Boral Bricks (Qld) Limited v Director-General, Department of Main Roads
[1999] QLC 10
•4 March 1999
|
BRISBANE
4 March 1999
Re: Claim for Compensation –
Resumption for road purposes –
Acquisition of Land Act 1967 –
(A97-23).
Boral Bricks (Qld) Limited
v.
Director-General, Department of Main Roads
J U D G M E N T
Background:
This is a claim for compensation for lands resumed under the provisions of the Acquisition of Land Act 1967 (the Act). By Proclamation in the Queensland Government Gazette of 16 October 1992, the Director-General, Department of Transport (now Department of Main Roads) (the respondent), resumed lands of area about 2.533 hectares comprising:
(i)an area of 2.404 hectares being part of Lot 1 on RP 172273, Parish of Oxley (Parcel A), and
(ii)an area of 1290 square metres, being the whole of Lot 9 on RP 100147, Parish of Oxley (Parcel B).
At the date of the Proclamation on 15 October 1992, the registered proprietor of the subject land was Boral Bricks (Qld) Limited (the claimant). The date of 15 October 1992 then becomes the date at which compensation is to be assessed.
The Claim:
By notice of intention to resume of 16 June 1992, the respondent issued a notice to the claimant seeking written objections to the proposed resumption, and signalling a willingness to negotiate an appropriate settlement, or failing agreement, to treat as to the compensation to be paid and all consequential matters. The Proclamation to resume of 15 October 1992 was amended by Proclamation dated 1 April 1993, only in so far as a technical correction of the former proclamation.
On 21 May 1997, the respondent wrote to the registrar of the Land Court seeking an application pursuant to section 25(1) of the Act, for a hearing by the Land Court of the matter of compensation. The letter advised that the respondent was willing to pay compensation to a total of $540,000, subject to reserving the right to vary the amount, and that an advance against compensation was paid to the claimant to an amount of $499,000 on 21 June 1993.
On 3 June 1997, the registrar of the Land Court ordered the claimant to file a claim for compensation on or before 4 August 1997. A claim for $7,721,189.55 (Exhibit 4) was received by the registrar on 30 July 1997, and the matter was set down for callover on 1 December 1997, with a projected date for hearing on 15 June 1998. With agreement of the parties the hearing was adjourned, and hearing commenced on 14 September 1998.
An amended claim was lodged with the Court on 7 September 1998 as follows:Land and improvements - $ 793,338.00
Disturbance - $1,982,642.68
Severance - $ 785,861.00
Injurious affection - NIL
Costs - $ 77,850.97Less advance payment - $ 499,000.00
Total Compensation Claimed - $3,140,692.65
During the hearing the claimant sought to amend the claim as follows:
(1)Land and improvements
(a) 2.404ha (part of Lot 1) - $ 601,000.00
(b) Loss of trees - $ 24,000.00
(c) 1290 sq.m. (Lot 9) - $ 161,250.00
(d) House improvements on Lot 9 $ 7,088.00
Sub-total $ 793,338.00
(2)Disturbance
(a) Loss of additional signs - $ 2,500.00
(b) New illuminated sign
(less betterment) - $ 66,158.57
(c) Replanting trees on bund - $ 2,407.00
(d) Raising bund wall - $ 4,470.00
(e) Extending brick road - $ 9,540.00
(f) Repairs to fences - $ 500.00
(g) Brick outside storage area - $ 55,810.00
(h) Tree planting materials - $ 110.00(i) Water line to bund wall - $ 804.52
(i) Report on raising bund wall - $ 1,980.20
(k) Time cost to claimant - $ 10,680.00
(l) Loss of income from loss ofSign plus interest - NIL
(m) Interest on compensation owed - $ 754,510.88
Sub-Total $ 909,471.17
(3) Injurious Affection - NIL
(4) Severance – Loss of clay $1,230,712.00
(5) Costs to date of lodgment of claim
(30.7.97 – professional fees) - $ 22,000.00
TOTAL COMPENSATION = $2,955,521.17
Less advance payment = $ 499,000.00
AMOUNT CLAIMED = $2,456,521.17During the hearing both parties agreed to settle on the amounts now claimed in respect of items 2(a); 2(c); 2(d); 2(e); 2(f); 2(g); 2(h); 2(i); 2(j) and 5. The remaining items therefore in contention are:
Item (1) (Land and Improvements including trees, Item 2(b) the sign, Item 2(k) the cost of supervision, and Item (4) the loss of brickmaking materials). With agreement of the parties a joint inspection was undertaken. At the hearing the respondent amended its offer to $791,621.52 plus interest.
Mr MN Cooke QC, with him Mr T Trotter, of Counsel, represented the claimant, instructed by Neil O’Sullivan and Rowell, Solicitors.
Mr GJ Gibson QC, with him Mr R Jones, of Counsel, represented the respondent, instructed by Crown Law.
The Nature and Location of the Land:
Generally the Boral land (area 53.4312 hectares) is of medium elevation, and has a rise in the topography towards the centre of the parcel to a height of 55.4 metres AHD. The area to the south, which includes the resumed lands, falls towards the south-eastern corner, except for a relatively minor area near Harcourt Road which drains to the west. The balance of Lot 1 drains towards the north. Apart from a small area of Parcel A near Harcourt Road, which contained the clay road, the rest of Parcel A carried native forest timber varying from mature trees to young regrowth. Parcel B had a gentle fall towards the north, and contained a detached brick residential house which was used at the date of resumption and was occupied by a tenant.
The Boral site is located about 17 kms south-west of Brisbane CBD, and is on the northern side of the busy Ipswich Road, which is the major arterial road linking Brisbane and Ipswich. The Boral site is bounded to the north by the south-western railway line, with a railway siding available, and there is residential development to the north, east and west. There are industrial lands to the south on the southern side of Ipswich Road. All services are available.
The Boral site has had a long continuous history of use for the mining and/or manufacture of clay bricks for almost 100 years, and is seen as being strategically located for that purpose. There is access to the site from Harcourt Road, and the site is protected from visual intrusion by bund walls and tree screenings along the south, east and northern boundaries. Ipswich Road is a major divided highway, and prior to resumption, its intersection with Harcourt Road was at grade, with signalised turning arrangements. Following resumption Ipswich Road has been lowered in height, and access to Harcourt Road is now by overhead bridge from the south, and turning and merging lanes from the west.
(4)The Use of the Land:
The Boral site was, and continues to be, used for the purposes of the manufacturing of clay bricks and pavers. The resumed areas of Parcels A and B have necessitated the modification of some replacement bund walls that were erected by the respondent near the Harcourt Road end of the resumed lands. Those additional costs have already been agreed by the parties. Those agreed costs also included upgrading of the concrete pavements to the clay road entrance for the heavy trucks transporting brick-making materials.
The Boral site contains three brick-manufacturing plants, two of which are currently operational. The site is also used for the storing and mixing of bulk brick-making materials prior to the manufacturing process, as well as major storage of bricks prior to distribution. There are two major clay pits. The main one locally called the “Main Darra Pit” is located towards the centre of the site, and another, referred to as the “Black Hole” is located in the north-eastern corner of the site. There were also several smaller old clay pits immediately to the north of the resumed areas. The geological record of the site reveals a total of 8 clay pits within ML 1100 (formerly ML 252).
(5) Planning Impacts:
The Boral site was zoned as “Extractive Industry” at the date of resumption on 15 October 1992, and has been included in that zone since the gazettal of the current Brisbane Town Plan in June 1987. Evidence was given by Professor John Brannock, a consultant town planner for the claimants, that town planning approvals have covered the site since at least March 1970, when a consent approval was issued for the erection of a new building and for the use of an existing building upon the site. Professor Brannock also advises that the site was designated as “Urban Fabric” under the Strategic Plan which was in force at the date of resumption.
Professor Brannock argues that, because of the relative limited availability of deposits of certain materials, including brick-making materials (clay), the intent of the Extractive Industry zone is to protect the availability of those resources by requiring the consent of Council in order to ensure inappropriate development does not further reduce their availability. (See section 8.9.1 of the Town Plan).
Such reserves are usually identified as a result of in-depth investigatory planning studies, which generally culminate in some protective zoning such as Extractive Industry in order to protect the resource in the overall pursuit of efficiency for the community. A site such as the Boral site, because of its large size and strategic location, would be seen as having an important role in the development of the community. Professor Brannock was unaware of any comparable sites in proximity in the Brisbane area, where manufacturing of bricks existed upon site, and where large deposits of brick-making material were available.
In respect of the future use of Parcel B (Lot 9), Professor Brannock argued that, in his opinion, it would not be necessary to seek a rezoning of Parcel B in order to use the site as a showroom for products from brick or paver manufacture. He argues that a showroom is an ancillary or associated use to a clay manufacturing plant that produces bricks for housing construction. He argues that section 30(a)(iii) of the Brisbane Town Plan defines the term “ancillary use” to include the sale of articles resulting from that extractive industry.
On that basis Professor Brannock believes that there would be good prospects of success of gaining approval to an application for that purpose upon the subject lands, subject to the normal detailed conditions affecting access, parking, setback, landscaping, etc. He sees that such a use of Parcel B would be approved by planning consent, rather than by re-zoning. He sees little risk in gaining such consent from Council.
Professor Brannock also advises that it is the use of the land which is controlled by the consent, and a showroom in such use would not need to be operated by Boral, but could be operated by a second party. He notes further that, at the time of resumption, such a showroom on Parcel B would have reasonable exposure to passing traffic. He argues that, at the time of resumption, the consent approval given in 1980 was for the “manufacture of bricks”. Should the manufacture of bricks have ceased, then Professor Brannock believes that, at the relevant date, a move to industrial purposes for Parcel B could also have been achieved under a Council consent approval.
In considering any proposal to compare Parcel A on the basis of Future Industry zoning, Professor Brannock argues that such a comparison would have little relevance to the actual conditions surrounding such rezoning. He argues that the existing Extractive Industry zoning has superior rights to any Future Industry zoning. Professor Brannock further argues that it is inappropriate to consider a scenario which virtually reflects a “downsizing” of the subject lands, as that was most unlikely to ever occur.
Mr Slater, a consulting registered valuer for the respondent, acknowledges such advice, but argues that he has only considered a scenario of Future Urban zonings for the subject lands, as a means of comparing comparable sales. That matter is discussed later in this decision. Mr Slater argued that, in his opinion, it would have a comparable impact upon the value of the subject land if the zoning was changed from Future Urban to General Industry, than if it were from Extractive Industry to General Industry for Parcel A.
(6) The Mining Operations:
There was considerable argument about the likelihood of the claimant actually mining the brick-making material upon the resumed lands. Mr V Guerra, Technical Manager with Boral, gave evidence that historically the previous owners of the site, Brittains Bricks and Pipes Limited, had mined the extraction of the red to brown type plastic clays at the top layer (about 7 to 9 metres deep), which tended to be underlain by yellow to creamy clays at about 10 to 15 metres depth. Those brick-making materials were won under mining leases ML1100, ML5012 and ML1158.
While a copy of ML1100 could not be provided to the Court, ML1158 (Exhibit 20) demonstrates to the best of the knowledge of the claimant the condition of those leases. Mines Department documentation confirms that former leases in the name of Brittains Bricks and Pipes Limited had extended back over the area of ML1100 from at least October 1949.
Under the conditions of Mining Lease ML1158, special conditions were applied to the operations which were designed to minimise hazard or nuisance to adjacent areas, to avoid subsidence beyond the site, or the accumulation of water within the site. There was also a special requirement to the lessee to maintain a visual obstruction of the site around the perimeter by the maintenance of trees and shrubs in order to contain noise and dust within the site area.
Prior to the current manufacturing practices of the claimant, the brick-making materials extracted from the site were used by Brittains for the making of both bricks and clay pipes for drainage and agricultural purposes. At that time the bricks were manufactured using a pressing process, where the brick was designed with a full frog for laying purposes. The clay pipes were used extensively through the building industry. Because of the more plastic and heavier clays from the site, they were very suitable for that purpose. The definition of “heavy clay” refers to its plasticity, not to its weight, although those pressed bricks were of greater weight than the modern extruded bricks. However the heavier clays of the site are quite suitable for the manufacture of pavers.
With the introduction of new technology and tunnel kilns, brickmaking changed at the end of the 1980s to extruded bricks. At about that time the claimant determined a policy to seek brickmaking materials from external sources, and clay extraction from the site has virtually ceased since then. The site is currently used for the stockpiling of brick materials, and there are two operational plants. A third plant is currently non-operational. Plant No. 1 was built in 1981 and has a capacity of 37 million bricks per annum; Plant No. 2 was built in 1968 and has a capacity of 32 million bricks per annum; and Plant No. 3 was built in 1975 and has a capacity of 64 million bricks per annum.
There are currently proposals under consideration for increasing the capacity of one plant through upgrading of that plant for a dedicated paver manufacturing process. Part of the strategic nature of the Darra site lies in its location for the marketing and distribution of its products to Queensland, Northern Territory, New South Wales, Victoria, Asia and New Zealand.
Under the former excavation policies of Brittains, clay materials were recovered to depths below the self draining level for the site. As a consequence any rehabilitation of the site, should it be determined to use the site for another purpose, would involve some filling. It has been the policy of the claimant to seek to maintain a free draining mining plan for the area. Even adopting such a policy there still remains considerable brickmaking materials available for excavation on the site, including the resumed areas.
There was no evidence to indicate that community pressures may be brought to restrict mining operations at the site. Indeed the claimants are very conscious of the need for environmental compliance in order to maintain good relations with their neighbours. In view of the existing well-established nature of residential development surrounding the site, it was anticipated that current operations would extend indefinitely under the current rules.
In respect of the existing plant upon the site the only restriction was seen to be the normal requirements to replace plant during its useful life. Because of the high capital cost of the plants (about $150 million) it would be a major business decision for the claimant to determine to reposition the enterprise to another site. On that basis it was argued that it would be inappropriate to limit the life of the plant to, say, 40 years. It was also argued that it would be very difficult to acquire an alternative site in the locality with all of the benefits of the Darra site.
The current No. 1 manufacturing facility is located on the site of the old clay pit located in the south-west corner of ML1100. Mr Guerra also confirms that the current location of the manufacturing plants, at that time, may have tended to compromise the reclamation of some materials. However, subject to the costs of repositioning the plant it would not be impossible to recover those clays. There was no plant equipment hindering the recovering of the clay on the resumed lands.
Mr V Guerra further advised that since the 1980s Boral has outsourced brickmaking materials from Westlake, Strathpine, Goodna, Browns Plains, Kingaroy and Redbank Plains. Details of those materials are discussed later in this decision. That policy by Boral to outsource those materials in the 1980s, arose from a perception that eventually, in order to increase capacity, Boral would need to go off-site for materials, and there was a need to retain the land form of the site for any possible future utilisation.
Of more recent times, in Mr Guerra’s opinion, there has been the beginning of a rethinking of that strategy in view of the need to reduce overheads and to gain the benefits of operational synergies. Mr Guerra argued that on a national basis it is now seen best to develop a policy of multi-plant sites, where several manufacturing plants are used on a single site. That is the reason for the current three plants at Darra.
Within the last 5 years Mr Guerra has perceived a move to possible future mining operations again on the site, however he was unable to substantiate that conclusion by any directions on policy from Boral’s senior management. He believes such a rethink of policy by Boral started about 1995, coinciding with shifts in demand for brick products as a result of a less buoyant building industry, and also with a change in Boral’s senior management. Mr Guerra advises that such a change is now evident in his current budget operational plan for 1998. He agrees that his perception may have been influenced by comments within Boral, that a claim for compensation for the resumption was likely to involve the issue of the life expectancy of the plant, but not necessarily related to the loss of clay.
Mr Guerra also confirms that Boral had moved in the early 1990s to acquire an alternative site at Blackstone, Ipswich, with the intent of a phased withdrawal from Darra to Ipswich. That land was subsequently purchased in the mid-1990s. One of the strategies then being investigated was to relocate to Ipswich over a period of some 15-20 years. However, in view of the very substantial cost of relocating the plant, Mr Guerra confirmed that the only concrete indication given by Boral so far, had been a management strategy document about 1997. There are no darker clays on the Blackstone site.
Mr Guerra also confirms that an Environment Overview Strategy (ENOS) was prepared for the Darra site in October 1995. That strategy noted that mining resources were to be held for future utilisation. The basis of that ENOS built upon the findings of a future land use study by surveyors Bennett and Francis some years earlier, which looked at maximising the sale potential of the site. The Bennett and Francis report had apparently concluded that the most likely future sale potential of the site would be for mixed residential and industrial type of development. There was no evidence of any proposal by Boral to seek rezoning of the land.
In its last 5-yearly plan of operations, prepared about 1995, Boral had indicated that for the life of the plant a major source of supply would continue to be sourced from Westlake. Presumably that decision was made after careful consideration of the various economic viabilities of obtaining the brickmaking material from alternative sources, including from the Darra site.
(7) The Impact of the Trees:
The matter of the value of the trees lost as a result of the resumption of Parcels A and B is disputed. The consultant registered valuers Mr Waghorn (for the claimants) and Mr Slater (for the respondent) have taken opposing views of the value of the trees removed. Mr Waghorn argues that the former mature trees averaging from 5 to 6 metres in height, did in fact provide a physical and visual barrier to the mining operations as required under the special conditions of the mining lease.
Mr Waghorn has sought to provide a conservative estimate of the in situ value of the timber, ignoring any immature trees. Mr Waghorn saw the lost benefit from the removal of the trees in that they had formerly provided a physical screen to filter dust, and to restrict views of the operations. He had made no allowance for any potential millable nature of the trees and had physically counted 300 trees and valued them at a notional value of $60 per tree.
Mr Slater, by comparison, saw the trees as having no value in estimating the value of the land for its highest and best use as future industrial land, in view of the need to remove the trees in order to achieve the benefit of using the land for industrial purposes. Under those circumstances he believes the trees are in fact a detriment to the value of the land, although he has made no allowance for that in his value. Mr Slater further notes that Boral, subsequent to the resumption, has made no attempt to replace the trees, save for a small area near the bund wall at the clay road entrance. This latter re-planting has already been allowed for by the respondent in agreeing to items 2(c) and 2(h). Mr Slater notes that for most of the area adjoining the resumed parcels A and B there are existing trees remaining which provide the barriers required under the mining lease.
(8) Brickmaking Materials:
A major part of this claim lies in the apparent loss of brickmaking material (clays) on the resumed Parcels A and B. It is the claimant’s argument that the clay upon parcels A and B in fact demonstrate a red brown characteristic which provides a darker burning base colour, and provides a type of darker brick which has proved fashionable in the current building industry. It is argued that the clays upon mining lease ML1100 are not uniform in colour or texture, as evidenced by exposures in the main Darra pit and the Black Hole.
In following its policy of only excavating to about 4 metres, in order to ensure a self-draining site, Boral would seek to win the red coloured clays in areas where they occur at that depth. Mr Cooke argues that, had the claimant been given opportunity to win the clay from the resumed area prior to resumption, that could have been effected within some 2 to 3 weeks, and the clays stockpiled, rather than lose the clay.
In understanding the nature of the clays upon the Darra site, I note the clays are identified as part of the Darra formation which forms part of the tertiary sequence in the geology of the region. This consists of poorly-consolidated, very fine to coarse-grained, poorly sorted sandstone and pebble to cobble conglomerate with clay stone and silt stone beds. The areas of mud stone near the Ipswich Motorway have low elevation and relief.
Drilling and analysis of bore samples was undertaken by JE Siemon Pty Ltd, and Enviro-Managers Pty Ltd, which disclosed the presence of a sequence of red to brown clays along the southern boundary of ML1100 after the resumption, at varying depths of between 5 and 27 metres. Those clays are suitable for burning the more intense colours.
A comparison section south of Ipswich Road demonstrates (about 150 metres south of the former southern boundary of ML1100), a continuation of the Darra formation with continuing brown hues in the subsurface materials. The samples demonstrate that there was subsurface clays below the reserved areas which were capable of extraction to a depth of some 4.5 metres on average. Some parts at the high elevation near the western end provided depths greater than 4.5 metres, while some areas to the eastern end were less than 4.5 metres.
The clays from the bore samples indicate that the materials have green strengths from medium/high to high, with shrinkage, colour, and plasticity levels suitable for brickmaking. However it was noted that the clay types (A and B) along the boundary of ML1100 would need to be mixed with less plastic material to reduce shrinkage and plasticity, depending upon the brickmaking process used. The firing test results indicate the clay is suitable for bricks.
The area surrounding the Old Black Hole in the north-eastern corner of the site (ML1158) comprises Neranleigh/Fernvale beds of the Devonian-Carboniferous to Triassic - Jurassic era, which tend to exhibit a more spasmodic occurrence, and tend to provide a top layer of red to brown clay. That is underlaid by a yellow silty sandy clay, which fires to a lighter brick from white to white-grey.
As a means of obtaining the darker hue materials, Boral has developed a source of that material at their Westlake leased deposit. Unfortunately, a re-investigation of resources at Westlake in 1995-96 disclosed that there was only a maximum of 4 to 5 years of material available. The previous exploration of Westlake, as a result of inadequate bore hole investigations, had not disclosed the lack of uniformity of the clay. As a result of that later disclosure Boral was now seeking alternative sources for the darker burning materials.
The Westlake site was also subject to environmental pressures as a result of growing urbanisation, which restricts hauling operations of the material to Darra to only a few days each month. It is anticipated that the Westlake deposit will expire in about 2 years. Westlake has been the preferred source for that type of material because of its proximity to Darra (5 kms), and the attractive transport costs available. An alternative source of the lighter clays is obtained by Boral from the Petrie formation at Strathpine.
In analysing the size of the clay resource on the Darra site, Mr Kershaw, a consulting geologist and extractive industry consultant for the respondent, adopted a model using existing topographic mapping, showing 5-metre contours and known geological investigations. Overburden was assumed to be 0.5 metres in depth and an average clay thickness of 4 metres was assumed in order to preserve the current self-draining strategy of the claimant. A buffer area of 10 metres around the boundaries was adopted, together with a batter slope of 30 degrees from the horizontal for the extraction.
Mr Kershaw estimated the total in situ volume of material over three sites on ML 1100 and ML 1158 at 2.115 million cubic metres. After allowing for the overburden he estimated a total clay resource of 2,000,929 cubic metres on the area after resumption, plus a further 77,000 on the areas resumed, giving a total clay resource of 2.077 million cubic metres. For the purposes of brick manufacture, Mr Kershaw treated that reserve as a relatively homogenous resource, bearing in mind the current premixing methods used for the extruded bricks.
Mr Guerra agrees that brickmakers tend to rely upon their own brickmaking materials but argues that the manufacturers can and do outsource materials from leases other than their own. He cites for example Austral Brick Manufacturing Company which sources materials from the Redlands Shire Council, and PGH which has sourced from the overburden at New Hope and Ebenezer mines. He also argues that there is some potential for the selling of the clays to outside bodies who may use the material to seal dams or to seal landfills, although, to his knowledge, Boral has not done so. Mr Guerra confirms that Boral currently purchases a white firing clay from an external source at Esk, however he confirms that Boral has not outsourced materials from either the Ebenezer or Jeebropilly mines.
Mr Kershaw by comparison argued that brickmaking is not a freely-traded commodity in south-east Queensland, as brick manufacturers tend to be self-sufficient and own and operate their own clay pits. Mr Kershaw maintains that, in the current climate of the brick manufacturing industry, there was no market for the clays lost as a result of the resumption, as the ceramic manufacturers would not purchase the material. Mr Guerra agrees that the clay material lost by the resumption would be more valuable for Boral’s use, than for selling to others.
In respect of the bore hole investigation of the clay resources in the vicinity of the resumed land, Mr Guerra confirms that the 9 bore holes tested by Siemon Pty Ltd were only explored about July 1998, in response to suggestions that the respondent was likely to reject compensation for the lost brickmaking material. However he advises that other bore samples were undertaken in that area in the 1970s and 1980s and again about 1992-93 in the area of the Main Darra Pit and the Black Hole. Mr Guerra also concedes that, without considering factors such as depth and strike, the general nature of the recent bore samples could be taken as representative of the whole area of ML1100.
Mr Guerra also agrees that it is the fired colour that the clay exhibits which is important in determining the final brick colour, not the appearance of the clay in situ. The final colour of the bricks he advises is achieved by the appropriate pre-mixing of materials prior to the firing, mainly to achieve homogenity or uniformity. He agrees that the darker brown colours can also be achieved through the addition of certain oxides, but argues that would be at a further cost to Boral. Later evidence confirmed that the addition of oxides can increase the cost of the final bricks by $9 per 1000 bricks, a not insignificant factor in servicing a competitive marketplace. Mr Guerra confirms that a key part of any exploration strategy for brickmakers is to seek to identify materials which will provide a different type of colour range for an often fickle marketplace.
In estimating the volume of clay materials upon Parcels A and B, Mr Kershaw adopted a computer-controlled calculation using a recognised commercial software package, which adopts a digital terrain model of the surface and estimated excavations. Mr Waghorn checked those calculations by using a more simplified model, using similar parameters for the excavation, but assuming a flat earth surface. In the end Mr Waghorn accepted the more precise nature of Mr Kershaw’s method, but disclosed an error in an assumption adopted by Mr Kershaw in entering the data.
The method of determining the two digital terrain model surfaces in the “before” and “after” situation, and deducting one from the other in order to arrive at the estimated lost clay, was accepted. However, in applying his model Mr Kershaw had interpreted a facsimile instruction to his office to direct for an excavation to a depth of 4 metres, not correctly allowing for the 0.5 metre overburden.
Mr Kershaw’s original estimate of material lost by resumption was 77,000 cubic metres; while Mr Waghorn’s more simplified method disclosed 96,160 cubic metres. After adjusting his model to correctly allow for the overburden, Mr Kershaw determined an amount of approximately 88,000 cubic metres on Parcels A and B, a figure finally accepted by both parties. Mr Kershaw also confirmed that the reserve of brickmaking materials would retain its value over time and, by his estimate the 88,000 cubic metres of clay could have conceivably been excavated and stockpiled elsewhere on ML1100 at the rate of 10,000 tonnes a day, or about 2-3 weeks. He however had no idea of the amount of red/brown firing material stockpiled at the date of resumption at either Darra, Westlake or Strathpine.
In considering the potential for Boral to utilise the in situ materials on ML1100, Mr Kershaw estimates that the annual usage of clay material for the manufacturing process at Darra at the date of resumption comprised the following:
· Strathpine (25%) – 67,500 tonnes
· Westlake (25%) – 67,500 tonnes
· Redbank (50%) – 135,000 tonnes
TOTAL 270,000 tonnes
That tonnage provides 90 million brick units, including 13 million pavers.
Mr Kershaw also advises that a recent decision has apparently been taken by Boral’s senior management to consolidate operations at Darra. A proposal is also being considered to refurbish Plant No. 2 with new technology which would manufacture specialty products, particularly pavers, utilising the plastic-type of material existing on ML1100. Such a proposal would create cost savings for the claimant.
Based upon the above advice Mr Kershaw estimates that in this matter the most favourable outcome for Boral would be for all of the outsourcing of the clays to cease, and the Darra materials to be used. Brick production would then use 72,000 tonnes of plastic clays and, if 50% of all pavers also used the plastic clays, a further 28,000 tonnes would be sourced from Darra. While Mr Kershaw believes any further growth of 15% in market share was most unlikely, he estimates that a maximum usage of 104,200 tonnes (or 52,100 cubic metres) per year could occur from ML1100. His assumptions also included the loss of any manufacturing capacity made necessary in order to win clay beneath any operating plant. Based upon an annual usage of 52,100 cubic metres, Mr Kershaw divided the 2.077 million cubic metres by the annual usage rate to arrive at an economic life of about 40 years for the resource.
He notes that at the date of resumption, and currently, there is no use made of the Darra plastic material for pavers. However Mr Kershaw concludes that the use of the Westlake material for the darker bricks, reflects mostly the likely greater suitability of that material compared to the Darra material for Boral’s manufacturing processes.
In seeking to ascertain the productive life of ML1100 as a clay extraction site, under his concluded extraction rates, rather than merely as a site for brick manufacture, Mr Kershaw determined the economic life of the resource at about 40 years. He agrees that brick manufacture itself could extend way beyond that period. He made no differentiation for the different colouring firing of the various materials upon ML1100. Mr Kershaw believes that an economic life beyond 20 years has no real relevance in the marketplace.
In converting the cubic metre volumes to metric tonnes Mr Kershaw adopted a figure of 2 tonnes to the cubic metre, rather than the figure of 1.2 tonnes as applied by Mr Waghorn in his calculations. Mr Kershaw advised that the factor of 1.2 times the cubic metre, related more to determining the weight of loose clay in a truck rather than converting in situ clays in the ground. The plastic clays are then pre-mixed with sandstone and other materials in order to provide suitable green strength for manufacturing the bricks. There were also inferences about the use of the clay lost by the resumption as part of filling by the respondent for roadworks, and for other site fills and capping of contaminated lands at Willawong. However there was no conclusive estimate of those uses which demonstrated a higher use for the claim material than would be obtained from normal spoil following major earthworks. There was also an allegation that Boral had sought to buy back the brickmaking material following the resumption, a matter not confirmed.
Mr C Webber, a consulting engineer for the respondent, advised that the majority of the clays taken from the project, particularly towards the end of the construction period, were unsuitable for subgrade material on the construction, due to the high clay content. Mr Webber had been the construction manager of the Ipswich Motorway from 1992 to 1994.
(9) The Loss of the Signs:
Another matter of dispute relates to the costs of replacing the former signage on the land lost as a result of the resumption. There was a total of three former signs upon Parcels A and B which either identified that the claimants were in the business of the supplying of brick products, or provided directions to the claimant’s products selection centre.
There was originally a single-sided illuminated advertising sign of area about 5 metres x 3 metres near the old southern boundary of ML 1100. The old sign faced the west-bound traffic, and identified the Boral products. The sign was located about 125 meres from Dowding Street, which is to the east of ML1100, and was visible to west-bound traffic for about 200 metres east of the sign. There was no visibility of the sign for east-bound traffic.
The other two directional signs were smaller in dimension and were located on Parcel B, near the intersection of Ipswich Road and Harcourt Road. Those signs provided directions to the sales selection centre which is located several hundred metres down Harcourt Road. The replacement of the two smaller signs is not contested by the respondent under Item 2(a) of the Notice of Claim.
However the claimant argues that the loss of the two smaller signs relates not only to their physical loss, but also to the loss of visibility of those directional signs as a consequence of the re-alignment of Ipswich Road. The new level of Ipswich Road is now some 6 metres below the former level, which was at grade with Harcourt Road. Prior to the roadworks any motorist who had reason to pause at the then traffic lights at the intersection of Ipswich Road and Harcourt Road, had a reasonable chance of seeing the directional signs on Parcel B. Following the re-alignment of Ipswich Road, that visibility is, in the claimant’s opinion, severely restricted. Because of this new constraint the claimant has sought to upgrade the replacement sign now claimed, in order to replace the visibility of the smaller signs now lost.
The respondent concedes that the roadworks removed all of the signs, and has already conceded the cost of the two smaller signs. However the respondent argues that he has already provided for a larger sign of size 7metres x 5 metres to replace the old large sign. Mr Webber concedes that the proposed replacement sign that he had allowed for was only as a single sided sign and was to be illuminated, at an estimated cost of $20,500. The respondent argues that any additional cost must represent a betterment to the signage, and therefore is not compensable.
In seeking to provide for a larger sign of 7 metres x 5 metres, Mr Webber sought to allow for the further distance to the new replacement sign occasioned by the road resumptions, but not at the location for the new sign chosen by the claimant, which is nearer to Harcourt Road. Mr Slater also concedes that the new replacement sign is still difficult to read until a west-bound driver is almost abreast of the slip road which provides access off Ipswich Road to Harcourt Road. As such Mr Cook argues that the marketing nature of the new sign is not superior to the old sign.
Before proceeding further it should be noted that the new sign is a much larger structure (a 10 metre monopole with sign boards perhaps 12 metres by 5 metres), and which provides both product identification and directional functions. The new sign is also topped with an electronic digital display clock of dimensions 3 metres x 1 metre showing both time and temperature. The clock was placed to attract attention to the sign, but the cost of that clock is not claimed in the notice of claim. The new sign is dual-faced, is directed at passing traffic in both a westward and easterly direction, and is illuminated. The graphics of the sign are superior to the old sign. Because of these enhanced characteristics, Mr Webber saw the new sign to contain elements of betterment over the old sign due to its newness, larger size, dual-facing nature, and superior graphics. Mr Webber argues that an indicative sign appropriate to more than replace the physical nature of the old sign would cost of the order of $20,500. The claimant provides costings for the new sign at $82,832,57, less the betterment by the digital clock display of $16,672, giving a claim cost of $66,158.57. Detailed costs of the new sign were provided.
In determining the requirements of a suitable replacement sign, the claimant, on advice from advertising agents, Bailey Advertising, also considered the effect upon east moving traffic as a result of the roadworks. Because of the lowering of the road pavement, and the planting of tree screenings along the side of Ipswich Road near Harcourt Road, which were negotiated with Boral in order to screen the site from traffic travelling eastward, a driver is almost at the slip lane leading to Harcourt Road before the new sign comes into view. The idea of the digital clock on the top of the new sign is to provide some warning to catch the eye of the driver.
It was agreed that the brickworks have been identified on street directories for many years, which would give an indication of the general proximity of the site. However the advertising sign was seen as important in directing passing traffic to the selector centre. Mr Cooke again argues that the directional components of the new sign provide no betterment when compared to the “before” situation, where slowing traffic at the former traffic lights, had opportunities to identify the direction to the site. The claimant argues that passing traffic, and referrals from builders, can constitute the major part of their domestic business. Initially Boral sought to claim for the loss of business as a result of the loss of the signs, however, that part of the claim was later abandoned.
In considering the claimed costs of the new sign, Mr H Johansen, the Maintenance Manager of Boral Bricks (Queensland) Limited, provided details of expenditure paid to contractors totalling $66,158.57. In considering his replacement value for the sign Mr Slater has adopted Mr Webber’s estimate of $20,500 to replace like for like for the old advertising sign, but concedes that the new sign does in fact also have some functions that replace the former directional signs.
(10) Costs of Supervision:
A matter also in dispute is the claim for $10,680 (Item 2(k)) for supervision by Boral of the general works associated with the resumption. That supervision was undertaken by Mr Johansen, and the claim was prepared based upon, in Mr Johansen’s opinion, a conservative estimate of the time involved. The claim is that a total of 178 hours @ $60/hour was a reasonable cost to Boral for the work involved, which was undertaken by Mr Johansen in addition to his general duties for Boral.
Mr Johansen advises that the rate of $60 per hour was supplied by Boral’s accountants, and represents a rate something in excess of his annual salary, and represents a charge-out rate including some overheads. There was no documentation of either the rate or the number of hours involved, and Mr Johansen did not maintain a daily diary at the time. The hours were assessed from memory over a period of some 18 months prior to documenting some notes in 1994 for the details for the claim.
There was no record of additional overtime worked, although Mr Johansen had passed off some of his normal duties to his foreman as a consequence of the need to supervise the resumption works. Mr Johansen argues that the claim costs for supervision represent a reasonable proportion of the total costs of the work involved, and reflect normal supervision overhead costs. Part of the costs claimed included $2,400 for supervising the work on the replacement sign.
(11) Method of Valuation:
There are three components of the determination of the value lost by the claimant:
· Loss of land in Parcel A (Lot 1)
· Loss of land in Parcel B (Lot 9)
· Loss of brickmaking material.
(i) Loss of land and improvements in Parcel A –
In seeking his estimate of the value of the land in Parcel A, Mr Waghorn has adopted a “before” and “after” situation, allowing for the land taken, and the additional buffer and batter areas on the remaining lands. The land was valued for its highest and best use to a hypothetical owner as General Industry land, and compared on a market comparison basis. Mr Waghorn determined:
Before
After
Loss
532,900m² @ $25/m²
$13,322,500
508,860m² @ $25/m²
$12,721,500
$601,000
The loss of trees at $24,000 is a severance item and is dealt with elsewhere.
Mr Slater used a similar approach and determined:
Before
After
Loss
532,900m² @ $23/m²
$12,256,700
508,860m² @ $23/m²
$11,703,780
$552,920
Because of the lack of comparable sales, Mr Waghorn had sought to compare sales similar in size to the area of the parcels resumed, rather than to compare sales similar to the area to the parent parcel. However, under cross-examination, he agrees that, as a valuation principle, it is preferable to compare sales similar to the parent parcel. While Mr Gibson argues that such a comparison by Mr Waghorn is fatal to the claimant’s case, it is the comparison of sales which is impacted not the method used.
Both valuers have adopted a highest and best use as General Industry land, because to value the land for its existing use as Extractive Industry would result in a much lower figure of compensation for the land lost. While there was no documentation of sales of extractive land, when pushed for an estimate, Mr Slater suggested a figure of the order of, say, $5 per square metre. He suggests that any compensation based upon the existing Extractive Industry use of the subject lands would be less than for General Industry. Both Mr Slater and Mr Waghorn assumed that there was a reasonable likelihood that the Boral site could be rezoned to General Industry in the future. Neither valuer adopted the principle of special value to the claimant, although Mr Cooke argues that the site is really unique in south-east Queensland, and has special value for that reason.
(ii) Loss of land and improvements in Parcel B –
In valuing the land in Parcel B Mr Waghorn adopted its highest and best use as an Industrial Showroom site, with an estimated value of $125 per square metre, after rezoning for that purpose. It was agreed that it would be likely for Parcel B to receive consent approval for its use as a showroom for the sale of brick and clay products, as an ancillary use to the current brick manufacturing processes. There is no argument between the valuers in respect of the highest and best use of Parcel B, and its value of $125 per square metre. After reconsideration of the profit and risk factor (15%), the cost of rezoning and demolition of the house, and holding and acquisition costs, both valuers agree on a land value of Parcel B for resumption purposes at $118,000.
(iii) The value of the brickmaking material –
Mr Waghorn has determined the value of the brickmaking material (clay) on the basis that it could have been won quickly and then stockpiled on the main area of ML1100. Based upon costs of transporting similar clays from the Blackstone site south of Ipswich, Mr Waghorn adopts the following costs per tonne for clays lost:
· Loading costs (pit to truck) = $ 0.56
· Transport costs = $ 4.16
· Royalty costs to the State = $ 0.25
· Costs of any clay to replace the clay lost.
Overall he estimates the cost of the clay lost at $7.17 per tonne, although it was noted that had the clay been won from Parcels A and B then royalty to the State of Queensland would also have applied.
Mr Slater uses $4.36 per tonne, assuming the replacement clays would be sourced from the Blackstone site, as did Mr Waghorn, and allowing a $0.20 levy to the Ipswich City Council. Mr Slater also notes the quotations supplied to Boral for the supply of materials from Jeebropilly Colliers Pty Ltd ($2.25 per tonne including royalty); and Ebenezer Mining Company ($3.45 per tonne including royalty). Based upon those figures for the materials the average costs would be about $7.20 per tonne, including all costs.
However, while Mr Waghorn advises that it costs $4.16 per tonne for transporting the alternative clay from the Blackstone site deposit, it should be noted that transport costs vary with the distance needed to move the materials. It is understood that there tends to be an initial base rate of about $2 per tonne for short hauls up to 5kms, increasing incrementally to about $4.50 per tonne at 25kms, and $7.75 per tonne at 50kms. Costs for transporting any excavated clays from the resumed land, to other storage areas on Parcel A, are likely to involve about $2 per tonne for transport, and 56 cents for loading the trucks (i.e. $2.56 handling charges). On the above basis the additional cost to Boral for having to outsource the clays from Blackstone, rather than recover clays from Parcel A, would be $7.20 per tonne less $2.56 per tonne, or $4.64 per tonne.
A key issue in this matter lies in the ability of the claimant to realise either, or both, the value of the land for General Industry purposes, or the value of the clay for brickmaking. In the normal course of use to a hypothetical owner, that owner is faced with either the prospect of winning the clay over a period of time, or using the land for its higher purpose as industrial land. As Mr Slater notes, to realise the higher value of the land, one has to “sterilise the clay” (Transcript p. 158).
The decision to adopt either strategy by Boral would no doubt depend upon the relative market value of the resource. With the cost of alternative clays available from outside sources, the relative value of the clay at an average of, say, $2.85 per tonne, is to be weighed against the deferred opportunity of realising the higher value for Parcels A and B. However the deferred opportunity was likely only to be for a short period of some three weeks, while the material was stockpiled. There would, of course, be the additional outlay for Boral for the early capturing of the 88,000 cubic metres (176,000 tonnes) of clay @ some $2.56 per tonne ($450,560), prior to their likely annual usage rate of, say, the Westlake red/brown clays @ 67,500 tonnes (i.e. 2.6 years). The lost opportunity costs of those monies must be considered.
While such a decision would be entirely within the responsibility of Boral, it is noted that the Company’s new policy is directed towards cost efficiency strategies. On that basis the most cost effective approach is most likely to be the preferred approach. In assessing the potential savings to Boral by stripping and stockpiling the material, it must be remembered that the main source of saving would be the actual costs of the material at, say, $2.85 per tonne ($250,800), as comparable transport and excavation and loading costs would be required by Boral as for any of the alternative sources of clay. Certainly there is no evidence that it was Boral’s desire to adopt that approach at the time of resumption. Indeed it was noted that Boral did in fact decide not to call evidence from a director of the company who may have been able to clarify the formal policy of Boral, in respect of the winning of clays from Parcel A, at the time of the resumption in 1992.
The Comparison of Sales:
(i)Parcel A –
In seeking comparable sales for Parcel A, Mr Waghorn has made some reference to the value of the whole site at $14.28 per square metre, and sought to adjust that figure upwards to allow for the small size of the portion resumed (4.72%). He then seeks comparison with the following sales:
· Sale 1 – (Bilsen Road, Geebung – Lot 2 on RP 801643)
This is a 5.48 hectare vacant parcel with an inferior exposure, in a superior location, and zoned “General Industry”. The sale sold in June 1990 for $1,375,000 ($25/m²). The sale is seen as similar.
· Sale 2 – (Lytton Road, Murarrie – Lot 3 on RP 813014)
This is a 6.5 hectare vacant parcel with an inferior exposure, is zoned “General Industry”, parts of which are flooded. The sale is seen as inferior, and sold in August 1991 for $1,388,000 ($21/m²).
· Sale 3 – (70 Yarraman Place, Virginia – Lot 34 on RP 226459 and Lot 23 on RP 226460).
This is a 5.78 hectare vacant parcel with no exposure, and inferior access. The sale is seen as inferior in respect of location, and sold in April 1990 for $1,525,000 ($26/m²).
Mr Slater provides the following sales for the comparison of Parcel A:
· Sale 1 – (2676 Ipswich Road, Darra – Lot 1 on RP 80835)
This is a 1.015 hectare parcel of land zoned as “Future Industry”. The sale has a relatively narrow frontage, and was improved with a shed and security fencing. The sale sold in October 1990 for $385,000 ($30.50/m²).
· Sale 2 – (Orchard Road, Richlands – Lot 10 on RP 811440)
This is a vacant site of 26.37 hectares, located away from Ipswich Road and requiring earthworks. The sale was purchased by Coca Cola, and is zoned “Future Industry”. Mr Slater saw Sale 2 as setting the upper level of value for the subject lands, after allowing for the difference in size. The sale sold in August 1990 for $4,223,000 ($16/m²).
(i)Parcel B –
Mr Waghorn provided four comparable sales:
· Acacia Ridge – (1016m² - $191/m²) - Superior
· Moorooka – (5000m² - $160/m²) – Superior
· Oxley – (5977m² – $120/m²) - Similar
· Rocklea – (3227m² - $88/m²) Inferior.
While the sales were not seen as ideal, Mr Slater believes that an appropriate
rate would be in the range $120-$125 per square metre. He has no concern with adopting Mr Waghorn’s value of $125 per square metre.
In further support of his adopted rate of $25 per square metre for Parcel A, Mr Waghorn draws comfort from negotiated settlements with the Department of Transport (Railways) at 915 Lytton Road, Murarrie (Winrose Skins) in December 1992, and also the adjoining abattoir parcel (AJ Bush). Both settlements were negotiated at the same time at $30/m². The AJ Bush land was his primary consideration and had an area of 11.8 hectares. Both settlements were zoned as Industrial or Commercial Use, rather than Extractive Industry for the subject lands. Mr Waghorn made an allowance for the smaller areas of the comparable sales, however he conceded that he had no knowledge of the details of the settlement arrangements themselves.
Mr Slater argues that Mr Waghorn’s sales at Geebung (Sale 1) and Virginia (Sale 3) are in entirely different market areas which are stronger than that of the subject lands. He also argues that the Murarrie Sale 2 is superior to the subject lands.
In drawing comparison with his Sales 1 and 2, Mr Slater has used sales of Future Industry lands. In making this comparison he has not concluded that the subject lands are comparable to Future Industry land, but merely to demonstrate an alternative method of avoiding the estimation of the risk and re-zoning costs of upgrading the subject lands from Extractive Industry to General Industry zoning. Mr Slater argues that Future Industry land may not contain more stringent or costly rezoning conditions, because the Future Industry land is often targeted in the Strategic Plan for upgrading to General Industry. Mr Slater has assumed a notional comparison on the basis of Future Industry as he believes that there would be similar steps and costs in taking Extractive Industry to General Industry zoning.
Decision:
(1)Value of the Land –
I turn first to the value of the land resumed in Parcel A. I note that both valuers agree that its highest and best use is for General Industry, and there is only a difference in the adopted rates per square metre of Mr Waghorn ($25), and Mr Slater ($23). In seeking to analyse those rates Mr Waghorn has compared sales on the basis of comparable size to the resumed land, rather than for the parent land. While his reason for adopting such an approach rests upon the lack of comparable sales, the preferred method from both the leading texts and precedents tends to compare in the “before” and “after” method on the basis of the parent parcel, and not on the resumed parcel.
In considering the “before” and “after” method of valuation, it is to be noted that the method involves two separate valuations. The land is valued at the relevant date as if the resumption had not occurred, and then again on the basis of the resumption having occurred. The difference between the two valuations is then taken to reflect the loss (or gain) as the case may be to the dispossessed owner. (See Land Acquisition – 4th Edition by D Brown (1996, p.191). Clearly the comparisons are more on the area of the parent parcel, as the smaller area resumed is but an outcome of the method.
In the “before” and “after” method for compensation, I note also that where a property is left as a lot, which is best compared with itself, then the “before” and “after” method has been seen to be the only true method of seeking comparison. In the matter of HA and SB Shann v. The Commissioner of Water Resources (1986-87) 11 QLCR 194, the learned Member found that the special features of the land could be impacted within a few days by rain falling in the dam, and the land was best compared with itself. That involved a resumption of land of 41,958 hectares for the Burdekin Falls Dam. In the current matter it has been claimed that the subject lands are almost unique, and comparisons with itself on a “before” and “after” basis would appear most appropriate.
The matter of Gwynvill Properties Pty Ltd v. Commissioner for Main Roads (1981-83) 50 LGRA 322 also considered the “before” and “after” approach, and rejected the comparison of sales in its favour, in view of a paucity of sales. However, Gwynvill can be distinguished from the current matter as it was agreed that there was no market for the small area resumed (70 square metres) in that matter.
In the current matter Parcel B has an area which would be suitable for its highest and best use as an “industrial showroom”. As Parcel B was resumed as a whole parcel of area 1290 square metres, it is best compared by direct comparison to comparable sales. The land resumed from Parcel A (2.404 hectares) has an area which is comparable to other General Industry lands, and could be compared to similar General Industry lands. However, a large proportion (47%) of Parcel A is elongated with a depth of only 23-27 metres, and therefore of restricted use for General Industry purposes.
I note that the “before” and “after” method is often used where a strip of land is resumed for road widening purposes. The “before” and “after” method was adopted in Parramatta City Council v. Gestetner Pty Ltd (1978) 37 LGRA 246, where the Council resumed an 8 foot wide strip of land for road widening purposes in a commercial business district. The Council argued that the resumed land should be valued as for road purposes, while the respondent argued that the value should be for commercial purposes. The Court accepted the “before” and “after” method as it found it had the effect of excluding the advantages or disadvantages due to the carrying out of the roadworks.
In addition to interest on compensation awarded, also to pay interest at 8 percent per annum for disturbance items, plus professional fees, commencing upon the dates the respective award items were paid by Boral Bricks (Qld) Limited (if they were paid) and ending upon the day immediately preceding the date upon which final payment of compensation for disturbance is made.
(NG Divett)
Member of the Land Court
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