Inglis v State of Queensland (No. 2)
[2014] QLC 7
•12 March 2014
LAND COURT OF QUEENSLAND
CITATION: Inglis v State of Queensland (No. 2) [2014] QLC 7 PARTIES: Robert Mallalieu Inglis, Marion Ann Inglis and Paul Mallalieu Inglis
(applicants)
v
State of Queensland
(respondent)
FILE NO: AQL863-12 DIVISION: General Division PROCEEDING: Application to determine compensation under the Acquisition of Land Act 1967 DELIVERED ON: 12 March 2014 DELIVERED AT: Brisbane HEARD ON: 6, 7, 8, 9, 13 May and 26, 27, 28, 29, 30 August 2013
Submissions finalised and decision reserved 19 December 2013
HEARD AT: Brisbane MEMBER: WA Isdale ORDERS: 1. The value of the land taken is assessed in the amount of Two Million, Two Hundred and Fifty Thousand Dollars ($2,250,000).
2. Costs attributable to disturbance are assessed in the amount of One Hundred and Eighty Nine Thousand, Six Hundred and Forty-five Dollars and Nine cents ($189,645.09).
3. Interest is payable to the applicants on the amount of compensation assessed, that is the sum of the amounts in Orders 1 and 2, at the rates applicable for the relevant years at the rates published on the Land Court website, that is:
2007 6%
2008 5.75%
2009 5%
2010 5.5%
2011 5%2012 4%
2013 3.75%
4. Interest is payable on and from the date of resumption in the case of the land and on and from the date of payment of the disturbance items to and including the day immediately preceding the date on which the respondent’s payment of the sum due is paid. Interest shall not be payable in respect of any amount of compensation advanced under s 23 of the Acquisition of Land Act 1967.
5. Any application for costs is to be filed and served within 14 business days of the publication of these reasons and any reply is to be filed and served within 14 business days of the application.
CATCHWORDS: Acquisition of land ― valuation ― competing methods ― adjusting sales analysis to allow for market movements over a period of time ― quantum and reasonableness of disturbance costs
Acquisition of Land Act 1967
Valuation of Land Act 1944Brisbane City Council v Bortoli (2012) 33 QLCR 418; [2012] QLAC 8
Brisbane City Council v Mio Art Pty Ltd & Anor (2011) 32 QLCR 285; [2011] QCA 234
Brook v Valuer-General [2011] QLC 76
Cattanach v Water Conservation & Irrigation Commission (1962) 9 LGRA
Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2013] QLC 47
Crompton v Commissioner of Highways (1973) 32 LGRA 8
De Ieso v Commissioner of Highways (1981) 27 SASR 248; (1981) 47 LGRA 412
Federal Commissioner of Taxation v St Helens Farm (A.C.T.) Pty Ltd (1980-1981) 146 CLR 336
Heavey Lex No. 64 Pty Ltd v Chief Executive, Department of Transport (1999-2001) 22 QLCR 177
Lowry v Coordinator-General (2012) 33 QLCR 263
Maurici v Chief Commissioner of State Revenue (2002-03) 212 CLR 111
Minister for Public Works v Thistlethwayte [1954] AC 475
Mio Art Pty Ltd & Ors v Brisbane City Council (2009) 30 QLCR 213; [2009] QLC 177
O’Kane v The Commissioner of Main Roads (1976) 3 QLCR 331
Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151
Spencer v The Commonwealth (1907) 5 CLR 418
St Martins’ Centre Pty Ltd v Valuer-General (WA) (2003) 35 SR (WA) 218
Tow v Valuer-General (1978) 5 QLCR 378
Yalgan Investments Pty Ltd v Albert Shire Council (1997) 17 QLCR 331APPEARANCES: Mr GR Allan, instructed by Anderssen Lawyers, for the applicants
Mr SP Fynes-Clinton, instructed by GR Cooper, Crown Solicitor
Background
The applicants were formerly owners of land in the Gatton area which was acquired from them on 14 December 2007 by the respondent for the purposes of a correctional facility. The parties have been unable to agree on the value of the land taken so on 5 November 2012 the matter of the amount of compensation payable to the applicants was referred to the Court on behalf of the respondent using the process provided by s.24 of the Acquisition of Land Act 1967 (the Act).
The legal framework
When the land was compulsorily acquired there arose, under s.12(5) of the Act, an entitlement to compensation for the value of what was taken and s.20(2) of the Act provides that:
“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.”
The “value” referred to in s 20(2) of the Act is accepted to be the value to the applicants as dispossessed owners.[1] The word “value” is not defined in the Act, its meaning has consistently been accepted to be the market value determined in accordance with the decision of the High Court in Spencer v The Commonwealth.[2] The relevant passages appear in the judgments of Griffith CJ and Isaacs J. The learned Chief Justice said:
“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, i.e., 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?’ It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. 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 the 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.”[3]
Isaacs J said:
“In the first place the ultimate question is, what was the value of the land on 1st January 1905?
All circumstances subsequently arising are to be ignored. Whether the land becomes more valuable or less valuable afterwards is immaterial. Its value is fixed by Statute as on that day. Prosperity unexpected, or depression which no man would ever have anticipated, if happening after the date named, must be alike disregarded. The facts existing on 1st January 1905 are the only relevant facts, and the all important fact on that day is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted. The plaintiff is to be compensated; therefore he is to receive the money equivalent to the loss he sustained by deprivation of his land, and that loss, apart from special damage not here claimed, cannot exceed what such a prudent purchaser would be prepared to give him. 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 cognizant 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.”[4]
[1]Brisbane City Council v Mio Art Pty Ltd & Anor (2011) 32 QLCR 285; [2011] QCA 234 per Fryberg J at [31] where his Honour referred to O’Kane v The Commissioner of Main Roads (1976) 3 QLCR 331 at 333 and Minister for Public Works v Thistlethwayte [1954] AC 475 at 491.
[2](1907) 5 CLR 418.
[3](1907) 5 CLR 418 at 432.
[4](1907) 5 CLR 418 at 440-441.
Site inspection
Inspections of the subject land and of a number of sale properties used by the valuers for comparison purposes were undertaken over two days. The properties to be inspected and the order in which they were viewed was as agreed between the parties. The view is not itself evidence but may assist in understanding the evidence.
Potential of the land for development
Where the potential of this land for some development is being considered in these proceedings, this Court does not need to consider the precise detail of what a local authority would have permitted but must proceed in the manner explained by the learned President:
“It is not the function of this Court to decide whether the planning authority would approve a particular proposal. Rather it is the function of the Court to determine, having heard the relevant evidence, how the hypothetical prudent purchaser referred to in the judgments in Spencer would have viewed the potential financial return if a proposal were considered that included one or other of the proposed plans.”[5]
[5]Mio Art Pty Ltd & Ors v Brisbane City Council [2009] QLC 177 at [12], citing De Ieso v Commissioner of Highways (1981) 27 SASR 248; (1981) 47 LGRA 412 at 417. This passage was quoted by Fryberg J in Brisbane City Council v Mio Art Pty Ltd & Anor [2011] QCA 234 at [9]. See also Brisbane City Council v Bortoli [2012] QLAC 8 at [39].
The land
The land taken is described as Lot 238 on Registered Plan CA 31519 with an area of 258.898 ha and Lot 242 on Registered Plan CA 31612 with an area of 101.171 ha. The Court must find its value at the date it was taken, 14 December 2007. The land is located about 101 km radially from the Brisbane General Post Office and 16 km north-west of the Gatton town centre. The two properties are separated by an unformed road reserve to the west of Lot 238 which is situated 1.5 km west of the intersection of the Gatton-Esk Road and Millers Road, Spring Creek. Lot 283 has a frontage of about 1.7 km to Millers Road and around 2.4 km frontage to Krugers Road. Lot 242 is about 3 km west of the intersection of the Gatton-Esk Road and Millers Road, to which it has about 600 m frontage. There is State Forest adjacent to the west and south of Lot 242. Lot 238 is connected to electricity and telecommunications and has a school bus service. Lot 242 could be connected to electricity and telecommunications. At the relevant date Krugers Road and Millers Road were gravel in the vicinity of the land and carried low volumes of traffic. They provide access to the Gatton-Esk Road, a dual lane bitumen road.
The respondent’s valuer’s methodology
In his valuation report prepared for the trial, the valuer relied upon by the respondent set out the method which he employed. The valuer, Mr Matthew Woodbridge, is a Registered Valuer and Certified Practicing Valuer working in the State Valuation Service. He has valued the land taken at $1,875,000. In his report,[6] Mr Woodbridge states:
“3.1 Property Sales
Single title lots as large as Lot 238 (258.898 Hectares) are scarce within the immediate area therefore appropriate adjustments are required when comparing sales to Lot 238.
The sales adopted within the attached sales schedule are concentrated within the immediate locality of the subject lots. The sale dates vary from August 2005 through to December 2006. An analysis of the market movement from date of sale through to date of valuation (December 2007) was adopted when applying these sales for comparison purposes to the subject. Each sale scheduled in Section 3.2 is indexed from date of sale to date of valuation from the internal statistical documentation known as the State Valuation Service Market Survey Report 2006 (Esk Shire, Laidley Shire, Gatton Shire) and State Valuation Service Market Survey Report 2007 (Esk Shire, Laidley Shire, Gatton Shire). The market movement from October 2005 to October 2006 is an index of 1.30 and the market movement from October 2006 to October 2007 is an index of 1.10. These indices were applied to the sales in Section 3.2 as direct comparison to the subject lots.”
[6]Exhibit 4, doc 30.
A simplified working of this model
To illustrate the operation of this methodology one may suppose the starting point of a sale in October 2005 for $1. Using the chosen method to find what is put forward as a reliable indicator of the market value on 14 December 2007 is a staged process. First, it is indexed by a factor of 1.3 to show a market value in October 2006. This will be $1.30. That figure is then indexed by a factor of 1.1 to arrive at what is said to be the market value in October 2007. Doing the mathematics yields $1.43. Starting with a sale price in October 2005, a 43% increase has been added to arrive at what is said to be the value in October 2007 and, without further refinement, on 14 December 2007. This illustration shows the large increase due to the effect typically observed in relation to compound interest.
A direct comparison?
Mr Woodbridge uses “internal statistical documentation” to index the sales on which he relies because he found that sales of single large lots were “scarce within the immediate area”. The two expressions quoted are themselves each deserving of some consideration but first it is noted that the figures obtained by indexing were applied to the sales “as direct comparison” to the subject land. Some understanding of what constitutes a direct comparison may be gained from the joint judgment of the five Justices of the High Court in Maurici v Chief Commissioner of State Revenue[7] where their Honours said:
“The traditional, and usually unexceptionable method is to seek out relatively contemporaneous sales of comparable properties between parties at arms length, unaffected by special circumstances, such as, for example, a strong desire by a purchaser to buy an adjoining property, and to use those sales as a yardstick for the valuation of the relevant land.”[8]
[emphasis added]In Federal Commissioner of Taxation v St Helens Farm (A.C.T.) Pty Ltd,[9] Mason J said, at 381:
“This Court has consistently applied the rule that on a question of valuation an appellate tribunal is not justified in substituting its own opinion for that of the court below unless it is satisfied that the court below acted on a wrong principle of law or that its valuation was entirely erroneous (references omitted). As with the assessment of damages, especially in personal injury cases, the valuation of property by a court has many of the characteristics of a discretionary judgment. Valuation is a matter of estimation, not of precise mathematical calculation. It certainly involves the making of a value judgment in the metaphorical as well as the literal sense.”[10]
[emphasis added]I conclude from the foregoing that a direct comparison of a sale with the subject land requires that there be a comparison of a “relatively contemporaneous” sale with the land. A “relatively contemporaneous” sale, when considered in the light of the facts of this case, would not be likely to be one where the time when it occurred is so far removed as to require the sale price to be mathematically adjusted by a factor as large as 43% in an attempt to achieve the comparability of which contemporaneity is a part.
[7](2002-2003) 212 CLR 111.
[8](2002-2003) 212 CLR 111 at 120 [16].
[9](1980-1981) 146 CLR 336.
[10](1980-1981) 146 CLR 336 at 381.
Sales scarce within the immediate area
The reason given for using the methodology chosen was that since sales of single large lots were “scarce within the immediate area therefore appropriate adjustments are required”. [emphasis added]
This conclusion is not the one supported by authority. By limiting the horizon to “the immediate area” when searching for sales, Mr Woodbridge has, for no good reason, limited the information available for his consideration to a limited, but not precisely defined, geographical area. He has then expanded his consideration of sales to a longer period of time, with the result to which reference has just been made. In Crompton v Commissioner of Highways[11] Wells J said:
“It seems to me that, ideally, the valuer should, in the first instance, look at the sales of land over a wide geographical and temporal range, and from these select those that appear potentially useful as a basis for comparison.”[12]
[11](1973) 32 LGRA 8.
[12](1973) 32 LGRA 8 at 23.
In selecting sales for comparison, comparability cannot be reduced in its content to mere propinquity.[13] By introducing this limitation an error in method was brought in at the commencement of the process in valuation. This error prevented the valuation process from proceeding correctly in a way that was fundamentally inimical to the validity of the process.
[13]The Law Affecting Valuation of Land in Australia, 4th edn Alan A Hyam. The Federation Press, 2009 p 199. “Special consideration should not be given to sales within a specified area over and above sales outside of that area, provided that the lands are truly comparable: Cattanach v Water Conservation & Irrigation Commission (1962) 9 LGRA 352 at 361.” Brook v Valuer-General [2011] QLC 76 [70], [71].
Internal statistical documentation
This expression tends to imply that authoritative facts are to be found within the “documentation”. Indeed, numerical factors, applied as correct with precision to two decimal places, are taken from it. One of these market survey documents was put into evidence in the re-examination of Mr Woodbridge. It became Exhibit 41. It describes itself as the 2007 Gatton Market Survey with a date of valuation of 1 October 2006. The copy put into evidence is neither signed nor dated but has a space for signature by Specialist Coordinating Valuer. It contains things not explained in the evidence such as:
“2 Section 37 Considerations”
Under that heading appears, amongst other things:
“· Rural residential values have generally increased by about 30% …
…· Grazing values have generally increased in the order of 25% to 30%, in contrast to the larger more highly valued mainly agricultural lands.
· On (sic) a variable market of the nature experienced in Gatton to date, there will need to be significant manual input into differentiating between categories of significant increases and those to be increased to a lesser degree or rewritten where sales information and support may be scarce.”
The document includes a table of areas and it has within it a “Range of Proposed Factors”.
A part of this document which is informative as to its nature is that which appears early in it, on its third page. This is:
“RECOMMENDATION: That an annual valuation should be undertaken of the above local government effective 30 June 2007.”
When considered with the reference to “Section 37 Considerations” which come on the next page, it takes little imagination to look at s 37 of the Valuation of Land Act 1944, which although now repealed was in force at the time. It is not necessary to set out s 37 for present purposes. It is sufficient to note that it refers to a “market survey” which was required to be considered by the chief executive if that officer was considering not to make an annual valuation of land in an area. This document is clearly something prepared for that purpose and the “Recommendation” is that an annual valuation of land in this area should be undertaken to be effective on 30 June 2007. This annual valuation is what is used for rating purposes by local authorities. The key consideration for present purposes is that it recommends that a valuation should be done, it is not itself a valuation of anything. It contains quite general statements relevant to the recommendation and ranges of proposed factors. While this information may be useful for the very purpose for which it was prepared it is not in any way a valuation of any specific land, nor does it purport to be.
Using this information for the purpose for which it was applied in this case is completely unhelpful. Its author or authors were not identified or called to give evidence and none of this material is able to be tested by the applicant. It is of no assistance to the Court for present purposes so the factors applied to the sales cannot be considered to have any reliability at all.
Conclusion on the limitation of sales to the immediate area and the use of indexing
For the reasons given, the limitation applied has invalidated the selection of sales and the indexing of the sales used is not able to be relied upon to assist in valuing the subject land.
A previous valuation
The applicant introduced Exhibit 27 in the evidence of its valuer Mr Knight. Exhibit 27 is a valuation of the subject land prepared by Mr Woodbridge on 25 March 2009. In this report he uses the same six sales used for his trial report. On page 20 of Exhibit 27 he calculates the value of Lot 238 and Lot 242 exactly as he does on page 21 of his trial report and arrives as the same value, $1,876,177. In both cases he arrives at the rounded-off figure of $1,875,000 “for practical real estate purposes”. Exhibit 27 ends at that point whereas the trial report continues further. It is noteworthy that the valuation arrived at in Exhibit 27, of the same land and made for the same purposes was made using the same sales and arrived at the same valuation figure without any reference to any indexing such as was used in the trial report where that device is described, on page 10 of that report as “required when comparing sales to Lot 238”. There was no explanation of how it was that the very substantial adjustments made in order to compare sales in the trial report yielded an identical valuation conclusion to the earlier report in which the same sales were used but not adjusted.
Other aspects of the valuation by Mr Woodbridge
Mr Knight’s sales
On pages 17 and 18 of his trial report, Mr Woodbridge lists seven sales relied upon by Mr Knight, who prepared the valuation relied upon by the applicant. In cross-examination Mr Woodbridge said that he had placed heavy reliance on six of these sales, excluding from that category only the sale of Lot 43 Greenswamp East Road, Moreton Vale which has an area of 82.61 ha and sold for $505,000 on 1 July 2006. Mr Woodbridge, on page 17 of his trial report, states that these sales “support” his valuation.
On page 19 of his trial report, Mr Woodbridge sets out his understanding that the adjoining owner, the poultry business company known, for brevity, as Darwalla was asserted by Mr Knight as being a willing potential purchaser of the land and would have been prepared to pay a premium for it. Mr Woodbridge points out that this approach contains within it the acceptance of Darwalla as an over-anxious purchaser.
A per bird rate to derive value
Mr Woodbridge considers, at page 20, Mr Knight’s use of a per bird rate to value the land on the assumption that it is to be valued as if a poultry farm of a certain size was its best development potential. Mr Woodbridge expresses the view that raw land without any approvals for poultry farming ought not to be valued in this way. Such a method would only be accurate, in his view, once such an operation was actually established. He does not accept that there is any evidence that Darwalla has paid a premium over and above market value for land it has acquired in other areas or that it would do so for the subject land. He states, at the end of page 20 that:
“The most appropriate method of valuation is considered to be direct comparison of sales within the immediate area”.
I have already considered the effect of the qualification imposed by the last four words of that sentence.
Value if Lot 238 has subdivision potential
Mr Woodbridge has relied on expert town planning advice from Mr Denis Brown that Lot 238 would not be able to be subdivided into two allotments and has proceeded on that basis. In order to assist the Court, he has considered a scenario in which it can be divided north-south down the middle into two lots, each of 129.5 ha. His calculations appear on page 22 of his trial report and result in a value of $1,989,276, which he considers ought to be rounded to $2,000,000 “for practical real estate purposes”. It remains the case that he does not believe that such a subdivision would be a realistic prospect and he values the land at $1,875,000.
The applicants’ evidence of valuation
Mr Douglas Knight, registered valuer and certified practicing valuer of Herron Todd White, valued the land for the applicants. He concluded that Lot 238 should be valued at $2,000,000 and Lot 282 at $900,000 yielding a total value of $2,900,000. Mr Knight formed the opinion that the highest and best use of the land at the date of resumption was a “greenfield site” chicken broiler farm and that its value was the amount that the adjoining owner, the chicken farm business Darwalla would pay for it. This was an amount that included a premium over the value of the land if assessed as useable for a mixed lifestyle/rural homesite with some associated grazing and/or cultivation.[14] Mr Knight sets out his reasons for this.[15] Mr David Bray, development manager of Darwalla[16] disagreed with some of these assumptions such as:
[14]Exhibit 4 doc 25 page 18 para 1.
[15]Exhibit 4 doc 25 page 18 para 2(i) to (xii).
[16]Transcript (T) day 1 (1) page 68 (-68) line (L) 1.
“(viii) that a purchase of this land and expanding on to it would have only required a minimal increase in the number of employees”[17]
[17]T 1-76 L 46-51.
and
“(x) that the existing staff accommodation on Darwalla’s adjoining land would have allowed a saving to be made on this.”[18]
Mr Bray did not accept the cost of about $21,729[19] for providing town water to the subject land, a cost relied on by the applicants, and suggested a much higher figure.[20] Mr Knight, applying the method of examining other acquisitions by Darwalla, concluded that if it acquired the subject land an overall rate of $2 a bird could be supported[21] and that the land would be useable for raising 1,440,000 birds. This led him to a value of $2,880,000 on that basis. He adopted $2,900,000 overall. This brings into focus the difference of about $1 million to the value contended for on behalf of the respondent. Mr Knight also valued the land on the basis that it was simply suitable for use as mixed lifestyle/rural homesites with some associated grazing and/or cultivation. In doing this he had regard to the seven sales which Mr Woodbridge subsequently considered in his trial report. Mr Knight proceeded on the basis that Lot 238 could have been split into two equal blocks which would have each had a frontage of 800 metres to Millers Road in the south. He values Lot 238 at $1,567,500 and Lot 242 at $675,000. This valuation, made on the basis of those sales and the assumption about subdivision can be compared with Mr Woodbridge’s valuation when he considered the same sales and applied the same assumption regarding subdivision.
Mr Knight Mr Woodbridge
Lot 238 $1,567,500 $1,382,250
Lot 242 $ 675,000 $ 607,026
$2,242,500 $1,989,276Both valuers use the same estimated subdivision costs of $50,000 and the same allowance of 5% for risk. When applying those assumption, the gap between the valuers’ assessments is $253,224.
[18]T 1-76 L 52 to 1-77 L 3.
[19]T 1-75 L 12.
[20]T 1-76 L 1-10.
[21]Exhibit 4 doc 25 page 41 para 3.
Mr Knight also considered the value of the land if it were useable as a turf farm.[22] He considered that the availability of water was such that there was a significant level of risk involved. Because of that, he was of the view that a purchaser with this use in mind would not be prepared to pay more than would be paid for the land for a mixed lifestyle/rural home use with some associated grazing and cultivation.
[22]Exhibit 4 doc 25 pages 26 to 28.
Mr Bray, the Development Manager of the Darwalla group of companies[23] gave evidence that water allocations are a desirable characteristic of land required for chicken farms.[24] As the subject land did not have a water allocation on it, and because of a water moratorium it was very unlikely to gain a water allocation after 2006, the Darwalla group would no longer have been interested in purchasing the subject land.[25] This must be put alongside the evidence stated in Mr Knight’s report,[26] that he had discussions with “the owners” of Darwalla, in fact a director of Darwalla, Mr Albert Benfer. From this, Mr Knight learned that if the land had been put on the open market in 2007, Darwalla would have expressed an interest in the land. This evidence did not improve. Mr Benfer was not called nor was there any written statement made by him placed into evidence. The evidence in the form in which it was presented by the parties is not contradictory such that one version needs to be preferred over the other except in one respect. Mr Bray’s statement that the Darwalla group would not have been interested in purchasing the land after 2006 is contradicted by Mr Benfer. Due to his position as a director of the company, I would accept his evidence, where it conflicts with that of Mr Bray, were there a need to make that choice.
[23]Exhibit 11 para 1.
[24]Exhibit 11 para 26.
[25]Exhibit 11 para 27.
[26]Exhibit 4 doc 25 page 16, 7.5 para 2 and Exhibit 18 page 16, 7.5 para 2 which replaced the original version.
Mr Bray’s evidence about the importance of the availability of water and the costs associated with obtaining reticulated water on the land is not contradicted by what Mr Benfer is reported to have said.
The applicants do not place any reliance on the words attributed to Mr Benfer, though they are reported by their valuer. It was submitted that it would be for the Court to decide what the effect on the market price of the land would be due to the presence of Darwalla as a potential purchaser and whether or not Mr Benfer expressed a particular view was irrelevant for present purposes. It was also submitted that Mr Bray did not speak on behalf of the company and his views were also irrelevant. I do accept his evidence so far as it relates to his knowledge and experience within the company as distinct from the intentions of the company.
The choice of valuation method
In Tow against determination of Valuer-General - Redland Shire[27] the Land Appeal Court considering the valuation of land for the purposes of the Valuation of Land Act 1944 said:
“Courts of the highest authority have laid down that the best test of value is to be found in the sales of comparable properties, preferably unimproved, on the open market round about the relevant date of valuation and between prudent and willing, but not over-anxious parties.”[28]
This comment by the Land Appeal Court, made in the context of an appeal under the Valuation of Land Act 1944, states a broader truth. The use of comparable sales evidence is the most widely accepted method of ascertaining the market value of land.[29] In St Martins’ Centre Pty Ltd v Valuer-General (WA)[30] the Land Valuation Tribunal said:
“The direct comparison method of valuation … is applicable in cases where sales evidence of other properties directly comparable to the subject are available, or where minor adjustments can be made when applying the evidence to take into account points of difference between the evidence and the subject properties. The method rests on the principle that evidence of market price is the best indicator of value. If acceptable evidence exists, direct comparison of comparable sales of other land provides the most straightforward and reliable guide to market values.”[31]
[references omitted and emphasis added][27](1978) 5 QLCR 378.
[28](1978) 5 QLCR 378 at 381.
[29]Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151 at 156.
[30](2003) 30 SR (WA) 218. The Law Affecting Valuation of Land in Australia, 4th edn Alan A Hyam. The Federation Press, 2009 p 191.
[31](2003) 30 SR (WA) 218 at 224. Quoted in The Law Affecting Valuation of Land in Australia, 4th edn Alan A Hyam. The Federation Press, 2009 p 191.
Mr Knight applied, as his definition of highest and best use of the land the following expression:
“the use from among reasonably probable and legal alternative uses, found to be physically possible, appropriately justified and financially feasible which results in an optimum value for the asset valued.”[32] [emphasis added]
The evidence of Mr Bray was that expansion of Darwalla’s operations onto this land would not have resulted in lower overall costs.[33] This evidence must be considered together with reason (viii) in Mr Knight’s list of reasons[34] why, in his opinion, the highest and best use of the land was as a “greenfield site” broiler farm and its value was what Darawalla would pay in addition to the market value of the land assessed on the basis of its use as a mixed lifestyle/rural homesite with some associated grazing and/or cultivation.[35] Mr Bray did not accept, as I have previously noted, Mr Knight’s reason (x), that there would be a saving on staff accommodation.[36] In addition, Mr Bray did not accept the cost relied on by the applicant for providing reticulated water to the land, suggesting a much higher figure, “very close” to $250,000.[37] In view of his position in the company I prefer his evidence on these matters where it conflicts with the opinions of others. Because of the inadequate basis for one of the reasons relied upon by Mr Knight to which I have referred and to the large variance in relation to the assumed costs of obtaining water, I am not satisfied that the Court should accept Mr Knight’s conclusion in this matter. Financial feasibility is less established than Mr Knight believed it to be when he formed his opinion based, in part, on the aspects which have now been shown to be different from his appreciation of them. These matters are not such as could be considered of insufficient importance to invalidate Mr Knight’s opinion, based as it is on 12 stated reasons[38] because these aspects, where he is contradicted by Mr Bray, are matters which go to the financial feasibility of the proposed use of the land, an aspect particularly stated in the definition applied by Mr Knight. As Mr Knight states in his report:
“being able to secure a reliable adequate water supply is essential to the successful production of broiler chickens. As such, there is a clear inter-relationship between water supply and Highest and Best Use.”[39] [emphasis added]
[32]Exhibit 4 doc 25 p 1 at 1.2.
[33]T 1-76 L 45-55.
[34]Exhibit 4 doc 25 p.18, 8.1.
[35]Exhibit 4 doc 25 p.18, 8.1.
[36]T 1-76 L 56.
[37]See footnotes 19 and 20 supra.
[38]Exhibit 4 doc 25 p 18.
[39]Exhibit 4 doc 25 p 22 8.5 para 1.
Market value for mixed lifestyle/rural homesites with some associated grazing and/or cultivation
Mr Knight has valued the land on this rural use basis as well. Mr Woodbridge has valued the land supposing that its highest and best use is for “rural activity purposes”.[40] The expressions used in this regard by the valuers appear to be coterminous. Mr Woodbridge has used the method of adjusting sales, which method I do not accept, but has also used the sales relied upon by Mr Knight[41] to value the land at $1,989,276. He has, as previously noted, adopted $2,000,000 “for practical real estate purposes”[42] if Lot 238 can be subdivided into two equal sized allotments with a north/south dividing line and $1,875,000 if, as he accepts, it cannot be subdivided.
[40]Exhibit 4 doc 30 p 3 Report Summary para 2 and p 7 last line.
[41]Exhibit 4 doc 30 p 17 and 18.
[42]Exhibit 4 doc 30 p 22.
Mr Woodbridge used his method of factoring sales as the primary source of sales evidence to arrive at the values in his report. This is so in the case of whether or not Lot 238 has a subdivision potential. Although he also relied heavily on six of the seven sales used by Mr Knight, Mr Woodbridge excluded the sale of Lot 43 Greenswamp East Road, Moreton Vale from those on which he placed heavy reliance. The use by Mr Woodbridge of his method of factoring sales in the whole of his report has the effect of contaminating all of it with the unreliable basis used, notwithstanding that he has also had recourse to the sales used by Mr Knight. Because of this, I am unable to rely upon Mr Woodbridge’s valuation of the land on the basis of the rural use whether or not there is a potential for subdivision of Lot 238.
Mr Knight’s valuation is not affected by the error in Mr Woodbridge’s approach. The result is that Mr Knight’s valuation on the basis of this rural use is not contradicted by any potentially useful valuation evidence. Mr Knight has concluded that if the highest and best use of the land was for a turf farm, it was not able to be shown that a purchaser would have been prepared to pay above the value that the land would have for the mixed lifestyle/rural homesite use.[43]
[43]Exhibit 4 doc 25 p 28 at 10.3.
The only acceptable evidence of value on the basis of rural use with a potential for subdivision of Lot 238 into two allotments comes from Mr Knight. He has arrived at a value of $2,250,000. The existence or otherwise of this potential for subdivision is a matter to be determined on the town planning evidence. A reasonable purchaser would not rely simply on the valuer’s view of the town planning position but would themselves consider the opinions of the relevant experts.
Town planning considerations
Mr Woodbridge, in his report[44] has accepted the opinion of the town planner Mr Denis Brown of Planning Australia[45] which is to the effect that Lot 238 would not receive approval for a two lot subdivision. Mr Brown has in turn relied on the opinion of Mr Bruce Napier who has prepared an agricultural suitability assessment of the soil.[46] Mr Brown notes that Mr Napier in his report concludes that most of Lot 238 is classified as Good Quality Agricultural Land (GQAL). In respect of such land there are planning requirements. The particular requirement to which Mr Brown directs attention is described as P41 of the Reconfiguration of a Lot Code and is in the following form:
“new lots proposed to be located on or adjacent to good quality agricultural land do not impact on the ongoing operational efficiency of that agricultural land.”[47]
[44]Exhibit 4 Tab 30 p 22.
[45]Exhibit 4 Tab 31.
[46]Exhibit 4 Tab 32.
[47]Exhibit 4 Tab 31 (12).
Mr Brown, taking from Mr Napier’s report that most of Lot 238 is classified as GQAL[48] goes on to conclude that:
“(14)A reconfiguration of a lot whereby the land was divided into 2 lots is likely to result in a reduced operational efficiency of the use of the land, and, it my opinion, would conflict with P41 of the Code.”[49]
[48]Exhibit 4 Tab 31 (13).
[49]Exhibit 4 Tab 31 (14).
The development would be Code assessable[50] and the purpose of the Code is expressed to include ensuring that reconfiguration in the Shire “contributes to the efficient use of land and infrastructure”.[51] In Mr Brown’s opinion, reconfiguring Lot 238 would be in conflict with the Code and sufficient planning grounds would need to exist so that reconfiguration was able to be shown to be in the public interest.[52] He was of the view that there would not be such grounds.[53]
[50]Exhibit 4 Tab 31 (8).
[51]Exhibit 4 Tab 31 (15).
[52]Exhibit 4 Tab 31 (16).
[53]Exhibit 4 Tab 31 (17).
Mr Brown does not explain why dividing Lot 238 “is likely to result in a reduced operational efficiency of the use of the land”, which is central to his opinion that such a step has a planning obstacle. He has not offered any consideration of what potential land use might be adversely affected. This evidence of a conclusion that reduced operational efficiency of the land is “likely”, in the absence of any explanation of why that would be so, is evidence to which very little weight ought to be given. A prospective purchaser would not be concerned about the proposed planning obstacle to which Mr Brown has referred.
In relation to this aspect, Mr Higginson, the town planning expert called for the applicants, gave the following evidence-in-chief:
“And could I direct your attention, please, to paragraph 12 of Mr Brown’s report where he states, by reference to a performance criteria, P41 of the code, the new lots proposed to be located on or adjacent good quality land do not impact on the – he records what the code states, I should say – that they do not impact on the ongoing operational efficiency of that agricultural land. He then goes on to record at 13 that Mr Napier concludes that most of lot 238 is classified as good quality agricultural land, and then expresses the opinion at paragraph 16 that lot 238 would not satisfy the purpose of the code and would represent a conflict with the code. Now could I direct your attention to the wording “operational efficiency of the use of this land.” You’ve clearly read Mr Brown’s report?---I have.
Do you have an opinion as to the meaning of “operational efficiency of the use of this land” in the context of the size and zoning and historical use of the subject property?---Well, to put it in a nutshell, I just disagree totally with Mr Brown that the operational efficiency of the agricultural land is impacted to such an extent that a subdivision into two lots, which meets the minimum lot size, should be refuse. I just don’t accept that notion - - -
And your reasons?--- - - - particularly having regard for the wording of the state planning policy regarding good quality agricultural land.
And your reasons, could you expand upon those in the context of what your understanding is of the wording in the code, “operational efficiency of the agricultural land” in the context of the subject property?---It – in my mind, it means that the land can – well, operational efficiency means it can be farmed appropriately. Again, having regard to the generalities of the area, 100 hectares seems to be more than adequate for farming purposes, looking at the average lot sizes in the valley for agricultural activities.
And is there a record in any document of – that records the average farm size that you had regard to?--- The only one that I’m aware of is in Powell’s report, 2002. Reference was made to that earlier today where Powell – I think it’s page 18 – Powell refers to average agricultural farm sizes of 25 to 40 hectares which is significantly less than the 100 hectares that would result here from the subdivision of the land.”[54]
[54]T 6-69 L 44 – T 6 – 70 L 31.
Mr Higginson has provided his understanding of “operational efficiency”, namely that the land can be farmed appropriately. This is helpful when he relates it to the average size of farms in the area as 25 to 40 hectares. He provides a basis for his disagreement with Mr Brown. Mr Higginson disagrees “totally” that the planning obstacle described by Mr Brown exists at all. The Court accepts the evidence of Mr Higginson in this regard as he has provided a basis for his opinion and accords it much greater weight than that of Mr Brown for the reasons that have been given. A reasonable prospective purchaser would be satisfied that good prospects existed to obtain the reconfiguration of Lot 238 into, essentially, two equally sized allotments. The extent of the GQAL, some 289 ha in the opinion of Mr Napier and 247 ha in the opinion of the opposing expert Dr Matthew, does not affect this conclusion.
Mr Knight’s sales
Mr Knight has considered the evidence of seven sales in order to arrive at a valuation for the subject land as mixed lifestyle/rural homesites with some associated grazing and/or cultivation. The sales are of mixed cultivation, grazing lifestyle lands. These sales are:
Sale 1 Lot 224 Rocky Gully Road, Coominya, with an area of 64.75 ha sold on 17 August 2007 for $570,000. This land is 15 km to the north-east of the subject and has no structures. It comprises open to lightly shaded forest county with about 20 ha suitable for cultivation. It is superior country overall but smaller than the subject.
Sale 2 Lot 92 Watsons Road, Mt Tarampa, with an area of 63.69 ha, sold on 10 April 2007 for $700,000. This land is 15 km to the east of the subject and has no structures. It is cleared forest country and has a 30 megalitre catchment dam. An area of 37.4 ha is leasehold reserve fronting Atkinson Dam. It is superior overall to the subject but it is smaller.
Sale3 4 Watsons Road, Mt Tarampa, has an area of 58.06 ha and sold on 22 May 2007 for $500,000. It is 18 km east of the subject, has no structures and is comprised of cleared forest country. It has a 65 megalitre dam. It was assessed as being superior country overall but is smaller than the subject.
Sale 4 Lot 43 Greenswamp East Road, Morton Vale, has an area of 82.61 ha. It sold on 1 July 2006 for $505,000. Located 7 km east of the subject, it has a good shed and a set of cattle yards. Comprising mostly tea tree country varying from open to shaded grazing, it is susceptible to some localised flooding so it is only suitable for grazing. Allowing for the structures, the sale was applied at $475,000. The country was assessed as superior to the subject overall and the age of the sale was considered.
Sale 5 “Hallenview” 36 Old Station Road, Mount Hallen has an area of 206.38 ha. It sold on 18 May 2007 for $970,000. It is 20 km to the north of the subject and improved with a three bedroom house, cattle yards and a machinery shed which together were allowed for in the amount of $150,000. The land is open to shaded grazing country of brown to red basaltic soils. Water and fencing were described as poor and the country as overall similar to slightly superior to the subject.
Sale 6 “Logan Park”, Brisbane Valley Highway, Wivenhoe Hill contains an area of 366.97 ha. It sold on 18 January 2008 for $2,650,000. Located 20 km north-east of the subject it contains only a basic set of yards. It comprises open to lightly shaded undulating forest country with some steeper parts moderately timbered. Water is available from the land’s significant access to Wivenhoe Dam and other large catchments. It is superior overall to the subject land.
Sale 7 47 Glen Esk Road, Glen Esk comprises an area of 113.12 ha and sold on 11 September 2007 for $425,000. The land is 25 km north of the subject and has no structures. It has about 40 ha of open to lightly shaded country with the balance being heavily timbered, very steep mountain country. The better country was of superior quality to both allotments of the subject land.
The result of the valuation evidence
It is unnecessary to consider at length the sales relied on by Mr Knight as the opposing valuation report cannot be relied upon. From the seven sales set out on pages 23 and 24 of his report[55] Mr Knight concludes that the land has a total value of $2,250,000 as at 14 December 2007 for the rural uses considered. This is the evidence upon which the Court can act and on this evidence the value is so determined. As Mr Knight has proceeded in this way, comparing the resumed land to sales rather than considering the value of certain sized areas of Good Quality Agricultural Land, and as Mr Woodbridge’s valuation is not of assistance, it is neither helpful nor relevant for present purposes to examine differences of opinion between witnesses regarding the extent of such land in the resumed area.
[55]Exhibit 4 doc 25 p 23 and 24.
Compensation
The value of the land taken is assessed at $2,250,000. An amount of $1,875,000 has been paid already as an advance and will be deducted from the compensation payable.
When was this claim made
The then solicitors for the applicants, Welsh and Welsh, by their letter dated 13 October 2010, set out their clients’ claim for compensation. On 26 November 2012 the applicants’ present solicitors filed a claim for compensation. It was not expressed to be an amendment of the previous claim. It is the basis upon which the case then proceeded. It has not been submitted on behalf of the respondent that the claimants were not entitled to proceed in this way. It has been submitted that they are not entitled to receive any amounts that could be characterised as “double recovery”.
The disturbance items and amounts
The claim for disturbance is made in the following terms:
(a) Solicitors fees $73,062.10
(b) Counsel fees $42,724.00
(c) Valuation fees $42,572.24
(d) Town Planner fees $20,509.50
(e) Agricultural Scientist;
Soil and Water
(Gilbert and Sutherland) $10,227.25
(f) Traffic Engineering
(The Harrison Group) $550.00
$189,645.09The respondent accepts the reasonableness of the traffic engineering costs only. Other costs will have to be considered separately. As the Land Appeal Court said in Heavey Lex No. 64 Pty Ltd v Chief Executive, Department of Transport:[56]
“In our view a claimant can recover for work of a nature and within the scope of that which a reasonable person in the position of the claimant would have done or caused to be done. The fees and charges for the work must also be reasonable.”
[56](1999-2001) 22 QLCR 177, 191.
This Court must show a basis of reasoning sufficient to indicate why one sum is selected rather than another.[57]
[57](1991-2001) 22 QLCR 177, 192-193.
Mr Nicholas Purcell, a solicitor, was called on behalf of the applicants in relation to the matter of legal costs.[58] His affidavit is Exhibit 33. In cross-examination, Mr Purcell agreed that he would not regard a claim for compensation as equivalent to preparing for a trial.[59]
[58]T 9-3.
[59]T 9-4 L 43-45.
What the respondent has offered
The respondent has made an open offer of $60,000 for disturbance items. Working from the Disturbance Schedule in Mr Purcell’s affidavit, which is page 1 of Exhibit 1 to that affidavit, the respondent has put its offer into the form of a table with an indicative only apportionment of the overall sum. The respondent accepts that the $600 per hour for counsel’s fees claimed as excluding GST would be reasonable if GST is included. The table is in the following form:
Category Total Rate Hours Solicitors $20,000.00 $500.00/hour 40 Counsel $8,000.00 $600.00/hour 13.3 Valuer $16,000.00 $2,500.00/day 6.4 days Traffic Consultant $500.00 (accepted by the Respondent as reasonable) - - Town Planner $10,000.00 $160.00/hour 62.5 hours Soil Testers $5,500.00 $380.00 14.47 hours $60,000.00
The solicitor’s time has been charged at $450 per hour plus GST,[60] compared to the Supreme Court scale rate, which was suggested to him to be $270 per hour. Mr Purcell was uncertain of what that rate was.[61] He was then asked a series of three questions, the outcome of which was that he agreed that, when instructed by his present clients, he knew well the leading cases and settled principles of compulsory acquisition. He agreed that he would choose a counsel with similar or greater experience than he had. He disagreed that he would have been able to do most or all of the work necessary to formulate a claim without the assistance of counsel. Mr Purcell described the claim as substantial and not straightforward. He described the town planning advice received as “relatively unique”.[62] In his view, whilst a lot of money was spent it was “a conservative spend” in the circumstances.[63]
[60]T 9-8 L 15.
[61]T 9-8 L 15-25.
[62]T 9-10 L 9.
[63]T 9-10 L 46-47.
All the other costs
Mr Purcell was questioned about the number of conferences he had with counsel, being 10 or 11,[64] and it was suggested to him that this was excessive, exposing his client to unnecessary cost. Mr Purcell did not agree. In relation to his site inspections, he gave evidence that his second visit with counsel and experts was useful and that costs could not have been properly saved here.[65] Mr Purcell was questioned in relation to drafting and settling letters of instruction to three experts, which resulted in charges of just over $3,000, including counsel’s fees of $1,012.[66] He did not agree with the suggestion that these costs were excessive.[67] Asked if every single minute charged “and all of the other costs” were necessarily and properly incurred in order to prepare the claim for compensation, he replied that this was so and that the costs were conservative, given the issues involved.[68] Mr Purcell explained that the spending was kept to a minimum at the stage of formulating the claim[69] and distinguished the approximately $40,000 to $50,000 spent by his clients on odour modelling “at the behest of the respondent’s town planner, merely to find out now that is not an issue”.[70]
[64]T 9-13 L 28.
[65]T 9-13 L 33 – T 9-14 L 8.
[66]T 9-14 L 10-26.
[67]T 9-14 L 26-27.
[68]T 9-15 L 5-10.
[69]T9-11 L9 to 9-12 L3.
[70]T 9-11 L 29-31.
The respondent asserts that Mr Purcell should not be able to include the cost of reading the file of the previous solicitor, which amounted to $7,899.76. It does not appear that it would have been prudent to start his task with his eyes closed to the existing situation, which might potentially have had damaging consequences to the proper discharge of his own responsibilities. Such a saving would have been a false economy. The respondent’s suggestion that there was wasteful experimentation with possible highest and best uses other than that finally adopted is not assisted by any evidence of what savings could have been made by a different approach being adopted. The same situation exists in regard to the fees paid for town planning consultants.
Conclusion on costs of preparing the claim
The legal costs, valuation and other professional costs incurred by the applicant in relation to preparing and filing the claim for compensation have been examined and questioned by the respondent. Mr Purcell, the solicitor has been cross-examined and has supported the claims made. The respondent has not produced any evidence of a competing level of costs in any of the categories examined. The indicative table of how such costs could potentially be set at $60,000 is not supported by any evidence upon which the Court could rely in coming to such a conclusion. It would not be open to the Court to reject Mr Purcell’s evidence in favour of a conclusion which is simply suggested but not supported by evidence such as might have been given by a cost assessor. There is no reason not to accept Mr Purcell’s uncontradicted sworn evidence which he gave as a professional solicitor. The claim for disturbance in the amount of $189,645.09 must be allowed.
The discretion to award interest
The respondent submits that the passage of time without effective action by the applicants to progress their claim ought to result in a reduction of the period for which interest is allowed. It is pointed out that the present matter was referred to the Court by the solicitor for the respondent. It is equally the case that the respondent’s solicitor could have chosen to do so earlier. The Court is aware that the applicants twice changed solicitors but not informed by evidence of all of the circumstances surrounding that action. In the present situation the Court is not able to be satisfied that the applicants have been conducting themselves in relation to this matter in such a way that there should be an adverse affect on any award of interest, the purpose of which is to protect the compensation due to them from being eroded.
Interest
Interest ought to be allowed so as to preserve the value of the compensation which the Court has determined. Interest is allowed at the rates set out below on and from the date of resumption on 14 October 2007 in the case of the land and on and from the date of payment of the disturbance items to and including the day immediately preceding the date upon which the respondent’s payment is made.
Interest rates
The applicable interest rates are those published from time to time on the website of the Land Court. At present, those interest rates are:
Year Rate
2007 6%
2008 5.75%
2009 5%
2010 5.5%
2011 5%
2012 4%
2013 3.75%
Disturbance
Costs attributable to disturbance are assessed in the sum of $189,645.09.
Costs
Any application for costs is to be filed and served within 14 business days of the publication of these reasons and any reply is to be filed and served within 14 business days of the application.
Orders
1. The value of the land taken is assessed in the amount of Two Million, Two Hundred and Fifty Thousand Dollars ($2,250,000).
2. Costs attributable to disturbance are assessed in the amount of One Hundred and Eighty Nine Thousand, Six Hundred and Forty-five Dollars and Nine cents ($189,645.09)
3. Interest is payable to the applicants on the amount of compensation assessed, that is the sum of the amounts in Orders 1 and 2, at the rates applicable for the relevant years and as published on the Land Court website. At present, that is:
20076%
20085.75%
20095%
20105.5%
20115%
20124%
20133.75%
4.Interest is payable on and from the date of resumption in the case of the land and on and from the date of payment of the disturbance items to and including the day immediately preceding the date on which the respondent’s payment of the sum due is paid. Interest shall not be payable in respect of any amount of compensation advanced under s 23 of the Acquisition of Land Act 1967.
5.Any application for costs is to be filed and served within 14 business days of the publication of these reasons and any reply is to be filed and served within 14 business days of the application.
WA ISDALE
MEMBER OF THE LAND COURT
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