Coffs Harbour City Council v Noubia Pty Ltd

1. [1]

   BATHURST CJ: I have had the advantage of reading the judgment of Basten JA in draft. I agree with the orders proposed by his Honour and with his Honour’s reasons.

2. [2]

   BELL P: I agree with Basten JA.

3. [3]

   BASTEN JA: The Lakes Estate is a residential development on the south-west side of Coffs Harbour, forming part of the North Boambee Valley. Pursuant to a development consent given to the respondent, Noubia Pty Ltd (Noubia), in April 2003, three parcels of land were vested in the Coffs Harbour City Council. Noubia, as the developer and owner of the land, sought compensation for the land so vested pursuant to a condition of the consent. The Council agreed to payment of an amount of $110,000 with respect to each of two lots, but denied liability to pay compensation for the third.

4. [4]

   Noubia commenced proceedings in both the Supreme Court and the Land and Environment Court. The Supreme Court proceedings were transferred to the Land and Environment Court and were discontinued by consent. The remaining issues to be resolved in the Land and Environment Court were identified in a note prepared by the parties on 4 March 2019 in the following terms:

5. [5]

   A hearing was conducted in the Land and Environment Court before Sheahan J in February and March 2019. On 13 August 2019, the judge made orders to the following effect: [1]

Issues on appeal

1. [6]

   Although the source of the jurisdiction was not identified, the parties understood that the Land and Environment Court was exercising its Class 4 jurisdiction, with the result that the appeal to this Court lay under s 58 of the Land and Environment Court Act 1979 (NSW). (The statutory basis of that jurisdiction will be noted below.) It was accepted that the appeal was not limited to questions of law and extended to review of findings of fact, in accordance with the statement of Kirby P in ACR Trading Pty Ltd v Fat-sel Pty Ltd. [2] Beyond that general proposition, no issue was raised as to the nature of the appeal, but it was further assumed to be a form of appeal by way of rehearing. So much may be accepted, given the limited nature of the grounds of appeal.

2. [7]

   The grounds of appeal may be briefly identified as allegations that the trial judge:

   1. (1)

      failed to provide any or adequate reasons with respect to the substantive contested issues (ground 1);

   2. (2)

      constructively failed to exercise his jurisdiction in failing to deal with the disputed evidence and competing submissions (ground 2); and

   3. (3)

      denied the Council procedural fairness by preferring the evidence of Noubia’s hydrologist on a basis which had not been foreshadowed in the course of the proceedings (ground 3).

3. [8]

   For reasons explained below, to the extent that grounds 1 and 2 addressed the first issue, namely whether Noubia was entitled to compensation at all with respect to lot 96, that matter can be finally disposed of by this Court.

4. [9]

   So far as grounds 1 and 2 relate to the exercise of determining the compensation payable for lots 94 and 163, success for the appellant will involve remittal of those issues to the Land and Environment Court. Where the complaint is, in substance, that a trial judge has failed to make necessary findings of fact based on oral evidence, it will rarely be open to this Court to make the necessary factual findings on the appeal, not having heard any of the witnesses. The trial in the Land and Environment Court ran for seven days. In the course of the trial the judge and the parties made a site visit to the land the subject of the proceedings. It is likely that such a visit was of material assistance to the trial judge in understanding the evidence of the expert witnesses. That benefit is also unavailable to this Court.

5. [10]

   As will be explained below, the first issue should be resolved in favour of the Council, with the result that no compensation is payable with respect to lot 96. With respect to the valuation of lots 94 and 163, although ground 3 must be rejected, the Council is correct in its submissions that the reasoning of the trial judge was deficient in essential respects. The better view is that he did not resolve key aspects of the dispute, so that ground 2 should be upheld. Unfortunately, that conclusion necessitates the setting aside of the judgment with respect to the amounts of compensation payable for those lots and remittal of the proceedings to the Land and Environment Court for a new trial.

6. [11]

   The Council is entitled to its costs in this Court; the costs of the first trial must abide the order of the judge determining the matter on the new trial.

Factual background

1. [12]

   The land the subject of the development application had previously been used for grazing. It was located in a shallow valley, the upper slopes of which included an area previously used to grow bananas, and an extant nature reserve. By 2002 Noubia’s land the subject of the development application had been identified by the Council as within stage 1 of the North Boambee Valley residential release area. A statement of environmental effects prepared in September 2002 noted that:

2. [13]

   The Council prepared a Developer Contributions Plan 2003 (“Contributions Plan”) with respect to the North Boambee Valley stage 1 release area. The executive summary to that report identified a “conceptual layout for Stage 1”, with “a net dwelling density of approximately 10 dwellings/hectare.” The summary continued:

3. [14]

   The plan then identified the contributions which would be required under s 94 of the Environmental Planning and Assessment Act 1979 (NSW) (“Planning Act”) in order to provide for those needs.

4. [15]

   The plan identified the numbers of public facilities required at regional, district and local levels. The relevant material for present purposes concerned the local facilities, which were identified as follows: [3]

5. [16]

   Map 3 depicted residential development to the east and west of a system of lakes, apparently following the general direction of existing water flows. One of the playgrounds shown on the map was in the south-east corner and to the east of the southern-most lake. Nothing turned on that facility. However, a second playground, identified to the west of the northern lake was relevant to the Council’s liability to pay compensation with respect to lot 96.

6. [17]

   Noubia lodged a development application in September 2002. It sought consent to a residential development for a staged subdivision of land to create 160 residential lots, together with a community centre, land for public reserves and a future development lot. Consent was granted on 11 April 2003, subject to a number of conditions. Condition 1, which was the only condition in issue in the proceedings, was modified on 25 September 2006.

7. [18]

   Condition 1 was headed “Acquisition of Land for Public Purpose”. There was a question, not ultimately resolved by the trial judge, as to whether it was appropriate to consider the terms of condition 1 as at April 2003 or in its amended form from September 2006. It is convenient to set out both forms of the condition, starting with the original terms:

8. [19]

   The substituted condition 1, of which notice was given by Council on 25 September 2006, varied only the first bullet point. It removed the requirement for a deed of agreement. As varied the first bullet point read:

9. [20]

   Apart from the abandonment of the proposed agreement, and meeting the consequential need for a basis for assessing compensation, the language used to identify the land which fell under the first bullet point was varied. Originally it had been “land nominated under the [Contributions Plan]”; in the amended version, it was described as “those lands identified in the [Contributions Plan].”

10. [21]

    The transfers of the three lots in question to Council all occurred after September 2006, on the following dates:

11. [22]

    To understand the location of the various lots transferred to Council, it is convenient to refer to the labelled plan which is Attachment B to this judgment.

Nature of proceedings

1. [23]

   In 2017 Noubia brought two sets of proceedings: the first, in the Land and Environment Court, was commenced on 17 March 2017; the second, in the Equity Division of the Supreme Court, was commenced on 7 September 2017. In each, Noubia sought payment for the value of the three lots in the amounts set out above, identified as “compensation” in the Land and Environment Court proceeding, and as “restitution” in the Equity proceedings. On 6 October 2017 the Supreme Court proceedings were transferred to the Land and Environment Court so that both matters could be heard and determined together.

2. [24]

   The proceedings in the Land and Environment Court were apparently commenced on the basis that the Class 4 jurisdiction of that Court was engaged. The application sought declarations as to the proper construction of condition 1 of the development consent. The only order sought was one that the Council “make an offer to pay compensation to the applicant in the particular amount that it considers is the amount due to the applicant”: order (3). Order (4) envisaged that, in the event that the applicant refused the “offer” there would be a determination of the amount of compensation, “determined as a separate question by this Court in Class 3 of its jurisdiction or otherwise.” That proposed order was presumably designed to invoke the class 3 jurisdiction in the category of “claims for compensation by reason of the acquisition of land referred to in Division 2”. [4] Division 2 covers claims for compensation “because of the compulsory acquisition of land in accordance with the Land Acquisition (Just Terms Compensation) Act 1991…”. [5]

3. [25]

   The effectiveness of that ploy may have been in doubt, because there was no “compulsory acquisition” under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Land Acquisition Act); rather condition 1 merely sought to import a method for calculating compensation into the development consent.

4. [26]

   The application in the Land and Environment Court also envisaged the possibility that condition 1 of the development consent might be invalid, in which case Noubia sought an order that the proceedings be “stood over” to allow it to commence proceedings in the Supreme Court seeking an order for “restitution”. Order 6(c) envisaged that those proceedings would then be transferred to the Land and Environment Court pursuant to s 149B of the Civil Procedure Act 2005 (NSW).

5. [27]

   Section 149B of the Civil Procedure Act permits the transfer of proceedings between the Supreme Court and the Land and Environment Court where “it is more appropriate for the proceedings to be heard in the other court”. The jurisdiction of the other court is not a limiting factor: s 149E permits the transferee court to exercise all of the jurisdiction of the transferor court in relation to the proceedings. The order transferring the proceedings identified s 149B as the source of power. Pursuant to s 20(1)(cj) of the Land and Environment Court Act, the transferred jurisdiction fell within the Class 4 jurisdiction of the Court.

6. [28]

   The form of the summons filed on 7 September 2017 in the Equity Division is not known except to the extent that it appears from an amended summons filed, curiously, in the Equity Division some 17 months after the transfer order was made, adopting terms similar to the declarations sought in the Land and Environment Court as to the value of the land. No party appears to have pursued the proposition implicit in proposed order 6(a) that condition 1 of the consent was invalid. It was also assumed that the Equity Division had jurisdiction to determine the amount payable under condition 1 of the development consent, assessed in accordance with the requirements of s 54(1) of the Land Acquisition Act. “with the relevant matters to be considered as set down by s 55 of the Act.”

7. [29]

   Section 54(1) of the Land Acquisition Act provides:

8. [30]

   The various terms used in the paragraphs of s 55 are explicated in the following sections of the Land Acquisition Act, namely ss 56-61. To the extent they were relevant, the parties and the Land and Environment Court proceeded on the basis that these provisions also applied, so as to achieve the apparent purpose of importing the exercise required for valuation of land compulsorily acquired under the Land Acquisition Act. The appeal was run on the same assumptions.

Nature of valuation exercise

1. [31]

   The third paragraph of the first bullet point in amended condition 1 of the development consent required that the value of land transferred to the Council under the first paragraph be determined at the date of transfer.

2. [32]

   Of the matters identified in s 55 and further defined in subsequent sections, relevantly for present purposes, the concept of “market value” in s 55(a) was addressed in s 56(1) in the following terms:

3. [33]

   Because there was no compulsory acquisition for a public purpose within the terms of the Land Acquisition Act, there was doubt as to precisely how the so-called “statutory disregard” provided in s 56(1)(a) should operate. It was common ground that the principles derived from the statute were to be applied by analogy, and in circumstances where the purpose of transferring land to the Council was a relevant public purpose.

4. [34]

   The land being in a shallow gully, it was necessary to maintain a drainage system, both to capture water entering the area to be developed, to hold the water and to channel it downstream with controlled release of manageable volumes. As explained by the trial judge, Noubia identified the public purpose with respect to lots 94 and 163 as being “for water quality management and stormwater/flooding control”. That was said to be an agreed purpose. [6] However, the breadth of that language obscured critical aspects of the dispute. An important element of the dispute related to the obligation of Noubia to detain and control storm water other than that emanating from the land the subject of its development. Noubia’s case was that use of its land to detain and control waters from upstream areas constituted a relevant “public purpose”.

5. [35]

   As may be seen from the agreed “Note” set out at [4] above, the major issue in the case concerned the valuation of lots 94 and 163. The Council contended at trial that the two lots should be valued at $220,600; Noubia proposed that the lots be valued at $3,816,000. The trial judge accepted the valuations proposed by Noubia.

6. [36]

   It is convenient to address that aspect of the case first.

(1) Identification of issues

1. [37]

   The valuation of the land first required determination of (i) the “highest and best use”, being valuation jargon for the financially most advantageous use of the land, subject to natural and planning constraints; (ii) the resolution of hydrological issues with respect to natural constraints, and (iii) an assessment of the market value of each lot. Each party proffered expert evidence in respect of each of these issues.

2. [38]

   Before identifying the positions of the respective experts, it is helpful to note the nature of the exercise being undertaken. The topology of the site was such as to require a drainage system which allowed for the control of stormwater, both as to volume and water quality. If the drainage system which was the subject of the consent were not to be adopted, there would need to be an alternative drainage system. Noubia put forward an alternative system, dealing only with water emanating from its development, which would have allowed for a further 35 residential dwellings, at a net value of over $100,000 per lot. That constituted the $3.8 million claimed as the value of lots 94 and 163.

3. [39]

   Of the total additional area, 17 dwellings were located on lake 4, 15 on lake 3, and a further three on lake 5. [7] The Council disputed the viability of the alternative drainage system which would permit the development of the land currently comprised by lakes 3, 4 and 5.

(2) The evidence – Hydrology

1. [40]

   The major constraint on development of the site was its liability to flood. Accordingly, planning for residential development required engineering reports from hydrologists. The expert reports of Mr Peter Jamieson for Noubia and Dr Daniel Martens for the Council were tendered, and oral evidence was given by them jointly.

2. [41]

   In 2002 Mr Jamieson’s firm, Umwelt (Australia) Pty Ltd, had been retained by Astoria Developments Pty Ltd, a company in the same group as Noubia which managed the land for Noubia. Umwelt was instructed to examine “a proposed two lake detention system that was to service the Lakes Estate development and upstream sections of the catchment.” Referring to this investigation in his evidence, Mr Jamieson noted that each lake would require a dam and continued:

3. [42]

   Mr Jamieson then outlined the basis on which he had prepared the hypothetical subdivision for the purpose of the proceedings, which led to the assessment of the value of lots 94 and 163.

4. [43]

   The Council obtained a report from Dr Daniel Martens in response to Mr Jamieson’s “alternative trunk drainage scheme”. He identified the functions of the approved scheme as requiring capacity to:

5. [44]

   On 20 February 2019 the experts prepared a Joint Hydrology Report of Engineers (joint hydrology report) which identified the areas of agreement and disagreement as to each of the topics (a)-(d). The result of the consultation was as follows.

(a) flood management

1. [45]

   The experts agreed on the volume of water likely to flow through the site in 1 in 100 year events. In his alternative scheme, Mr Jamieson had allowed for a channel with a width at the surface of 16.5m. Dr Martens calculated the minimum requirement at around 25m. Mr Jamieson asserted that the hypothetical subdivision layout permitted a width of 20-23m. The differences on this point were not important.

(b) stormwater detention

1. [46]

   The parties disagreed as to whether the proposed alternative drainage scheme would result in an increase in peak flow rates from the development site, and therefore not meet the objective of not increasing pre-development levels of flooding below the site. Dr Martens had undertaken modelling which demonstrated that the objective would not be reached.

2. [47]

   Notably, Dr Martens referred to Mr Jamieson’s assumption [8] that the capacity to detain water was limited to the proportion that the hypothetical subdivision bore to the total catchment, which was planned to include 533 lots. [9] Dr Martens rejected the validity of the assumption and undertook modelling based on “catchment conditions” including areas outside (upstream from) the site, which were assumed to be undeveloped. He then removed lakes 3 and 4 from the 5 lake scheme, concluding: [10]

3. [48]

   The validity of Mr Jamieson’s assumption is critical to determining whether Noubia’s alternative hypothetical subdivision was viable.

(c) stormwater quality and treatment requirements

1. [49]

   The objective of limiting nitrogen and phosphorous levels in respect of stormwater was accepted by both experts. Mr Jamieson contended that the trunk drainage scheme would achieve such levels; Dr Martens’ modelling demonstrated that the alternative scheme would not be capable of meeting such water quality objectives.

(d) riparian corridor requirements

1. [50]

   The experts disagreed as to whether the trunk drainage scheme would provide a sufficient riparian corridor. However, to a significant extent the difference related to town planning expectations as to an appropriate standard. Whether those expectations could adequately be gleaned from the 5 lake scheme which had been approved was more a matter for the town planners. The question of visual amenity of the riparian corridor was also ultimately a matter for the planning experts.

2. [51]

   In the course of the oral evidence, Dr Martens accepted that the hypothetical subdivision allowed for a corridor around the drainage channel which was close to his minimum requirement. He accepted that the proposal would “in substance” meet his standard in relation to flood conveyance, [11] apparently based on Mr Jamieson’s assumption as to volume.

3. [52]

   Mr Jamieson was questioned as to Noubia’s abandonment of its original proposal for a 2 lake scheme, with a drainage channel running through the site, in favour of a 5 lake scheme. He agreed that one of the factors taken into account was that “the lakes have generally been located in the areas which follow the original watercourse, rather than filling those areas.” [12]

4. [53]

   It is apparent that significant weight was placed, both by the experts and by counsel in questioning the experts, on the fact that the Council had approved a proposal similar to the alternative drainage scheme relied upon by Noubia, and then at a later date had approved the 5 lake scheme. In dealing with the issue of the riparian corridor, Dr Martens considered a riparian corridor with an average width of 40-50m would be required. He did not know, however, of any extant policy in the 2000’s requiring such a width. He noted that the 5 lakes system provided, on average, a 50m riparian corridor, or riparian area, although it was narrower at particular points and in fact was in the order of 15m just south of a bridge. [13]

(3) Manner in which trial judge dealt with the hydrology evidence

1. [54]

   The judge noted briefly, as part of the description of the development, the design of the 5 lake system by Umwelt. [14] The judge then turned to the central issues, which were identified as the elements of the hypothetical subdivision upon which Noubia rested its valuation case, and stated:

2. [55]

   The judge returned to a description of the drainage scheme and a summary of the expert hydrology evidence at [76]-[98], setting out the opinions of the experts with respect to each of the four elements identified above. Having noted aspects of the evidence where the experts disagreed, the judge expressed his conclusion on the hydrology evidence in the following passage:

3. [56]

   The judge returned to the issue in setting out the parties’ competing submissions. The applicant’s submissions were either summarised or quoted in the lengthy passage from [143]-[165] (applicant’s submissions), [166]-[190] (respondent’s submissions) and [191]-[202] (applicant’s submissions in reply). At [203]-[209] the judge set out further submissions in relation to a claim for stamp duty and costs. He then returned to the valuation issue, commencing with the “highest and best use” of the lots to be transferred to Council. The judge concluded that the hypothetical subdivision was “both feasible and achievable”, accepting Noubia’s case in that regard. With respect to the hydrology evidence, the judge stated:

(a) grounds 1 and 2

1. [57]

   The primary complaint of the Council (grounds 1 and 2) was that, although the judge expressed a preference for Noubia’s case over the Council’s, at no point was there any attempt to explain how the judge resolved the substantive points of difference between the experts. Grounds 1 and 2 will be addressed after referring to the rest of the expert evidence, which in part rested upon inferences drawn from the hydrological reports.

(b) Ground 3: procedural unfairness

1. [58]

   Ground 3 alleged that the Council had been denied procedural fairness by the judge expressing a preference for Mr Jamieson’s hydrology evidence based on his “close involvement over many years with the specifics of the subject land”: at [100]. In substance, the point taken by the Council was that, while evidence of the qualifications and experience of each expert had been adduced, no issue had been raised as to the qualifications of either, and Noubia had not relied upon Mr Jamieson’s earlier experience in advising it with respect to proposed developments as a point of distinction in his favour. The Council also submitted that reliance on his earlier experience did not provide a valid reason for preferring his evidence to that of Dr Martens.

2. [59]

   The complaint that no reliance had been placed on Mr Jamieson’s experience with the land was misplaced. The issue was raised in Noubia’s written submissions in reply, dated two days before final oral submissions and served in advance of the final oral submissions. The reply relied heavily on the submission that there was no permanent or substantial natural water course in the area where the lakes were created. The submissions continued:

3. [60]

   In the course of oral submissions, Mr Lancaster SC for Noubia stated: [15]

4. [61]

   Noubia relied on these passages on the appeal, and further submitted that Mr Hemmings SC for the Council had responded to, or at least acknowledged awareness of, Noubia’s position, in saying: [16]

5. [62]

   Thus, it was not correct to say that (i) the judge’s reasoning found no support in the submissions before him; (ii) the Council had no notice of Noubia’s reliance on the basis of preference, or (iii) Mr Jamieson’s earlier experience was irrelevant. It follows that, however the procedural unfairness ground is formulated, it cannot be accepted. Ground 3 is rejected.

(5) Town planning evidence

1. [63]

   Each party called a town planner to consider whether the hypothetical subdivision proposed by Noubia would have received development consent if applied for prior to the transfer of the relevant lots and, in particular, the transfer of lot 94 on 18 May 2007. Lot 163 was not transferred until February 2012, but lot 163 was an elongated lot which, although of similar total area to lot 94, contained only three residential dwellings under the proposed hypothetical subdivision, located on lake 5. Lot 94 contained 32 residential dwellings. As the same approach was adopted in relation to each lake it is sufficient to discuss the evidence with respect to lot 94, as did the parties.

2. [64]

   The difference in approach between the two planners turned in part upon the expert hydrology evidence. Thus, Ms Brown, briefed by the Council with Dr Martens’ report, concluded that the hypothetical subdivision would not have been accepted because the alternative drainage system was inadequate. Ms Hunter, retained by Noubia, relied upon Mr Jamieson’s assessment, namely that the drainage system was adequate, to form the view that Council would have accepted the alternative hypothetical subdivision.

3. [65]

   Although the judge did not address the issue, it is clear that at least Ms Brown was conscious that Noubia’s alternative hypothetical subdivision was based on the planning assumption that Noubia was only required to deal with water emanating from its development. Ms Brown’s report identified the point of departure between the hydrologists in Part 4.2 headed “Drainage”:

4. [66]

   Ms Brown then noted, in identifying the public purpose of the dedication of the land, under the heading “Land for drainage purposes”:

5. [67]

   There was one other significant aspect of the proposed subdivision requiring town planning consideration, namely that by May 2007 both housing and the 5 lakes had been constructed. Ms Hunter and Ms Brown agreed that the 5 lakes had benefits beyond stormwater retention, namely providing riparian corridors, areas of visual interest and passive recreation. [17] In a final section assessing the potential of the land for development Ms Brown stated:

6. [68]

   The Joint Expert Report – Planning provided little more than a summary of the positions taken by the two planners in their individual reports.

7. [69]

   In the course of cross-examination Mr Hemmings SC (for the Council) asked Ms Hunter the following questions: [18]

8. [70]

   On the same topic, Mr Lancaster (for Noubia) asked Ms Brown: [19]

9. [71]

   The answers given by the town planners with respect to this issue suggest that neither was fully cognizant of the importance of Mr Jamieson’s assumption that only 46% of the stormwater needed to be addressed for the purposes of the development proposal. However it appears that both counsel were cognizant of the importance of the issue.

(6) Evidence of valuers

1. [72]

   It is sufficient to consider the evidence of the valuers as to lot 94, being the lot the subject of the largest amount of compensation.

2. [73]

   Mr Davis, a valuer retained by the Council referred to the report of Ms Brown and the hydrology report of Dr Daniel Martens. Mr Davis noted that Dr Martens’ report indicated “that the form and function of the existing five lakes in the Lakes Estate represent an optimal solution to flood management, detention storage, water quality improvement, riparian habitat and visual and public amenity.” Mr Davis noted that Dr Martens’ critique of Mr Jamieson’s report included the following proposition: [20]

3. [74]

   Mr Davis concluded that lot 94 was required for its present use and had “no possibility of residential development”, so that the market value was measured by the sales of “constrained land” in the vicinity. He identified a number of sales of constrained land with comparable constraints, concluding that a price might be obtained in the range of $40,000 to $50,000 per hectare. He adopted a figure of $40,000 per hectare, reaching a valuation of the 2.72 hectares in the amount of $110,000.

4. [75]

   Noubia’s valuer, Mr Maher, accepting the availability of the land for residential development in accordance with Noubia’s alternative hypothetical subdivision, and allowing for development costs of the land, derived a land value of $3.256 million.

5. [76]

   Mr Maher went through a careful exercise in identifying the “highest and best use of land”. He also identified the public purpose of the “acquisition”, to be “disregarded when determining compensation for market value”, as stormwater drainage and detention. [21] He then expressly considered the exercise undertaken by Mr Jamieson, including the division of responsibility for stormwater management between landowners in the following terms: [22]

6. [77]

   The joint report of the valuers was extensive, and involved alternative calculations by Mr Davis on the basis that the land value was not constrained in the manner in which he had accepted in his individual report. Relevantly for present purposes, the joint report set out a list of matters agreed in section 6 and a list of matters not agreed in section 7. The matters agreed included the following propositions:

7. [78]

   The next section, “Matters not agreed” commenced with subsection 7.1 “Nature of Stormwater Management System” which set out, in identical terms, the same paragraphs as those set out above. The Court was not taken to any material in the cross-examination of the valuers indicating that the discrepancy had been identified or explored. However, there is no doubt that the issue (that external water should be disregarded) was not agreed as between the valuers, or the parties.

(a) identifying the issues

1. [79]

   There is further material in the valuers’ evidence which needs to be noted. However, it is convenient to do so by reference to the issues to be resolved which can be identified as:

(b) the effect of the “public purpose”

1. [80]

   The concept of “public purpose” needs some further explication in a context which does not involve compulsory acquisition of land. In particular, its relationship with restrictions on use becomes important.

2. [81]

   All land will be subject to constraints on use, either deriving from its natural features, or from legally imposed planning constraints. Indeed, the categories are not mutually exclusive. For example, development may not be permitted on areas of land involving koala habitat. That constraint involves a natural feature of the land, to which a planning constraint is attached. Such a constraint is imposed, not for the benefit of the landowner, but for broader environmental purposes. In that sense, it involves a “public purpose”. Noubia’s development site was subject to a similar constraint. The area was subject to stormwater runoff both due to water collecting on the site itself, and water flowing from upstream land. The need to deal with upstream flows was both a consequence of the natural topology and a feature which affected surrounding landowners, in that sense containing a public element.

3. [82]

   As reflected in Mr Jamieson’s evidence, Noubia’s claim assumed that a condition of consent which required the developer to manage waters flowing onto the site from upstream areas was not a condition intended to benefit the developer, but rather was intended for the purpose of benefiting others, and thus a “public purpose”. However, the same could be said of the manner in which the developer was required to manage water flowing downstream which originated on its land. Because the purpose was to benefit downstream landholders and the quality of water in Newports Creek, even that condition would involve a public purpose. Zoning constraints may be characterized in the same way in so far as they benefit the amenity of other landholders in the neighbourhood.

4. [83]

   The principle underlying Mr Jamieson’s alternative hypothetical subdivision was that the public purpose of managing water flowing onto the land from upstream properties could be disregarded in formulating a proposed development. Viewed in those terms, there was logic to the alternative hypothetical subdivision. However, that said nothing about the likelihood of the subdivision being approved. The reason why it might not be approved was that it failed to address an inherent constraint on the use of the land, namely that it was subject to flooding from upstream areas. No doubt it was true that control of such flooding involved a benefit to other landholders. However, accepting the internal logic of the alternative hypothetical subdivision, it remained necessary to ask whether it would be approved as a freestanding development. If it would not be approved, it was not the financially most advantageous development of the land; it was not an available development.

5. [84]

   There was substantial evidence in favour of the view that the Council would not have approved a development which did not provide for the detention and management of upstream flows onto the land. Indeed, that was the point being made by Mr Martens in his evidence referred to at [47] above. It was the point made by the Council’s town planning expert, Ms Brown, in the passage at [66] above.

6. [85]

   There was also a distinction between upstream flows deriving from undeveloped land and upstream flows which might later arise after development occurred. The distinction formed the basis of Mr Lancaster’s questioning of Ms Brown at [70] above.

7. [86]

   The issue was raised by Mr Hemmings in cross-examining Mr Maher. [23] An objection was taken by Mr Lancaster on the basis of the language being used, namely the suggestion that the land was, on one assumption, “undevelopable”. [24] The semantic dispute is of no present consequence, but Mr Hemmings’ response was: [25]

8. [87]

   For Noubia, Mr Jamieson appears to have assumed that that question did not arise because s 56 of the Land Acquisition Act required him to disregard the “public purpose”. Thus, by simply preferring Mr Jamieson, the trial judge said nothing about the resolution of this critical issue. It was one of two matters which should have been dispositive of the case. (The other is discussed below.)

9. [88]

   On that basis alone, the judge’s valuation of lots 94 and 163 should be set aside. However, as the issue appears to involve, at least in part, a question of the proper construction of condition 1 of the consent, this Court should indicate how the legal issue ought be addressed, although that will not determine the factual outcome.

10. [89]

    The difficulty arises from invoking a statutory provision for the assessment of compensation for compulsory acquisitions as a basis for valuing land which is dedicated as a condition of a development consent. If it were clear that residential development would simply not be permitted on an area of land because, for example, it contained high quality koala habitat, refusal of consent to develop that area, subject to the addition of some form of long term protection for the habitat, could not sensibly be described as acquisition for a public purpose. Indeed it might not involve acquisition at all. This case is different in that there is no specific area of land which necessarily required protection from development. However, the principle must remain the same. If development would not be permitted absent protection of a specified characteristic, and assuming that the protection could properly be described as being for a public purpose, it is not possible to disregard the public purpose and assume that development consent would have been granted absent protection of the characteristic. In this case, the characteristic involved existing water flows and water quality; that characteristic did not distinguish whence the water came. It turned on the volume and quality of the water flowing off the undeveloped land.

11. [90]

    Accordingly, Noubia’s alternative hypothetical subdivision could not simply be assumed to be an acceptable development which would receive development consent. Further it appears that Mr Jamieson assumed that s 56(1)(a) of the Land Acquisition Act required that all upstream water was to be disregarded. [26] If that was what he did, it was not a correct understanding of the operation of condition 1 of the development consent. (That is not a criticism of Mr Jamieson, who was given an exercise attended by legal difficulties, apparently without much assistance.)

12. [91]

    What was, perhaps, not fully articulated in the submissions of the parties was the way in which consideration of the “statutory disregard” in s 56(1) of the Land Acquisition Act applied where the public purpose was an element inherent in the development application. Nevertheless, the need to address the question of whether the alternative hypothetical subdivision would have obtained consent, given that it did not address the question of upstream water flows from undeveloped land was critical to Noubia’s compensation case and was simply not addressed in the reasons of the trial judge.

(c) assessment of financial return

1. [92]

   There was a second issue arising in the valuation exercise. As noted above, Mr Jamieson, who had been involved in advising Noubia in the development of the 5 lakes proposal, had promoted the proposal as preferable to a scheme involving two lakes, with high dam walls, and an open drainage channel between them. [27] To the extent that the water bodies improved visual amenity, passive recreation and riparian corridors, the value of the lots may have been higher using the 5 lake proposal. [28] In addition, there were significant issues as to the cost of building the dam wall required for the upstream lake and for cutting and filling the land the subject of the development. Mr Jamieson recognised the benefits to be obtained from the 5 lakes system. [29] In short, the Council contended, the approved development and the alternative hypothetical subdivision involved different costs and benefits. Removing lakes 3, 4 and 5 could not be viewed in isolation.

2. [93]

   It was part of the Council’s challenge to the valuation evidence provided by Mr Maher that he did not attempt an assessment comparing the overall value of the subdivision as approved, and the hypothetical subdivision. After some preliminary questions (which led to some confusion with the witness), the cross-examination of Mr Maher addressed the critical point in the following terms: [30]

3. [94]

   The detail of the issues raised by that concession need not be examined; its suffices to say that Mr Maher accepted that the “before and after” methodology was not the same as simply valuing the extra lots which would be available if lots 94 and 163 were to be subdivided for residential development.

4. [95]

   The issue thus raised and expressly identified in the Council’s written submissions was not directly addressed in Noubia’s written reply. Those submissions merely asserted that Mr Maher’s methodology was “well recognised”, without engaging with the critique ostensibly accepted by Mr Maher. [31] In oral submissions, counsel for Noubia identified the public purpose as “water quality management and stormwater and flooding control.” [32] Counsel continued:

5. [96]

   This submission did not address either of the two critical matters set out above. In its terms, it required analysis of at least the second issue set out above. It follows that the judge’s adoption of the case presented for Noubia could not answer the Council’s case in respect of that issue without acknowledging and assessing the significance of Mr Maher’s concession in cross-examination. That did not happen.

6. [97]

   By way of response in this Court, Noubia contended that Mr Maher had said in re-examination that the instruction he was given to abandon a “before and after” valuation was “not material” to the opinion he expressed. That evidence was as follows: [33]

7. [98]

   The trial judge set out the submissions of the Council and referred to the evidence, at [180]-[181]. In other words, the issue was identified, but the submissions (and the evidence on which they were based) were neither assessed nor otherwise addressed.

8. [99]

   The fact that Mr Maher’s valuation exercise may have been conventional in one sense did not address the question raised by the Council, which was that the valuation of one element of the alternative hypothetical subdivision failed to take into account the fact (demonstrated by correspondence between Noubia and its then consultant) that there would be both costs and benefits associated with the alternative proposal. There were undoubtedly consequences, both financial and aesthetic, in constructing the dams required by the two lake system and removing lakes 3, 4 and 5. That was the issue which the Council sought to raise by inviting consideration of a “before and after” valuation. The substance of the critique was not addressed by the trial judge.

9. [100]

   The materiality of this issue can be explained in principle. A “before and after” valuation may have shown that the approved development was more or less financially advantageous than the alternative hypothetical subdivision. If more, the approved development was the “highest and best” use of the land for the developer. If the alternative proposal provided a more financially advantageous outcome, it would be necessary to assess the likelihood of it being accepted by Council. That would require an evaluation of whether it maintained the same level of downstream flows without lakes 3, 4 and 5, and achieved an equivalent level of water quality. This artificial exercise is one the hypothetical purchaser would be expected to undertake. The fact that Noubia in fact adopted the 5 lake system, might be evidence of such an assessment.

10. [101]

    It might be thought that assessing the cost of the alternative proposal would depend on when it was undertaken. That is, should it be costed as the development of a greenfield site, as in 2003, or as a reconstruction of the partly constructed development in 2007? The hydrologists appeared to adopt the former alternative, the town planners and valuers, the latter. How that issue should be resolved was barely addressed on the appeal. Accordingly, the matter must be left to the Land and Environment Court on remittal.

(8) Valuation exercise - Conclusions

1. [102]

   There are, as the Council accepted, two ways of viewing the failure to engage with these material issues. Ground 1 asserted that the Court failed to provide any or adequate reasons with respect to the contested issues. If the court were satisfied that the judge had identified the need to resolve the issues, and had done so, but failed to record why they were resolved in a particular way, there might be a failure to provide reasons. The better view is that the judge did not attempt to resolve the contested issues, a conclusion which may be described as a constructive failure to exercise the jurisdiction of the court.

2. [103]

   There is a difficulty in that circumstance for this Court in seeking to resolve the dispute. On the assumption that the exercise has not been undertaken in the trial court, this Court would be exercising original jurisdiction. While that is not necessarily beyond the function of this Court on an appeal by way of rehearing, it would require a detailed analysis of the evidential material and submissions below which neither party undertook on the appeal. For the Court to take the matter further would be to risk committing error from which there would be no right of appeal available to the unsuccessful party.

3. [104]

   The judge having erred in the way discussed above, the judgment below in respect of the valuation of lots 94 and 163 must be set aside and the matter remitted to the Land and Environment Court for determination according to law.

Lot 96 – liability to pay compensation

1. [105]

   Lot 96 was an area of 1,581m2, or about double the size of the residential lots in the development, and was located on a crescent on the western side of the development. There was no dispute as to its value, which was agreed at $265,000; the dispute was as to whether the Council was required to pay compensation for the transfer of the land to it as a public reserve.

2. [106]

   The transfer took place on 31 July 2008. Pursuant to the first bullet point of condition 1 of the development consent, as amended in 2006, [34] Council was required to pay Noubia for lot 96 if it were “identified in the [Contributions Plan] for koala management, traffic management, water quality and community facilities”. If not, it constituted “additional land” which could be dedicated, but at no cost to Council, pursuant to the third bullet point.

3. [107]

   The Contributions Plan described “local open space”, as “neighbourhood parks, children’s playground areas, passive reserves and drainage reserves.” [35] Because local open space was to be used primarily by children, the Contributions Plan further stated that “these facilities should be provided within walking distance of residential development.” A reasonable walking distance was identified as 500m. The Contributions Plan included Map 3, showing a 500m radius around potential neighbourhood park sites. It identified two playgrounds within stage 1, one of which was to the east of the lakes and the other to the west. Lot 96 was closer to the playground to the west, but was well within the 500m radius of the eastern playground. The western playground was not within Noubia’s development site. The respective locations of Noubia’s lot 96, and the proposed playground, are shown on Attachment C, a plan prepared by the town planners, using Map 3.

4. [108]

   It is necessary to consider how one should interpret the language, and Map 3, of the Contributions Plan. It identified its purpose as enabling the Council to levy contributions under s 94 of the Planning Act, as then in force. It provided a method of calculating the contributions required. Section 94(1) provided:

5. [109]

   Section 94B provided for the Council to prepare a “contributions plan for the purpose of imposing conditions referred to in this Division.”

6. [110]

   Because the purpose of the Contributions Plan, and s 94 of the Planning Act, was to empower the Council to require payments or dedication of land by developers, those powers should not be construed loosely if the result is to permit a council to require the developer to dedicate lands not clearly identified, “free of cost”. Where a Contributions Plan indicated the area in which land was to be dedicated, by a marking on a map which fell outside the development site, a court should be slow to permit the council to claim land to be dedicated free of cost as against that developer.

7. [111]

   The effect of the consent was to identify land, not so that it could be required to be dedicated free of cost, but so that the Council could be required to pay compensation for the land so dedicated. However, it is by no means clear that a document, such as the Contributions Plan, produced for one purpose should be differently construed when used for another purpose. Further, accepting the change in purpose for which the Contributions Plan was being used, the principle of strict construction can be justified in the same way. A developer should not be able to impose an obligation on the Council to expend money, by dedicating a block of land which did not clearly fall within the terms of the Contributions Plan. Approaching the matter in this way, as the western playground indicated in Map 3 was well outside Noubia’s development site, it should not be open to Noubia to dedicate the area and require the Council to pay its full value as residential land.

8. [112]

   The trial judge adopted a different approach. The dispositive reasoning for accepting Noubia’s claim was as follows:

9. [113]

   Several aspects of this paragraph require explanation. It was preceded by an extract from the judgment of Lloyd J in Kendall Street Developments Pty Ltd v Byron Shire Council, [36] quoted by Noubia in its written submissions, which identified a need to read a development consent “in a common sense way so as to give effect to the obvious intention of the draftsperson.” The words used were to be construed “from a practical viewpoint”.

10. [114]

    Noubia’s submissions at par 87, referred to by the trial judge then said that such an interpretation of condition 1 “leads to the conclusion that if the approved plan of subdivision shows land ‘set aside’ for acquisition, prima facie compensation for the acquisition of that land must be paid by Council.” It may be inferred that, adopting this submission, the trial judge was construing condition 1, rather than the Contributions Plan.

11. [115]

    The development consent, to which the approved plan of subdivision was presumably attached (it bears the date 4 March 2003, consent was granted on 11 April 2003), bore the notation “public reserve” on the area identified as lot 96, although not then so numbered. It was not, as Noubia acknowledged in its written submissions in a passage not quoted by the judge, expressly stated to have been set aside for acquisition, although an inference could possibly have been drawn from the use of the term “public reserve”.

12. [116]

    The problem with the judge’s reasoning, however, is more fundamental. First, condition 1 in the original development consent granted on 11 April 2003 did not include the words “the lands set aside for acquisition within the approved plan of subdivision”. It merely referred to “land nominated under the [Contributions Plan].”

13. [117]

    Secondly, the language of the amended condition 1 did not stop after referring to the lands set aside for acquisition within the approved plan of subdivision, but continued, “being those lands identified in the [Contributions Plan].” The second limb followed faithfully the language of the pre-amendment condition, with the principal change being the term “those lands identified in” rather than “land nominated under”, the Contributions Plan. For present purposes little turns on that particular change in language; “identified in” requires express reference in the Plan itself, as no doubt did “nominated under”. The only such identification of particular land was on Map 3.

14. [118]

    Thus, reading the whole of the first paragraph of condition 1 (as amended), it is apparent that there is a dual qualification for land the subject of the obligation under par 1 of condition 1. It is an element (the second limb) that the lands be relevantly identified in the Contributions Plan. Thus, even accepting that lot 96 was set aside for acquisition for a relevant purpose in the approved plan of subdivision, that characteristic was not, by itself, sufficient to engage par 1 of condition 1.

15. [119]

    That reading operates harmoniously with the third bullet point, providing that additional lands “proposed by the developer for public ownership … are to be dedicated at no cost to Council at the time of linen plan registration.” That requirement in the third bullet point suggests that such lands must also be marked on the plan of subdivision. Accordingly, little turns on the fact that lot 96 was designated as a “public reserve” on the plan of subdivision. By way of counterpoint to the first bullet point, the lands must be lands “not detailed in the [Contributions Plan].”

16. [120]

    In this Court, Noubia contended that the judge’s conclusion should be accepted for the reasons contained in Noubia’s submissions at trial. [37] Understandably, there was no attempt to suggest that lot 96 coincided geographically with the position of the western playground identified on Map 3 of the Contributions Plan. Rather, Noubia submitted that the Contributions Plan was “a concept document” with “broadly indicative locations for neighbourhood parks.” [38] The submissions further stated:

17. [121]

    For reasons already indicated, that approach to construing the Contributions Plan, given its function under the Planning Act, should not be accepted.

18. [122]

    Noubia’s submissions in this Court also referred to its submissions in reply in the Court below. Those submissions accepted that the liability of the Council to pay compensation for lot 96 was a matter of construction and did not turn upon the evidence of witnesses (although that evidence was called in aid when it was favourable to Noubia [39] ). Otherwise, the reply submissions noted again the reference in the plan of subdivision to lot 96 as a “public reserve” and then noted that the Contributions Plan identified “an area of land in the close vicinity of lot 96” as being required to be applied to public purposes. It did not submit that the area identified in the Contributions Plan was located on the land the subject of the development consent.

19. [123]

    These submissions have been addressed above. The Council was correct to focus on the requirement of condition 1 that what was required to be transferred or dedicated was land “identified in” the Contributions Plan.

20. [124]

    If lot 96 did not engage the first bullet point in condition 1 as amended, it clearly fell within the third bullet point. There being no third possibility, there was no obligation on the Council to pay for the land. That conclusion flowing as a matter of law, as Noubia correctly accepted, there is no issue left to be remitted to the Land and Environment Court. The orders of the Land and Environment Court required payment by the Council for lot 96, must be set aside. This Court should declare that the Council is not obliged to pay Noubia for lot 96.

Conclusions

1. [125]

   Because the assessment of value of lots 94 and 163 has miscarried, the orders of the Land and Environment Court in that respect must be set aside. It is not open to this Court to exercise the evaluative judgment conferred on the Land and Environment Court in this regard. The matter must be remitted for determination in that Court.

2. [126]

   However, so far as a challenge was brought to the ruling of the Court with respect to lot 96, it is sufficient to set aside the order requiring that the Council pay an amount for that lot and make the alternative declaration.

3. [127]

   The Court should make the following orders:

   1. (1)

      Allow the appeal and set aside orders (1), (2), (3) and (5) made in the Land and Environment Court on 13 August 2019.

   2. (2)

      In place therefore,

   3. (3)

      Order that Noubia Pty Ltd pay the Council’s costs in this Court.