Australia: 32/14 R F Thompson (Qld) Pty Ltd v Noosa Shire Council [2014] QPEC 17

P&E Court Updates - July 2014

Robin QC DCJ - 24 April 2014
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Planning and environment – appeal against respondent Council's refusal of compensation for injurious affection asserted by coming into force of a new strategic plan – preferred dominant land use (PDLU) mapping and descriptions of designations changed – open space PDLU designation (with wording allegedly more restrictive of development) significantly expanded to overlie more land zoned Residential High Density – former Urban Area PDLU also reduced where it overlay Future Urban zoning and designated Detached Housing for future – zoning and designated Detached Housing for future – zonings all unchanged – symbol identifying site for potential tourist development removed – whether site's development potential, consequently value, was restricted to a similar extent by the original strategic plan and the continuing planning scheme given provisions in them protective of the environment, local and visual amenity, etc and limiting intensity of development – relevance of Council approval 9 years before of rezoning (not subsequently endorsed by the Governor-in-Council) which would have opened the way for intensive development of the whole site – whether council bound by intimations that a development approve prior to original strategic plan coming into effect complied with its objectives - relevance of a more contemporary approval for the adjoining property, which shared an environmentally sensitive wetland – relevance of subsequent Council assessment of various development applications over the site by reference to the new strategic plan– flora and fauna, geotechnical, hydraulic, traffic, visual amenity, economic, architectural, town planning and valuation issues – changing legislative regimes - Government, community and Court attitudes to environmental issues

Facts: This was an appeal against the Noosa Shire Council's refusal of an application for compensation under s.3.5 of the Local Government (Planning and Environment) Act 1990 (PEA). The appeal was commenced in 2000.

The subject site had an area of 37 hectares and was centrally located in Noosa Heads. At the east of the site there were two areas of high dunes separated by a low-lying corridor to the low, flat remainder of the site which fronted Weyba Creek. The northern dunal area was referred to as Area A, the southern as Area B. The flat area was referred to as the sedgeland.

The claim was based on the coming into force on 5 September 1997 of a new Strategic Plan which replaced the 1988 Strategic Plan, and changed the preferred dominant land use (PDLU) designations of the site.

The 1988 Strategic Plan had included the water frontage and western half of the site as being located within the "Public and Private Open Space" PDLU, with the remainder being located within the "Urban Area" PDLU.
Under the 1997 Strategic Plan, approximately 4 hectares of the site was within the "Semi-Detached and Attached Residential" PDLU, approximately 8 hectares were within the "Detached Housing" PDLU and the remainder was within the "Open Space – Conservation and Waterway Protection" PDLU.

Under s.3.5(1) of the PEA, where a person's interest in land was injuriously affected by the coming into force of a provision contained in a planning scheme (or of a new prohibition or restriction) compensation was payable by the local government.

Section 3.5(8)(a) of the PEA stated:

"the amount of compensation is (subject to paragraphs (b), (c) and (d)) to be an amount equal to the difference between the market value of the interest immediately after the time of the coming into operation of the provision of the planning scheme by virtue of the operation hereof the claim for compensation arose and what would have been the market value of that interest if the provision had not come into operation".

The Court was required to determine whether the site was "injuriously" affected in the sense of a reduction in value by the coming into effect of the 1997 Strategic Plan. That turned on what a hypothetical prudent purchaser would pay for the site on an open market immediately before and immediately after the coming into effect of the 1997 Strategic Plan.

The Appellant argued that:

  1. the 1997 Strategic Plan materially changed the pro-development line taken in the 1988 Strategic Plan;
  2. Council had approved a rezoning for a large-scale development on the site in 1988 on the basis that it was consistent with the objectives of the 1988 Strategic Plan (although that rezoning was never subsequently approved or gazetted); and
  3. there was a contemporary approval of similar development on a site immediately adjacent approved in 1997.

Evidence was also given about subsequent development applications over the site, after the commencement of the 1997 Strategic Plan, in particular:

  1. an application made in December 1994, for development similar to that which was the subject of the 1988 approval. Council had failed to decide that proposal and a deemed refusal appeal had resulted, which was resolved by a consent Order approving a modified proposal; and
  2. an application made in September 2001 and ultimately refused. The recommendation of refusal was based significantly, but not solely, on the 1997 Strategic Plan.

The Court heard from experts in numerous fields (including geotechnical, flooding, flora and fauna, acid sulphate soils, stormwater and water quality, visual amenity, traffic, engineering, economics, architecture and valuation) who were called upon to indicate what advice they would have given to a potential purchaser of the site in relation to its realistic development potential.

The Appellant's valuer assessed the value before the relevant date as $37.73 million, compared with $14.45 million immediately after the relevant date. Council's valuer did not put dollar amounts on values of the site on the basis that the before and after values would be the same because a properly advised hypothetical prudent purchaser would assess changes in strategic planning as not having any impact on a site's development potential.

The parties argued about the implications of the increase in "environmental awareness" leading up to the relevant date at all levels of government and in the community. Council argued that the phenomenon would have meant that a hypothetical prudent purchaser would not rely on historical approvals as an indication of what could currently be approved. The Appellant argued that a hypothetical purchaser would have thought that if Council had pursued a "green agenda" under the 1988 Strategic Plan it would have lost in an appeal, while under the 1997 Strategic Plan it would have won.

Council also relied upon the decision in Sparke v Noosa Shire Council [2001] 1 Qd R 344 as a basis for rejection of the Appellant's claim. It argued that rezoning of Area B would have been necessary in the Appellant's "before" case and that therefore the Appellant could not show a legal right to use the land for the purposes which it said were prohibited or restricted from the relevant date.

The onus was on Council to show that compensation was not payable.

Decision: The Court held, in dismissing the appeal:

  1. The 1988 Strategic Plan would have stood in the way of the Appellant's "before" cases as effectively as its successor.
  2. The Appellant failed to show that a hypothetical prudent purchaser properly advised would have held any reasonable expectation of rezonings in the "before" case. Further, reasonable prospects existed for rezoning (or development approvals necessary to achieve the before case) after the relevant date, which could not practically or convincingly be shown to fall short of those that could be expected before.
  3. The case law did not support the Appellant's argument about increasing environmental awareness.
  4. The Appellant was not entitled to rely on the 1988 approval. Council's resolution on that rezoning application did not affect rights in the way a town planning permit did. Statements by Council that the proposal was in accordance with the 1988 strategic plan did not create an estoppel or in any way bind Council. Council was free to contend that whatever may have been said or done in regard to that application was wrong.
  5. Only an irrational purchaser would have taken any heart from the Council's statements and actions in respect of the 1988 approval by September 1997. To the extent that there may have been some value in the 1988 approval, the potential purchaser would not pay for it.
  6. There were a number of matters that would have given a prudent purchaser pause before placing reliance on the 1997 approval over the neighbouring site.
  7. The coming into force of the 1997 Strategic Plan appeared not to have had the overnight effect of restricting development possibilities.
  8. It had to be accepted that there were geotechnical unknowns which had the potential to significantly affect the feasibility of development of the site. While all acknowledged constraints could be overcome, the cost was unknown and could be considerable.
  9. Flooding issues hardly loomed large but pointed out problems a developer of the site concerned to achieve maximum development might face, the engineering and financial implications of which were unknown.
  10. In relation to ecology, enough had emerged by September 1997 in relation to the site to send a clear warning that serious environmental concerns were held regarding development proposed on it.
  11. Inconsistency with the attitude taken to development to the immediate south did not matter. It would have been extraordinarily rash to count on what happened there as in any way indicating what might happen on the subject site.
  12. Circumstances pertaining by September 1997 dictated the cautious advice that the site presented with serious ecological issues that could limit development, further assessment of the site was needed to identify its values and other expert advice was required.
  13. There were risks in relation to acid sulphate soils which could not be calculated accurately and that would have placed any potential purchaser in a state of huge uncertainty.
  14. In relation to stormwater and water quality, the evidence of Council's experts was accepted as to the extent that caution would have characterised advice given to a potential purchaser.
  15. The visual amenity evidence was largely neutral. There was no significant change in the planning arrangements on the relevant date.
  16. In relation to traffic, it remained entirely uncertain as to what was known or could have been ascertained at the relevant date.
  17. In relation to economic need, the hypothetical prudent purchaser should be treated as being in receipt of the cautious advice of the Council's expert, whether or not less cautious advice was also available.
  18. Council's Sparke point succeeded. In other contexts it might be a concern that a landowner was left by changes in strategic planning with land reduced to a fraction of its value otherwise than, by recourse had to Sparke. However, ignoring any effect of Sparke, the Council had established that at the relevant date there occurred no diminution in the development potential of the site, and therefore no diminution of market value.
  19. The Appellant did not show that its interest was "injuriously affected" which was essential to invoke s.3.5 of the PEA. The appeal should be dismissed.

The Brisbane office of Norton Rose Fulbright Australia has one of the most experienced environment and planning groups in Queensland. Please contact Michael Walton if you would like to know more about the Queensland Planning and Environment Law Reports. To view all our reports please click here.

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