice 1128662) contained 8825 m³ of waste. • Asbestos is classified as "special waste" and cannot lawfully be stored or transferred or recovered by ways or separating or processing at the premises. • The EPA ordered the following activities to be completed by the Licensee: • Immediately cease stockpiling, applying, removing or disposing of any waste from Stockpile 1 and Stockpile 2. • Immediately restrict access to Stockpile 1 and Stockpile 2. • By no later than 4pm, 15 September 2011 submit to the Manager of Waste Operations a report detailing a proposed extensive sampling regime to determine the Waste Classification of Stockpile 1 and Stockpile 2 at the Premises in accordance with Steps 1-6 of EPA's "Waste Classification Guidelines, 2009". The proposed sampling regime must include both sampling across the stockpile and at depth. • By no later than 4pm, 6 October 2011 submit to the Manager of Waste Operations a detailed proposal to manage and dispose of the waste to a place that can lawfully receive that waste. 12594 1502233 • Variation to Clean-Up Notice 1500750 – amendment to proposed sampling and testing regime. 2 November 2011 12594 1520084 • Variation to Clean-Up Notice 1500750 – removal of all asbestos containing material subject to Clean-Up Notice 1500750 must be completed by Friday 3 July 2015. 3 July 2014 • All sampling and chemical analysis must be done in accordance with the EPA's document "Waste Classification Guidelines (2009)", with the exception of BTEX which may be tested using photoionisation detection ("PID"). 1. At the DOA, there were approximately 24 stockpiles located on Lot 2, across both EPL premises. 2. A central issue in this matter is the cost that a hypothetical purchaser would consider that it would need to incur, at the DOA, to deal with non-compliant stockpiles on Lot 2. 3. As at the DOA, Lot 2 was subject to a Clean-Up Notice issued, in relation to EPL 12594, by the EPA to Boiling Pty Ltd, on 8 June 2011 (TB 168 – relevantly amended on 2 September 2011 (TB 170), 2 November 2011 (TB 171), and 3 July 2014 (TB 169)). 4. The Clean-Up Notice contained the following terms (TB 168, p2): Q. Asbestos is classified as "special waste" as defined in the POEO Act. Asbestos cannot lawfully be stored or transferred or recovered by ways of separating or processing at the Premises. Foundry sands are classified as general solid waste however preliminary results indicate that the waste may be Restricted Solid Waste. Foundry sands are not permitted to be accepted at the Premises. R. The EPA reasonably suspects that a pollution incident has occurred at the Premises, in that waste containing asbestos and foundry sands has been transported and deposited at the Premises without lawful authority. S. The EPA reasonably suspects that Boiling Pty Ltd has caused the pollution incident referred to in paragraph Q above, in that it has accepted waste without lawful authority. 1. The Clean-Up Notice (as amended on 2 September 2011) relevantly stated (TB 170, p2 – emphasis added): K. Based on the volumetric survey prepared by Vekta Pty Ltd, the EPA has drafted a new map (see Attachment A – Map 1). Stockpile 1 (identified as Stockpile No's 21 and No. 298 on the volumetric survey dated 22 June 2011 and Areas 1 and 2 on Map 1 of Clean-Up Notice (Notice No. 1128662)) contains 164,995m³ of waste. Stockpile 2 (known as No. 246 and No. 247 on the volumetric survey dated 22 June 2011 and known as Area 3 on Map 1 of Clean-Up Notice (Notice No. 1128622)) contains 8825m³ of waste. 1. The Clean-Up Notice (as amended on 2 November 2011) relevantly stated (TB 171, p1 – emphasis added): E. On 7 October 2011, the EPA received from the Licensee via electronic mail an amended proposed sampling and testing regime for the asbestos contaminated stockpiles identified in Clean-Up Notice (Notice No. 1500750) ("the Proposal"). The EPA again requested further information including chemical testing data for the waste in the contaminated stockpiles. F. On 10 October 2011, the EPA received the additional information and data requested. 1. The Clean-Up Notice (as amended on 3 July 2014) related to "Stockpile 21" (SP21 – which had been referred to as "stockpile 1" in the previous version of the Clean-Up Notice), and relevantly required the following action to be taken by 3 July 2015 (TB 169, pp2-3): The Licensee must undertake sampling, testing and disposal of the waste stockpiles subject to Clean-Up Notice (Notice No. 1500750) in accordance with the Proposal with the exception of the following: a. All sampling and chemical analysis must be done in accordance with the EPA's document "Waste Classification Guidelines (2009)", with the exception of BTEX which may (sic) tested using photoionisation detection ("PID"). b. Prior to commencing any sampling and testing of the waste stockpiles, the licensee must submit a map to the Senior Manager of Waste Compliance, ... identifying the proposed location of the dust and air-borne asbestos monitoring points in the Proposal … c. When sampling, testing and handling of waste in accordance with the Proposal is not occurring, the stockpiles must be sectioned off and access restricted to all staff of Boiling Pty Ltd, Dial-a-Dump Pty Ltd or Alexandria Landfill Pty Ltd or any other persons. d. Where test pits have been cleared as not containing bonded asbestos, one third of those cleared tests (sic) pits must be tested for fibrous asbestos. e. If asbestos is identified in any stockpile or test pit that waste must also be classified in accordance with the EPA's document "Waste Classification Guidelines (2009)" prior to disposal at a lawful facility. f. The removal of all asbestos containing material subject to Clean-Up Notice (Notice N. 1500750) must be completed by Friday, 3 July 2015. 1. The "Proposal" referred to in the Clean-Up Notice (TB 266, p22) related to stockpiles 298, 247 and 21. In relation to SP21, the Proposal relevantly provided the following (TB 266, p29): Stockpile 21 PART OF STOCKPILE 1 IN CLEAN-UP NOTICE 1500750 Key Characteristics of Proposed Activity Element Description Size 160,000m3 Dimensions 147m x 60m x 25m Sampling proposed Asbestos test pits (per layer): approx. 140 (being approx 3,500 test pits) Minimum chemical samples:65 Layers 25 1. As at the DOA, the Clean-Up Notice remained on foot, and had neither been further amended, nor withdrawn, by the EPA. 10.4 The evidence in detail 1. The experts were cross-examined on five key issues (Exhibit A3) – being their sources of information, the Clean-Up Notices, stockpile recycling, stockpile volumes, and any stockpile assumptions. 2. The Court accepts that the primary matters in contention between the experts can be divided into nine key issues, including: 1. Environmental due diligence and sources of information 2. Preliminary classification of SP21 and compliance with the Clean-Up Notice 3. Volume of SP21 4. Date of commencement and application of EPL 12594 5. Processing of SP21 prior to 2007 6. Respirable asbestos 7. SP298 8. Removal of SP21 after acquisition 9. Other Stockpiles 1. The first point of contention related to the criticism by Dr Ryall and Dr Martens of Mr Clay's due diligence approach, and his reliance on consultant reports prepared after the DOA. 2. Mr Clay designed an environmental due diligence process, which required consultant reports to be produced on aspects of the site. He considered the following reports, to the extent that they contain information that he would have advised a hypothetical purchaser to obtain: 1. AECOM Phase 1 Report dated 22 August 2014 ("Draft AECOM Phase 1 Report"); 2. Draft AECOM Phase 2 ESA Report, dated 6 May 2015 ("Draft AECOM Phase 2 ESA Report"); 3. Phase 2 Area Preliminary Stockpile Characterisation Alexandria Landfill, 10 Albert Street, St Peters, ENVIRON. 7 April 2015 ("the Environ Report"); and 4. Preliminary Waste Classification: Stockpile 21 – 10-16 Albert Street, Alexandria Landfill, St Peters, NSW. AECOM, 31 March 2015 (the AECOM Classification Report) ("AECOM SP21 Classification Report"). 1. Dr Ryall accepted that consultant reports would be necessary to inform the hypothetical purchaser. However, Dr Ryall and Dr Martens criticised Mr Clay's reliance on the second, third and fourth of the above-listed reports. In particular, they criticised the reliability of the drilling, sampling and testing methods used to classify the stockpile materials. Moreover, they did not accept that these reports had completed assessments in accordance with the Waste Classification Guidelines. 2. Secondly, the experts differed on the preliminary classification of SP21, and its compliance with the Clean-Up Notice. In his individual reports, Dr Ryall devised three key categories of materials within the stockpiles on Lot 2 (CB 21, par 29), including "cover materials" placed on top of stockpiled materials, and: Placed Materials: Materials imported onto the Site prior to June 2007 during which time the entire Site operated as a landfill under EPL 4627 and materials imported onto the ALF Licensed Site after June 2007 for the purpose of disposal to landfill; and Stockpiled Materials: Materials imported onto the Boiling Licensed Site after to June 2007 under EPL 12594 for the purpose of recycling. Stockpiled Materials have been placed on the surface of the Boiling Licensed Site as the surface was in June 2007. 1. Dr Ryall utilised these categories to inform the hypothetical purchaser, and make three key conclusions: Firstly, placed materials do not require any assessment or removal, as these materials were placed on the stockpile, in accordance with the conditions in EPL 4627. Secondly, ADE Consulting Group ("ADE") screened and removed the 300m3 of asbestos-containing materials from the stockpiled and cover materials (see CB 21, par 102). Finally, the remaining stockpiled and cover materials are suitable to be screened, segregated and sold, in compliance with the site's resource recovery orders. 2. Mr Clay strongly disagrees with Dr Ryall's designation of three categories of materials within SP21. 3. Neither Mr Clay, nor the EPA, nor the consultant reports prepared by AECOM, ADE or ENVIRON, have "classified" SP21 using the categories of "cover", "stockpiled" or "placed" materials. Rather, Mr Clay would rely on the AECOM SP21 Classification Report to advise the hypothetical purchaser to have a qualified consultant test and classify the stockpiles, including SP21. 4. Mr Clay relies on his site inspection, and the waste classification reports, to identify the presence of friable asbestos fibres within SP21. He considers that the Clean-up notice related to the entirety of SP21, and he relies upon the Clean-up notice's specified terms and listed stockpile volume to determine SP21's compliance. Further, the EP Risk's classification Report, and Mr Kenneth Reid's affidavit, outline the presence of asbestos within the stockpile, and the costs associated with stockpile removal. Further, Mr Reid, Construction Manager for the M5, provided evidence of the $19,369,675 incurred by the WDA in removing SP21. 5. Accordingly, Mr Clay would classify SP21 as "special waste asbestos, general solid waste (non-putrescible)", which the hypothetical purchaser would be required to dispose of to landfill. 6. The third issue relates to SP21's volume after June 2007. Whilst the experts agree that SP21 grew significantly after June 2007, they disagreed on SP21's volume at the DOA. Dr Ryall relied on AAM Pty Ltd's "Landfill Facility Information Sheet", dated December 2014, which estimated the volume at 75,622 cubic metres. Mr Clay relied on the AECOM report, dated 31 March 2015 (CB 26). This data was consistent with the data sheets subpoena'd by RMS from AAM Pty Ltd (CB 31, Annexure A). 7. The fourth issue arose during the joint cross-examination of Dr Ryall and Mr Clay. Upon review of the EPL 12594, both experts agreed that it commenced in 2009, upon the variation of the licence. The parties appear not to agree on this – see Biggs's affidavit dated 22 November 2017, and Item H of the Notice of Variation of EPL 4627, dated 21 June 2007 – but the Applicant has not tendered any further evidence to support the view that EPL 12594 commenced in 2009. 8. Fifthly, SP21's combined volume at June 2007 was agreed to be estimated at approximately 100,000 cubic metres. However, the experts disagreed on how SP21 was processed prior to 2007. In the Second Joint Report on Stockpiles, Mr Clay further stated that (CB 123, par 49): 9. Mr Biggs in his Site Information Affidavit has said that the area of Stockpile 21 was used for recycling prior to the Boiling Licence being in place. In his Site Information Affidavit, Mr Biggs states that during 2002-2007: "This stockpile [21] consisting of sand and soil varied considerably in size between survey dates as material was added to it and then that material was screened processed and sold." This is indicated in Mr Biggs Site Information Affidavit photos and Figure 1 of my Reply to Ryall dated 15 May 2017 (i.e. prior (sic) the Boiling Licence being in place), which appear to show active recycling occurring in March 2007 in the area of Stockpile 21, and Stockpile 21 was also significantly smaller than it subsequently became. Although there is merit to the argument that material imported prior to the Boiling Licence was legally allowed to contain asbestos, it appears from the evidence that this area was in use for recycling prior to 2007 and that Stockpile 21 grew considerably subsequent to the Boiling Licence being put in place. ... 1. In his affidavit dated 22 November 2017, Biggs included (CB 79, p9): Stockpile 21 Origin 2002 up to 2007 … 70. Stockpile then numbered 21 was formed in the north western "top" corner of Lot 2. This stockpile consisting of sand and soil varied considerably in size between survey dates as material was added to it and then that material was screened processed and sold. 1. Prior to the formulation of EPL 12594, Lot 2 was licensed only to landfill and store waste, and was not licensed, or otherwise authorised, to recycle material received at the premises. However, it is clear from Mr Clay's graph (CB 29, par 49), and the accompanying aerial photograph (on p11), that SP21 was being processed (i.e. materials added and subtracted) prior to the operator being lawfully allowed to recycle and process material (from 21 June 2007 onwards). The aerial photograph (CB 29, at 11) dated March 2007 (i.e. prior to the commencement of the recycling EPL 12594) supports the volumetric data that material was being processed. 2. Sixthly, the experts also contested whether SP21 was found to contain respirable asbestos, and the location of other forms of asbestos within SP21. Draft Clean-up Notice 1128662 indicated the locations where the EPA identified asbestos at the surface of SP21, i.e. the location of "Cover Materials". The experts agree that the EPA sampled pieces of asbestos sheeting from the stockpile surface. 3. However, Dr Ryall considered that asbestos was located on the western side of SP21, and only within the cover materials. Relying on the ADE Letter, he concluded that ADE had removed, prior to the DOA, 300 cubic metres of stockpile material. This material was categorised as special waste, and the weekly testing operations were designed to remove materials in one metre lifts. Further, Dr Ryall also criticised the reliability of the AECOM Preliminary Waste Classification of SP21. He considered that the placed materials would require waste classification, only upon their removal from the Boiling Licensed Site. He also considered that the placed materials sampled and tested had only preliminary results, and were not representative of the "placed materials" on the stockpile. 4. Mr Clay disagreed with ADE's sampling methodology. In particular, he was critical of Dr Ryall's suggestions that asbestos contamination was limited to "cover materials". Rather, sampling was conducted on a roughly deposited stockpile and therefore the sampling did not test a uniformly distributed cover layer of 300 cubic metres. Upon review of the AECOM and ENVIRON reports, he considered there was significant evidence of potentially respirable fibres detected within stockpiles (including SP21). Therefore, Mr Clay also does not accept that an operator would simply place 300 cubic metres of asbestos contaminated fill over all or part of SP21. Rather the stockpiled materials contained asbestos, which would require the hypothetical purchaser to deal with them as "special waste (asbestos)". 5. Seventhly, the experts also disagreed upon the lawfulness of ADE's sampling methods for SP298: 6. Upon review of the ADE SP298 Report, dated 15 December 2011, Mr Clay considers the waste classification to be potentially unlawful. In the report, ADE referred to SP298 as comprising 700 tonnes of waste. The waste samples contained asbestos, as well as detections of chrysotile and amosite asbestos. ADE then provided the classification "General Solid Waste (non-putrescible)". As the material was observed to contain asbestos, confirmed by subsequent analysis, ADE should also have classified this material as "special waste (asbestos)". Accordingly, Mr Clay was concerned that ADE's failure to classify material as "special waste (asbestos)" was unlawful. 7. Dr Ryall disagrees with Mr Clay on the ADE's compliance with the EPA Waste Classification Guidelines, and would advise the Hypothetical Purchaser that SP298's asbestos-containing materials had been disposed to landfill, and that the remaining materials did not contain asbestos. 8. Eighthly, the experts disagree as to conditions for removal of SP21 materials after the DOA. Dr Ryall observed that, after the DOA, EP Risk classified materials in SP21 as waste to be removed from the Site by RMS for construction purposes only. Mr Clay responded that the EPA Clean-Up Notice (#1533773) was re-issued to RMS on 6 November 2015 (CB 31, par 118), and in it the EPA stated that RMS must, inter alia, "…commence sampling, testing and removal of asbestos waste material… …by no later than 7 December 2015". Accordingly, ADE had not resolved the issues with SP21. Since further removal was required to satisfy the EPA requirements, a levy was incurred for each tonne of affected material. 9. The ninth issue was whether or not the 23 other stockpiles present on the Boiling Licensed Site, at the DOA, addressed in the Environ Report, can be processed to make "fines" able to meet relevant Resource Recovery Exemptions (section L2.1 of EPL 12594). The experts disagree on the validity of the Environ Report, in defining the quality of the stockpiled material. Mr Clay considers that the stockpiles of soil and/or fines material exceed either the Boiling EPL or the Recovered Fines Order chemical criteria. Therefore, such materials would be unlikely to represent a resource, and/or were imported in contravention of the licence conditions. Dr Ryall questioned the reliability of Environ Report (CB 123, par 25) because: "... [The] preliminary waste classifications made in the Environ Report were made primarily so that their client would have a preliminary understanding of the classes of waste they likely would be required to excavate and dispose to landfill to allow construction of the St Peters Interchange of the WestConnex project." 1. Dr Martens added (CB 124, par 4) that: "... The Environ Report was preliminary in nature and did not undertake sampling in compliance with the density and compositing requirements of any of the Resource Recovery Orders. It is therefore not possible to assert that [the] samples failed the relevant Orders." Section 11: Environment management experts 11.1 Introduction 1. The parties to the hypothetical sale and purchase of the subject land would require specialist environmental management advice on the landfill operation. 2. In particular, the parties would require advice on the technical, environmental engineering aspects of the landfill, and the obligations for its closure and post-closure management. 3. In both parties' highest and best use, the landfill would be filled within just 8 years. In determining costs to include in the DCF model, the purchaser would consider both the costs of management over those 8 years, as well as the costs of the closure and post-closure obligations. 4. The expert evidence on environmental management relates to three key components of the valuation task. 5. The first aspect is that the ongoing environmental management obligations affect how the hypothetical purchaser can utilise Lot 2, and, more importantly, the regulatory considerations which may affect the highest and best use. 6. The second aspect is that the appropriate leachate and landfill gas infrastructure has a consequential effect on any proposed subdivision or sale of the land. 7. The third and final aspect requires consideration of associated costs, which a hypothetical purchaser would incur in managing leachate and landfill gas, and implementing a landfill closure plan. 8. In addressing these environmental management concerns, the hypothetical purchaser would require specialist expert advice. Mr Paul Fridell (ERM) and Dr Gareth Swarbrick (PSM) were the environmental management experts for the Applicant. Mr David Gamble, Mr Anthony Dixon, Mr Matt Welsh and Ms Alison Horlyck (all from GHD) were the environmental management experts for the Respondent. 9. On 12 September 2017, the environmental experts conferred and drafted a joint report (CB 42). Mr Fridell, Dr Swarbrick, Dr Ryall and Mr Webster attended as the Applicant's experts. Mr Gamble, Mr Dixon, Mr Welsh, Ms Horlyck and Mr Clay attended as the Respondent's experts. 10. At the request of the Court (Tp946), the environmental experts (the so-called "group of nine") conferred and prepared a joint report dated 14 December 2017 (Exhibit A5; CB 113). 11. The key components of this evidence deal with: 1. The approach a party to the s 56 sale would take to the costs associated with leachate management, including the scope, nature and cost of necessary infrastructure, which would be factored in to the DCF valuation; 2. The approach a party to the s 56 sale would take to landfill gas management, including the scope, nature and cost of necessary infrastructure, which would also be factored into the DCF valuation; and 3. Advice that would be given to a purchaser about the environmental management and landfill closure considerations that may impact upon what I have so far referred to as "the McLandsborough subdivision" (SKC23). 11.2 Experts' Qualifications and Experience 1. Mr Paul Fridell holds a Bachelor of Science and Masters in Environmental Science (Hydrogeology & Waste Management) from the University of Melbourne. His primary report, dated November 2016 (CB 32), examines the environmental management, leachate and landfill gas issues. 2. Dr Gareth Swarbrick has over 25 years' experience as a consulting engineer. He holds a Bachelor of Engineering (Honours) from University of Adelaide, and a PhD in Civil Engineering from UNSW. In his report, he addresses three key issues: 1. The relevance of using software '12d' for calculating volume at the Site 2. His ability to calculate volumes at Site and how he would approach such a task. 3. Comments made by Mr Fridell in his expert witness report (dated July 2017), on his and Dr Stuart Dever's work on landfill gas biofiltration, and his general ability to contribute to discussions related to landfill gas management at the Site. 1. Dr Ryall and Mr Webster's qualifications have already been noted (at [280] and [211] above, respectively). 2. Mr Gamble is the Technical Leader (Waste Infrastructure), and a Principal Environmental Engineer, at GHD. He holds a Bachelor of Engineering (Mechanical Engineering), Bachelor of Economics and Masters in Engineering Science (Waste Management). His report is dated June 2017 (CB 36), and is the principal report on environmental management. It addresses an approach to the hypothetical purchase, and all of the key environmental management issues. 3. Ms Horlyck holds a Bachelor of Civil Engineering (First Class Honours), Bachelor of Science (Chemistry) and Masters in Engineering Science (Waste Management). In her report, dated 25 May 2017 (CB 33), she outlines the issues with the leachate management system, the void space, and capping requirements. 4. Mr Dixon is the Principal Environmental Engineer and Service Group Manager (Waste Management) at GHD. He holds a Bachelor of Engineering (Chemical Engineering) (Honours) from UNSW, a Masters in Engineering Studies (Environmental Engineering) from Sydney University and a Masters in Engineering (Groundwater Management) from UTS. His report is dated May 2017 (CB 34), and addresses the leachate water balance issue. 5. Mr Welsh is a Senior Environmental Scientist at GHD. He holds a Bachelor of Science (Environmental Science) (Honours) and has 17 years' experience in waste management in Australia and the United Kingdom. His report is dated May 2017 (CB 35), and addresses the landfill gas management issue. 6. Mr Clay's qualifications were noted above (at [281]). 11.3 Leachate management 1. A key aspect of the evidence relates to the scope, nature and cost of leachate management infrastructure which would require consideration in the DCF valuation. 2. In order to determine the DCF valuation inputs, the Court must consider two key issues. The first relates to the sources and volumes of leachate on the site. Upon review of the leachate sources and volumes, the second consideration arises – whether the existing infrastructure (i.e. the sequence batch reactor ("SBR")) has capacity, or requires an upgrade, to manage leachate generation on the site. 3. In relation to the first issue, the experts applied different methodologies to assess the sources and volumes of leachate. Mr Fridell and Dr Swarbrick were of the opinion that the existing leachate management model was adequate. Mr Fridell relied on Ian Grey Groundwater Consulting Pty Ltd ("the IGGC") historical two-water balances to derive an average daily leachate volume of 112kL/day. Upon review of the water balances, Dr Swarbrick also accepted the conclusions as scientifically valid and reliable. Neither expert prepared any further modelling. 4. Mr Fridell noted that his review of the historical material showed that any non-compliance with permitted waste acceptance requirements was incidental. Further, he observed that the disposal of leachate to the sewer was monitored by Sydney Water, with minimal "red flags" around compliance. 5. Prior to ALF's ownership, the site accepted incinerator ash "which is likely to [have] increase[d] the potential for a greater suite of heavy metals to be present". However, the concentration of leachate compounds is "likely to be more dilute due to the groundwater ingress from the Botany Sands and the absence of any engineered barrier system". 6. In reviewing the site, Mr Fridell undertook a review of its inherent risks. In particular, he plotted "cations" and "anions" (respectively, positively and negatively charged ions) reported in water from groundwater wells, for comparison over time. This data was then used to compare concentrations of "dominant leachate cations" with natural water cations found in the natural environment, in order to determine the "potential influence of leachate". 7. In contrast, Mr Dixon prepared a further model, because the hypothetical purchaser would require further investigations beyond the historical information available at the DOA. Upon review of the IGGC data, Mr Dixon observed (CB 40, Appendix A, par 33-34): 33. From this review I make the following observations and comments: a) I have identified that in IGGC 2011 that some monitoring data was provided for the stormwater discharged from the site to offsite surface waters. IGGC 2011 states that with regard to stormwater quality: 'Results obtained during the monitoring period reflect inadequate sediment control and pollution prevention measures. Stormwater management works have been undertaken but further works may be required to ensure future compliance'. b) I note that the Annual Return for the period covered by IGGC 2011 (1 December 2009 – 30 November 2010) did not identify this issue (point a) above) as non-compliance with licence condition L1.1 (pollution of water). c) A large suite of data on the quality of stormwater entering and being discharged from the site was made available to me and is referenced (No. 274) in the Fridell Report (IGGC 2014). I note that Mr Fridell does not assess or comment on this data. The data indicates to me that water discharged from the site to the surrounding streets and ultimately to Alexandria Canal was at times substantially higher in pollutant concentrations for some substances than the trigger concentrations for the protection of 95% of marine water aquatic organisms and therefore potentially polluting off-site waters. I base this on the data which extends until 16 December 2013 and indicates the concentrations of substances entering the site were generally significantly lower than the downstream concentrations. The stormwater being discharged from the site had elevated total suspended solids, lead (a heavy metal) and total organic carbon (and potentially other untested substances). For example, on 16 December 2013 the lead concentrations in the sampled stormwater being discharged from the site was approximately 12 – 60 times higher than the trigger concentration for the protection of 95% of marine water aquatic organisms. Alexandria Canal where the site's water enters it is tidal and hence why the marine waters criteria is relevant. 34. I note from my review of the site's EPLs (Nos 4627 and 12594) that conditions were added to both licences in August 2012 which generally reflected parts of IGGC (2012) and in particular the Filling Plan (DADI 2012). These conditions required the installation of works in: a) Area E so that the stormwater could potentially be managed as leachate; and b) Area F so that stormwater could be collected from this area and potentially used for dust suppressions and discharged off-site into the stormwater system." 1. Mr Dixon summarised thus (CB 40, Appendix A, par 13): "An important aspect for understanding my advice and as reflected by Mr Gamble in his June 2017 Expert Report is to note the potential sources of leachate that would be generated at the site and whether the leachate needs to be pre-treated to be disposed to sewer or could be disposed to sewer directly. These sources are: a. Infiltration of groundwater from the Botany Sands aquifer and which enters the waste mass and would be extracted from the main leachate riser. This leachate would end up as high strength leachate and should be pre-treated before it is disposed to sewer; b. Infiltration of groundwater from the Botany Sands aquifer which is intercepted and is impacted slightly by leachate and could be discharged to sewer without the need for pre-treatment; c. Infiltration of rainwater into the landfilled waste which is the bulk of the leachate extracted from the main leachate riser/s from the site and is of high strength and should be pre-treated before it is discharged to sewer. This source of leachate encompasses also the leachate source identified in point a. above; and d. Contaminated stormwater which has not infiltrated into the waste and could be disposed to sewer without pre-treatment." 1. In response to the Applicant's suggestions that leachate could be stored in the void, Mr Dixon said (CB 34, par 17.b.): "I noted that a note is included in the EPL (no. 4627) under condition O4 which states that: "Note: The EPA would vary condition 06.4 to permit the water to be managed as stormwater provided the licensee provides evidence to demonstrate that the water does not contain leachate." This suggests that the EPA would contemplate a licence amendment to permit the diversion of stormwater from Quadrant C to be discharged to surface water off-site, provided the licensee could demonstrate that it could be done in a manner not to unacceptably pollute off-site water. On this basis the model assumed the following: i. Half of Quadrant C would be able to be managed so that it generated mostly clean surface water. I selected this value as I considered that, potentially, a hypothetical buyer could relatively quickly undertake works to enable some of the stormwater falling into Quadrant C to be disposed to stormwater off-site and have condition O6.4 amended and still comply with condition L1.1 of EPL (No. 4627). The ability to amend condition O6.4 was contemplated by the EPA as stated in the note under condition O4. I did not want to be overly optimistic in the ability to reduce potential leachate volumes in the provision of advice to a hypothetical purchaser and hence selected the midway point of 50%. I also noted that even when IGGC 2012 assumed the bulk of quadrant C was able to be discharged to stormwater the results reported in Table 6.2 (IGGC 2012) showed that in a wet year (April 1988) there was insufficient leachate disposal capacity available at the site. This finding was also reflected in the Scenario 1 leachate water balance Ms Horlyck undertook for me (Appendix B). IGGC 2012 suggested that the potentially excess volume of leachate could be temporarily stored in the landfilled waste. However, I ruled this out as a possibility as the leachate level recorded in the landfilled waste at the time of acquisition was too high (having been recorded at -16.98 m on 10 December 2014. In my opinion the excess leachate would not have been able to have been stored in the landfilled waste and still achieve compliance with condition O5.15 which states, 'The licensee must maintain the level of the leachate below -16.0 metres AHD and at least 0.5 metres below the standing groundwater level.' This in my mind reinforced the need to recommend to a hypothetical purchaser that an above ground pond would likely be needed to enable excess leachate from wet periods to be able to be managed in a controlled manner at the site. A leachate generation rate of 15% of rainfall has been assumed for this half of Quadrant C based on the value provided by IGGC 2012 and I consider it to be a reasonable approximation of leachate generation via the infiltration of stormwater through daily or intermediate cover material into the landfilled waste ii. Half of Quadrant C would have leachate affected surface water. A leachate generation rate of 90% of rainfall has been assumed for this area which I selected it based on guidance in the EPA's Vol. 2B Guideline for sediment basins for landfills. I consider this a reasonable value, noting that by the model's use of a monthly timestep the storage volumes could need to be greater than estimated. However it is a still a useful measure before undertaking calculations for a detailed design" 1. The second matter of contention between the experts relates to the capacity of the SBR, and whether an upgrade is required. The experts differed in approach to the SBR, based on their calculated volumes of leachate generation. 2. Mr Fridell also observes that the primary control on leachate management comes from the EPL, which prescribes a level of -16AHD, as well as prescribing that the levels at the sump always remain at least 0.5m below those in groundwater well MW3. This latter control ensures an "inward hydraulic gradient". The controls combine to ensure that leachate levels remain "within the lower permeable Ashfield Shale". 3. Mr Fridell is confident that the leachate management system works, because these controls have been complied with – but for two minor events – and because his chemical analysis shows that, despite the sump and MW3 having a "strong hydraulic connection", there is no contamination of MW3, showing that the "inward hydraulic gradient has been maintained by the existing leachate management measures". 4. Dr Swarbrick opined that he could not foresee any infrastructure, development or management changes required, as at the DOA, but he conceded that "this type of operation must always be ready for events that exceed design capacity and may temporarily overload the system" (CB 39, p14, par 60(c)). 5. Contrary to the Applicant's experts, Mr Dixon and Mr Gamble prepared calculations and reasons that an upgraded system would be required. In their joint report, Mr Gamble summarises the reasons for an upgraded system as follows (CB 42, Annexure B, p35): "11. ... This [i.e. the Applicant's suggested model] does not allow any time for fixing a plant breakdown during a wet weather period, when leachate production is at a maximum, and there is a need to continually pump from the leachate sump to maintain low leachate levels (below the licence levels). It also doesn't allow for one unit to be taken out of service for maintenance for any length of time, as the treatment capacity is reduced to only 120 kL/day (below the average daily leachate production rate) if the larger of the two SBR units is out of service. 12. ... Hence on the basis that (1) I believe that the treatment cycle is quite short (12 hours instead of a more typical 24 hours) and additional volumetric capacity may be needed, (2) I have no information on whether both SBRs are in working condition and major repairs could be needed, (3) there is uncertainty about the sampling and testing results and whether the plant can operate as is for the next 30 or more years, and (4) the plant may not meet current standards and major work may be necessary, I would recommend to a HP that a new 100 kL/day SBR unit be budgeted for, to be installed in parallel with the existing SBRs. 13. ... This would provide for higher capacity during certain times of year, allow flexibility in scheduling of necessary maintenance work. This would potentially enable one of the existing SBR units to be replaced, particularly if it required major repairs, and maintain existing capacity but with potentially greater reliability. In the event that a 12 hr cycle was proved not to be successful in practice, and the existing SBR plant capacity was effectively reduced to 142 kL/day, the additional SBR unit would provide another 75 kL/day of treatment capacity, and should enable the overall treatment plant capacity to be sufficient for most situations. 14. ... Alternatively, an allowance could be made for fixing one or both SBRs and making them fully operational, and conducting more frequent maintenance than for a new SBR, but this does not allow for the possibility of a 12 hour cycle being insufficient. Since I have no information on the condition of the two existing SBR units, I cannot make any recommendations on what costs should be allowed for this, hence my conservative approach in recommending to the HP that another new SBR unit be installed." 11.4 Landfill gas management 1. The second consideration for the DCF model relates to the extent to which the hypothetical purchaser would need to account within it for landfill gas management infrastructure. 2. The DCF valuation inputs for landfill gas management are dependent on three considerations. The first relates to leachate gas generation. Considering the source and magnitude of landfill gas generation, the experts secondly proposed different types of landfill gas systems. Thirdly, the expert evidence considered the appropriate ongoing monitoring and post-closure requirements. 11.4.1 Landfill gas generation 1. The first point of contention related to the source and volume of landfill gas generation ("LFG"). The experts agreed in the joint report that the available "information [was] very limited": CB 42, p6. 2. In approaching this issue, Mr Fridell considered the materials historically landfilled on the Site. In particular, he opined that landfill gas will be generated "at a lower generation rate and for longer compared to a putrescible site", and, therefore, any system imposed to deal with LFG should be based on that generation rate. He considered that, firstly, at the DOA, there was no regulatory requirement to capture and treat landfill gas, and, secondly, no significant risks were identified on or off-Site. Nevertheless, he would have advised a purchaser that a system would foreseeably be required "particularly if a purchaser intended to redevelop the site". 3. In his first report, Mr Fridell posed options for gas extraction systems, based on an assessment of low risk of gas migration. In his report in reply, he also recommended measures that may be appropriate to a greater than expected rate of gas generation, including passive oxidation, low calorific flaring, or high temperature flaring. 4. In the joint report, Mr Fridell and Dr Swarbrick estimated rates at 200-400m3/h, but Dr Swarbrick noted that providing an estimate was difficult. In particular, he raised concerns that the testing had been limited, flawed in methodology, and not "flux-based". 5. In contrast, Mr Welsh undertook modelling to take into consideration the limited available information on landfill gas generation. He prepared six different models to form a view of the different potential scenarios to address the uncertainty which would otherwise arise. In order to carry out his modelling, he needed to make predictions about generation. 6. There are differences in the gas generation rates estimated by the Applicant's and Respondent's experts. Mr Welsh prepared a number of gas generation models (3 initially, and then a further 2 or 3 later on). The outputs from Mr Welsh's models included the model uncertainty (+/- 35%). Mr Fridell prepared 1 gas generation model only, and this did not consider the model uncertainty (+/- 35%). 7. One of the initial points of reference was the classification of the "Characteristic Situation", which is an objective measure of the risks potentially posed by the landfill gas. I quote from the oral evidence (Tp765, LL12-47): EASTMAN: ... Can I ask the court officer to go to page 27 of the joint report, tab 42. That's the paginated version. The page number is PDF page 33, 2.14 on page 32. The question there is: Does characteristic gas situation 4 (moderate to high risk) (NSW EPA2012) apply for the classification of the site for future design purposes. You've agreed that the site is characterised as gas situation CS4; is that right? WITNESS SWARBRICK: That's correct EASTMAN: Mr Fridell, Dr Swarbrick, that doesn't involve an assessment of gas generation in coming up with that characterisation, does it? WITNESS FRIDELL: The characteristic situation is based upon concentration and measured gas flow in the gas bores. EASTMAN: What, in a broad sense, information do you rely on to come up with your characterisation of CS4 in this case? WITNESS FRIDELL: For myself in my report in reply, the difference between my initial statement in chief and my report in reply was I was allowed to rely on the AECOM phase 2 information and I relied on the information in the draft phase 2 AECOM report. There was recorded flow measurements and concentrations for a number of bores, and the various bores in the AECOM report reported different levels of risk, CS1 through to CS4, the highest being CS4, and within the joint report we had discussions and we agreed to adopt the more conservative, which was CS4. 1. The experts accepted the AECOM data, which suggested that the landfill be classified as a Characteristic Situation ("CS") of 4: CB 42, p27. That rating is taken from this risk based table: Table 6 - text version (57.3 KB, rtf) | Table 6 - text version (81.6 KB, pdf) 1. The experts, therefore, agree that there is "moderate to high risk" in relation to landfill gas, which must be predicated on some broad assumptions about generation. The "CS rating" of 4 cannot numerically be used to calibrate gas generation models, but does indicate significant gas generation (comparable to a closed putrescible landfill). 2. Even if the specific content of the landfill mass is not known, there is objective industry data available – the National Greenhouse Energy and Reporting ("NGER") – being national and regional waste audit data: see CB 40, Appendix B, par 99. Mr Welsh refers to this data as likely indicating the sort of material that would be relied upon by a hypothetical purchaser. He, therefore, suggests that there is potentially 9 to 21.5% of food waste within the commercial and industrial waste stream on site. In contrast, Mr Fridell indicates that food waste constituted 0% of the waste stream: Tp775, LL20-37. 3. The 2015 C&I NSW Audit (TB 394, pp80 and 81) identified the composition of C&I waste in the Sydney Metro areas as follows (Respondent subs par 768) NSW Everything C&I 0.6% else, waste rubber some stream Not Not (leather element (approx.) 9 16.1 5.2 14.5 5.6 specifically specifically not of which 100 – from identified identified specifically may be 2015 identified) biodegradable C&I 49% Audit 1. The NGER default percentages given above are national averages based on national waste audit information: TB 391, at PDF 24. Whilst the gas generation models developed by both RMS and ALF experts were not developed for the purposes of NGER reporting, it is noted that, under the NGER legislation, reporting companies (which includes some landfill operators such as Suez and Veolia) are required to complete detailed waste stream audits to justify altering the waste stream inputs in the Solid Waste Calculator model: TB 223, at PDF 480-481, and see Respondent subs par 769. 2. The Respondent's experts did not alter these defaults, as no detailed waste audit information was available to justify any change. The Applicant's experts altered those compositions in their modelling. 11.4.2 Landfill gas system 1. Taking into consideration the data on landfill gas generation, the experts each devised landfill gas system models: CB 42. 2. Mr Welsh suggests the implementation of an active gas system, i.e. one involving the use of a mechanical blower or flare to burn off excess gas. 3. In contrast, Dr Swarbrick suggests the implementation of a passive gas system, i.e. one involving the use of a series of biofilters and trenches to collect and control landfill gas. 4. In support of an active landfill gas collection system, Mr Welsh suggested (CB 42, p14) that: 18. A complete active landfill gas collection system should be in place across all landfilled waste present at the site at the time of the acquisition, nominally within 12 to 18 months of its acquisition. I note that this timeframe may extend subject to compliant future landfill gas monitoring results and prevailing odour conditions) (sic). A preliminary concept of such a complete system is provided in Figure 15 in Annexure C. An associated LFG monitoring network and monitoring program (discussed later on in this report) should also be installed and implemented. In addition to the permanent vertical gas wells, interconnecting pipework and flare, a complete active landfill gas collection system installed in such a timeframe may need to include temporary interconnecting pipework (that is moved to allow filling temporarily then re- connected), vertical wells (that are temporarily disconnected and extended to allow filling to occur around them and then re-connected once filling is complete in the area), and/or sacrificial horizontal wells. This approach to landfill gas extraction during filling occurs at many other landfill sites." 1. In response, Mr Webster observed (CB 42, p14) that: 19. It is not practical to have a complete landfill gas collection system to be installed within 12-18 month of acquisition. Areas could be complete within this time frame, however with significant filling activities still to be undertaken; gas collection infrastructure must wait for this filling work to be completed. 1. Dr Swarbrick suggested (CB 42, pp14-15) that: 20. The most efficient approach to landfill gas management in the short term is likely to be a hybrid system that is designed for both passive and active treatment. The passive component would be designed on the basis of a lower gas emission rate which would be determined from a gas flux study. Assuming a landfill gas generation rate of 120 m³ gas/hr (taken as the PF prediction 5 yrs after acquisition) and assuming 50% methane and 80% collection efficiency and the NSW DEC landfill gas passive biofilter handbook and a 90% oxidation efficiency the biofilter area would be 8,200 m². This would be preferentially located in a higher area of the site and close to the main gas source. It could be split into two systems if gas flux testing indicated two main sources and into any shape as long as delivery pipeline system was configured to match. At a concept design level other aspects of the system would be: (a) Approximately 1,000m of trenching over the gas collection field (assumed to be 5.7Ha and centred around the 'D') excavated to a depth of at least 1.3m, around 0.6m wide, with at least 0.5m of recycled aggregate overlain by a nonwoven geotextile (eg A16) overlain by compacted backfill. This assumes a maximum trench spacing of around 25m. (b) A biofilter around 8,200m² in area excavated to a depth of 1.2m with 0.4m of recycled aggregate overlain by a nonwoven geotextile (eg A16) overlain by biofilter media comprising 2/3 composted garden waste mixed with 1/3 shredded wood by volume. (c) Around 1000m of slotted pipework within the aggregate below the biofilters media (d) Additional solid pipe connecting the trench system to the biofilter if the biofilter is not located directly over the gas collection field. 1. Responding to Dr Swarbrick's model, Mr Welsh identified, in the joint report, significant uncertainty about the Applicant's approach. He opined (CB 42, p17): 31. ... I am of the view that the active / passive system proposed by PF and GS above and in Figure G of Annexure C even in combination with the trench design outlined by PF above is unlikely to be able to offer an equivalent level of landfill gas collection (and therefore migration prevention) from this area (although if a flare is used should be able to achieve an equivalent level of landfill gas treatment when the flare is operational, potentially less so with a biofilter). It is unclear to me how the gas system proposed in Figure G of Annexure C that does not penetrate the waste mass to a significant depth will be able to adequately collect gas generated within the deeper waste at this site. It is unclear to me how the system shown on Figure G of Annexure C will be able to collect landfill gas and therefore prevent gas migration from areas of the site where it is not proposed to be installed (these areas seem significant in size to me). It is unclear to me how the system identified in Figure G of Annexure C will be able to be installed immediately given that it is a shallow surface system, much of the area where it is proposed to be installed could take between 5 and 10 years from acquisition to be filled and it would be filled with waste soils only (therefore the system would only be installed into waste soils (likely low to non landfill gas generating) not the underlying landfill gas generating waste). Finally it is unclear how this system will achieve a landfill gas capture efficiency of 100% as stated on Figure G. 11.4.3 Ongoing monitoring and post closure costs 1. In relation to monitoring and post closure costs, Mr Welsh provided the following estimates (CB 42, pp52-53) : 4. … Allowed for the installation of 50 wells from time of acquisition. This figure was based on twice the maximum recommended bore spacing (i.e. 50% of the recommended bores) for relevant geology and development distances recommended in Environment Agency of England and Wales Guidance on the management of landfill gas (2004). This guideline suggests that a total of approximately 102 bores would be required for such a site as illustrated on Figure 27 in Annexure C (subject to a landfill gas risk assessment). 50 bores was considered to be an appropriate allowance by MW considering the available information for the site and that an active landfill gas management system was proposed to be installed, operated and maintained by MW. 5. Nominally this results in wells around the entire site boundary at 40 m spacings (although actual locations / spacings may ultimately vary). A figure of $5k - $10k for installation of each well was allowed for. I would further advise the HP to allow for replacement of 25 of these bores during the operational and post closure period. 6. … Considers that the landfill gas monitoring program required will vary with time and the HP should allow for the monitoring of perimeter bores, surface emissions, on-site services and on-site buildings and gas protection measures in buildings from acquisition to the end of the post closure period as per my Evidence in reply. 7. … In addition, I am of the view that the HP should allow $2,000 + GST per round for the potential need to monitor some or all of the accessible off-site service pits within 50 m of the site boundary from acquisition to the end of the post closure period on an average quarterly basis during that period. This allowance is if elevated concentrations of methane and/or carbon dioxide are encountered in perimeter bores. 8. … In addition, the HP should make an appropriate allowance (a nominal figure of $5,000 + GST per round is suggested) for the potential need to monitor some or all of the accessible off-site buildings within 50 m of the site boundary from acquisition to the end of the post closure period on an average quarterly basis during that period. 9. This allowance is if elevated concentrations of methane and/or carbon dioxide are encountered in perimeter bores and monitored accessible sub-surface service pits within 50 metres of the site's boundary. 1. The Applicant's experts jointly disagreed with Mr Welsh, stating (CB 42, p53) that: 11. … The 50 wells around the perimeter is deemed excessive. Around the residential areas, the frequency (spacing of wells) is appropriate, but in other areas a greater spacing between wells would be more appropriate given the AECOM Phase 2 results report the majority of monitoring results on the perimeter as 'Very Low Risk'. Given this finding it would be reasonable to advise the HP to extend the spacing of the LFG bore spacing in comparison to guidelines. 12. … Provision of 20 monitoring wells were envisaged as being adequate. In addition it is also deemed more important to monitor surrounding underground utility service pits in preference to installed gas bores, especially those constructed in shale as these would most likely form preferential pathways. 13. … Provision of monthly monitoring of surrounding services for 6 months then decrease to quarterly monitoring until 2 years after cap placement. Further decrease to 6 monthly during aftercare period. 14. … All services around the site can be monitored quickly and could be completed by 2 people in one day. An allowance of $2,000 per monitoring round should be made for underground services and could be undertaken by on-site staff using a rental FID. Section 12: Quantity surveying experts 1. Mr Anthony McLandsborough was the quantity surveying ("QS") expert for the Applicant. He is a director of AT&L, and has 25 years' experience in development and construction. He prepared a report dated 8 November 2016, with the assistance of Mr Andrew Tweedie, a civil engineer at AT&L. However, Mr McLandsborough alone provided evidence in the form of expert reports (CB 52 and 55), and his contribution a joint report with Mr Lawson. 2. Mr David Lawson was the quantity surveying expert for the Respondent. He is the Principal of InfraSol, and has 25 years' experience in commercial cost and risk management of major infrastructure and building projects in Australia, the United Kingdom and the Middle East. In particular, he has worked on the capital costs estimates for various major developments related to landfills, waste recovery and waste management. His report is dated June 2017. In preparation of his expert report, Mr Lawson relied on the scope of works outlined by Mr Gamble, and the expert advice provided by others on traffic, environmental, geotechnical, planning and waste operations. 3. The QS experts each prepared individual reports, dated 8 November 2016 (CB 52), and June 2017 (CB 53), and individual reports in reply dated 6 October 2017 (CB 54) and 17 October 2017 (CB 55). The experts conferred, and prepared a first joint expert report dated 3 November 2017 (CB 59). In February and March 2018, they engaged in further joint conferencing on the site, and prepared an amended second joint report dated 20 March 2018 (CB 127B). 4. The primary points of disagreement were in relation to the contingencies and other margins for the related works. 5. In relation to the preliminary design and scoping advice, both experts agree that their costs advice is subject to an accuracy range of between -10% and +30%. Similarly, both experts agree that the regulatory cost (including statutory fees) would be 5% of the building and design cost, or 10% of the estimated building costs. 6. Although Mr Lawson did not accept SKC23 as a "reasonable site development solution", he provided his opinion on the costing of the proposed design. 7. Further, the experts calculated the different costs design and scope options for both waste management planning options, being Mr Webster's proposal for the Applicant, and Mr Haywood and Mr Berkefield's waste management option. 8. Both experts nonetheless agree that the cost differences are attributable to two key issues: firstly, the extent of stockpile management works, calculated by Dr Ryall and Mr Clay, and, secondly, the extent of piling, calculated by Mr Mostyn and Dr Thomas. 9. With regard to construction, both experts agree that a head contractor would construct the proposed sheds and associated civil infrastructure. Consequently, it would be appropriate to include a head contractor's margin and overhead of 5%. Further, both experts agreed that the mixed waste crushing plant (in Option 1) would be housed in a lightweight industrial building, in accordance with DC 2007/00278. 10. With respect to the landfill cap, gas system and leachate management, Mr Lawson considers that such works should be delivered by a specialist civil contractor. In contrast, Mr McLandsborough has assumed that such works would be undertaken by the operator, and would be accounted for within the landfill's operational costs. 11. Both experts agree that a contingency should be applied, in consideration of design and construction risks associated with the development works. However, Mr Lawson and Mr McLandsborough differ on what contingency rate should be applied, and how many risks should be considered within the cost estimates. Section 13: Land valuation evidence re Lot 2 1. Arriving at the land value of Lot 2 requires consideration of four calculations to include within the income components of the DCF (see [7] above). Those calculations involve determining a terminal value of the land at the end of the life of the landfilling business. 2. Mr Michael Dyson was the land valuation expert for the Applicant. He holds an Associate Diploma in Real Estate Valuations and a Graduate Diploma in Applied Finance and Investment, and has 40 years' experience in valuation, property management and sales. 3. Mr David Lunney was the land valuation expert for the Respondent. He holds a Bachelor Degree in Commerce (land economy), and has more than 20 years' experience as a land valuer. 4. Mr Lunney and Dr Ferrier jointly prepared an individual expert report for Lot 2, dated 14 November 2017 (CB 60). Mr Dyson also provided an individual expert report for Lot 2, dated 7 November 2017 (CB 64). The land valuation and business valuation experts jointly conferred in November 2017, and prepared a joint report dated 22 November 2017 (CB 69). 5. During the course of the proceedings, Mr Lunney and Mr Dyson prepared further individual valuation reports dated 13 March 2018 (CB 129A and 129B), and a supplementary joint report dated 8 March 2018 (CB 129). 6. There are four main contentions in relation to land value, including: first, the approach taken to the proposed staged subdivision and sale of surplus land; second, the rate to be put on the sale of surplus land (to calculate its terminal value); third, the appropriate land discount rate to be applied; and fourth, the effect of the Boiling lease. 13.1 Proposed subdivision of land 1. Mr Dyson considered three scenarios, which were outlined by Mr Samuel in his initial report (CB 65, p7, par 20) (a) Scenario 1, in which I rely on forecasts attributable to the Land as prepared by the management of [DADI]. I have then adjusted those forecasts so as to assume the Land was used by a hypothetical willing buyer, and not the entities actually using the Land. My approach therefore removes any value that was attributable specifically to the entity or entities using the Land; (b) Scenario 2, in which I rely on the forecasts provided in this matter by Mr Webster (the Webster Forecasts). I then; (i) adjust those forecasts to include inflation in circumstances where inflation appears to have been omitted; (ii) adopt the inflation rate (2.5%) I consider appropriate; (iii) include cash flows arising from tax consequences; and (iv) apply a discount rate (8.7%) I consider appropriate; (c) Scenario 3, in which I assume the Land is sold as at the Resumption Date. For this purpose, I rely on the report of Michael Dyson dated November 2017 (the Dyson Report). 1. Further, Mr Samuel provided two further options for scenario 2 (CB 65, p9, par 25): (b) Scenario 2 shows the Market Value based on the Webster Forecasts which: (i) assume an eight year period in which the landfill is maximised and Areas A, B, C and D are made available for sale for development purposes of over time; and (ii). uses two alternatives after year 8, being: - Alternative 1, in which the Land would be used to operate a 20 year long term plant (LTP) on Area E, or - Alternative 2, in which the remaining Land, being Area E, would be sold; ... 1. Ultimately, Mr Samuel adopted Alternative 1 of Scenario 2, for the following reasons (CB 65, p10, par 26): In my opinion, based on the results summarised in Table 1, the highest and best use would arise under Scenario 2, Alternative 1, which: (a) is based on the Webster Forecasts, which assume: (i) the Land would be used in a manner that is similar to the use of the Land as at the Resumption Date, except that all residual waste would be landfilled at Alexandria, and no waste would be transferred to Eastern Creek or any other third party site; (ii) the landfill would be filled over an 8 year period; (iii) a new [RRWTF] would be constructed during year 8 to commence operation in year 9; (iv) surplus Land not required could be sold, in accordance with the five stage plan set out in Appendix A of the McLandsborough Report; and (v) the new business would continue in perpetuity; (b) results in a Market Value for the Land of $338.1 million; ... 1. In approaching the proposed subdivision of Lot 2, Mr Lunney noted that (CB 60, p36, par 90): From my review of the Joint Report of the waste operations experts (Haywood, Berkefeld and Webster), it appears to me that these experts have agreed that the most profitable or "highest and best" use of the Subject Property, at least for the period of approximately eight years following the [DOA], would be the use of the Subject Property for: • Landfilling with waste soils, the conduct of a mixed waste recycling operation on part of the Subject Property, and • The use of the Subject Property for alternative purposes upon the completion of landfilling activities. 1. Further, Mr Lunney considered that an intending purchaser of the Subject Property, as at the DOA, would not contemplate subdivision of the Surplus Land (being Area A), prior to the cessation of landfilling and waste management operations. In reaching this conclusion, he relied on the expert evidence presented, and the related costing and access issues outlined in his initial report (CB 60, par 98). 2. Mr Lunney suggested two options: 1. "... an intending purchaser of the Subject Property would anticipate the ability to generate a "ground rent" equivalent to $40m² p.a. gross over this area during the initial eight years prior to selling the whole of the Subject Property to a third party" (CB 60, p39, par 99). 2. "... the most likely future use of the Subject Property, upon the cessation of its use for landfilling and recycling purposes, is lower order industrial uses such as the storage of shipping containers or other hardstand type uses" (CB 60, p7). 1. Accordingly, Mr Lunney arrived at the following opinion (CB 60, par 103), reflected in the DCF spreadsheets before the Court (see [7] above): ... an intending purchaser of the Subject Property, as at the [DOA], would capture the terminal land value in a DCF calculation by assuming a sale of the Subject Property after the completion of landfilling activities, eight years after the [DOA]. 1. In the First Joint Valuation Report, the parties' valuers deal with how a hypothetical purchaser would treat the so-called Surplus Land (although much depends on the evidence of others). The Applicant's valuers (Samuel and Dyson) advised as follows (CB 69, p4, par 2.6.(a) – footnote omitted): ... the Subject Property should be valued on the basis of highest and best use. That approach requires consideration of whether the Subject Property can be subdivided for the purpose of maximising value. Mr Samuel therefore considers whether the maximum value arises from operating a business on part(s) of the Subject Property whilst subdividing and selling the balance. Mr Samuel has prepared the DCF calculations, and relies on Mr Dyson's opinions for cash flows arising from the sale of any parts of the Subject Property; 1. In his initial report, Mr Dyson relied upon SKC23, and the evidence of Mr McLandsborough, as the basis for the proposed subdivision, noting (CB 64, p23, sec 8.3) that: ... It sets out a Development Schedule within five (5) stages over an eight year timeframe, which appears to fit with the timeframe for the [DC] and renewal for the Waste Management Facility. ... 1. Mr Dyson concluded (CB 64, p24, sec 8.3) that: "... Therefore from the above, the subject property could be seen as a part industrial land development site and part ongoing Waste Management Facility providing positive cash flow over the next 8 years and thence part of the site (Area E) could be retained as a Waste Management Facility or sold for future development." 13.2 Terminal value of land 1. In preparation of the terminal value for Lot 2, the Valuers selected and adjusted comparable sales. 2. In determining a rate per square metre, there were two principal differences in the adjustments the respective Valuers made. The first related to the applicability of an adjustment for geotechnical constraints to the five key areas identified for potential subdivision (i.e. Areas A to E). Mr Dyson did not consider it necessary to apply any geotechnical adjustment for Areas A, B, C and D. In contrast, Mr Lunney applied 40% for Area D, 25% for Area C and 10% for both Areas A and B. However, Mr Lunney applied 40%, and Mr Dyson applied 20%, by way of geotechnical adjustment for Area E. 3. For Areas A and B, Mr Dyson considered that all of the selected comparable sales suffered from some degree of geotechnical constraint. In contrast, Mr Lunney applied an adjustment, in order to account for the effect of the specific geotechnical restraints on its marketability and value, against remediation costs. For both areas, the geotechnical experts had agreed that only settlement-tolerant structures could be erected, subject to the provision of a structural fill layer (no less than one metre thick). Further, Mr Lunney also relied upon the geotechnical expert evidence regarding the structural requirements for the buried batters within Area B. 4. In relation to Area C, Mr Lunney opined greater geotechnical restrictions than Areas A and B. In particular, he considered the geotechnical experts' concern with the geotechnical impact of a buried batter within the area. Further, settlement-tolerant development may need to be delayed for two years, and/or piling may be incorporated into the development. Mr Dyson made no comment on Area C, beyond his initial comments about the remaining site. 5. According to Mr Lunney, Areas D and E presented significant geotechnical restraints, which would require an adjustment for a cost and/or time penalty. In his initial report, he suggested a potential adjustment of 46.4%, comprising a cost penalty component of 17.4%, and a time penalty component of 29%. In particular, he observed that lot-specific adjustments were necessary to account for landfilling and capping, as well as an assumed further surcharge period of 5 to 10 years. 6. Mr Dyson disagreed with any adjustment for Area D by way of either a cost penalty, or a time penalty. His understanding was that Area D would be filled, and capable of immediate built-form development in year 8. In cross-examination, Mr Dyson also accepted that Area D would be filled after four years. For Area E, Mr Dyson accepted that a geotechnical adjustment was necessary, but he proposed 20%. In his opinion, Area E could be used to generate a rental income during the 5 to 10 year period of surcharging. 7. The second difference between the valuers related to adjustment of the comparable sales for the so-called "stigma" factor – i.e. the market's perception of the environmental constraints on, and contamination of, Lot 2. Mr Lunney adjusted the comparable sales by -10%, -5% and 0%, whereas Mr Dyson made adjustments of -5%, 0%, and +20%. 8. Mr Lunney summarised the two different approaches as follows (CB 69, p52, par 11.12.(e) – footnote omitted): Contamination/Stigma/Risk. For the reasons I set out in my Joint Report with Dr Ferrier, I consider that any ultimate on-sale of the Subject Property in the future, upon the cessation of land filling activities, would likely be met with a degree of market resistance by reason of the "Stigma" of contamination and risks associated with the ownership of a contaminated site. This is notwithstanding the assumptions I made in relation to the likely conditions of any future on-sale (which would almost certainly be subject to the vendor retaining the responsibility and liability of the management of contamination). In the joint conference Mr Dyson expressed the opinion that no such market resistance would apply. He also expressed the opinion that it is double counting the burden to consider both the projected cost of contamination management and also the possible stigma or market resistance to a contaminated site. I do not agree that this is the case. One needs to consider the position of a future purchasers acquiring land which was (and would remain) contaminated to some degree. Whilst such a purchaser would likely require a conditional sale and would take some comfort if the terms of such a sale in the future imposed a responsibility on the vendor of ongoing management of contamination it is my opinion that the majority of purchasers would carefully consider the risks of ownership of a contaminated site. In my opinion this is distinguishable from another contaminated site which is to be remediated at the vendor's expense and for which the perceived ongoing risks of ownership would likely be regarded as being significantly less onerous. The other factor which I took into consideration for the purpose of quantifying this adjustment was the requirement for leachate and landfill gas management infrastructure to be installed across the Subject Property upon the cessation of land filling activities. I have considered the issues raised by Mr Dyson however maintain the opinion that the adjustments which I made on account of contamination/stigma/risk is warranted and appropriate. 13.3 Land discount rate 1. In the circumstances where the land was to be subdivided, the experts applied different land discount rates for the risk of the subdivision. In the supplementary joint report (CB 129, p6, par 5.10.), the experts agreed: "... that an intending purchaser of the ALF site, as at the [DOA], would likely perceive that a potential future subdivision of the land was technically possible, there is a greater risk (and therefore required return) than a passive investment. We agree that if the assumed future disposal of the ALF Site, either progressively or otherwise, was by way of proposed subdivision and sale, the discount rate adopted should be at least 5% greater than the "no subdivision" discount rate of 5% p.a. (real)." 1. Whilst the experts agreed upon a "no subdivision" real discount rate, Mr Dyson during cross-examination applied a nominal discount rate of 12.5%. This rate captured a projected long term growth of 5% p.a., and comprised of: 2.5% for general property risk or passive industrial investment risk, 5% for subdivision risk, and 5% for projected escalation. 2. In contrast, Mr Lunney proposed 5% for a real discount rate (no subdivision), 5% for subdivision risk, and 5% for projected escalation. 3. In comparing the two rates, Mr Lunney suggested that the underlying property risk component of 2.5% is equivalent to the real discount rate which would apply on a "no subdivision" basis. 4. Mr Dyson disagreed that it was appropriate to apply a real discount rate. However, he did postulate, in the first joint report, and the supplementary joint report, that he would apply a real discount rate of 4.6% on a no subdivision basis (CB 69, pars 15.2 and 15.4; CB 129, par 5.4). Nonetheless, Mr Lunney proposed that, if a nominal discount rate were to apply, he would derive a discount rate of 15%. 13.4 The Boiling lease 1. In his initial report, Mr Lunney noted the existence of an "... unregistered lease to Boiling Pty Limited (Boiling) which was due to expire on 31 December, 2014, 11 days after the [DOA]". (See Sec 4.6 above.) 2. In particular, he noted, firstly, that Boiling had an option of renewing the Lease for three additional periods, and, secondly, that Boiling had breached an essential term of the lease, which would have allowed the hypothetical purchaser to terminate the lease, and achieve vacant possession. 3. Having regard to these points, he assumed that the hypothetical purchaser would not have considered that the Boiling Lease had any material effect on the site's market value. Nonetheless, Mr Lunney noted that, if the Court found that Boiling could have exercised its option of renewal of the lease, his assessment of market value would be different. 4. Mr Dyson was cross-examined on his assumptions, in relation to the Boiling lease, and accepted that his valuation opinion assumed vacant possession: Tp1983, LL9-32. Section 14: Business valuation evidence 1. Given that the Applicant proposed using a DCF method of valuation, the Respondent agreed that the land value of Lot 2 required consideration of an appropriate discount rate to be applied to the projected business cash flows, and an appropriate DCF model to calculate compensation. 2. Mr Tony Samuel was the business valuation expert for the Applicant. He is an Accountant, who holds a Bachelor of Commerce and a Diploma in International Commercial Arbitration. He has expertise in the valuation of shares, business entities and intellectual property. 3. Dr Rodney Ferrier was the business valuation expert for the Respondent. He holds a Diploma in Technology (Commerce), Bachelor of Arts, Master of Economics (Accounting), and is a Doctor of Philosophy. He has approximately 49 years of experience as an accountant, and has expertise in the valuation of shares, business entities (including waste processing and recycling facilities), and other assets. 4. As already noted above (at [400]-[401]) Dr Ferrier and Mr Lunney jointly prepared an expert report for Lot 2, dated 14 November 2017 (CB 60). Mr Samuel also prepared an individual expert report, dated 13 November 2017 (CB 65). The land valuation and business valuation experts jointly convened in November 2017, and prepared a joint report dated 22 November 2017 (CB 69). 5. During the course of the proceedings, Mr Samuel and Dr Ferrier prepared a second joint report dated 11 March 2018 (CB 128A). The table on page 10 of the joint report was revised on 20 March 2018, and, the Annexure to the joint report was amended on 9 April 2018 (CB 128AA, and CB 128AAA). 6. There are three key issues in relation to business value: 1. The after-tax discount rate to be applied to business related cash flows; 2. The after-tax discount rate to be applied to initial stockpile remediation cash flows; and 3. The valuation of Area E, based on the cash-flow of the future business. 14.1 Discount rate for business related cash flows 1. The main issue between the business valuers related to the appropriate discount to be applied to the business-related cash flows. 2. In calculating the discount rate, both valuers were required to assess the projected cash flows against inherent business risks. 3. Generally, the experts adopted different calculation methods to generate a discount rate. In Mr Samuel's view, the appropriate discount rate is 8.7% for all businesses, for all periods, derived on the basis of the weighted average of the cost of debt and the cost of equity (i.e. the Weighted Average Cost of Capital – "WACC"), using the Capital Asset Pricing Model ("CAPM") to establish the cost of equity component: CB 65, Appendix E, par 7. He observed (CB 69, p16, par 6.12.) that: [This approach] establishes the risk free rate and market risk premium by reference to market data, and the cost of debt by reference to ALF's circumstances. It is only the beta element of the cost of equity that is determined by reference to comparable companies, and a typical industry gearing ratio. ... (The "beta element" is an allowance made for "volatility" in the relevant industry at a particular time.) 1. Dr Ferrier observed that it is only appropriate to derive a cash flow for the "Year 1-8 option", on the basis that landfilling will cease by the end of year 8, and further uses will not be "inextricably linked" or "uniquely tied" to the land, and are too uncertain to warrant a DCF calculation: see CB 69, p26, par 6.49(c); CB 128, p8-9, par 2.18. 2. In relation to the cash flows for the "Years 1-8" option, Dr Ferrier opined that the appropriate methodology to determine the discount rate in this case would have regard to "Earnings Before Interest Tax Depreciation and Amortisation" (EBITDA), and analyse a number of sales of significant assets (principally operating waste disposal businesses) within the landfill industry: CB 60, p47. Although Dr Ferrier originally derived a discount rate of 19.5%, he ultimately arrived at a discount rate of 13.9%, on the basis of reassessing his discount rate without reference to the Bingo Pty Ltd company listing transaction: CB 69, p28, par 6.59. 3. Noting that the primary position taken by Dr Ferrier and Mr Lunney is that a DCF approach is not appropriate at all from year 9 onwards, Dr Ferrier derives a discount rate of 20.9% (being a 50% increase over 13.9%), if it is relevant, for the years 9 to 29: CB 60, p50, par 150. 4. Whilst Mr Samuel's approach involves a generally applicable discount rate, it is necessary to consider the two components of the business-related cash flows, being the: 1. Discount Rate applicable for the Years 1 to 8 Business Model 2. Discount Rate applicable for the Years 9 to 29 Business Model 14.1.1 Discount Rate for Years 1 to 8 Business Model 1. The first component relates to how a participant in the market would apply a discount rate to the cash flows, in order to determine their present value. Both parties' experts agree that "business-related cash flows and the relevant discount rate should both be expressed on an after-tax basis": CB 69, par 4.2. 14.1.1.1 The WACC method 1. The Respondent tendered an article (Exhibit R30), authored by Dr David Parker, regarding the relevant International valuation standards for a DCF valuation. Dr Parker says (Exhibit R30, p544): Accordingly, the following practices, which are common in Australia, are inconsistent with [International Valuation Guidance Note No. 9 ("IVGN9")] and valuers may wish to amend their approach to DCF accordingly: a single discount rate where a property has multiple cash flows, with multiple discount rates appropriate; a single figure cash flow where a property has multiple leases, with lease by lease cash flows appropriate; no allowance for vacancies, where an allowance for vacancies is appropriate; no allowance for capital expenditure, where an allowance for capital expenditure is appropriate; and no allowance for option exercise, lease renewal and costs, where an allowance for option exercise, lease renewal and costs is appropriate. In the event that a valuer is of the opinion that a local practice differs from that specified by IVGN9, the practitioner (sic) expected by [International Valuation Standards Committee ("IVSC")]: "to quantify and explain the consequent differences in value" (IVSC 2003) which places a considerable burden on local practitioners to value under both of the respective bases and explain the difference. 1. Mr Samuel's approach (WACC analysis) is outlined in Table 5 of his initial report: CB 65, Appendix E, p9: Table 5: WACC Low Risk free rate Rf 3.0% Market risk premium (Rm-Rf) 6.0% Beta β 0.8 Specific company risk premium (including SSRP) α 3.0% Cost of equity (Ke) Ke = Rf + β(Rm – Rf) = α 10.8% Cost of debt (Kd) (after tax) Kd 4.5% Debt to enterprise value ratio D/(D+E) 33% Calculated WACC (Ke x E/(D+E)) = (Kd x (1-t) x D/(D+E)) 8.72% Selected WACC 8.7% 1. The experts provided conflicting opinions on the reliability of this model for assessing risk within the Year 1-8 Business Model. The key components of the model included: 1. Risk Free Rate and Market Risk Premium 2. Beta 3. Small Size Premium 4. Buffer 5. Cost of Debt 1. In relation to the first of these five issues, the experts primarily disagreed on the applicable risk-free rate. Although the experts relied on different data sets, they both agreed on a market risk premium of 6%: CB 69, p33. In reaching his conclusions, Mr Samuel used the rate applicable to ten year Australian Government Bonds (being a rate of 2.96%, at 9 December 2014) to derive a rate of 3%: CB 65, p75, par 10. 2. Dr Ferrier disagreed with this approach, and would have adopted a risk-free rate of 4.9%, in accordance with the long term Australian market data published by the Independent Pricing and Regulatory Tribunal of NSW ("IPART"), this State's independent statutory pricing regulator, which undertakes independent reviews and investigations into a diverse range of economic markets, including for water, public transport and local government. 3. In particular, Dr Ferrier observed that, with respect to the IPART document, whether short term or long term, adding the risk free rate with the market risk premium gives approximately the same total risk: CB 69, p30, par 6.63. In explaining this calculation, Dr Ferrier noted (CB 69, p30, par 6.63.): In February 2015, IPART published its WACC Biannual Update (attached as Annexure A to this joint report). That document reported a long term (10 year) average risk free rate of 4.9% and a long term (10 year) average market risk premium of 6.0%. It also reported a short term (40 day) average risk free rate of 2.7% and a short term (40 day) average market risk premium of 8.3%. Mr Samuel's risk free rate (which is the risk-free rate which existed on the date of compulsory acquisition) and his market risk premium (which is a long term average rate and not the rate which existed on the date of compulsory acquisition) are not consistent with the parameters reported by IPART. 1. During cross-examination, Mr Samuel was questioned on his approach to the IPART analysis, and the determination of the 8.3% short term risk rate, and this exchange occurred (Tp2145, LL2-20): LANCASTER: If you make the assumption that IPART have in table 1 on page 70 correctly identified both risk-free rate and market risk premium as at 40 days and as at 10 years, that does create a situation in which your selection of the market risk premium would not sit at all comfortably with your selection of the risk-free rate, if they are right about it? WITNESS SAMUEL: If I had to adopt your assumption, I would agree with you, but I don't know how that figure's been determined. LANCASTER: Do you have any reason or basis to doubt the IPART analysis, or you just don't know how it's been determined? WITNESS SAMUEL: The IPART analysis tells us the long-term market risk premium is 6 per cent, and I'm not sure what the 8.3 per cent is purporting to be. 1. The second and third of the five issues relate to Mr Samuel's approach to assessing the beta and "small size" premiums. Mr Samuel utilised the beta to represent the relative risk for this particular business against a selection of comparable companies. Mr Samuel utilised the comparable companies to assess the beta of the cash flow forecasts to be derived from Lot 2, and the amount of debt expected to be adopted by a prospective purchaser of Lot 2. Mr Samuel selected the following international companies as "comparable" (CB 69, p31): Country Value $million Activities Clean Harbors, Inc. USA 3,978 Waste treatment and disposal, surface remediation, groundwater restoration, waste packaging, analytical testing, consulting, excavation, oil and gas field services Seche Environnement SA France 412 Product and energy recovery, eco-logistics, waste management, site rehabilitation, treatment of polluted soils, decontamination and rehabilitation of PCB transformers Shanks Group plc UK 693 Treatment of contaminated soil and water, collection and treatment of commercial waste, sustainable waste-to-product. Waste Management, Inc. USA 30,539 Waste collection and recycling, portable storage Republic Services, Inc. USA 20,976 Collection, transfer and disposal of non-hazardous solid waste, recycling, energy services Waste Connections, Inc. USA 5,934 Waste collection, landfill, transfer station, portable toilets, intermodal containers Lassila & Tikanoja Oyj Finland 644 Waste collection, recycling, property maintenance, sever maintenance, damage repair, process cleaning, environment construction, event services 1. In his initial report, Mr Samuel had relied on two Australian Companies as well as those seven (CB 65, p77): 20. In determining the appropriate beta I have considered the betas of comparable listed companies. My detailed analysis is set out in Appendix E1: Table 1: Betas for comparable companies Company Geared beta Gearing Ungeared beta Transpacific Industries Group Ltd 1.50 8% 1.41 Tox Free Solutions Ltd 0.18 25% 0.15 Clean Harbors, Inc. 0.92 29% 0.73 Seche Environnement SA 0.87 57% 0.47 Shanks Group plc 0.91 44% 0.56 Waste Management, Inc. 0.72 27% 0.59 Republic Services, Inc. 0.71 33% 0.54 Waste Connections, Inc. 0.64 33% 0.47 Lassila & Tikanoja Oyj 0.76 10% 0.70 Average 0.80 29% 0.62 Average without Transpacific and Tox Free 0.79 33% 0.58 21. I note that the betas of Transpacific Industries and Tox Free Solutions do not appear consistent with the geared betas for the remaining companies which are grouped between 0.64 and 0.92. I have therefore excluded these in my estimate of an appropriate beta. 22. In selecting an appropriate beta I have considered the average ungeared betas for the above comparable companies (ignoring Transpacific Industries and Tox Free Solutions). Assuming an ungeared beta of 0.60, a corporate tax rate of 30% and gearing of 33%, I conclude that a beta of approximately 0.8 is appropriate. 1. Mr Samuel then discarded the two "comparable" Australian companies (Transpacific Industries Group Ltd and Tox Free Solutions Ltd), because of par 21 quoted in the previous paragraph (from CB 65, p77). 2. During cross-examination, Mr Samuel accepted that he had relied solely on US and European markets to assess the "small size" premium: Tp2157, LL21-27. 3. Dr Ferrier is critical of Mr Samuel's "excessive reliance on information in relation to non-comparable foreign listed companies for an assessment of an appropriate beta": CB 69, par 6.68(a). 4. The fourth of the five issues related to the application of a buffer to the discount rate. Mr Samuel's Specific Company Risk Premium of 3% in table 5 included a specific risk factor of 2%, which Mr Samuel claimed was justifiable at the time of his report, as he was considering "Scenario 1". Because that Scenario was set aside, all of the matters on which he relied to apply the premium were no longer relevant. Nevertheless, he would still keep the 2%: see Tp2157, L42 to p2158, L32. 5. The fifth and final issue concerned the cost of debt, which was factored into the discount rate. As noted in the joint report, and maintained in cross-examination (Tp2161, LL5-15), Mr Samuel relied on ALF's actual cost of debt. "ALF is… an operator in the relevant industry", and it provides "the best guide to the cost of debt that a willing but not anxious buyer would incur": CB 69, p14, par 6.3. Accordingly, Mr Samuel adopted a cost of debt rate of 4.5%. 6. Dr Ferrier is critical of this approach, opining that it is "not a reliable guide to the cost of debt which could reasonably be expected to be incurred by a prospective purchaser". Dr Ferrier relies on the objective data provided in the IPART report, which indicates that the total cost of debt is 4.9% short term, and 7.8% long term: CB 69, p32, par 6.67.(d). 14.1.1.2 The EBITDA method 1. Dr Ferrier opined that it is preferable to identify the required rate of return "by reference to the market for the particular asset being valued, as long as there are sufficient market transactions to provide a reasonable basis for the identification of that required rate of return (discount rate)": CB 69, par 6.49(d). Accordingly, he considers that it is more appropriate to apply the EBITDA method to the sale of assets within the waste management industry. Dr Ferrier and Mr Lunney outlined their comparable transactions at Annexure B to their initial report (CB 60, p47, par 142): Transaction No. Type Purchaser Vendor Date Pre-tax nominal discount rate 1 Property Transpacific Boral Dec-14 12.0% 2 Business Toxfree Wanless May-13 20.1% 3 Business Toxfree Worth Mar-16 21.3% 4 Business Bingo Konstruct Aug-17 20.3% 5 Listing Bingo May-17 16.2% 6 Business Sita WSN Feb-11 17.2% 7 Business Remondis Thiess Jul-12 19.6% Average 18.1% 1. Mr Samuel suggested that transactions 3, 4 and 5 should be disregarded, because they were conducted after the DOA. 2. In response, Dr Ferrier observed that these transactions were "sufficiently comparable as they relate to substantially similar businesses operating in the same industry as the business which is proposed to be operated from the Subject Land": CB 69, p27, par 6.50. He analysed these market transactions, which show a range of pre-tax discount rates between 12.0% and 21.3%, and settled on a rate of 13.65%: CB 60, pars 142-147. 3. In consideration of the Year 1 to 8 Model, Dr Ferrier also explained that he would not factor in any cash flows from the proposed waste recycling/transfer business for the initial 8 year period, on the following basis (CB 128, p9, pars 3.1.-3.3.): 3.1. ... the Joint Waste Expert Report indicates that Messrs Haywood and Berkefeld "would advise the HP to allow for a period of between 15 and 18 months after the acquisition before waste recycling operations could commence" (paragraph 15). This period is necessary for the completion of construction of the undercover recycling facility. 3.2. The consequences of the delayed commencement of operations (resulting in a shorter operational life), the high initial capital costs and the low operating profitability of the waste recycling operations are such that the net present value of the cash flows from those operations is less than the market value of the land (Area B and, possibly, Area A) which would be used for those operations. Accordingly, Mr Lunney has advised that the use of that land for waste recycling operations would not constitute a "highest and best use". Mr Lunney has therefore advised Dr Ferrier that the land proposed to be used for the waste recycling operations would not be valued by a hypothetical purchaser on the basis of the cash flows which could be derived from those business operations but, instead, would be valued adopting real estate valuation principles. 3.3. Dr Ferrier has therefore amended the respondent's valuation model to exclude business-related cash flows related to the waste recycling operations. The business cash flows related to the landfill operations are used by Mr Lunney to assess the value of Areas C, D and E for the 8 year life of the landfill. Mr Lunney adopts real estate valuation principles to determine the value of the vacant remediated land at the end of the 8 year operational life of the landfill. 14.1.2 Derivation of Discount Rate for Years 9-29 1. The second component of the cash flows relates to the proposed development and operation of the RRWTF facility from years 9 to 29. 2. In relation to this second component, Mr Samuel uniformly applied a discount rate of 8.7%, in the cash flow for Years 9-29. The joint report records in this regard (CB 69, p22, par 6.34.): ... Mr Samuel does not agree that a "new" business is more risky than established businesses. The willing but not anxious buyer would most likely be experienced in waste management, waste transfer and recycling. It could also be determined through due diligence that a successful waste management, waste transfer and recycling business had operated on the Subject Property prior to the Resumption Date. Indeed, its prior use would be obvious. In Mr Samuel's opinion, this factor should be set aside as irrelevant. 1. Dr Ferrier rejects this view on the following grounds (CB 60, pp49-50): 148. In my opinion, there are significant difficulties in assessing an appropriate pre-tax nominal discount rate to apply to the forecast cash flows for the possible waste recycling / transfer station business to be established on 5.7 hectares of the land after the landfill is closed and capped, as proposed by the Applicant's experts, for the following reasons: (a) There is no market evidence in relation to transactions which involve the establishment of a hypothetical business in eight years' time; (b) There are significant uncertainties and risks surrounding the establishment of the business, including risks associated with gaining appropriate consents and ensuring that the filled land is suitable for the construction of the necessary structures; (c) There are significant uncertainties surrounding the nature of the waste treatment industry in eight years' time, including uncertainties as to market participants and market demand. 149. In my experience there is no reasonably reliable objective method for assessing a discount rate which would be appropriate for the future possible transfer station business. In my opinion, the discount rate should be significantly greater than the rate adopted for the landfill business which is (hypothetically) to be established immediately after the acquisition of the Subject Property. 150. If, contrary to my advice, a prospective purchaser insisted on adopting a DCF calculation based on the forecast cash flows of a hypothetical transfer station for the purposes of determining the terminal value of part of the land after completion of the landfill, I would advise that hypothetical purchaser to adopt a discount rate which is at least 50% higher than the rate adopted for determining the net present value of the business cash flows during the first eight years of operation until the landfill is complete. In the absence of market evidence, I would give that advice based solely on my experience in assessing business risk. On that basis, I would advise a potential purchaser of the Subject Property to adopt a nominal pre-tax discount rate of 30% for the purposes of determining the net present value of the future transfer station business. 14.2 Discount rate for initial stockpile remediation cost 1. In relation to the initial stockpile remediation costs, Mr Samuel did not consider it appropriate to modify the discount rate for the business cash flows and applied a rate of 8.7%, particularly because "the estimates are subject to estimation and business risks in the same manner as all other cash flows used in the DCF calculation": CB 69, p34, par 7.1. 2. Dr Ferrier opined that the cash flows associated with site remediation are "wholly separate and distinct" from the cash flows attributable to business operations, and should be "discounted at a rate which is relevant to the risks associated" with that cash flow: CB 128, p11, par 5.3. It is, therefore, appropriate to attribute different discount rates to the cost and benefit cash flows related to environmental remediation. 3. Dr Ferrier considers that the costs for initial site remediation are risk-free, in that they will have to be incurred by the purchaser. He, therefore, considers it "appropriate to adopt a short-term average risk-free rate" of 1.89% (rounded to 1.9%): CB 69, p35 par 7.3. 4. When it comes to the future tax benefit associated with remediation, Dr Ferrier considers that "although an intangible future tax benefit arises from a risk-free cash flow, the cash flows arising from that tax benefit only occur in the context of business profits". Accordingly, he adopts a different discount rate for the costs associated with remediation for the tax benefit (13.9%), as he considers that this cash flow "should, therefore, take the same risk profile as the business cash flows": CB 128, p12, par 5.6. 14.3 Valuation of Area E based on cash flow of future business 1. Mr Samuel calculated the value for Area E on the basis of the cash flows of the future business (the "Years 9-29" option). 2. In response to this issue, Dr Ferrier opined that a DCF is not commonly used when valuing land, and is used only in special circumstances, where a prospective purchaser of the land would use the land for a business operation uniquely tied to it: CB 69, p26, par 6.49.(c): ... although a DCF approach is considered by business valuers to be the most theoretically sound approach to asset valuation, the advice of Mr Lunney and Mr Dyson is that it is almost never used in the context of land valuation, and is only ever used in the special circumstances where a prospective purchaser of the land would intend to use the land for a business operation which is uniquely tied to the land. In Dr Ferrier's opinion, it is likely that a DCF approach is very uncommon in the context of land valuation because there are readily available comparable transactions which provide evidence of the capitalisation rates at which land assets transact in the market, so that it is unnecessary to attempt to construct a capitalisation rate based on a risk-adjusted WACC. Section 15: Highest and best use of Lot 2 15.1 The principles 1. As a general principle, the Court is required to determine the "highest and best use" of land, before its value is determined. 2. A central issue in dispute in this case was the highest and best use of Lot 2. 3. The parties agree that, in the course of purchasing the land, the hypothetical purchaser (1) would have regard to all relevant available information; (2) would be cognizant of all circumstances which might affect the value of the land; and (3) would require expert advice as to each of the topics upon which the Court has heard evidence, summarized in Sections 6 to 14 above: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259, 276-277; Boland v Yates Property Corporation Pty Limited ("Boland v Yates") (1999) 74 ALJR 209; [1999] HCA 64, at [271]-[274]. 4. That information has been input into the DCF model ([7] above). 5. In determining the highest and best use, the Court takes into consideration the parameters outlined by Biscoe J in Commonwealth Custodial Services Ltd v Valuer General (NSW) (2006) 148 LGERA 38; [2006] NSWLEC 400, at [15]: 15 There is no statutory definition of "highest and best use". It has been described in the High Court as "the most advantageous purpose for which [the land] was adapted": Spencer v The Commonwealth (1907) 5 CLR 418 at 441 per Isaacs J. It "is the present value alone of such advantages that falls to be determined": Cedar Rapids Manufacturing and Power Co v Lacoste [1914] AC 569 at 576 per Lord Dunedin. In Park v Allied Mortgage Corporation Ltd (FCA, 5 July 1995, unreported) Hill J said at [70]: "As Spencer's case itself makes clear the valuation must proceed by reference to the best use of the property. For this purpose the valuer will take into account not only the present use to which the land is applied, but any more beneficial use to which it may reasonably be applied. This is the process which a purchaser negotiating to purchase the property would undertake. Thus, it is not inappropriate in valuing property to take into account a potential development of the property, for among the range of hypothetical purchasers can be assumed to be a person who would undertake such a development as would maximise the usage of the land". In Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 at 415 (SC/SA) Jacobs J said: Common experience shows that land ideally suited for commercial development will fetch a higher price per unit of area than residential land, but it does not follow that the highest and best use of all land is a commercial use, for the highest and best use means exactly what it says – the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential. The first task of the valuer is to determine what that use is and then to value the land on that basis. It is not appropriate to determine the highest and best use by reference only to value. 1. On the role of the valuer, the Western Australian C of A said, in Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 136 LGERA 16, at [183]-[185]: 183. For that reason, the Court relies on the competence and integrity of professionally qualified valuers who, although retained by one or other of the parties, are under a duty to the Court to present evidence which "should be, and should be seen to be, the independent product of the expert, uninfluenced as to form or content by the exigencies of litigation": ... The Court is not itself a valuation agency. 184. The skill of the valuer lies in assessing (in this case) the market value of the reserved Mount Lawley land, had it been offered for sale on 7 May 1996. That value would reflect the highest and best use to which the land could be put, consistent with its zoning: Boland v Yates at [271]. 185. As we have noted, in carrying out the valuation the valuer will take into account any potential the land may have for a higher and better use than permitted by the current zoning. In so doing the valuer should exercise an independent judgment about the likely perception of such matters in the relevant market. 1. On the assessment of the land's "potentialities" ([126] above), I note that Handley JA said, in Mosca, at [15]: With great respect to the Judge the value of these lost opportunities was not relevant to the assessment of compensation under the Act. The first opportunity was to realise the development potential of the land in accordance with the Council's existing policies. 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: Yates Property Corporation Pty Ltd v Darling Harbour Authority (1991) 24 NSWLR 156, 175-6 ... citing the Raja's case [1939] AC 302, 313 and Turner v Minister [of] Public Instruction (1956) 95 CLR 245, 268-9 .... 1. Applying these principles, I have considered the feasibility and commercial utility of the alternate valuation scenarios, submitted to the Court by both the Applicant and Respondent, and concluded that the "highest and best use" of Lot 2 is not simply a matter of having regard only to its value; the Court has to determine the feasibility of each aspect of the valuation scenario, in the light of all the expert evidence. 15.2 Applicant's submissions 1. The Applicant defined the purpose of the market valuation as ascertaining "the full return which may reasonably be expected from the sale of land, not the most conservative value;" Turner v Minister for Public Instruction (1956) 95 CLR 245, at 264. 2. As the DCF method establishes the relevant cash flows, the Applicant deemed it unnecessary for the judicial valuer to make any preliminary finding on the highest and best use. 3. In summary, the Applicant's proposed highest and best use involved: 1. Landfilling for 8 years by importation of waste soils; 2. Operation of a recycling business (on various parts of the land) in years 1 to 8; 3. Subdivision of surplus land; and 4. Operation of a RRWTF building in years 9 to 29. 1. Upon consideration of the expert evidence for Years 1 to 8, the Applicant suggested that the following issues had been agreed upon: 1. The purchaser would have a sufficient profile to operate the site after the DOA: CB 22, p12, par 8.1; CB 69, p7, par 2.9. 2. Landfilling can continue under existing approvals: CB 2, p24; CB 3, p20, par 5.24(a). 3. Waste recycling would likely continue with regulatory approval (CB 2, p26; CB 3, p18-19; CB 9, p2), and some obligations such as environmental management, securing future approvals and the transfer of licences to the new operator: CB 42, Annexure B, p4, par 1.2(1). 1. The Applicant submitted, firstly, that an operator would seek to operate the recycling business, simultaneously with landfilling for the first 5 to 10 years. The Applicant proffered its advice and valuation, on the basis that the experts also agreed on the regulatory requirements for capping, on the ongoing management for the post-closure period of up to 30 years, and on making the site suitable for commercial or industrial purposes: CB 42, pp56 and 63. 2. Secondly, the Applicant relied upon SKC23 (CB 52, PDF p18), and SKC23B (CB 127A, PDF p18), to justify the feasibility of the subdivision of Areas A and B within Years 1 to 8. The premise of the valuation option was to sell surplus lands for industrial purposes, and operate a long-term recycling option on Area E, in order to allow the purchaser to derive income, while maintaining its environmental obligations during a 30 year post-closure period: Applicant subs par 41. 3. The Applicant relied on its planning and traffic experts' opinions to deduce two key points on the subdivision of Areas A and B: Firstly, Area A had no issues which would prevent it from being subdivided, or sold, at the end of year 1; and, secondly, a SSD application could be drafted so as to encompass future developments, including the consolidation of Area E, and the grading and severance of Areas B, C and D. In this respect, the Applicant submitted that Ms Bindon had misunderstood that the SSD application could be modified by a s 80A modification application, in order to sever land as it was graded and filled. 4. Finally, the Applicant suggested that a "sophisticated" purchaser would seek to secure cash flows within the post-closure period: subs par 24. In order to capitalise on the site, the Applicant and its experts devised a future development, which could operate on an ongoing basis: subs par 23. In support of this approach, Mr McLandsborough suggested the development of a RRWTF business on Area E, while the land continued to be monitored for the next 30 years. 5. Ultimately, Mr Samuel devised an approach for the new waste facility to operate within Years 9 to 29, and he, therefore, applied a discount rate of 8.7% to the expected business cash flows. 15.3 Respondent's submissions 1. In summary, the Respondent's proposed highest and best use involved: 1. The use of the land to earn income by filling the landfill void on Lot 2 with waste soils over an eight-year period from the DOA; and 2. The sale of the whole of the land, at the conclusion of those land filling operations, as general industrial land, at the end of year 8. 1. In particular, the Respondent relied on three factors, in order to determine this as the highest and best use: 2. The first was associated with the physical considerations, which a hypothetical purchaser would consider as opportunities on, and constraints of, the land. In particular, a "potentiality" would not be a potentiality ([126] and [478] above), if the physical and geographical constraints of the land would render it unfeasible to pursue a suggested potential use. 3. The second related to regulatory considerations, which might restrict the hypothetical purchaser's ability to operate or develop the land for a particular use. Consent authorities (such as the Council or EPA) regulate and approve land for particular uses, with conditions. Such regulatory limitations must be taken into account in determining the "potentiality" of a future use, business or development. 4. The third consideration was the economic costs and benefits which may encourage or discourage a hypothetical purchaser to pursue one or more of the suggested potentialities. These factors would require the purchaser to identify the financial value of various potentialities, in accordance with the regulatory and physical limitations of the land. 5. Accordingly, the Respondent approached the highest and best use, in accordance with these three factors, to assess the four aspects of the valuation scenario, and made three key submissions: 1. The subdivision of surplus land was not feasible, on physical and regulatory grounds, and would likely be disregarded by the purchaser; 2. The operation of the recycling business in Years 1 to 8 was also not financially feasible, and would likely be disregarded by the purchaser; 3. The operation of the RRWTF building in years 9 to 29 was not feasible, on regulatory or economic grounds, and would likely be disregarded by the purchaser. In any event, it was not a proper component of the valuation methodology. 1. In support of its first submission, the Respondent outlined 25 steps which would be required to effectively subdivide and sell Areas A and B separately, within Years 1 to 8. I summarise the 25 steps as follows: 1. Step 1: The Respondent submitted that the Applicant's proposed filling of PDA1 is inconsistent as between SKC23 and SKC33B. The timing of filling of Area A could also typically take up to 10 months: Tp389, L19-p390, L13. Further, a structural fill layer would be required, delaying any development for a further two months: Tp395, LL32-46. Altogether, Mr Webster conceded that the land would need to be filled to RL11, which would take approximately 18 months (from the start of year one) after the DOA: Tpp1263-1266 and Tp1275, LL23-33. 2. Step 2: Subdivision and sale of Areas A and B would require both EPLs to be varied. The Applicants did not provide any evidence regarding the likelihood, timing, conditions, or costs related to the variation of either EPL. Accordingly, the Respondent submitted that the subdivision and sale plan is speculative on three grounds. 1. Firstly, the only historical boundary alteration for the EPLs was the creation of the recycling licence in 2007, which limited landfilling to the centre of the site. 2. Secondly, the site would require consent for filling, including the construction of 8 metre high walls. This issue was not considered by the planners. 3. Thirdly, the hypothetical purchaser would need to manage landfilling and regulatory issues, including alteration of the licence to fill the land (Tpp1266-1268); alteration of the licence to excise Area A, due to the capping area of 13.2 hectares (Tp1270, L34-p1271, L1); requirements under the EPL regarding post-closure activities (Tp1304, LL31-41); and the licensing issues, with five different owners managing the post-closure plans for the landfill (Respondent subs par 132, and CB 38, pars 62-63). 1. Step 3: The Respondent submitted that a landfill cap would need to be placed on most of Lot 2, prior to the subdivision and sale of Areas A and B: CB 127A, p7. In particular, concerns were raised about licensing and post-closure requirements for waste facilities, under s 76 of POEO Act: Tp832, LL2-27, and pp1483-1484. 2. Step 4: If Area A is to subdivided, the hypothetical vendor or purchaser would need to obtain a DC, or a s 96 modification to the existing consent, which designates Area A for bunds and a buffer: Tpp216-217, and p260, LL25-40. The Respondent raised serious concerns with the ambiguity in the Applicant's expert evidence, in respect to the re-use of Area A for a different purpose, and its effect on the buffer and protective bunds: Tp209, LL13-27; pp253-254; and p256, LL20-36. 3. Step 5: The hypothetical purchaser would require approval to construct 9 metre high retaining walls (as per SKC23). Mr Dyson conceded in cross-examination that he did not consider that SKC23 was being graded to the boundary: Tp1829, LL23-28. The Respondent raises a particular concern as to whether the Applicant relies on SKC23 or SKC33B, as they involve different requirements, fill levels and construction heights: Tpp1450-1451, and pp1474-1475. 4. Step 6: The hypothetical purchaser would also need to manage the existing environmental management infrastructure, including the Botany Sands Interceptor, the herringbone leachate drain, the SBR, and the discharge to trade waste. The Respondent relied on its environmental management experts' evidence to the effect that Lot 2 would require an active gas management system, leachate plant upgrade, stormwater retention ponds, and a gas flare, and raised concerns about the practicality of accessing and constructing offsite gas monitoring wells, as per the Applicant's expert evidence: CB 113; Tpp839-840, and p977, LL10-32. 5. Step 7: The Respondent raised concerns with the requirements to develop an internal access road within the proposed area of subdivision. The Applicant put no position as to the timing of the road's construction: Respondent subs pars 170-172. Mr Webster conceded during cross-examination that he had not seen a design to accommodate an access roadway for Lot A via Albert Street: Tp1276, LL2-42. 6. Step 8: If the access road discussed in Step 7 were to be dedicated, the hypothetical purchaser would need to negotiate with Council about the construction of the road, and the ultimate responsibility for it. The Respondent relied on Mr Brogan's opinion that redevelopment of area A would experience deficiencies in access via Holland Street: Tp160, L47 to p161, L7. Further, Mr Pindar conceded in cross-examination that he had not considered the leachate or landfill gas management issues: Tp178, LL1-37. The Respondent contends that the hypothetical purchaser would need to consider settlement, gas and leachate management infrastructure, and the Botany Sands pump, in constructing the internal road. 7. Step 9: Mr Webster accepted Mr Eastman's proposition that the hypothetical purchaser is "selling [Area A]… encumbered with… a licence over it and potentially obligations or easements arising from how area E is ultimately going to be managed": Tp1273, LL32-46. The Respondent submits that the Applicant adduced no evidence as to how the hypothetical purchaser would create easements, in order to accommodate the infrastructure, or the Botany Sands aquifer: Tp1484, LL25-39. 8. Step 10: The Respondent submitted that the EPA would be required to accept that a separate person may own Area A. That owner would be required to have a licence, and meet the "fit and proper person" test. Further, there may be additional requirements for the area to be subject to a closure plan for capping, and/or the rear section may need to be excised from the licences altogether, despite containing a cap, and a critical component of the leachate management system. Mr Webster accepted that these requirements would need to be met by the incoming purchaser of Area A: Tp1273, LL20-30. 9. Step 11: The Respondent contested the feasibility of the hypothetical purchaser obtaining DC for the subdivision of Area A. Mr Webster conceded during cross-examination that he could not provide any examples of a staged subdivision of a landfill in New South Wales: Tp1293, L46 to p1294, L45. 10. Step 12: The Respondent challenged the viability of commencing construction of the temporary shed on Area B. Its construction would require geotechnical designs, shed engineering designs, a quantity surveyor to obtain a construction certificate, the actual construction of the shed, then the obtaining of an occupation certificate, and any EPA regulatory approvals (Tp1293, L42-p1284, L13), plus the installation of plant and equipment. Further considerations would be involved in taking account of the fact that the shed would be constructed over the main leachate drain (herringbone drain): Tp1283, LL12-29. These steps would need to be completed, prior to the operation of the recycling activities: Tpp1280-1285, and pp1410-1414. 11. Step 13: Area B needs to be filled. The EPL would need to be varied, in order to ensure the site area is filled to the appropriate level. 12. Step 14: Area B requires a landfill cap. The Respondent submits that the hypothetical purchaser would then need to ensure compliance with the POEO Act, and prepare a landfill closure plan prior to capping works. 13. Step 15: The hypothetical purchaser would need to negotiate with the EPA to redefine the boundaries for the recycling and landfill licences (to excise Area B). 14. Step 16: The hypothetical purchaser would need a DC, or a s 96 modification to the existing consent, in order excise Area A, as a bunds and buffer zone. 15. Step 17: The hypothetical purchaser must carry out works for the gas infrastructure, by constructing boundary trenches and pipe works for underground gas collection. Mr Mitchell conceded in cross-examination that he had not considered the potential overlap, nor the obligations in respect of leachate management, for Area B: Tp259, LL21-36. 16. Step 18: The hypothetical purchaser must renegotiate its Trade Waste Agreement (TWA), in order to ensure the pipe works connect the SBR to the sewer discharge point. 17. Steps 19 and 20: The amended TWA would need to transfer the responsibility to subsequent purchaser(s) of the subdivided lots. During cross-examination, Mr Webster acknowledged that he would require further clarification, in order to determine who would be the recipient of the ongoing environmental management, controls and respective licences: Tp1283, L42-p1284, L17; and p1284, L42-p1285, L6. 18. Steps 21 and 22: Area B may require access, by creating an adjoining road through Areas A and B. If the road is to be dedicated, the Respondent contends that the hypothetical purchaser would need to negotiate with Council about carrying out the works, and determining ultimate responsibility for it, given that there are settlement issues, gas and leachate infrastructure, and the Botany Sands pump on the road area: Exhibit R10. 19. Step 23: The hypothetical purchaser would need to prepare and register easements and positive covenants for the gas infrastructure, cap, and leachate management system. 20. Steps 24 and 25: The hypothetical purchaser would need to obtain approval from all the necessary licensing and consent authorities, so as to subdivide Area B. 1. While these 25 steps are being taken, the hypothetical purchaser would need to continue filling the other areas, and construct a "temporary shed" on Area D, and the Respondent contends that this would require a SSD application. This would involve SSD concept approval, geotechnical designs, full shed engineering designs, a Quantity Surveyor to obtain a construction certificate, the actual construction of the shed, an occupation certificate, the installation of plant and equipment, and its operation thereafter. Further, Mr Webster suggested during cross-examination that the operator would process brick material in the void of area D, during the filling and capping process: Tp1411, LL12-33; p1412, LL5-21; p1413, LL24-30; and p1414, LL33-44. 2. Taking into consideration all these issues, the Respondent raised serious concerns about the appropriateness of the estimated income Mr Samuel projected to commence from day 1 after the DOA. Further, Mr Samuel did not take account, in his valuation models, of the delay associated with Council approvals, EPL variations, and the filling for, and construction of, a shed in Area B. 3. Accordingly, the Respondent says, firstly ([494](1) above), that the proposed subdivision was speculative, and unfeasible, within the Applicant's costing and timeframe. 4. The Respondent's second submission contested the feasibility of the recycling business in Years 1 to 8 of the valuation model. 5. Primarily, the Respondent relied on s 56(1)(c) of the JTC Act ([34] above) to disregard any recycling activities deemed to be unlawful. Until the shed has been constructed – within 15 to 18 months – the recycling business could not lawfully operate, or process recyclable materials. 6. Further, the Respondent submits that the business is not economically viable, in terms of recovery rate, uncertainty of the gate fee, and the likely tonnage it would attract. The Respondent suggests that the activity would be relatively short-lived: see subs Appendix B. 7. In its third submission ([494](3) above), the Respondent disregards the operation of a recycling business on Area E in Years 9 to 29 of the DCF valuation model. 8. In particular, the Respondent relied on the evidence of Dr Ferrier and Mr Lunney as to the serious uncertainties surrounding the mooted operation of a new RRWTF business on Area E. 15.4 Applicant's submissions in reply 1. In its reply, the Applicant characterised the Respondent's valuation approach, as applying a criminal standard of proof to establishing the highest and best use. 2. In particular, the Respondent's position on onus (subs pars 76 and 77) was criticised because "the application of an onus is not without difficulty in Class 3 resumption matters, indeed in any merits review case" (Applicant reply subs p17, par 82): Smith and Hannaford v Zhang and Zhou [2011] NSWLEC 29, at [38]. 3. Instead, the Applicant asserted that the Court's task was "evaluative", and that any reference to onus was "unhelpful and should be avoided": subs par 83. In particular, the Applicant relied on ISPT v Valuer General (2009) 165 LGERA 25, at [5], for the correct approach to assessment by the judicial valuer of the utility of, and the weight to be afforded to, material put forward. 4. The Applicant characterised the Respondent's criticisms of SKC23, SKC23B and SKC33B, as a "linear approach to the evidence": reply subs p9, par 32. In particular, the Applicant defended its staged development approach, its mooted recycling operations in years 1 to 8, and its proposed subdivision of the site. 5. In relation to the proposed subdivision, the Applicant attacked the Respondent's approach as contradictory, on three grounds. The first related to the alleged change in position of Mr Lunney regarding the valuation task. Primarily, the Applicant interpreted Mr Lunney's rate per square metre, as a change in position from his initial rejection of the proposed subdivision. In particular, the Applicant criticised the Respondent for departing from this valuation, and providing no opportunity for the Court to weigh opposing evidence on the potential rental values of Lot 2. 6. The second submission criticised the Respondent's 25 step process for subdivision of Areas A and B ([495] above). The Applicant interpreted these submissions as largely a critique on the viability of managing the environmental issues with the proposed landfilling activities. Comparing the two valuation models, the Applicant suggested the Respondent's highest and best use similarly requires that (reply subs p11, par 44): • the land can, and will, be landfilled; • the land will be made available for future industrial use; • the Botany sands groundwater can be intercepted and diverted; • leachate can be managed; • stormwater can be managed; • landfill gas can be managed; • consents can be obtained for other uses; and • licences can be changed to facilitate those other uses. 1. Accordingly, the Applicant contends that the Respondent's approach suffers from the same issues and, therefore, the DCF model permits the Court to (1) identify the issues, (2) quantify the costs, (3) incorporate a contingency, and (4) allocate risk: reply subs p11, par 46. At Appendix 1, the Applicant outlined its submissions in reply to each of the 25 steps (in [495] above, with which these submissions should be read): 1. Step 1: The Applicant contends that the site is authorised to be filled, and capped for future use. Further, the Applicant relies on Paul Mitchell's opinion that "landfilling is not constrained by height limits imposed in … the waste recycling approvals": CB 2, p25, par 69. Further, the Applicant contends that less fill will be required for Areas A and B, especially in SKC33B. 2. Step 2: The Applicant provided examples of the EPLs being varied to account for different boundaries: TB 166; TB 153, p15; and TB 160. 3. Step 3: The Applicant says that it is not necessary to alter the landfill consent for the capping, environmental measures, and closure of the landfill. They rely on evidence of Dr Ryall and Mr Mitchell to support this view: CB 9, p2, par 15; and CB 21, pars 15, 21, and 31-35. Further, the Applicant notes the environmental experts' agreement that (CB 42, p55): 1. There is a broader overall management system across the site which is the responsibility of a single entity (HP); 2. Developers on any subdivided lot would be responsible for their own management systems for control of landfill gas. HP would remain responsible for collection, treatment and disposal of leachate and intercepted Botany Sand groundwater. A physical barrier between subdivided site as identified in the DG HP report is extremely expensive and not practicable. 3. Physical, vertical separation on site boundaries is not necessary if other gas management systems are implemented across the site. Refer comments above in –active v passive landfill gas system, landfill gas management generally) and (refer to discussion on gas management in the Site Audit section of this table, where it was agreed that a single entity (being the HP) would be responsible in perpetuity to manage gas and leachate for the entire site. 4. Also it was agreed that any blocks subdivided will have encumbrances and/or easements on the title allowing access for landfill gas system repair works and other site maintenance by the HP. 1. Step 4: The Applicant relies upon Mr Mitchell, Dr Ryall and Mr Mostyn's evidence to confirm that DC, or a modification to the existing consent, would pose "minimal" impacts to general industrial-type developments. 2. Step 5: The Applicant relies on SKC 33B to confirm that less fill would be required, and retaining walls not required. 3. Step 6: The Applicant asserts that the site already has most of the landfill gas and leachate management infrastructure. In particular, it relies on Mr Fridell's suggestion to implement off-site monitoring wells and landfill gas bores within existing public infrastructure (CB 42, p53). 4. Step 7: The Applicant submits that subdivision does not occur until the end year 1, in order to account for the planning approval and geotechnical works: Applicant reply subs p88; CB 12, par 68. Further, as there is existing road access to Holland Street, only half of the internal road costs are factored into year 1, to account for an internal road via Albert Street, if required. 5. Step 8: The Applicant rejects dedication of the road to Council: see Pindar (Tp161) – Holland Street provides adequate access for Area A. 6. Step 9: The Applicant dismisses the Respondent's Step 9 submission, on the grounds that the environmental experts agreed that (CB 42, p55): 1. There is a broader overall management system across the site which is the responsibility of a single entity (HP) … 4. Also it was agreed that any blocks subdivided will have encumbrances and/or easements on the title allowing access for landfill gas system repair works and other site maintenance by the HP. 1. Step 10: The Applicant proposes three options for excising licence areas, in accordance with the POEO Act (reply subs p90): 1. The EPL remains over the subdivided lot but the EPL is amended so that no scheduled activities are permitted on the subdivided lot except obligations within the EPL remain relating to leachate and landfill gas monitoring. This EPL continues to be held by the s. 56 hypothetical purchaser not the owner of the subdivided lot because the s. 56 purchaser it continues to manage the adjoining waste facility for 20 + years and is the one carrying out the scheduled activity requiring the licence. The owner of the subdivided lot would not be carrying out a scheduled activity and would not require its own licence; 2. The EPL is suspended or surrendered over that portion of Lot 2 to be subdivided but the EPA imposes conditions on that surrender under section 76 or 81 of the POEO Act so that the closure plan and monitoring obligations remains with the last licence holder. 3. The EPL is surrendered without conditions where the EPA is satisfied there are no ongoing risks that need to be managed. 1. Step 11: The Applicant relies on Mr Mitchell's evidence to support its conclusions on subdivision consent: CB 2, pars 85, and 117.4. Mr Mitchell opined that "the market would be the principal determinant of the number and type of lots that could result from a subdivision of the site … [but] given the large size of the residual land and consolidated ownership … a large lot mixed development type subdivision would be feasible": CB 2, par 93. Mr Mitchell's advice, pars 95-97 of his report, is dependent on the evidence of Mr Mostyn and Dr Ryall. 2. Step 12: The Applicant disputes the Respondent's timing for the shed's construction on Area B because the shed has already been approved. With Council approval, the operator can continue recycling and construction of the shed simultaneously. Further, filling on Area B is minimal, and could be dealt with by capping alone: Tp1282, LL41-44. 3. Step 13: The Applicant relied upon its geotechnical and operational experts, to conclude that Areas A and B could be filled simultaneously. Further, it was standard operational procedure to vary filling plans for other areas as well. 4. Step 14: Areas A and B can be capped at the same time. Further, the Applicant submits that environmental experts generally agree on capping requirements, and on the leachate and landfill gas management solutions in the closure plan. 5. Step 15: The Applicant notes that EPLs on this site have, historically, changed their boundaries. 6. Step 16: Separate DC is not required, because the subdivision consent allows the operator to modify the existing landfill and waste recycling consents, as per s 4.17(b) of the EP&A Act. 7. Step 17: The Applicant relies on its environmental management experts' evidence to support its conclusions on the gas infrastructure. Further, it relies on Mr Webster's view that the underground leachate infrastructure does not affect Area B, except at the discharge point at the road boundary: Tp1284, LL26-35. 8. Step 18: The Applicant challenges the view that the s 56 purchaser would need to amend its TWA with Sydney Water. 9. Step 19: The Applicant suggests that the hypothetical purchaser would retain ownership of the leachate infrastructure in Area E, and have easements to the sewer's existing discharge point in Area B. 10. Step 20: The Applicant contends that the existing leachate discharge infrastructure is adequate, and includes a TWA. Upon purchase, the s 56 purchaser would obtain a new TWA, and would continue to own the infrastructure, after subdivision and sale of Areas A and B. The main pump would be located on the s 56 purchaser's retained land (Area E). Moreover, the SBR on Area C would not be subdivided and sold. Rather, the s 56 purchaser would retain ownership of that land and hold an easement for access. 11. Steps 21 to 24: These four steps were factored into the above discussion, and would be addressed in the first SSD application for Area B, as a modification application. Further, the Applicant disregarded Step 22 because the road would not be dedicated to Council. 12. Step 25: The RRWTF could be constructed, subject to a modification application, because it would incorporate the same components as the temporary shed, and be located in a different part on the same site. The Applicant relies on Pt. 5A.2 of State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 to confirm that the new industrial building could be constructed on Area E, if it is less than 15m in height and has a total area of 20,000m2. 1. In its third submission, the Applicant contested the Respondent's contention that the recycling operations in years 1 to 8 were not feasible. The Applicant characterised Mr Lunney and Dr Ferrier's evidence as follows (reply subs p12, pars 50 and 51): 50. The Respondent's primary approach to the valuation task is to assume no recycling in Years 1 to 8. That is because Mr Lunney advised Dr Ferrier that recycling activities would not take place: CB 128 at [3.2]. As a result, Dr Ferrier simply includes zero dollars for recycling in Years 1 to 8 (see the DCF models "YR1-8 Resp"). 51. What the Court does know, from all the evidence, is that the business operating on the land at the DOA was a high turnover, low cost, high gross profit business: CB 65 at 25-29. It would be starting from entirely the wrong foundation to assume that the hypothetical purchaser would not be able to similarly put the land to use. This is patently absurd for an operation at the DOA that was almost exclusively recycling and had an EBITDA of $17M with a 33.5% profit margin or $12M/34% profit margin EBITDA in 2012 based on 239,940 tonnes with 19,480 landfilled: see CB 65 at 25. 1. The Applicant's reply subs continue (p12, pars 52-53): 52. As a result, the continued lucrative resource recovery would only not be considered by the hypothetical purchaser if the costs associated with the construction of the undercover resource recovery facility on Area B and then on Area D (at an approximate total cost of around $5 million) exceeded revenue. 53. Experience from many years operation of the site shows that would simply not be the case. 1. The Applicant suggested that the recycling business would be rejected, only if the Court accepted the Respondent's position on the following DCF inputs in the Years 1 to 8 spreadsheet (CB 128A): Input Applicant Respondent Line 2: Initial site remediation - $1,828,336 - $37,716,283 Line 13: Initial site remediation costs (post-tax nominal) (Discount rates) 8.7% 1.89% Line 14: Recycling and landfill operations (post-tax nominal) (Discount rates) 8.7% 13.9% Line 39: Mixed waste tonnes recycled and sent offsite p.a. $168,000 $134,400 Line 46: Waste to landfill (residual [calculation]) 34.9% 48.90% Line 50: Site establishment (year 0) $0 $139,842 Line 51: Site preparation (year 0) $0 $44,279 Line 52: Foundations and ground enhancements (year 0) $0 $502,000 Line 59: Contingency - % of building works 10% 20% Line 69: Other streams gate fees $/tonne $31.35 $12.00 Line 80: Timber disposal ($/tonne) $30.00 $75.00 1. The Applicant's fourth submission challenged the Respondent's conclusion that the RRWTF was "speculative" and unfeasible. The Applicant argued, firstly, that the Respondent's experts had accepted "that ongoing resource recovery on the land is an appropriate, or logical, outcome", and, secondly, that they "appropriately estimate the anticipated costs and cash flows for that use": reply subs p13, par 55. 2. Specifically, the Applicant rejected that "the RRWTF could not be built, so as to be able to produce income in Year 9, because that would not allow for the 5 to 10 year settlement period": reply subs p13, par 56. Rather, the Applicant characterised the second geotechnical joint report as acceptance and consideration of the RRWTF by both parties. Further, the Applicant generally challenged the Respondent's position that no income could be derived from the RRWTF in Year 9, and, accordingly, it would not have been constructed. 3. The Applicant's fifth submission challenged the Respondent's application of s 56(1)(c) of the JTC Act to the cash flows derived: firstly, before the shed's construction on Area B; secondly, the processing limit of 240,000 tonnes pa; thirdly, the calculation of volumes of leachate; and, fourthly, the clean-up notice. 4. Mr Hemmings specifically contended (reply subs p6, par 22) that, contrary to the Respondent's submission (subs par 89), Pain J had not made any specific decision about the applicability of s 56(1)(c), in her judgment in Jameson v Rail Corporation NSW [2014] NSWLEC 83, at [77], which Mr Hemmings says is refuted, at least in obiter dicta, by Her Honour at pars [75] and [96] of that decision. Section 54 requires that compensation would not be "just", if it were awarded for something which is unlawful. 5. Further, all experts have undertaken an assessment of an anticipated future use that is, at all times, lawfully carried out. To that end, many items of costs involved in obtaining approvals and carrying out works to comply with existing approvals have been included as items in the DCF analysis. 15.5 Consideration – highest and best use 1. Upon consideration of the evidence and submissions, I accept the Respondent's submissions on the highest and best use, and have come to the following conclusions: 1. On the DOA, there existed the potential to continue the filling of the landfill void, on Area E, as a profitable enterprise, provided the fill material attracted no landfill levy. This could be achieved by allowing fill consisting of excavated natural material (ENM), and could be totally filled in 8 years; and 2. Resource recovery (RR) activity was permitted under existing DCs, but was limited primarily to a maximum of 240,000 tonnes per annum, and time-limited to one further five-year extension, subject to the continuation of the landfill and the construction of a building in which to conduct RR; and 3. When the activities (1) and (2) above cease, at the end of the 8 years, the highest and best use of the land would be to liquidate it by sale of the unsubdivided areas post closure of the landfill, and to provide for long term leachate and land fill gas infrastructure and maintenance. 1. I shall now elaborate on my reasoning. 2. The Court accepts Mr Eastman's summary of the geotechnical considerations, which affect the highest and best use for Lot 2 (Tp2636, LL1-18): The way the geotechnical evidence affects my case directly is to say the highest and best use of this land is not for placement of an RRWTF on area E at the end of the landfilling operation and then have a discounted cashflow, to immediately project income from, I think we discussed, day 1 of year 9 yesterday, and I said to Mr Lancaster I think it is day 3,300, or something like that, but that's effectively what it is. The question is the applicants' valuation commences its income on the RRWTF from day 1 of year 9. That is not viable, it is not possible, and cannot be part of the highest and best use. That, on my case, is perhaps the critical issue that arises out of the geotechnical evidence and also what I think I perhaps described in questions to Mr Webster is what might be characterised as the disarray in the applicants' case of coordination between different experts on who is dealing with which part of timing and which part of the works that are being done on each of these components of the land. 1. Mr Eastman described the competing evidence, as follows (Tp2638, L29-p2639, L13): Your Honour might recall in a general sense I asked Mr Mostyn some questions about a lot of academic articles and about what projections were made for settlement, and what seemed to be germane to that were two things: whether you'd look at a snapshot like Mr Mostyn did, or whether you would look more broadly, like Dr Thomas did; and, secondly, if you would make some safe assumptions about what's already under the ground, which Mr Mostyn thought is pretty clean and unlikely to be biodegradeable and therefore causative of differential settlement over time, whereas Dr Thomas took a different view and he based that on bore hole logs and other things. That essentially means, if you were to accept Mr Mostyn's view, you are accepting as the applicants' (sic) put in their written submissions, yes, settlement might take a long period of time, but it's not of a significant magnitude that couldn't be dealt with. On the contrary, the respondent's evidence is you can't make that projection and to do so would be to deny two critical facts: one is what information we have on what's actually under the landfill; and, secondly, the approach that the academic articles have taken. If you accept Mr Mostyn, you've still got the first problem I have identified, but if you accept Dr Thomas, there is no way that there would be any real projection of doing development in the way that the applicants' (sic) have projected on essentially any of areas C, D and E without waiting or, alternatively, incurring such significant costs that before you'd even factor that into a DCF, that approach would be rejected. That's what Dr Thomas essentially said in the second joint report, which is court book tab 15. That then is the critical issue between them. 1. The Court prefers and accepts Dr Thomas's geotechnical evidence, on three grounds: 1. he holds qualifications, and has extensive experience, in assessing the geotechnical and geo-environmental engineering aspects of landfills, and in contaminated land regeneration. I accept his approach to the due diligence requirements, which are required to address the geotechnical risks associated with differential settlement, the decomposition of fill containing significant portions of wood waste, and engineering foundations required to develop the site. In contrast, Mr Mostyn has recommended limited due diligence considerations, beyond the AECOM geotechnical investigations. 2. Dr Thomas was more thorough in researching the differential settlement rates, and he considered extensive research done in regard to similar landfill sites, and the settlement of waste fill, both prior to and after the filling of the sites with structural fill. Noting the thickness of waste fill in PDA2 of the site, Dr Thomas's advice to the hypothetical purchaser considers the structural risks which would likely affect the site's development, if additional piling or an alternative foundation system were not to be adopted. 3. Mr Mostyn's evidence was premised on the assumption that the hypothetical purchaser holds "experience in developing large sites for industrial/commercial uses". Such an assumption flies in the face of authority. In Macarbell Pty Ltd v RTA; Nasser v RTA [2006] NSWLEC 366, Jagot J examined the "conventional" application of the Spencer test to the characteristics of the "hypothetical prudent purchaser". In particular, Her Honour observed (at [9]-[10]): 9 In applying the Spencer test, it is conventional to refer to the views of the "hypothetical prudent purchaser". I understand this to encompass the ultimate point at which the notional buyer and seller posited by the statute would meet (s 56(1) of the JTC Act). For convenience, I generally adopt the terminology of the "hypothetical buyer" on the basis that the reference includes the notional buyer and seller, cognizant of all circumstances which might affect the value of the land and acting on ordinary business considerations (as identified by Isaacs J in Spencer ). 10 Various circumstances potentially affecting the development potential of land (and thus its value) may arise. The relevant issue is the view of the hypothetical buyer and seller about those circumstances and their effect on the value of the land, not the circumstances per se ... 1. The parties to the hypothetical sale would have sought geotechnical advice regarding: 1. The extent and nature of geotechnical investigations that a hypothetical purchaser would be advised to undertake, to ascertain the state of Lot 2; 2. Whether, as at 19 December 2014, any part of Lot 2 was, or could be made, suitable for the erection of buildings for the purposes of industrial development; 3. The type, scale and structure of any buildings, which could be constructed and maintained on Lot 2; and 4. The extent of geotechnical works that would be necessary to enable any parts of Lot 2 to be used for future industrial purposes. 1. Although the Applicant and Respondent accepted the first component of the highest and best use of Lot 2, they proposed differing inputs (and businesses) for the agreed period Years 1 to 8. The Applicant suggested recycling operations on various parts of the site (Areas B, D and E) at line items 36 to 92 of the Years 1-8 Assumptions spreadsheet (CB 128AAA), but the Respondent provided competing final calculations in response to those line items at Annexure B to its final submissions. 2. Taking into consideration the two alternative business models, I accept that the Years 1 to 8 operations should be limited to the Respondent's model. 3. The relevant disputed line items (CB 128AAA) are: LINE ITEM APPLICANT RESPONDENT Line 34. Recycling activities Line 35. Include recycling activities? Y/N Y N Line 36. Other streams received (tonnes / year) 70,000 0 Line 37. Other streams % saleable 88.60% 0.00% Line 38. Other streams % waste timber (residual calculated) 11.40% 100.00% Line 39. Mixed waste tonnes recycled and sent offsite p.a. 168,000 134,400 Line 42. Plastic % of tonnes recycled 7.00% 0.00% Line 44. Timber % of tonnes recycled 25.00% 18.00% Line 46. Waste to landfill (residual calculated) 34.90% 48.90% Line 47. Initial Capital costs - recycling operations Line 50. Site establishment (year 0) $0 $139,842 Line 51. Site preparation (year 0) $0 $44,279 Line 52. Foundations and ground enhancements (year 0) $0 $502,000 Line 53. Construct final covered facility (year 1) $2,240,000 $2,372,000 Line 59. Contingency - % of building works 10% 20% Line 68. Operating revenue - recycling Line 69. Other streams gate fees $/tonne $31.35 $12.00 Line 70. Other streams sales price $/tonne $8.61 $8.00 Line 71. Mixed waste Gate fees $/tonne $130.00 $149.50 Line 77. Operating expenses - recycling Line 79. Wages - $/tonne (variable cost) $11.58 $17.06 Line 80. Timber disposal ($/tonne) $30.00 $75.00 Line 81. Inert fraction disposal ($/tonne) $5.00 $8.00 Line 91. Transport inert fraction ($/tonne) $4.50 $7.50 1. That table of figures assists the Court in assessing the financial feasibility of the operation in years 1 to 8. I reviewed that table, and the expert evidence from the business valuers, waste operations experts, and quantity surveyors, in light of the requirements for an intending purchaser to undertake a detailed and extensive due diligence investigation, prior to purchasing the site. I also considered the relevance of the future costs associated with the geotechnical works, landfill closure and the specific environmental management of Lot 2 in the post-closure period forthcoming years. 2. I accept the Respondent's submissions on the recycling operations in years 1 to 8, on four grounds: 3. Firstly, the town planning experts agreed that DC would be required for the construction of a temporary shed: CB 3, p19; Tp208, LL30-35. They also agreed that DADI had not complied with the conditions of the waste recycling consent: Tp206, L41-p207, L8. The hypothetical purchaser is already presumed, on either scenario, to either negotiate with the relevant authority or comply with the necessary regulatory approvals. More importantly, the Court is concerned with the very minimal time considerations taken into account in Mr Webster's proposed negotiations with Council. Further, Messrs Webster and McLandsborough's suggested construction of an undercover facility, on three occasions within an eight to ten year period, increases capital costs dramatically for a hypothetical purchaser. 4. There are no cogent reasons for the Court to accept that the hypothetical purchaser could derive income from day one, or even in year one, after the DOA. 5. Secondly, the Court prefers the waste operations evidence given by Messrs Haywood and Berkefeld, which would be cogent advice for a hypothetical purchaser, due to the existing DC, EPL, and the recycling operations, existing at the DOA. I have also considered the significant limitations of the recycling operations. 6. Messrs Haywood and Berkefeld provided a detailed analysis of the cash flow projections, and considered three options for the waste operations business: firstly, landfilling for 8 years, by importing waste soils; secondly, operating a mixed waste recycling business, with disposal of residuals offsite; and, thirdly, operating a temporary crushing operation, to crush existing concrete stockpiles for re-use on site. Observing the key operational limitations of the site, I accept Messrs Haywood and Berkefeld's characterisation of four principal issues: 1. The hypothetical purchaser would continue to operate for the remaining three years of the existing DC and then likely seek to obtain a five year extension: CB 46, par 55. 2. The hypothetical purchaser/operator would be required to construct an undercover facility prior to commencing recycling operations. The town planning experts agreed that the shed would need to be constructed, in accordance with DA No 200700278.01 and DA No 200300514.01. Accordingly, the recycling operations would need to be delayed for the first 15 to 18 months, in order to allow for the shed's construction. 3. The hypothetical purchaser/operator would have ongoing obligations to manage existing and future environmental issues arising from its operations, such as leachate, landfill gas, noise, dust, traffic and stormwater: CB 44, p20, pars 86-87. 4. The hypothetical purchaser/operator could accept only a maximum volume of 240,000 tonnes per annum of recycling waste under the condition of the EPL. However, the recycling operations would have to cease within six months of the cessation of landfilling. Crushing operations would not be viable, as the recycling DCs include crushing restrictions, and the crushing operation would suffer from low returns, and require additional costs by way of both capital and labour. Mr Haywood correctly opined that the importation of waste soils over eight years would be the most economically viable operation. 1. Thirdly, the Court has reviewed the contingency costs for the construction of the multiple recycling facilities. Mr Lawson's QS evidence is to be preferred, because Mr McLandsborough did not adequately justify aspects of the project design, nor outline contingent costs associated with the suggested plan. In contrast, Mr Lawson was an impressive and clear witness, who included considerations which would be appropriate to account for the risks and indirect costs associated with the QS aspects of the project design. I accept the Respondent's submission, in relation to the quotation from "Taylor Constructions", which was not able to be tested in Court, and did not include any consideration of the information which was used to determine the estimated cost. Accordingly, I accept that a contingency cost of 20% was more reasonable, in advising the hypothetical purchaser on the quantum of risk and associated costs with either project design option. 2. The final consideration relates to Mr Lunney and Dr Ferrier's "disregard" of the Years 1 to 8 recycling operations. The Applicant oversimplified the Respondent's approach, by stating that this business was rejected because "Mr Lunney advised Dr Ferrier that recycling activities would not take place" (reply subs p12, par 50). Mr Lunney and Dr Ferrier's joint advice refers rather to the Applicant's expert evidence (CB 128, pars 3.1.-3.2.): 3.1. Dr Ferrier notes that the Joint Waste Expert Report indicates that Messrs Haywood and Berkefeld "would advise the HP to allow for a period of between 15 and 18 months after the acquisition before waste recycling operations could commence" (paragraph 15). This period is necessary for the completion of construction of the undercover recycling facility. 3.2. The consequences of the delayed commencement of operations (resulting in a shorter operational life), the high initial capital costs and the low operating profitability of the waste recycling operations are such that the net present value of the cash flows from those operations is less than the market value of the land (Area B and, possibly, Area A) which would be used for those operations… 1. Mr Lancaster relevantly recorded the opinion of Mr Lunney in these terms (Tp2725, LL7-28): What he did say was that if there were identified areas of land not required for immediate operational purposes, that that could be the subject of a lease and receipt of ground rent, as he describes it. After obviously a great deal of subsequent evidence and analysis of other alternatives and possibilities, with the exception of the waste management operations being undertaken by the incoming purchaser, that is, in essence, what the RMS still contends a purchaser would regard as a reasonable and feasible use of the land. The opinion of Mr Lunney, as we record in paragraph 1020, was that an intending purchaser of the subject property as at the DOA would capture the terminal land value in a DCF calculation by assuming a sale of the subject property after the completion of landfilling activities eight years after the [DOA]. We invite your Honour to make a finding to that effect and to accept that proposition as the highest and best use of the land… 1. To this point, I have generally reviewed the viability of the various business operations in Years 1 to 8. 2. However, beyond those components of the DCF model, I assessed the viability of the Applicant's plan of subdivision and proposed RRWTF business in years 9 to 29. 3. The Court does not accept the propositions for that extended period, and prefers the Respondent's submission that Lot 2 would be sold at the end of year 8, without any prior subdivision of the land, rather than the Applicant's suggested subdivision of surplus land and operation of a RRWTF in years 9 to 29. 4. Without repeating all that has already been said, I should briefly summarize why I reject the proposed subdivision: 1. The Applicant has submitted inconsistent plans for subdivision, being SKC23, SKC23B and SKC33B, in support of its submissions on different aspects of the plan. These include: 1. In its closing submissions (par 36), the Applicant relies on SKC22B for the fill profile, and SKC23 for the staging of development, in accordance with filling and development (see subs pars 253-255, 258, 266, 267, and 328). However, the Applicant relies on SKC33B in its submissions in reply (pp59; 84; and 86). 2. In its submissions, the Applicant relies on SKC23 to justify the construction of retaining walls, which would be "fully-functional keystone earthen walls": Applicant subs par 393. In its reply submissions (Appendix 1, par 86), the Applicant relies on SKC33B to disregard the necessity for certain retaining walls: 1. The hypothetical purchaser would need to factor in several key limitations, which would delay any subdivision of Areas A to E – filling of different aspects of the site (including a structural fill layer and capping), settlement, variation or applications for planning and environment instruments (EPLs, DCs, modification applications, easements, licences, post-closure plans etc.), post-closure requirements for waste facilities, and renegotiating or excising licence areas. 2. The hypothetical purchaser would need to consider existing environmental management infrastructure, including the Botany Sands Interceptor, the herringbone leachate drains under the land, the SBR, and the discharge to trade waste. Further works would also be required to establish an active gas management system, and upgrade the leachate plant, stormwater retention ponds and gas flare. Any subdivision would require consideration of significant environment management works, differential settlement, project designs, and regulatory requirements. 3. The hypothetical purchaser would be required to construct an internal road, in order to facilitate access to proposed areas of any subdivision. There is insufficient evidence before me on how the Applicant's DCF accounts for the capital costs involved, the timing of the road construction, regulatory approvals (including access, easements etc.), and design amendments to account for the environmental management infrastructure. 1. Mr Lancaster put to Mr Dyson, in cross-examination, the twenty-five steps (to which reference is made at [495] cf., [510] above). 2. Relevantly, Mr Lancaster's submissions drew the following from the cross-examination of Mr Dyson (Tp2725, L4 to p2726, L22): It became very clear when I asked Mr Dyson about the matters that he considered when expressing his valuation opinion, that he did not consider as a valuer any question of proposed feasibility of the subdivision proposal that's contained in SKC23. I put to him the series of steps that have now found their way into our written submissions that I addressed previously, and it's probably fair to say that he hadn't turned his mind and/or expressed an opinion or conclusion about any of those important steps. What he's relying on is not really clear. His opinion, in my submission, cannot be taken to be a free-standing expert opinion of a valuer that something like SKC23 was achievable or viable from his perspective as a valuation expert. He can't express that opinion, because he didn't take into account the matters that would be necessary to be taken into account before expressing an opinion like that. What he did agree, as we record in 1025, and this is important, your Honour, is that if the highest and best use of the land is not some sort of subdivision proposal like SKC23, the land would be sold at the end of the filling process in one lot. That alternative is of course the alternative that we put forward as the highest and best use of land. Even then, he has a different valuation in terms of a rate compared to Mr Lunney, but he agrees that if subdivision isn't viable, then that's the approach that the incoming purchaser of lot 2 would take to fixing a price. 1. I accept the Respondent's submissions that the RRWTF would not form part of the highest and best use of Lot 2, as it is "speculative, and not a proper assessment of market value": Respondent subs par 236. 2. The most relevant dispute in the evidence relates to the conflicting opinions of the business valuers, on the anticipated cash flows, and appropriate discount rate. For the Applicant, Mr Samuel propounds a uniform 8.7% discount rate, whereas Dr Ferrier, for the Respondent, applies a 50% increase to his original discount rate for the Years 1 to 8 businesses, and subsequently arrives at a 20.9% discount rate. 3. Mr Hemmings criticised Dr Ferrier's discount rate, as follows (Tp2402, L36 to p2404, L24): Then you've got Dr Ferrier, with the greatest of respect to him, carrying out a totally unacceptable and arbitrary step but one which makes many, many tens of millions of dollars of difference, and that is, he takes his already, in our submission, wrong and too high 13.9 per cent, and the court will recall just adds 50 per cent. Whereas beforehand there are comparable sales and analysis of EBITDA and calculations of multiples and all sorts of complex and able-to-be-tested analyses carried out, all he does is add the 50 per cent and it's entirely unacceptable and, in our submission, will be rejected and, as I say, hides the very significant difference. In fact, it changes the future operations from being unprofitable to profitable, even if one just adopts or continues to adopt his 13.9 per cent, let alone if the court does what it says we would submit is the correct approach, and that is to adopt the 8.7. … Now, there is suggestion by Mr Lunney and Dr Ferrier that there needs to be an intimate connection which is not a limitation that we accept. But even if it is one and there needs to be that intimate connection in order to use the DCF, there is here a clear example where you have an historical landfill where there are continuing obligations to carry out about half a million dollars a year for the next 20 to 30 years ongoing environmental management tasks and costs to have the person with those obligations remaining on the land, and not only the land but to the great satisfaction, one would have thought, of someone like the EPA or the then current licensing body, to know that they are not just relying upon the financial assurances, for example, that are put in licences, but rather they have an owner of land with a continuing and significant income stream because of the ongoing resource recovery and waste transfer facility that will be on area E. … The other concern, as we understand it, by Dr Ferrier was it's a new business. With respect, the court will ultimately prefer the evidence of Mr Samuel on this point where there was no real understanding of the new business. It's a continuing landfill resource recovery operation by an experienced operator where, yes, licensing and consent regimes change, but that is already a component part of the discount rate, and it's already a component part not of Dr Ferrier's extra 50 per cent, because that's already included in the discount rate for the continuing operations on the site where it's accepted. Even now there is the ability to obtain consents, modify consents, comply with licensing regimes and other policy requirements. That appears to be no reason for the departure from the DCF. The third thing was well it's in year nine. The forecasting of cashflows, as Mr Samuel tells us, is something which is common and frequently done on a 20-year timeline. It is part and parcel of the discounted cashflow model. There is no reason to depart from the use of the otherwise agreed process to the valuing of the land merely because one is looking at a cashflow in year nine as opposed today a cashflow in year one. Otherwise, the matters in the table are consistent. 1. On the other hand, Mr Lancaster's oral submissions on the differences between the discount rates (Tp2753, L43 to p2755, L38) included the following: The approach that Mr Samuel takes to that supposed business is to apply his 8.7 per cent discount rate to the anticipated perpetual business income from that facility starting in year 9 and thereafter. Your Honour's right, there is an overlap between that topic 3, paragraphs 1158 to 1166, and the submissions we have made at paragraphs 1138 through to 1149 address the derivation of the discount rate for years 9 to 29. We probably should have put paragraphs 1138 and following in the topic 3 assessment. Your Honour, as a matter of conflicting opinion on the applicable discount rate for that year 9 and thereafter operation, the competing expert opinions of Mr Samuel and Dr Ferrier are, of course, Mr Samuel with his 8.7 per cent which, by his adoption of the same discount rate as the operations as they are to be conducted in the first eight years necessarily assumes and conveys that those cashflows have the same risk in his view. That's an important point to note, because we rather impress upon the court, consistently with Dr Ferrier's approach, that an incoming purchaser of lot 2 would see a markedly different risk profile for the suggestion that there is a new business that can be implemented on a new area of land in year 9 after I buy this property, the RRWTF, and I'm going to apply exactly the same approach to my assessment of risk of that income as I do to the income I can earn in years 1 through to 8 from a business just like the business that's conducted currently on the land, the landfilling operation. At that broadest of levels, we say Mr Samuel's assessment does not ring true in the sense that it does not reflect commercial reality, surely, that an incoming purchaser of lot 2 would think that those year 9 and following cashflows have the same risk profile as the first eight years. … [Dr Ferrier] does say, "If I need to apply a discount rate to it" - in other words, if he is meeting his opposite number's assumption - "there should be a discount rate applied to the cashflow for those years." He has put forward a discount rate of 20.9 per cent, and we refer to this in paragraph 1143. His reason for doing so was certainly robust. It was broadbrush but, nonetheless, robust, in my submission. He added half on again to the calculated discount rate that he applied to year 1 to 8 cashflows, a 13.9 per cent. He added another 7 per cent, 50 per cent of that existing. One can understand why Dr Ferrier took a broadbrush, robust approach, in my respectful submission, and that is because of the character of the cashflows that he was being asked to advise about. They did have the character of great uncertainty and ambiguity. This wasn't even then land that was capable of maintaining an RRWTF. That was something that the land from which this enterprise was to take place was not even in place. It was something that had to be filled and capped and dealt with. All the other steps that needed to be taken to achieve this pie in the sky, this area E, RRWTF, had to be achieved before the first dollar was earned that was to be discounted, according to the analysis. Our friends have been deeply critical of Dr Ferrier for his 20.9 per cent discount rate for those cashflows in year 9 and following but, in our submission, in the circumstances that he was faced with and being required to come up with a discount rate, he did a reasonable and supportable job of it… It is obviously preferable, as a matter of expert opinion, to Mr Samuel's insistence with the same 8.7 per cent that he applied to that cashflow because, as I said a few minutes ago, it is absolutely plain that there are very different, additional and substantial risks associated with the idea of earning that income from the RRWTF in year 9 and following. There must be some adjustment. It cannot possibly be the case that the same risks are associated with that future cashflow as they are with the short-term future cashflows. Mr Samuel's position is simply unjustifiable, in our respectful submission. 1. On one hand, Mr Samuel has applied a uniform discount rate, without a clear consideration of identifiable risk, beyond the rate itself. 2. On the other hand, Mr Lancaster relevantly records that Dr Ferrier increased the years 1 to 8 discount rate, in order to account for "apparent risk uncertainty, ambiguity, about the way in which those future cashflows could be earned": Tp2755, L47 to p2756, L2. 3. Applying Mosca, at [15] (see [126] and [478] above), 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". On a regulatory level, Mr Lancaster relevantly records (Tp2756, LL4-21): We have identified and summarised in paragraph 1144 just how different the business that's proposed from the RRWTF is considered by the applicant to be. Rather than an enterprise that deals with 240,000 tonnes per annum of material, as was permitted on lot 2, the theory is this the RRWTF can deal with half a million tonnes a year. Unlike the operation on lot 2, it will be able to receive putrescible waste, apparently. We don't know the basis for that or how that could be thought to be permissible or consistent with the Environment Protection Authority's attitude to the land. It involves a shed that's three times as large as any shed that's been approved on the balance of lot 2 historically. It is expected to operate in perpetuity, not to have consents and approvals limited in time, as every consent and approval that has ever been applied to lot 2 has had imposed on it. ... 1. The RRWTF would require considerable regulatory, financial, environmental and geotechnical consideration, in order to be accepted as part of the highest and best use. 15.6 Conclusion – highest and best use 1. I accept the approach urged upon the Court by the Respondent's submissions (pars 237 to 239): 237. The respondent's approach, as a consequence of this is to: a. Value the land on the basis that its best potential, is to be filled over 8 years and sold; b. Consider and cost the recycling operations during that 8 year period, but given it is not commercially feasible (and makes a loss) to dismiss that as any component of highest and best use; c. Apply a valuation pursuant to the DCF method having regard to the income to be generated from filling and the expenses associated with the land use; d. Include a terminal value for the land to be input, on the basis it will be sold (as a single lot) at the conclusion of 8 years; and e. Dismiss the subdivision and long term RRWTF options as either speculative or without foundation on the basis of the information presented to the s 56 parties (and the Court). 238. As has been set out above, the respondent has prepared a spreadsheet being what it contends is the appropriate DCF method and model to be adopted. It does not account for subdivision, it does not account for any income (or loss) from the Yrs 1-8 recycling business and it does not speculatively project income from the non-existence RRWTF for Years 9-29. 239. That document, Appendix A, to these submissions, is the Yr 1-8 landfilling, with a terminal land value. That is the highest and use (sic) from a regulatory, physical and economic perspective. 1. In the interests of brevity I will not include in this judgment the detailed spreadsheet in Appendix A to the Respondent's submissions, but I accept it (and Appendix B). 2. Accordingly, I have concluded that the RRWTF operations are no more than speculative, and would not form part of the highest and best use of Lot 2, which, put shortly, I find to be to fill the land for 8 years and then sell it in a single parcel. Section 16: Arriving at the Market Value of Lot 2 16.1 Introduction 1. Having assessed the highest and best use, it is now necessary to settle on appropriate figures to determine the market value of Lot 2. Some of those elements were ultimately agreed upon by the parties' experts. 2. However, I have borne in mind what Allsop P (as His Honour then was) opined in Caruso, at [3]-[4] (Sackville AJA agreeing, at [191]): 3 The general principle that in determining compensation to a dispossessed owner doubts should be resolved in favour of a more liberal estimate is well-known: see generally A Hyam The Law Affecting Valuation of Land in Australia [("Hyam")] (4th Ed 2009 Federation Press) at 316-318. That does not, however, detract from the need to engage with and evaluate evidence and competing witnesses. If, however, upon engagement and assessment, the judicial valuer finds, for example, as Anderson J did in Cook and Edwards v City of Sterling (1991) 4 WAR 469, that the reasoning of both valuers was not fallacious, that their respective capitalisation rates were open, that none took into account irrelevant considerations and no errors otherwise appeared, the proper conclusion might be that there are simply two open views on the relevant issue – as there can be in ascribing a value: cf Fenton Nominees Pty Ltd v Valuer-General (1981) 47 LGRA 71 at 76-77. In such circumstances, applying the general principle would be uncontentious. 4 It is not helpful to examine the scope of the general principle in the abstract beyond saying that it is not a licence to accept one expert over another without undertaking the task of assessing the evidence in the usual way. If a judge properly undertakes that task, the evaluation of the evidence may well persuade the judge to accept the evidence favouring the resuming authority. That would be a product of assessing the evidence. That process is not to be abandoned as the statement of the judge at [81] of her reasons would suggest she did. 16.2 Contamination Considerations 1. Line items concerning site investigations (Line 95) and treatment of non-compliant stockpile(s) (Line 96) required consideration of the contamination experts' opinions, (see CB 21 to 31, and section 10 above). The parties primarily contested the costs associated with handling the non-compliant stockpiles, especially SP21. 16.2.1 Applicant's Submissions 1. The Applicant submitted the Court should accept the advice of Dr Ryall, Dr Martens and Mr Webster, on two grounds. 2. The first ground related to the credibility of Mr Clay as a witness. At first instance, the Applicant stated that Mr Clay "is not qualified to advise operators since his experience is limited to carrying out auditing functions rather than actual operations" (par 183). Further, the Applicant raised significant concerns with the AECOM (2015) Phase 2 Environmental Site Assessment (Draft) dated 6 May 2015 because Mr Clay was a reviewing author of that document. In its submissions (par 182), the Applicant contended that Mr Clay's evidence should be dismissed because: "As a witness he is not suitable to give objective evidence to either of the hypothetical parties due to the fact that he had already provided advice to the acquiring authority - regarding its specific purposes and notably at a time when that client was understanding only environmental constraints on its proposed use - which creates inherent conflicts of interests: Willoughby City Council v Transport Infrastructure Development Corporation (No 2) [2008] NSWLEC 238 at [11]." 1. The Applicant listed (subs par 184) several reasons for submitting that Mr Clay's evidence was "particularly partisan". In particular, the Applicant criticised his demeanour during cross-examination, and complained that his advice was premised on a "reasonable worst case" scenario. 2. The Applicant's second ground required the Court to accept Dr Ryall's classification of the stockpiled materials. The Applicant advanced the following propositions (par 187), derived from Dr Ryall's evidence: "• The relevant Clean Up Notices required only that (sic) sensible action referable to the adoption of the Proposal. Indeed, it is agreed to be a "reasonable position" that the various Clean Up Notices given by the EPA could only apply to material added to the Site after 2007/2009. ... • The work required under the relevant Clean Up Notices was at or nearly complete at the [DOA]; • Stockpiled materials did not, of themselves, require any classification or qualification under [Resource Recovery Operation]; • Classification and qualification would follow processing if there was a desire to sell such materials as new product; • Subsequent evidence - ie that not strictly available at the [DOA]- could confirm a foresight that such material could be reasonably foreseen to be fit to be sold at a profit – this includes any material in Stockpile 21 if this was desirable." 1. In particular, the Applicant emphasised (par 180) that the hypothetical purchaser would not "need to make any allowance for disposal of materials stockpiled in the recycling premises or, alternatively, would make a significantly smaller allowance for the net cost of sorting and disposal of unusable parts of those stockpiled materials than to simply 'condemn' extremely large volumes of material to disposal". 16.2.2 Respondent's Submissions 1. The Respondent contended that Mr Clay's evidence should be preferred, as his advice takes into consideration the risk profile of Lot 2, and its significant effect on the purchase price. In particular, the Respondent submitted that Mr Clay's advice should be preferred on several grounds: 2. Firstly, the Respondent contests the reliability of Dr Ryall's evidence and the ADE reports, in relation to waste classification, processing and compliance regarding SP21. In particular, ADE had tested only 21,016m3 of SP21 for asbestos, and had concluded that the rest of the stockpile complied with the Clean-Up Notice requirements. In contrast, Mr Clay utilised the ENVIRON and AECOM reports to confirm his foresight that SP21 and other stockpiles contained asbestos. Further, RMS relies upon the EPA letter to Mr Jewell dated 8 July 2015 (TB 267), in order to confirm SP21's volume and that further clean-up action was required. 3. Mr Clay also considered ADE's classification of SP298 as non-putrescible waste. Since SP298 was reported to contain asbestos, he confirmed that any stockpile containing asbestos should be classified as "special waste asbestos". In accordance with the EPA Waste Classification Guidelines, ADE's misclassification of SP298 was, therefore, potentially unlawful. Accordingly, Mr Clay's evidence would be preferred, as he relies on consultant data to estimate risk, in accordance with the Clean-up Notices, and relevant waste classification guidelines. 4. In relation to the other stockpiles, Mr Clay's evidence is that the advice that would be given to the willing but not anxious hypothetical parties to the sale of Lot 2, on the basis that Lot 2 was subject to a Clean-Up Notice at the DOA, would cause concern to a hypothetical purchaser that the other stockpiles may also carry significant liability. Furthermore, the Environ Report demonstrates that 21 of the 23 stockpiles on Lot 2, at the DOA, were not able to be immediately processed and sold, without further work and testing. In the Respondent's submission, Dr Ryall and Dr Martens fail to consider, or even acknowledge, the significant risks associated with the other stockpiles, which is not the advice that would reasonably have been provided to the hypothetical vendor and purchaser of Lot 2. 5. Finally, the Respondent noted that the "processing" and "blending" costs set out in Table 1 – Other Stockpiles, were agreed between the waste operations experts. It is, therefore, only the revenue that was not agreed between them on a rate per tonne basis. The Respondent submits that Mr Clay's position on processing costs should be preferred, for the reasons set out above, in relation to the classification and processing of the other stockpiles. Further, the Respondent submitted that Dr Ryall appears to have made mathematical errors in his costings, and did not adequately explain why he departed from the processing costs advised by the Applicant's waste operations expert, Mr Webster. 6. In terms of Mr Clay's credibility, the Respondent noted that he has extensive experience as an environmental consultant and auditor, qualifying him to provide advice regarding the pre-sale due diligence, regulatory compliance, Clean-Up Notices, contamination, and asbestos. For all stockpile processing costs, Mr Clay relied on the waste operations experience and expertise of Mr Haywood. 7. The Respondent also refuted the charge that Mr Clay's evidence was "partisan". He had genuinely attempted to assist the Court, by, firstly, preparing eight comprehensive expert reports; secondly, utilising consultant reports post-acquisition to confirm his foresight; and, thirdly, providing adequate reasons for his amendments to final costings for non-compliant stockpile treatment. 8. The Respondent also clarified Mr Clay's use of the term "reasonable worst case". He used the term specifically within the context of determining the liability cost, which the hypothetical purchaser could reasonably incur in managing the non-compliant stockpiles. 9. With regard to the compliance issues, the Respondent emphasised that the DCF model is not "inherently suitable to resolve" risks. Rather, the hypothetical purchaser, acting reasonably, would consider Mr Clay's evidence, as part of its pre-sale due diligence investigations. In particular, the hypothetical purchaser would recognise that the EPA's Clean-up Notices were directed to a volume of 164,995m3, instead of to "placed", "stockpiled", and "cover" materials, as categorised by Dr Ryall. Accordingly, the hypothetical purchaser would be informed of the risk, based on the specific terms of the Clean-Up Notices and the EPLs. 10. The Respondent also emphasised the significance of the extensive consultation process between DADI and the EPA, in which the EPA negotiated several variations to the clean-up notices. Accordingly, the hypothetical purchaser would not assume that the EPA would disregard this consultation process, and reduce the stockpile volumes for its new waste operations business. 16.2.3 Consideration 1. Both experts are appropriately qualified to advise the hypothetical purchaser, and have assisted the Court in determining the relevant costs. Having considered the competing considerations advanced by both witnesses, I have accepted Mr Clay's evidence on the appropriate values to insert into the DCF spreadsheet for line items 95 and 96. 2. It is relevant to highlight here Mr Lancaster's oral submissions on the hypothetical purchaser's position on contamination and stockpile management issues (Tp2684, LL3-8 – emphasis added): …If the clean-up notice meant what it said, obviously that would be a very substantial monetary liability immediately after the purchase of the site, and that would be something that would be taken into account in fixing the sale price by effectively taking it out of what would otherwise be offered as the sale price. 1. Taking into consideration the hypothetical purchase and sale, Mr Lancaster relevantly identifies Mr Clay's interpretation and investigation of the site contamination issue (Tp2685, LL6-21 – emphasis added): By way of background for the use of the site in terms of DADI's business operations taking advantage of what was permitted on the site by the EPLs, Mr Clay looked, among other things, at the historical uses of the land. In paragraphs 457 and 458 we reproduce tables from his report indicating historical non-compliances with the environment protection licences. That has a relevance, your Honour, because, as we'll come to see, there was evidence in the proceedings, certainly in relation to stockpile 21 but also in relation to other stockpiles in the site, they were working stockpiles for many years, in the sense that the operator had been adding to and subtracting from the stockpiles as time progressed, the precise configuration and location of the stockpiles on the land varied over time and the volume, of course, in particular of stockpile 21, but also other stockpiles, changed over time. 1. Mr Lancaster relevantly characterises Dr Ryall's evidence (Tp2685, LL23-38 – emphasis added) as follows: It is part of our eventual proposition that one of the reasons that Dr Ryall's theory about a three-way stratification of stockpile 21 and his admittedly made-up identification of the labels of that three-way stratum that he identified in stockpile 21 is an unrealistic view of what must have been the condition of the stockpiles given that they were working stockpiles that changed dramatically in volume and shape over very many years of operations. I'll come back to it, of course. It was Dr Ryall's view that there was a distinct top layer that contained asbestos that could be removed, but then a clear middle stratum that didn't have to be taken to landfill or otherwise dealt with by the incoming purchaser below which lay another stratum which, likewise, formed the other slice in the asbestos sandwich, as it were, is an entirely unrealistic approach to have taken to the analysis of stockpile 21. 1. I also record Mr Lancaster's submissions regarding SP21, and its inherent liability for the hypothetical purchaser (at Tp2688, LL11-45): As we observe, the cleanup notice remained on foot and, we say, unsatisfied, certainly not amended or withdrawn, by the EPA at the date of the acquisition. Stockpile 21 itself, as I mentioned, was a stockpile that was a working stockpile over the years, and its precise boundaries no doubt changed from time to time, but there is a depiction of it at two particular times that we've reproduced in paragraph 467. The green line is the June 2011 drawing of stockpile 21's boundaries by Vekta, as our footnote 206 records, and the black outline is the AAM December 2014 depiction of the stockpile 21 boundary, a slightly larger area than back in 2011, which reflects its movement over time. As we record at the end of paragraph 469, what Dr Ryall says is that stockpile 21 represents a liability to a hypothetical purchaser of about $1.2 million. Contrast that with Mr Clay's advice, who would have advised the purchaser that none of stockpile 21 can be considered as a potential resource, that there would be an applicable levy of about $120 per tonne required to be paid on a volume of approximately 143,979 cubic metres. This is recorded in paragraph 470 of our written submissions. Your Honour, that 143,000, almost 144,000 cubic metres, reflects the volume identified in the clean-up notice, or thereabouts, less about 20,000 or 21,000 cubic metres that had been taken out pursuant to the "Proposal" before the [DOA]. So, as at the [DOA], the incoming purchaser would have appreciated that there was a volume of about 144,000 cubic metres of stockpile 21 that the clean-up notice required to be removed. If one puts that into dollar terms, [it is] a very substantial immediate liability for $31,332,709 for stockpile 21. 1. In accepting reports produced after the acquisition, the Court carefully restricts such evidence to confirming the foresight of the substantial due diligence process and associated costs, which a hypothetical purchaser would undertake upon purchase of the land at the DOA. 2. Dr Ryall's choice of categories to describe materials within the stockpiles is neither related to any approved study, nor prescribed by any relevant regulatory body, or environmental report. Mr Clay correctly identified the issues with Dr Ryall's reliance on the ADE reports. Accordingly, the Court accepts Mr Clay's calculations for the costs in line items 95 and 96. 16.3 Quantity Surveying 1. As part of the valuation process, the Court is required to determine the relevant inputs for project designs subject to capital costs, and rates for contingencies and other margins. Both parties rely on the evidence of their respective quantity surveying experts (section 12 above), in order to resolve disputes regarding a range of line items in the DCF. 16.3.1 Applicant's Submissions 1. The Applicant made submissions only in relation to the "scope of works"; and accepts that the quantity surveying evidence is dependent on the Court's findings on the "highest and best use", and the other expert evidence. 2. Where there was a margin of difference, the Court was urged to prefer Mr McLandsborough's evidence, because "Mr Lawson could not identify that Mr McLandsborough was 'wrong' and ought not to be accepted" (Applicant subs par 392). 3. On the Applicant's best case, the fill profile is across the whole of the site, necessitating construction of retaining walls at the perimeter. In that event, the evidence of Mr McLandsborough as to the construction type, and cost, should be preferred, in that a fully-functional keystone earthen wall could suffice for the purpose of giving advice, and could be significantly less expensive than a unitary block wall system, with "core rebar" and a substantial toe-footing (at up to four times the cost). 4. In any event, as Exhibit A13 shows, an alternative position is still economically viable: that is to fill the Site to only level RL10 (cf., RL11 – see [272] and [495](1) above). That involves a loss of potential fill material of up to 230,000m3 (with consequent loss of income), but provides for a contoured final landform capable of supporting future land uses without significant retaining walls (and their cost), or, by way of further alternative, moderate retaining walls (at some cost), but allowing for a restoration of 180,000m³ of fill (and its value as a revenue source). 16.3.2 Respondent's Submissions 1. The Respondent advanced four submissions, as to why Mr Lawson's evidence would be preferred by the Court: 2. Mr McLandsborough trained not as a quantity surveyor, but as a civil designer, and does not have the qualifications or experience to provide advice on costs related to tenders for work on: 1. The closure of any site similar to the subject. The only site in his CV with any similarity was a site used as a dump, but the work there required only removal of material that could not be compacted. There was no leachate or gas infrastructure. The dumped material was simply removed and other material was then imported and compacted; 2. Any cost estimates for works related to landfill closures including leachate and gas systems; 3. The capping of a landfill. Whilst he has had experience in laying and compacting material, this is not relevant, as other works, such as leachate and gas control are incorporated into the capping works; and 4. EPA requirements for capping works. 1. In contrast, Mr Lawson has qualifications and experience, which are relevant to providing cost estimates for works such as those listed above, and landfill projects similar to that on Lot 2. 2. Secondly, Mr McLandsborough relied on costs provided by Taylor Constructions for the RRWTF building, foundations and ground enhancements (Exhibit A9, pp6, 8 and 12). The Respondent considers this evidence "unsafe", because the Taylor Constructions evidence ([534] above) was untested, and the quote did not disclose the considerations which were used to provide the cost estimate. 3. Thirdly, the Respondent submitted that Mr McLandsborough was "the draftsman who … represented the opinions of others as to certain matters on SKC23". The Respondent relies on the evidence given by Mr McLandsborough in cross-examination, and on Exhibit R19 (at 4-5), to support this conclusion. In cross-examination, Mr McLandsborough conceded that he had not incorporated leachate and gas management systems. Further, he had not determined: 1. The size or location of proposed buildings on Area E; 2. The location of the internal road; 3. SKC23 as the highest and best use for the land; 4. The delineation of Areas A to E, or why Mr Mostyn's suggested subdivision was amended; and 5. The implications of filling the site (independently of the other experts). 1. Specifically, achievement of finished levels of RL11 (see [272], [495](1), and [583] above) would result in a difference in levels of up to 9m to adjoining sites. The Respondent observes that these issues have very significant implications for the site's development, as such factors affect the amount of waste fill that may be brought onto the land, and thus the profit that the existing operations could have made in the next 8 years. 2. Moreover, it also affects Mr Dyson's valuation (for the Applicant) of the subdivision of Lot 2. In particular, Mr Dyson assumed that the levels of the allotments would be the same as adjoining land, and would not have large walls to adjoining neighbours. 3. In order to avoid the inconsistency between the assumption made by Mr Dyson and what SKC23 actually showed, Mr McLandsborough prepared a revised plan of finished levels, SKC33 Revision B. One result of this was to reduce the amount of fill by almost a quarter of a million cubic metres, which could result in reduced cash flow of the order of $20m-$30m. It would also appear likely that the landfilling would be completed more quickly than that in the Applicant's pleaded claim, but the claim has apparently not been adjusted in this regard. Alternatively, Mr McLandsborough suggests a wall up to 2.4m, or a batter with a different grading. 4. The fourth submission relates to contingencies. 5. Mr Lawson allows 20% for contingencies in all scenarios, and the Respondent states that his view should be accepted, having regard to: 1. The schematic and concept nature of what is being costed. There is either no, or only preliminary, design, and scoping; 2. The evidently unclear and apparently fluid nature of the proposal, as set out above in terms of SKC23; 3. The high degree of regulatory involvement in many aspects of the work, which has the potential to change the scope and cost; and 4. His experience generally as a quantity surveyor, and specifically in relation to landfill closures. 1. Mr McLandsborough's differential contingencies in allowing a lower amount for the short-term scenarios should not be accepted. He agreed that the works in the long-term scenarios were not as complicated. 2. The short-term scenarios include the landfill closure works, in respect of which Mr McLandsborough is not qualified at all. Mr McLandsborough was unable to say anything about the likely impact of regulatory requirements on costs: Tp1527, LL23-38. Accordingly, his evidence on these aspects and the relevant contingency should not be accepted. 16.3.3 Applicant's Submissions in Reply 1. The Applicant did not make any specific submissions in reply to the Respondent's first submission (on relative qualifications of the QS witnesses). 2. In respect of the Respondent's second submission, the Applicant generally contended that (Tp2841, LL27-32): ... The costs of another of the large items was the construction of the shed. Those costs had been fixed by both of the experts using experience and also in the case of Mr McLandsborough being cross-checked against an actual quote. So there is certainty in relation to the cost. 1. In relation to the third submission, the Applicant responded (reply subs Chapter O, par 11): "the Respondent has attempted to set up a straw man argument about [SKC] 22 'authored' by Mr McLandsborough". In support of this conclusion, the Applicant relied on the following evidence: 1. Mr Mitchell's evidence that Lot 2 had the potential for consolidation of existing operations, allowing surplus land to be released: CB 2, p29; 2. Mr Mitchell's evidence that no control mandates particular lot sizes, and, therefore, other experts could be engaged to design the layout: CB 2, pars 93-98; 3. Dr Ryall's evidence as to the utility in consolidating operations at the Canal Road frontage: CB 21, p15; 4. Mr Mostyn's evidence on the suggested subdivision of land, in consideration of the Mitchell report: CB 12, p25; and 5. Mr Mitchell's evidence regarding the ability to fill to surrounding levels: CB 2, p28. 1. In consideration of this evidence, the following plans were developed: 1. SKC22, being the concept plan for filling, consolidating and subdividing the land; and 2. SKC23, being the staging plan. 1. The Applicant's opinion is that the Respondent's environmental experts accepted the modelling as appropriate for modelling "as proposed by the HP": CB 42, at 56. Mr Lunney's evidence (in CB 129 and 129A) was noted as accepting that Lot 2 would indeed attract value based on this concept and some staging. Moreover, the Applicant submitted that Mr McLandsborough had refined the boundaries to allow grading of the fill levels, to meet surrounding levels, as envisaged by Mr Mitchell (SKC33B): CB 127A. 2. In response to the fourth contention regarding Mr Mostyn's evidence, the Applicant submitted (reply subs p56, par 6) that contingency rates were dependent upon particular circumstances of the quote. The Applicant's assessment of Mr Lawson's evidence was (reply subs p56, par 7) that he: ... had selected a high figure of 20 per cent which reflects a perceived risk involved with regulatory approvals. [However] in cross examination he accepted that there was no relevant "impact" from approvals in the first 8 years because there was existing approval for landfilling and recycling and the building of the shed to cover mixed waste processing. 1. In contrast, the Applicant submitted (reply subs p56, par 8) that: ... Mr McLandsborough took express account of the circumstances of the particular scope of works being costed. His view on contingency for the early years was that a large component of the cost was a specific, fixed, cost associated with a particular item (capping) and for that item there was complete agreement between the management experts: see CB 42 at 81 on the capping layer/works required. The cost of that one item was 50 per cent of the whole cost of what would be done in years 1-8: T.1526.43-47. Another large item in the schedule for the years 1-8 was the construction of the shed. These costs had been fixed by both experts using their experience and Mr McLandsborough had his cross-checked against an actual quote. Accordingly, there is also certainty involved in the cost of this item. In respect of these two items, there is little to no question of regulatory risk on the evidence – the shed could be commissioned immediately and would (sic) in the interests of the hypothetical operator to do so. Similarly, given the degree of agreement from the environmental experts on capping requirements, it is difficult to see any regulatory problem with submitting that type of agreement to the EPA for commission of the capping works to commence. Accordingly, there is little risk involved in large items of the early works. A lower contingency is entirely appropriate and better reflects the actual evidence than a general view that there is "risk" and so 20 per cent should be adopted. 16.3.4 Consideration 1. The Court accepts Mr Lawson's quantity surveying advice, and, accordingly, the Respondent's inputs for the DCF valuation model, for the following reasons. 2. Firstly, Mr Lawson's experience and qualifications indicate that he is more appropriately able to advise the hypothetical purchaser. During cross-examination, Mr McLandsborough was unable to respond to, or did not consider, aspects of the brief, including: 1. The future prospect and likely costs of relocating the planned waste processing facility, similar to that approved in an earlier development application, to a more optimal part of Lot 2, with a transition stage of a temporary facility: Tpp1461-1463; 2. The designing, operating and costing of a leachate management system, and landfill gas system: Tpp1464, and 1472; 3. The incorporation of an internal road system along Canal Road: Tpp1464, and 1472-1473; 4. The change in boundary lines between Areas D and E, from the original plan of subdivision in Mr Mostyn's individual expert report (CB 12): Tpp1468-1469. 5. The inclusion in, and then removal from, the plans, of a workshop in the south-west corner of SKC23: Tpp1471-1472. 6. The origin of the lot layout for SKC23: Tp1472. 7. In his initial reports, the consideration of opportunities and risks, including financial risks (e.g. retaining walls) in estimating costs: Tp1475. 8. The design for a batter or a vertical wall: Tpp1477-1478; 9. The costs required for ground treatment or stabilisation works: Tp1478; 10. The impact of reduced fill levels (as shown in SKC33) on waste operations: Tp1478; 11. The staging and capping of the landfill: Tpp1483-1484; 12. The risk involved in the subdivision and sale of areas A and B: Tp1484; 13. The required easements for access to the private road within the site: Tp1484; 14. The provision to Taylor Constructions of the relevant DC, and a preliminary pricing for the building: Tp1522; and 15. The costs and regulatory risks associated with the closure works for the landfill: Tp1524. 1. Appreciating the above quantity surveying issues, Mr McLandsborough did not appropriately justify aspects of the project design nor outline contingent costs associated with the suggested plan. In contrast, Mr Lawson included considerations which would be appropriate to account for the risks and indirect costs associated with the quantity surveying aspects of the project design. Accordingly, Mr Lawson's evidence is to be preferred, in advising the hypothetical purchaser on the quantum of risk and associated costs with either project design option. 2. Secondly, I accept the Respondent's second submission, in relation to the quote from Taylor Constructions. This evidence was not able to be tested in Court. Further, the quote did not include any consideration of the information which was used to determine the estimated cost. 3. The third contention related to the Applicant's view that the Respondent had set up a "straw man" argument regarding Mr McLandsborough's authorship of SKC23. The submissions, in relation to authorship, are not relevant to quantity surveying advice to the hypothetical purchaser. Rather, the more appropriate approach is to consider whether Mr McLandsborough has relevantly costed the risks and materials required to develop SKC23. Upon review of his approach, I conclude that Mr McLandsborough failed take account of all of the fifteen factors listed above ([604]). 4. In respect of the fourth contention, Mr Lancaster submitted (Tp2719, L21 to p2720, L3): … There are at least four reasons for accepting Mr Lawson's 20 per cent contingency amount. The first is the very schematic and concept nature of what it is that [he has] been asked to address his quantity surveying skills to. If there is at best only preliminary design and scoping, a quantity surveyor is going to be very hard pressed to come up with a final number without a substantial contingency to take account of the lack of specificity of what's being proposed. We rely, of course, on that. One other factor that Mr Lawson referred to is the high level of regulatory interest and involvement in many aspects of the work that would be required on lot 2. It's not as though it's a remote greenfields site that is of not much interest to any regulator, and that justifies in a quantity surveyor's reasonable opinion, in my submission, a healthy contingency amount. Of course, we rely on his experience that has specifically been obtained in landfill closure situations as a quantity surveyor. Mr McLandsborough, on the other hand, has a contingency of 10 per cent for short-term scenarios, 15 per cent for long-term scenarios. This is a little odd, because he agreed that long-term scenarios were not as complicated as short-term scenarios, so one wonders why the differential worked in the way it did. But, in any event, Mr McLandsborough does not have sufficient direct experience of landfills to be able to advise with the same reliability as Mr Lawson on this topic. 1. In determining the appropriate contingency for the associated projects, I am content to rely on the experience of Mr Lawson, and his considerations, and I adopt the Respondent's contingency of 20%. 16.4 Geotechnical Considerations 1. In terms of the void space and tonnage for the onsite landfill, the Court is required to assess the differences on relevant line items in the DCF. 2. The Court examined (in sections 8, 11, and 12 above) the expert evidence, from competing geotechnical experts, environmental management experts and quantity surveyors, in order to deduce appropriate amounts. The primary focus of that evidence was the geotechnical considerations for the void space and fill. 16.4.1 Applicant's Submissions 1. In its written submissions, the Applicant noted (pars 27-41): 27. The problem with that approach commenced with modelling a concept that did not allow for or plan for a subsequent land use [CB 38, at 4 [2.1(6)-(7)]]. Mr Gamble had identified this outcome as something he needed to know [CB 36, at 52 [169]]. He had anticipated a "future for waste management purposes" [CB 36, at 52 [170]]. But this was not part of his design [CB 33, at 24; 26]. 28. In addition, the Gamble design overstated the need for cover materials [CB 42, at 55 [4.3]]. In his reply, Mr Gamble noted that the final slope design on his proposed concept allowed for less fill cover over the Site reducing the financial return that could be made [CB 40, at 18 [63]]. This did not, at that time, cause him to re-consider the original design. 29. However, by the joint report of environmental experts, Mr Webster had identified that Mr Gamble's design did not "take into consideration the proposed final use for the site and the elevations that would be necessary to achieve this" [CB 42, at 55 [4.1(3)]]. The Respondent's experts (Mr Gamble and Ms Horlyck) acknowledged that in place of a 5% gradient (put in the original design), parcels for development could be designed at 1% and that, as this is what had been done in the Applicant's concept design, the SCK22 concept plan "is what would be proposed by the Hypothetical Purchaser" [CB 42, at 56 [4.6(2), (4)]]. 30. Based on that agreement, it was noted that volumes for fill profiles would need to be recalculated [CB 42, at 56 [4.8(2)]]. Despite this acknowledgement, the need for a revised fill profile was not taken into account by the Respondent's environmental experts in designing infrastructure to allow for subsequent landuse [Tp815, LL11-21]. 31. The operational experts, by comparison, understood that additional material should be anticipated for acceptance on the site to achieve a final landform [CB 48, at 5[6]]. Yet, despite this, Mr Heywood and Berkefeld relied on Mr Gamble's original calculations for the land fill void [CB 48, at 6[12]; 20[96]]. Similarly, Mr Lawson was not provided with updated information [Tpp1446-1448]. Further, many of Mr Lunney's adjustments to comparable sales evidence, similarly, rely on the original position of Mr Gamble rather than assuming a useable landform at completion of landfilling [Tp1687, LL6-40]. 32. This failure to address an acknowledged flaw in the Respondent's concept design becomes a further problem that Mr Heywood and Berkefeld's model, which again relies on Mr Gamble's original calculations, is adopted by Dr Ferrier [CB 60, at 44-45 [128];[132]]. 33. The failure to correct the Gamble/Horlyck approach, following the JER Environmental, has infected the entirety of the Respondent's case. 34. This is highly significant -but the extent of departure in the Applicant's and Respondent's case is masked in the different economic models. On their face, the models assume only a modest difference in landfill void for the Site in the 1-8 year assumptions. This is a coincidence more than being an input that is close-but-different on the modelling of the voidspace. … 36. …[T]he Respondent's fill profile has more fill deposited at the Princes Highway side of the Site (that is, more than the Applicant would place) and less as the profile slopes towards, but stops well before, the other boundary. The Applicant's fill profile, by comparison, assumes a more uniform fill envelope across the whole of the Site (with SKC22B suggesting a modification to allow for a modest slope towards the east). Again, the Respondent's own experts recognised a need to modify this design but did not do so, which radically understates the amount of fill that could be placed on the Site. … 37. The Applicant has by comparison properly planned for the full future potential of the Site and obtained expert opinion evidence from Mr Geoffrey Webster as an experienced consultant [CB43, at 5-6] to the waste industry who has been able to build and contribute to economic models finally considered by Mr Samuel that involve several different assumed uses of the Site. … 40. The Applicant's concept for future uses of the Site that maximise return is based on two sketch concept drawings: SKC23 [CB 52, at 18] and SKC23B [CB 127A, at 18]. … 41. These drawings show multiple overlapping layers of advice that would be of interest to a purchaser and/or vendor as to the potential for the rapid increase of landfill activity to facilitate the consolidation of recycling operations on the area marked "E" over 8 years. While that takes place, over that time, surplus lands could be sold for other industrial purposes and a long-term recycling operation could be approved and established on Area E allowing the purchaser to draw income while maintaining its environmental obligations for the rest of the Site during a long post-closure period. 1. During his closing submissions, Mr Hemmings pointed out that the Applicant's position on the total void space was dependent on the Court accepting two key assumptions: firstly, that SKC22 and 23 formed part of the highest and best use, and, secondly, that SP21 would be addressed, in accordance with the evidence of Dr Ryall and Mr Webster. Relevantly, Mr Hemmings observed (Tp2396, LL1-17): … One example of it is here, for the total void space. The court will recall I think I asked the experts about this on three different occasions - firstly when we had the group of nine. I said, "You've said in your contribution to the joint report that you need to recalculate the volume. What are you waiting on that should have been done?" They were waiting on a decision by the court as to what was to happen with stockpile 21 - was it going to be taken off-site, was it going to be kept in the hole, was it going to be processed? As we understand it, that position still pertains, so there is still a need for final calculation, or agreement of calculation, of the total void space applying SKC22 and 23, that they have already agreed, once the court has determined what happens to stockpile 21. That's one thing that arises from that part of the debate. 1. If the Court accepted the Respondent's evidence on either or both assumptions, Mr Hemmings noted (Tp2397, LL1-4): The state of the evidence as it is, that would, for example, require the experts to go away and agree upon the total void space, consistent with the court's finding, so that can then be put into the model. 16.4.2 Respondent's Submissions 1. In its written submissions, the Respondent observed (pars 447 and 448): 447. Essentially, the difference between the parties and this area of expert evidence, is the approach to settlement. Dr Thomas (sic) evidence should be preferred for the reasons set out above: mainly that he has proper regard to the available information as to the conditions under the surface, and, he also has proper regard to the academic literature on settlement. 448. The consequences of the Court's acceptance of this evidence would be: a. It demonstrates that a purchaser would not accept the feasibility of the putative McLandsborough subdivision; b. It also demonstrates that the RRWTF facility on Area E is speculative, potentially very costly and likely to be disregarded by a potential purchaser of Lot 2; and c. And finally, that the relevant inputs to the DCF in relation to geotechnical matters ought be those input in the respondent's column, as advised by Dr Thomas and Mr Lawson. 16.4.3 Consideration 1. The Court prefers the approach of Messrs Clay and Lawson, over that of Dr Ryall and Mr McLandsborough, and has accepted the Respondent's suggested "highest and best use" (section 15.6 above). 2. In response to Mr Hemmings's submissions, the Court notes that both parties have, in fact, quantified the total void space (line item 29), total void space tonnes (line item 31) and tonnes to onsite landfill (line item 33): see CB 128AAA. 16.5 Environmental Management (Leachate and Landfill Gas) 1. The Court has considered systems which may be required to address ongoing environmental issues with the site, especially the generation of leachate and landfill gas. The parties relied on a total of nine experts to support their conclusions on many inputs to the DCF model for all of the environmental management issues (section 11 above). 16.5.1 Applicant's Submissions 1. The Applicant observed (subs par 287) that "no critical issue emerged on the evidence as to how future operations (hence cash flows) would be hampered by on-going environmental management". In particular, the key differences in evidence related to the "scale of measures" required to meet the environmental management issues. 2. In comparing the different approaches to the hypothetical purchase, the Applicant observed (subs pars 289-290): 289. This advice tells a purchaser and vendor that experienced experts in the field of environmental management could predict from the [DOA] a set of management measures that could be put in place during the on-going use of the Site for continued landfilling and recycling purposes while also allowing for establishment of a longer-term recycling use on part of the Site with successive sales of surplus land; primarily focussed upon landfill gas and leachate disposal and on-going monitoring expenses. 290. That basic advice is not contested by the Respondent's experts [T13.926-963] – rather, those experts say there can be a similar outcome provided though there ought to be more factored into the expenses forecast for additional items of infrastructure: particularly for leachate management. As will be shown below, these additional items are unnecessary and expensive and so only an anxious purchaser or unwilling vendor would account for them. 1. On the issue of leachate management, the Applicant submitted that the existing system was fit for the purpose of completing landfilling. Further, the system could operate for long-term use with ongoing monitoring obligations and associated costs. The Applicant invited the Court to accept the evidence of Mr Fridell and Dr Swarbrick on two grounds. 2. The first ground was that the Applicant's experts had a precise and well developed opinion on the current state of the leachate management system. Both experts had provided a clear example of what would be expected of an adviser to parties to a transaction of this nature. They were diligent in analysing the site history, geology and hydrology of the site, the existing infrastructure and the requirements to address the leachate management issues within the Site. 3. Further, Mr Fridell is confident that the leachate management system works, for two reasons. Firstly, the Site has complied with the necessary controls, except for two minor events (CB 39, p9-10). Secondly, his chemical analysis shows that despite the sump and MW3 having a "strong hydraulic connection", there is no contamination of MW3, showing that the "inward hydraulic gradient has been maintained by the existing leachate management measures": CB 32, par 4.2.5. 4. The Applicant submitted, secondly, that the Respondent's experts had adopted a different approach to the hypothetical purchase, and had made inaccurate assumptions. The first criticism noted that the Respondent's experts had assumed that a lengthy due diligence period was required by the hypothetical parties. In particular, Mr Gamble confirms that the proper advice ought to be based upon a "desktop assessment of the existing information", and then "testing of samples of incoming leachate" (CB 36, p30, par 132) – a process followed by Mr Fridell. However, the Respondent's experts have not followed this approach. Instead, they developed their own water balance model: CB 34, p5, par 12. 5. The second criticism related to the assumptions made by the Respondent's experts. These are summarised as follows (subs par 305): 1. "Those parts of the model that turned up negative conclusions were based on scenarios in which leachate catchment areas have been arbitrarily increased [CB 38 at 5] – counterfactual to the way existing operations on the Site were carried out over many decades (confirmed by the two ICCG (sic) reports)". 2. "The modelling doesn't consider the different operations carried out on the Site. [CB 38 at 5 [13]-[14]]". 3. "The modelling doesn't take account of how the EPL's require ongoing management of water and separation of stormwater into clean channels and daily covering of the landfill site to minimise leachate generation. [CB 38 at 7 [22]]. Dr Swarbrick notes that this failure results in purported outcomes … [exceeding] the capacity of the treatment system in single occurrences whereas the historical records have consistently shown compliance [CB 39 at 9 [32]]". 4. "Dr Swarbrick concludes that the Respondent's model is flawed because contribution rates were increased but groundwater inflow calibrated from the ICCG (sic) models was not adjusted which 'degrades [the] model accuracy'. [CB 39 at 10-11] These increases are 'without justification'. [CB 39 at 13 [59(c)]] Had that factor been taken into account, Dr Swarbrick said that the 'net result would essentially be the same as that predicted by IGGC'. [CB 39 at 11 [41]]". 5. "The model was not verified by reference to the historical documents. [CB 38 at 8 [24]; note also T11.871.5-9 ...]". 1. In respect of landfill gas management, the Applicant made two key submissions, as to why Dr Swarbrick's evidence should be preferred. 2. The first related to Dr Swarbrick's "considerable experience in modelling, measuring and recommending mitigation strategies": Applicant subs par 309. In particular, the Applicant stated (par 310) that the experts had agreed that: … it was theoretically possible that either of an active or passive system of gas management could be designed to meet the principal objective of safety from off-site migration and for on-site occupiers [CB 42, at 16[2.6(5)]]. Similarly, as set out above, the Applicant's experts final recommendations are not criticised by the Respondent's experts. 1. The Applicant relied on the following recommendations, which included (subs par 309 – footnotes omitted): … These recommendations are: • Pumping trial to determine the need for other infrastructure with the principal objectives being to prevent off-site migration and on-site risk to occupiers • Passive trenching along the boundary 3000m length at Albert Street frontage • A management system is likely to involve a biofiltration system comprising passive biofilter and subsurface trenching however an integrated design that involves some active measures in the short term with passive biofiltration in the medium to longer term could also be effective at the concept stage • Additional perimeter wells • Monitoring program costing around $60,000 per year for LFG 1. In its second submission, the Applicant outlined why the Court should accept Mr Fridell's evidence on landfill gas generation (subs pars 312-314 – footnotes omitted): 312. …Mr Friddel's (sic) analysis of risk regarding landfill gas commences with acknowledgement that the historical materials landfilled on the Site means that landfill gas will be generated "at a lower generation rate and for longer compared to a putrescible site". He notes that any system imposed to deal with LFG should be based on the generation rate. Mr Fridell is clear that at the [DOA] there was no regulatory requirement to capture and treat LFG and no significant risks identified on or off-Site. However, Mr Fridell would nevertheless advise a purchaser that it is foreseeable that a system will be required "particularly if a purchaser intended to redevelop the [S]ite". Accordingly, in his first report, Mr Fridell then posed options for gas extraction systems based on an assessment of low risk of gas migration. 313. In his report in reply, Mr Fridell confirmed that he would act prudently in recommending measures that may be appropriate to a greater than expected rate of gas generation, including passive oxidation, low calorific flaring or high temperature flaring. In the joint report, Mr Fridell and Dr Swarbrick estimated rates at 200-400m(3)/h but Dr Swarbrick noted that the capacity to estimate was difficult because testing had been limited, flawed in method, and not flux based. 314. Nevertheless, the appropriate advice would be to undertake a pumping trial to first validate the assumptions being made as to generation rates as the need for infrastructure may not be as great as what has only been modelled. In the joint report, this trial became an agreed position. 1. The Applicant asserted (pars 315-317) that the primary differences between the evidence of Messrs Fridell and Welsh were as follows (some footnotes omitted): 315. The primary difference in the rates of generation modelled by Mr Fridell and Mr Welsh arise primarily because Mr Welsh relied on a higher composition of food and sludge in historical materials (Mr Welsh modelled up to 21.5% for food waste with Mr Fridell having 0%). 316. Mr Fridell notes that the model is itself conservative and likely results in an overestimate of landfill gas generation rates (which as a diagnostic tool likely is a result of the precautionary principle being applied). Mr Fridell criticises Mr Welsh's approach to the modelling as "compounding conservatism" by modelling waste streams that the Site was never authorised to receive in high quantities. Mr Fridell notes [CB 38, at 16 [46]-[47]]: Based on my experience, I consider the concept design prepared by Mr Welsh as conservative for a solid inert landfill and the quoted upper range of landfill gas generation rate included compounded conservatism resulted in an exaggerated over estimate in landfill gas generation rate. The higher end of the range is more typical of a municipal waste landfill rather than a solid inert landfill. I also consider Mr Welsh's recommendation of a 40m x 40m spaced LFG extraction grid to be an overly conservative recommendation considering the absence of a pumping trial verifying gas extraction… 317. Mr Fridell rejected Mr Gamble's suggestion that a passive trench extending around the perimeter of the Site was justified. It is significant that by the time of the Joint Report this position became accepted by Mr Welsh (indeed all experts viewed such a recommendation as "extremely expensive and not practicable"). Another example of that conservative approach is Mr Welsh's recommendation to provision for "potential landfill gas related clean up/mitigation works off site". 16.5.2 Respondent's Submissions 1. On the topic of leachate, the Respondent relevantly outlined (subs par 743) three reasons for accepting Mr Gamble's opinion, on the necessary upgrades to the leachate treatment plant: a. First, as analyzed by Mr Gamble, the required future capacity based on the review and modelling is 221 kl/day; b. Secondly, this is essentially similar to the work undertaken previously on Lot 2 and which would have been available in the due diligence process. The modelling by Ian Gray (200 kl/day) as reported in the document prepared historically and known as "IGGC 2011" [CB 36, at 54 [187]]; c. Thirdly, the information provided in a late served affidavit in the proceedings by Mr Biggs (prepared after the Gamble report) confirms that the SBR was operating at capacity and would require upgrading. 1. In responding to the Applicant's expert evidence, the Respondent noted (par 744) Mr Gamble's criticism of their opinion on the leachate treatment plant (footnotes omitted): In the joint report, the applicant's experts consider that sufficient capacity exists without the need for an upgrade and in this report, the Court has the benefit of the detailed evidence of Mr Gamble as to why he disagrees. He does so for a number of reasons including: a. According to design principles, existing plant does not have sufficient volumetric capacity; b. Independent sampling data has not been provided; c. The header tank is 12 years old, and the SBRs are at least 7 years old in 2014 and this means that the existing treatment plant may need to be replaced sooner than if it was 3 years old. There is uncertainty whether existing plant will last another 30 years; d. There are non-compliances (particularly, high ammonia going to sewer after treatment) post the [DOA]; e. Advice to the hypothetical purchaser would have been that independent assessment of plant capacity is needed, and should have been possible pre-acquisition, as well as a physical inspection of the plant (including checking against safety and current standards eg electrical wiring); f. That advice would also be that the opinions of the applicant's experts have a number of difficulties including: i. According to Mr Fridell, average flows over a 3 month period have been as high as 248 kL/day (this means some daily ones much higher); ii. US EPA and other references suggest that 8 hour contact time is not sufficient, so only one treatment cycle per day is possible; iii. This means that 8 hour contact time may or may not be sufficient to reduce ammonia from over 200 mg/l to below 100 mg/l, and there is no documentary evidence that this has been achieved (where results should be readily available); iv. If existing plant is run with 2 x 12 hour cycles per day, then 2 x 142 kl/day = 285 kl/day is possible. This is sufficient for the maximum 90th percentile year predicted by IGGC (285 kl/day), but both existing SBRs need to be fully functional during critical times (and rainfall is not predictable); v. This mode of operation does not allow for plant breakdowns, which can often occur at inconvenient times (such as when high flows are occurring more often, such as during wet weather); vii. It also does not allow for regular maintenance, which would involve taking one of the SBR units out of service – when one unit is not available, the system capacity reduces by 50-60%; viii. Hence the only prudent course for a hypothetical purchaser to take would be to allow for an extra 100 kl SBR, which provides capacity for increased wet weather flows, allows for one unit to be out of service at times for maintenance, without compromising the ability to treat normal flows. 1. Secondly, the Respondent briefly outlined (par 749) Mr Welsh's opinion (CB 35, p5, pars 9-12) on the existing landfill gas management system: 9. Following my review of those documents, Mr. Gamble asked me to provide formal review comments on the Landfill Gas Management Plan. At this time, Mr. Gamble also asked me to prepare sketches of my interpretation of the dimensions and design of the installed and proposed landfill gas management system (perimeter system) described in the Landfill Gas Management Plan. 10. I completed these works by preparing hand-sketches of the perimeter system and attaching them to an email to Mr. Gamble dated 3 February 2017 in which I presented my review comments (Appendix B). 11. Mr. Gamble subsequently verbally requested that I consolidate these items of work into a memorandum to him. I did this on 3 February 2017 (Appendix C). As set out in this memorandum, I concluded that: (a) No concept, detailed or as built drawings or specification of the installed systems were provided in the Landfill Gas Management Report (b) Incomplete and/or insufficient information was available in relation to the installed / proposed landfill gas mitigation system and associated monitoring data (c) That the absence of the information identified in (a) and (b) above made it very difficult to understand precisely what had been installed and its likely sufficiency for the purposes of managing landfill gas generated by the Site (d) That further monitoring and assessment of landfill gas at the site was required to determine the most appropriate management approach for landfill gas generated by the site 12. In addition to the above, I note that at the time I provided my specialist advice to Mr Gamble (and to date), I had not sighted any evidence that confirmed that an engineered landfill gas management system had been installed at the Site. 1. Taking into consideration the landfill gas generation rates, the Respondent (pars 750-752) "adopted the view that in order to manage landfill gas and potential gas migration (particularly on the 'unprotected' southern/eastern boundary) there would be a need for an active landfill gas system". In support of this conclusion, the Respondent relied on material from the EPA Vic BPEM and NSW EPA, regarding the preference of active systems, where landfill gas generation is "large". Accordingly, Mr Welsh would have advised the hypothetical purchaser regarding the requirements for "very significant underground infrastructure which would need to be integrated with the landfilling of the whole of Lot 2". 2. In response to the Applicant's suggested "hybrid" system, the Respondent noted the following difficulties (subs pars 753-754 – footnotes omitted): 753. The applicant's position, on what system is required, is Protean. At first, the applicant contended for a passive system. Then, through the joint report it contended for a hybrid active/passive system, which is unorthodox to say the least. The respondent contends that the difficulties with the applicant's approach include: a. Its advisors haven't designed a system it is contending for (see paper by Dr Swarbrick: "Longer Term Performance of a passive landfill gas bio filtration system in Australia" for the Kelso Landfill in Sydney); b. If a purchaser was going to develop the land and maximize the ability to have Lot 2 used for non landfill purposes, it would design around where the buildings are going to be. Having open trenches (including large sized ones like in Annexure C to the joint report) would not be feasible, whereas with an active system, this work can be done much quicker; c. If the system is not designed to go deep enough, gas will migrate sideways. In Part 2.6 at [24] in the Joint Report, Dr Swarbrick appears to concede that an active system will be needed, at least for a period of up to 5 years, but this hybrid design seems to be novel, a mish mash of different approaches and it is undetermined who is going to monitor it, who is going to maintain it and deal with something going wrong, such that a hypothetical purchaser would reject this advice and accept the orthodox advice given by the respondent's experts. 754. The second main issue relates to what information has been used in the costing of the different designed system. The information provided by the respondent's experts to the respondent's quantity surveyor and input in to the respondent's DCF model, has predictable costs from a predictable design, with some level of precision and detail and therefore certainty (see David Gamble chapter 8 in chief). The applicant's approach is novel, unorthodox and uncertain and, the respondent contends, would be rejected by a hypothetical purchaser. 16.5.3 Consideration 1. Mr Eastman succinctly summarised the main issues, which the Court would need to consider, when attributing values to the relevant DCF inputs (Tp2647, LL1-12): … There are really three main issues that arise out of this evidence … [firstly] what are the costs for the leachate infrastructure that a purchaser would project and therefore put into the DCF, that's one; the second is what is the necessary landfill gas infrastructure, and what's it going to cost; and then the third, or I probably should say the first, is it affects the viability of this proposal for a subdivision and, more critically, the staged timing that has been valued by the applicants. … 1. The third issue was resolved (in section 15 above), as a part of determining "highest and best use". Therefore, the Court will consider only the evidence, outlined at section 11, where it relates to the DCF inputs for the relevant line item disputes. 2. On the first issue, regarding an upgrade to the leachate management system, the Court prefers the evidence of Messrs Gamble and Dixon, and, in respect of landfill gas, the Court prefers the evidence of Mr Welsh. 3. My views in this regard have been formed on reconsideration of their respective qualifications and experience, their relative conservatism (in the Applicant's favour), their reliance on modelling (e.g. Welsh's extensive modelling cf., Fridell's very limited modelling), and the transcript of their performance under cross-examination. 4. In this respect, I accept the summary submissions of the Respondent (pars 770 to 775), which include (at 770, 772, and 773) these comments: 770. ... the proper advice to a purchaser, in order to act prudently in relation to LFG generation and associated management, would be as has been set out in Mr Welsh's modelling [which] ... [772] is based on proper assumptions and is an important and critical piece of the jigsaw for a hypothetical purchaser, because landfill gas management was undeniably necessary, potentially costly, would involve works across the entirety of Lot 2 and even (perhaps absurdly) on the applicant's case, works offsite including in the middle of public roads. 773. Mr Welsh's design is based on this modelling. This is the approach the hypothetical purchaser would take, not the guesswork that the applicant's experts have engaged in. ... (See also Respondent's subs pars 778 to 812, and Section N.) 16.6 Waste Operations 1. The Court is required to assess the appropriate gate fees, which would be accrued from receiving waste soils for disposal on the site. The parties rely on the expertise of their respective waste operations experts to inform the appropriate figures for the DCF model. In addition, the Respondent relies on Exhibit R16, and the lay evidence of Messrs Vella and Le Provost. (See section 9 of this judgment.) 16.6.1 Applicant's Submissions 1. The Applicant relied on Mr Webster's proposed gate fee, $195 per tonne, and suggested (subs par 374) that its expert evidence relied on three key factors (footnotes omitted): … First, as at the [DOA], material of the type the hypothetical purchaser could expect to receive was "going to landfill at a rate in the order of $185-$200/tonne for large scale projects." Accordingly, a rate of $195/tonne was appropriate. Secondly, the operator of the ALF site could expect to achieve higher gate rates than many competitors given its locational advantage with respect to the Sydney CBD. Thirdly, as void space at landfills around Sydney decrease, and yet the volume of waste produced remains steady or increases, supply and demand dictates that landfill space will be increasingly in demand and gate fees will increase. Accordingly, the hypothetical purchaser ought to expect to achieve higher gate rates than are sometimes seen in the market at present. 1. The Applicant criticised Mr Haywood's gate fee because he was unable to offer documentary evidence, beyond stating his experience, to support it. Further, the Applicant criticised Mr Vella's evidence on gate fees because he had merely averaged revenue against tonnages which arrived at the gate. The Applicant was critical of this method, as it had potential to disguise the actual site operations. In response to Mr Le Provost's evidence, the Applicant noted that Erskine Park had a lower gate fee because it had less of a locational advantage, than the operation at St Peters. 16.6.2 Respondent's Submissions 1. The Respondent characterised the basis of Mr Webster's gate fee as "scant" information: subs par 878. The Respondent relied on Mr Webster's rejection, in cross-examination, of two sources of objective evidence (Tp1336, LL37-41, and subs par 881 – footnotes omitted): 881. The two pieces of objective evidence put to Mr Webster were: a. The affidavit of Mr Le Provost dated 14 November 2017 which annexed a copy of Transpacific's internal price list for FY 2013/14 and showed a range of gate fees for asbestos soils between $136/tonne (ex GST) to $167/tonne (ex GST) and for solid waste soils/low level contaminated soils between $135.20/tonne (ex GST) to $167/tonne (ex GST); and b. An invoice for the actual removal of stockpile 21 from the site by Ward Civil to the Enviroguard facility at Erskine Park which showed a charge of $156/tonne. 1. The Respondent relevantly highlighted Mr Eastman's cross-examination of Mr Webster (Tp1340, LL6-12): EASTMAN: No, I'm asking you that you would tell a purchaser on a potential $23 million question to go with your advice, despite the fact that there is no objective market evidence that you advance to support it. That is correct, isn't it? WITNESS WEBSTER: Yes. 1. The Respondent submitted (subs par 888) that the Court should accept the Haywood/Berkefeld position, because (footnotes omitted): a. The objective information available from people in the industry is that $165/tonne is the rate most applicable for this material; b. There is no objective support for the Applicant's rate of $195/tonne, suggesting that no one in the industry was charging this rate; c. Competition in the Sydney Metropolitan Area would keep the price able to be charged by the HP in line with surrounding businesses, noting that large landfill facilities exist in the Eastern Creek precinct and in other surrounding areas such as Kurnell, Belrose, Lucas Heights, Horsley Park and Kemps Creek; and d. As a result of these market factors, a facility operating out of the Alexandria site would be forced to 'meet the market' in terms of pricing and would not be successful in attracting tonnes as an outlier to the industry accepted price range. 16.6.3 Consideration 1. The Court recognises that the evidence given by Messrs Webster and Haywood relies upon their experience and expertise, which would suitably assist the hypothetical purchaser. However, the Court also has the benefit of the affidavit evidence of Messrs Vella and Le Provost, and of Exhibit R16. In line with this evidence, the Court prefers the prevailing waste gate fee suggested by Mr Haywood, as it is within a more suitable range from the accompanying lay evidence and tendered materials. 16.7 Land Valuation 1. The parties rely on the land valuers' evidence (section 13 above) to derive the terminal value of Lot 2, on a rate per square metre basis. 16.7.1 Applicant's Submissions 1. The Applicant made its submissions on land value on the basis of its five nominated areas of land within Lot 2, namely Areas A to E. 2. In respect of Area A, the Applicant propounded (subs pars 398-399 – footnotes omitted) that: 398. Area A is most suitable to designation as surplus land. Accordingly, it could be quickly capped, filled to the appropriate level, and made ready for sale to the market for industrial uses. 399. Area A comprises a land parcel of approximately 2.8ha. It is zoned to permit a wide range of industrial uses. Access to it would be from Holland Street, at least at first, with other access available from the internal road in due course providing links to Campbell Street and Canal Road. In the hands of the s 56 purchaser at the [DOA], some minor works are required to then make the Area saleable within approximately 12 months to a specific market that can make use of the Area for in-demand industrial uses like good[s] transfer or storage. 1. In support of Mr Dyson's calculations, the Applicant suggested (par 404 – footnotes omitted) that: 404. The differences between Mr Dyson and Mr Lunney are deeper than simple differences in professional judgment. As identified above, Mr Lunney has assumed a concept for the Site, even if this involves subdivision, that is substantively less economically viable than Mr Dyson. This is why Mr Lunney has a "geotech" adjustment that is "the biggest difference between [them as experts]". This is why Mr Lunney has such a pessimistic view of the Site and its value (representing only $550psm as a total or en-globo sale and only $900psm for severable parcels at Area A and B). The only explanation Mr Lunney gives is that this "geotech constraint" apparently affecting Areas A and B is "less" than that affecting Areas D and E. Mr Dyson explained that the adjustment for a "geotech" constraint was wrong in principle because the Areas would each be made suitable for future industrial uses by the time of their separation. In addition, the adjustment was double-counting because the costs of making the Areas suitable was included in the DCF method. 1. In particular, the Applicant criticised Mr Lunney's adjustments to sales for location or frontage, stigma, geotechnical constraints, etc. Accordingly, the Applicant supported the use of the Euston Road and Pacific Highway sales, in valuing Area A. The Applicant submitted that the land sale of Area A should occur in year 1 after the DOA. 2. For Area B, the Applicant ascribed similar features to the land, and suggested that the same rate of $1,300 per square metre should be applied. The Applicant submitted that the land sale of Area B should occur in years 1 or 3 after the DOA. 3. For Areas C and D, the Applicant described the difference in valuation process between Messrs Lunney and Dyson, as follows (subs pars 429-432 – footnotes omitted): 429. Areas C and D are in a different position to Areas A and B but exemplify well how the use of the DCF method means that it is inappropriate to double count the geotechnical costs and time involved in making those Areas saleable and then including subjective adjustments to the underlying land value rate to reflect a "geotech" concern. 430. The rate represents a value (fixed from sales around the [DOA]) for industrial land available for a variety of uses for parcels of similar size (whether this be $1300psm as derived by Mr Dyson or $900psm as derived by Mr Lunney). Mr Lunney would nevertheless adjust this rate for Areas C and D to represent time and cost "penalties" involved for these Areas. 431. However, three things need to occur for that rate to be useful in the DCF method: a. The appropriate rate needs to be escalated to take account of the increase in real estate values (over inflation) likely to occur between the [DOA] and the date of a future sale of those Areas (likely in Year 8). b. Costs involved in bringing those Areas into a state to be saleable need to be quantified and taken into account. c. An appropriate discount is applied to bring any cash flows involved in this process to a net present value. 432. Having done this, it would be wrong to adjust the initial rate to account for "time" or "costs" as these have been accounted for in that process. 1. The Applicant did not seek to nominate a value for Area E, as it would be used in perpetuity for the RRWTF. 16.7.2 Respondent's Submissions 1. The Respondent has identified four main issues in dispute in the valuation evidence: 1. The approach taken to the putative staged subdivision, and the sale of surplus land; 2. The rate to be put on the sale of surplus land (in order to calculate its terminal value); 3. The land discount rate, appropriate in the circumstances; and 4. The effect of the Boiling lease. 1. The first step for the valuers in determining the terminal value of Lot 2 at the DOA was to establish its highest and best use – the value of Lot 2 is actually an entry into the income components of the DCF analysis. 2. At the end of the hearing, the Respondent was still relying upon Mr Lunney's original approach, i.e. not assuming subdivision, but allowing the rental/licence of the surplus land (PDA1), as a component of income generation. 3. The Respondent's final position of the valuation of Lot 2 reflects that the highest and best use was as landfilling, with no ongoing recycling business (as it is not viable), no 29 year RRWTF, and no subdivision. It noted that Mr Lunney had agreed to a higher rate per square metre, namely $550psm. 4. However, the costs of constructing an internal road would be relevant, because that would add value before the hypothetical purchaser would on-sell the lots. Otherwise, RMS adopts all the changes that have now been brought forward by the valuers, in their March 2018 joint supplementary valuation report, and in the spread-sheet at CB tab 128A. 16.7.3 Consideration 1. The difference in market value between the subdivision scenario, and the "no subdivision" scenario, is stated to be $1.1M. The joint supplementary valuation report of March 2018 reached a figure of $46,535,246, now to be compared with the figure $45,742,467 for which RMS contends in its submissions. 2. In determining the appropriate terminal value for Lot 2, the Court must consider the two principal differences, being the geotechnical constraints of Lot 2, and the adjustments for comparable sales. On both issues, the Court accepts the evidence of Mr Lunney. 3. In relation to geotechnical constraints, Mr Lunney has preferably taken into account the compelling geotechnical expert evidence of Dr Thomas, in applying adjustments for Areas A to E. The geotechnical evidence would correctly affect the market perception in developing the land. Accordingly, adjustments are necessary for all five areas, in order to take into account the significant timing, development, and settlement issues. 4. In relation to the adjustment of comparable sales, the Court accepts Mr Lunney's adjustments for the "stigma" of the environmental constraints on, and contamination of, Lot 2. Mr Lunney's approach, as set out above (in section 13.2, and in CB 69, p52, par 11.2(e)), correctly addresses the future purchaser's consideration of the environmental liabilities, which affect Lot 2's terminal value. 16.8 Business Valuation 1. The Court is required to determine the appropriate discount rate to apply to the business related cash flows and the initial stockpile remediation cash flows, in light of the business valuers' evidence (see section 14 above). 16.8.1 Applicant's Submissions 1. The Applicant submitted that Mr Samuel's evidence should be preferred for five reasons. 2. Firstly, the Applicant criticises Dr Ferrier for "separating" ongoing cash flows into categories, and discusses (subs pars 436-437) the views of Wayne Lonergan, author of "The Valuation of Business, Shares and other Equity": 436. First, he has "separated" on-going "cashflows" into categories. No text on the method supports that approach. Lonergan states, simply, that the DCF method [T26.2008.12-13]: takes the cash flow (note that it is cash flow, not profit) generated by the company or business each year and discounts it back to a current value [footnote cites "Lonergan at 63"]. 437. Similarly, this assumes different assets being acquired. As Mr Samuel states: I see it very much as an acquisition of one asset, which is the land [T26.2017.27-29]. 1. Secondly, the Applicant suggests that Dr Ferrier's differential rates are based on "subjective considerations". In particular, the Applicant criticised Dr Ferrier's increase of the discount rate for the year 1 to 9 model by 50% (subs pars 438-441). 2. Thirdly, the Applicant alleges that Dr Ferrier has "not adopted a common method of deriving a discount". Rather, the Applicant suggests "Dr Ferrier has, on his own account, used a method of valuation of a business – discerning the relationship between a price and an earnings figure". The Applicant relies upon Mr Samuel's opinion that the EBITDA is "appropriate for small companies, typically owner-manager operations or when a WACC cannot be derived" (subs par 442). 3. Fourthly, the Applicant characterises Dr Ferrier's evidence as erroneous, because "he has assumed he did not need to understand the post-tax consequences adopted by any particular business analysed" (subs par 443). 4. Fifthly, Dr Ferrier relied on transactions, which were distant from the point-in-time valuation task. The Applicant suggested that it is more appropriate to rely on transactions at the DOA (subs par 444). 16.8.2 Respondent's Submissions 1. The Respondent considers that the land valuation and business valuation experts must work in tandem, and that each has an appropriate role to play within the valuation process. Mr Lunney, therefore, obtained the assistance of Dr Ferrier in "quantifying the business-related cash flows which could reasonably be assumed by a potential purchaser of the land, and the discount rate which a prospective purchaser would reasonably apply in order to determine the net present value of those business-related cash flows ...": CB 69, p4-5, par 2.7(b). 2. The Respondent's valuation experts have valued the land, with the input of relevant business cash flows, in line with the advice of the Respondent's experts, and in particular, the waste operations experts. The Respondent submits that the highest and best use which would be adopted by a hypothetical purchaser would be a landfilling operation for years 1 to 8. The Respondent's experts consider that, thereafter, the land would be sold on the basis of a conventional real estate approach. 3. Dr Ferrier advises that the appropriate discount rate to use on the cash flows for that business is 13.9%, a discount rate derived after thorough analysis of waste operations transactions in the market. Dr Ferrier considers that this is the appropriate methodology to adopt, as it is preferable to identify the required rate of return reasonably adopted by a willing, but not anxious, purchaser or seller, "by reference to the market for the particular asset being valued": CB 69, p26, par 6.49(d). 4. The Respondent considers that this is the advice that would have been provided to the hypothetical purchaser on the basis of the risk profile of the site. 16.8.3 Consideration 1. I have several reasons for rejecting Mr Samuel's DCF discount rate, and accepting Dr Ferrier's: 1. Dr Ferrier's superior qualifications and experience in the assessment of compensation under the JTC Act, in cases involving extinguishment of a business, and his clear understanding and articulation of relevant provisions of the Act, DCF, and related methodology. 2. Mr Samuel's use of comparable businesses and transactions in this case was flawed, and Dr Ferrier's was correct. Mr Samuel excluded from his list of comparable stock exchange listed corporations the only two which involved Australian (NSW) businesses. Mr Samuel persisted in relying upon business statistics of large to very large US corporations, and large to very large European (French, Finnish, and UK) corporations. These are listed in Mr Samuel's Appendix F to CB 65. For each company, the relevant currency is given, as well as the market capitalisation (as at 19 December 2014), net debt, enterprise value (EV), EBITDA and the ratio EV/EBITDA. 3. In Dr Ferrier's opinion, which I accept, the information obtained from these corporations is not comparable to the potentialities of carrying on business on Lot 2. Nor does it provide information of the kind required by the international valuation standard in Australian Accounting Standards Board 136 (Exhibit R26), paragraph 5.1 of which, entitled "Guidance" in the International Valuation Standard ("IVS") (6th ed. reproduced in Exhibit R30), states that "the discount rate should be selected from comparable properties or businesses in the market. In order for these properties to be comparable, the revenue, expenses, risks, inflation, real rates of return, and income projections ... must be similar to the subject properties". Also the IVS requires the valuer to list all assumptions underlying the analysis, showing that "sufficient research has been carried out to show that the assumptions used as the basis of the DCF model are appropriate and reasonable for the subject market". 4. Mr Samuel accepted, in cross-examination, that having excluded the Transpacific company, all the large overseas US and European listed companies in Appendix F had market capitalisations in the hundreds of millions, if not billions, of dollars. Mr Samuels had noted that the Betas of Transpacific (1.5) and the Tox Free company (0.18), both of which are Australian, were deliberately excluded by Mr Samuel from his basket of so-called comparable businesses. He agreed that these two Betas were "wildly different" from each other, and from those of the other (overseas) companies he was considering. 5. When asked whether this could relate to some fundamental difference in the Australian market in this sector, he said it was "possible", and when it was suggested that he was "simply at a loss to explain why it is that there is such a divergence in respect to the Australian companies", he replied "I'd have to investigate, that's correct", and that he would "have to investigate at some depth to try and work out what happened to both of them" (Tp2150, LL35-43). 6. Dr Ferrier noted that, although Mr Samuel "considers the discount rate determination methodology adopted by Dr Ferrier 'is a valid methodology for estimating a discount rate'" (CB 69, par 6.48.), Mr Samuel had rejected three of the transactions because they post-dated the DOA: see CB 65. However, Dr Ferrier was entitled to use and analyse them, subject to any necessary adjustment: see John Bridge Ltd (in liq) v Commonwealth (1951) 11 The Valuer 375, at 377: Evidence of prices paid for comparable lands, not only before but after the critical date is admissible, the weight of the evidence varying with the distance in time of the comparable sale from the critical date. Prices or future sales not to remote in time might well be within the range of forecast at the critical date, not being prices obtained during a period of unexpected prosperity or depression. NOTE: In dealing with John Bridge (in his 5th ed.), Hyam refers to Kelly v Western Australian Planning Commission [2006] WASC 208, where Simmons J said at [393]: It is indeed the case that sales subsequent to the valuation date may be used as comparable sales (citing John Bridge (supra)); Commonwealth v Arklay (1952) 87 CLR [159] at 170 per Dixon CJ, Williams and Kitto JJ. This is subject to allowance, as a matter of weight to be given to such sales, for any indications that their prices have been affected by events which at the valuation date were matters as to which there was uncertainty: see Housing Commissioner of NSW v Falconer [1981] 1 NSWLR 547 at 576, per Mahoney JA. 1. In cross-examination, Mr Lancaster put to Mr Samuel: "you really just pushed through with the WACC methodology, notwithstanding that you accept that there was an undesirable absence of Australian companies to which you could compare?"; and Mr Samuel replied "That's correct ... the Beta is ultimately a matter of judgment for the valuer" (Tp2152, LL13-19). 2. Dr Ferrier's discount rate is consistent with what was referred to as the "standard industry rate", which both parties' waste operations experts independently asserted was, in their experience, 13% (CB 60, par 147). 3. Dr Ferrier's opinion was that the difficulties in applying the CAPM to determine the cost of equity, and the discount rate, in the circumstances of this case, were such that "it is preferable to assess the discount rate by reference to the anticipated EBITDA capitalisation rates evident in comparable transactions occurring in Australia, after appropriate adjustment for time" (CB 69, par 6.69.). Nevertheless, Dr Ferrier's opinion was that, if it were considered necessary and appropriate by the Court to adopt the approach taken by Mr Samuel, including his assessment of Beta and gearing based on overseas listed companies, Dr Ferrier would do so using the long-term Australian market data published by IPART, and would adopt size and specific risk factors as follows (CB 69, par 6.70.): Risk free rate (IPART long-term) 4.9% Market risk premium (IPART long-term) 6.0% Beta 0.83% Size premium 3.0% Illiquidity and specific risk premium 3.0% Debt margin (IPART long term) 2.9% Debt / EV 33% Calculated WACC 12.4% 1. The result in (ix) is to be compared with Dr Ferrier's discount rate of 13.9% (CB 69, par 6.59.). 2. Dr Ferrier summed up his opinion of Mr Samuel's methodology and conclusions, as follows (CB 69, pars 6.67. to 6.68.): 1. On the basis of Australian market data reported by IPART, Mr Samuel has inconsistently adopted the short-term (single day) risk-free rate, and the long-term (ten-year average) market risk premium; 2. The international listed companies referred to by Mr Samuel are not reasonably comparable to the business which is proposed to be operated from the subject property by a prospective purchaser, and are, therefore, not a reliable basis upon which to assess the Beta, or the level of gearing, appropriate to a prospective purchaser of the property; 3. Using the available market evidence, in relation to actual transactions for Australian businesses in the waste disposal industry as a test of reasonableness (as suggested by Mr Samuel), indicates that Mr Samuel's specific (and subjective) equity risk premium is too low to adequately reflect all of the differences in risk between the identified international companies listed, and the cash flows expected to be derived from the business to be operated on the subject property; 4. ALF's actual cost of debt (adopted by Mr Samuel) is not a reliable guide to the cost of debt which could reasonably be expected to be incurred by a prospective purchaser of the subject property. The IPART report indicates that the debt margin (above the risk-free rate) was 2.2% (short-term average), and 2.9% (long-term average), or total cost of debt of 4.9% short-term, and 7.8% long-term. This long-term average rate is higher than Mr Samuel's assumed pre-tax cost of debt of 6.4% (or 4.5% after tax); 5. Mr Samuel has placed excessive reliance on information regarding non-comparable foreign-listed companies, for an assessment of an appropriate Beta; 6. Mr Samuel has relied on studies of the effects of size on the cost of equity of US-listed companies, without taking into account either the increased risk attributable to illiquidity, or the fact that there is considerable disagreement about the quantum of an appropriate adjustment for size. Mr Samuel's 1% adjustment appears to be wholly inadequate, in Dr Ferrier's opinion; 7. Mr Samuel has inconsistently, and incorrectly, adopted a mixture of short-term average and long-term average variables, in his assessment of the risk-adjusted WACC; 8. Mr Samuel has derived a discount rate which is inconsistent with available and relevant market evidence; and 9. Mr Samuel has provided no evidence as to why he considered Dr Ferrier's chosen transactions evidence did not represent market value. 16.8.4 Discount rate to apply to initial land remediation cash flows 1. In Mr Samuel's opinion, the discount rate to be applied to the initial land remediation cash flows should be the same as the discount applied to the business cash flows. 2. In Dr Ferrier's opinion, Mr Samuel is wrong when he states that the initial land remediation cash flows are subject to estimation and business risks, in the same manner as all other cash flows. 3. In Dr Ferrier's opinion, these costs are subject to significantly lower estimation risks, and to no business risk. There is no "estimation risk", as described by Mr Samuel, and the cash flows associated with the initial land remediation costs are not subject to any other estimation or business risk, arising from market or commercial factors, or disagreements about the costs of implementing the identified remediation processes. 4. After the method of dealing with the necessary land remediation is established, and the costs quantified, there is essentially no risk that the identified costs will be incurred. This is especially so where the method of dealing with the contaminated stockpiles is to place them in the void (as proposed by the RMS's experts). 5. For all of the above reasons, I do not accept the reasoning of Mr Samuel, and, where his evidence is inconsistent with that of Dr Ferrier, I prefer Dr Ferrier's. That conclusion links up with my conclusion (in [553] above) about the highest and best use of Lot 2, and takes me to the DCF valuation of it in the appendices to the Respondent's submissions, namely $45,742,467, which is the amount to which I conclude the Applicant is entitled. Section 17: Market Value for Lot 1 17.1 Introduction 1. As earlier noted (at [127]), the parties agreed that the most appropriate valuation methodology for determining the market value for Lot 1 is the direct comparison approach. 2. On this basis, the Applicant's valuer, Mr Dyson, determined the amount to be $5,500,000, while the Respondent's valuer, Mr Lunney, determined it to be $3,920,000. 3. Accordingly, the Court has reviewed the comparable sales evidence, in order to determine which valuer's opinion to accept in respect of Lot 1. 17.2 Evidence 1. Lot 1, known as 4-16 Campbell Street, St Peters, has an area of 2,410m². Its only improvements at the DOA were a carport, some hardstand areas and fencing, none of which was regarded by the valuers as contributing to its market value. 2. It was zoned IN2 – Light Industrial. The maximum floor space ratio ("FSR") would have been 0.95:1, and the maximum height control would have limited buildings to 14m, in the absence of the public purpose. The town planners agreed that no "spot rezoning" of the land in isolation was likely to occur. 3. Mr Lunney relied on three comparable sale properties: 1. 90 Burrows Road, St Peters ("90 Burrows"); 2. 84-88 Burrows Road, St Peters ("84-88 Burrows"); and 3. 32 Burrows Road, St Peters ("32 Burrows"). 1. Mr Dyson relied on four comparable sale properties being: 1. 90 Burrows; 2. 71 Burrows Road, Alexandria ("71 Burrows"); 3. 32 Burrows; and 4. 16 Huntley Street, Alexandria ("16 Huntley"). 1. The two common sales, between the valuers, were, therefore: 1. 90 Burrows; and 2. 32 Burrows. 1. Mr Lunney disagreed with the adoption of 71 Burrows, which has an area of 923m², and 16 Huntley, which has an area of 777.8m². They are said to be too small, and would likely appeal to a different market, compared to Lot 1 of the acquired land, which has an area of 2,410m². As a general rule small parcels of land attract higher rates per square metre than larger, and I agree with Mr Lunney on this point. 2. Mr Lunney conceded that his sale at 84-88 Burrows Road was too large to be a reliable comparable sale, as its area is 7,823m², and it too would likely appeal to a different market. The comparability of this sale was also complicated by the need to deduct the estimated added value of its existing structural improvements. 3. In the valuers' joint report on Lot 1 (CB 68), a schedule of explicit adjustments to the remaining comparable sales is set out, indicating each adjustment and its quantum. 4. Mr Dyson arrived at a rate per square metre, at the DOA, of $2,300/m², which yields a market value of $5,543,000, which he rounded to $5,550,000. 5. Mr Lunney arrived at a rate of $1,627/m², which leads to a market value, on the DOA, of $3,921,070, rounded to $3,920,000. 6. Mr Lunney's analysis and adjustment of the sales at both 90 Burrows and 32 Burrows are set out in the schedule to the valuers' joint report. 7. 90 Burrows sold in November 2014, about 1 month prior to the DOA, for $3,860,000. It had a land area of 1,678m². Nominal adjustment was required for market movement, according to Mr Lunney. No adjustment was made by Mr Dyson. 8. Mr Lunney made negative adjustments of 10%, 15%, and 5%, a total of -30%, on account of size, zoning/development potential, and a location/frontage respectively, and valued Lot 1 at $1,627/m². 9. Mr Dyson made no adjustments at all to 90 Burrows, which resulted in his land value for Lot 1 of $2,300/m². 10. 32 Burrows was adjusted by both Mr Dyson and Mr Lunney. It sold in September 2013 for $5,300,000, with a land area of 3,914m². Messrs Lunney and Dyson both added 22.5% for market movement in the 15 month period from the date of sale of 32 Burrows to the DOA of Lot 1, and added 10% for size. 11. Mr Lunney deducted 15% for zoning/development potential, and added 5% for location/frontage, yielding total adjustments of -10%, to derive the value rate for the subject Lot 1 of $1,573/m². Mr Dyson made no adjustment for zoning/development potential, nor for location/frontage. 12. Hence, the valuation dispute between the parties, regarding Lot 1, principally focused on the differences in their experts' adjustments. 17.3 Consideration 1. The Respondent submitted that Mr Dyson's approach to the Lot 1 valuation was generally unsound, because it proceeded on the basis of a number of assumptions not supported by particular analysis or market data. 2. The first assumption by Mr Dyson was that the ability to develop a particular site to an FSR greater than 0.95:1 (which was the FSR of the subject Lot 1) was not an advantage or a value benefit. It was submitted that part of Mr Dyson's reasoning on this point was that, in one of the cases where an FSR of greater than 0.95:1 was sought and achieved (the 90 Burrows sale), the purchaser did not act on the DC for the site, and on-sold the property. The inference apparently sought to be drawn was that the approved FSR obtained by the purchaser must have been viewed by the purchaser as of no added value, but such reasoning would appear to me to be flawed. 3. Mr Lunney stated, in his oral evidence, that the purchaser of 90 Burrows still owns the property, and had completed the approved development: Tp1931, LL8 and 12. This militates against Mr Dyson's inference. 4. The second assumption made by Mr Dyson was that there is a land size "band width" of approximately 1,000m² to approximately 2,500m², within which the properties appeal to the same market, and, therefore, no adjustment for size is warranted. Mr Dyson said, in oral evidence (Tp1929, L41ff), that he did not adjust 90 Burrows for size, because he considered that a lot of 2,400m² (actually 2,410m²) and one of 1,600m² (actually 1,678m²) were in the same "bracket" of properties, and appealed to same group of purchasers. He did not adjust 90 Burrows for size because he considered that, having regard to the size of the subject site, as compared to 90 Burrows, the difference in area was only 732m². 5. On the other hand, Mr Lunney said (Tp1930, LL25-34): [T]he subject property is 50 per cent larger than the sale property. Whilst a 2,400 square metre site and a 1,600 square metre site could, broadly speaking, appeal to the same market, I don't think that that obviates the requirement for an adjustment for size. Indeed, if I look at 32 Burrows the difference there is about 50 per cent larger than the subject property. We've agreed on an adjustment of 10 per cent. I think 10 per cent is internally consistent there. 1. Mr Lunney then said that the issue that separates the valuers in respect of Lot 1 is the adjustment for zoning and development potential. 2. He referred to the fact that the planners agree that the underlying zoning (IN2 – Light Industrial) permits a fairly broad range of uses. The planners also agree that it would have been subject to an FSR control of 0.95:1. Mr Lunney then stated that, in many cases, the sale properties enjoyed a much greater FSR. In some cases 1.5 to 1; in other cases 2 to 1. 3. He agreed with Mr Dyson that "unlike some other markets where FSR potential and value are directly linked – there's a direct lineal relationship between FSR and value – this is not one of those markets". 4. He added (Tp1930, LL2-6): "If the subject property had FSR potential of 1 to 1, and a comparable sale had 2 to 1, you would not make an adjustment of 50 per cent. That would be wrong. Where we disagree is whether any adjustment ought to be made". 5. Mr Lunney was unshaken in his opinion that 90 Burrows "is the subject of a DA approval by the purchaser after sale that achieved 1.63 to 1, that the purchaser has since proceeded with [the sale]" (Tp1931, LL10-12). Mr Lunney conceded that there "is not a perfect data set of sales where we can compare them all and forensically quantify these adjustments. They are, to some degree, subjective in nature" (Tp1931, LL15-18). 6. Mr Lunney was cross-examined closely, and at length, on his adjustments, by Mr Hemmings (commencing Tp1948, L13). He clearly explained his process of reasoning, and his exercise of judgment, and I accept his evidence concerning the difficult matter of making adjustments, in the absence of sales evidence of transactions, which prove unequivocally the quantum of the adjustment. 7. As indicated by Caruso ([555] above), ultimately the question can be resolved only by examination of the reasoning of the valuer, and his experience and expertise in the basis of the adjustment. 8. While both Messrs Lunney and Dyson are experienced valuers, well-known to this Court, I believe that the hypothetical vendor and purchaser of Lot 1, acting prudently, and being fully informed, would reach the conclusions which Mr Lunney has reached, and accept his advice. 9. Accepting Mr Lunney's evidence, therefore, I conclude that Lot 1 should be valued at $3,920,000, and that the Applicant is entitled to compensation in that amount. Section 18: ALF's Disturbance Claims 18.1 The Principles 1. The Applicant claims an entitlement to disturbance losses under s 59(1)(f) of the JTC Act, on three apparently alternative bases: subs par 465. 2. It is the disturbance component of ALF's claim which falls to be dealt with in the light of some post-hearing authority (see [15]-[22] above), to which I will shortly return, but I begin with the statutory principles. 3. The right to claim compensation is given by s 37 of the JTC Act: 37 Right to compensation if land compulsorily acquired An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part [3] by the authority of the State which acquired the land. 1. Only a dispossessed owner is entitled to claim compensation, pursuant to s 37. 2. It is common ground that, as at the DOA, DADI was not an "owner of an interest" in Lot 2, and so is not entitled to be paid compensation in accordance with Part 3 of the Act by the Respondent: see DADI CA (cited in [42] above). 3. Section 54 of the Act deals with the quantification of the amount of compensation to which a person described in s 37 is entitled. It provides: 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 [3], will justly compensate the person for the acquisition of the land. 1. Section 55 lists the only matters to which regard may be had in determining the amount of compensation to which "a person" is entitled. Section 55(d) lists "any loss attributable to disturbance" as one such matter to which regard must be had in determining the amount of compensation. 2. Section 59(1) provides (some emphasis now added, cf., [34] above): 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. 1. The word "means" in the chapeau (cf., "includes") indicates that the list is, and was meant to be, exhaustive. 2. Central to the present argument is s 59(1)(f). 3. The first five items in s 59(1), namely subsections 59(1)(a) to (e), refer to the incurring of costs by the person(s) entitled to compensation, but the 59(1)(f) does not. 4. Having regard to s 37, the words "any other financial costs reasonably incurred (or that might reasonably be incurred)", in s 59(1)(f), must refer to the incurring of costs "by the person entitled to compensation". 5. The requirements of s 59(1)(f) are cumulative: "financial cost", "reasonably incurred", "relating to the actual use of the land", and "a direct and natural consequence of the acquisition". Any claimant must satisfy all of those requirements. 6. The terms "relating to the actual use of the land", and "as a direct and natural consequence of the acquisition", are important qualifications on the right to claim compensation for loss attributable to disturbance. 7. There may be multiple claimants for compensation under s 59(1)(f), provided each claimant is entitled to compensation within s 37, and a financial cost has been (or might be) reasonably incurred, by such a person, and the cost claimed relates to the actual use of the land, prior to its acquisition, by that claimant. 8. It is common ground that ALF was the owner of the acquired land at the relevant time, but it did not occupy, or "actually use", Lot 2. DADI occupied and used that land, but was held by the C of A not to have an interest in it. 9. On this basis, RMS submits: 1. ALF could not have relocated; and 2. ALF could not have suffered any loss related to the actual use of the land as a direct and natural consequence of the acquisition. 1. RMS submits, therefore, that the appropriate conclusion is that ALF's disturbance claims are outside the ambit of "loss attributable to disturbance" under the Act. 2. The three arguments relied on by ALF in an attempt to avoid this conclusion are: 1. There was an actual use of the land (by DADI), and s 59(1)(f) does not require that the actual use be that of the person entitled to compensation (ALF); 2. DADI was a wholly owned subsidiary of ALF, so, if DADI has suffered a loss, ALF has suffered the same loss, or an equivalent loss; and (in the alternative) 3. DADI used the land as an agent for ALF. 1. ALF also submits (subs pars 467-469) that, to be claimable, losses need only be consequent on an actual use by anyone, not that it need be consequential upon actual use by ALF. 2. The Respondent's position is that : 1. ALF's first argument relies on a novel approach to the construction of s 59, which is clearly wrong in light of the authorities; 2. the second approach does not seem to pay any regard at all to the statute (or is simply another way of putting the first argument); 3. the third argument is not made out on the facts; and 4. the "use by anyone" argument is an "odd and unprincipled submission, which is not supported by any decided case". 18.2 The Claims 1. In its schedule of disturbance losses dated 11 April 2018, other than GST and legal and valuation fees, ALF claimed: Disturbance claim Sub-Category Source Amount Lost profits Third Joint Report CB 145 (2/4/18) includes a Table at p9 $173,753,000 Loss to 19 December 2014 Third Joint Report CB 145 (2/4/18) includes a Table at p9; Samuel Report CB 130 at [20] and [142]-[143] $2,620,000 Business disruption Bradshaw Hill Third Joint Report CB 145 (2/4/18) includes a Table at p9; Samuel Report CB 130 at [21] and [277] $1,486,000 Relocation costs Third Joint Report CB 145 (2/4/18) includes a Table at p9; Samuel Report CB 130 at [22] and Table 28 at [263]] 76 Burrows Road – set up costs by landlord Carlewie for relocation Samuel Report CB 130 at para [257-263]; Marks September affidavit CB 82 at [75-89] $1,101,475 76 Burrows – DADI relocation cost Samuel Report CB 130 at para [261-263]; Marks September affidavit CB 82 at [87-89] and Tab 22 $187,082 33 Burrows Road – aborted set up costs Samuel Report CB 130 at para [263]; Marks September affidavit CB 82 at [72]. $19,650 Total $1,308,000 TOTAL Disturbance (excluding GST and legal and valuation fees) $179,167,000 1. On 8 April 2019, following a series of C of A decisions (see [23]-[24] above), ALF amended its disturbance claim in its APOC (pars 38 to 49), to read as follows: 38. ALF has incurred legal and valuation costs. A claim is made for those costs pursuant to s 59(1)(a) and 59(1)(b). The amount is $426,710.68. Relocation Costs 39. After the Acquisition Date, and to the extent it was able, ALF relocated the waste transfer and waste collections operations, some workshops and some aspects of administration of the Corporate Group to premises at 76 Burrows Road, St Peters as well as 84-88 Burrows Road, St Peters. 40. In relocating to 76 Burrows Road and rehousing some plant and equipment to Eastern Creek, ALF reasonably incurred financial costs in the amount of approximately $1,288,557. 41. In the relocation of plant and equipment, and the preparation of 33 Burrows Road for operation of the waste transfer operations, ALF reasonably incurred financial costs in the amount of approximately $19,650. 42. ALF claims those financial costs pursuant to s 55(d) by way of s 59(1)(c). Relocation Losses 43. The operation of the waste transfer and waste collections facility and workshop and administration at 76 Burrows Road and 84-88 Burrows Road has not been, and is reasonably anticipated not to be, as profitable as would have been on Lot 2 but for the Resumption. 44. ALF's landfill operations on Lot 2 were extinguished as a direct and natural consequence of the Resumption and an inability to relocate. 45. ALF has suffered and will continue to suffer losses as a consequence of the partial relocation and extinguishment of its landfill operations on Lot 2. 46. ALF claims: (a) The losses it incurred by reason of not being able to relocate all aspects of it (sic) business of $173,753,000; (b) The losses incurred leading up to the relocation of $2,620,000; (c) 76 Burrows establishment and 33 Burrows aborted costs of $1,308,207; (d) The losses incurred in being unable to pursue Bradshaw Hill upon the relocation in $1,486,000, pursuant to section 55(d) by way of section 59(1)(c) or in the alternative 59(1)(f). Purchase of replacement property 47. As at the acquisition date Lot 1 and Lot 2 were being used for commercial and/or industrial purposes. 48. ALF was using Lot 1 and Lot 2 as part of an extensive landholding, or landbank, in the Alexandria region. 49. ALF intends to purchase replacement property and will incur costs associated with that purchase. Those financial costs are claimed pursuant to s 55(d) by way of s 59(1)(d). The amount is (sic) depends on the market value determination. 1. The parties subsequently agreed that compensation is payable, pursuant to s 59(1)(a) and (b), for legal and valuation fees, in the total sum of $424,910.68, leaving in dispute the claims for relocation expenses/losses, Bradshaw Hill, and the purchase of replacement land. 2. I now turn to the parties' competing submissions in regard to these disputed claims. 18.3 Applicant's submissions in more detail 1. The Applicant submits that a disturbance claim is to be assessed in accordance with the specific statutory entitlement in s 59(1)(f) of the Act. It is open to the Applicant to claim compensation for the loss of the market value of the site as well as those costs and those losses involved in relocating (in part), and extinguishing (in part), aspects of the business carried out on Lot 2. It submits that the only factual investigation to be made by the Court is directed to the question of whether there has been a cost or loss that was "reasonably incurred", citing Robson J in United No 1, at [235]. 2. ALF submits that s 59 focuses on the actual use which gives rise to the cost paid or the loss suffered, and does not focus upon the "user" of "land", and "in some instances" market value may be determined by reference to a use that is different from the "actual use" of the land. Further, costs or losses may be incurred that do not relate to any actual use of the land, but to some other consequential effect of the acquisition. All that is required is a connection between a cost/loss and an actual use. 3. The second ALF argument identifies DADI as a wholly owned subsidiary of ALF, and part of the consolidated tax group for taxation, accounting, and recording purposes, and submits that there is "little doubt" that ALF has suffered a loss. 4. The third argument relies upon DADI acting as an agent of ALF, noting that every corporate claimant would rely upon agency to establish a claim in disturbance. In the present case, ALF submits that the notion of agency "can apply to anyone merely performing a service for another". It emphasises that "the service performed consists of standing in the place of the principal and not in an independent capacity". DADI operated the business on Lot 2 "for and on behalf of the ALF group", with the present Applicant being the head of that group. The "service" provided by DADI is the carrying out of the EPA-licensed activities, even though those licences were held by ALF and Boiling. 5. Reliance was placed on the judgment of Beazley P in the C of A in DADI CA, where RMS submitted, but DADI denied, that the trial Judge had made a finding of agency in respect of DADI's use/occupation of the land. Her Honour said (at [57]): Accepting, or at least assuming for [DADI's] benefit that his Honour did not make a positive finding of agency, I am nonetheless of the opinion that no other conclusion is tenable on the facts found by his Honour. As G E Dal Pont explains in Law of Agency, (3rd ed, 2014, LexisNexis) at 6 [1.4], the relationship of agency necessarily involves: "… acting in a representative capacity for the principal, whether for the purpose of creating contractual relations for a principal or to represent the principal in a more restricted ambit." (emphasis in original) 1. Her Honour also said (at [132]): In oral submissions, [DADI] resisted the proposition that it was carrying on its activities on behalf of a group rather than operating on its own behalf. [DADI] submitted there was not a 'group' in the "legal entity sense" and it could not have been said to have been acting as an agent of an unidentified entity without a legal personality. [DADI] submitted that no agency relationship between ALF and/or Boiling and itself should be imposed or imputed. This submission was consistent with its earlier submission that no finding of "agency" had been made by the primary judge. [DADI] also contended that there was, in fact, no agency relationship between it and ALF or Boiling. It submitted that the primary judge approached the fact-finding exercise by asking the wrong question: ... 1. The "costs" claimed by ALF were detailed in its final submissions (see [52] above); they were "updated" in the 2019 APOC ([57] above), and then again in the "supplementary material" of 6 May 2019 ([60] above), always in addition to agreed legal and valuation fees ($424,910.68). 2. In addition, also, there were three items for which the monetary claim has not (yet) been specified: grossing up for income tax, stamp duty for replacement land, and grossing up of relocation costs. 3. ALF also claims compensation for lost opportunities, namely a lost business opportunity on "Bradshaw Hill", land adjoining Albert Street, St Peters, which does not form part of the acquired land the subject of the present proceedings (see [63] above). The lost opportunity alleged is the opportunity to win saleable material (sandstone), on the basis that, on 15 May 2014, a sublease was executed between Concrete Recyclers (Group) Pty Ltd and ALF, for the term of five years, with an option for renewal. ALF's financial officer discerned a potential benefit to ALF from "Bradshaw Hill", using ALF's cost of processing. 4. Mr Samuel calculated the value post-tax of the opportunity lost, at $1.486M. 18.4 Submissions in reply by RMS 1. With respect to the claims pursuant to s 59(1)(a) and (b), RMS accepts that the Applicant is entitled to compensation by way of loss attributable to disturbance. It accepts that the Applicant is entitled to the amount claimed in the (amended) total sum of $424,910.68. 2. As to the relocation costs and other losses under s 59(1)(c) and (f), the RMS denies that the Applicant is entitled to compensation, on the grounds that ALF was not in occupation of Lot 2 at the DOA. 3. Lot 2 was leased to Boiling, which had, as found by the C of A, in DADI CA, granted, in turn, a "bare permission" to DADI, to operate its business on Lot 2. Consequently, RMS submits that relocation was not possible, and that s 59(1)(c) is not engaged. 4. As to the claim under s 59(1)(f), RMS submitted that the Applicant had no entitlement to claim disturbance losses, because the Act requires that the use be by "the person entitled to compensation", and there has been no relevant actual use of Lot 2 by the Applicant. Jagot J held in Almona Pty Ltd v Roads and Traffic Authority of NSW ("Almona") [2008] NSWLEC 112 (at [60]) that "the actual use of the acquired land in [s 59(1)(f)] is the use by the dispossessed owner". 5. On the proper construction of s 59(1)(f), the "financial costs reasonably incurred" are the costs incurred (or losses suffered) by the person entitled to compensation, relating to the actual use of the land, by the person entitled to compensation, namely ALF. ALF did not make any actual use of Lot 2, and so did not suffer the losses. 6. In George D Angus Pty Limited v Health Administration Corporation ("Angus") (2013) 205 LGERA 357; [2013] NSWLEC 212, Preston J held, at first instance (at [100]-[101]), that: ... the natural and ordinary meanings of the words "financial costs" and "reasonably incurred" in s 59(1)(f) permit a construction that allows compensation for not only financial expenses which the person entitled to compensation by their actions incurs, but also financial losses which the person suffers as a consequence of the acquisition. 1. On appeal, the C of A endorsed that finding of Preston J: Health Administration Corporation v George D Angus Pty Limited ("Angus CA") (2014) 88 NSWLR 752; [2014] NSWCA 352. 2. Hence, the incurring of the financial costs referred to in s 59(1)(f) must be the act of the "person" entitled to compensation, and the "actual use" referred to must be used by that same person, namely the dispossessed owner of an interest in the land. (ALF contends that, in this submission, RMS is wrongly seeking to read into the provision an additional limitation – namely, that it must be shown to be the actual use of the land by ALF). 3. ALF also submitted (subs fn 819) that corporate land owners act through "physical or abstract agents", and that "it has never before been held that a corporate land owner cannot claim disturbance to the extent that it is in fact that company's employees who are exercising the physical use". However, there is no evidence that employees of ALF actually used the land, as at the DOA, and the example is, therefore, not apt, on the evidence in this case. 4. RMS submitted that ALF had cited no case in support of its construction of s 59(1)(f), and that absurd results could flow from ALF's contention. RMS, on the other hand, cited a long line of cases in which passive investors were excluded from claiming alleged "disturbance costs", such as stamp duty on a replacement property, where the actual use of the land was by a tenant: see Speter v Roads and Maritime Services [2016] NSWLEC 128, at [84] per Robson J; Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259; Hatzivasiliou v Roads and Maritime Services [2017] NSWLEC 9 at [144]; Konduru T/as Warringah Road Family Medical Centre v Roads and Maritime Services [2017] NSWLEC 36. 5. RMS submits that ALF cannot recover compensation for loss attributable to disturbance, in respect of DADI's losses, because any such loss is, at best, an indirect loss to ALF, and, therefore, outside the scope of s 59(1)(f). Losses must be a direct and natural consequence of the acquisition. It is to be noted that the relevant financial accounts of DADI exist as at the DOA, and that Mr Samuel accepted that they could be used for the purpose of the claim. 6. RMS submits also, in my view correctly, that ALF has failed to establish any causal relationship between the acquisition and the lost business opportunity at "Bradshaw Hill". 18.5 ALF's claim based on Agency 1. The third argument relied on by ALF is that it is entitled to claim DADI's losses, as principal under an agency relationship. 2. I accept the submissions of RMS (pars 1279 to 1304) in this regard: The asserted agency relationship between ALF and DADI has not been established, so as to show that the income and the expenditure of DADI, relied upon as the foundation of ALF's disturbance claim, was, either in fact or as a matter of law, the income and expenditure of ALF, or ought to be treated as the income and expenditure of ALF. That conclusion makes it impossible to award compensation to ALF for the alleged lost profits, and any other losses or expenses incurred by DADI in respect of Lot 2. 3. The essence of the submissions of RMS is that the proposition of agency is starkly different from the Applicant's pleading. Paragraph 3(b) in the POC (as at 28 November 2017) said that DADI was, prior to the DOA, using Lot 2 "as the agent of ALF and Boiling", for various purposes. However, Boiling is not a company in the ALF group of companies, nor is it either the parent or subsidiary of either ALF or DADI. The legal and financial incidents of joint occupancy are not dealt with, and the financial consequences of the asserted agency with Boiling were not dealt with, by ALF. 4. Further, ALF bears the onus of establishing its claims of agency, and the material brought forward by ALF, or otherwise before me, does not establish the pleaded agency relationship. 5. The observations and findings made in the DADI litigation, in respect of DADI's activities "on behalf of" the Alexandria Landfill Group, or ALF and/or Boiling, were observations and findings made in the context of the issues in that litigation, which dealt with the question whether DADI had an "interest in land" (Lot 2), and on the basis of the evidence adduced in those proceedings. 6. Those observations and findings do not, however, preclude RMS from contesting the issue of alleged agency in the present case, and are not determinative of the matters that ALF must establish to succeed on this point. RMS relies on the submissions on which it succeeded in my ALF judgment No 4, and the parties are also not precluded by that fact or outcome from contesting the issue of alleged agency in this present matter. 7. The observations and findings in the DADI proceedings were addressed to a different topic, and shed little or no light on the nature of any agency relationship, the terms and conditions of that relationship, and/or the nature of the fiduciary obligations and duties in the alleged agency relationship between ALF and DADI. Significantly, the observations and findings in the DADI litigation were not required to, and did not, address, or include findings about, the extent to which (if at all) the income and expenditure of DADI is to be treated as the income and expenditure of ALF. 8. In the present case "the person" entitled to compensation is ALF, it being the only entity held to be entitled to compensation within the meaning of s 37. ALF must be inferred to concede, or accept, this, as it alone seeks compensation for lost profits and other amounts, which are said to relate to the activities of DADI, as the alleged agent of ALF, or, alternatively, as a subsidiary of ALF. 9. Section 59(1) does not cover any present or future cost incurred by anyone other than the "person" entitled to compensation under s 37. 18.6 Recent decisions 1. In Section 1.3 above (from [10]), I mentioned a number of recent decisions which have informed my thinking on this matter, notably on the Applicant's contested disturbance claims. 2. I turn now to discuss those authorities in important detail (cf., [20]-[23] above), but with some emphasis added to make my point. Melino 1. In Melino, the C of A bench comprised Beazley P, and Basten and Payne JJA, and the primary concern in the appeal was Moore J's rejection of some disturbance claims made pursuant to s 55(d) (by way of s 59(1)(c) or (f)). 2. Payne JA gave the longest judgment, and allowed the appeal, remitting the matter to this Court on a specific issue. Basten JA wrote separately, but at modest length, in slightly different terms, allowing the appeal only in part, and also remitting the matter to this Court, in the same terms as Payne JA. (Their Honours also agreed that there should be no order as to costs.) 3. The learned President agreed with Payne JA, including with His Honour's reservations about the line of authority in the C of A regarding s 59(1), dealt with below (from [778]), but she added (at [1]): ... in the absence of full argument and where there has been no challenge to those decisions, I am of the view that those authorities should be applied insofar as they are relevant to the case in hand. 1. Payne JA deprecated (at [59]) the tendency in the authorities to employ "non statutory language", such as the terms "just terms override" and "double dipping", and noted (at [60]): ... The potential for overlap between compensation for the market value of the acquired land and compensation for disturbance is a key question in the present case, as it has been in a number of cases in this Court. In addressing this question it is necessary to refer to these earlier decisions, which are not always easy to reconcile. 1. His Honour then examined Roads and Traffic Authority (NSW) v Peak ("Peak") [2007] NSWCA 66; Roads and Traffic Authority (NSW) v McDonald ("McDonald") (2010) 79 NSWLR 155; [2010] NSWCA 236; Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367; Angus CA ([757] above); and Roads and Maritime Services v Allandale Blue Metal Pty Ltd ("Allandale") [2016] NSWCA 7. 2. His Honour said (at [77]): ... It is true that while the precise point of construction was not apparently raised in these earlier cases, Peak, McDonald and Allandale all proceeded on the basis that what is now s 59(1)(f) was an available basis to order that compensation be paid for the costs of purchasing or rebuilding (in whole or in part) structures. It may be that those earlier cases are able to be distinguished. It may be, however, that to decide this issue this Court would need to give consideration to whether those cases were correctly decided. For this reason, the question of whether s 59(1)(f), like other parts of s 59(1) was restricted to ancillary costs, and does not extend to purchasing or rebuilding structures should be determined in a case where the point has been squarely addressed by the parties. and then (at [81]-[82]): 81 As I have said, on the assumption that s 59(1)(f) was capable of applying in this case, the correct approach to the section was to apply the words of the section, without putting any gloss on those words. The focus of s 59(1)(f) is the costs incurred or which might be incurred by the landholder relating to the actual use of the land, being the acquired land: Mir Bros [Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales ("Mir Bros") [2006] NSWCA 314] at [88] per Spigelman CJ. Those costs must be reasonably incurred (either now or in the future) as a direct and natural consequence of the acquisition. 82 The [JTC] Act does not expressly or implicitly provide that the value paid for land compulsorily acquired necessarily includes "the full compensatory value for all fixtures included in the acquisition". It was an error on a question of law for the primary judge so to conclude. 1. His Honour later remarked (at [111]) that, contrary to a submission made, s 59(1)(f) was not to be regarded as a "catch all provision", but must be read "in its context as part of s 59 and in its place part of the tightly drawn constraints imposed by the section" (emphasis mine). Moloney 1. The same bench (Beazley P, Basten and Payne JJA), on the very same day as Melino (2 November 2018), handed down the C of A's decision dismissing the appeal against Pain J's decision, in Moloney, declining to award compensation under ss 55(d) and (f) for the costs of building a new home on the dispossessed owners' remaining land. 2. Again, Payne JA gave the main judgment, but, on this occasion, Beazley P agreed with both him and Basten JA. Basten JA agreed with Payne JA's reasons, but added some "observations" of his own (at [2]-[24]). 3. Basten JA expressed (at [5]) his own concern that what he called "shorthand" terms (cf., Payne JA in Melino, at [777] above), such as "just compensation override" and "double dipping", can "distract attention from the statutory scheme and can lead to errors in approach", although not to any error by Pain J at first instance in Moloney. His Honour then cautioned (at [6]) that: Other glosses upon the statute have been approved in earlier cases, some of which appear to have arisen as a result of too ready an acceptance of the proposition that different heads of claim may "overlap", and a failure to read the statutory provisions as a whole. 1. His Honour said (at [8]-[9]) in respect of the so-called "override": 8 The second limb of s 54(1) identifies the amount payable as "such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land." That is not language permitting a departure from the terms of Pt 3. For example, one matter to which regard must be had is the market value of the land on the date of its acquisition: s 55(a). The term "market value" is defined to mean "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 …": s 56. Nothing in s 54(1) allows some different basis for assessing the market value of the land. 9 Further, s 55 sets out six factors to which regard must be had and which are the "only" matters to which regard may be had. Five of the six factors are defined in the ensuing sections, being ss 56-60. Section 55(f) is not further defined, although it may be affected by s 61. Each of these provisions is to be applied in its terms; s 54(1) gives an overview by reference to the purpose underlying the provisions which follow. 1. On "double dipping", His Honour said (at [10]-[11]): 10 The mandatory factors set out in the exclusive list in s 55 appear on their face to be discrete and independent sources of compensation which, if possible, should be construed so as to avoid overlap. That is to avoid a risk of their being assessed in different ways under different heads, or allowed more than once when the Act does not permit that. 11 A practical problem facing courts dealing with claims for compensation is that valuers do not always assess value by reference to the statutory concepts. There is no doubt that the common form of "before and after" valuation wraps up a number of elements in one exercise. Often that is the best approach. Nevertheless, it may be necessary to dissect the reports to ensure they address all relevant heads of compensation, do so on a basis consistent with the Act, and do so only once. 1. His Honour commented on s 59(f), now s 59(1)(f) (at pars [13], and [19]-23]), in these terms (emphasis mine): 13 ... By comparison with s 55(f), which deals with "other land", s 59(f) [6] deals with certain costs "relating to the actual use of the land", meaning the acquired land. Case law has suggested that "if the actual use of the residue land is so intimately connected with the actual use of the acquired land so that use of the one is [dependent] on use of the other, then that is sufficient to bring it within s 59(f)." [See Peak, at [71].] ... 19 Section 59 defines the scope of the phrase "loss attributable to disturbance", which appears in s 55(d). Section 59 had six paragraphs. [9] Paragraph (a) addresses legal costs "reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land", and par (b) deals with valuation fees reasonably incurred by "those persons". Paragraph (c) addresses various financial costs "reasonably incurred in connection with the relocation of those persons", being the persons entitled to compensation in connection with the compulsory acquisition of the land. Paragraphs (d) and (e) address limited stamp duty and mortgage expenses incurred by "those persons", limited to those requiring relocation. There is a question as to whether pars (c), (d) and (e) are limited to relocation of persons as a result of the land on which their home stood being acquired, or whether they include relocation of persons whose home was on adjoining land. There is also a question as to whether, if they extend to the latter category, they are limited to the specified financial costs of relocation caused by the acquisition (that is the loss of ownership of the acquired land) or by the carrying out of the public purpose for which the land was acquired, or both. These questions do not arise in the present case because the focus is on the sixth paragraph in s 59, which is partly in different terms. 20 Paragraph (f) commences with the phrase "any other financial costs". The word "other" indicates financial costs other than those referred to in pars (a)-(e); however, the use of the phrase "financial costs" indicates that they are costs of a similar kind. 21 Secondly, the other financial costs must relate to "the actual use of the land", namely the acquired land. The reference to "actual use" is to the use to which the land was put at the date of acquisition. 22 Thirdly, the other financial costs must be reasonably incurred "as a direct and natural consequence of the acquisition." That language requires a direct and natural causal connection between the use of the land and the fact that the use is no longer possible because of the change in ownership. If the acquired land was actually used at the date of acquisition for the purpose of access to other land, including, in this case, land on which the owners' house stood, the cost of rerouting the access road would be covered by this provision. That was not the issue in the present case: such costs, legitimately falling within the scope of par (f), had been accepted and agreed. The disputed claims related to the relocation of the dwelling house further from the highway. The claims included the cost of a replacement dwelling and numerous ancillary costs, such as the design of the dwelling and its connection with electrical services, town water supply and a new septic system. 23 None of these costs fall within the scope of s 59(f). The removal of the house to a place further from the new highway was not caused by the loss of ownership of the acquired land, but by the loss of amenity caused by the proposed use of the acquired land for the public purpose for which it was acquired. Such a claim fell comfortably within the concept of a "decrease in the value of any other land of the person at the date of acquisition which adjoins … 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." That is the language of s 55(f). In the jargon used in this area of the law, this diminution in value is described as "injurious affectation". The appellants had a strong claim for injurious effects on amenity under s 55(f). So much was not in dispute and was expressly incorporated within the "before and after" calculations of value accepted by the primary judge. The disputed claims under s 59(f) were correctly disallowed. 1. Payne JA introduced the main part of his judgment, in Moloney, with a note of caution (in [67], [68], and [74] – emphasis mine): 67 The relationship between the grounds in s 55 of the [JTC] Act and the operation of s 59, in particular s 59(f), has been the subject of consideration in this Court on a number of occasions. 68 The question of what has been determined about the construction of these provisions in the earlier cases must be approached with a little care. The precise factual background in each case has provided the occasion for some apparently broad statements of principle made by the Court, which on one view are difficult to reconcile. It is thus necessary to examine whether a number of those statements are expressions of principle relevant to the central construction questions posed here or are better understood as expressions relevant to the operation of the [JTC] Act in the particular case being considered. ... 74 ... The potential for overlap between compensation for the market value of the acquired land and compensation for disturbance is a key question in the present case, as it has been in a number of cases in this Court. In addressing this question it is necessary to refer to these earlier decisions, which are not always easy to reconcile. ... 1. His Honour then noted some relevant earlier decisions, before arriving at what Jagot J had decided in Almona ([754] above). His Honour commented (at [77]-[78] – emphasis mine): 77 Jagot J explained, correctly, that each of the sub-paragraphs in s 59 involves a causal relationship between the fact of the acquisition (that is, the taking of the land as effected by publication of the acquisition notice, referred to in s 20 of the [JTC] Act) and some cost. The focus of s 59 is financial costs connected in some way to the acquisition of the land itself. Her Honour, correctly, regarded Peak and the other decisions analysed in Peak as supporting an approach to s 59(f) focusing on a relationship between the acquisition (that is, the taking of the land) and the claimed costs. The relevant costs are limited to costs "relating to the actual use of the land, as a direct and natural consequence of the acquisition". The "actual use" of the acquired land in s 59(f) refers to the use by the dispossessed owner, not the use by the acquiring authority for the public purpose. The words "the acquisition" direct attention to the fact of the taking of the land. 78 Critically, for present purposes, the words "direct and natural consequence of the acquisition" direct attention to the nature or degree of the required causal relationship. Only costs incurred or that might be incurred as a direct and natural consequence of the acquisition are captured. The carrying out of the public purpose is possible because of the acquisition, but that does not mean that costs incurred because of the carrying out of the public purpose are themselves a direct and natural consequence of the acquisition. They are a result of the public authority, in pursuit of its statutory powers, deciding to carry out the public purpose for which it acquired the land. 1. Payne JA continued (at [83]-[85] – emphasis mine): 83 The carrying out of the public purpose was possible because of the acquisition. That does not mean that the costs to be incurred by the appellants because of the carrying out of the public purpose, being those that would be incurred in rebuilding the dwelling at another location, are themselves a direct and natural consequence of the acquisition. 84 On the facts found by the primary judge, the claimed costs here are clearly the result of the public authority, in pursuit of its statutory powers, deciding to carry out the public purpose for which it acquired the land. ... [T]he existing dwelling was still able to be used, albeit with a diminution in amenity. Critically, however, that diminution in amenity was due to the public purpose being carried out; the proposed upgrade to the Pacific Highway, not the acquisition of the land. It follows that the proposed costs of rebuilding the dwelling on another part of the residue land were not a direct and natural consequence of the acquisition. 85 It is true, as the appellants submitted, that the primary judge did not reason in the way I have described immediately above. That is, the finding at paragraph [272] that "[t]he application of the 'before and after' method in this case takes into account the loss of value of the main dwelling. The cost of building a replacement dwelling cannot be separately claimed as a disbursement by the [appellants] as that has already been taken into account in the 'before and after method' was an error on a question of law in the interpretation, and application, of s 59(f) of the [JTC] Act. An error on a question of law permits the Court to set aside the judgment of the primary judge, if it is a material error: Peak at [152] per Basten JA. 1. Later, His Honour noted and responded to submissions of some relevance to the present case (at [95]-[100] – emphasis mine): 95 The respondent submitted that the ability of land to produce profit is inherently a feature of the market value of the land, for which the appellants had already been compensated in the market value claim. There was no error in the primary judge's approach to the loss of profits claim because where sugarcane is an inherent component of what adds value to the land and the land has a specific valuation rate per hectare, as it did here, compensation for market value on a rate per hectare basis fully compensated the appellants for their loss. 96 ... [The Respondent further submitted that] any loss from the acquisition arose from how the appellants decided to invest the compensation received for market value rather than from the acquisition itself. ... 97 As I have said, the provisions of the [JTC] Act must be applied according to their terms and without preconceptions based on limitations which do not appear in the statute. 98 I reject the appellants' contention that whatever be the content of a claim made and addressed under ss 55(a), (b) and (f), the Court must separately determine entitlement to compensation for disturbance under s 55(d) as reflected by s 59(f) of the [JTC] Act, without regard to the fact that the same amount, in whole or in part, has already been the subject of a claim for compensation under s 55(a), (b) or (f) of the [JTC] Act. This approach is inconsistent with the overlapping nature of the heads of compensation in s 55 and with prior authority in this Court, including McDonald which was otherwise heavily relied upon by the appellants. 99 The loss of profits claim illustrates the potentially overlapping nature of the heads of compensation in ss 55(a), (b) and (f) of the [JTC] Act and s 55(d) as reflected by s 59(f) of the [JTC] Act. The finding of the primary judge that "the right to potential profits from growing sugarcane after the date of the acquisition is encapsulated in the market value of the land" was plainly correct. The market value of the acquired land included the capacity of that land to generate a profit in the future, whether by growing sugar cane or doing anything else. 100 It is not a gloss on the legislation to recognise the overlapping nature of the heads of compensation in s 55. Section s 55 requires that "regard must be had" to the identified matters, without specifying how they should be understood to interrelate. When compensation has been obtained, in full, for losses occasioned by the acquisition in the claim for market value under s 55(a), (b) or (f) of the [JTC] Act, a separate claim for the same amount as disturbance under s 55(d) is not maintainable. Monti 1. In February 2019, Pepper J decided Monti. 2. The dispossessed owners claimed not only market value, but also special value and disturbance – they "anticipated permanent loss of profits ... from their inability to conduct a quarrying business on the acquired land" (at [4]). 3. In dealing with the "loss of profits" disturbance claim, Her Honour noted (at [118]): The fundamental error in the Montis' approach to their claim for lost profits was that it overlapped with the amount being claimed under ss 55(a) and (f) of the [JTC] Act, and therefore, amounted to impermissible double-counting upon the proper construction of the Act. 1. Her Honour observed that the C of A had "recently rejected" such an approach in Moloney, and quoted pars [98]-[100] of Payne JA's judgment (above at [790]), with which the other two Judges hearing the appeal had specifically agreed. Her Honour commented ([120]-[121]): 120 Pursuant to the reasoning in Moloney, it is now unarguable that the [JTC] Act does not permit a claim for disturbance under s 59(1)(f) for the loss of profits or income from the carrying on an activity on the acquired land where the capacity of the land to derive that income or profits is included in the assessment of the market value of that land. 121 As a consequence, the Montis' claim for loss of profits, which comprised a significant proportion of their claim for compensation, cannot succeed. In short, Moloney was entirely dispositive of this aspect of their compensation claim. ... United CA 1. Finally, in this sequence of cases, on 6 March 2019 a five-Judge bench in the C of A delivered its judgments, allowing the United appeal. 2. Only Macfarlan JA refrained from any individual commentary, agreeing with the principal judgment, delivered by Basten JA. 3. Payne JA wrote briefly ([73]-[78]), expressing only "one possible qualification" regarding Basten JA's reasons, in relation to possible "overlapping claims". 4. Payne JA adhered to what he had decided in Melino, and also agreed with Sackville AJA's judgment (in United CA), which he found "not inconsistent" with that of Basten JA. He agreed with Sackville AJA, specifically, that the C of A ought to review, in an appropriate case, its decision in El Boustani v The Minister administering the Environmental Planning and Assessment Act 1979 ("El Boustani CA") (2014) 199 LGERA 198; [2014] NSWCA 33. In this respect, Payne JA said (at [77] – emphasis mine): It may be that the approach to s 59 in earlier cases, especially El Boustani (CA), was the result of inadequate attention being paid to identifying the market value of the acquired land in that case. What was relevantly in issue in El Boustani was a claim by the landowners for lost profits for four years into the future from the operation of an existing market garden on the acquired land, styled as a "disturbance" claim. It will be recalled that the highest and best use of the acquired land in that case was "its existing use of intensive horticulture": at [12]. Assuming that what was being valued was the highest and best use of the acquired land, I fail to see as a matter of principle why the market value of the acquired land, correctly identified, would not include the capacity of that land to generate a profit in the future, including by conducting a market garden. That is, the right to potential profits from market gardening after the date of the acquisition would be encapsulated in the market value of the acquired land. As I explained in [Moloney] at [97]-[100], in those circumstances there is no room for any separate "disturbance" claim. 1. The fifth judgment in United CA was that delivered by the learned Chief Judge of this Court, Preston J. 2. The respondent to the United appeal had operated a service station and restaurant on land it held under an oral lease, terminable on one month's notice, and, after acquisition, it was unable to relocate its business. 3. The key issues in the appeal concerned possible entitlement, under the then s 59(f), to compensation for (i) its loss of ongoing business profits, and (ii) the increased rental it paid to the acquiring authority. 4. The headnote records that, in United CA, El Boustani CA was "doubted", McDonald was distinguished, and Angus CA "not followed", with the result that: 1. four Judges in the C of A have now expressed doubt about whether the term "any other financial costs" in the now s 59(1)(f) "extends to the loss of future income or profits from a business" (contrary to the view taken by Preston J, at [138], [142] and [163]); and 2. at least three of the Judges (Basten, Macfarlan and Payne JJA) found that "the claim for loss of business in circumstances where United's interest in the land was of no value was an attempt to re-characterise loss that was previously recognised in the assessment of the market value of the land", and paid to the owner of it. (See Elmon Pty Ltd v Roads and Maritime Services [2016] NSWLEC 168, at [11].) 1. The Court also held that no compensation for the rental increase should be awarded, because such "loss" was not a "direct and natural consequence of the acquisition". 2. I turn now to consider the individual judgments, extracting, where relevant to the present case, passages of reasoning of sufficient length to make clear the development of the relevant legal principles. 3. Basten JA noted the similarities and differences among the various provisions within what is now s 59(1), and then said (at [9]): ... par (f) differs from each of the preceding paragraphs. Thus, each of pars (a)-(e) refers to specifically identified costs or fees; by contrast, par (f) involves no such element of precision, referring rather to "any other financial costs". As will be seen shortly, there has been a tendency in the discussion of the scope of this paragraph to read that phrase in isolation and give it the broadest possible interpretation consistent with dictionary definitions of the individual words. That approach disregards four different forms of constraint imposed by the context and structure of the section. 1. He identified the four constraints (at [10]-[13]) – a temporal element; the need for "actual use"; the cost having to flow as a "direct and natural consequence"; and the construction of the phrase "any other", in respect of which His Honour said (at [13] – emphasis mine): ... It would be erroneous to construe par (f) as including any financial cost not specified in pars (a)-(e); to adopt that approach would be to disregard the careful limitations imposed by the specific provisions. ... It would subvert the purpose of those carefully crafted provisions to allow additional amounts to be paid by way of stamp duty or mortgage fees simply because they fell within the language of par (f), read in isolation from the earlier paragraphs. 1. Basten JA held (at [14]-[18] – emphasis mine): 14 In order to be sure that a construction of par (f) does not subvert the limitations contained within the earlier paragraphs, it may be necessary to identify those limitations with a degree of precision. For example, par (f) should not be understood as permitting recovery of financial costs of relocating persons beyond those recoverable pursuant to par (c). The costs of relocating persons may, for example, in the case of residential premises, include the costs of furniture removal and storage whilst alternative premises are acquired, and other incidental costs of relocation. There is no apparent reason for limiting "the relocation of those persons" to the relocation of the individuals concerned, or their immediate belongings; the phrase is apt to include the relocation of business operations conducted on the acquired land. A question then arises as to whether the interruption to the operation of the business, resulting in reduced revenue, whether temporarily or permanently, constitutes a financial cost reasonably incurred in connection with the relocation of the business operated on the acquired land by the person entitled to compensation. However, such amounts as may be recovered under par (c), would not be recoverable under par (f). Compensation for continuing operation of business 15 The primary judge found that the compulsory acquisition terminated the business operation conducted by United on the land acquired. There was no relocation. Accordingly, the question for determination was whether United could be compensated under s 59(f) for the loss of an opportunity to continue to operate its business on the land which had been acquired. There are three reasons why that question should not be answered favourably to United. 16 First, the ordinary meaning of "financial costs reasonably incurred … relating to the actual use of the land", is not apt to describe the loss of an opportunity to continue to use the land. While there may be financial costs incurred in terminating a business operation, the loss of the opportunity to continue the business operation is not aptly described as a "financial cost" relating to the actual use of the land at the date of acquisition. 17 Secondly, the direct and natural consequence of the acquisition of the interest in the land was to prevent the continuation of the business on that land; the acquisition did not cause the owner to "reasonably incur" the termination of the business; rather, in ordinary parlance, the acquisition caused the owner to suffer a loss of revenue. The loss of revenue may have caused the business owner to take other steps, but the loss of revenue itself was not aptly described as a "financial cost"; however, the cost of taking other steps, such as the cost of relocating the business, readily fell within the language of par (f). 18 Thirdly, and by way of expansion of the last point, the kinds of financial costs covered by pars (a)-(e) are all costs incidental to the loss of the land; they assume the loss of the land for which market value will have been paid pursuant to other provisions in s 55, assuming that the owner's interest in the land had a compensable value. 1. Also relevant to the present matter are His Honour's remarks, at [22] and [27] (emphasis mine): 22 United did not seek to deny the proposition that its leasehold, terminable at will by the lessor, had no market value. Rather, it sought to avoid the conclusion that the land had no commercial value for it by claiming the full commercial value of the business operation undertaken by it on the land. However, as a matter of principle that which may be described as the basis of calculation of market value of an interest in land cannot be recharacterised as a form of consequential loss, known as disturbance, so as to be fully recoverable, in circumstances where the interest in land is so attenuated as not to enjoy any relevant market value. ... 27 Furthermore, there would be an inconsistency between an assessment of the market value of the land based on capitalisation of earnings and the separate capitalisation of those earnings as an element of disturbance. Whilst disturbance is a separate head of compensation from compensation for the market value of the land acquired, it is a form of compensation for a distinct loss, not for the same loss recharacterised. 1. His Honour later said (at [49]-[50] – emphasis mine): 49 ... In most, if not all, cases of compulsory acquisition of interests in land, the compulsory acquisition will terminate the actual use of the land by the prior owner. ... If ... the prior use was commercial, the prior owner's interest is again compensated by receiving the market value of its interest in the land. There is no additional compensation for termination of the cash flow from the prior use. Rather, the best available financial return for the commercial use of the land will form the basis of its market value. It will be compensable as such. As explained in [Moloney] ... "[t]he market value of the acquired land included the capacity of that land to generate a profit in the future, whether by growing sugar cane or doing anything else." 50 There is a danger in treating the different matters identified in s 55 as capable of giving rise to "overlapping claims". This is not a necessary construction of the legislation. The better view may be that each provision provides an independent basis for a relevant award of compensation, but should be read as exclusive in its terms and not as overlapping with other bases of claim. This may be important in order to avoid misapplication of limitations on compensation. Thus, it would be inconsistent with the statutory scheme if a particular head of loss could be recoverable as market value of the land or under another head in s 55. If that were possible, the limitation on the compensation payable for market value set out in s 56(2) might be capable of avoidance by manipulation of the heads of claim. 1. Sackville AJA analysed (at [87]) the concepts brought together in s 59(f) (see [728] above), and then said (at [88] – emphasis mine): Some of the matters which the [JTC] Act specifies must be taken into account in assessing the amount of compensation payable to a person whose land has been compulsorily acquired have nothing to do with the market value of the land. This reflects the legislative purpose of providing compensation in accordance with specific statutory criteria that do not depend on the value of the interest in land compulsorily acquired (although in particular cases there can be some overlap). In the present case, for example, there is no dispute that the market value of United Petroleum's tenancy at will at the date of acquisition was nil. But the fact that United Petroleum's interest in the land was valueless did not prevent it claiming compensation for "loss attributable to disturbance" (s 55(d)), provided that it could satisfy one of the categories of loss identified in s 59. For example, United Petroleum was not precluded from claiming legal costs pursuant to ss 55(d) and 59(a) of the [JTC] Act if it could show that it had reasonably incurred legal costs in connection with the compulsory acquisition of the land. Similarly, it is common ground that United Petroleum was not precluded by the limited nature of its interest in the land from claiming "other financial costs" pursuant to s 59(f) provided that it could satisfy the requirements set out in that paragraph. and (at [91] – emphasis and "NOTE" added by me): As Payne JA observed in Melino [at [56]]: "The [JTC] Act should be approached on the basis that the [claimant's] right to compensation should not be subject to limitations or qualifications not found in the terms of the statute". To determine whether a claimant is entitled to a particular form of compensation requires close attention to the "natural and ordinary meaning of the words of the legislation". (NOTE: See also [96], re the use of the phrase "any other" in s 59(f), and [97] re the interaction of s 59(f) and s 61, of which His Honour said (i) it "is designed to prevent overcompensation where the value of the land reflects a potential for redevelopment or a higher and better use, but realisation of the potential would require the owner to incur 'financial loss'", and (ii) it "does not control the interpretation of s 59(c) or (f)". See also [98].) 1. Despite the threat it poses to keeping this judgment, and this section of it, as concise as possible, I wish to set out now two further passages from Sackville AJA's reasons in United CA. 2. Under the heading "A difficulty", His Honour said (at [99]-105]: 99 Although there is a strong textual basis for limiting s 59(f) of the [JTC] Act to losses in the nature of liabilities or outgoings, this construction encounters a difficulty that was not fully addressed in argument in the present case. It has long been accepted that the compensation payable to a person whose land has been compulsorily acquired may include compensation for loss of an income stream or profits resulting from the relocation of a business conducted on the acquired land. Prior to the enactment of the [JTC] Act, loss attributable to disturbance was not a separate head of compensation in New South Wales. But a long line of authority interpreted "value" for the purposes of the law of compulsory acquisition to mean "value to the owner". This formulation was a "unifying concept" that encompassed, among other things, loss attributable to disturbance. By this means the "loss of trade or production" occasioned by a relocation or termination of a business came within the concept of special value to the owner and thus could be compensable. 100 It appears to have been accepted after the enactment of the [JTC] Act that loss of income or profits due to the relocation of a business continues to be compensable. In [El Boustani at first instance [2012] NSWLEC 266] the trial Judge awarded the claimant compensation for loss attributable to disturbance calculated by reference to the profits lost over the three year period required to relocate and re-establish a market garden previously conducted on the acquired land. The trial Judge made the award pursuant to s 59(c) of the [JTC] Act but held that if, contrary to her view, s 59(c) was not applicable, s 59(f) would support the award. On the appeal this Court recorded that it was not controversial that compensation for loss of profits was payable and that the dispute was merely as to the period of time for which lost profits should be allowed. 101 In [Angus CA], Tobias AJA expressed the view that: "Given that it was the clear intent of the [JTC] Act that disturbance losses should be recoverable as a separate head of compensation … it cannot be the case that disturbance losses which under the prior law were recoverable as special value should no longer be recoverable because of a narrow construction of the expression "financial costs" in s 59(f)." His Honour considered that the decision in El Boustani (CA) mandated rejection of the proposition that loss of income or profits due to disturbance can be compensated as part of "special value", now separately defined in s 57 of the [JTC] Act. It followed, so his Honour held, that if lost income or profits are to be compensated in compulsory acquisition cases, this can only come about if the loss falls within s 59(f). 102 RMS did not submit that El Boustani (CA) and [Angus CA] were incorrect insofar as they held that loss of income or profits by reason of the forced relocation of a business cannot be claimed as an element of "special value of land to the person on the date of its acquisition" within the meaning of ss 55(b) and 57 of the [JTC] Act. Nor did RMS submit that this Court in El Boustani (CA) was incorrect to proceed on the assumption that s 59(c) of the [JTC] Act permits compensation to be claimed for loss of income or profits incurred in connection with relocation. 103 In the present case United Petroleum cannot rely on s 59(c) of the [JTC] Act because it does not seek compensation for loss of profits incurred in connection with relocation of its business. It therefore must rely on s 59(f) which is not confined to financial costs arising from relocation of a business. The language of s 59(f) is capable of covering financial costs incurred by reason of the closure of a business previously conducted on the acquired land, where the evidence shows that relocation of the business was not feasible. 104 In the absence of an attack by RMS on the reasoning in El Boustani (CA) and [Angus CA] referred to above, the construction of s 59(f) of the [JTC] Act should be approached on the basis that the expression "financial costs" in s 59(c) extends to the loss of income or profits resulting from the forced relocation of a business conducted on the acquired land. On that basis, there is nothing incongruous in construing the expression "other financial costs" in s 59(f) to extend to the loss of income or profits where a business conducted on the acquired land is forced to close and cannot be relocated. 105 In reaching this conclusion I do not foreclose the possibility that in a future case the construction of s 59(c) of the [JTC] Act assumed in El Boustani (CA) and of s 59(f) adopted in [Angus CA] might have to be reconsidered. That may involve reconsideration of the nature and source of the entitlement of a person whose land has been compulsorily acquired to compensation for lost income or profits resulting from the forced relocation or closure of a business conducted on the acquired land. 1. In the last section of his substantive judgment, before His Honour dealt with costs, Sackville AJA said (at [116]-[121] – emphasis mine): 116 United Petroleum's interest at the date of the acquisition was terminable on one month's notice. The lessor was entitled to give that notice at any time. In these circumstances, it cannot be said that United Petroleum's long-term loss of profits by reason of the closure of its business is a "direct and natural consequence" of the acquisition of its interest in the land on which the business was conducted. 117 It is one thing to say (as RMS conceded) that the closure of the business was a direct and natural consequence of the compulsory acquisition. It is quite another to say that United Petroleum's loss of profits from the business was a direct and natural consequence of the compulsory acquisition. The principal cause of United Petroleum's loss of profits was its decision to conduct a business intended to operate in the long term under a lease which could be terminated at any time on very short notice. No doubt United Petroleum took into account in conducting and investing in the business the likelihood that the lessor, a related company, would choose not to terminate the lease, at least in the short term. But that likelihood is irrelevant to the question of whether United Petroleum's loss was a direct and natural consequence of RMS' acquisition of the tenancy at will. 118 Since one month's notice was required to terminate the tenancy at will, it is only the loss of one month's profits can fairly be said to be the "direct and natural consequence of the acquisition". I do not consider that the loss of profits in respect of a longer period satisfies the requirements of s 59(f) of the [JTC] Act. 119 Mr Lancaster submitted that [Angus CA] is distinguishable insofar as it held that the tenant at will in that case could receive compensation for the loss of profits that would have been earned from the business conducted on the acquired land over a two year period. [65] In my view, however, the conclusion I have reached is inconsistent with the reasoning in [Angus CA]. The essential point of difference is that I consider that it is the "financial costs" that must be incurred as a direct and natural result of the acquisition of the tenancy at will. The fact that the tenant at will would not have incurred the losses had the acquisition not taken place does not establish that the claimed losses were a direct and natural consequence of the acquisition. The inquiry needs to go further. 120 In my respectful opinion this aspect of the reasoning in [Angus CA] is plainly wrong and should not be followed. The error lies in the assumption that because the closure of the business was triggered by the compulsory acquisition of the lessee's interest the loss of profits was the direct and natural consequence of the acquisition. Further analysis is required before that conclusion can be reached. 121 I note that the conclusion I have reached limits the opportunities for related companies to order their affairs so that each is entitled to claim compensation for what is essentially the same economic detriment. It may be accepted that a loss sustained by two different entities as a consequence of the acquisition of their respective interests in the land must be assessed separately for the purposes of determining compensation, even if the entities are related. But if United Petroleum's argument is correct, in a case such as the present the interest of a lessor may be valued taking into account its entitlement to terminate the tenancy at will on one month's notice (for example, by assessing the value of the fee simple estate by reference to the stream of profits from a business similar to that conducted by tenant at will). Yet the tenant at will's interest is to be valued without reference to the fragility of that interest. 1. I turn then, finally, to the reasons of Preston J, who took a minority view on some of the issues, but essentially joined in the Court's decision. 2. His Honour said (at [133]-[135] – emphasis added): 133 These categories of loss attributable to disturbance in s 59 exhaustively define the compensation to which a person is entitled for "loss attributable to disturbance". 134 Each of these categories of loss attributable to disturbance assume the acquisition of the land. The acquisition of the land is a necessary cause of the disturbance of the person's occupation and use of the land and of the person incurring any of the specified categories of loss attributable to disturbance. Although acquisition of the land is a necessary cause of incurring loss attributable to disturbance, it is insufficient by itself to establish entitlement to compensation for loss attributable to disturbance. This is because the specified categories of loss attributable to disturbance in s 59 require further matters to be established. For example, as I will explain further below, s 59(f) requires that the "other financial costs" incurred relate to "the actual use of the land", not a potential future use, and be a "direct and natural consequence of the acquisition", not that some state of affairs, such as a closure of a business conducted on the land, be a direct and natural consequence of the acquisition. 135 The concept of "financial costs" in s 59(f), read alone, is capable of bearing a wide meaning. Financial costs can include not only expenditures (outgoings) but also forgone benefits and advantages, such as a forgone stream of income or profit (forgone ingoings). However, the words "financial costs" in s 59(f) need to be read in context, both the specific context of s 59(f) as well as the general context of the other categories of loss attributable to disturbance in s 59. and later (at [156] and [161]): 156 Where the actual use of the acquired land by the person entitled to compensation is terminated by the acquisition, the loss of an opportunity to continue to use the land (and any concomitant financial loss) is not a financial cost reasonably incurred "relating to the actual use of the land", but rather financial costs not relating to the actual use of the land. The actual use has come to an end. Any financial costs incurred after the actual use has terminated, including the loss of the opportunity to continue operating a business on the land, cannot relate to the actual use of the land (as Basten JA observes at [16]). ... 161 This limitation imposed by the requirement that the financial costs be incurred as a direct and natural consequence of the acquisition operates to confine the compensation payable to United in this case. As Sackville AJA points out (at [117]-[120]), the loss of future profits from the business that had operated on the acquired land is not a "direct and natural consequence" of the acquisition. The closure of the business that had operated on the acquired land might be a direct and natural consequence of the acquisition, but the loss of a perpetual stream of profits from the business, by United not being able to operate the business on the land indefinitely, is not a direct and natural consequence of the acquisition. Rather, the forgoing of these profits is a consequence of United's decision to conduct its business under a tenancy at will terminable on one month's notice. As Sackville AJA finds at [118], since one month's notice was required to terminate the tenancy at will, at most only one month's profits could be said to be a "direct and natural consequence" of the acquisition. The loss of profits for an indefinite period after one month is not a "direct and natural consequence" of the acquisition, but of other causes, including United's arrangement of its business affairs. This interposition of a third variable or action between the acquisition and the incurring of the financial costs results in there being only an indirect relationship, rather than the required direct relationship, between the acquisition and the incurring of the financial costs. 18.7 Conclusions on Disturbance 1. The recent cases surveyed in the previous section speak for themselves, and clearly demonstrate: 1. that the C of A has recently tightened its interpretation and appreciation of s 59(1); 2. that the particular compensation provisions in the JTC Act have to be considered as a whole, with a close eye on their internal differences in terminology; 3. that, when looking for authority on a particular issue, one has to be aware that, in many instances, valuers in some of the earlier cases have not paid sufficient attention to the detail in the relevant provisions under which they have prepared their reports and evidence; and 4. that the precise terms of s 59(1)(f) must not be read in isolation. 1. Like Pepper J in Monti (see [794] above), I am obliged to follow the approach, which emerges from these more recent C of A authorities, but I should add that I find the judgments compelling, in any event. 2. I turn, therefore, to ALF's specific alternative claims. 3. The first alternative claim for entitlement under s 59(1)(f) depended on there being no requirement that actual use be that of the Applicant for compensation in a particular case. If this were correct, it would be contrary to binding recent authority, and the many cases in which passive owners of interests in land have been refused compensation under s 59(1)(f). 4. The second alternative, based on attribution of the occupant DADI's loss to the claimant ALF, would appear contrary to the object, scope and purpose of s 59, as explained by the authorities. 5. The third alternative, based on an agency relationship, has simply not been established. 6. Accordingly, I have concluded that ALF's disturbance claims, other than for legal and valuation costs, which are agreed, must fail. Section 19: Special Value 1. The relevant provisions of the JTC Act concerning Special Value are ss 55(b) and s 57, which provide: 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): ... (b) any special value of the land to the person on the date of its acquisition, 57 Special value In this Act: special value of land means the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person's use of the land. 1. The final version of ALF's APOC includes a section entitled "Features of the Subject Land of special value to the Applicant", which includes the following: 10. Between 2002 and the Acquisition Date Lot 2 was an important base for the administrative, finance and maintenance functions of ALF and the Corporate Group. 11. In 2012 DADl commenced operations of a second and larger recycling and landfill facility at Eastern Creek. 12. Between 2012 and the Acquisition Date Lot 2 was operated so as to be a key supplement to the operations of, and efficient supplier of raw materials to the facility at Eastern Creek. 13. The location of Lot 2 being so close to the Sydney central business district provided a competitive advantage for the targeting of materials received at the site. 14. In 2013, the Corporate Group lodged a development application under the EPA Act to obtain development consent to construct a facility to generate energy from waste (Project) with Lot 2 intended as a significant source of materials for this Project. 15. The location of Lot 2 being so close to the Sydney central business district – particularly during several large public infrastructure projects involving demolition – gave ALF a strategically important site for waste disposal and to obtain recycling product to sell or to source for the efficient supply of materials to the Project or the Eastern Creek Site that were advantageous to it and incidental to the use of Lot 2. 16. As at the Acquisition Date, had all necessary plant and equipment in order to use the land pursuant to each of the development consents referred to above. 1. The particulars provided later in the APOC include the following: Special Value 34A. ALF is entitled to compensation. 34B. ALF was using Lot 2 through the actions of its agent DADI for the purposes set out in 3(b). 34C. ALF had advantages incidental to that use of Lot 2 due to the matters set out in 10 – 16. 34D. The financial value of such advantages is in addition to the market value of Lot 2. Methodology 34. The DCF methodology can be used to quantify the financial value of any advantage, in addition to market value, to which ALF is entitled which is incidental to ALF's use of Lot 2 (including through its agent, DADI). Special Value of Lot 2 35. The special value is determined by accounting for adjustments to the DCF methods for market value employed under Scenario 1 and Scenario 2 by: (a) eliminating what was otherwise imposed as an internal charge for the transferring of waste to other sites given that ALF could transfer to the Eastern Creek Site without such a charge; (b) eliminating what was otherwise imposed as overheads for workshop costs and administrative costs that are not incurred by ALF; and (c) accounting for the fact that ALF had all necessary plant and equipment. 36. The special value for ALF for Lot 2 under Scenario 1 or Scenario 2 Alternative 1 is $60,751,000. Particulars 36.1 Removal of the notional waste transfer charge is $24,194,000. 36.2 Not deducting for administrative costs is $35,153,000. 36.3 Not needing to purchase plant and equipment is $1,404,000. 37. The special value for ALF for Lot 2 under Scenario 2 Alternative 2 is $23,451,000. 1. In general terms, there are three components to ALF's Special Value claim – equipment needed for year 1, various overheads, and profits on waste transfers. 2. In Bronzel v State Planning Authority (1979) 21 SASR 513; (1979) 44 LGRA 34, Wells J, in the Supreme Court of South Australia, said of "Special Value" (at 525, 46), before s 57 was enacted: ... There is no exhaustive definition of what special value is. If it exists, its value must be assessed at what it is worth to the owner at the date of valuation, and not at what it may be worth to him in the future or after due development. It must be something objectively ascertainable derived from the land or some attribute or propery (sic) of it and cannot be recognized if it rests in mere subjective affection or emotional involvement. For the rest, whether it is present and capable of being evaluated depends on all the circumstances of the case. (Cited with approval by the C of A in Roads and Traffic Authority v Hurstville City Council (2001) 112 LGERA 223; [2001] NSWCA 11, at [46]. See also Mir Bros, at [65].) 1. As the Applicant's submissions say (par 515): ... The Court's task is to determine the claim by reference to that statutory definition and not by any gloss to be imposed upon the words of the provision from authorities that predate the [JTC] Act. 1. I gratefully adopt Pepper J's analysis of the current law on Special Value, in Monti (at [131]-[146]). I will not repeat it in full here, but in what follows, I will emphasize a few of Her Honour's points and authorities. 2. Her Honour also highlighted (at [126]-[130]) the practice of claimants basically identifying a cost or a loss, and seeking to have it accepted as either special value (i.e. as not being included in market value), or as disturbance, especially in the wake of the decisions in Melino and Moloney, surveyed above. 3. In Boland v Yates, Callinan J said (at [292]-[293]): 292 ... The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it. ... There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a racetrack on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use. Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no one else. 293 The Australian Law Reform Commission report Lands Acquisition and Compensation, with some slight adaptations goes some way towards correctly defining special value as "that additional economic advantage which the owner obtains, by reasons of his ownership … and which is not reflected in the market value". The example which I have given answers this description. ... 1. In Denshire ([21] above), Pain J said (at [86]-[93]), regarding the criteria to be satisfied for a finding of Special Value: 86 Steven Denshire submitted that his claim for special value falls within the definition in s 57 as the benefits to him under the [Put and Call] Option are in addition to market value. It is necessary to construe ss 54(1), 55(b) and 57. Firstly, "to the person" refers to the person entitled to compensation which in this case is Steven, not Warwick, Denshire. Secondly, the "financial value of any advantage" must be to the person entitled to compensation, namely Steven Denshire. Thirdly, that value and that advantage must be in addition to market value. Fourthly, the advantage must be incidental to the person's use of the land at the date of acquisition. ... 88 The essence of the claim for special value is that Warwick Denshire will act in Steven Denshire's best interests as his father and attorney and will not let the P&C Option expire. That was submitted to satisfy the requirement in s 57 of any financial advantage. In addition to market value 89 Fundamental to a successful claim for special value is that the advantage must be additional to market value. Development consent for a residential subdivision was granted in relation to the parent parcel in 2004. The residue land can be subdivided under a modified development consent which the town planners agree is able to be obtained under s 96 of the EPA Act. At the date of acquisition the valuers agreed that use of the land as a rural lifestyle property was a more valuable use than subdivision. Nevertheless, the ability to subdivide land is inherently part of market value. 90 Steven Denshire's claim does not rely on any attribute of the land. There is nothing "special" about the acquired or residue land. It remains capable of subdivision after acquisition assuming that market conditions are favourable regardless of who is the owner. 91 Boland v Yates a professional negligence claim concerning valuation advice was considering s 124 of the Public Works Act 1912 which did not refer to special value. The special value the subject of the professional negligence claim was recognised as arising at common law. ... 92 In Mir Bros ... the size of the land was rejected as the basis for a special value claim under the [JTC] Act because that was part of its market value. The observations of Spigelman CJ (Handley and Tobias JJA agreeing) in Mir Bros at [84] and [85] are pertinent: 84 …The land was vacant industrial land. The allegedly special position related only to the size of the land. Size is a matter that does affect the market value of the land. Where there is no difference between the value of the land in general, and its value to the owner, there is no special value: Turner v Minister for Public [Instruction] (1956) 95 CLR 245. That principle is now enshrined in the statutory definition of "special value"… 85 In Service Design Pty Limited v Commissioner of Highways (No 2) (1986) 59 LGRA 176 Matheson J held that the potential of land for subdivision is not a matter capable of attracting special value in the hands of the resumed owner, as the potential for subdivisions is one of the inherent characteristics of the land. Similarly, the potential development, or the potential for development of the then holding (which is said to be the special business of the Appellant), is an inherent characteristic of the land. The value created by that potential is included within the market value. The Appellant is not the only developer/investor in the fictional market exchange under s 56(i). 93 Particular reference was made by Handley JA, and the Full Court of the Federal Court, to the case of Baringa Enterprises [Pty Limited] v Manly Municipal Council [(1965) 15 LGRA 201]. That case turned upon its own special facts. By reason of established council policy, the owner of the resumed land in question was the only person who could have expected to be allowed to develop the land to its maximum potential. The highest and best use available to anybody else was of a more restricted nature. Whether or not Hardie J was factually right to conclude that the case was a proper one for allowing special value, that conclusion involved no inconsistency with the assumptions on which market value had been assessed, and there was a reason why it could have been regarded as necessary to assume that any hypothetical purchaser would be able to put the land to a use less profitable than that to which the dispossessed owner might have expected to put it. The case had never been regarded by commentators or judges as a case of head start. It was a case in which there was a difference between the use to which the dispossessed owner might have put the land and the use to which anyone else would have been able to put it. That is the basis upon which the decision has been explained subsequently. 1. Pepper J summarized, in Monti, Pain J's decision in Denshire, in these terms (at [146]): ... In other words, the financial advantage claimed was not related to any special quality of the land. Put another way, the alleged financial advantage was not incidental to the use of the land as at the date of acquisition. Second, even accepting that the concept of "advantage" contained in s 57 of the [JTC] Act is broad, her Honour nevertheless found that the applicant had no unique capacity to exploit the land given that he possessed no enforceable contractual right at the relevant time. Accordingly, no financial advantage existed (at [100]). Third, the special value claim was "in the nature of an impermissible 'double dip' of compensation" insofar as no deduction had been made for the value of the developed residue land (at [105]). 1. Her Honour dismissed the Montis' claim for special value (at [154]-[160]) for "at least six reasons". 2. The Applicant in the present case relies heavily on Mr Samuel's evidence, and is very critical of Dr Ferrier's approach: DADI already has the equipment needed for year 1 (estimated purchase price $1.4M), and ALF has quantified relevant overheads. The third component (subs par 521) is "the profits that would have been made upon transfer of waste from Lot 2 to Eastern Creek from resource recovery". The claim is that the use of Lot 2, as part of integrated operations with Eastern Creek, has a "special" economic value to ALF, not covered by market value. 3. The Respondent rejects those three elements of ALF's claim "out of hand" (subs 1170-1178). 4. The Applicant conceded that the effect in this case of s 57 (especially its express reference to "the person's use of the land") is that ALF is entitled to compensation for special value, only if DADI were using the land in Lot 2 as ALF's agent. 5. This indicated to the Court that ALF accepts that it did not itself "use" the land, and that its claim depends on the use of the land by DADI being attributed to ALF for the purposes of s 57: Applicant subs par 511; Tp2535, LL34-45. On the concept of "actual use", see discussion by Pain J in GCapital (at [35]-[55]). 6. I have already rejected ALF's agency claim (see [763] to [771] above). 7. At the DOA, ALF was not itself using the land, and DADI was not using it as ALF's agent, so ALF cannot establish "any advantage" within the meaning of s 57, nor any element of value, in addition to market value, arising from any special feature of the land, of unique or particular benefit to ALF. None of the "advantages" asserted by ALF are incidental to its "use" of the land, within s 57. 8. The Respondent's submissions argue that none of the three Special Value claims made by ALF can identify (subs par 1188): ... any special feature of the land, or "something objectively determined from the land or some attribute or property of it" that provides an advantage to ALF in addition to market value. The claim is a speculative and unreasonable assertion of an entitlement to compensation of more than $60 million. 1. The submissions go on to argue, in detail, against each of the three claims, in turn (subs 1189-1203), and I will now summarize those submissions briefly. 2. In respect of plant and equipment, the key submission by RMS (subs par 1192) is that: ALF cannot claim compensation (as special value of land, or at all) for the value of plant and equipment that DADI or ALF owned and used on Lot 2 and which it continues to own and (presumably) use. It is absurd to suggest that compensation be paid to a person for the value of something they have not lost by virtue of the acquisition (or at all). 1. In respect of overheads (said to be necessary for the hypothetical purchaser to incur), the Respondent submits (pars 1195-1199): 1195. Again, the respondent submits that the value of saved overheads in the hands of DADI or ALF is not an advantage that is incidental to the use of the land by ALF. It is not an advantage that is "something objectively determined from the land or some attribute or property of it" that provides value to ALF in addition to market value. This claim fundamentally fails to identify any special characteristic of the land, which is a necessary element of the claim. ... [and would] [1196] be better characterised as an assessment of a loss of profit suffered by DADI (i.e. a disturbance cost) rather than an assessment of the special value of land to ALF. ... 1197. If the Court were to allow this cost as part of the disturbance claim by ALF, it would be an impermissible double recovery (or "double-dip") [Denshire at [105]] to allow it also to be claimed as compensation for special value. ... 1199. ... ALF's claim for compensation in respect of its "overheads" claim ... is a feature of DADI's business operations, not special value of Lot 2. 1. In respect of the claim for lost profits, the Respondent argues at length that the evidence before the Court (subs 1202): ... provides a clearly inadequate and insufficient basis on which to conclude that owning Lot 2 increased the profitability of DADI's operations at Eastern Creek – let alone support for the very different proposition that Lot 2 provided a special value to ALF that was in addition to its market value. On the contrary, in 2017 the business operated by DADI was able to generate greater revenue and profit than before the [DOA]. The ownership of Lot 2 is thus demonstrably not critical to the profitable operations of DADI and the applicant. To the extent that the gross profit margin in 2015 and 2016 was somewhat less than 2014, the applicant has not proven that the cause of that lessened profit was connected to the acquisition of Lot 2, as opposed to some other reason like a general downturn in DADI's business operations. 1. I accept the Respondent's submissions on the three claims, but, in case they are wrong, I also indicate my clear preference for the very persuasive evidence, and compelling analysis, of Dr Ferrier (see subs 1204-1211), over the work of Mr Samuel. 2. The outcome is, therefore, that I reject the Applicant's claim(s) for Special Value. Section 20: Costs 1. In all the material before the Court, the question of the costs of the proceedings was raised only in the suggestion, by the Respondent (par 1742), that costs be reserved. 2. The test to be applied when costs are considered was articulated by the C of A in Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328, and restated in United CA (at [67] by Basten JA, with whom Preston J agreed (at [167]); see also Sackville AJA, at [122]): ... as a general principle, "a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense." Nevertheless, the final outcome remains a relevant consideration, particularly where a claimant has raised a number of issues capable of substantially affecting the compensation awarded, but has failed on all the major points. 1. As I have neither read nor heard any argument on costs – and/or on any question of the reasonableness of the parties' conduct of the matter – all questions of costs will be reserved, in the hope that the parties can reach agreement. Section 21: Conclusion 1. Despite some movement in the Respondent's submissions over the passage of the hearing, they are clearly to be preferred, on the evidence, over those of the Applicants, as I have attempted to explain above. 2. In their supplementary closing submissions, filed on 12 April 2019, counsel for the Respondent correctly relied on United CA as supporting the Respondent's "hard line" on such of ALF's claims as were touched by s 59(1)(f), ALF being the holder of only the reversionary interest in the land it leased entirely to Boiling. 3. The Applicant's submissions to the contrary, filed on 15 April 2019, are rejected. 4. In the Boiling proceedings, there will be an order for payment of $11,000 ([124] above). 5. In ALF's proceedings there should be orders in its favour for the market value of each of Lot 1 and Lot 2 (see [715] and [681] respectively), and for the legal and valuation fees which the Court was told had been agreed at $424,910.68 (as per replacement page 9 of the Applicant's closing subs, rather than $426,710.68, as per par 30 of the Respondent's closing submissions). 6. The figure of $3,920,000 for the market value of Lot 1 is not in doubt ([715]). 7. There are, however, some inconsistencies and/or disparities in some of the "final" figures put before the Court for the market value of Lot 2. 8. The market value of Lot 2 is shown in par 1741 of the Respondent's closing submissions as $45,762,270, a figure said to have been drawn from the DCF at Appendix A. However, the correct figure is shown as $45,742,467 in par 30 of, and Appendix A to, those submissions, and that figure was repeated in par 27(b) of the FAPOD of 11 April 2019, and accepted by the Court (at [681] above). 9. In deciding on this (slightly lower) figure, which was determined on a DCF basis, I am fortified by the valuation evidence given primarily by Mr Lunney on a direct comparison basis, in Appendix A to the Respondent's joint report at CB 60, dated 14 November 2017. Section 22: Determinations and Orders 1. The Determinations and Orders of the Court in the matter of Boiling Pty Limited v Roads and Maritime Services (No 2016/155930) are that the Court: 1. determines total compensation under Part 3 Division 4 of the Land Acquisition (Just Terms Compensation) Act 1991 in the total sum of $11,000; and 2. the costs of the proceedings are reserved. 1. The Determinations and Orders of the Court in the matter of Alexandria Landfill Pty Limited v Roads and Maritime Services (No 2016/155678), are that the Court: 1. determines total compensation for market value under Part 3 Division 4 of the Land Acquisition (Just Terms Compensation) Act 1991 for the acquisition by the Respondent of Lot 1 DP1010128 being the whole of the land in folio identifier 1/1010128 (Lot 1) in the total sum of $3,920,000.00; 2. determines total compensation for market value under Part 3 Division 4 of the Land Acquisition (Just Terms Compensation) Act 1991 for the acquisition by the Respondent of Lot 2 DP1168612 being the whole of the land in folio identifier 2/1168612 (Lot 2) in the total sum of $45,742,270.00; 3. determines compensation for disturbance by way of legal costs and valuation fees under sub-sections 59(1)(a) and (b) of the Land Acquisition (Just Terms Compensation) Act 1991 in the sum of $424,910.68; 4. determines that the Applicant is entitled to no other compensation under the Land Acquisition (Just Terms Compensation) Act 1991 for the acquisition of the land in Lot 1 and Lot 2; 5. Orders the Respondent to pay the compensation determined in Orders [1], [2] and [3] of this paragraph, being a total sum of $50,087,180.68, less any advance payment of compensation made by the Respondent to the Applicant prior to the date of these orders; 6. The costs of these proceedings are reserved; and 7. The exhibits and all USB sticks submitted by the parties may be returned. ********** ​ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 July 2019