Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2007] HCATrans 470 (30 August 2007)

Last Updated: 3 September 2007

[2007] HCATrans 470

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S307 of 2007
No S308 of 2007

B e t w e e n -

WALKER CORPORATION PTY LIMITED

Appellant

and

SYDNEY HARBOUR FORESHORE AUTHORITY

Respondent

GLEESON CJ
GUMMOW J
HAYNE J
HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 30 AUGUST 2007, AT 11.54 AM

Copyright in the High Court of Australia

MR N.J. YOUNG, QC: In each of the two appeals, if the Court pleases, I appear with my learned friends, MR J.J. WEBSTER, SC and MR I.J. HEMMINGS. (instructed by Minter Ellison)

MR B.W. WALKER, SC: May it please the Court, I appear for the respondent in each of the appeals with my learned friends, MR A.E. GALASSO, SC and MR M.G. GILBERT. (instructed by Deacons)

GLEESON CJ: Yes, Mr Young.

MR YOUNG: Your Honours, may I say at the outset that while we will do our best, both Mr Walker and I think there may be some difficulty in completing the two appeals within the day.

GLEESON CJ: We might just end up with a part-heard matter on our hands until some future sittings, Mr Young.

MR YOUNG: Yes, if your Honours please. The appeals concern the application of section 56(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW). The central issue in the appeals is whether the maintenance of industrial zoning for the land from 1992 and its re-enforcement and extension in December 2000 were part of the proposal to carry out the public purpose for which Ballast Point was acquired in September 2002. In each of its two decisions the Land and Environment Court held that it was part of the proposal. In the second decision Justice Talbot gave alternative grounds for his conclusion. The alternative grounds are reflected in issues 1 and 3 we identified at the outset of our written submissions.

In each of its two decisions the Court of Appeal did not accept that the lower court’s findings were determinative of the case. In our submission, the ultimate answer and, in a sense, the short answer to the appeals is to be found in the limited nature of the appeals from the Land and Environment Court to the Court of Appeal. In our submission, the questions as to when the proposal commenced and what were its constituent steps are entirely questions of fact. So much, we say, is clear from the decision in San Sebastian in this Court, from the decision of the English Court of Appeal in the Wilson Case and from the decision of the New South Wales Court of Appeal in Perry, to which I will come.

On the questions I have mentioned we submit that the primary judge’s findings were conclusive and ought to have been treated as such by the Court of Appeal. The Court of Appeal’s conclusions on that issue in the second decision can only be ascertained, really, by assembling several passages and can I take the Court directly to those passages. The key passage is perhaps at paragraph 40 of the second appeal decision. That is at page 4043 in volume 10. It commences at line 21 and runs to the end of paragraph 40. Central to their Honours’ conclusion is the last sentence, namely, that:

The actions of the Council, or anyone else, cannot be part of the carrying out of the public purpose for which the land was later acquired, at a time when the party later taking action did not intend to acquire it.

There are some other passages in similar vein. If I can go back to paragraph 33 at page 4038, the passage appears in the last two sentences of paragraph 33 and it is to similar effect. The Court will note that in those two passages I have been to, the Court of Appeal slides into the language of the first limb of section 56(1)(a), namely, “carrying out”. The next passage is at paragraph 35 at pages 4040 to 4041, the last two sentences. There the court introduces the idea of “acting jointly” being a requirement that conditions the meaning of the word “proposal”. In paragraph 39 there is a passage in similar vein to the first of the passages I went to.

Finally, at paragraph 52 the court refers to the absence of a committed decision prior to February 2002, albeit that “the Minister had a certain preference” before that date. That passage also refers to the absence of public knowledge of a committed decision by the State Government prior to February 2002.

The Court of Appeal did not in this judgment recognise Justice Talbot’s alternative ground of decision. That is dealt with at paragraph 45 at page 4045. It needs to be read with the preceding paragraph in which certain passages from Justice Talbot’s second decision are quoted, including what appears at the top of page 4045, namely, his Honour’s conclusion “that the proposal was adopted” by the State Government at the time “of the making of LEP 2000”, that is, Leichhardt Environmental Plan 2000. Their Honours said in paragraph 45 that, “The effect of these findings is not clear.”

GLEESON CJ: Leichhardt or local?

HEYDON J: Is it Leichhardt or local?

MR YOUNG: Local. I am sorry, local.

GLEESON CJ: That is a bit of local knowledge, Mr Young.

MR YOUNG: Thank you, your Honour. Their Honours do not recognise that as a finding that the State Government adopted what had theretofore been the Council’s proposal. I will try and deal with that alternative ground separately. The passages I have taken the Court to from the Court of Appeal’s decision appear to impose a limitation on the meaning of the phrase “the proposal to carry out, the public purpose” which appears in section 56(1)(a) and that limitation might be summarised as follows in the context of this case which concerned zoning, namely, the restrictive zoning must have been imposed by actions taken by or on behalf of the acquiring authority and those actions must have been taken at a time when the acquiring authority had decided, or at least intended, to acquire the land.

None of those aspects of the limitation are expressed by the court as legal limitations found either in the language of 56(1)(a) or in cases which have explained the operation of section 56(1)(a) or similar provisions that preceded it or similar provisions found in other States. In their decision their Honours in the Court of Appeal did not address the fact that the State Government indisputably adopted the same public purpose as the Leichhardt Council in February 2002 when the Premier announced the proposed acquisition which was then completed later that year in September 2002.

GUMMOW J: Mr Walker, in his submissions, encourages us to look at the statutory text and at the definite article, “the” proposal.

MR YOUNG: Yes, I am going to do that, your Honour. I will turn to that very shortly. The matter I have just mentioned was something that Justice Talbot relied upon. His conclusion was that it was not to the point that the State Government initially opposed the Council’s proposal because it subsequently implemented that proposal for the identical public purpose. That submission is based on Justice Talbot’s reasons in what I will call Walker 2 at paragraphs 31 and 32 at pages 4009 to 4010. It appears at the very bottom of page 4009.

The same point was made by Justice Talbot in the first decision, Walker 1, at paragraphs 108 and 115 at, respectively, pages 3916 and 3919.

GUMMOW J: The trouble with paragraph 31 at 4009, it talks about “a scheme of acquisition”. It is not what the statute is talking about.

MR YOUNG: No, it is not what the statute is talking about, your Honour.

HAYNE J: Is not the essential meaning you are giving to “proposal” that of scheme?

MR YOUNG: No, your Honour.

HAYNE J: That is, set of interconnected steps rather than statement of intention.

MR YOUNG: No, your Honour. Our submission is that the Court of Appeal did not articulate any legal limitation on the meaning of “proposal” based on anything in section 56(1)(a) and when one turns to section 56(1)(a), as I will now, it is apparent that the meaning and the limitations the Court of Appeal imposed are not consistent with the language of the section. We also say it is not consistent with the language of the authorities which applied similar provisions by reference to the notion of a scheme. That is where the word “scheme” comes from, San Sebastian and Murphy in this Court and other cases which approached earlier provisions which likewise did not use the word “scheme” but they applied those cases by applying what had been the common law principle established in the Pointe Gourde case.

GUMMOW J: Wait a minute, what common law principle? All this comes out of the Land Clauses Acts of 1846 and thereabouts, does it not?

MR YOUNG: It comes out of the use of the concept of value in statutes which then was given a meaning that required any increase or decrease in value attributable to the scheme for acquisition to be disregarded and that principle was first established by judicial decision in Pointe Gourde and later cases.

GUMMOW J: Yes, but in construing statute law. One thing the common law did not provide was for swiping other people’s property.

HAYNE J: It is called theft.

MR YOUNG: We agree with that, your Honour.

GUMMOW J: So there is layers of glosses upon a statutory tangle that starts in 1846.

MR YOUNG: Yes.

GUMMOW J: I am not saying it is bad for that, but that is what it is.

MR YOUNG: That is where the word “scheme” derives from.

GUMMOW J: You will not get much traction with me by invoking the common law. Common law would find a lot of this deeply offensive.

MR YOUNG: Can I turn to the statute, if I may, your Honour?

GUMMOW J: Yes.

MR YOUNG: The key provisions are section 37 which provides the right to compensation for compulsory acquisition. Then section 54(1) which requires “The amount of compensation” to be such as “will justly compensate the person for the acquisition of the land”. Section 55 which requires compensation to be assessed on the basis that it is “the market value of the land on the date of its acquisition”, paragraph (a). Then section 56(1)(a) gives a special meaning to the concept of “market value”. Relevantly, paragraph (1)(a) requires that valuation to disregard:

(a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired –

By way of introductory observation we would note what Chief Justice Spigelman said in the Leichhardt’s Case [2006] NSWCA 353; 149 LGERA 439 at 37, that the dominant provision that informs the construction of a balance is section 54(1) that speaks about just compensation, would make these points about paragraph (1)(a) that bears upon its proper construction.

HAYNE J: Just staying with the proposition you have just advanced, what is the significance you give then to the words “regard must be had to the following matters only” in 55? It is, I rather suspect, either none or very little.

MR YOUNG: No, we give, we would say, full effect to that, your Honour, but that does not mean that you do not construe those words consistently with the purpose enunciated in section 54(1) for just compensation. There is no tension between the two, we would say. Section 56(1)(a) does not speak of the proposal by the acquiring authority to carry out the public purpose. There is a contrast in that regard between paragraph (a) and paragraph (b) which does refer to the carrying out by the authority of improvements.

Secondly, the emphasis in section 56(1)(a) is on the proposal to carry out the public purpose, not the proposal to carry out the acquisition. It is the proposal to carry out the public purpose identified by looking at the acquisition, but that is distinct from the proposal to carry out the acquisition. Our learned friends in their submissions treat the section as if it said the proposal to carry out the acquisition that in fact took place by the acquiring authority. The phrase “the public purpose for which the land is to be acquired” therefore uses the completed acquisition as the means of identifying that public purpose.

The third aspect of the provision is that it draws a distinction between carrying out the public purpose and the proposal to carry out the public purpose – what I call the first and second limbs. The latter concept the proposal seems to be anterior and wider to the carrying out of the public purpose for which the land was acquired. The word “proposal” itself, in our submission, is deliberately wide and flexible. Relevantly, to answer Justice Gummow, it does not seem to convey any necessarily different notion than the word “scheme” would if it were used.

HAYNE J: Does it include, on your submission, a statement of an intention to carry out the public purpose for which the land was acquired? Is that a proposal to carry out the public purpose for which the land was acquired, a statement of intention to do so?

MR YOUNG: It may, your Honour, but such a statement may not have an impact on value of and by itself.

HAYNE J: Or it may commonly have a very profound effect on value.

MR YOUNG: The issue in this case is whether the action of retaining restrictive zoning and then extending it in 2000, whether those actions which did in fact on the findings impact value, whether can be connected with the proposal to carry out the public purpose. Justice Talbot’s analysis was that they could because the State Government acted in 2000, that action was for the public purpose there stated. The Council was, on his Honour’s findings, acting for the same public purpose, that is, bringing the land into public ownership so it could be established as public open space and a harbour side park either by the Council itself, funds permitting, or by another organ of the State.

We submit the word “proposal” has been chosen because it is wide and flexible. There is nothing in paragraph (a) that could confine its operation so that the only proponents of the proposal can be the acquiring authority for people acting at the direction of the acquiring authority, nor is there anything in paragraph (a) that would say that you cannot have a proposal to carry out the public purpose in advance of a definite and committed decision being made by the State Government acquiring authority to commit funds and to proceed with the acquisition.

They are the limitations that have been introduced by the Court of Appeal decision. They are not founded, in our submission, in the language of section 56(1)(a) or in its purposes. The Court of Appeal does not say that that is the source of the limitations that they introduced. We have in our list of authorities referred the Court to some extrinsic materials including the Australia Law Reform Commission Report No 14. I will not take the Court’s time to go to it.

HEYDON J: What connection would it have with the State Act?

MR YOUNG: Legislation in the same terms was introduced in the Commonwealth and the Court of Appeal in the Leichhardt Case said that the Land Acquisition Act (NSW), including in particular section 56, was clearly influenced by the Australian Law Reform Commission Report. It recommended the very language that appears in section 56(1)(a).

GLEESON CJ: Was the Leichhardt Case the case about the value of land that could not be used for any - - -

MR YOUNG: Yes, it was.

GLEESON CJ: Did we give special leave to appeal on that matter?

MR YOUNG: No, I think it was refused. I think it may be useful if I take the Court briefly to the Law Reform Commission Report. The Court has the explanatory note which introduced the New South Wales legislation and in addition the Law Reform Commission Report. The relevant recommendation and the discussion of it appears at paragraph 247 to 249 in that report. At the last sentence of paragraph 247 the recommendation is made in the precise language adopted in section 56(1)(a).

The preceding discussion indicates that there was no thought in the mind of the Law Reform Commission at least that that language in section 56(1)(a) would introduce limitations of the kind articulated by the Court of Appeal in this case or that there was any intention to narrow the principles that had been recognised in the Australian cases, including San Sebastian and Murphy, which are the subject of discussion as this report proceeds. The Commission moreover treated the question of proposal and effect on value as purely factual questions.

GUMMOW J: Where do we see that?

MR YOUNG: At the foot of page 127, your Honour.

HAYNE J: The last sentence?

MR YOUNG: The last sentence in the quote to which it is referring. The other passage to which I was referring is at page 131 at about point 3 on the page, “The better course”. We recognise that extrinsic material of this kind is only an aid and often a very small aid but it does not provide any support for a narrow reading of the reference to “proposal to carry out, the public purpose” in section 56(1)(a). There is one provision in the Act I have not mentioned which I need to. Section 3(1) is an objects clause. The Court will see that it refers to:

land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) –

That language is different from section 56(1)(a). In our submission, although no doubt our opponents might argue the contrary, it does not detract from the construction we will advance of the subsection. It refers to “a proposal for acquisition”, not “the proposal”. The acquisition is “by an authority of the State” which is defined in section 4(1) to include a Minister, a statutory body or a local council. It speaks of the land being “eventually acquired” without any stipulation that the acquisition must be by an entity or by the entity involved in the proposal. But more broadly, that general reference in the objects clause, in our submission, should not be regarded as delimiting or altering what would otherwise be the natural meaning of section 56(1)(a).

The other thing it does not do is that it does not refer to either the carrying out or the proposal to carry out the public purpose. There is no reference to the public purpose in section 3(1)(a) which is the core of section 56(1)(a).

HAYNE J: “Public purpose” is a defined term?

MR YOUNG: It is, but it does not take it - - -

HAYNE J: What relevantly is the purpose for which land may by law be acquired by compulsory process under this Act?

MR YOUNG: It encompasses, your Honour, a range of acquisitions authorised by various statutes of the State.

HAYNE J: What I need to know is what the statutory chain is. If 56(1)(a) uses a term that is defined, the defined term refers to the purpose for which land may by law be acquired by compulsory process under the Act, where do I go from there?

MR YOUNG: You go to section 19(1) which are acquisitions effected by notice in the gazette. The opening words of 19(1) refer to “An authority of the State”, that is, Minister, department, statutory body, local council, et cetera, “that is authorised to acquire land by compulsory process”, effectively under its own statute, as is the case - - -

HAYNE J: That takes me, does it, to section 17(1) of the Sydney Harbour Foreshore Authority Act?

MR YOUNG: That was the acquisition effected in this case.

HAYNE J: That is what I am fussed about. Does it take me to 17(1) of the Sydney Harbour Foreshore Authority Act?

MR YOUNG: The reference in section 3(1) does not take you there directly. The facts of this case take you there.

HAYNE J: I understand that. The facts of this case take me to 17(1) and where do they take me beyond 17(1) within the Sydney Harbour Foreshore Act, because until I understand the public purpose which is spoken of in 56(1)(a), I am at sea.

MR YOUNG: The Sydney Harbour Foreshore Authority is authorised to acquire land by its Act, section 17(1).

HAYNE J: Yes, and where do I go from section 17(1)?

MR YOUNG: I do not think you go anywhere, your Honour.

HAYNE J: Because they may acquire land for the purposes of that Act. Where I am heading, Mr Young, is this, and I need to know the statutory chain with considerable precision, because does it not then, by the identification of the public purpose for which the land was acquired, at least cast some light upon what is meant by “proposal to carry out, the public purpose for which the land was acquired”? In particular, does it not identify the person or authority which is to be considered?

MR YOUNG: No, your Honour, the section operates by reference to the carrying out of the public purpose. You go to the acquisition to identify the public purpose. The acquisition was by the Sydney Harbour Foreshore Authority for the purposes of its Act under the power conferred by section 17(1) and the functions of the Authority are stated in section 12. They are not stated very precisely because those functions include promoting, managing the use of foreshore areas, et cetera. But factually, your Honour, the purpose of the acquisition is identified in this case by going to the Premier’s announcement.

HAYNE J: I understand that is where you need to go and where you want to go. What I am doing at the moment is - - -

MR YOUNG: That is where the Court of Appeal went, your Honour.

GLEESON CJ: How on your construction of the Act does it apply in a case where in a particular locality there is a lobby group that commences to lobby for the acquisition of Blackacre for a public park, if you like, and that goes on for some years and finally they persuade the local council to support the idea and then some years later they persuade the State Government to support the idea and ultimately the land is acquired for that public purpose? Does the proposal have its beginning with the political activity of the lobby group?

MR YOUNG: We would say, no, your Honour. There is a difference between a lobby group and actions taken by a body which has powers of compulsory acquisition. So it is no earlier than the point at which the council, having relevant powers of acquisition, takes steps for the public purpose in question.

GLEESON CJ: Why not if what the council is doing is adopting a proposal of a particular action group?

MR YOUNG: You have to draw the line somewhere and the section speaks of the proposal to carry out the public purpose. I think there has to be an element of ability or capability of carrying out that public purpose that informs the identification of the first step in the proposal. So, in our submission, talk about ginger groups and lobby groups are, in general terms, usually outside the point at which the proposal commences. Factually in this case it is not relevant because the primary judge identified the proposal as commencing with the actions of the Council.

If I can elaborate a little bit further, your Honour, on that answer. The purpose of the Council from 1992 onwards was identified by Justice Talbot in the first Walker decision at pages 3916 and 3917 in terms that spoke of the acquisition of the land for use as open space either by the Council itself, finance permitting, or by the State Government. If that is the relevant public purpose for which a council with powers of public acquisition was acting, it is possible to see how the ultimate adoption of the Council’s proposal by the State Government leads to the conclusion that there is a single public purpose underpinning the acquisition. It was pursued by the Council initially. It was then adopted by the State Government, but in applying section 56(1)(a), you go back to the point at which that proposal was commenced by the Council. That was Justice Talbot’s first ground of decision essentially.

His alternative ground of decision was that the State Government itself acted directly to expand the industrial zoning in December 2000 to enable, amongst other things, it to investigate compulsory acquisition, certainly to freeze development pending a decision. That action by the government itself, the positive action it took, facilitated the public purpose, facilitated the acquisition, and therefore was part of the proposal on his Honour’s alternative ground. Now, either of those ways of identifying the proposal and its constituent elements, in our submission, falls squarely within the natural language of section 56(1)(a).

The kind of example your Honour the Chief Justice gave me was addressed in San Sebastian by Justice Jacobs. I will take the Court there. The reason I go to the cases is that they are instructive in informing the approach that is to be adopted to these sorts of application issues that arise in applying a provision like section 56(1)(a). There has been no suggestion that section 56(1)(a) intends to depart from the approach described in San Sebastian and Murphy, notwithstanding that those cases were based on sections that had different language. Can I take the Court to San Sebastian [1978] HCA 28; 140 CLR 196. The leading judgment was by Justice Jacobs and the other judges agreed. The discussion commences relevantly at page 205.

The language of section 124 of the Public Works Act is quoted or referred to in the second last paragraph. The language used in that section was the establishment of the public works which, on their face would appear to be quite a narrow collection of words, are read more widely by the courts and consistently with the Point Gourde Case. I will just make several points about his Honour’s discussion that proceeds from the last paragraph at 205 to the middle of 206. His Honour there accepted that the section applied to proposals that raised “the possibility or likelihood of resumption”. That is the last passage at page 205 and again at the top of 206. In the next paragraph his Honour referred to zoning restrictions:

imposed as a result of consultation with or direction by the public authority concerned with the carrying out of the particular public purpose.

His Honour treated this case as a case like that because the zoning restriction followed an intergovernmental agreement and so there was a direct relationship. But to take up your Honour the Chief Justice’s question to me, his Honour would include a restriction imposed as a result of consultation between the local council and the resuming authority. His Honour then spoke of a wider category of connection at page 207 at about point 3 on the page.

If the zoning was done with the intent or in anticipation that the land should be resumed for a purpose such as a public reserve or if the zoning was proposed or dictated by the resuming authority then s. 124 requires that the zoning be ignored. It is only a step in the process of subsequent resumption.

In the example I gave your Honour the Chief Justice, a council’s zoning imposed with the intent or in anticipation of resumption either by the council or by the State Government, if it can be persuaded, would seem to fall within that category of connection that would establish the sufficient relationship in the view of the court in San Sebastian.

The limitations that arise from the passages in the Court of Appeal’s decision I have taken the Court to are effectively a reprise of the approach adopted in the Court of Appeal in San Sebastian which the High Court specifically rejected. That appears in Justice Jacobs’ judgment at page 213. His Honour quotes two passages from Justice Hope’s judgment of the Court of Appeal at the foot of 212 to the top of 213. We have, I think, provided a reference to the Court of Appeal’s decision but can I summarise in essence what Justice Hope had said.

Based on his Honour’s reading of the Stocks & Parkes Case in this Court his Honour concluded that relevant acts concerning zoning could only be part of a proposal if they were in fact the acts of the acquiring authority. That appears at pages 201 point 2, 203 point 4 and 204 point 3 of Justice Hope’s judgment in the Court of Appeal. Justice Jacobs rejected that approach at 213 in the passage commencing “For reasons which he had earlier expressed”. Justice Jacobs went on to say:

I am not satisfied that this distinction should be drawn and I do not think that I am constrained by the Stocks & Parks Case to make that distinction. Section 124 refers to the establishment of public works. These words are in my opinion wide enough to cover the whole subject matter of the establishment of the particular public work – proposal or requirement by the relevant authority, –

which we read as a reference to the acquiring authority –

intention of the planning authority –

that is a different authority –

by such a zoning to induce the establishment of the public work, even urging by outside bodies that the public work should be established.

We do not need to go so far as to contend for that last element.

GUMMOW J: I thought you rejected that.

MR YOUNG: We did, your Honour, yes. His Honour then observed that the effect on value will differ depending on how authoritative the connection. His Honour then observes that it was unnecessary to decide that aspect in the case because there the zoning was dictated by an intergovernmental agreement between the Commonwealth and the State of New South Wales.

GUMMOW J: What do you say about the treatment of this by the Court of Appeal which was quite lengthy?

MR YOUNG: We say the Court of Appeal, in our submission, misunderstood this aspect of San Sebastian. Can I take your Honour to the first Court of Appeal decision. I mean, there is something of a difficulty here in that there are two Court of Appeal decisions and much of the discussion of San Sebastian is in the first and there is a differently composed court on the second occasion. Now, subject to that, we draw the Court’s attention to page 3971, paragraph 59 - - -

GUMMOW J: They started, did they not, at 3964 with the text of section 124?

MR YOUNG: Yes, they did, your Honour.

GUMMOW J: The phrase that Justice Jacobs was construing seems to be that set out at 3965:

without reference to any alteration in such value arising from the establishment of railway or other public works - - -

MR YOUNG: Yes, and, if anything, your Honour, those words are narrower than the words we confront in section 56(1)(a). There are two passages towards the end of the discussion of San Sebastian we draw attention to, your Honour. In order, the first is in paragraph 55 at page 3969, the last sentence. It is the concluding words “absent any indication of agreement on the part of the resuming authority”. That seems to introduce an element not contemplated by the High Court in San Sebastian.

In paragraph 59 the court discusses one of the passages I referred to from San Sebastian. The court refers to the words “relevant authority” at about point 4 on the page in San Sebastian as being “a reference to the resuming authority”. We accept that is so. But in the immediately following passage Justice Jacobs refers to actions by the zoning authority to induce action on the part of the resuming authority as being within the kind of connection that would suffice. Their Honours do not refer to that. In our submission, the Court of Appeal did not, at least in the first decision, address the proposition that San Sebastian is inconsistent with the kind of limitation that was introduced by the Court of Appeal primarily in its second decision but hinted at in its first decision.

Another feature of the first Court of Appeal decision that I will mention now whilst it is open is that the Court of Appeal in the first case doubted that section 56(1)(a) applied to a failure to do something. There are several passages addressing that matter. Paragraph 39 firstly at page 3961. It is the last sentence, but I should also draw the Court’s attention to the passage that immediately precedes it, namely, the reference to section 56(1)(a) “not expressly refer to steps taken in the development of a proposal or steps which are merely preparatory to the carrying out of the public purpose”. In a way, the very reference to the proposal is to something preparatory to the carrying out of the public purpose.

The other passage is at paragraph 87, page 3985. I have mentioned those passages because the next case I wanted to go to is The Crown v Murphy in volume 65 ALJR 593 and the relevant passages are at 595. The case proceeds on the footing that a refusal to rezone by a council is capable of being a step in a proposal to carry out the public purpose of an acquisition by the Crown. The facts were that the Council refused an application to rezone land as residential. The land was situated adjacent to a turtle rookery. After the Council’s decision the Council wrote a letter referring to representations made by National Parks and saying that in refusing to rezone the land it was protecting the interests of the State Government departments.

The land was later resumed by the Crown. So it was a case in which there were two different authorities; the council that refused the rezoning and the Crown or government department which effected the resumption. The Court set out the applicable principles at page 595 in a manner entirely consistent with the passages I have taken the Court to in San Sebastian. In particular it is the middle paragraph in the left column at 595, after the reference to Melwood:

The principle applies in cases where there is a direct relationship between the planning restriction and the scheme of which resumption is a feature and extends to cases where there is merely an indirect relationship, provided that the planning restriction can properly be regarded as a step in the process of resumption.

The case appears to have proceeded on the footing that this principle may have been capable of applying but for the fact that the proximity of the turtle rookery meant that the land was never likely to be rezoned residential in any event and any decrease in value inhered in the characteristic of the land that was adjacent to an important turtle rookery. Therefore the decrease in value alleged had nothing to do with the proposal for resumption. It was pre-existing and existed quite independently. That was the basis of the Court’s decision. But the proposition that section 56(1)(a) could not apply to inaction in the form of a maintenance of zoning, not for proper planning purposes but for other purposes, is not consistent, in our submission, with The Crown v Murphy.

The other case I will take the Court to is the decision of Justice Gobbo in Rees 76 LGRA 167. The contention his Honour dealt with was that land adjacent to the resumed had been reserved for the purposes of a cemetery and the argument was that that reservation of the adjacent land, that zoning, decreased the value of the land the subject of the acquisition and ought to be disregarded under a provision of the Victorian Act. The Victorian Act is quoted in the headnote. The language of the applicable provision, section 43(1)(a), is virtually identical to section 56(1)(a).

Justice Gobbo rejected the contention because the zoning of the adjacent land had, in his view on the facts, nothing to do with the proposed resumption of the land in question for open space. However, his Honour addressed the argument that the proposal had to be associated in every way with the resuming authority.

Our learned friends rely upon a passage at the outset of page 171. They quote the first paragraph. That, in our submission, is simply making the point that the zoning of the adjacent land for cemetery purposes had nothing to do with the scheme for resumption of the land in question, but we would draw attention to the passages discussing the proper application of the section from point 4 on page 171 with the reference to “Pointe Gourde” and the paragraph that follows. We rely, as Justice Talbot did, on the next passage, that:

It is not necessary that only the eventual acquiring authority is involved for the scheme may be set in train by a planning authority that is different from the eventual resuming authority. A court should not be astute to restrict the operation of a principle to only obvious and direct activities in pursuit of the scheme.

There is a further passage to similar effect at 172, the first complete paragraph. There is one further case we would mention without going to. It is Carter v Roads and Traffic Authority of New South Wales [2006] NSWLEC 89; (2006) 144 LGERA 375 and the passage is at paragraph [55]. That was a case of restrictive zoning being imposed to exclude urban development and to effectively reserve land for a highway deviation proposal. That kind of imposition of zoning was found to be - - -

GUMMOW J: Have we got Carter? Is it on your list?

MR YOUNG: I do not think so, your Honour.

GUMMOW J: What was the page?

MR YOUNG: Paragraph [55] and the page 388.

GUMMOW J: Whose judgment?

MR YOUNG: Justice Bignold. The court was applying the words of section 55(f) of the Just Terms Act which relevantly uses the same language as section 56(1)(a). I am conscious of the time, your Honour.

GLEESON CJ: We are going to adjourn at 1 o’clock and resume at 2 o’clock.

MR YOUNG: Thank you, your Honour.

GLEESON CJ: Then we are going to adjourn at 4 o’clock.

MR YOUNG: Thank you, your Honour. There are some important factual findings by the primary judge which founded his conclusion that the restrictive zoning was related to the public purpose for which the land was acquired to which I will take the Court. The first is that the same public purpose actuated the Council’s conduct and the State Government’s announcement of the acquisition and the acquisition.

GLEESON CJ: The Council’s conduct being what?

MR YOUNG: The Council, your Honour, maintained the original waterfront industrial zoning between 1992 and 2000, rejecting applications for rezoning and contesting in the courts the Liberal State Government’s attempt to get the land rezoned as residential. Those resistant steps were in the period 1992 to 1995. After the election of the new State Government in 1995 the Council maintained its position that the land should be zoned industrial to prevent development pending its acquisition either by the Council, funds permitting, or by the State Government, and there are several Council resolutions to that effect, and the Council actively sought funds from State and Federal Government to fund its own acquisition.

The latest or the last or one of the last resolutions to that effect by the Council was in December of 1999 at page 2360 of volume 6. Justice Talbot’s findings about the Council’s purpose are summarised and to some extent reiterated in his second decision at pages 4002 to 4004 at paragraphs 9 and 13 to 15.

GUMMOW J: Was the Council acting in this respect under powers it has under the Local Government Act 1993 (NSW), is it?

MR YOUNG: I think it is the Environmental Planning and Assessment Act, your Honour.

GUMMOW J: Right. We had better have a note about that because we just need to know.

MR YOUNG: Yes. The Council remained the zoning authority until February 2002 when the Minister transferred the land from Schedule 2 to Schedule 1 of SEPP 56, which is the State Environment Policy Plan made under the Environmental and Planning Act. But the way in which zoning was affected was the Council proposed the zoning and if there was to be a change in zoning it had to be submitted to the Minister and the actual zoning change was made by the Minister, and that is what happened in December 2000.

The State Government when it announced the acquisition on 19 February announced an acquisition for the same public purpose that had been articulated by the Council, that is, the land would be acquired for use as open public space in the form of a harbour side park. The Premier’s news release is quoted by the Court of Appeal in its second decision at paragraph 1 at page 4026 of volume 10. In our submission, we said in our written submissions in reply the question of the purpose for which the acquisition was made by the State Government is to be determined as a matter of substance, not by looking at the form of section 12 - - -

GUMMOW J: That is something that I wanted to get clear. I do not think there could be in this form of proceeding, but there is not attack, is there, on the propriety in the administrative law sense of any exercises of statutory power at any stage in this lengthy period?

MR YOUNG: No, your Honour. The point I am making is section 56(1)(a) requires the judicial value, I think is the jargon, to identify the purpose for which the land was acquired. That, in our submission, is a substantive inquiry. Here on the facts it was acquired as a matter of substance for use as public open space as a harbour side park. That was the purpose that actuated the Council throughout. It is not to be determined by looking at the formal acquisition notice that is gazetted which refers simply to the purposes of the Sydney Harbour Foreshore Act. In the proceedings below in the Court of Appeal the argument and the decision proceeded on the basis that the purpose of the acquisition was the substantive purpose.

GLEESON CJ: Perhaps we can come back to this after lunch, Mr Young. We will adjourn until 2.00 pm.

AT 1.04 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.02 PM:

GLEESON CJ: Yes, Mr Young.

MR YOUNG: Before I return to the point I was at at the adjournment, can I very briefly answer some of the questions that were asked of me this morning. Justice Gummow asked me about the relevant statutory powers. The Council’s power of acquisition is in section 186 of the Local Government Act 1993. Under the Just Terms Act, that acquisition must be done in accordance with the Just Terms Act. That is section 5(1) of the Just Terms Act. The Council’s power to make the local environmental plan is found in section 54 of the Environmental Planning and Assessment Act. It prepares the plan and then there are a series of provisions about submissions and consultations. Under section 68, it is the Minister who makes the LEP. Section 70 is also relevant to the Minister’s powers. That gives him power, amongst other things, to defer the making of a particular plan.

GUMMOW J: That is the Environmental Planning and Assessment Act 1979?

MR YOUNG: Yes. If the Council were to zone land solely for public purposes in an LEP, that LEP must include an acquisition clause that is permitting affected people to require the Council to acquire the particular land. That is section 27(4) of the Environmental Planning and Assessment Act. The LEP 2000 in this case has such a clause specifying certain land that could be the subject of a required acquisition. That is at volume 8, page 3345, but it did not include Ballast Point.

In answer to your Honour Chief Justice Gleeson about what actions the Council took from 1992 I should expand on what I said. In 1991 there were two recommendations to the Council by local commissioners and the municipal town planner that the land should rezoned residential. There was also prepared a local environmental plan, DLEP 81, that would have rezoned this land as residential. The Council refused to accept those recommendations. It deferred DLEP 81 but it made local environmental plans in respect of three other harbour side sites, rezoning them residential. So they are the steps by the Council at the outset of its course of conduct.

Can I turn to the matter I was addressing at the adjournment which concerned the purposes of the acquisition. In developing the point I will endeavour to give a better answer to the questions that Justice Hayne asked me this morning concerning the SHFA Act. We addressed the points in the first section of our written reply submissions. In this case the gazettal notice is at volume 3, page 1073. It states that the acquisition was “for the purposes of the Sydney Harbour Foreshore Authority Act 1998” and is no more specific than that.

That, of course, takes one, if one pursues the statutory track, to the functions of the Authority under section 12, giving it a power to manage core land and a power to manage and deal with non-core land. Initially, after the acquisition on 26 September 2002, the land qualified as non-core land, that later changed. The point we make is that in applying section 56(1)(a) it is not only permissible but the proper application of the section requires that one identifies the real purpose of the acquisition, the substantive purpose as revealed by the facts. That may be more specific than the formulaic identification in the acquisition notice. There are several cases that support that view. One is the Court of Appeal’s decision in Perry that the Court has been referred to.

GUMMOW J: What is the citation?

MR YOUNG: I am sorry, your Honours. It is [2001] NSWCA 251; 52 NSWLR 222. In Perry the acquisition notice is referred to in paragraph 1 of Justice Handley’s judgment at page 224 in the last line and that acquisition was stated to be “for the purposes of the Roads Act”. The Court of Appeal in the end referred or remitted the matter back to the primary judge to make more definite and specific findings about the purpose of the acquisition and the content of the proposal for acquisition.

The primary judge found certain purposes were the true purpose of the acquisition at paragraph 11 at page 226. Justice Handley addressed the sufficiency of the findings at paragraphs 65 to 68. The effect of his Honour’s statements is essentially that more definite findings were required as to the public purpose to be served by the acquisition and as to the content of the scheme, or proposal for acquisition, and for that reason the matter was remitted. That is paragraph 68.

The decision, in our submission, reflects the proposition that the public purpose referred to in section 56(1)(a) is the purpose of the acquisition substantively as revealed by the facts of the case and is not necessarily confined to the formula used in the gazetted acquisition notice.

GUMMOW J: If one looks at the last sentence on page 230, the reference to San Sebastian, it is said:

it was necessary for the courts to determine with some care the true scope of the scheme underlying the acquisition.

MR YOUNG: Yes, your Honour.

GUMMOW J: What does that mean in terms of the statute?

MR YOUNG: The language is loose, but his Honour is referring to the scheme of the proposal.

GUMMOW J: It says “underlying the acquisition”.

GLEESON CJ: That was taken from the language of the judgments in Pointe Gourde on page 226 paragraph 13.

GUMMOW J: Yes, that is right.

MR YOUNG: Yes, and the Privy Council in Pointe Gourde was extrapolating upon the meaning of “value”.

GUMMOW J: House of Lords, is it not, Pointe Gourde?

HAYNE J: The Privy Council.

MR YOUNG: I think it came from somewhere in the Caribbean.

HAYNE J: Trinidad and Tobago.

MR YOUNG: Yes. Can I also draw attention to his Honour Justice Handley’s discussion in Perry of San Sebastian at 41 to 43 and at 52 his Honour uses a different formula in describing Pointe Gourde. There his Honour refers to “the scheme for which the property is compulsorily acquired”, which his Honour takes from the Fraser decision.

GLEESON CJ: Mr Young, section 56(1)(a) deals with increases and decreases and in both cases of course there is a causation question. The assumption seems to be that one is just a mirror image of the other. I think this is connected with the question I asked you earlier about what were the acts of the Council. You are claiming here that there was a decrease in the value of the land caused by a carrying out of the public purpose, right?

MR YOUNG: Yes.

GLEESON CJ: The Council in effect doing nothing about the zoning in response, as you say, to its ultimate objective of having the land available for public use, in other words, the Council refusing to rezone it residential.

MR YOUNG: And resisting and challenging the Court’s rezoning effected by the Minister earlier in the 1990s and then participating in the making of LEP 2000 which extended the zoning.

GLEESON CJ: That is a decrease in its value, is it? A decrease from what to what?

MR YOUNG: Your Honour, one needs to be careful to recognise this. The valuation is done at the date of acquisition, 26 September 2002. One is not assessing the decrease in value of the application of industrial zoning as at the earlier dates. The proposition is that, but for those steps, the land would have been rezoned residential and would have a residential zoning as at 26 September 2002, that is to say, as at the date of acquisition. Land so zoned, that is, residentially zoned land, would have been more valuable than land zoned as industrial. His Honour Justice Talbot made a finding of fact that, but for the steps in the proposal, the land would positively have been rezoned as residential and that is the way in which his Honour assessed the measure of the decrease, that is, the decreased value that was impacting as at 26 September 2002. It was the product of the application as at that date of industrial zoning which, but for the proposal, would not have existed. It would have been residential zoning instead and the residential zoning would have applied to the land as at the date of acquisition. So his Honour has measured the decrease by making a finding as to what in fact the zoning would have been absent the relevant steps in the proposal.

GLEESON CJ: Which produces the practical consequence that if you acquire land zoned industrial which is, if I can use this word, the subject of a proposal for resumption for public use, you get compensated on the basis that it is residential because that is what it would have been but for the proposal.

MR YOUNG: Yes, you get compensated for the decrease in value caused by the proposal insofar as the proposal involved applying a zoning, a less attractive zoning, than would otherwise be the case.

GLEESON CJ: You have paid less for it presumably because of the extant proposal.

MR YOUNG: Whether that is so or not that is not the calculus that section 56(1)(a) applies. It simply looks at who - - -

GLEESON CJ: But that is the outcome?

MR YOUNG: It is, your Honour, but there could have been transactions in this land between 1992 and 2001. The fact is the legislation operates to value the land by assessing compensation in favour of the owner as at the date of acquisition even if he has been fortunate enough to acquire it well a few years earlier. It is assessed as at the date of acquisition.

GLEESON CJ: But it means that if you can buy land which is depressed in value because of an extant proposal that has not yet become the subject of an acquisition, when the land is acquired you will be compensated on the basis that the land had a value unaffected by the proposal which depressed the price that you had to pay for it.

MR YOUNG: Yes. There is a case exactly of that kind and I will find it for your Honour, but the argument was you should be disabled from getting the benefit of the section because you bought the land in the knowledge of the proposal taking that punt and that was held not to be a disabling feature in respect of the application of the section.

GLEESON CJ: Anyway, you will give us a reference?

MR YOUNG: Yes, I will.

HAYNE J: The hypothesis in the example the Chief Justice gives you is that the vendor exacts no price on account of the possibility, you say the actuality, of an entitlement to an increased value?

MR YOUNG: Yes.

HAYNE J: Increased compensation?

MR YOUNG: Yes, and that is the product of the bargain that they did. If the vendor was more astute, the vendor may have exacted the price and hence there is no ultimate benefit to the purchaser. It has paid a higher price but then will get compensated in the end because it will get a compulsory acquisition price or get compensation that is the result of the application section 56(1)(a).

The other case we refer to in our written submissions is Howarth v McMahon. We do not have copies for the Court but can I simply indicate that the question there was whether an acquisition was within power. The notice says the acquisition was for the purpose of providing a club for returned soldiers and sailors. It was an ambiguous description. In fact, the council never intended to build or operate such a club but intended to acquire the land and turn over the building of a club to somebody else. The High Court looked into the actual purposes of the acquisition and did not confine itself to the ambiguous notice. The relevant passages are at page 451 in [1951] HCA 19; 82 CLR 442 in the judgment of Justices Dixon, Williams and Webb.

The other point we wish to make beyond the point of principle that you look beyond the recitation in the notice to the substantive purpose is that the point that our argument could not prevail in the face of the formula used in the acquisition notice was not pursued by the respondent when the matter was in the Court of Appeal. There Mr Walker told the Court of Appeal that it was common ground that the public purpose was putting the land at public disposal as open space and they did not take any point concerning the original status of the site as non-core land under the Sydney Harbour Foreshore Authority Act. The transcript is annexed to our reply submissions.

We would say, as I said too shortly to Justice Hayne this morning, that the Court of Appeal proceeded on the footing that it was common ground that the purpose of the acquisition was the land be acquired for use as open space in the form of a harbour side park as the Premier outlined in his news release which the Court of Appeal quoted in the first paragraph of their reasons for decision.

HAYNE J: Would it be consistent with the Sydney Harbour Foreshore Authority Act and the particular compulsory acquisition that has occurred for the Authority, in particular I have in mind its functions under 12(2), to develop the land?

MR YOUNG: It would be consistent with the Authority’s powers but that would not address the question as to what the purpose of the acquisition was for the purposes of the application of section 56(1)(a). The landowner is entitled to be compensated on the basis of the purpose that existed at the date of acquisition, the true purpose at that date, as revealed by the facts.

Can I return then to my identification of a number of important factual findings by the primary judge. I have mentioned the pursuit of the same public purpose. The next point is this, Justice Talbot found that the Council consistently and continuously pursued that public purpose in Walker 1 at paragraphs 110 to 113 and in Walker 2 at 9 and 15 to 19. Notwithstanding those findings the Court of Appeal in the second decision seems to have taken a different view of the facts. Can I take the Court to paragraph 35 of the Court of Appeal’s decision at pages 4040 to 4041. At the foot of page 4040 the Court of Appeal addresses certain passages that it has just quoted from the primary judge’s first judgment. Their Honours say that those passages:

deserts the statutory language because once Federal and State funds were not forthcoming the Council had no proposal for it to carry out the public purpose, was not carrying out such a proposal by it, and was not acting jointly with the body that later acquired the land. The Council did not have any scheme that it would make the land available.

With respect to their Honours, that passage addresses factual findings by the primary judge who found the contrary on the facts; that the Council was consistently and continuously pursuing the public purpose of acquisition as a harbour side park and they did that even as they exhibited LEP 2000 in 1999. In our submission, that statement by the Court of Appeal went beyond its proper function in this appeal. Their Honours’ remarks do not seem to be addressed to the difference between the word “proposal” and the word “scheme” because in the concluding sentence their Honours use the word “scheme”.

Next, the primary judge made an important finding that the industrial zoning was retained and then reinforced in December 2000 to thwart development and that the industrial zoning served no proper planning purpose. The relevant passages are in Walker 1 paragraphs 110 and 113 where the words “freezing” and “thwart” are used. That is at pages 3917 to 3918. In Walker 2 at paragraphs 9 and 13 at pages 4002 to 4003 and at 22 to 24 at pages 4006 to 4007. Can I go to the last mentioned passages and draw the Court’s attention to paragraph 22 “that it was not seriously contemplated by”, amongst others, the state government “that the use of the site for the purpose of industry . . . would be maintained or established”.

Over at paragraph 23 his Honour finds there was “no proper planning purpose . . . It was a low risk device used by the council to ensure that development antipathetic to the creation of a harbourside park did not occur . . . zoning was solely maintained for the purpose of thwarting development”.

GUMMOW J: What does that mean? In order to thwart, that seems to suggest some concerted decision of the Council somehow or other which would be an exercise of its power for an improper purpose which is not alleged. So why is it put there?

MR YOUNG: It is put there, your Honour, because the Council’s actions in maintaining the industrial zoning - - -

GUMMOW J: Or it suggests an improper exercise of power.

MR YOUNG: This was a holding zoning to prevent any other development inconsistent with public open space. Your Honour, the question of whether the Council was operating within power or outside power, in our submission, is also not germane to the application of section 56(1)(a). I mean, it acted as it did. The question is whether the zoning that was applied was a step in a proposal for the acquisition.

GLEESON CJ: There does seem to be a suggestion that the industrial zoning was bogus.

MR YOUNG: There was a finding, your Honour, that it was not for a proper planning purpose of controlling industrial development of the land. That does not necessarily equate to bogus.

GUMMOW J: Where is that finding?

MR YOUNG: That is in paragraph 23 at page 4007, your Honour.

GUMMOW J: Thank you.

MR YOUNG: In the course of decisions this was the finding that the Court of Appeal had said needed to be made by the primary judge in order to establish that the restrictive zoning was a step in the proposal and it was remitted back to the judge for the purposes of finding whether there was a proper planning purpose of controlling industrial development and he found that there was not.

GLEESON CJ: But it said that “Caltex was winding down its activities on the site”.

MR YOUNG: Yes.

GLEESON CJ: Caltex was using the site for industrial purposes.

MR YOUNG: Yes, it was. Waterfront industrial, your Honour, and it was winding down.

GLEESON CJ: So it would have to be zoned industrial for Caltex to be lawful, would it not?

MR YOUNG: Subject to existing use rights, yes. One of the significances we say of this finding is that it bears on the assessment of the making of LEP 2000 by the Minister on 22 December 2000. Can I first indicate what was done, in effect, by that rezoning by reference to some diagrams. They are found in volume 3 of the appeal book.

GLEESON CJ: Did your client buy this land from Caltex?

MR YOUNG: It did, in essence, your Honour, but by the step of first acquiring an option and then exercising the option and the option was exercised after the Premier’s announcement that the land - - -

GUMMOW J: What is the date of the option again?

MR YOUNG: 1997. I cannot be more precise without looking it up, your Honour, but 1997, exercised in 2002. I ask the Court to go to volume 3 to show the Court the effect of the LEP 2000. If the Court turns to pages 825 to 827. At 827 the Court will see Local Environmental Plan 2000 made by the Minister. The area in blue at the tip of Ballast Point is the land in question. There is an area at the upper left corner of it, an irregular polygon shaped land. That was prior to 2000 zoned residential. One can see that at page 825 in the top diagram the land hatched at the end of the point was zoned waterfront industrial. The small area in Birchgrove to the left of it on the waterfront was zoned residential. The effect of the Minister’s making of the local environment plan in 2000 was to transform that land from residential zoning to industrial zoning.

While I have this volume, there is a diagram at 898 depicting the structures on the site, that is to say, Caltex’s fuel depot. The lots that were the subject of the compulsory acquisition are identified in this volume as well. They were lots 1 to 4, 7, 11 and 413 on several different deposited plans, but the relevant certificate of title diagrams are at 1217, that is lots 1 to 4, at 1234 you find lot 7, which is a lot adjoining lot 1 and fronting Snail’s Bay. At 1257 the diagram is aimed at lot 11, but you effectively find the next two lots, lot 11. In front of lot 11 fronting Snail’s Bay, there is that area that was originally zoned residential and then it became industrial, which was lot 413. I am corrected by Mr Webster and I am grateful. It was not only lot 413 that was originally zoned residential. It was also lot 11 and lot 7 as well. The point is, a significant area of land by the Minister’s action in 2000 ceased to be zoned residential.

For completeness, your Honours, particularly the Chief Justice in view of your Honour’s question to me a moment ago, LEP 2000 by substituting a general industrial zoning, actually made Caltex use of the land as a fuel depot illegal subject to its existed use rights. So that change was effectively made. I have gone to those matters to indicate that the change in 2000 was a significant change and it was the action of the Minister. It was the action of the Minister taken in circumstances where there was no intention that the land should be maintained or used for wholesale industrial purposes. It was a holding zoning effectively, one would infer, to which the Minister was a part.

HAYNE J: Holding in the sense that no other zoning was then in contemplation or holding in some other sense?

MR YOUNG: Holding in the sense that no other zoning was in contemplation because – from the Council’s view point, certainly. The desire was to ensure that there was no development on the land inconsistent with its dedication as a park. The other finding to which I need refer briefly is Justice Talbot’s findings that but for the proposal to carry out that public purpose, the land would have been rezoned residential and that, when one comes to the acquisition date his Honour found, had a depressing effect on value or at least would have but for the application of section 56(1)(a). The consequence is that unless section 56(1)(a) is applicable, the State Government is going to take the benefit of the decrease in value caused by that zoning step in 2000 because his Honour’s finding was that that was still operating as at 26 September 2002 to depress the value of the land.

In our submission, on its proper construction section 56(1)(a) is capable of applying as a matter of law where the zoning authority maintains a particular zoning not for a proper planning purpose but to preserve the land so that it can in due course be compulsorily acquired. That proposition can be applied to the Council in respect of its actions right through the period. It can be applied, in our submission, to the State Government with respect to the Minister’s actions on and from the making of LEP 2000 on 22 December 2000. That approach, in our submission, is consistent with the statutory purpose that underlies section 56(1)(a) that the landowner be provided compensation on just terms. It is also consistent with the language used in section 56(1)(a) and most certainly consistent with the authorities that have approached the application of section 56(1)(a) and like provisions.

Further, we submit that there is no reason why the commencement of a proposal cannot predate the taking of a final decision to resume by the resuming authority or the formation of a definite intention by the resuming authority to resume. That is certainly the way in which provisions like this were applied in San Sebastian.

Now, can I give the Court an example that to some extent is informed by the discussion undertaken by the Court of Appeal in its second decision to which I will come in a moment. The example is this. If a government department takes steps to impose or continuing the restrictive zoning classification so as to facilitate a later decision to acquire land for use as a public park, those steps, in our submission, should consistently with the authorities be regarded as part of a proposal within section 56(1)(a). I use the expression “to facilitate” a later acquisition. By that I mean that if the government imposes a holding zoning, a restrictive zoning, in order to permit it to investigate the feasibility of compulsory acquisition, then surely the imposition of that zoning to facilitate an investigation that then results in a decision to proceed to compulsory acquisition all falls within the compass of a proposal within the meaning of section 56(1)(a).

I have taken that example because it is not far from the facts and perhaps it is exactly the facts referred to by the Court of Appeal. The Court of Appeal discussed towards the end of their reasons what unfolded in the period immediately after February 2002. It commences at paragraph 48 and runs through to 52. Paragraph 48 refers to a suspension of “all work on this framework plan pending SHFA’s discussions with Walker”. We know from his Honour Justice Talbot’s findings that those discussion were about compulsory acquisition, amongst other things. Paragraph 49 refers to the Minister’s preference for open space, as does paragraph 50.

The conclusion drawn by the Court of Appeal at paragraph 52 was that the Minister had a certain preference but declined to take a decision. In fact, the facts in the appeal book and in Justice Talbot’s findings are more extensive than that. I mention them briefly and just give the references without going to them. In the course of 2000 the State Government and the Council worked on the preparation of a framework plan under the government’s regional action plan for Sydney Harbour. The draft framework plan contemplated that substantial parts of Ballast Point would be reserved for the public as open space, appeal book volume 6, 2535 and 2523.

In August 2000 the State Government obtained a quote as to the cost of compulsory acquisition of the land. Volume 6 at 2438. On 18 October 2000 the Authority sought to transfer the land to Schedule 1 of SEPP56 which would make the Minister responsible planning authority in lieu of the Council. Then LEP 2000 is made on 22 December 2000. In March 2001 Justice Talbot found that representatives of the Minister canvassed compulsory acquisition with representatives of Caltex and McRoss which is Walker. That is paragraph 103 in the first Walker decision. Then the framework plan work is suspended in March. There are meetings in May and September with Caltex and Walker to discuss the possibility of compulsory acquisition and so the matters proceed until the decision is taken and announced in February.

All of that is consistent with the Minister agreeing to the imposition of an industrial zoning in 2000, indeed, extending it to land previously zoned residential whilst the possibility of compulsory acquisition is investigated. That seems to be the thrust of what the Court of Appeal was drawing attention to. Otherwise it is not entirely clear why the Court of Appeal was canvassing these facts. But in all events, I use it not to invite the Court to make findings of fact but simply as a concrete example of steps anterior to a decision to acquire or a formation of an intention to acquire which nonetheless could properly be seen as part of a proposal within the meaning of section 56(1)(a).

There is one other aspect of the Court of Appeal’s findings I need to turn to which is what they said in paragraph 52 of their decision at page 4049 concerning publication. The drift of the passage appears to be that actions by the State Government could not be regarded as part of a proposal within the meaning of the subsection if those actions were not publicly known. If that is a correct reading, we submit that the proposition is erroneous for these reasons. As I submitted earlier in answer to the Chief Justice, the section requires the assessment of market value at the date of acquisition, 26 September 2002. It also requires that any decrease or increase in value be assessed at that date and then disregarded.

The section requires the court or the valuer to look back in time from the date of acquisition to identify what was the proposal and what were the steps in the proposal. That is a question of fact. The proposal is the proposal and it does not vary with the extent of publicity concerning it. You are not concerned with assessing value as the date the proposal commences or the date steps are taken in the proposal. The assessment of value is as at the date of acquisition.

There is also a difference between the proposal and the effect on value of the proposal. They are two different things. The latter might depend on publicity when assessed as at the date of acquisition, but the identity of the proposal does not vary with publicity. Therefore, in our submission, it is not correct to say that every step in the proposal must be publicly known before the section can be attracted. If that were so, the observations in San Sebastian would not be correct. If that were so, the representatives in Murphy relating to the turtle rookery that influenced the council’s actions would not be capable of bringing the case within the Pointe Gourde principle.

It will often be the case that zoning is imposed by a council perhaps at the request or as a result of consultations with the government that affects the resumption, but those consultations or directions are not known about at the time and they only become known in the process of undertaking the valuation exercise as at the date of acquisition. If that were the case, it would not prevent the subsection operating. Finally, we make the observation that on Justice Talbot’s alternative ground of finding relating to adoption of the proposal in December 2000, this point would have no application anyway because the government’s actions in making LEP 2000 were public and were known, as was the extension of the zoning. They were public actions and the only issue is the factual one, is it connected with the proposal?

Can I then turn to the alternative ground found by Justice Talbot. The case put against Walker when the matter first went to the Court of Appeal was that there could be no proposal within section 56(1)(a) unless the State Government adopted the Council’s proposal or unless there was unity of purpose. That appears in the Court of Appeal’s first decision at paragraphs 24, 25 and 30. The Court of Appeal made observations about the need for unity of purpose and it was that that led Justice Talbot in his second decision to use the term “unity of purpose”. His Honour’s, that is, Justice Talbot’s findings in his second decision are at paragraphs 17 to 19 at pages 4005 to 4006. In paragraph 17 his Honour commences by referring to “the proposal to acquire the land was first adopted” and that is by the Council “on 6 February”. And in the third sentence his Honour says:

If unity of purpose is a prerequisite the time that the proposal was adopted was the date of the making of LEP 2000.

The proposal his Honour is referring to is the one he mentioned in the preceding paragraph and the one then he mentions in the next sentence, that is, “the proposal to acquire the land for the public purpose”.

His Honour reiterates that finding and, to some extent, extends it in paragraph 19 on page 4006 where his Honour says:

The importance of the drafting and making of LEP 2000 by the council and the Minister is that, at least from that point, I am satisfied there is sufficient unity of purpose displayed by the two arms of government -

His Honour then notes that he remains of the view that he does not think that is a necessary requirement which is his first ground of decision. His Honour refers again to his first ground of decision in paragraph 31 and contrasts it effectively with the adoption ground. In the second sentence of paragraph 31 his Honour referred, as he did in his first judgment, to Rees. Paragraph 32 is directed to that context. In paragraph 32 in the last sentence his Honour refers to:

the common purpose of the local government and state bodies converged when the respondent acted to bring the land into public ownership.

That is addressing his first ground for his decision, namely, that without a finding of adoption there was nonetheless common purposes of the local government and the State Government and they converged in the sense that the acquisition was made for the purpose pursued by the State Government and the same purpose having been pursued by the local council. Against that background, can I go to the Court of Appeal’s consideration of these findings at paragraph 45 of the second decision at page 4045. This is the passage that says Justice Talbot’s findings I have just referred to were not clear. The Court of Appeal does not refer to all of Justice Talbot’s findings. There is a reference to paragraph 17 but not paragraph 19 in relation to “unity of purpose”.

The first proposition then advanced in this passage is that the unity of purpose referred to by Justice Talbot was:

that, by approving the 2000 LEP, in December 2000, the Minister adopted the industrial zoning as appropriate.

In our submission, that is not what Justice Talbot said. He said the proposal was adopted and the proposal that was adopted was the proposal of the Council to acquire the land for public purposes, open space. Secondly, Justice Talbot’s findings of fact was that the industrial zoning was not imposed because it was the appropriate zoning having regard to the intended uses and development of the land. His finding was that it was imposed to prevent inappropriate development.

In the next passage, their Honours say that:

the statement at [32] [by Justice Talbot] seems to recognise that the State Government did not itself adopt the proposal to carry out the public purpose until shortly before February 2002.

In our submission, that is not the appropriate reading. Far from it. His Honour Justice Talbot found that there was an adoption and said so squarely twice. The passage their Honours refer to is really a passage that appears in the context of considering the alternative ground of decision, absent any finding of adoption, but where you have simply got findings that in the end the State Government acquired the land for the same purpose which they pursued from February 2002 as the Council had pursued throughout.

Next their Honours refer to his Honour not having said there was any adoption. In our submission, paragraphs 17 and 19 say there was an adoption. Their Honours then refer to paragraph 101 of Justice Talbot’s first judgment. Now, it is hard to see the relevance of that paragraph. Their Honours extract it at the foot of page 4046 in paragraph 47. All paragraph 101 says is that the department and the Council were working on a draft framework plan which was non-committal except to say that it comprised a significant element of public open space. That is not, in our submission, pertinent to what Justice Talbot was saying about the government’s adoption of the Council’s proposal to acquire the land for public purposes.

In our submission, in this passage the Court of Appeal has simply failed to recognise and give effect to the factual findings by Justice Talbot. The Court of Appeal’s position is expressed somewhat tentatively in paragraph 45. It hardens somewhat by the end of paragraph 56. The last sentence in paragraph 56 states that the Council was not:

acting in concert with the State Government, which did not adopt such a proposal prior to February 2002.

That sounds like a finding of fact contrary to the finding of fact by the primary judge. If that is correct, it goes beyond the bounds of the appeal.

HAYNE J: Have you completed what you want to say about the Court of Appeal or are you about to go to another aspect?

MR YOUNG: I was just going to state the conclusion, your Honour.

HAYNE J: Do that.

MR YOUNG: The conclusion we advance is this. The Court of Appeal erred by not recognising or giving effect to Justice Talbot’s findings of fact in three respects. The State Government adopted the proposal to carry out the public purpose of making the land available as a harbour side park by making LEP 2000. Secondly, that on and from that point the Council and the State Government displayed a unity of purpose in pursuing that proposal. Thirdly, that in the absence of that proposal the chance that the land would be rezoned from industrial to residential and would be residential as at the date of evaluation was 100 per cent.

HAYNE J: Which brings me to this question founded in 56(1)(a). You need, I think, the text before you. The conclusion you urge is that the land should be valued as if residential, is that right?

MR YOUNG: That is right, your Honour, but in this context. We say that any increase or decrease in value brought about by the relevant proposal is to be disregarded. The means of measuring that decrease in value is to make a factual finding as to what the zoning would have been in the absence of that proposal. It is the means to the end of applying section 56(1)(a).

HAYNE J: Is another way of stating that proposition that you value it as if residential because, but for steps taken and not taken – you point to both steps taken and steps not taken – to effectuate the proposal, the land would have been residential? Is that another formulation of your proposition?

MR YOUNG: It is more than a proposition about the construction of the section.

HAYNE J: I understand you say there are factual findings which buttress it. Leave aside the factual findings issue and assume for the purposes of argument that you are right to say that there are frangible factual findings that would show that the steps were or were not taken to effectuate the proposal.

MR YOUNG: Yes, but the other thing we would add, your Honour, is that those steps were found as a fact to have brought about a decrease in value of the land as at 26 September 2002.

HAYNE J: It is that which I want to come to. The statutory task under 56(1) is to value as at the date of acquisition, is that right?

MR YOUNG: Yes.

HAYNE J: Is another way of describing the consequence of 56(1)(a) a requirement to value the land on the basis that the public purpose for which the land was acquired has not been and will not be carried out?

MR YOUNG: If I understand you correctly, your Honour, the answer to that is, no.

HAYNE J: Would not the proposition I have just put to you accurately capture what is described as the Point Gourde principle, namely, you value the quarry on the basis that the land will not be used for the US naval or US military base which will have this vast requirement for quarry product?

MR YOUNG: No, your Honour, on the contrary. You do the valuation knowing there has been an acquisition and knowing from the terms of the acquisition and its circumstances what in fact was the public purpose of the acquisition.

HAYNE J: The point to which I want you to come to grapple is that you would disregard all steps taken or not taken to effectuate the purpose, would you not?

MR YOUNG: No, your Honour.

HAYNE J: I thought that is what we had agreed at step two in the propositions I had put to you.

MR YOUNG: No, your Honour, that is a misunderstanding and it may be my error for not making it clear enough. The section requires the disregarding of any increase or decrease in value caused by the proposal to carry out the public purpose. The steps in the application of a subsection are these. As at the date of acquisition you identify the public purpose of the acquisition, the public purpose for which the land was acquired. Having identified the public purpose, you then look back to see what were the steps in carrying out that public purpose or, alternatively under the second limb, what were the steps in the proposal to carryout the public purpose? The question then is simply whether any of those steps once you have identified them as a question of fact have caused an increase or decrease in the value of the land as at the acquisition date.

In order to determine whether there has been any increase or decrease in the value of the land, one needs to identify what would be the value of the land if those steps had not taken place. That is not to disregard the steps, it is to ask the question, what impact on the value of the land have those steps had and that is ascertained by comparing two situations; the value of the land under the zoning it has as at the date of acquisition compared to the value of the land under the zoning it would have if those steps had not taken place.

CRENNAN J: You are just trying to get the market value of the land at the date of acquisition unaffected by the proposal.

MR YOUNG: Yes, that is exactly right.

HAYNE J: Exactly.

MR YOUNG: But that does not mean you disregard the proposal or any steps in the proposal, your Honour. That is where we differ - - -

HAYNE J: It is the latter step. It is steps taken to effectuate the proposal, which is the point to which I want you to come and grapple.

MR YOUNG: I am grappling with it, your Honour.

HAYNE J: Because there is nothing in the section which speaks of it.

MR YOUNG: There is nothing in the section which explains how the differential in value up or down is to be assessed. That is left to the valuer as an exercise in valuation. But it does not follow from that that it is inappropriate to assess the difference in value by comparing two situations. What would be the value of the land under the zoning it has and, having found that the zoning was imposed as a restrictive zoning to prevent development as part of the proposal, what would be the value of the land if that restrictive zoning had not been applied?

That requires the valuer or the fact finder to make a finding of fact as to what the alternative value would be in the absence of the proposal, and that is all that Justice Talbot has done. That is exactly what the Land and Environment Court, Chief Justice McClellan, said in Smith, as we pointed out in our written submissions, and it is the traditional approach to the application of provisions of this kind, including section 124.

But, your Honour, more importantly, at the end of the day the Court of Appeal seems to accept the proposition I have just put. Although it took issue with it in the first Court of Appeal’s decision, a differently constituted Court of Appeal addressed the valuation question. Can I take your Honour to that. At pages 4051 to 4052 the Court of Appeal sets out fairly lengthy extracts from Chief Justice McClellan’s judgment in Smith including the step-by-step process that Chief Justice McClellan said was appropriate under section 56(1)(a). That is in paragraph 58:

1. Identify the zoning of the land at the date of acquisition.

2. Determine whether that zoning was imposed or retained in order to facilitate the implementation of the public purpose for which the land was acquired.

3. If the answer to question 2 is yes, that zoning is notionally set aside and the potential of the land and ultimately its market value is assessed by determining how the land would have been zoned, at the date of acquisition, but for the proposal –

With that approach their Honours had no disagreement. The disagreements of the first appeal judgment seemed to have been left behind. In paragraph 60 their Honours address the second step. That is the language in which the proposal is described. Their Honours say it should be more accurately described in the language of the section and, of course, that is right. That is exactly as we put it:

Determine whether the imposition or retention of that zoning was part of the carrying out of the public purpose or part of the proposal to carry out the public purpose –

Then in paragraph 61 their Honours say, “If the answer to that question were yes” – so, yes, the restrictive zoning is part of the proposal – “the approach in the third step would usually be legitimate”. In other words, it is usually legitimate to assess the decrease in value by making a factual finding as to how the land would have been zoned at the date of acquisition but for the proposal to carry out the public purpose. That is precisely the submission we make. In our submission, it is now in line with the view the Court of Appeal took to valuation in the second judgment. That does not involve disregarding steps or activities that form part of the proposal. The contrast with the first Court of Appeal’s decision is this. Can I take the Court to paragraphs 44 and 45, I think it is page 3900 - - -

HAYNE J: Page 3963.

MR YOUNG: Pages 3963 to 3964, the discussion of Royal Sydney that I want to go to. Royal Sydney was a tax case and the question was, what value should be placed on land forming part of the Royal Sydney Golf Club that was zoned for open space? In the quote from Justice Kitto’s judgment, at the top of page 3964, two methods of approach are addressed and they might be labelled “top down” and “bottom up”.

His Honour said in that passage:

there was only a slender chance that it would ever become permissible to use any part of the land for other than recreational purposes. For that reason, I do not think that a method of valuation can be supported which aims first to ascertain what value the land would have had on the relevant date if it had been free from the restrictions of the Ordinance, and then to fix upon a deduction . . . the proper course is to inquire first what was the value of the land on the footing that there was no possibility of its ever being turned to other than recreational purposes, and then how much extra should be allowed for such chance –

That is undertaking a valuation in the absence of some special rule such as section 56(1)(a). In a later passage at paragraph 79 that approach to a valuation is said by the Court of Appeal to be appropriate to the section 56(1)(a) context. I refer to the conclusion at the end of paragraph 79. That approach is not pursued by the Court of Appeal in the second decision. They find no error with Justice Talbot’s approach to valuation. In our submission, the Royal Sydney approach would be appropriate in the absence of some special rule like section 56(1)(a) but it is not appropriate in the context of section 56(1)(a).

The reason is that, if you start with land with a restrictive zoning, you are taking into account rather than disregarding the effect on value of the step in the proposal to carry out the public purpose. If ex hypothesi in this context that was a restrictive zoning applied for the purpose of ensuring there was no development inconsistent with the public purpose of making it a park, the question is, if that is still the zoning at acquisition, did it reduce value or would it reduce value, how do we assess if it reduced value? If it did reduce value, we have to disregard that reduction value. If you start with value of the land as affected by the restricted zoning, you are not following the injunction in section 56(1)(a), you are taking into account the
adverse effect on value and then making an adjustment for it. That is why, in our submission, Smith is correct, Justice Talbot was correct and the Court of Appeal’s view that I took the Court to is the correct view concerning valuation. If the Court pleases, those are our submissions.

GLEESON CJ: Thank you, Mr Young. Yes, Mr Walker.

MR WALKER: Your Honours, this is, as you have seen from the exchange of written submissions, the case where the respondent says the beginning and end of the matter is in the statute. At all points of the record that you have read judges, and I fear counsel perhaps even more so, depart from time to time from verbatim use of the relevant statutory language. It is our submission that that as a technique is permissible in this case only if it is understood what parts of the statutory wording are being sought to be understood and applied by the various paraphrases and elaborations that are found in both judgments and argument.

In order to focus the matter we emphasise not for the first time in the presentation of this case that the particularly critical words, not the only ones, but the particularly critical words which should determine the outcome of the case are the words “the proposal to carry out the public purpose for which the land was acquired”. Now, of course, that is a phrase embedded in an immediate context which has some very important words to which I will be coming and it is also embedded in a statutory context which includes particularly sections 54 and 55 as well as section 3, and I will come to those as well.

But may I, bearing in mind the limited time this afternoon, by way of an opening to our position, try as well immediately to place this in the context as we submit this Court should approach it, which is even more broad and about which you have heard even more by way of reading the judgments below and hearing and reading arguments, and that this context that my learned friend introduced under the rubric common law which might be better described as the judicial treatment of legislation which is more or less, judging from previous authorities, to be regarded as cognate, at least in a very general sense, with the current legislation before this Court and that is why, for example, there is an eponymous principle, the Pointe Gourde principle, so-called, not of common law but of an approach to understanding in a compensation statute which plainly has something to do with what I will call social justice, recognising the rights of private ownership and the paramount claim in the public interest to be able to take property upon the basis of compensation, the word “compensation” itself containing in its meaning the notion of an equivalence, a justness in the equivalence which is offered in return for the land taken.

Now, against the background of that expectation that the judges have manifested in decisions such as Pointe Gourde and the others to which reference has been made, there has been devised in what we would respectfully submit is a form of dialectic between courts in different jurisdictions and parliaments in different jurisdictions. There has been developed for the purposes of the present case the wording of section 56. It is not, as my learned friend has with respect correctly pointed out, unique to New South Wales. Neither does it come with a background or history properly placable before this Court, or indeed in fact available, which shows any specific response by those ultimately responsible for introducing the Bill in the New South Wales Parliament to any particular judicial utterance, let alone upon section 124 of the Public Works Act, being the provision which was considered in San Sebastian.

So, in our submission, the first response to the broader context which both sides before you and all judges below you call in aid in trying to understand section 56, that first response ought to be that that pre-history cannot control the meaning of any of the words in section 56. At best, it explains the milieu out of which the words in section 56 historically have come.

One reason why resort to that broader judicial and legislative context, one might even say social and political expectations about compensation for appropriate land, ought not to govern any reading of any of the words in question is that the Land Acquisition Act – that is what the respondent calls it. The appellant calls it the Just Terms Act, perhaps tellingly – the Land Acquisition Act comes with, as it were, a statement of how its provisions are to be understood and applied and my learned friend has already, with respect, tracked you through those. If I may, for the purpose of different emphasis, briefly remind your Honours of those without taking time to read them all in full. The first, of course, is the objects provision in section 3(1). I need to draw to attention some quirk in section 3 which, on the respondent’s, part we do not claim fully to understand, your Honour. In subsection (2) it is said that, “Nothing” in section 3 “can be taken into account in, any civil cause of action.”

We think, with great respect, that does not mean that the Court has to, if I may use this expression, disregard it but, rather, that it will not be founding any civil liability. However, I pass over that quirk and go back to subsection (1) and in particular paragraph (a). My learned friend very fairly drew that to attention, and in particular drew your Honours’ attention to the verbal distinctions to be observed between section 3(1)(a) and section 56(1)(a). For example, it refers to “a proposal for acquisition”, neither the indefinite article nor the notion of a proposal for acquisition is reproduced in section 56. However, we would draw to attention, and with great respect apropos the questions directed by Justices Hayne and Crennan most recently to my learned friend, to the words in parentheses in the fourth line of section 3(1)(a), namely “(unaffected by the proposal)” and that which is unaffected by the proposal is the market value and those are concepts which are then fully explained for the purposes of applying this statute by the provisions to which attention has already been paid.

Briefly, they are first section 54 and that is the notion of what I will call just compensation. The object is that having regard to all the relevant matters under this Part, and we know that they are exhaustively stipulated in section 55, the object is that that which is determined “will justly compensate the person for the acquisition of the land”. Your Honours, if I may plant, perhaps tentatively, one notion in relation to the idea of justly compensating and that is that there is some form of mutuality or balance involved in the very notion of something which it justly compensates, that is, this is a statute which regulates and permits the payment of public money and we know from what we see in section 56(1)(a) that the matters to be disregarded include increases as well as decreases.

In short, the justice in question is something which seeks to strike a balance between the public interest in obtaining land for public purposes. The public interest, if I may put it this way, in paying no more than is proper for it, equally a public interest that enough is paid, that is certainly not only private interest but public interest, as well as then the avowedly private interest to maximise the return, at least so far as compensation is concerned within the limits of justice for land which has been taken.

We will return to that notion later, your Honours, in an attempt to persuade you that the lumbering of the State Government – which is the inexact term, which I will explain later as to its use – for the resuming authority in this case with the inaction, action or attitude, which might be more accurate word, of the Local Government which we know from the findings stems from some local residence and entirely properly so – that is politics – the lumbering of the State Government with that attitude is one which moves out of the field of attempting to balance as a matter of justice the proper amount of compensation to be paid bearing in mind the effect of the proposal to carry out the public purpose for which the land was acquired and how that may affect market value. Now, this may cut both ways in relation to increasing or decreasing of compensation to be paid in a manner I will seek to explain later.

Then may I move very briefly to section 55. Attention has already been drawn during the course of argument to a critical word in section 55 being one of the words which justifies, in our submission, the court’s determined focus, if we can persuade your Honours to this, to confine consideration to the words of the statute, and that is the word “only” to be found towards the end of the second line. So there is a stipulation of relevant matters and there is a rendering of those matters exhaustive. Now, the first of them in paragraph (a) the market value happens to be where all the attention is focused in this case, although for reasons my learned friend has already, with great respect, fully put, the wording of paragraph (f) obviously raises a very similar concept as the provisions of paragraph 56(1)(a) with which we are specifically concerned.

The point about paragraph (a) is that by using the expression “market value” subject to what in fact happened, namely, the definition in section 56, it is of course clear that that was more or less a term of art for such legislation, certainly a term of art in relation to the case law in this Court. Spencer’s Case will suffice as a reference not only to it but to all the authorities that have followed and explained it. So we then come to section 56 and see, not surprisingly, clear pedigree in the definition of “market value” with which subsection (1) commences and the pedigree is clearly in decisions such as Spencer’s Case and the English authorities that preceded it.

In our submission, Justice Talbot in making his findings of fact or, as the Court of Appeal put it in both their judgments, in asking the questions which then set the guidelines for the answers to be supplied has paid insufficient attention, indeed in express terms we submit none at all, to the market behaviour construct which is express in this definition of “market value”. By that I mean the supposition of the willing but not anxious seller and the willing but not anxious buyer and the behaviour of them, respectively, which would produce what is called “the amount that would have been paid” if it had been sold at that time by such people. The disregard is, of course, directed to the judicial valuer rather than supposing that these hypothetical market participants are disregarding anything.

When one looks, therefore, at the notion of market value, the statute requires, for the disregard in paragraph (a), that is, of an increase or decrease in the value of the land, an inquiry factually as to the impact on these market participants which by the statute are rendered hypothetical but the evidence will try by so-called comparables and by experience and expertise to call upon actual conduct observable in like cases, the inquiry about them is, how would they respond as to the amount which would have been paid as a result of the proposal? I have already ventured upon one paraphrase or elaboration. I have said as a result of, in order to convey the notion carried by the words “caused by” in paragraph (a).

A further elaboration is, how can market participants respond, that is, be influenced in the amount that they would agree should be paid, to something they do not know; and the answer is, they will not. Jumping ahead, that is one of the explanations that we offer in defence of the Court of Appeal’s approach in the passage that my learned friend has criticised including by the rhetorical question, what does the issue of public knowledge matter? The short answer is that the mechanism supposed by Spencer’s Case reproduced in section 56(1) is that proposals which are secret and never come to fruition will do nothing to blight the value of the land nor, for that matter, will they cause, as it were, a run on the market. So secrets that remain secret have no effect and the Parliament is not concerned with them. They are only concerned with things which cause an increase or decrease in the value of the land.

GUMMOW J: There is also support, I think, for the Court of Appeal from paragraph 56(1)(b). It talks about “the authority”. Although the authority is absent before, if you read (b) back into it, it becomes clear, perhaps.

MR WALKER: Yes. There is a reason why “the authority” is referred to in (b) but not in (a). One reason that we would offer, with respect, is that (b) is talking about actual conduct, which obviously post-dates the initiation of the proposal, that is, the earliest days of the proposal and, furthermore, it lays responsibility on the authority of the State which, in the notion of balance or justice to which section 54 is directed, plainly ought to be at the expense of the public not at the expense of the privately affected land owner.

HAYNE J: But it is pre-acquisition conduct.

MR WALKER: Yes.

HAYNE J: That is the critical point, is it not? Paragraph (b) is conduct before the land is acquired.

MR WALKER: Could I draw to attention that (b) is only an increase.

HAYNE J: I understand that – whereas (a) land was acquired. The hypothetical participants in the transaction, do they know the public purpose for which the land was acquired or is this separate from consideration of the hypothetical participants?

MR WALKER: In (b) it is separate for this reason; it is an increase caused by the carrying out of improvements. The Court knows that not all improvements in fact answer that description, some of them spoil the land terribly but here, plainly enough, Parliament contemplates that some will cause an increase, hence the expression “any increase” caused by improvements. That will, your Honours, be an increase whether or not, for example, the landowner knew of the public purpose. There are some cases which raise this very possibility, a dam being built before an acquisition, and, in effect – I do not mean this rudely of the landowner or those who represented it – as it were, a hostage price being sought because obviously the public now had to have the dam, and that is covered by paragraph (b).

GLEESON CJ: Mr Walker, insofar as section 3(1)(a) assists in the construction of 56 - - -

MR WALKER: Is it (b), your Honour?

GLEESON CJ: Section 3(1)(a), I am seeking to relate that to 56. That presupposes that affectation will precede and perhaps precede by a long time acquisition. You see the words “eventually acquired”. Land is “affected by a proposal for acquisition” and then it is “eventually acquired”, and:

the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition –

MR WALKER: So that there may be more than a decade, as in this case, and may be much more than a decade during which there has been what is colloquially called “blight” on the value of the land because of longstanding plans for urban consolidation or whatever. Normally that will not blight, that will improve but, depending upon the use to which the particular lot would be devoted such as public park, it may well blight.

GLEESON CJ: How does the valuation of the land at the date of acquisition take account, if at all, of the history of affectation that precedes the eventual acquisition?

MR WALKER: It can do so only by means which, according to the nature of the facts in the case, will include the means upon which my learned friend most recently addressed in his submission and which were not, as I think my learned friend indicated, the subject of any contention so far as correctness in principle is concerned.

GLEESON CJ: Here you seem to have a factual situation where land is zoned industrial, and I may have misunderstood the facts, but it seemed I thought to be common ground that the industrial use was winding down and, as it were, did not have an industrial future.

MR WALKER: That is right. I am going to qualify that later by going to some findings by his Honour which significantly qualify that in terms of what I think his Honour calls full-scale industrial development over the whole of the site, the proposition is correct. That was not in the future.

GLEESON CJ: Take a hypothetical case. Suppose you have got land that has currently industrial zoning but no industrial future, the industrial use, for example, has become anachronistic.

MR WALKER: And certainly not as valuable as residential.

GLEESON CJ: Yes, and suppose in this case there are two realistic possibilities for the future, one is residential development and the other is public.

MR WALKER: Your Honour, I appreciate this is a hypothetical, but on the facts of this case you would only need to add a mixture of uses which includes certain waterfront and other industrial uses for that actually to be this actual case.

GLEESON CJ: Yes, well, I am trying to put aside the possibility that somebody might want to put a hospital there or somebody might want to put a school there.

MR WALKER: A hotel, for example, was at one stage raised. We can put hotel to one side of this case.

GLEESON CJ: Yes. Now, two possible alternatives, residential, public use, public park, and you are then required to assess the market value unaffected by the longstanding proposal eventually given effect to by the acquisition of use for a public park. Do the words “unaffected by the proposal” or “value of land unaffected by the proposal” produce the consequence that you have to value it as residential?

MR WALKER: Not necessarily at all. Indeed, the next steps in my argument is to say that you start with the actual industrial zoning and the market asks of that actual, what are the prospects of it being, if your Honours will forgive the colloquialism, upzoned, up meaning to a more lucrative use, possible use? They will also ask something else, it is not just zoning obviously, it is, what kind of development am I likely to get consent for? Your Honours have already seen in I think all the judgments, but particularly the first instance judgments below, the considerable controversy about the nature of the residential development which would most likely have been permitted and that being the driver of much of the monetary dispute between the parties. So there are at least two stages of thinking by people who were going to consider their response as a buyer or seller in some rational rather than wholly intuitive way.

GLEESON CJ: What is the justification for concluding that if the group who want it to be a park do not prevail, it is not going to be a hospital or a school?

MR WALKER: There is no way of that ever being certain, although I have to grapple with a finding of fact that it was a hundred per cent residential in this case and I am stuck with that and I cannot move away from it, but in theory it will be a matter of evaluating at the time in question, which presumably starts with, and it may not finish with, but it will start with when the proposal first emerges as a proposal. Not every snowflake is the River Murray. Eventually the water generated by them may be the River Murray. Neither in this case is every resident’s action group indignantly wanting a park, but not too many people using it with their motor cars, at the end of their street that will not be the proposal to carry out the public purpose for which the land was acquired.

Now, in our submission, the question, as I say, asked at a starting point when the proposal first emerges as a proposal is, how does that affect the market participants in relation to that which would influence their offer for heavily contaminated industrial land requiring very considerable remediation before you can do anything, really – and that was the case here, remediation was an issue, a big issue – and obviously the catalogue that you find in the found facts in this case includes that they will consider the possibility of enhancing the zoning, upzoning it to residential.

On the findings of fact in this case, your Honours, I am not able to say that there were other upzonings apart from residential which were candidates. In theory there could have been all manner of other kinds of rezonings, maybe no upzoning other than residential, all other rezoning would have been perhaps not to improve the value, although one would have thought rezoning for hotel use, for example, may have made the land very valuable. On the other hand, the traffic generated by a hotel presumably would be the very kind of thing which would lead market participants to say my chances of getting that rezoning and a development consent for a worthwhile hotel in the face of these articulate and well-funded residents, too problematical for me to want to risk any money on it at all or too problematical for me not to restrict my premium over and above industrial value to a very small amount indeed.

That is the kind of factual inquiry which, with the assistance of experts and admissible evidence, was called for by the Spencer’s Case terms of section 56 and that necessarily will include consideration of the possibilities that would go through the mind of the market participants. Then, in order to obey the disregard in section 56(1)(a), the Court seeks to reconstruct that market response by taking out of account “the proposal to carry out the public purpose for which the land was acquired”. I am sorry, you take that out of account, bearing in mind that you have already decided that it has caused a decrease, and that is common ground in this case. It will not slow your Honours down.

The public purpose carried out in this case and the proposal to carry it out is calculated to reduce, that is, decrease the value of the land, there is no doubt about that, that is why we are perfectly happy to pay industrial value for the land, for obvious reasons. We cannot ask that we pay the value that the market would give for public parkland, which presumably is a very small amount - - -

GUMMOW J: Why on your theory – I can understand in a practical sense, but why do you then not put into consideration the possibility of residential development?

MR WALKER: Your Honour, the possibility of residential development for waterfront land in Sydney, it may not be a rule of law but it is very obvious and is common ground, that is why the so-called attributes of the site point dealt with by Justice Talbot is not an issue before your Honours. It is different from the land next to the turtle rookery in that regard. We accept what my friends say about that.

Doing the best I can, a reading overall of Justice Talbot’s findings of fact about a decrease in value caused by the proposal, et cetera, would appear to be – and I am going to try and make this good in more detail in response to some of my friend’s arguments – that the attitude of the Council – my word “attitude” – was what would deter purchasers from offering some unspecified, that is, never found by his Honour, smaller sum than would be offered by somebody assessing as 100 per cent the prospect of a residential upzoning and development consent. He does not have to specify the amount how much more because he finds it was a decrease, and we accept it is a decrease, he finds it is a decrease. Then on the reasoning that has been adopted, he eliminates that decrease, that is - - -

GLEESON CJ: That is the affectation prior to the eventual acquisition.

MR WALKER: It is. But I said this is how you start because the judge seems to be saying it is the attitude of the Council that did this. Indeed, that must be so. If I could take you to Justice Talbot’s second - - -

GUMMOW J: The attitude of the Council did what?

MR WALKER: The attitude of the Council is described by his Honour in various ways but it is said to be a consistent attitude and we do not resist that characterisation at all. It manifested itself in large degree by what I will call declarations, resolutions of Council. It partly manifested itself in begging letters to other levels of government, all of which were unsuccessful. It never manifested itself in a decision to organise its own finances in order to exercise the undoubted legal power it had to resume.

GLEESON CJ: What about the attitude of the well-furnished, aggressive local residents, was that also something he took into account?

MR WALKER: Probably not, although I am going to have to take your Honours to the specific way, the detailed way, in which his Honour makes findings of fact. I do not think I will be able to disentangle resident’s groups and Council in terms of his Honour’s findings. We note that the position against us as of today is that local resident’s groups’ activities as to any blight it caused will be to the landowner’s account and not to the public account, but that is as I understand my learned friend’s answers to the Chief Justice’s questions in particular.

GLEESON CJ: Presumably there is a difference between a political situation and a proposal?

MR WALKER: Yes, that is at the nub of my case. Politics may or may not produce a proposal which may or may not be the proposal to carry out the public purpose for which the land is acquired, and we insert the word “eventually”, but politics in themselves may certainly cause blight. Simply being in controversy is, of course, a reason why a buyer may say to a seller, you would be better off getting out of this, who knows what is going to happen here. You have got the residents with their well-known determination, you have got a council who will roll over to them, you have got a State Government that who knows what will happen in the next election, et cetera, et cetera, et cetera, you had better get out of this and I would be happy to take it off your hands for a 5 per cent premium on industrial evaluation, consider yourself lucky. Now, of course, that is how a buyer would negotiate. But that would not require any proposal to exist at all, simply being in controversy.

In our submission, it is plain to demonstration that the words of section 56 are inadequate by the expression “increase or decrease in the value of the land caused by . . . the proposal to carry out, the public purpose for which the land was acquired”. They are inadequate to include all the preceding politics or controversy or social agitation which happened eventually to produce the proposal and, as I am going to show and his Honour’s findings below permit me to rely on, produced not only that proposal but a number of others as well. Most of them are stillborn or all of them were stillborn, as it happened.

GUMMOW J: You are saying that these political agitations will not go to market value obviously.

MR WALKER: Of course they will. In Spencer’s Case terms, you get two valuers in the witness box and you are cross-examining them and you would say, “Mr X, have you ever come across the phenomenon of residents groups being successful in their agitating for X, Y and Z?” “Well, of course I have.” “And is that something that you would take into account in advising your clients when you have your development consultant hat on rather than your expert valuer hat on as to what they should allow for, uncertainties in development prospects?” “Of course I would.” So the questioning would proceed until you had actual money translated for that uncertainty.

GUMMOW J: But it would not be paragraph 56(1)(a)?

MR WALKER: It would never be paragraph (a) because that would occur even if there was never an acquisition. This statute does not compensate for blight in the absence of acquisition – and that is all it is – and it does not compensate for blight in the absence otherwise than that which has been caused by the proposal to carry out the public purpose for which the acquisition was made for which the land was acquired. It is for those reasons, in our submission, that as a matter of law the approach of the trial judge below miscarried, correctly diagnosed by both courts of appeal.

GUMMOW J: Miscarried why?

MR WALKER: Miscarried because he did not ask or answer the questions about the difference between antecedent and accompanying politics and that which answers the description in law of the proposal. May I venture another of these paraphrases or elaborations. What is a proposal? The word obviously varies according to its context, as all words do, but, in our submission, in the context of this case, bearing in mind paragraph 3(1)(a), bearing in mind section 54 and the justness and bearing in mind the role of authorities of the State in resuming, it is clear that the proposal has to be something in the nature of a statement of intention which may contain some contingency. We would accept that.

It is not live in this case but we would accept that there may be some contingency, something in the nature of a statement of intention to do something which is or involves, more than incidentally, the acquisition of the land in order that a public purpose may be carried out and classically that occurred publicly – I stress publicly – in February 2002 when the Premier made his announcement. Who knows how rapidly or how soon before that announcement was made the actual decision was made to that effect. The evidence does not permit us actually to know, but it might be a matter of days or weeks.

HAYNE J: But the contingent kind of proposal to which you refer is presumably, it is proposed to build a freeway between point A and point B generally along route X. The detail of the route remains to be settled.

MR WALKER: Yes, subject to geotechnics or – another one would be, not uncommon in this day and age, subject to Commonwealth funding. That is the cargo cult approach, your Honour. That is one that we would accept could cause blight. People may assess, well, what are the prospects of there being Commonwealth funding? As we speak today, presumably extremely high.

GLEESON CJ: Is that a convenient time, Mr Walker?

MR WALKER: Yes, your Honour.

GLEESON CJ: This matter will be stood over part heard for a date to be fixed in the November sittings of the Court and we will adjourn until 9.30 am tomorrow in Canberra and 9.30 am tomorrow in Sydney.

AT 3.59 PM THE MATTER WAS ADJOURNED