Denar Pty Ltd & Shepherd v Mackay Sugar Co-Operative Association Ltd

[2002] QLC 1

LAND COURT

BRISBANE

9 JANUARY 2002

Re:     Claims for compensation consequent upon

the granting of easements by the Queensland Sugar

Corporation on the application of the Mackay Sugar

Co-Operative Association Ltd under the provisions

of the Sugar Industry Act 1991 and the Acquisition

of Land Act 1967 (A2000-0025 and A2000-0026).

Denar Pty Ltd

v.

Mackay Sugar Co-Operative Association Ltd

AND

RW, JW, RA and IR Shepherd
v.

Mackay Sugar Co-Operative Association Ltd

(Hearing at Mackay)

J U D G M E N T

Introduction
           These are two claims for compensation following the granting on 12 February 1996 of three easements by the Queensland Sugar Corporation (the QSC) on the application of the Mackay Sugar Co-Operative Association Ltd (the respondent) for two cane tramline sidings and for an access road to one of the sidings, over land owned by Denar Pty Ltd and by RW, JW, RA and IR Shepherd (the claimants).
           Mr W Cochrane, of Counsel, appeared on behalf of the claimants, while Mr M Hinson, Senior Counsel, appeared on behalf of the respondent.

The Relevant Legislation
The respondent (as a mill owner) applied to the QSC for the granting of the three easements on 12 December 1991 (Exhibit 1).  At that time the Sugar Industry Act 1991 provided as follows:

"       11.1 Easements.  An easement for tramway, road or other like purposes may be granted under this Part, whether or not the easement is annexed to or used and enjoyed together with any other land.
        11.2  Grant of Easement.  (1)  An easement referred to in section 11.1 may be granted to a mill owner –
        (a)  by the holder of land affected by the easement; or
        (b)  by the Corporation upon the application of the mill owner.
The easement may be granted subject to conditions.
        (2)  An easement so granted may be varied in the same manner as an easement may be granted.
        The provisions of this Part applying to a grant also apply, with necessary adaptations, to a variation.
        11.3   …
        11.4   …
11.5 Grant by Corporation. (1) Where the Corporation grants an easement under section 11.2, the Corporation is to note the easement in the Register of Easements.
        (2)  The easement then takes effect and not beforehand.
11.6 Compensation. (1) Where the Corporation grants an easement under section 11.2, any person who, if the mill owner in question were empowered to take and took the easement as a constructing authority under the Acquisition of Land Act 1967-1988, would be entitled to claim compensation, may claim compensation in respect of the easement. 
        (2)  For the purposes of the claim for compensation, the provisions of Part IV of the Acquisition of Land Act 1967-1988 apply as if a reference to a constructing authority were a reference to the mill owner."

Part 4 of the Acquisition of Land Act 1967 contains sections 18 to 35 and deals with compensation.  Section 20 provides for the assessment of compensation:

"Assessment of compensation

20(1)    In assessing the compensation to be paid, regard shall in every case be had not only to the value of land taken but also to the damage (if any) caused by either or both of the following, namely—

(a)the severing of the land taken from other land of the claimant;

(b)the exercise of any statutory powers by the constructing authority otherwise injuriously affecting such other land.

(2)       Compensation shall be assessed according to the value of the estate or interest of the claimant in the land taken on the date when it was taken.
…"

For some unexplained reason, the QSC did not grant the three easements for over four years after the date of the original application during which time the Sugar Industry Act 1991 had been renumbered, but the substance of the provisions dealing with easements does not appear to have changed.

The Claim for Compensation
           Although the easements affect two parcels of land, one held by Denar Pty Ltd (the Shepherd's development company) and the other held by the Shepherds, only one claim for compensation was lodged.  That claim dated 19 September 2000, was as follows:

1.   Land  ------

2.   Improvements  ------

3.   Severance & Injurious Affection  $350,000.00

4.   Disturbances  $187,421.31

(i)     Interest (8.25%x4.5 years x $350,000)     $129,937.50

(ii)     Legal Costs  $10,000.00

(iii)    Cost of Maintaining Bank Guarantee
  and interest on same  $8,415.86

(iv)    Accountants Costs regarding
  Bank Guarantee calculation  $345.00

(v)     Valuers Costs  $5,000.00

(vi)    Engineers Costs  $8,847.25

(vii)   Surveyors Costs               $3,389.00 }     $18,569.95
  Fees Extra Planning         $15,180.95}

(viii)   Cost of Mowing (4.5 years)  $4,500.00

(ix)    Return Airfare to Brisbane  $347.00

(x)     Rates on unusable land  $1,458.75

The total amount of compensation claimed  $537,421.31

On the final day of hearing the claimants amended their claim to $400,589, comprising $380,000 based on the valuation of their valuer, Mr Deacon, and $20,589 for disturbance items, including interest thereon, as agreed between the parties.
           The respondent's valuation finally put in evidence by their valuer, Mr Dodds, was $29,000, making the respondent's final position $49,589, with the inclusion of the $20,589 as agreed for disturbance items and interest thereon.
Background
           Much of the background to this matter was provided by Mr B Sheedy, a director of the respondent and Mr DF McLean, former Assistant Chief Cane Inspector for the respondent, whose statements were tendered by consent.
           The Shepherd family has held cane-farming land in the Mackay area for many years.  Mr Arthur Shepherd (the father of Mr RW Shepherd) was Chairman of Directors of the Marian Mill (now part of Mackay Sugar) for approximately 30 years.  It seems that he (with others) held Lots 1 and 2 on RP 743305, County of Carlisle, Parish of Barrett (the subject land), at least from the early 1980's.  Progressively during the 1980's the subject land was transferred into the ownership of the present claimants.
           A cane tramline had existed on the subject land since prior to 1948, possibly since the 1930's.  However, the two sidings on the subject land have been in their present locations only in more recent times.  The Bucasia Siding and the access road are located adjacent to the northern boundary of Lot 2, while the Eimeo/Quarry Siding is located on the southern part of Lot 2.  The easement granted in respect of the southern siding is a peculiar shape, with a narrow strip of land running into Lot 1.  That is the only effect on Lot 1 of the grant of the easements.
           It seems that formal agreements were not entered into for the taking of land by sugar mills for purposes of the construction of cane tramlines and sidings.  Sugar-cane farmers were willing to make land available for such purposes because the presence of a tramline and a siding on a cane farm reduced the haulage distance for harvested cane and improved harvesting economies.  Growers did not ask for compensation and in most cases contributed to the earthworks necessary to construct the sidings.
           The mill constructed the sidings at no cost to the grower and in return the grower enjoyed improved siding facilities which reduced the cost of delivering cane.  Generally, negotiations with growers for the construction of or additions to sidings were concluded with a handshake and were  not always confirmed in writing.
           Although the Central Sugar Cane Prices Board (the predecessor of the QSC), had power to grant easements upon the application of a mill owner under s.35 of the Regulation of Sugar Cane Prices Acts 1915 to 1954, it was not until 1948 that legislation was enacted in s.41 of that Act to regularise the "unofficial easements".  Easements for tramway purposes were deemed to have always existed where tramlines were constructed prior to 25 October 1948 (s.41).  Such easements were for a distance of 8 feet on either side of the centre line of the tram rails over or across the lands on which the tramline had been laid down and constructed by the mill owner (s.41).  Such easements were continued by s.84 of the Regulation of Sugar Cane Prices Acts 1962 to 1989 for such period of time as the tramlines were required or used by the mill owner for the carriage of sugar cane. Those easements were again continued by sub-s.(1) of s.119 of the Sugar Industry Act 1991 for such period of time as the tramline was required or used by a mill owner for the carriage of sugar cane.
However, under s.112 of that Act, the QSC had power to grant an easement to a mill owner upon the application of the mill owner. If the QSC was satisfied that the easement existed by virtue of the legislation, the QSC could grant the easement (s.119(3)), without payment of compensation (s.119(4)). However, an easement which existed prior to 1948 and which was continued or preserved under s.119(1), ceased to exist if it had not been registered on the Register of Easements on or before 30 June 1996 (s.119(5)).
           The tramway on the subject land had existed from prior to 25 October 1948, so upon the application of the mill owner, the QSC granted the easement on 1 October 1993 (Exhibit 16 paragraph 5.13).  However, the two sidings did not qualify for this statutory protection as they had either not existed prior to 25 October 1948, or their locations had since been altered.  The respondent therefore applied to the QSC for the grant of an easement for the Bucasia Siding, an easement for its access road and for an easement for the Eimeo/Quarry Siding.  These three easements were granted on 12 February 1996.  The claimants claimed compensation as discussed earlier.
The Subject Land
           Throughout the proceedings, the subject land was treated as an aggregation of 23.386 ha, although it consists of two separately held parcels of land.  Lot 1 on RP 743305 had an area of 2.991 ha.  The registered owners are shown as Raymond William Shepherd (³/₈ interest), John William Shepherd (¹/₈ interest), Ross Alexander Shepherd (¼ interest) and Ian Raymond Shepherd (¼ interest).  A title search shows Lot 1 to be encumbered by a tramway easement in favour of the Mackay Sugar Co-Operative Association Ltd and the QSC, Registered Easement No. 621, lodged 21/7/1995.  However, no further details were provided and the plan prepared by surveyor, Mr JB Kane, shows the tramway easement (QSC Easement 622) as located entirely on Lot 2.
           Lot 2 on RP 743305 had an area of 20.395 ha.  The registered owner is shown as Denar Pty Ltd.  A title search shows Lot 2 to be encumbered by easements in favour of the Pioneer Shire Council and in favour of the Mackay City Council.  In addition, there was the tramway easement No. 622 (measured by Mr Kane to have an area of 4,726.5 m²) in favour of the respondent and the QSC, lodged 21/7/1995.  Except for the cane tramline easement, the other easements, apparently drainage easements, were not mentioned by the valuers for the parties as affecting the value of the property.
           Lot 2 is the balance area of a larger parcel, the eastern part of which had been developed by the claimants as a residential subdivision in the mid 1990's.
           With the grant of the tramway easement, the area of Lot 2 available for development was reduced by 4,726.5 m², Lot 1 being unaffected by the tramline easement.  The surveyor, Mr Kane, measured the area of the three easements associated with the sidings as having substantially different areas to those shown in the QSC plans defining the easements.             Mr Kane's measurement of the total area of the sidings easements (and access road to the northern siding) is about 11,734 m², of which about 9,209 m² is net area.  The QSC plans show the total area as 10,416.4 m².  The valuers adopted the QSC areas.

The subject land is an irregular shaped property, located opposite the junction of the Mackay-Bucasia Road and the Eimeo Road at Nindaroo, about 12 km north of the Mackay Central Business District.  The land was used for cane farming with other land, but Lot 2 ceased being used for cane farming in 1994.  To the east of the subject land is the residential estate, known as Explorer Estate, which was developed by the claimants in 1993 and 1994, while to the west is a quarry and cane land.  The subject land has access to the Mackay-Bucasia Road on the east, Eimeo Road on the south-east and Wallmans Road on the south.  The cane tramway through the subject land services the Farleigh Mill, about 13.5 km away.  The distance between the two sidings is about 600 metres.
           The subject land was described by the valuers  as being gently undulating to gently sloping, cleared former cane land, intersected by a drainage gully as well as the cane tramline, which intersects the property from north to south.  It generally falls from about RL 14 to RL 19 along the Wallmans Road frontage to approximately RL 5 adjacent to the north-west corner.            Electricity, reticulated water, sewerage and telephone services are available.  There is a primary school nearby, local shopping within 600 metres with general shopping and a high school within 6 km.
Planning Considerations
           Town planning reports were prepared by experts for the parties and they were tendered by consent.  The following details are summarised from the report of the town planner for the respondent, Ms Lorell Edwards.
           The claimants initially applied in October 1991 to develop Lots 1 and 2, then containing 32.8152 ha, into 254 allotments in six stages.  Some 26.3 ha was assigned cane land and Mackay Sugar objected to the development application, raising issues that the proposed development would result in the loss of valuable agricultural land, would create a conflict in terms of land use and would lead to the loss of the cane tramline and associated sidings with adverse impacts on cane transport costs.  Ultimately, the matter was resolved by the Planning and Environment Court on 12 May 1993, which approved a substantially amended application by consent, subject to ten conditions.
           Stage 1 of the Explorer Estate for 35 lots was registered in December 1993 and Stage 2 for 34 lots was registered in October 1994.  The Consent Order of the Planning and Environment Court which allowed the development contained a specific condition to protect the cane tramline infrastructure, namely:

"(vii)  In respect of any future development the applicant will be responsible for the relocation of the existing tramline and sidings if the balance area is proposed to be developed in such a way as to jeopardise the tramline communications to cane growers."

A further development application for part of the subject land was lodged in June 1995 and that application was under review and negotiation at the date of the granting of the three subject easements on 12 February 1996.  The proposed Stage 3 on the western side of the tramline was for 108 lots and the proposed Stage 4 for 61 lots.  This application did not make any provision for the continued operation of the cane tramline and associated sidings.  The majority of the subject land was still assigned cane land and once again, the Farleigh Mill lodged an objection to the application for rezoning and subdivision.    On 12 February 1996, the QSC granted the subject easements in favour of the respondent. 
           In March 1997, the Planning and Environment Court approved the rezoning of the subject land from "Rural A" to "Residential A" to permit the development of 60 lots, subject to some 15 conditions.  However, Ms Edwards made the point that as at 12 February 1996, there was no planning provision indicating that further rezoning and subdivision of the subject land could occur automatically or be expected as of right. 
           In addition to conditions requiring buffers and fencing of the cane tramline and sidings, the following conditions were specified in the 1997 order of the Planning and Environment Court:

·Condition (m)  "The appellant shall prior to the entry into contract of sale with any purchaser of the subject land or any allotment created by subdivision of the subject land, give to the intending purchaser a written statement in the following terms:

'The land you are thinking of buying may be affected by noise during the crushing season from the tramline and sidings.  You are advised to make your own inquiries in this regard and to consider the potential noise effects in making your decision to purchase land and in the design of a house you may wish to construct on the land.'"  (Referred to hereafter as "the disclosure notice".)

·Condition (o)  "In respect of any future development the applicant will be responsible for the relocation of the existing tramline and sidings if the balance area is proposed to be developed in such a way as to jeopardise the tramline communications to cane growers."

Condition (o) is identical to Condition (vii) contained in the Consent Order of the Planning and Environment Court of March 1993. 

Ms Edwards summed up the situation of the subject land from a planning perspective as at the date of the grant of the easements:

·the land was zoned "Rural A" under the 1983 Pioneer Shire Town Plan;

·the Strategic Plan stated the Council's intention to protect valuable agricultural land within this locality, indicating that development should first take place on lands not suitable for cane growing and that due consideration should be had to supply and demand factors;

·the Strategic Plan did not envisage that all lands within the Urban Preferred Dominant Land Use would necessarily be used for urban development.

Ms Edwards concluded that the preservation of the operational cane tramway and siding infrastructure was a critical issue in the judgments of the Planning and Environment Court and in Council planning decisions which allowed the residential developments, subject to conditions, to proceed in 1993 and 1997.  She expressed the view that from a planning perspective, the amenity of the locality was not affected by the granting of the sidings easements on 12 February 1996 and that the residential development had been permitted in full recognition of the need for the ongoing operation of the cane transport infrastructure.

For the claimants, a town planning report had been prepared by town planner, Mr RJ Ryter.  Mr Ryter expressed the view that prior to the granting of the easements in 1996, the sidings and road access to the northern siding existed on the subject land only by grace and favour of the claimants.  He thought that if the respondent wished to formalise their occupation of that land it could simply resume it and acquire legal title to the land.
           He thought it would be inappropriate to consider the existence of the sidings and road access to the northern siding as constraints to the development potential of the land prior to 12 February 1996.  However, he conceded that he was not suggesting that the protection of infrastructure required for the production of sugar cane was not an important town planning objective.  He also acknowledged that whether the sidings and road access should be ignored at the relevant date was a question of law.
           Mr Ryter considered that the 1993 Consent Order of the Planning and Environment Court established the general suitability of the claimants' land for residential development.  However, he acknowledged that the Consent Order attached conditions requiring the protection and possible relocation of cane production infrastructure.  He also recognised that although the Consent Order of the Planning and Environment Court approving a further 60 residential allotments on both sides of the tramline and sidings, had been agreed by the parties in 1997, the application had been lodged in 1995, prior to the relevant date.  That order required buffering between residential allotments and the tramline, sidings and road access.  However, if the sidings and road access were ignored, then in Mr Ryter's view all land within the 1996 easements could have been developed into residential allotments, subject to appropriate buffering of the tramline.

           Mr Ryter acknowledged that the quarry on the claimants' adjoining land to the west, was operational at the relevant date, but as the quarry operations were moving westward, he thought that the quarry should not be viewed as a planning constraint to development of the subject land.  He concluded that the residential development shown on Mr Kane's "before" layout survey plan would represent the development potential of the subject land immediately prior to the relevant date, if the sidings and road access were ignored.  After the relevant date, development of the subject land would need to provide for appropriate buffers to the tramline, the sidings and the access road, as reflected in Mr Kane's "after" layout plan.  (Mr Kane's "before" and "after" layout plans will be explained later.)

As ordered by this Court, Ms Edwards and Mr Ryter had conferred to discuss their town planning reports.  They agreed as follows:

·Mr Ryter's report concerning the protection of the 1993 Consent Order being limited to the tramline, be deleted;

·the question as to whether or not the physical existence of the sidings and road access should be ignored in determining the development potential of the subject land immediately prior to 12 February 1996, is a question of law;

·if it is found to be appropriate to ignore the physical existence of the sidings and road access, then the development depicted on Mr Kane's "before" layout plan represents the residential development potential of the land immediately prior to 12 February 1996.

The Valuation Evidence
           Valuation evidence for the claimants was provided by registered valuer, Mr BJ Deacon, who assessed compensation at $350,000 (later amended to $380,000).  Registered valuer, Mr JD Dodds, provided valuation evidence for the respondent, assessing compensation at $29,000.  The main difference between the two valuers was in their respective opinions concerning the development potential of the subject land at the date of the granting of the easements.  Mr Deacon considered that the subject land was ripe for subdivision into residential allotments, while Mr Dodds considered that the potential for development was longer term. 

Mr Deacon listed what he considered to be the effects of the granting of the easements as:

·loss of use of 10,416 m² of land;

·severance; and

·injurious affection to the highest and best use of the land.

Mr Deacon assessed compensation by adopting the "before and after" valuation method, which involves valuing the land before the granting of the easements and valuing the land after the granting of the easements.  The difference between the two valuations represents the loss in value of the owner's interest in the land, as well as severance and injurious affection.

In undertaking the "before" and "after" valuations, Mr Deacon used the "hypothetical development" method.  This term has been used generically to describe the methods referred to as the "land residual" technique:  Jacobs, "The Law of Resumption and Compensation in Australia" (1998) p.320.  However, this Court has continued to refer to the method adopted by Mr Deacon as the "hypothetical subdivision" method:  (See for example Turner v. Minister of Public Instruction (1956) 95 CLR 245; Maori Trustee v. Ministry of Works [1958] 3 All ER 336; and Hutchins & Cunnington v. Woongarra Shire Council (1992) 14 QLCR 286; contrasted with the "hypothetical development" or "notional development" method in Merivale Motel Investments Pty Ltd v. Brisbane Exposition and South Bank Redevelopment Authority (1985) 10 QLCR 175 and the cases discussed in Thirty-Fourth Philgrim Pty Ltd v. The Crown (1993) 14 QLCR 13.)
           The hypothetical subdivision method requires the notional subdivision of the land into the optimum number of residential allotments, determining the expected gross realisation from the sale of those allotments and deducting the estimated costs of that development, making appropriate allowance for profit and risk (development margin) which would be expected from such an undertaking.
           In undertaking his "before" and "after" valuations, Mr Deacon used proposed layouts prepared by surveyor, Mr Kane, for what he considered to be the appropriate subdivision layouts before and after the granting of the easements (Mr Kane's "before" and "after" layout plans).  These layout plans appear to have been prepared for the purposes of this case and do not seem to be related to any development proposal.  They are both dated 6 June 2001.
           The plans show a net loss of 10 allotments as a result of the granting of the easements.  Mr Deacon reasoned that Stage 3 (28 lots) and Stage 4 (24 lots) being furtherest from the sidings would be unaffected, but all other stages would be affected, either by loss in value of potential lots (Stage 5, 19 lots) or by loss in value as well as loss of number of lots (Stages 1, 2 and 6).
           Mr Deacon had discussed the matter with the chief planning officer of the Mackay City Council.  He formed the view that assuming the sidings and access road did not exist at the relevant date, the Council would more than likely have approved a staged rezoning of the subject land for residential subdivision purposes, subject to typical conditions, including buffers along the tramline 9.6 metres wide and with acoustic barriers comprising 1.2 metre high earth mounds and 1.8 metre high acoustic fencing.
           Mr Deacon accepted that Mr Kane's "before" layout plan with a total potential yield of 156 allotments would be developed over six stages.  He calculated that 34 of those lots would back onto the acoustic barrier along the tramline, which he reasoned would be typically used for three cane tram services per day from mid-June to November.  He reasoned that the realisable value of those lots would be affected, but the effect would be largely offset by the added value of the fencing, the acoustic barrier and the "minimal nature of the disturbance".
           In assessing the value of the land before the granting of the easements, Mr Deacon assumed that although the sidings were in existence, there was no legal right for them to be there and that the claimants could have requested the respondent to relocate them.  He was aware of the condition in the 1993 Planning and Environment Court Consent Order approving Stages 1 and 2 of the Explorer Estate, that relocation of the tramline and sidings was the responsibility of the claimants.  However, that condition was not considered by Mr Deacon in his "before" valuation of the land.
           After the granting of the easements, Mr Deacon was of the opinion that the subdivisional capacity of the land was restricted due to the decreased developable area, with the required buffer areas being increased to 13.6 metres wide, while the acoustic barriers would comprise a 1.7 metre high earth mound and a 1.8 metre high acoustic fence.  In addition, there would be increased noise and dust associated with the sidings.  The sidings would be the hub of activity, increasing from what would have previously been three cane tram services per day to what he estimated to be over 10,000 movements per season, with associated noise and dust.  In addition, and most significantly from Mr Deacon's viewpoint, was the requirement that potential purchasers be provided with a written disclosure notice in accordance with Condition (m) of the 1997 Planning and Environment Court order.

Mr Deacon acknowledged that the condition concerning that disclosure notice was imposed by the Planning and Environment Court as a condition attached to the 1997 development approval and not as a condition associated with the granting of the easements by the QSC.  However, he reasoned that it was the existence of the sidings easements that led the Court to impose that condition.  Indeed, that seems to be common ground between the parties.
           For his "after" valuation, Mr Deacon adopted Mr Kane's "after" layout plan, which showed a potential yield of 146 lots developed over six stages, which constituted a loss of 10 potential lots.  Mr Deacon was of the view that the noise and dust  associated with the sidings would detrimentally affect the potential saleability of the land adjacent to the sidings, while the required disclosure notice would significantly impede the orderly sale of the lots.
           In undertaking his hypothetical subdivision valuations, Mr Deacon estimated the gross realisation from the sale of the allotments in each stage of the proposed subdivision, arriving at a gross realisation for 156 allotments before the granting of the easements of $6,343,000, or $40,660 per allotment, and $5,814,000, or $39,822 per allotment after the granting of the easements.  His basis for valuing the allotments was drawn from the sales of the allotments in the Explorer Estate.  Development costs had been estimated by the engineering firm, Connell Wagner Pty Ltd, for each of the stages before and after the granting of the easements, averaging $22,529 per lot before and $23,928 per lot after.  Connell Wagner estimated the construction period for each stage at three months.
           Mr Deacon estimated that each of the stages would have sold out within 12 months of construction in the "before" situation while development of the other stages continued, an average sale rate of 2.1 lots per month for 156 lots, a total selling period of about 75 months.  In the "after" situation, he thought there would be a slightly slower selling rate for Stages 1, 2, 5 and 6 because of the adverse effect of the sidings and the disclosure notice, an average sale rate of 1.7 lots per month for 146 lots, a total selling period of about 85 months.
           In undertaking his hypothetical subdivision valuations, Mr Deacon adopted a profit and risk factor after interest of 29.4% before the granting of the easements and 32.6% after, resulting in a land value "before" of $700,000 and a land value "after" of $350,000.  Compensation was therefore assessed at $350,000. 
           Mr Deacon explained that he later became aware that Mr Kane had surveyed Easement 3762 to exceed the area shown on the QSC easement plan and had prepared another "after" layout plan, indicating the loss of a further two lots.  He therefore reworked his "after" hypothetical subdivision valuation, adjusting the gross realisation and development costs to show an "after" value of $320,000, which equated to $13,683 per ha.  That, he said, confirmed his view that the highest and best use of the land after the granting of the easements was for cane growing, or as a holding proposition for longer-term subdivision potential.  He produced four sales of what he called "fringe acreage or land with impediments to subdivision", which happened to be Mr Dodds' Sales 7, 8, 9 and 10, to support this view.
           In his valuation exercises, Mr Deacon accepted that the Planning and Environment Court required the construction of acoustic barriers and that they would be designed to minimise noise, but he reasoned that in the "after" situation there would be wider buffers, higher earth mounds and acoustic fencing, which he thought would become an aesthetic liability and adversely affect the value of those allotments.
           Mr Deacon checked the results obtained from his hypothetical subdivision valuations before and after the granting of the easements by comparison with sales of in globo land.  He referred to six such sales, at least some of which had since been developed, which showed land values ranging from about $50,000 per ha to $60,000 per ha, for available land.  His values of $700,000 "before" and $350,000 "after" showed about $30,000 per ha and $15,000 per ha respectively.  He thought that those values were in correct relationship with the sales evidence, taking into account the potential yield, topography and the  existence of the tramline on the subject land.
           Of the six in globo sales, Mr Deacon considered that Sale 3, which became Avalon Estate, close to the subject land but on the east of the Mackay-Bucasia Road and Sale 4, which became Royal Sands Estate, some kilometres north of the subject land and on the west of the Mackay-Bucasia Road, provided the greatest guidance.  He believed that those two sales represented the market perception that land in the northern beaches area was ripe for subdivision and that they demonstrated developer interest.

Mr Dodds, the valuer for the respondent, took an entirely different approach, as he did not regard the subject land as being ripe for subdivision.  In deciding on the highest and best use of the subject land at the relevant date, Mr Dodds considered the history of problems experienced by the claimants in gaining subdivision approval.  He noted that the attitude of the Mackay City Council was not conducive to residential subdivision; the 1996 planning report of the Council stated that the land not be considered for immediate development.  Mr Dodds reasoned that any prudent purchaser of the subject land would also be aware of falling demand and would have treated the land as having only long-term development potential.
           He considered that the highest and best use of the subject land both before and after the granting of the easements, was as "Rural A" zoned land, with long-term residential subdivision potential.  He saw its immediate potential as being constrained by its proximity to cane land and the quarry, as well as severance by the cane tramline.
           Mr Dodds noted that except for one proposed stage, all the other stages in Mr Kane's layout plans were closer to the tramline than Stages 1 and 2 of the Explorer Estate and that the three stages north of the tramline were closer to the quarry.   He summarised what he considered to be the status of the subject land as at 12 February 1996:

·it was zoned "Rural A";

·it was subject to a statutory easement for a cane tramline intersecting the property from north to south;

·it was included in the Strategic Plan Urban Neighbourhood Area;

·a development application had been lodged for subdivision into 169 lots;

·an application to modify it to provide for 109 lots was later lodged, with the application assuming the tramline would be removed;

·Council notified the applicant on 31 August 1995 that the application was premature until evidence was submitted to the Council that the respondent no longer had any rights over the land and that the tramway and sidings were to be removed;

·the owner had appealed to the Planning and Environment Court on 6 October 1995 against the deemed refusal by the Council.

In Mr Dodds' opinion, the refusal by the Mackay City Council of the 1995 application was based on the intention of the respondent to maintain the operations of the tramline and the sidings.

The effects of the granting of the easements were considered by Mr Dodds to be threefold.  First, there was the effective loss of 10,416.4 m² of land (from the areas shown on the QSC easement plans).  However, he reasoned that an area of approximately 2,521 m² of that area was already covered by the easement granted for the tramline on 1 October 1993, which also covered some 1,830 m² between the sidings.  Therefore, the area available for development before the granting of the sidings easements was 22.95 ha and after the granting of the easements was 22.16 ha.  Second, the area covered by the tramline easement was widened by between 6 metres and 20.5 metres for a total distance of approximately 525 metres in the north and south sections of the property.    Third, there would be increased activity from cane trams and farm machinery in the vicinity of the sidings.

Mr Dodds noted that it would be a requirement of subdivision, both before and after the granting of the easements, to provide earth mound barriers and acoustic fencing to shield the future allotments, although he acknowledged that the extent of buffering and the barriers would be greater in the "after" situation.  In such circumstances, he thought that the increased activity within the sidings and access easements would have only limited effect on the adjacent allotments. 

Mr Dodds thought that a prudent purchaser of the subject land before the granting of the easements would accept that any development potential of the land was long term and involved considerable speculation and uncertainty.  The existence of the tramway was already a detriment to the property and while he conceded that the sidings and access road would have some impact on the amenity of the land, he thought it would be fairly nominal in the context of the problems that otherwise affected the property.
           To assess compensation, Mr Dodds also adopted the "before" and "after" valuation method.  However, his valuations both "before" and "after" were made on the assumption that the land was not ripe for subdivision.  Therefore, his valuations were made by comparison with in globo sales which had only longer term potential for development.
           Mr Dodds referred to 11 sales of in globo land, only one of which was referred to by Mr Deacon in his original report.  However, he conceded that Sales 1 to 5 were not really comparable.  They were of land with immediate subdivision potential and sold for prices ranging from between $52,000 and $75,000. 
           Mr Dodds' Sales 6 to 9 were of lower priced land, which sold two to three years before the relevant date.  Sale 6, which became the Peppermint Grove Estate, was purchased for residential purposes.  Sales 7 to 10 became park residential, with water available but not sewerage.  His Sale 11 at Barkers Creek sold 12 months after the relevant date and showed $22,000 per ha for the available area.  It was future development land, designated "Open Space" in the Strategic Plan and has since been developed into a golf course.  While allotments in the Barkers Creek area sold at prices similar to those in the Explorer Estate, he conceded that it was not an area where much subdivision takes place.
           In arriving at his valuation before the granting of the sidings easements, Mr Dodds was particularly influenced by the intention of the Mackay City Council and of the Planning and Environment Court to protect the cane tramline and sidings at the responsibility of the developer.  In his view, a potential prudent purchaser of the subject land would make only a broad estimate of possible future yield, which could be expected to fluctuate with the conditions imposed by the Council.  He contrasted this to sites which have rezoning approvals and subdivisional designs in place, with readily estimated development costs.  In his opinion, a prudent purchaser would discount the price he/she would pay for the subject land because of the greater element of risk. 
           In the "after" situation, Mr Dodds reasoned that there was a slightly smaller area of available land, with greater impact from the activity of farm vehicles and cane trams associated with the sidings.  However, he considered that the major detrimental impact had already been caused by the tramline easement and that combined with the uncertain zoning and redevelopment options for the subject land, any injurious affection caused by the sidings would be, as he put it, "fairly nominal".
           Mr Dodds' assessment of compensation was as follows:

Value of subject land before the granting of the
           sidings easements
           22.95 ha @ $22,500 per ha  $516,500
           Value after the granting of the sidings easements

22.16 ha @ $22,000 per ha  $487,500
           Compensation  $29,000

The Issues
           Obviously, Mr Dodds disagreed with Mr Deacon's use of the hypothetical subdivision method, which assumed a clearly defined subdivision potential which he thought did not exist at the relevant date.  In his opinion, a hypothetical purchaser of the land before the granting of the sidings easements would have had considerable doubts and uncertainties regarding rezonings and development approvals and could not have accurately estimated a potential yield, or have anticipated development conditions.  According to Mr Dodds, the problems of the hypothetical subdivision approach are well established in cases such as Turner v. Minister of Public Instruction.

           He considered the approach to be "excessively theoretical", where minor variations in allotment values and development costs per allotment can translate into a halving of the in globo value.  In particular, he was critical of Mr Deacon's approach in several key aspects.  First, he could see no justification for increasing the development margin (profit and risk) in the "after" valuation.  Second, he thought Mr Deacon had underestimated the expected selling period, as a prudent purchaser of the land at the relevant date would not have expected to develop and sell 150 lots in six to seven years, when it took 52 months to sell most of the 69 allotments in the Explorer Estate, which were not affected by proximity to the cane tramline.  Third, he felt that any approach which resulted in halving the value because of a minor acquisition and extension of injurious affection, was not supported in the marketplace.
           In Mr Dodds' opinion, it was not appropriate to change the profit and risk rate in the "after" valuation because he thought it was "double dipping", as Mr Deacon had already reduced the value of some allotments, had increased the selling period and had increased the development costs per allotment.  The impact of the disclosure notice had already been taken into account in the "after" values of the allotments.

Mr Deacon endeavoured to support his adopted rate of sale by reference to an analysis of vacant residential sales in the Mackay area.  That analysis showed that the market was strongest in 1993/1994 and declined in 1995/1996 to reach a low point in 1996/1997.  Construction peaked in 1993/1994 and declined thereafter to bottom in 1995/1996.  However, market values were generally maintained.  Mr Dodds' research showed much the same trend.

However, the sales of allotments in Explorer Estate Stages 1 and 2 were Mr Deacon's primary basis for the rates of sale adopted in his hypothetical subdivision exercises.  Mr Deacon had adopted a selling rate of 2.1 allotments per month before and 1.7 allotments "after".  He disagreed that he should have allowed a much longer selling period, pointing out that in the period November 1994 to February 1996, 25 lots sold at a rate of 2.1 lots per month.  Mr Dodds thought that the sales in Stage 2 of the Explorer Estate provided a better indication of the demand for allotments, when 34 allotments were sold between November 1994 and May 1998, a period of 42 months, and a sales rate of 0.81 allotments per month.  However, I note that in the period November 1994 to May 1996, 25 lots sold at a rate of 1.4 lots per month.
           Mr Dodds thought that the sales of allotments in the other estates referred to by Mr Deacon were of no assistance, as they did not have the problems of the subject land.  On the other hand, the sales of the allotments in Explorer Estate were more helpful, as the Explorer Estate was affected by the Mackay-Bucasia Road, had an acoustic fence along the front boundary and it was near the tramline.  He did not regard it as a particularly attractive residential area, but it was the then best part of the claimants' land, furtherest from the tramline and the quarry. 
           In my view, the evidence establishes that Mr Deacon was somewhat optimistic in his estimate of the rate of sale of the proposed allotments, both before and after the granting of the easements.

Mr Deacon explained that he adopted a different profit and risk factor after the granting of the easements because of the greater risk from the impact of the sidings, particularly the disclosure notice.  But that was the reason for his adoption of the lower allotment values and the longer selling period.  It would seem that having made those adjustments to the "after" hypothetical subdivision exercise, then any further adjustment to the profit and risk allowance does seem to be doubling-up.  In any event, Mr Deacon did not explain why he adopted the very precise figures of 29.4% "before" and 32.6% "after" for profit and risk.  He may have had a reason for doing so, but it was not revealed.

Mr Deacon considered his Sale 4, which became the Royal Sands Estate, to be very significant.  It occurred only one month after the relevant date and he thought it was representative of the sentiment of the market at the time.  He considered it to be pioneering development, as it was the first major residential subdivision in the Shoal Point area on the west side of Shoal Point Road.  All such previous development north of Bucasia had been between Bucasia Road and the beachfront, except for some ribbon development of larger allotments.  As in globo land, Sale 4 showed $43,340 per ha, compared with approximately $30,000 per ha which he applied to the subject land before the granting of the sidings easements.

On the other hand, Mr Dodds did not regard Sale 4 as being comparable to the subject land.  While it was zoned "Rural A", it was purchased subject to rezoning.  Although it was a producing cane farm, the rezoning was approved notwithstanding the objections of the mill.  Mr Dodds said that any comparison with Sale 4 would have to take into account the fact that it was closer to the beach, that it sold subject to rezoning and was not affected by a cane tramline.  I agree with Mr Dodds' views.  The evidence establishes that Sale 4 is significantly superior to the subject land.
           Mr Dodds' opinion that the operations of the sidings would only marginally increase the injurious affection was challenged by Mr Cochrane.  Under cross-examination, Mr Dodds agreed the cane cutting season was one of concentrated frantic activity, with the mill operating 24 hours per day, with the activity on and near the sidings equally frantic, being dusty and noisy, for a period of about six months of the year, often at night.  He conceded that it was a very different situation to where there was a cane tramline only, as he knew of residential developments close to cane tramlines without apparent effect on amenity, although he thought there was an effect on values.  He agreed that the acoustic buffers would have to be wider and higher because of the sidings, but he did not see that as a particularly unattractive intrusion.
           Mr Dodds thought that Mr Deacon's "after" value of $15,000 per ha was a bit low.  He considered that the subject land "before" was, as he put it, a "tremendously tainted block" being affected by the tramline and the quarry.  He did not think that the market would have been much concerned about losing the use of about 10,000 m² out of about 23 ha, or having to construct larger buffer zones.  He conceded that the sidings would create further injurious affection, but in his view, because of the state of the market and the long-term potential of the land, the market would not be greatly influenced by the sidings.
While I substantially agree with Mr Dodds' reasoning, I think that he has somewhat underestimated the effect of the sidings.  It seems to be common ground that the disclosure notice condition imposed by the Planning and Environment Court was because of the existence of the sidings.  This requirement, together with the other impacts would, in my view, have a greater adverse effect than Mr Dodds allowed.

The question of whether the land had immediate or short-term potential for subdivision will be considered after I have dealt with the arguments on the legal status of the land at the date of granting of the easements. 

The Argument of Proprietary Estoppel
           It is clear that the basis for Mr Deacon's approach to the "before" valuation was his assumption that the sidings could have been removed at the request of the claimants.  However, Mr Hinson submitted that as a matter of law, that assumption was not correct. The arrangement reached between Mr Arthur Shepherd, who was the owner of the land in 1984, and the respondent was, he argued, in the form of a licence permitting the respondent to do something on the land without which licence there would be a trespass.  The concept is discussed in Megarry and Wade, "The Law of Real Property", (5th ed., 1984), at p.804, under the heading "Revocation restricted by estoppel": 

"A licence may be irrevocable at common law if the licensor is estopped by having allowed or encouraged the licensee to act to his detriment on the understanding that his right was to be permanent. …
In equity there is a corresponding doctrine, known as the 'equity arising out of acquiescence' and sometimes as 'proprietary estoppel', …"

At p.805, there is discussion of the formulation of a broader rule under which the question is simply whether the assertion of the licensor's strict legal rights is unconscionable in the circumstances.  In discussing the advantages of the principle, the view is expressed that such estoppels both bind and benefit successors in title.
           Mr Hinson referred me to the case of Ward v. Kirkland [1967] 1 Ch 194. In that case Ungoed-Thomas J found that in circumstances where drains in a farmyard were laid at the plaintiff's expense in reliance on permission given by the fee simple owner without any stipulation as to period, the plaintiff had an equitable right to keep the drains in position permanently and he was entitled to an injunction restraining the defendant from interfering with that right. Mr Hinson submitted that an analogy could be drawn between that case, which involved laying drainage pipes in land with permission but without any stipulation as to time, and the present case involving the events and conversations between Mr Sheedy and Mr Arthur Shepherd, and the expenditure of money putting permanent works on the land, without any stipulation as to time.
           Mr Hinson also referred me to Crabb v. Arun District Council [1976] 1 Ch 179 in the Court of Appeal in England, which was concerned with a right of way. He submitted that these two cases provide a basis for the Court to reject Mr Deacon's assumption in the "before" situation, that the landowner could at any time have requested the respondent to remove the sidings.
           The discussion above deals with the common law situation, not land which is under the Torrens System.  Furthermore, both of the cases referred to by Mr Hinson involved undertakings by landowners.  The question arises, is a successor in title to land under the Torrens System bound by the equity?  Mr Hinson submitted that if a person acquires land which is not under the Torrens System, with knowledge of an equity, that person is bound by the equity:  Wood v. Browne [1984] 2 QdR 593; see also MacDonald, McCrimmon, Wallace and Stephenson, "Real Property Law in Queensland", 1998, p.401.
           The subject land is land which is under the Torrens System, subject to the provisions of the Land Title Act 1994.  I will consider Mr Hinson's submission in that regard after I have set out the submissions advanced by Mr Cochrane.

Mr Cochrane acknowledged that the concept of equitable estoppel had been recognised by the Full Court of Queensland in Riches v. Hogben [1986] 1 QdR 315, where the Full Court referred to Crabb's case.  He also accepted that Crabb v. Arun District Council is authority for the proposition that at common law a court may recognise the creation of an equity in favour of an adjoining landowner and may satisfy that equity by granting a right of access and a right of way.  Lord Denning MR in Crabb's case spoke of "proprietary estoppel", apparently as a corollary  to "promissory estoppel" established in the Central London Property Trust Ltd v. High Trees House Ltd [1947] KB 130. In Ward v. Kirkland, Ungoed-Thomas J was prepared to enforce an equitable right which a plaintiff had acquired by carrying out drainage works at his expense and in reliance on permission given by the owner.  Mr Cochrane submitted that it was significant that in both cases the equity was held to vest in a party who had direct dealings with the legal owner, not the legal owner's predecessor in title.
           Mr Cochrane quoted from Bradbrook, MacCallum and Moore "Australian Real Property Law", 2nd Ed., at paragraph 5.55:

"The doctrine of proprietary estoppel provides a remedy which can lead to a proprietary interest.  A party could be compelled to execute a document registerable under the Torrens System.  However, even though an equity is said to arise in favour of a party acting to that party's detriment, the right seemingly has limited proprietary impact upon subsequent transferees under the Torrens System.  The protection of indefeasibility should accrue to someone who becomes a registered proprietor in good faith and for value in succession to the party creating the estoppel.  Possible protection of good faith volunteers further weakens the scope of the right."

Mr Cochrane submitted that the respondent's argument would have greater force if the claimants were the registered proprietors at the time the arrangements had been made.  He argued that the statements of Mr Sheedy and Mr McLean contained no allegations against the claimants as current registered proprietors, so if there was any proprietary estoppel, it was against the former registered proprietors; furthermore, there is no evidence that any of the claimants as present owners of the land have made representations to the respondent upon which the respondent may rely to establish a proprietary estoppel; similarly, there is no evidence that any of them took their registered interest with the knowledge of representations of their predecessors in title such as might bind them.

I turn now to consider the arguments in relation to the present case.
In Queensland, s.184 of the Land Title Act 1994 confers an indefeasible title upon the registered proprietor of an interest in a lot, subject to the exceptions set out in s.185, one of which is:

"(1)(a)  an equity arising from the act of the registered proprietor; …"

Clearly, under the Torrens System, equitable interests may exist, although they are not capable of registration. Indefeasibility is not absolute, but is subject to exceptions, one of which is s.185(1)(a) of the Land Title Act.  However, it seems that mere notice of an unregistered interest will not affect indefeasibility; there must be something more by way of an undertaking, written or oral, to honour the interest, (MacDonald, McCrimmon, Wallace and Stephenson pp.337-338) or other conduct by the registered proprietor, before or after registration (at p.336).  There is evidence that Mr Arthur Shepherd and D & J Wallman were the registered proprietors before 1985.  The Shepherds (the claimants) were registered proprietors in December 1991.  In July 1993 Lot 2 was transferred to Denar Pty Ltd (the other claimant).
           The schedules attached to Mr Sheedy's statement show that Mr RW Shepherd (one of the claimants) was growing cane on the subject land from 1987 to 1993.  From 1990 to 1993, the Shepherds (the claimants) were growing cane on the subject land.  From 1994 to 1996 the Shepherds were growing cane on Lot 1 and Denar was growing cane on Lot 2.  Between 1989 and 1993 the Shepherds delivered cane to the sidings (Annexure 2 to Exhibit 17).  From the details in Annexure 1, it would seem that the claimants, Denar and the Shepherds, delivered cane to the Quarry Siding in 1996 and thereafter.
           There is no evidence to indicate when prior to December 1991, the Shepherds became registered proprietors of the subject land.  However, it is clear that prior to their refusal in 1991 to consent to the grant of easements, they were aware of and made use of the sidings.  There is no evidence that they did anything other than acquiesce in the situation that existed before they refused consent.  Mr Hinson submitted that by refusing consent they resiled from the state of affairs which they had accepted and of which they had taken advantage.  Therefore, he argued, there was not only conduct by the predecessor in title, but also conduct by the Shepherds and by Denar as registered proprietors which gives rise to the equity.
           Mr Hinson submitted that the equitable exception to indefeasibility applied in the present case.  His argument proceeded as follows:  the cases indicate that there had to be some form of encouragement by the landowner, the party sought to be estopped in bringing about the situation. In Crabb's case, Lawton LJ spoke of both direct and indirect encouragement by the landowner.  In the present case there had been direct encouragement by the then landowner to the respondent to spend money in establishing or relocating the sidings and by subsequent conduct.  The claimants (the present registered proprietors) delivered their cane to the sidings, so they took advantage of the facility that their predecessor in title had permitted the respondent to construct on the land. 

Indirect encouragement in Crabb's case was said to arise from a failure to act, or abstaining from giving the other party to the transaction any indication that there would be an insistence upon strict legal rights.  In the present case, there seems to have been an abstaining from insistence upon strict legal rights deriving from indefeasible registered title to the land from the date when the respondent constructed the sidings until such time as consent was sought to formalise the arrangement.

In summary, Mr Hinson submitted that Mr Deacon was wrong as a matter of law in taking the approach that the sidings could be disposed of by the claimants as a matter of right.  The respondent had an equity which could have been protected by proceedings in the Supreme Court, but after the refusal to formalise the arrangement, the respondent chose another path, seeking the grant of easements from the QSC.

On the other hand, Mr Cochrane submitted that the fact that the claimants  grew sugar cane on the subject land prior to, or after, they became registered proprietors, is not evidence of any knowledge by them of representations made by their predecessors in title.  He argued that there is evidence of the existence of the sidings on the subject land, not that they were tolerated; mere acquiescence by the claimants is insufficient to establish any proprietary estoppel; therefore, up to the time the easements were granted by the QSC, the claimants would have been entitled to assert their rights and request removal of the sidings.  It was therefore appropriate, he argued,  that Mr Deacon's "before" valuation was made on the assumption that the claimants had the right to request removal of the sidings.

As I understand the submissions, Mr Cochrane is prepared to concede that there may have been an equity created in favour of the respondent as a result of the arrangement with Mr Arthur Shepherd.  However, whatever may be the situation at common law, the indefeasibility provisions of the Land Title Act prevent the equity from affecting the title of the claimants as successors in title. The equity exception in s.185(1)(a) refers to a "personal" equity and does not extend to successors in title even if they took with notice of the equity. Thereafter, mere acquiescence by them is not sufficient; there must be something more.
           However, Mr Hinson argues that by continuing to take advantage of the existence of the sidings by delivering their cane to them, the claimants have acquiesced  in their existence to their benefit, at least until they refused to formalise the agreement.  Therefore, a new equity was created as it would be unconscionable for the claimants to insist on the enforcement of their legal rights.
           In my view, it is not necessary for me to resolve whether or not such an equity existed and would have been enforceable by the respondent at the relevant date.  What is more appropriate is to consider the effect upon the mind of a hypothetical prudent purchaser when he/she became aware that there was a reasonable legal argument that before the granting of the easements, the sidings could not have been removed at the request of the landowners.    

Conclusions
           It is well established that the hypothetical subdivision approach is appropriate only where land has potential for immediate subdivision:  see for example Crompton v. Commissioner of Highways (1973) 32 LGRA 8, at 25, where Wells J of the Supreme Court of South Australia, distinguished between land which was ripe for subdivision and land which merely had potential for subdivision, finding that the principles in Turner v. Minister of Public Instruction apply only to the former.  Although the Courts have expressed reservations about the use of the hypothetical development method of valuation because of the difficulties of assumptions about the elements of the exercises, Mr Cochrane submitted that the method should not be set aside lightly.  He referred to the judgment of Cripps J (as he then was) in the New South Wales Land and Environment Court in Gwynvill Properties Pty Ltd v. Commissioner for Main Roads (1983) 50 LGRA 322, where Cripps J held that he should not disregard the hypothetical development method.
           That case involved the hypothetical development method of valuation, as distinct from the hypothetical subdivision method.  However, his Honour's comments regarding the criticism of the method are equally applicable to both methods.  Cripps J explained at p.326:

"          The hypothetical development method is normally suspect because it depends on a number of assumptions and a number of estimates, e.g. cost of building, estimated gross rentals obtainable, probable outgoings and, most significantly, the rate percentum of return which could be expected and the profit and risk factor expressed in percentage terms.  It has been said that because many estimates and assumptions must be made, the hypothetical development method ought not be used where some use can be made of a comparable sale."

However, in the special circumstances of that case, all the ingredients were known and Cripps J preferred the method to comparison with a somewhat dubious "comparable" sale.  That is not the situation in the present case where Mr Deacon in adopting the hypothetical subdivision method, made assumptions which were either unexplained or have been proven to be of doubtful validity.

Throughout this case, the valuers and counsel continually referred to what might be the attitude of a hypothetical prudent purchaser of the subject land.  That concept is derived from the test for market value established by the High Court in Spencer v. The Commonwealth (1907) 5 CLR 418. The following passages are from Griffiths CJ and Isaacs J. Griffiths CJ said at 432:

"In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, that is, whether there was in fact on that day a willing buyer, but by inquiring 'what would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?' …
The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together."

In the same case, Isaacs J said at 441:

"To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration.  We must further suppose both to be perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property."

The Spencer test therefore assumes a sale of the land at the relevant date between a fully informed vendor and purchaser, but neither of them so anxious to buy or to sell as to overlook any ordinary business consideration.  Although the price that an informed prudent seller would require for the land cannot be ignored, the courts have tended to emphasise the attitude of the hypothetical prudent purchaser, as illustrated by the following passage from Brown, "Land Acquisition" (4th ed., 1996) at p.98:

"          The rule in Spencer has been recognised in a number of Statutes.  The rule emphasises that both the seller and the buyer are willing to transact a transfer of the land for a price.  It underlines that both the seller and the buyer are aware of market conditions and are influenced by market prices.  In Pastoral Finance Association Ltd v Minister [1914] AC 1083 at 1088 the Privy Council stressed the element of prudence:

Probably the most practical form in which the matter can be put is that [the claimants] were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it.

The Spencer rule presumes the existence of a person desirous of buying the land at a fair price:  Chapman v Minister [1966] 2 NSW 65.  He or she is an imaginary, reasonable purchaser, but must not be taken to possess any special prescience:  Edinburgh Pty Ltd v Minister (1962) 8 LGRA 45 at 50." (Footnote omitted)

However, to that should be added that

"… the facts a court should take into account are those which would be known to a buyer, who has taken such practical steps as are reasonably necessary to become properly acquainted with the property he has in mind purchasing.":  Davey v. Minister of Agriculture (1979) (1) SA 466 at 469.

In my view, a prudent purchaser of the subject land before the granting of the sidings easements would have regard not only to the legal argument concerning the possibility of an equity in favour of the respondent, but to a number of other considerations affecting the land.  Even if the hypothetical prudent purchaser was of the view that there was a reasonable possibility that the opposing legal argument would prevail, he/she would still be faced with the physical existence of the sidings and the attitude of the Council, the Planning and Environment Court and the respondent, as well as other cane growers, all of whom would be anxious to protect the sidings.  The evidence indicated that there are several growers who delivered their cane to one or other of the sidings at the relevant date.  There is little doubt that those growers as well as the respondent would have strongly contested the right of the claimants to insist on the removal of the sidings.  As discussed, there is certainly a legal argument that the respondent could have succeeded by action in the Supreme Court to prevent the claimants asserting their legal rights.  Any potential prudent purchaser contemplating removing the sidings would realise that there would be the likelihood of considerable legal costs without any guarantee of success.
           Quite apart from the legal question as to the existence of an equity, there are other factors which lead me to conclude that a potential prudent purchaser would consider this land to have only longer-term residential subdivision potential. 

First, rezoning was required before it could be developed; Ms Edwards was of the view that at the relevant date there was no planning provision indicating that further rezoning and subdivision could be expected as of right.  She identified potential amenity impacts, incompatible land uses, cane tramline infrastructure, the conditions imposed upon the May 1993 rezoning approval for Stages 1 and 2 which dealt with amenity impacts and buffering, and the 1995 Draft Planning Guidelines by the State Government dealing with separation of agricultural and residential land uses. 

Second, there was the inclusion of the subject land in the expanded Blacks Beach/Planella Neighbourhood Area following the 1988 amendment to the Strategic Plan.  Ms Edwards observed that "The Strategic Plan therefore stated its intention to protect valuable agricultural land within this locality, indicating that development should first take place on lands not suitable for canegrowing, and that due consideration should be had to supply and demand factors."  (Exhibit 16 p.6)  This is reflected in the Council's planning report of August 1996 in respect of the claimants' development application of June 1995, expressing concern about development of the subject land. 

Third, there was the Council's attitude that the June 1995 application was premature, until evidence was produced that Mackay Sugar no longer had any rights over the land and that the tramway and sidings were to be removed.  The June 1995 application covered the whole of the subject land and assumed the tramline and sidings did not exist. 

Fourth, the experience of the claimants in the development of the Explorer Estate, in particular the conditions imposed by the Planning and Environment Court on the 1993 approval, which sought to provide for protection of the cane tramline and sidings and to provide for acoustic buffers between the residential land and the tramline.  That approval was for substantially reduced development than applied for and was in respect of what was then the best part of the claimants' land. 

Finally, there are the physical features.  At the relevant date, the land was severed by the tramline protected by an easement granted in 1994, it was adjacent to a quarry, it had frontage to the busy Mackay-Bucasia Road , with the probability of the requirement of acoustic fencing along that frontage and to the quarry, as the 1997 approval included a condition requiring a buffer to the quarry.  In my view, it would be only a most unrealistically optimistic purchaser who would think that the subject land would have immediate potential for subdivision. 

Therefore, I find that the subject land at the date of the granting of the sidings easements was not ripe for subdivision.  I cannot accept the approach adopted by Mr Deacon.  I prefer the approach adopted by Mr Dodds.

In making this analysis, I have not had regard to the March 1997 rezoning approval by the Planning and Environment Court permitting the development of 60 lots, subject to conditions, as that occurred subsequent to the granting of the easements on 12 February 1996.  However, I have had regard to conditions, particularly the requirement for the disclosure notice, first, because the parties continually referred to them and second, because I am of the view that a hypothetical prudent purchaser would have foreseen that some such type of restrictive condition would be imposed on any future development.
           Mr Deacon was of the view that after the granting of the easements the immediate subdivision potential had been destroyed and its potential was longer term.  He arrived at that conclusion after undertaking a hypothetical subdivision exercise after the granting of the easements which showed an "after" valuation of $350,000, or about $15,000 per ha.  He thought that figure reflected an appropriate difference in value compared with his "before" valuation of approximately $30,000 per ha and his sales.  However, it was not explained how he could draw such a conclusion from the sales in Annexure 16 of his original report, Exhibit 10.  Besides, the use of the hypothetical subdivision method of valuation for land which had no immediate potential for subdivision is not appropriate.

It was common ground that there are no directly comparable sales.  At best the sales set some upper and lower limits of the range within which the subject land falls.  Each of Mr Deacon's sales represents a value per ha for usable land which is well in excess of the value that he applied to the subject land in the "before" situation.  It is difficult to see how Mr Deacon can assert that those sales support the value of $700,000, or $30,000 per ha, in the "before" situation.  It is even more difficult to see how those sales can give him any comfort for his "after" valuation of $350,000, or the amended valuation of $320,000.  It was also common ground that the subject land was inferior to the common sale, Sale 3, which showed about $52,000 per ha for available land.  Mr Deacon felt that the result of the "before" valuation of approximately $30,000 per ha was in relationship to the sale, principally because of the tramline and its proximity to the quarry and the busy Mackay-Bucasia Road.  On the other hand, Mr Dodds' "before" valuation was $22,500 per ha, which he said was derived by comparison with sales of land with longer term potential for subdivision.
           I prefer the approach of Mr Dodds.  Although none of his sales was directly comparable, they are of land which does not have immediate potential for subdivision.  He was of the opinion that the effect of the sidings would be only nominal.  However, for the reasons discussed earlier, I am of the view that he underestimated the effect that the sidings would have on the mind of a prudent purchaser.  Before the easements were granted, there was the possibility that by legal action or by negotiation, the sidings could have been relocated or removed.  With the granting of the easements that possibility was eliminated.  When that is combined with the requirement for additional buffering and acoustic barriers and particularly the disclosure notices, in my view a prudent purchaser would see a greater difference than a mere $500 per ha in the value of the land after the granting of the sidings easements than before. 

The sales produced by the valuers are of no assistance in determining the value of the land after the granting of the easements.  Mr Deacon thought that the value of approximately $15,000 per ha was the approximate value of cane-growing land with some longer-term residential subdivision potential.  With no sales evidence to assist, the "after" value is therefore essentially a matter of judgment.  However, I do not think that the value of the land would be only $15,000 per ha after the granting of the easements as adopted by Mr Deacon.  On the other hand, it would not be as close to the "before" value as adopted by Mr Dodds.  I have adopted $21,000 per ha.

Determination of Compensation
           In accordance with my findings, I determine compensation using the "before and after" valuation approach as follows:
           Value of Available Land before the granting of the Sidings Easements

22.95 ha @ $22,500 per ha  $516,375
           Value of Available Land after the granting of the Sidings Easements
  22.16 ha @ $21,000 per ha  $465,360
           Compensation
Value "Before"  $516,375
  Value "After"  $465,360
Compensation  $51,015

Disturbance
           Compensation for disturbance items was agreed upon by the parties at the figure of $20,589, including interest on those disturbance items. 

Interest
Section 28 of the Acquisition of Land Act 1967 gives the Court discretion to award interest on compensation payable.  It is the Court's usual practice to make such award unless there are special circumstances in which it should not do so.       There was no argument that the Court should not follow its usual practice and award interest on the amount of compensation payable from the date of the grant of the easements.  I was informed that no advance had been paid in this matter.

Determination and Orders
           Compensation is determined in the sum of Seventy-one Thousand Six  Hundred and Four Dollars ($71,604) and the respondent is ordered to pay the claimants that amount.

I further order that the respondent pay the claimants interest at the rate of 6.5 per cent per annum on the sum of Fifty-one Thousand and Fifteen Dollars ($51,015) from the date of the granting of the easements on 12 February 1996 up to the day immediately preceding the date upon which payment of compensation is made.

JJ TRICKETT
PRESIDENT OF THE LAND COURT