Roads and Traffic Authority of New South Wales v Mosca [2006] NSWCA 159 (23 June 2006)

Last Updated: 23 June 2006

NEW SOUTH WALES COURT OF APPEAL

CITATION: Roads and Traffic Authority of New South Wales v Mosca [2006] NSWCA 159



FILE NUMBER(S):
41214 of 2004

HEARING DATE(S): 7 December 2005

DECISION DATE: 23/06/2006

PARTIES:
Roads and Traffic Authority of New South Wales (Appellant)
Franco Mosca (Respondent)

JUDGMENT OF: Mason P Handley JA Bryson JA

LOWER COURT JURISDICTION: Land & Environment Court

LOWER COURT FILE NUMBER(S): LEC 30121 of 2003

LOWER COURT JUDICIAL OFFICER: Bignold J

COUNSEL:
S Gageler SC/J B Maston (Appellant)
J J Webster SC/J Whyte (Respondent)

SOLICITORS:
Corrs Chambers Westgarth (Appellant)
Thorntons (Respondent)


CATCHWORDS:
APPEAL – limited to error of law
COMPENSATION – compulsory acquisition – assessment to disregard effects of proposal to carry out public purpose – questions of law – questions of fact
D

LEGISLATION CITED:
Land Acquisition (Just Terms Compensation) Act 1991
Liverpool Local Environmental Plan 1997

DECISION:
1 Appeal allowed with costs.
2 Awards of compensation for the market value of the land taken and for injurious affection set aside.
3 The proceedings are remitted to the Land and Environment Court for such compensation to be assessed according to law.
4 The respondent is to have a certificate under the Suitors' Fund Act 1951.


JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 41214 of 2004

MASON P

HANDLEY JA

BRYSON JA

23 JUNE 2006

ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES v FRANCO MOSCA

CATCHWORDS

APPEAL – limited to error of law

COMPENSATION – compulsory acquisition – assessment to disregard effects of proposal to carry out public purpose – questions of law – questions of fact

FACTS

The appellant resumed part of the respondent’s land, divided by a watercourse, which was zoned Residential 2(a), Special Uses 5(a), and Drainage and Recreation – Public 6(a) under the Liverpool Council’s Local Environmental Plan. A substantial part of the land was low lying and subject to flooding.

The trial Judge found that the subject land had remained undeveloped because of the blighting “effect” created by proposals for the Western Sydney Orbital Motorway which affected part of the land. Section 56(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 required the effect of the planning blight to be disregarded when assessing compensation.

The trial Judge found that, as a result of the proposals for the Motorway, the owner had lost opportunities for the advantageous development or sale of the property, which diminished its value at the compulsory acquisition date. Under s 56(1)(a) of the Act the Court was bound to disregard any decrease in the value of the resumed land caused by the proposal to carry out the public purpose for which the land was acquired. The Judge held that he could give effect to this obligation by valuing the land as if it was in a condition which would enable its residential potential to be realised in the ordinary course of development.

The appellant appealed from the Judge’s determination of the market value of the resumed land and the compensation for injurious affection. HELD: (1) Two of the three lost opportunities identified by the Judge had not been lost and the third had been lost for reasons other than the proposals for the Motorway and the Judge’s findings were affected by legal error; (2) The appellant still had to establish that the errors were material and that the awards of compensation were vitiated by them; (3) The Judge was entitled to assume that conditions in the area of the watercourse would have been improved to the extent that this would have occurred had there been no proposal for the Motorway: Woollams v The Minister (1957) 75 WN (NSW) 103 followed; (4) This required the Judge to make appropriate findings of fact which had not been made; (5) The Judge was not entitled, as a matter of law, to value the land on the assumption that it was “in a condition that would enable its residential potential to be realisable in the ordinary course of development” that is that the necessary flood control works had been carried without cost to the land owner; (6) This error of law had vitiated the Judge’s identification of the most comparable sale where the relevant land was higher and far less affected by flooding than the subject land; (7) These errors of law vitiated the award of compensation for the land zoned Residential; (8) The Judge applied a value of $190/m2 supported by the owner’s valuer for the land zoned Residential to land zoned Special Uses – Drainage which the same valuer valued at $20/m2; (9) The compensation awarded for the land zoned Special Uses – Drainage was vitiated by legal error; (10) The appeal should therefore be allowed.

ORDERS

1 Appeal allowed with costs.

2 Awards of compensation for the market value of the land taken and for injurious affection set aside.

3 The proceedings are remitted to the Land and Environment Court for such compensation to be assessed according to law.

4 The respondent is to have a certificate under the Suitors’ Fund Act 1951.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 41214 of 2004

MASON P

HANDLEY JA

BRYSON JA

23 JUNE 2006

ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES v FRANCO MOSCA

Judgment

1 MASON P: I agree with Handley JA.

2 HANDLEY JA: On 4 October 2002 the Authority (RTA) resumed part of the respondent’s land at Prestons near Liverpool for the purposes of the Roads Act 1993 and the construction of part of the M7 Motorway for the Western Sydney Orbital (WSO). Prior to the resumption the respondent’s land consisted of a rectangular block 50m x 400m between Ash Road on the west and Skipton Lane on the east. Maxwells Creek which had become a man made watercourse ran through the centre of the block. The resumed land which comprised lot 5 in DP 1045043, on the eastern side of Maxwells Creek, severed the respondent’s remaining land into two blocks, one fronting Ash Road, and the other Skipton Lane.

3 The land was zoned Residential 2(a), Special Uses 5(a), Drainage and Recreation – Public 6(a) under the Liverpool Local Environmental Plan 1997, but these zonings dated from Liverpool LEP No 237 gazetted on 15 May 1992. However unlike other land zoned Residential 2(a) to the east and west the subject land and other land in the Maxwells Creek corridor had not been developed for residential use prior to the resumption.

4 The owner’s claim for compensation was heard by Bignold J in the Land and Environment Court who assessed the market value of the acquired land at $941,260 and the compensation for injurious affection of the retained land at $278,740. The claim for compensation for severance was abandoned, and the claim for compensation for disturbance was rejected. The RTA appealed from these awards in favour of the owner.

5 The Judge held that the land along the Maxwells Creek corridor remained undeveloped because of the blighting effect created by proposals for the WSO to link the M5 Motorway at Prestons with the M2 Motorway at Baulkham Hills. The history of the scheme was in evidence as part of the background information in the Environmental Impact Statement (EIS) prepared for the RTA exhibited in October 2000. In 1993 the Liverpool to Hornsby Highway Strategy Study final report prepared for the Commonwealth Government identified preferred routes for a future national highway to link the M5 Motorway at Prestons with the F3 Freeway at Wahroonga. A public announcement was made by the Commonwealth Minister for Transport in April 1994 (supp blue 4/781-2).

6 The RTA prepared its initial design proposal and overview reports in 1994 and 1995 (783-4). Its updated report was exhibited during July and August 1998 (784, 785). The subject land was shown as affected by Option 2 for the WSO in a plan which formed part of the EIS (supp blue 2/458). This and another four options had been identified in the 1994 Route Investigation Study undertaken by the RTA (supp blue 4/783, red 25 para [39]).

7 In December 1995 the Council adopted Development Control Plan (No 31) which applied to land in the Maxwells Creek corridor. It came into force on 11 March 1996. One of the maps forming part of the DCP (ex 7) contained a note stating that the area east of Bernera Road, which includes the land between Ash Road and Skipton Lane, “may be subject to replanning due to the proposed Western Sydney Orbital Road” (red 27 para [46]). From then on developers interested in this area would have been well aware of the impact of the WSO proposals on the land in the Maxwells Creek corridor.

8 The Judge found that the subject land remained undeveloped at the resumption date because of the deterrent effect of the WSO proposals and the inference to that affect from the aerial photographs was overwhelming.

9 The Judge found that the effect of this planning blight on the subject land had not been sufficiently recognised in the expert evidence (red 22 para [9]). He also found that there were independent constraints including liability to flooding, the need for fill, and the need for a riparian and flood way corridor in accordance with the Rivers and Foreshores Improvement Act 1948 (the 1948 Act) which were not associated with the WSO proposals (red 22 para [13], red 25 para [35]). He recognised “that much of the Applicant’s land was flood liable in varying degrees” (para [19]) and that this “required obvious remediation or amelioration so that the residential potential could be realised” (para [35]).

10 A substantial body of expert evidence was called dealing with the Council’s trunk drainage proposals for Maxwells Creek. In 1998 Mr Bewsher was retained to prepare a Review of Environmental Factors (REF) for a trunk drainage system. This included proposals for the deepening and stabilisation of the channel upstream of Kurrajong Road between Ash Road and Skipton Lane which would involve work within the subject property (supp blue 5/1274-5). On 26 March 1999 Mr Bewsher’s firm was commissioned to prepare detailed engineering drawings and documentation for Stage 1 of the works (supp blue 2/331, black 1/250), to include a design for the channel upstream from Kurrajong Road (supp blue 5/1274).

11 Work began on the detailed drawings in April 1999 but the Council stopped further work two months later, soon after the preferred route for the WSO through the subject land was selected (red 23 para [21]). The Judge described the parties’ fixation with this issue as “myopic” because it overlooked the wider effects of the WSO proposals (red 23 para [19]), and was unhelpful (para [22]).

12 He held that the planning blight affecting the subject land had not only prevented the earlier realisation of its development potential, it had also caused the owner to lose opportunities that earlier development offered. He said (red 30 para [65]):

“... there are a number of effects of the blight which relevantly caused the value of the Applicant’s land to be decreased at the date of compulsory acquisition, namely-

(i) the value of the lost opportunity to realise the development potential by implementing the detailed planning provisions of DCP 31 and the s 94 Contributions Plan as they affected the Applicant’s land and neighbouring lands;
(ii) the value of the lost opportunity to realise that development potential by either selling the Applicant’s land to a developer who was intent on agglomerating development sites or by some joint enterprise between the Applicant and neighbouring land owners;
(iii) the value of the lost opportunity to realise that development potential by adopting a trunk and local drainage solution conformably to the Council’s s 94 Contributions Plan adopted in 1992 which propounded engineering drainage solutions/treatments different from the more recently conceived and/or imposed demanding environmental solutions/treatments including the requirement for the creation and preservation of riparian zones along creek corridors.”

13 He said that although these losses had been incurred before the date of compulsory acquisition they decreased the value of the land as at that date. He added (para [66]):

“The quantum of the value of those lost opportunities is found in the additional costs apt to be incurred in realising the potential of the Applicant’s land on and from that date compared with the lesser costs that would have been incurred in the earlier realisation of that potential which would have occurred, but for the blight created by WSO.”

14 He held that the decrease in the value of the land caused by the WSO was to be disregarded under the Land Acquisition (Just Terms Compensation) Act 1991 (the Act) s 56(1)(a). He distinguished Griffith City Council v Polegato (1990) 20 NSWLR 696 (Polegato) where this Court held that compensation could not be awarded for a lost opportunity to carry out approved development which the resumption process had interrupted where that potential had disappeared before the resumption date as a result of economic and market forces independently of the resumption process.

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 (Yates) citing the Raja’s case [1939] AC 302, 313 and Turner v Minister for Public Instruction [1956] HCA 7; (1956) 95 CLR 245, 268-9 (Turner).

16 If one ignores the effect of the WSO proposals at the resumption date, as directed by s 56(1)(a), there was nothing to stop the land being developed in accordance with DCP 31 and the Council’s s 94 Contributions Plan. On that assumption the opportunity had not been lost, the unrealised potentiality was still there, and the land could be valued on that basis. However it would be worth more to a developer who could develop it as part of a larger site, than on a stand alone basis.

17 The second lost opportunity was to sell the land in globo to a developer or to develop it jointly with neighbouring owners. Again, if one ignored the effect of the WSO proposals, those opportunities were still available. The hypothetical purchaser would be a developer and the market value would be determined on this basis: Spencer v The Commonwealth (1907) 5 CLR 418, incorporated in s 56(1). On the assumptions required by the statute the potentiality of the land for its development as part of a joint venture with neighbours could only be taken into account in so far as it increased its market value on a sale in globo. The statutory test does not permit the market value to be determined by calculating the present value to the owner of the proceeds of a hypothetical subdivision (Turner (above) at 268-9) let alone the proceeds of a hypothetical joint venture. There is a proper place for a valuation based on a hypothetical subdivision, but as is clear from Turner (above) per Dixon CJ at 267-8 allowances must also be made for a number of other factors.

18 The other lost opportunity was to adopt a trunk and local drainage solution in accordance with the Council’s s 94 Contributions Plan. This propounded solutions which were less onerous for developers than those being applied under the 1948 Act as at the date of resumption. However this opportunity had not been lost as a result of the WSO proposals but because the Department had adopted a more stringent policy.

19 This change of policy was not connected with the resumption process and its effect on value could not be ignored: Polegato (1990) 20 NSWLR at 701:

“... the development potential which existed at ... the start of the resumption process had disappeared for reasons other than the proposed resumption by the date of the acquisition. The principles applied in Housing Commission of New South Wales v San Sebastian require the land to be valued at the relevant date on the artificial, but just, assumption that such value has not been affected by the resumption process. It does not require or authorise the court to disregard facts themselves independent of the resumption process such as costs of building and general market values at the date of resumption.”

20 See also Director of Building and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111.

21 In my judgment therefore the lost opportunities identified by the Judge were irrelevant in determining the market value of the resumed land and the Judge erred in law in holding otherwise: Melwood Units Ltd v Commissioner of Main Roads [1979] AC 426, 432 (Melwood).

22 An appeal from a judgment of the Land and Environment Court in class 3 of its jurisdiction is limited to questions of law (Land and Environment Court Act s 57(1)). An appellant must not only establish an error of law, he must also establish that the decision is vitiated by that error: Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409, 419; Yates (1991) 24 NSWLR 156, 177. This Court must therefore review the Judge’s reasoning to determine whether his assessment was affected by his errors in principle.

23 He recognised that the determination of market value would be difficult:

“... where there has been no attempt ... to quantify ... the decrease in value and where there is no evidentiary foundation for applying the approach ... of commencing with the value of the land immediately prior to the first public announcement of WSO in 1993 and then bringing that value ... up to the date of compulsory acquisition.” (red 33 para [77])

24 He might have added that although he had identified the value of the lost opportunities as “the increased costs apt to be incurred in realising the potential of the Applicant’s land” (para [66]) neither party had led evidence of that increase.

25 He concluded that:

“... the only reasonable and practical manner to give effect to the statutory imperative of disregarding any relevant decrease in value is to treat the Applicant’s land, at the date of compulsory acquisition, as being regarded by the parties to the hypothetical sale, as being in a condition that would enable its residential potential to be realisable in the ordinary course of development. This approach generally accords with the position assumed by the Applicant’s valuer, Mr Paris, relying upon Mr Bewsher’s expert opinions concerning flood mitigation works in Maxwells Creek involving ... the deployment of the excavated material in filling the flood liable sections of the land” (emphasis supplied).

26 He found that the opinions of the applicant’s experts, relevantly Mr Bewsher and Mr Paris, were more compatible with the approach he held was appropriate (red 34 para [88]), and that Mr Paris’ valuation was more soundly based on expert advice than that of Mr Lunney, the valuer for the RTA (para [89]). He also found that over 90% of the residentially zoned land would become capable of development (paras [36], [81]), and in this respect also Mr Paris’ valuation was more appropriate (paras [92], [97]).

27 He found that the sale of 2115 Camden Valley Way at Prestons on 12 March 2002 was the most comparable (the most comparable sale) and this, when analysed, yielded an average value of $167/m2 in globo (para [98]).

28 Experts for the owner claimed that the resumption had caused the loss of 12 lots on the eastern side of Maxwells Creek, while experts for the RTA claimed that only 4 or 8 had been lost. The Judge did not accept the evidence that only 4 had been lost, but declined (red 37 para [112]) to decide whether the correct figure was 12 or 8. He adopted as “a more sure foundation for assessing compensation ... the piecemeal approach of determining the market value of the compulsorily acquired land on a rate per square metre”.

29 Both valuers had adopted a before and after approach which involved valuing the owner’s land at the resumption date ignoring the resumption, and then valuing what was left. The Judge rejected this approach (para [115]) and said (para [116]):

“... the series of convolutions and prognostications by the expert witnesses in the present case involving, as I have found a large degree of misdirection, in order to facilitate the employment of the before and after method of valuation, demonstrates an ultimate futility in such an approach.”

30 The Judge held (as quoted in para [24] above) that the statutory obligation under s 56(1)(a) to disregard the effects of the planning blight entitled him to value the land on the artificial assumption that at the date of acquisition it was “in a condition that would enable its potential to be realisable in the ordinary course of development”.

31 He adopted Mr Paris’ valuation at $190/m2 (para [98]) and determined the market value of the 4954m2 taken at $941,260 (para [117]).

32 The evidence of Mr Paris must be examined to determine whether the Judge’s decision can be supported independently of the errors of law that have been identified and the assumption he adopted. This will require consideration of how Mr Paris treated the liability of the land to flooding and the need for remediation work that the Judge had recognised (see para [8] above). It will also require consideration of the most comparable sale (above para [26]).

33 Mr Paris dealt with the flood liability question in his second valuation (blue 3/511):

“Mr Bewsher advised that once Liverpool Council had completed their land management program, this would have reduced the flooding of the property to some extent and with the implementation of the proposed plans of Toby Fiander and Associates and Bewsher Consulting Pty Ltd the property would be flood free. We have allowed $50,000 in our valuation of the property on a before basis to cover the cost of fill and removal” (emphasis supplied).

34 He then considered what the situation would have been at the resumption date but for the WSO proposal (blue 3/512):

“It is our opinion that had the proposed public purpose not caused the cessation of the work of Council in this area of the catchment that by the acquisition date the form of the drainage works would have either been in the course of implementation or at least finally designed so that the subject land and its adjoining neighbours could have been developed generally in accordance with the DCP. The development of the subject land would have either developed in conjunction with neighbouring properties or, as demonstrated in the adjoining catchments, [been] acquired by a Developer for such purpose. It is our opinion that a purchaser of the subject land, ignoring the proposed road would have regarded the DCP as the most likely form of development that could have been achieved” (emphasis supplied).

35 Mr Paris’ assumptions (paras [32], [33]) require the Court to examine the evidence dealing with the effect of the WSO proposals on the Council’s plans for Maxwells Creek, and the evidence of the exposure of the property to flooding.

36 Mr Bewsher was engaged by the Council in 1998 to advise on the Maxwells Creek drainage system (supp blue 5/1273-4). One of the options he considered was the construction of basin 18 upstream from the subject property to retain floodwater. He said that if the WSO proposal had not intervened it was “impossible for him to say exactly when basin 18 would have been built” (supp blue 5/1274). However his REF allocated high priority to the construction of basin 18 which he considered meant 5 years or sooner (5/1275) and since he had advised the Council of its potential liability for flooding if it was not constructed he believed that it would have been given even greater priority. Basin 18 would have substantially reduced the peak discharge down Maxwells Creek.

37 In his oral evidence Mr Bewsher said that the WSO proposal was “a major factor” in the Council’s decision in June 1999 (above para [10]) to stop his firm doing further work on the detailed engineering drawings and documentation for Maxwells Creek (black 1/234). This was confirmed by Mr Davison who had become the Manager Land Development of the Council in April 2002 (black 2/309) and the Judge so found (para [21]).

38 When asked about the subdivision potential of the land at the date of acquisition on the assumption that there was no WSO proposal and the Council had not constructed drainage works on Maxwells Creek Mr Bewsher said (black 2/273): “it entirely hinges on ... what council was proposing to do in relation to that channel”. Without Council infrastructure “the highest investment use of the land ... would result from development in conjunction with ... neighbours. So you’d go and talk to your neighbours and proceed to do a development in conjunction with them, either at the same point in time or staged together” (2/275 C-D). The land could also have been developed in isolation (2/275 H-J).

39 Mr Bewsher discussed with Mr Fiander, the civil engineer retained by the owner, the latter’s proposals in Figure 1 (supp blue 5/1277) for the development of the site on the assumption that basin 18 was not constructed (supp blue 5/1276). Mr Bewsher’s summary and conclusions in his report (supp blue 5/1279) included the following:

“29 For existing conditions, more than half of the site is inundated during a 100 year flood event. The depth of inundation is shallow and through site earthworks, a large part of the site could be made free from inundation in a 100 year flood

...

33 Having regard to flooding constraints and assuming that basin 18 was not constructed, a realistic development proposal at the date of acquisition would see all of the subject being available for development, except for a 70m wide strip for the creek and its overbank.

34 The cost of construction of these works might have been partially shared by Council, depending on the timing of Council’s 1999 creek proposals and the developers’ proposals.

35 If development of the site proceeded in conjunction with construction of basin 18, additional compensatory excavation may have been provided within the basin, thus allowing the area of creek and overbank to be reduced to a width of approximately 50m. Whilst the developer would have obtained additional developable land under this proposal, this benefit would be offset against a contribution to the basin 18 construction costs.”

40 Mr Fiander said in his statement (supp blue 5/1243-7) that “Council has allocated sufficient land for drainage to ensure that the 1% AEP flood event is contained within a channel in the drainage reserve without filling the surrounding land” (5/1244 K-L). He added (1244 P-S):

“I have examined the situation that would have been publicly known in October 2002 ... I consider that Council would have advised any person enquiring about flooding in the vicinity of Maxwells Creek of its draft Flood Management Plan (1999) ... but that the Plan was under review. It seems likely to me that the extent of any review would not have been available in October 2002 because, as far as I can determine, the matters were still under review.”

41 He said the planning history demonstrated “that Council has had a proposal for channel improvements along Maxwells Creek for a long period of time” (5/1246 I-J). On the subject of earthworks he said (5/1246 O-R):

“I have been asked to provide an estimate of the volume of earth that would have been required to fill the land with frontage to Ash Road to have the whole land above the 1% AEP flood level. From my investigations I conclude that Council had allocated in its planning scheme sufficient land to enable a channel to be constructed which would contain the once in 100 years flood ... modelled by Bewsher Consulting for the flood plain management study and that no filling of the land is required to ensure that surrounding land is above the 1% AEP flood level ... It would be necessary to improve the drainage channel for which Council collects s 94 contributions in the area.”

42 His conclusions included (5/1247):

“ the channel of Maxwells Creek passing through the site requires stabilisation to prevent further erosion.

...

Council has demonstrated its intention to construct channel improvements in Maxwells Creek in the area of the subject site ...

...

provided basin 18 is constructed as outlined and the channel banks repaired and improved as proposed, there would be no filling on the subject land; it is likely that the channel repair process will result in excavation of material which will need to be disposed of. Filling of the adjacent land is one possible location of the this material,

I would have advised a hypothetical purchaser at the date of acquisition, ignoring the Orbital Road Proposal, that the land would be free of flooding at the 1% AEP event once Council had completed its drainage proposal and that no filling was required on the subject land” (emphasis supplied).

43 In cross-examination he said that this statement did not address the development of the owner’s land in isolation but in conjunction with the down stream allotments south of Kurrajong Road (black 2/295). In his further statement (supp blue 5/1249-51) he said that Mr Bewsher’s report to the Council in 1999 (REP) did not fully cater for the flood risk in the case of a 1:100 year storm (5/1249). However with a slight modification those works could have left the whole of the subject land free of flooding (5/1250).

44 Mr Davison, the Council’s Land Development Manager, said that had there had been no WSO proposal further studies and approvals would have been required before the Council could adopt any detailed design for trunk drainage works on Maxwells Creek, and the process would have taken a minimum of two years (blue 3/548). The Council would then have had to commission an EIS which it would have to approve (3/548) before the drainage works could be carried out.

45 Construction of the works would have been dependent on developers or on the Council preparing an appropriate s 94 Contributions Plan (3/548-9). As at 4 October 2002 it had not resolved to acquire any of the land zoned 5(a) or 6(a) or to prepare a s 94 plan to cover trunk drainage works in the Maxwells Creek area (3/549). He would have advised the Council that the commencement of such works should be a necessary pre-condition to development approval for any property in this area (3/549). The Council stated in a letter to the owner’s solicitors that he drafted (3/551 E) that the trunk drainage work would have taken 12 months to complete (3/552).

46 He said that the Bewsher channel works under consideration in 1999 would not have made the Mosca property flood free (3/549). Between 1999 and the date of resumption the Council had no available funding for trunk drainage works in the area. The 1992 Contributions Plan made provision for the acquisition of the land zoned for drainage reserve, but not for any trunk drainage works (3/550).

47 Mr Paris said his valuation was not based on the assumption that all the necessary drainage work had been done because he had allowed $50,000 for fill and removal (black 2/354-5, 390). However he had assumed that by the acquisition date the necessary drainage works in Maxwells Creek had been or were being designed (2/389-90), and he also assumed that the whole of the owner’s residential zoned land was available for development and subdivision (2/389).

48 The most comparable sale included some flood affected land (2/357), but other parts were elevated compared with the subject land (2/396-7). About one-third was low lying (397), but not as flood affected as the subject land (397), and significant fill was not required for its development (398).

49 The Judge found that much of the owner’s land was liable to flooding and required remediation or amelioration “so that the residential potential could be realised” (above para [8]). However he assumed that it was in a condition that would enable its potential to be realised in the ordinary course of development (above para [29]), which must mean he assumed that the Council had carried out the drainage works.

50 Woollams v The Minister (1957) 75 WN (NSW) 103 established that, in disregarding blight caused by the resumption process, the Court disregards its effect on other land, and takes into account development that would otherwise have occurred in the area.

51 Woollams’ case involved the acquisition of the plaintiff’s property in Cox’s Valley as part of the scheme for the construction of the Warragamba Dam. This became public knowledge in 1941 (above at 105), but the resumption did not occur until 1954 (ibid). There was no electricity supply to the Valley but Hardie J found (at 105) that “it was reasonable to anticipate that the main electricity supply line would have extended into the area had the Warragamba Dam project not been decided upon”. He also found that the resumption process had had a serious effect on the amenities in the Valley. The bus services had ceased, all prospects of electricity supply had disappeared, the main road had deteriorated and the area had regressed in many ways (at 106).

52 Counsel for the defendant contended that value “should be determined on the basis of the amenities and other social and economic conditions ... in the Valley at the date of resumption” and that the deterioration in those conditions should not be ignored (at 107). However Hardie J held (at 108) that:

“... the value of the subject property [should] be determined without regard to any effect on such value of the decision ... to establish the Warragamba Storage Dam project ... and without regard to any effect on such value of the various steps taken by the Board up to the date of resumption.”

53 He further held (at 109):

“... that the value is to be determined on the assumption that the amenities and other economic and social conditions in the subject area did not deteriorate ... and on the assumption that those amenities and conditions would have improved during the period under consideration, as they did in other primary producing and tourist areas during the post-war years.”

54 This decision was approved by this Court in Stocks and Parkes Investments Pty Ltd v The Minister (1971) 25 LGRA 243, 252.

55 The Judge was therefore entitled to assume that conditions in the Maxwells Creek corridor would have been improved to the extent to which this would have occurred if there had been no WSO proposal. This is the equivalent in the present case of the provision of electricity supply in Cox’s Valley that Hardie J found could reasonably have been anticipated but for the Warragamba project.

56 However what could reasonably have been anticipated but for the resumption process is a question of fact, not a question of law. Unfortunately Bignold J treated it as a question of law when he said that he would (para [79]):

“treat the Applicant’s land, at the date of compulsory acquisition, as being regarded by the parties to the hypothetical sale, as being in a condition that would enable its residential potential to be realisable in the ordinary course of development.”

57 The Judge expressly held that he did not have to decide this as a question of fact when he said (para [113]):

“To determine the market value on a rate per square metre approach avoids the debatable points in issue between the parties that have been exhaustively explored through many twists and turns in the detailed expert testimony.”

58 The Judge found that in June 1999 the Council stopped further work by Mr Bewsher’s firm on the planning for Maxwells Creek because of the WSO project (above para [36]). It is reasonably clear that but for that project his firm would have completed that work within a few months.

59 The Judge made no other findings as to what would have happened but for the project. Mr Davison’s evidence, if accepted, established that another two years would have elapsed before the Council could commission an EIS, but he offered no estimate of the further time that would have elapsed before its approval by the Council.

60 The Council did not have funding for these works and could only have obtained it if a s 94 Contributions Plan was adopted. No estimate was given of the time that this would have required, or the time that would then have elapsed before the necessary funds had been accumulated. It is not clear however that the Council was having these drainage works designed with a view to doing the work itself, it may have contemplated requiring a developer to do it.

61 The work was said to take 12 months (above para [45]), and thus would be expensive but there was no estimate of its cost. It is clear however that this must have exceeded by many times the $50,000 allowed by Mr Paris.

62 There was evidence that developers buying land in globo factor s 94 contributions into their price so that values established by comparable sales of in globo land do not need to be adjusted because of the contributions that will have to be paid or provided by the developer.

63 There was no evidence that the Council would have established a contributions plan but for the resumption process. It may have contemplated or in the event decided that the cost should be borne by the party developing the corridor.

64 Thus a developer who accumulated sufficient land in this corridor may have undertaken the necessary work either by choice, or as a matter of legal or practical necessity. There was no evidence from Mr Paris or Mr Fiander that such a developer would ignore the cost of works which were not covered by a s 94 Contributions Plan.

65 The Judge’s identification of the most comparable sale (above para [26]) may have been dependent on his assumption that at the date of acquisition the subject land could be developed for residential purposes in the ordinary course (above para [24]). This assumption reflected assumptions made by Mr Paris (above paras [32]-[33]).

66 What is or is not a comparable sale, and the extent to which it is comparable, are, within broad limits, questions of fact: Yates (1991) 24 NSWLR 156, 177-8. However such decisions may be vitiated by an error of principle, and if so they will be open to review for legal error: Melwood [1979] AC 426, 432; Yates (1991) 24 NSWLR at 177. The subject land was flood affected to a far greater extent than the land the subject of the most comparable sale and there was a greater need for remediation works. The adoption of this sale as the most comparable and the value per square metre that the Judge adopted suggest that his erroneous assumption (above para [64]) affected his identification of the most comparable sale and the use he made of it. In any event the Court cannot be satisfied that this error did not affect those findings and was immaterial.

67 The land acquired comprised 4300m2 of land zoned Residential 2(a) and 654m2 of land zoned Special Uses – Drainage 5(a) (blue 3/517). Although at one point the Judge held that “the value of the residentially zoned area of the subject property [was] in the order of $190m2 ... en globo” (para [100]), he later determined that the market value of the whole of the 4954m2 acquired was $190/m2 (para [117]).

68 Thus the Judge awarded compensation at the rate of $190/m2 for the land zoned Special Uses – Drainage 5(a) although Mr Paris had valued this land at only $20/m2 (3/516). Mr Paris said specifically that his value of $190/m2 was only for the developable land and was not an average (3/565). The Judge awarded compensation of $124,260 for this 654m2 of land that Mr Paris, whose evidence was generally accepted, valued at $13,080, a difference of $111,180.

69 This was not just a mistake of fact, it was a finding vitiated by legal error. There was no evidence that this part of the land was worth $190/m2, and the finding was not supported by evidence. Moreover in the words of Lord Radcliffe in Edwards v Bairstow [1955] UKHL 3; [1956] AC 14, 36 “the true and only reasonable conclusion contradicts the determination”, a test referred to with apparent approval in Vetter v Lake Macquarie City Council [2001] HCA 12; (2001) 202 CLR 439, 450, compare 465-6.

70 Mr Paris deducted $50,000 from his valuation in globo to cover the cost of fill and removal (above paras [32], [46]), but the Judge made no deduction for the cost of this work. This was another albeit minor error affected by the Judge’s erroneous assumption that the residential zoned land was capable of development in the ordinary course.

71 The owner’s residentially zoned land comprised 17,266m2 (red paras [36], [81]) and if $50,000 is apportioned rateably over that area one obtains a rate of $2.90/m2. Arguably this should be deducted in valuing the 4300m2 of residentially zoned land, giving a total deduction of $12,470.

72 The Judge’s errors of law in taking into account the value of the lost opportunities (above paras [11]-[20]) led to, and were compounded by, his error of law in assuming that the land acquired was in a condition which would allow its development for residential purposes in the ordinary course (above paras [54]-[55]). This in turn affected his decision to deduct nothing for the cost of fill and removal (above para [72]). His decision to value the land zoned Special Uses – Drainage 5(a) at $190/m2 (above paras [69]-[70]) is vitiated by a different legal error.

73 The errors of law that have been identified were, in total, material and the appeal must therefore be allowed and the matter returned to the Land and Environment Court for the compensation to be determined according to law. The award for injurious affection was based on a loss of 17.5% in respect of the land zoned Residential which fronted Skipton Lane valued at $190/m2. The figure of 17.5% was not affected by legal error and will not be disturbed, but the award must otherwise be set aside as it was based on the value of $190/m2 for the residentially zoned land. It is to be hoped that the parties may now be able to agree on the value of the residential land by negotiation or mediation and that a further hearing will not be necessary. The reception of further evidence will be a matter for the discretion of the Judge presiding at any further hearing.

74 The following orders should be made:

(1) Appeal allowed with costs.

(2) Awards of compensation for the market value of the land taken and for injurious affection set aside.

(3) The proceedings are remitted to the Land and Environment Court for such compensation to be assessed according to law.

(4) The respondent is to have a certificate under the Suitors’ Fund Act 1951.

75 BRYSON JA: I agree with Handley JA.

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LAST UPDATED: 23/06/2006