Blackley Investments Pty Ltd v Burnie City Council (No 3)
[2013] TASSC 14
•9 May 2013
[2013] TASSC 14
COURT: SUPREME COURT OF TASMANIA
CITATION:Blackley Investments Pty Ltd v Burnie City Council (No 3) [2013] TASSC 14
PARTIES: BLACKLEY INVESTMENTS PTY LTD
v
BURNIE CITY COUNCIL
FILE NO: 89/2006
DELIVERED ON: 9 May 2013
DELIVERED AT: Hobart
HEARING DATES: 19 to 22 February and 15 April 2013
JUDGMENT OF: Holt AsJ
CATCHWORDS:
Equity – Equitable remedies – Injunctions – Damages in addition to or in lieu of injunction – Damages in lieu of injunction – Assessment – Damages for loss of chance – Reliance damages.
Supreme Court Civil Procedure Act 1932 (Tas), s11(13).
Aust Dig Equity [1144]
REPRESENTATION:
Counsel:
Plaintiff: S B McElwaine and C J Bartlett
Defendant: M E O'Farrell SC and D Crampton
Solicitors:
Plaintiff: Bartletts
Defendant: Levis Stace & Cooper
Judgment Number: [2013] TASSC 14
Number of paragraphs: 112
Serial No 14/2013
File No 89/2006
BLACKLEY INVESTMENTS PTY LTD
v
BURNIE CITY COUNCIL
REASONS FOR JUDGMENT HOLT AsJ
9 May 2013
An award of damages to be assessed in lieu of an order for specific performance of a contract for the sale of land
The plaintiff, Blackley Investments Pty Ltd, contracted to purchase land at Burnie from the defendant, the Burnie City Council, for the sum of $1m. The defendant refused to settle and the plaintiff sued for specific performance. Pursuant to the Supreme Court Civil Procedure Act 1932, s11(13), the Court, if it thinks fit, may award damages in addition to or in substitution for an order for specific performance. The parties agreed that if the defendant was in breach of its obligation to settle, damages should be awarded in lieu of specific performance. On 24 October 2011 the Full Court found that the defendant was obliged to settle and, in accordance with the parties agreement, ordered that judgment be entered for the plaintiff for damages to be assessed. See Blackley Investments Pty Ltd v Burnie City Council (No 2) [2011] TASFC 6. The Court directed that the assessment be listed for hearing before me. This is my decision on the assessment.
The plaintiff's claim and the defendant's response
The plaintiff says that the land, as at the date of the order for damages in lieu of specific performance, had a value of $2m with its existing industrial zoning under the Burnie Planning Scheme 1989. The balance purchase price payable, if the contract had proceeded to completion, was $950,000. Accordingly, damages based solely on this land value would result in an award to the plaintiff of $1.05m.
Further, the plaintiff says that it ought to be compensated for the lost chance of a rezoning allowing residential development. As an indicative figure the plaintiff produced valuation evidence that the land, with an assumed approval for a 40 lot subdivision, had a value of $3.58m. The plaintiff says that its award of damages should reflect the value of the chance of the land significantly increasing in value in the event of a rezoning. The plaintiff adduced evidence from a planner estimating the chance of a rezoning as 70 per cent.
In the alternative, the plaintiff claims, that if it is not demonstrated that it would have profited from the transfer of the land to it, it is entitled to recover the money which it reasonably spent as a result of the contract. This alternative claim is for approximately $245,000, which sum includes the $50,000 deposit paid to the defendant.
The plaintiff claims in addition to its claim for damages for lost profit or lost expenditure damages in the nature of interest pursuant to the principles set out in Hungerfords v Walker (1989) 171 CLR 125.
The defendant says that the land, with its industrial zoning, had a value of $1m only, as at the date of the order for damages in lieu of specific performance, and has no higher value resulting from the claimed potential for a rezoning allowing residential use. Accordingly, it follows that the plaintiff would not have profited and would not even have recovered its expenditure resulting from the contract had there been an order for specific performance. The award should be for the amount of the deposit paid, being $50,000, less the cost of selling, with the end result being an award of nominal damages only.
Some matters of approach
The Full Court awarded damages in lieu of specific performance pursuant to the power contained in the Supreme Court Civil Procedure Act 1932, s11(13). The provision is in materially the same terms as Lord Cairns' Act, which was passed in England in 1858 and is in materially the same terms as the relevant legislative provisions throughout Australia. Accordingly, in considering the cases as to the interpretation and application of the provision, there is no need to distinguish between English cases and the cases from various Australian jurisdictions.
Section 11(13) is as follows:
"(a) In all cases in which the Court or any judge thereof now has jurisdiction to entertain an application for an injunction against a breach of any covenant, contract, or agreement, or against the commission or continuance of any wrongful act, or for the specific performance of any covenant, contract, or agreement, it shall be lawful for the Court or any judge thereof, if it or he thinks fit, to award damages to the party injured, either in addition to or in substitution for such injunction or specific performance, and such damages may be assessed in such manner as the Court or judge directs;
(b) But paragraph (a) shall not be so construed as to empower the Court or a judge to award damages in substitution for an injunction in any case in which no breach of covenant, contract, or agreement, or no wrongful act (as the case may be), has been committed.
An award under the provision is not an award of damages for breach of contract. If the plaintiff here had wanted such an award, it would have accepted the defendant's repudiation, putting the contract to an end and sued for damages for breach. Instead the plaintiff pursued its claim for specific performance, resulting in the award of equitable damages in lieu.
If this were a case where damages had been awarded for the repudiatory breach the amount recovered, by way of common law damages, would generally (but not necessarily always) be the difference between the market value of the land at the date of the contract and the value of the land at the date of breach. However, where equitable damages are awarded in lieu of specific performance, the contract comes to an end at the date of the order and so the damages will generally (but not necessarily always) be the difference between the purchase price for the land and its value at the date of the court order.
The leading case, as to the basis of the assessment, is Wroth v Tyler [1973] 1 All ER 897. There the plaintiff had contracted to purchase a house for £6,000 but the defendant failed to complete. Damages were awarded in lieu of specific performance under a Lord Cairns' Act provision. At the date of the repudiatory breach the value of the house was £7,500. At the date of the order the value of the house was £11,500. The award to the plaintiff, which but for some matters which have no bearing on the point of principle, would have been the difference between the purchase price and the value at the date of the order, namely £5,500. Megarry J said at 921 – 922:
"No doubt in exercising the jurisdiction conferred by the 1858 Act a court with equitable jurisdiction will remember that equity follows the law, and will in general apply the common law rules for the assessment of damages; but this is subject to the overriding statutory requirement that damages shall be 'in substitution for' the injunction or specific performance …
In my judgment, therefore, if under Lord Cairns' Act damages are awarded in substitution for specific performance, the court has jurisdiction to award such damages as will put the plaintiffs into as good a position as if the contract had been performed, even if to do so means awarding damages assessed by reference to a period subsequent to the date of the breach. This seems to me to be consonant with the nature of specific performance, which is a continuing remedy, designed to secure, inter alia, that the purchaser receives in fact what is his in equity as soon as the contract is made, subject to the vendor's right to the money, and so on. On the one hand, a decree may be sought before any breach of contract has occurred, and so before any action lies for common law damages; and on the other hand the right to a decree may continue long after the breach has occurred. On the facts of this case, the damages that may be awarded are not limited to the £1,500 that is appropriate to the date of the breach, but extend to the £5,500 that is appropriate at the present day, when they are being awarded in substitution for specific performance."
Although some doubt may have arisen as to the manner of assessment as a result of the decision of the House of Lords in Johnson v Agnew [1980] AC 367, the position in Australia is well established and is consistent with Wroth v Tyler. For example, in Johnson v Perez (1988) 166 CLR 351 Dawson J, in an obiter statement, said at 387:
"Another category is where damages are awarded in lieu of specific performance and the value of the property which is the subject matter of the contract is assessed at the date of judgment: see Wroth v Tyler."
In Tasmanian Seafoods Pty Ltd v MacQueen (2005) 15 Tas R 1, Underwood CJ, with whom the other members of the Full Court agreed, said in an obiter statement concerning equitable damages at par[84]:
"The appellant was entitled to have its damages assessed up to the date of trial. See Wroth v Tyler."
Of course, the rule that equitable damages in lieu of specific performance are to be assessed at the date of the order is not inflexible. The circumstances of a particular case may justify a departure. This was explained in Madden v Kevereski [1983] 1 NSWLR 305. In that case the purchase price for the land was $33,500. Its value at the date of the vendor's repudiatory breach was $30,000. The value at the date of the order for damages in lieu of specific performance, made under the Supreme Court Act 1970 (NSW), s68 (the relevant Lord Cairns' Act provision), was $55,000. Helsham CJ in Eq assessed the damages as the difference between $33,500 and $55,000. However, in an obiter statement, at 306 – 307 His Honour said:
"In my view the law in this area is in such a mess that it is time some court gave an authoritative decision about s68. I take the view that the damages which the court has power to award under s68 have nothing to do with common law damages. Since the Supreme Court Act, the court sitting in the Equity Division has power to award damages for breach of contract quite independently of s68. In a case such as the present where the plaintiff has not accepted the repudiation of the contract by the defendant, has kept the contract on foot and wants to enforce it, it would be quite artificial, and wrong, to treat him as if he had, for the purpose of assessing damages or anything else. In fact, of course, if he had accepted the repudiation of the contract by the defendant and rescinded, he would have no redress under s68 at all. That section only applies, in my opinion, where a plaintiff has made out a case for equitable relief by way of injunction or specific performance, and has either got it, or for some equitable or discretionary reason, been refused it. The section, in simple terms, makes this clear. If a plaintiff does not make out an equity for relief by way of injunction or specific performance, he must fall back on his common law rights, if any. Section 68 does not provide any remedy in such a situation. If he does make out an equity for such relief, then he may or may not get it. But whether he does or does not, the court can, by means of the section, attempt to do justice otherwise. The damages which the court may award under s68 are sui generis; the power to award them is a power to enable the court to do complete justice so far as equity considers it ought to be done, by supplementing with money the equitable remedy, or attempting with money to substitute a remedy. The section is simply not available when damages, in the common law sense, are an adequate remedy, or when a plaintiff has to rely on a common law right to damages for breach of contract.
If this be the correct view there is no date which can be said to be the date at which damages under s68 should be assessed. They will be assessed so as to do that which is just as between the parties in the particular circumstances of each case, so far as the court's special remedies and money can effect this."
The parties here agree that the relevant date for the assessment is the date of the Court order awarding damages in lieu of specific performance.
A purchaser of land, awarded damages in lieu of specific performance, may prove that he or she would have put the land to a profitable use if the court had ordered specific performance. The damages awarded are to be a true substitute for performance and so must, so far as is possible, put the plaintiff in the same position as would have been the case had there been specific performance. It follows that a plaintiff who has lost the chance of making a profit from the land in addition to its market value is entitled to be compensated for the value of the chance which has been lost.
Some principles applicable to the assessment of damages for breach of contract are set out and explained in the Commonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 64. The facts in Amann were as follows. Amann contracted with the Commonwealth to conduct aerial coastal surveillance for three years. The Commonwealth repudiated the contract and Amann accepted the repudiation and terminated the contract. It sued for the recovery of its wasted expenditure. The damages awarded in the Full Court of the Federal Court were not reduced because of the chance that the Commonwealth might have validly terminated the contract before the expenses could be recouped. The reason that there was no reduction was that a chance of termination had not been proven to be more likely than not. The award of approximately $6.6m was appealed to the High Court. So far as is relevant to this case the principles accepted by the High Court in Amann were as follows:
·A plaintiff deprived of the benefit of a contract by reason of the defendant's wrongful repudiation may recover an amount commensurate with his or her objectively determined expectation, if it is ascertained that the expectation had a likelihood of attainment. These damages are called expectation damages.
·Alternatively, the wronged plaintiff, if he or she cannot prove that performance of the contract would have resulted in a profit after the recoupment of expenses, can nevertheless, recover expenses incurred in reliance on the contract being performed. These damages are called reliance damages. They comprise such amounts expended which were reasonable and were in respect of steps the defendant would normally expect the plaintiff to take as a result of the contract.
·On a claim for reliance damages the law presumes that the plaintiff would have recovered the wasted expenditure. The defendant may only displace this presumption by proving, on the balance of probabilities, that some or all of the expenditure would not have been recouped.
·Reliance damages may be recovered where a plaintiff does not claim to have suffered a loss of profit and also where a plaintiff, so claiming, is unable to show that performance of the contract would have produced a profit in excess of reasonable expenses.
Sometimes the chance of a repudiated contract producing a profit, or an extra profit, will depend on matters not the subject of the performance obligations imposed by the contract. In such cases, if it is shown that the loss of the chance is causatively linked to the breach, that the chance is not so low as to be purely speculative, and that the chance would have been taken up, damages may be awarded for the value of the chance, regardless of whether the chance is assessed at being more or less than 50 per cent. In Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Mason CJ, Dawson, Toohey and Gaudron JJ said at 350:
"In Malec v J C Hutton Pty Ltd. (1990) 169 CLR 638; this Court drew a distinction between, on the one hand, proof of historical facts - what has happened - and, on the other hand, proof of future possibilities and past hypothetical situations. The civil standard of proof applies to the first category but not to the second, particularly when it is necessary to determine future possibilities and past hypothetical situations for the purpose of assessing damages
In Malec, Deane, Gaudron and McHugh JJ explained the way in which the matter is to be approached in these terms at 643:
'If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. ... But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability.'
The same approach has been adopted in England (Mallett v McMonagle [1970] AC 166 at 174; Davies v Taylor [1974] AC 207 at 212, 219) and Canada (Janiak v Ippolito [1985] 1 SCR 146; (1985) 16 DLR (4th) 1).
Neither in logic nor in the nature of things is there any reason for confining the approach taken in Malec concerning the proof of future possibilities and past hypothetical situations to the assessment of damages for personal injuries. The reasons which commended the adoption of that approach in assessments of that kind apply with equal force to the assessment of damages for loss of a commercial opportunity, as the judgments in Amann acknowledge."
Difficulty in estimating damages, including lost chance damages, does not relieve the Court from the responsibility of estimating them as best it can, even if the task sometimes of necessity may involve a degree of guesswork. See Amann at p83.
The application of the relevant principles to the present case result in the following propositions:
(1)If the market value of the land at the date of the order, namely, 24 October 2011, and any lost chance damages are shown to exceed the sum of the purchase price that would have to be paid by the plaintiff to complete the contract and the reliance damages (subject to any adjustment for realisation expenses and for Hungerfords v Walker damages) the award will be for that amount.
(2)As to lost chance damages, if an order for specific performance directing the transfer of the land had been made and the transfer carried with it a better than negligible commercial opportunity for the plaintiff to profit from the land in addition to realising its market value, as at the date of the order awarding damages, which opportunity the plaintiff would have taken up, the value of the chance, as proved by the plaintiff, is to be assessed and included in the award (with any adjustment applicable for realisation expenses and pursuant to Hungerfords v Walker).
(3)If such an award (market value plus loss of chance damages less the cost to the plaintiff of completing the contract and realising the benefit) does not exceed the reliance damages, the award will be for the reliance damages (plus any addition pursuant to Hungerfords v Walker), unless the defendant can demonstrate, on the balance of probabilities, that some or all of the reliance damages would not have been recouped even if there had been performance.
The background
The analysis of the plaintiff's claim and the defendant's response needs to be undertaken in the context of some background matters. They are:
·The plaintiff's business activities;
·The description of the land;
·The purchase contract; and
·The planning scheme.
The plaintiff's business activities
The plaintiff was a family owned company engaged in the business of acquiring, developing and selling real estate in Tasmania.
The plaintiff's first venture involved the purchase of a public housing block of apartments at Burnie from the Tasmanian government in 2002. The purchase price was $300,000. The block contained 40 apartments. The plaintiff divided the block into separate strata lots for each of the 40 apartments. The apartments were cleaned and where necessary minor repairs were undertaken. On the day the plaintiff settled the purchase from the Tasmanian government it on-sold the 40 apartments for a price of $1.685m.
Thereafter, between 2002 and 2009 the plaintiff purchased and sold about 15 residential properties at a quick turnover rate. In most cases only minor renovation work was undertaken and in some cases existing units were divided into separate strata lots.
The plaintiff company discontinued its commercial operations in 2009 and has not been in the business of buying and selling real estate since.
The land
The land is waterfront land on Camdale Point which is approximately 6 kms to the west of the centre of the City of Burnie. It is roughly semicircular in shape. The northern curved edge extends to the high water mark of Bass Straight. The southern, roughly straight edge, is about 450m long and is bounded by a railway line with the Bass Highway, a major articular road, adjoining the railway line immediately to the south. The land comprises two blocks on separate titles. The blocks have a common boundary which is a straight line approximately 80m in length running north-south roughly through the middle of the semi-circle, from the high water mark to a road at the southern end. The road is about 20m wide and extends from the railway line north for a distance of about 10m. The road gives access from the northern side of the railway line to each of the two blocks. Access from the Bass Highway is directly across the railway line from a point opposite the road. The western block is slightly larger than the eastern block. The combined land area of the two blocks is 3.149ha.
The land is relatively flat and is low lying even though most of it has been raised in height by at least 0.5m with the use of artificial fill over natural sand deposits. Including the fill the land is about 4.5m above mean sea level at the south-western end. It is about 3.5m above sea level through the middle and is generally lower in the eastern half. About 10m in from the high water mark the land is about 3m above sea level at the western end and about 2.5m above sea level at the eastern end.
Consultant Planner, Mr Neil Shephard, who is familiar with the site, provided the following description, which I adopt:
"3.3The land is essentially a rock platform overlain with windblown sand and soil. It has been exposed on its northern edge, where it flanks High Water Mark, by wind and waves.
3.4Below Low Water Mark, outside the property boundary is outcropping of rock shelving.
3.5The inter-tidal zone is predominantly a thin strip of sandy beach although this encroaches slightly in places into the property.
3.6A 2 to 3m high bank has been constructed from rubble above the beach and immediately to the south of this a 20m deep band of coastal shrub has been established – being a mix of Australian natives and exotic species, including weeds. A low net fence has been erected along the southern edge of this vegetation, possibly to protect Penguin burrows, or the vegetation from the impacts of people, dogs and vehicles – or both.
3.7The western end of the land is generally at a higher elevation being an almost flat platform created by fill. The most elevated area within the site is at the south side of the west area alongside the rail line.
3.8The east end land is lower with a more natural bank sloping down to the beach and dense coastal shrubs around a creek outlet.
3.9Most of the land is enclosed between screen planting along the rail line and coastal shrub around the shore-line creating an amenity of containment although the internal area is relatively open.
3.10The ground plane is flat with areas of concrete, bitumen and gravel hardstand remaining from earlier buildings, and large areas of open grassland with isolated shrubs establishing.
3.11The structures that remain on-site include a substation and a concrete tank.
3.12There is currently a general appearance of a lack of maintenance of the site, creating, in my opinion, an overall character of blight or waste-land."
The land is subject to inundation by water with predicted sea level rises. A report from a geologist obtained in February 2004 identified that over a 50 year period extreme storm event high tides could reach 3.2m above mean sea level and over a 100 year period could reach up to 4.08m above mean sea level.
The land up to 25m in from the high water mark contains habitat for The Little Penguin, which is a protected species under the Wildlife Regulations 2010 in force under the Nature Conservation Act 2002. A report in April 2004 stated that, at the time, the penguin colony on the land consisted of about 60 birds including 20 breeding pairs.
Mr Shephard, in his report, referred to a site contamination report of April 2005 and a supplementary report of October 2005. He said that the reports indicated the presence of petroleum hydrocarbon contaminated material in a stormwater pipe and "hot spots" of soil with elevated levels of petroleum hydrocarbon contamination associated with a former heavy fuel storage bund.
The purchase contract
The evidence of Mr Colin Blackley, a director of the plaintiff company was as follows. In 2003 he responded to an advertisement, published by the defendant, seeking a developer interested in building a motel in Burnie. The advertisement did not identify any particular site for the development. Mr Blackley met with the Council's general manager. The general manager suggested the subject land as a suitable site, but Mr Blackley, who was familiar with the site, disagreed saying that the land was ideally suited to a residential development. A price was discussed and the general manager said that the Council would sell the land for $1 m. Council, however, wanted to ensure that the land was suitably developed.
In December 2003 the Council contracted to sell the land to the plaintiff. The plaintiff paid a deposit of $50,000 comprising a non-refundable payment to the defendant of $20,000 and a $30,000 payment to be held by the defendant's solicitors as stakeholder. The land was zoned "Industrial" under the Burnie Planning Scheme 1989, in which zone residential development was prohibited. The contract obliged the plaintiff to pursue a development comprising at least 70 medium density dwelling units on individual titles, a small retail development and a restaurant or coffee shop. The contract required the plaintiff to lodge with it, as the relevant planning authority, an application which, if approved, would by the one decision result in the planning scheme being amended and a permit issuing for the proposed development. Such a permit would be subject to the Resource Planning and Development Commission approving the scheme amendment and the development. The contract provided that the plaintiff may rescind the contract if the Council, at first instance, or the Resource Planning and Development Commission later, refused the application.
An application, pursuant to the Land Use Planning and Approvals Act1993, s43A, was submitted for development on the land of 36 residential units, 36 serviced apartments, an 80 seat restaurant and café, an indoor pool and car parking provision. The defendant approved the proposal. The application proceeded to a hearing before three delegates of the Resource Planning and Development Commission. The hearing resulted in the necessary amendments to the planning scheme being disallowed and it followed that no development permit could issue. The decision was published in July 2006. The decision included the following:
"Conclusion
In consideration of:
(a) the nature of the subject land;
(b) the lack of persuasive grounds for relinquishing the current zoning;
(c) the potential for conflict between industrial and residential activity, and
(d) the ambiguity in the intent of the amendment as drafted.
The Delegates conclude that the rezoning cannot be supported, and the amendment should be rejected.
The permit is dependent on the approval of the amendment, consequently it cannot be confirmed."
The plaintiff wanted to proceed with the purchase regardless. The land was still zoned "Industrial" and subject to appropriate permits might have been so developed. The plaintiff nominated 29 November 2006 as the settlement date. The defendant refused to settle and on 6 December 2006 the plaintiff issued its writ seeking specific performance.
The Planning Scheme
At all relevant times the land has been within the area subject to the use and development controls contained in the Burnie Planning Scheme 1989. For many years it has been zoned "Industrial".
The "Industrial" zone extends south across the railway line and Bass Highway and contains predominantly land used for industrial and commercial purposes, although there are some long established residential properties in the area.
The blocks of land, when purchased by the defendant in 1995, contained large industrial sheds used for abattoir operations. However, those operations had ceased and the sheds had been demolished by the time of the plaintiff's purchase.
Under the "Industrial" zone developments for permitted uses include warehouse, timber mill, timber yard and bus depot. Other developments are specified to be permissible, subject to the favourable exercise of a discretion. Prohibited developments include houses, apartments, holiday units, motels, restaurants and licensed establishments.
The land, being within 1 km of the high water mark is within the coastal zone as defined by the State Coastal Policy 1996. The Planning Scheme contains the following provision:
"A1 IMPLEMENTATION OF STATE COASTAL POLICY
Where the planning authority determines that a proposed use or development would be inconsistent with the State Coastal Policy, that use or development is, unless prohibited by this scheme, and notwithstanding any other provision of the scheme, a use or development which the planning authority has a discretion to refuse or permit."
The effect of the provision is that if a permitted or discretionary development under the balance of the Scheme appears to be inconsistent with the State Coastal Policy approval for the development will be refused unless it is demonstrated to be consistent with the policy, or by conditions or otherwise it can be made to be consistent with the policy.
The policy includes a requirement that the coastal zone be managed "to conserve the diversity of all native flora and fauna and their habitats" and that the "design and siting of buildings, engineering works and other infrastructure including access routes in the coastal zone, will be subject to planning controls to ensure compatibility with natural landscape". The policy states that "priority will be given to those (uses) which are dependent on a coastal location".
Accordingly, there is a real possibility, that even if a proposed development for an industrial use is designated as permitted under the Scheme, a development application will be processed as if the development was discretionary, and unless it can be demonstrated to be, or made to be, consistent with the policy the development application will be refused.
Since the rejection by the Resource Planning and Development Commission of the plaintiff's proposed development in July 2006 there have been a number of planning developments. Strategic Master Plans for specific areas including Camdale Point (the subject land) have been developed. The draft Master Plans were publicly exhibited in September 2011 with comments invited. The exhibited plans were not materially changed before being presented to Council in December 2011. The Master Plans were endorsed by Council at its meeting of 13 December 2011. Accordingly, at the date of the order of the Full Court, namely 24 October 2011, there was in the public domain a document relevant to the consideration of any future zoning changes.
The Master Plan for Camdale Point includes case study examples. Two of the three case studies contained footprints for residential apartments. The first case study shows 28 apartment footprints, all on the western block, with a café, playground and conservation area on the eastern block. The second case study shows 20 apartment footprints with 14 on the western block and 6 on the eastern block. The apartments, depending on their location could, according to the Master Plan, contain one, two or three storeys. The case studies, accordingly, provided examples of how the land might be developed by the construction of between about 40 and 60 residential apartments.
There were strategic documents which came into existence after the Resource Planning and Development Commission had rejected the plaintiff's application in 2006 leading up to the Master Plan and the case study examples to which I have referred.
The Council had commissioned the preparation of a report called "A Settlement and Investment Strategy for Burnie to 2026". The report was finalised in May 2007. The purpose of the strategy is set out in cl 1.1 of the strategy and is as follows:
"1.1 The Strategy
The Burnie Settlement & Investment Strategy is an important planning initiative of Burnie Council and represents an integrated approach to future land use planning, urban development and investment across the Burnie Local Government Area (LGA).
The Burnie Settlement & Investment Strategy is intended to guide development and investment decisions in Burnie in a manner that will provide a pattern of settlement and infrastructure provision that is achievable, orderly, economic and sustainable, and that will be relevant to future needs, capabilities and potentials.
In summary, the key objectives of the Burnie Settlement & Investment Strategy are to:
1Analyse trends, predictions, drivers and forces influencing the future of Burnie;
2Assess local capacity versus potential for change, growth and development; and
3 Develop a settlement and investment strategy to guide planning policy."
In relation to Camdale the report includes the following:
"Camdale: Camdale is a mixed activity area comprising industrial, commercial and residential uses. The industrial and commercial could be described as 'ribbon' development along the Highway. It is recommended Camdale be transformed over time into a single purpose residential settlement and areas of industrial land be rezoned to residential to accommodate future residential expansion and infill. This would require the relocation of commercial and industrial uses from Camdale to suitable areas identified in the Industrial Lands Strategy. This would reduce fragmentation in these markets and open up new residential product in a well-positioned coastal location. There would also be benefits for transport planning and truck movements along the Bass Highway. It is considered the industrial uses in Camdale are not required to meet local service requirements, and it is suggested these local service industrial needs for Camdale could be adequately accommodated within Burnie proper in the interests of concentrating land uses and given the relative short distance between the centres. Any further development of industrial and commercial facilities would further fragment the market and limit possible synergies for businesses, employment and planning in Burnie. It is recommended the rural-residential land on the southern side of Camdale be retained for rural-residential development only."
In May 2010 the Council received a draft report which it had commissioned to identify strategies specific to the coastal area to the west of the City of Burnie. As to the implementation of the 2007 strategy, the report said in relation to Camdale:
"While current Council strategy (Settlement/Investment 07) proposes that Camdale is transformed over time to residential, this Study suggests tempering that strategy:
·Any transformation from industrial use should commence with precincts least suited for industry and with highest value for other uses, ie Camdale Point, Camdale Hub and then Cam River."
In December 2012 the Council submitted a draft Burnie Interim Planning Scheme to the Minister for approval. The draft Scheme states its objectives as including to coordinate sustainable use or development of land in accordance with certain strategic documents including the strategic documents to which I have referred.
There are some points concerning Interim Planning Schemes which need to be mentioned. They are as follows:
·Such schemes are provided for under the Land Use Planning and Approvals Act 1993.
·A Council may submit to the Minister a draft Interim Planning Scheme. s30D(1).
·The Minister may declare such a draft to be an Interim Planning Scheme. s30F(1).
·Upon the date specified in the Minister's declaration, the Interim Planning Scheme comes into force, replacing the old planning scheme, and continues in force until, with or without modification, it becomes the new planning scheme. s30F(5).
·After the Interim Planning Scheme has been publicly exhibited the Council must provide a report to the Tasmanian Planning Commission, such report to contain copies of all representations made in relation to the Scheme and Council's opinion as to each representation, and thereafter the Commission is to conduct a hearing in respect of each representation. s30K.
·The Commission may then declare the Scheme to come into operation as the planning scheme for the relevant municipality. s30N
·The existence of an Interim Planning Scheme does not preclude applications being considered for a combined rezoning and planning permit under s43A, such as the application made by the plaintiff which was disallowed in 2006, as referred to earlier in these reasons.
However, the draft Scheme proposes that the subject land be zoned "Environmental Management". The defendant's planning officer, Mr Earle, explained the proposed zone as having arisen from the need for planning zones to accord with title survey boundaries. In other words, that it was not feasible to zone part of the land as "Environmental Management" and to give other parts of the land a different zoning. Mr Earle conceded, under cross-examination, that although the draft Interim Planning Scheme designates residential development as discretionary in an Environmental Management Zone, the way the draft presently appears, such development could not receive approval under the Scheme.
Mr Earle acknowledged, under cross-examination, that a Special Area Plan would be an appropriate substitution in the draft Interim Scheme for the Environmental Management Zone. He said [transcript p362]
"MR MCELWAINE: (Resuming) Right, now the solution Mr Earle is to do what Mr Shephard recommended to us yesterday, bring in a special area plan. Correct?.....I don't disagree with that.
Right. And that would have been the solution if I had asked you to express that view as at today or indeed October 2011 correct?.....That a specific area plan was necessary?
Yes?.....Well it is necessary in the context – well it would be – certainly make it extremely useful in the context of the environmental management zone …"
It is reasonable to assume that Mr Earle now has or will alert the Minister or the Commission to this error.
A future planning scheme, including an Interim Planning Scheme, can incorporate a "Specific Area Plan". Such a plan might accommodate an appropriate balance between environmental protection and residential development on the site.
The plaintiff's claim that the land had a value of $2m as industrial land as at 24 October 2011
Evidence was presented by valuer, Mr Russell Cripps for the plaintiff, and valuer, Mr John Austin for the defendant.
Mr Cripps listed a number of sales of industrial land in the north-west region of Tasmania between 2010 and 2011. Six of the seven sales listed reflected a land value per square metre of between $83 and $123. The most proximate sale site was a level site of 7,080m2 opposite the subject land. It was sold for $1.2m in October 2007. Excluding improvements, Mr Cripps assigned a component price of $120 per square metre for the land content.
Consistently with the listed sales Mr Cripps went on to assign a value of $100 per square metre for the developable portion of the subject land as is. He made an assumption that the developable portion comprises 2ha. The result was that the value which he assigned to the land, as at October 2011, was $2m.
Mr Austin said that, in his opinion, an analysis of larger industrial sites, such as the subject land, produced lower valuations per square metre than the smaller industrial sites relied upon by Mr Cripps. However, notwithstanding this, his conclusion and assessment produced the same value per square metre for the developable portion of the land. Mr Austin assumed that only 1ha of the land was developable, with the result that the value of the land at the relevant time was $1m.
Mr Austin's report included the following:
"CONCLUSION
This is indeed a unique site which at the relevant date was zoned "Industrial" and was not subject to development approval. It is a vacant site with severe constraints, which if overcome, would seemingly have development potential for an industrial use and with rezoning, uses such as residential, mixed use residential, tourism, open space and the like could be permitted.
The market value of the property as at 24th October, 2011 must be assessed having regard to what a prudent purchaser with full knowledge of the land, its zoning, site constraints and the like would pay unconditionally for it. I find this a difficult task with conflicting town planning advice, no clear economic use for the land, the lack of directly comparable sales evidence, and the fact that refusal for a change in zoning to permit a mixed residential use was given by Resource Planning and Development Commission sometime prior to the relevant date. Considering all available data and noting the obvious risks to the development of this holding, I am of the opinion it has a market value, exclusive of GST, at the relevant date in the sum of $1,000,000. My assessment is detailed as follows:
ASSESSMENT
3.1418 hectares @ $32 per square metre $1,005,376
(or 1 hectare developable area @ $100 per square metre)
*** Adopted Value $1,000,000 ***"
Accordingly, I must consider whether the plaintiff has established, on the balance of probabilities, that the developable area of the site for industrial purposes is more than 1ha.
The defendant's planning officer, Mr Earle, said in his report at pars[62 – 63]:
"62 It is difficult to say how much of the site is useable for industrial purposes:
None of the analysis to date has definitely delineated and calculated the useable area.
The Burnie West Coastal Strategy (to which I will later refer) suggests approximately one–third of the site or about 1ha is available – but then says such a figure is misleading if all management issues are integrated into a single solution.
In my opinion the absence of such specification is instructive in highlighting uncertainties with capability of the land for sustainable future use.
I am unable to say what proportion of the site is available for use.
63 It is tempting to contemplate that all restrictions on use of the land can be resolved through engineered and managed solutions. However, the particularities of the site both individually and cumulatively have potential to add significant cost to development.
If cost is not an object then it may be possible to say that the entire site is potentially available for use if engineered solutions are applied.
However, engineered solutions have potential to impact on the other site values, including for coastal processes, visual presentation and conservation management.
Engineered solutions must be based on best available knowledge. The level of understanding for impact of sea level rise on coastal inundation and process remains inconclusive. There can be no assurance engineered solutions will provide a consistent and acceptable level of protection for the life cycle of development.
Engineered solutions require maintenance to remain effective. There are ongoing cost and responsibility implications. Failure to adequately maintain can enhance the level of risk."
Consultant planner, Mr Shephard, who was the principal author of the Master Plan, containing the case studies, to which I have referred earlier, said at par[10.3] of his report:
"I have identified the following assumptions [in Mr Cripps' reports] that I am able to comment on in a town planning context. They are common to both [valuers'] reports:
…
·The usable area of the site is 'guesstimated' as 2ha
Comment: None of the literature associated with the Disputed Land has definitely delineated and calculated the usable area, after subtracting penguin habitat, areas vulnerable to erosion, public access and use etc. The sub-precinct plan in the BWCA Stage 2 Study [the 2011 Master Plan referred to earlier in these reasons] shows approximately one third of the total area is usable for built development (buildings, car parking, access, recreational use), ie slightly more than 1ha. However this is potentially misleading as demonstrated by the case study examples which integrate the overall site management of various issues and elements into the overall development. In an integrated development of the site the only 'unusable' areas of the Disputed Land are the areas of penguin habitat and foreshore edge where armouring may be required. If we simply subtract these areas then the Valuer's assumption seems a reasonable one. However approximately half of this 2ha is required under the sub-precinct plan in the BWCA to be used as buffers to the penguin habitat and vulnerable foreshore areas, so in reality the area that is 'usable' for built development is only 1 ha."
Planner, Ms Duckett, who gave evidence on behalf of the plaintiff, was not asked to comment on or give an assessment of the developable area of the land and did not do so.
A prudent purchaser, wishing to purchase the land for industrial use, would make enquiries of the Council and would ascertain that a developable area in excess of 1ha would be uncertain. Engineering plans might need to be prepared and earthworks undertaken in accordance with those plans to raise the height of the land, if the lower lying land was to be developed. Depending upon the intensity of the development a developer might be required to include in the development proposal a substantial buffer area between the built industrial portion of the land and the coastal and penguin habitat areas and also to implement measures relating to coastal protection and the protection of the penguin habitat.
The plaintiff has failed to present sufficient evidence to show, on the balance of probabilities, that 2ha of the land is developable for industrial use, without significant added cost, as assumed by Mr Cripps.
The evidence only supports a finding that not less than 1ha of the subject site is developable for industrial use and, in accordance with that evidence and the evidence of the valuers, assigning a value of $100 per square metre to the developable portion of the land, I conclude that the industrial value of the land as at 24 October 2011 was not less than $1m. It might have a higher industrial use value, but I am not persuaded that this is more likely than not.
The loss of chance claim
In order to succeed on this aspect of the claim the plaintiff must establish:
·That an opportunity for the development of the land for residential use existed as at 24 October 2011;
·That the plaintiff would have taken advantage of that opportunity; and
·That the land would have a higher value if applied to residential development.
Was there an opportunity for development of the land for residential use as at 24 October 2011?
In the section of these reasons under the heading "The Planning Scheme" I have referred to a number of strategic planning documents existing in October 2011, which generally supported a zoning of the land enabling residential use. It follows, from the existence of these documents, that by October 2011 there was more than a negligible chance of the land being rezoned to accommodate residential development.
Would the plaintiff have taken advantage of the opportunity?
The evidence of a director of the plaintiff company, Mr Colin Blackley, was as follows [transcript p112]:
"MR McELWAINE: (Resuming) October 2011, some assumptions, Mr Blackley. Hypothetical transfer of the land in accordance with the contract?……Yes.
Extant industrial zoning, obligation to fund the balance purchase price of nine hundred and fifty thousand dollars?……Yes.
What options were available to fund the balance purchase price at that time?……Again, borrow money from the ANZ or back to back sales ...
Now, you have of course read the planner’s reports about the studies that have occurred since November 2006?……Yes.
An option to have another go at rezoning?……Yes, very much.
For what?……I would have a go at a residential rezoning and try and get that up.
But is it likely or not in October 2011 that Blackley Investments would actually have done the development?……No.
Why not?……Again, I think Burnie City Council would just make it too hard.
So what was likely?……Likely was a back to back sale."
This evidence was not disputed. I have no reason to reject it. I find that the plaintiff would have made attempts to have the land rezoned to permit residential use had the land been transferred to it in October 2011. In the alternative, I find that the plaintiff would have attempted to sell the land at residential value with the purchaser obliged to pursue a rezoning and with the purchaser being able to bring the contract to an end should a rezoning not have been achieved following reasonable endeavours.
The plaintiff's claim that the land would have a value of $3.58m if zoned residential as at 24 October 2011
The plaintiff's valuer, Mr Cripps, valued the land as at 24 October 2011 as if it were residential. The sum he arrived at was $3.58m.
He came to this figure by assuming that 2ha of the land could be subdivided with the subdivision comprising 40 allotments each having an area of about 450m2. He assumed that 28 of such lots would be waterfront.
In order to arrive at the value of $3.58m Mr Cripps considered that the 28 assumed waterfront lots would sell for $270,000 each with the other 12 lots selling for $180,000.
Mr Cripps said that the "summation method" of valuation was "the most appropriate basis of assessment". His calculation for the pre-subdivision value of a waterfront allotment which he considered could ultimately sell for $270,000 was as follows:
"Gross Sale Price $270,000
Less: GST $ 24,545
$245,455
Less: Selling Costs @ 5.5% (agent's fees, legal fees, marketing costs) $14,850
Net Sale Proceeds $230,605
Less: Profit & Risk Allowance @ 35% $ 59,787
$170,818
Less: Development Costs – Civil Works $25,000
Sewerage & Water $ 4,000
Survey, Engineering & other fees $ 3,000
Electricity $ 1,500 $ 33,500
$137,318
Less: Further Development Cost: New access from Bass
Highway @ $300,000 or $7,500 per allotment) $ 7,500
$129,818
Less: Interest on Development Costs 9 months @ 8.5% $ 2,614
$127,204
Less: Interest on Land 18 months @ 8.5% $ 16,218
$110,986
Less: Acquisition Costs – Stamp Duty & Legal Fees $ 4,718
$106,268
Adopt per lot $106,000"
(The means by which Mr Cripps converted a profit/risk allowance of 35 per cent into an amount of $59,787 has not been disclosed.)
He assessed the lesser pre-subdivision value of a non-waterfront allotment, which he considered would ultimately sell for $180,000, at $51,000, presumably using the same methodology as he had for the notional waterfront allotments.
His final calculations were accordingly as follows:
"28 waterfront lots @ $106,000 $2,968,000
12 non-waterfront lots @ $51,000 $ 612,000
Total $3,580,000"
I am not persuaded on the evidence presented by Mr Cripps that the land, if zoned residential and capable of supporting a 40 lot subdivision, would have any greater value than its value as industrial land. The reason is that I am not persuaded that the comparative sales evidence relied upon by Mr Cripps to produce an end price per waterfront lot of $270,000 has been applied correctly.
Mr Cripps relied principally upon six sales of subdivided allotments at Park Grove in Burnie occurring in 2011. Five of the building allotments had an area of about 800m2 and the other building allotment had an area of 1,600m2. Four of the five smaller lots sold for $175,000. The other smaller allotment sold for $180,000. The large allotment sold for $345,000.
These comparative sales figures show that each of the six allotments sold for a price of about $220m2. The figures also show that there is a direct correlation between land size and price. If these figures are to be applied to the assumed 450m2 allotments, the price per non-waterfront allotment would be $220 multiplied by 450m2 producing an end sale price of about $100,000.
Mr Cripps went on to uplift by 50 per cent the prices obtained in the Park Grove subdivision for the presumed 28 waterfront allotments. This uplift is based on comparative sales figures showing that good quality waterfront land is worth at least 50 per cent more than similar quality non-waterfront land. Applying the same uplift, the value per square metre would rise from $220 to $330. $330 per square metre applied to a 450m2 building allotment produces an end sale price of about $150,000.
Because I have no evidence to support a conclusion that the value of building allotments is unaffected by land size I cannot accept Mr Cripps' valuation.
Doing the best I can to recalculate Mr Cripps summation method valuation, taking into account land size, I arrive at a land value of approximately $1.32m rather than Mr Cripps' final figure of $3.58m. My methodology is as follows. Using Mr Cripps' figures, an ultimate sale price of $270,000 for a waterfront allotment produced an en globo pre-subdivision value of $106,000 per waterfront allotment. This is about 39 per cent of the end sale price. An ultimate selling price of $180,000 for a non-waterfront allotment produced an en globo pre-subdivision value of $51,000. This is about 28 per cent of the end sale price. This equates to a drop in the comparison between the end post-subdivision sale price and the pre-subdivision en globo value of about 1.1 per cent for every $10,000 the end sale price is reduced. The difference between Mr Cripps ultimate selling price for a waterfront allotment of $270,000 and my assumed price of $330 per square metre multiplied by 450m2, namely about $150,000, is $120,000. Applying a reduction of 1.1 per cent for each $10,000 in ultimate price reduction (12 multiplied by1.1 per cent) the end pre-subdivision en globo value for a waterfront allotment is reduced to about 26 per cent of the end sale price. The result is a pre-subdivision en globo value of about $39,000. Applying the same reduction to the non-waterfront allotments, namely, a reduction in the end selling price from $180,000 to my assumed price being $220m2 multiplied by 450m2 being about $100,000, the reduction of 1.1 per cent for each $10,000 in ultimate sale price (8 multiplied by1.1 per cent) produces an end pre-subdivision en globo value of about 19 per cent. The result is a pre-subdivision en globo value for the non-waterfront allotments of about $19,000. With these adjustments the final calculation would be as follows:
28 virtual waterfront lots @ $39,000 $1,092,000
12 non-waterfront lots @ $19,000 $ 228,000
Total $1,320,000
However, even if my recalculation was correct, and I do not know whether it is, I would still be unable to be satisfied that my recalculated figure represents the true pre-subdivision residential value of the land. This is because of other difficulties with Mr Cripps' assumptions. Mr Cripps appears not to have included in his subdivision costing the cost of raising the land levels to accommodate climate change. He does not appear to have included the cost of dealing with the part of the land with petroleum hydrocarbon contamination. He does not appear to have included any potential costs which may be required to accommodate coastal conservation and the protection and management of the penguin habitat. Further, he has assumed that all lots would be sold within 18 months of land acquisition. The 18 month presumption does not appear to take account of the fact that the evidence is that there is an oversupply of residential land in the Burnie area. The evidence is firstly in the "Burnie Settlement and Investment Strategy to 2026" and secondly, in the evidence of the defendant's planner Mr Earle and is respectively as follows:
"A summary of residential supply and demand indicates there is sufficient dedicated residential land in Burnie to cater for each future growth scenario. Therefore, the future residential development strategy will need to carefully consider the need for new residential release areas."
"The Council has subsequently completed a more contemporary (2009) in-house analysis of residential land stocks. The analysis confirmed assessments contained in the Strategy for available developed and zoned residential land to provide an adequate resource for up to 40 years from the present without need for additional release."
There is another relevant matter noted by Mr Cripps, but apparently not taken into account in the valuation. Mr Cripps identified certain site characteristics, but applied no reduction in respect of them. The characteristics are as follows. The land is adjacent to a predominantly industrial/commercial precinct. It is next to a busy highway. Although the railway line abutting the southern boundary, near where most of the building allotments are likely to be, is not presently in use, railway operations on the line might resume in the future. The foreshore area is not attractive and, according to planner Mr Shephard's evidence, the sandy parts of the foreshore, which might otherwise attract swimmers, are subject to undertow and current from the Cam River. In short, the land is neither pristine, peaceful nor idyllic waterfront land.
Further, when the figures produced by Mr Cripps, applying the summation method, are tested against a straight sales comparison they do not match up. Mr Cripps referred to the sale of the George Town ferry terminal site. The property was sold in December 2004 for $880,000 reflecting a land content sale price of $600,000 for a land area of approximately 2.3ha. This equates to a value of $26m2. The Real Estate of Tasmania figures show that the median land sale price in the north-west region of Tasmania was $65,000 in 2004 and $104,500 in 2011, an increase of 62.5 per cent. No figures for median price increases in north-east Tasmania were produced and so there is no basis for finding that a different increase applies to George Town. Applying the north-west Tasmania percentage increase to the sale price of $26m2 for the George Town land, the 2011 price would be $42m2. Assuming that the developable area of the subject land for residential use is 2ha, the value of the subject land, using George Town as a comparative sale, would only be $840,000. This figure bears no relationship to the figure of $3.58m arrived at by Mr Cripps applying the summation method.
There is an even more compelling comparative sales example to demonstrate the unreliability of Mr Cripps' summation method residential valuation of $3.58m. The example was not included by Mr Cripps in his analysis, but was referred to by the defendant's valuer, Mr Austin. The land at Park Grove in Burnie, which Mr Cripps relied upon for his post-subdivision end sale figures was sold unsubdivided, but with subdivision approval, in December 2008. The land area was 2ha and the sale price $810,000. This equates to about $40.50m2. If this is uplifted by the percentage sale price increases between 2008 and 2011 as disclosed by the Real Estate Institute of Tasmania figures (in 2008 the median selling price for land in north-west Tasmania was $85,000 and in 2011 it was $104,000) the uplift would be 22 per cent producing a price of about $49m2. If a further uplift to accommodate two-thirds of the developable portion of the subject land being capable of being subdivided into virtual waterfront allotments the further uplift would be about 33 per cent. This would bring the price expected to about $65m2. Applied to the subject land, assuming a developable area of 2ha, the broad acre pre-subdivision value would be $1.3m. This is almost exactly the figure which I arrived at in my recalculation of Mr Cripps' summation method valuation. See par[83] of these reasons.
However, even when Park Grove is applied as a comparative sale and adapted to take into account that the subject land is on the waterfront, I am not persuaded that 2ha of developable residential land would produce a value in excess of $1m. The original development proposed by the plaintiff and the defendant, which was rejected by the Resource Planning and Development Commission in 2006, was considered by the Department of Infrastructure Energy and Resources. The department required such an intensive development to have a new access point at the eastern end of the land from existing traffic lights. The plaintiff's evidence was that the cost would be about $300,000. When this, and other pre-subdivision infrastructure expenses dealing with raising the height of the land and coastal protection, are deducted the value would fall below $1m, being the land's value developable as a 1ha industrial estate.
Mr Cripps went on to say that the George Town site was ultimately developed into 30 residential townhouses and allotments. He then says that this equates to "$18,750 per equivalent unit site". He then doubles this figure to take account of price rises between 2004 and 2011 to produce $37,500 per unit site, despite the fact that there is no evidence of such an increase applicable to either George Town or north-west Tasmania. Mr Cripps then multiplied $37,500 by 73 assumed unit sites for the subject land to produce an alternate value for the subject land of $2,737,500.
This approach, like Mr Cripps' summation approach, seems to assume that land values are not affected by land size. If land size is taken into account, the land component for the 30 unit sites at George Town would be 2.3ha divided by 30 sites producing an area of 767m2 per site. $18,750 uplifted by 62.5 per cent for price increases between 2004 and 2011 and divided by a site area of 767m2 produces a value of about $40 per square metre. 73 unit sites on an assumed developable area of the subject land of 2ha produces an average unit equivalent site area on the subject land of 274m2. At $40 per square metre, the unit sites would have a value of about $11,000 each and not Mr Cripps' figure of $37,500 each. $11,000 per unit site multiplied by 73 unit sites produces a value of about $800,000, which is nothing like Mr Cripps comparative based value of $2,737,500.
Mr Cripps also referred to the sale of Riverside land in 2000 and 2002 which was developed as the Seaport development in Launceston. The sale price was $1.25m. The land area was 1.31ha producing a value of about $95m2. However, there was no assertion, nor comparative sales evidence, to equate this land, which is within easy walking distance of the centre of Launceston, being Tasmania's second largest city, to land values in outer Burnie.
For these reasons, I find Mr Cripps' residential valuation evidence unpersuasive and do not accept it. I am not satisfied that the subject land, as residential land, would have a value in excess of its industrial value, which for reasons already given, I am not persuaded exceeds $1m. The plaintiff agreed to pay $1m for the land in 2003, but the analysis of the valuation evidence shows that the plaintiff had agreed to pay far more than the land was worth.
What was the chance of the land being rezoned to accommodate residential development as at 24 October 2011?
In light of my rejection of the plaintiff's residential valuation evidence and the consequent result that I have not found that the subject land would have a higher value if zoned residential, it is unnecessary to assess the chances of a residential rezoning. However, the matter was argued and so I will briefly set out my reasoning and conclusions on this aspect.
The strategic planning documents, to which I have referred earlier in these reasons, and which came into existence after the Resource Planning and Development Commission's decision in 2006 not to change the industrial zoning dealt specifically with the subject land. Plainly from the parts which I quoted from and the case studies in the December 2011 Master Plan the clear strategy is to change Camdale from a predominantly industrial/commercial locality to a predominantly residential locality. The subject land was assessed in high detail in the December 2011 Master Plan and that Plan was on public display shortly prior to 24 October 2011, being the relevant date for the assessment.
Assuming that these documents form an integral part of the basis for future planning decisions and based on the evidence before me I would have no doubt that a rezoning to accommodate residential development was highly likely. This is despite the evidence that there is already a satisfactory supply of residential land in the Burnie Municipality, because the strategies, notwithstanding this fact, identify the subject land as being land which should be rezoned for residential use. I am unable to put the likelihood as high as a certainty because ultimately all zone changes are subject to public advertisement and where representations are made public hearings to consider the merits of the representations. With this in mind there may be matters which were not the subject of evidence in this proceeding which might affect the chance of or nature of any particular rezoning.
As pointed out earlier, some speculation or even guesswork is permissible in the assessment of the value of a chance which has been lost to a plaintiff through the defendant's breach of contract. I would assess the chance of a rezoning allowing residential development at 90 per cent.
However, the rezoning might not be such as to create or permit a developable area of 2ha as assumed by Mr Cripps in his valuation.
The evidence of the two planners called by the defendant does not support such a finding. As noted earlier planner, Mr Earle, said that he was "unable to say what proportion of the site is available for use". Planner, Mr Shephard, relied on his 2011 Master Plan for his conclusion that only 1ha was developable. But that plan was not and is not part of a Planning Scheme. The conclusion is based on a significant part of the subject land being required "to be used as buffers to the penguin habitat and vulnerable foreshore areas". Mr Shepard, however, did not assert that such extensive buffers would necessarily be required under the State Coastal Policy or the Master Plan. In particular, his Master Plan says of the buffers at p29:
"Provides a default 20m buffer between habitat areas and any coastal development or design or manage development in the buffer area to provide buffering equivalent to a 20m separation.
The buffer could be reduced (potentially allowing a greater area available for coastal development) where the proposal could demonstrate regional conservation management outcomes comparable to or exceeding the contribution of the 20m buffer, that could include:
·building design features that reduced impacts
·enduring conservation management arrangements
·off-site conservation habitat areas
Such a proposal would need to be accompanied by a report assessing conservation habitat performance, undertaken by an ecologist or land manager recognised by DPIW as competent to report on habitat impacts."
The intensity or nature of industrial development might be such that an extensive buffer zone is required rendering only about 1ha of the site developable. Residential development, however, might be better capable of accommodating appropriate conservation outcomes with a reduced buffer area. If this transpired, the rezoning might allow a developable area of up to 2ha. However, I would rate the chance of 2ha being developable as low having regard to the Master Plan 2011 and Mr Shephard's evidence. I would regard the chance of a rezoning enabling about 1.5ha of the site to be developed as a medium chance.
Assessing the chances, informed by the evidence provided, but acknowledging a degree of guesswork, and doing the best I can, I would have applied the following percentages:
·Rezoning with 1ha developable land – 90 per cent.
·Rezoning with 1.5ha developable land – 60 per cent.
·Rezoning with 2ha developable land – 30 per cent.
Reliance damages – Has the defendant demonstrated that some or all of the plaintiff's contractual expenditure would not have been recouped if the purchase had been completed?
The plaintiff's claim for reliance damages is particularised at about $245,000, including the $50,000 deposit paid under the contract. When the claim for interest on this sum is added, the total claim comes to about $460,000. The plaintiff has the benefit of the presumption, referred to earlier in these reasons, that expenses would be recouped if the breached contract had been performed. The onus is on the defendant to rebut the presumption on the balance of probabilities. Accordingly, to avoid the obligation to pay reliance damages the defendant must show that had the land been transferred to the plaintiff on 24 October 2011, the plaintiff would not have recouped the expenditure and interest.
The plaintiff would have had to pay a further $950,000 to settle the contract and so the defendant needs to show that the land would not have returned more than about $1.4m for the plaintiff, if reliance damages of about $460,000 are to be reduced or negated.
To show this the defendant would need to prove that the industrial value of the land was less than about $1.4m. If able to prove this the defendant would then need to show that even with a residential zoning the land would not have returned more than about $1.4m to the plaintiff if zoned residential or, alternatively, that the chance of a residential rezoning was less than 50 per cent.
Although the plaintiff has been unable to prove an industrial value in excess of $1m, conversely the defendant has not proved that the land was worth less than $1.4m.
The industrial value was assessed by both the plaintiff's valuer and the defendant's valuer at $100 per square metre of developable land. Accordingly, the defendant needs to show that less than about 1.4ha was developable for industrial use.
Having regard to the uncertainty as to the extent of any buffer area which might be ultimately required, in view of the contents of the Master Plan as set out at par[98] of these reasons, I am not satisfied that it is more likely than not that less than about 1.4ha of the land is developable land. The extent of the buffer area required will be influenced by the type and intensity of the industrial use. I am not satisfied that the land had, in October 2011, an industrial value of less than $1.4m. I note that the more intensive the use, the higher the likelihood is that a new access would be required at a cost of about $300,000 (see par[88] of these reasons). However, it was not suggested by the defendant that an increase in developable industrial area to a to a little above 1ha would be likely to result in a new access being required.
Counsel for the defendant submitted that the industrial value of the land would not exceed $1m even if the developable area exceeded 1ha. It was said that this is because a prudent purchaser would assume, at the time of purchase, that only 1ha might be developable with any degree of certainty. This, however, does not take account of a sale being conditional upon approval of a particular development proposed by the purchaser, which might involve using more than 1ha of the land. Although the comparative sales evidence relied upon by the defendant's valuer, Mr Austin, showed that the value per square metre for industrial land was lower for larger sites, the evidence is not sufficient to show, on the balance of probabilities, that the land value would fall significantly below $100m2 for land a little in excess of 1ha, say 1.4ha.
The defendant having failed to prove a land value of less than $1.4m, it follows that the plaintiff is entitled to reliance damages.
If the industrial value of the land had been shown to be less than $1.4m, it would have been necessary for me to consider whether the land would have a higher value if zoned residential. I would have determined, for the following reasons, that it would not.
Firstly, I have already rejected the figures produced by the plaintiff's valuer, Mr Cripps, based upon the summation method of valuation.
Secondly, the comparative sales evidence available to me indicates that pre-subdivision broad acre residential land in Burnie has a lower value than industrial land. The 2008 sale of the broad acre pre-subdivision Park Grove land referred to in these reasons at par[87] reflects a value of about $40.50m2. The industrial land, opposite the subject site, referred to in par[57] of these reasons was sold in 2007 for $120m2.
Disposition
I have not been persuaded that expectation damages are payable and the presumption in favour of the plaintiff on its claim for reliance damages has not been displaced. Accordingly, the reliance damages need to be assessed. In other words the wasted expenditure claim, or at least the disputed items in it, will need to be considered. Evidence was presented on the claim for these damages, but counsel for the defendant, in closing submissions, asked that the submissions on such damages be deferred to a later time, pending whether or not a determination was made that reliance damages are payable. Counsel for the plaintiff acceded to the request. Accordingly, reliance damages will be awarded in such amount as the parties might agree, and in the absence of an agreement as determined by the Court following further submissions.
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