Jenkins v Chief Executive, Department of Transport
[1996] QLC 153
•22 November 1996
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BRISBANE
22 November 1996
Re: Claim for Compensation
Resumption of Land for Road Purposes
Acquisition of Land Act 1967
(A95-92).
Colin W Jenkins
v.
Chief Executive, Department of Transport
J U D G M E N T
By Proclamation dated 31 March 1994, published in the Queensland Government Gazette of the same date, the Chief Executive, Department of Transport, took for road purposes an area of 1,412 square metres from land described as Lot 4 on Registered Plan 110552, Parish of Nundah, County of Stanley, ("the subject land").
Prior to resumption, the subject land had an area of 1.265 hectares. It is situated on the northern side of Albany Creek Road, just to the west of the Pinnaroo Lawn Cemetery and opposite the Albany Creek Crematorium, about 15 kms by road north of the City Centre. The locality has been described as an established and prestigious rural residential area.
The subject land has water, electricity and telephone services, but sewerage is not available. District shopping and service facilities are available at Aspley, about 3 kms to the east, and local shopping at Albany Creek, about 2 kms to the west. There are State primary and high schools at both centres.
The land was zoned "Rural Residential" under the City of Brisbane Town Plan both before and after resumption, where the minimum allotment size is one (1) hectare. Situated on the subject land is a high-set timber dwelling which was built in 1968. It has concrete stumps and a brick base with a concrete tile roof. The enclosed area is about 95 square metres with balconies on three sides. There is accommodation for two cars beneath the house.
The land was resumed for the purposes of upgrading Albany Creek Road to a four-lane road divided by a median strip. The road reserve is wide enough to accommodate six lanes, but that is not envisaged in the near future. The two east-bound lanes, as well as kerbing, channelling and footpath, have been constructed on the resumed land.
The resumption took a strip of land approximately 15 metres wide along the Albany Creek Road frontage. The loss of 1,412 square metres has reduced the area of the subject land from 1.265 hectares to 1.123 hectares. It has also resulted in the setback of the dwelling from the road being reduced from about 29 metres to about 14 metres. The construction of the east-bound lanes on the resumed land has deprived the subject land of direct access to and from the west-bound lanes. To proceed in a westerly direction, a vehicle must exit the subject land by turning left and proceeding to the turning slot constructed at the Bronson Street intersection.
Mr Jenkins lodged a claim for compensation dated 17 October 1994, for $35,500, comprising land $35,000 and valuation fees $500. During the hearing Mr Jenkins was granted leave to amend his claim to $17,500.
Mr Jenkins, who is a civil engineer and local government engineer, appeared and gave evidence. He purchased the subject land in 1971 for $18,000. He lived in the house on the subject land until 1976, when he moved to Maclean in northern New South Wales. The subject land has been rented since then. Mr Jenkins was aware that because of its shape it would be relatively easy to develop by putting a cul-de-sac down the middle of the block and subdividing to it. He said that he bought the property with that long-term potential in mind.
Although he had no intention of applying for rezoning for perhaps another five years, Mr Jenkins felt that an earlier application would be successful, provided that the subject land could be sewered. He felt the Council requirements could be satisfied by a small package treatment plant at a cost of between $10,000 and $15,000, with disposal of treated water to the cemetery or the crematorium. Alternatively, he thought the connection could be made to existing sewerage mains, perhaps in conjunction with the development of neighbouring lands.
The Valuation Evidence for the Claimant.
Two registered valuers gave evidence for the claimant. Mr RB Perkins, who was subpoenaed, had made an assessment of compensation in respect of the resumption when his firm was engaged by the Department of Transport to carry out valuations for compensation purposes of properties along Albany Creek Road. Mr Perkins assessed compensation at $48,000 on a before and after approach, valuing the subject land before resumption as follows:
Land as developed $210,000
Added value of dwelling $ 40,000
Allotment improvements $ 5,000
Value of property prior to resumption $255,000
His valuation after resumption was:
Land as developed $165,000
Added value of dwelling $ 37,000
Allotment improvements $ 5,000
Value of property after resumption $207,000
Compensation being $48,000, the difference between the two valuations.
Mr Perkins considered the property to be located in a prestigious rural residential area where the larger rural residential lots were principally developed with good quality homes. He was of the opinion that the impact of the resumption consisted of two elements, (i) the loss of 1412 square metres of land and (ii) the diminution in value of the property because the dwelling was located closer to the road.
As a basis for his before and after valuations, Mr Perkins referred to five sales of vacant land situated in Bridgeman Road, Graham Road and Beams Road, in addition to four improved sales in Albany Creek Road. Apart from analysing each of the sales to a rate per square metre, he provided no basis for his comparisons with the subject land.
In the course of his oral evidence Mr Perkins conceded that although the land is smaller after resumption, the resumption did not change the basic shape or topography of the land. He also conceded that the presence of the median strip was not taken into account in assessing the impact of the road. He said that his "before" valuation of $210,000 was made on the basis of direct comparison with his sales. He denied that it was made on a per square metre basis.
Mr Perkins' "after" valuation was also made by direct comparison with sales, taking into account the fact that the land will be fronting what will in the future become a six-lane road or highway. That seemed to be the principal reason for Mr Perkins' diminution in value in the after situation, although he was uncertain of the intended timing of the construction of the six-lane highway. He agreed that the value of rural residential properties does not vary on a square metre basis, but is affected more by other attributes such as situation, topography, aspect and access.
Although he agreed that the house on the subject land was out of character with the prestigious properties surrounding it, Mr Perkins thought that it added value to the land. It was, he said, quite a substantial house, even though he would not normally expect to see a $40,000 house on land worth $210,000, and was "under use" of the land.
Mr Perkins felt that after resumption it was hard to categorise any property as a prestige property when it was situated on what was to become a six-lane highway. He admitted that he had no directly comparable sales, particularly for the "after" valuation. In relation to his "before" valuation, Mr Perkins conceded that the price a prudent purchaser would pay for a rural residential property would be affected by the busyness of Albany Creek Road, but he did not think that it would be by a discounting factor of 20 percent.
Mr Perkins agreed that, leaving aside all other considerations, a prudent purchaser would pay only a nominal difference for a rural residential property with an area of 1.265 hectares and one which was 1412 square metres smaller.
Registered valuer, Mr PE Sandhoff, also gave evidence for the claimant, but adopted a different approach. Mr Sandhoff assessed the compensation payable at $28,750 as follows:
Loss of land $ 28,250
Valuation fees $ 500
Total $ 28,750
In his valuation report, Mr Sandhoff commented that while the resumed land is "not particularly significant in relation to a strictly rural residential lot, in which the dwelling is considered to underdevelop the site ... the site is considered to have future potential, perhaps somewhat distant, for either residential subdivision or town house usage".
Mr Sandhoff envisaged that the subject land could be further subdivided by construction of a cul-de-sac through the middle, with 32 perch allotments on either side. In the course of his oral evidence, he said that the resumption of the 1412 square metre strip could represent the loss of two regular allotments or town house sites.
Mr Sandhoff was aware that the problem of sewerage had to be overcome before the Council would grant approval for development of the subject land . He referred to the rapid development of the Aspley and Bridgeman Downs areas and the proximity of sewerage within two kilometres of the subject land. He reasoned that as the subject land had potential for subdivision, then every square metre was important. Although he agreed that the highest and best use of the land was as rural residential, for valuation purposes its potential for future development must also be considered.
Mr Sandhoff conceded that the house on the subject land added no value to the property. He made no allowance for severance or injurious affection, his assessment of $28,250 was for loss of land only.
Mr Sandhoff seemed to reason that a prudent purchaser would pay no more than a rural residential value for the subject land, but would be aware of its future potential for development at some indeterminate time. Therefore, each square metre had equal value and compensation should be paid on that basis. However, he conceded that if he was wrong about the future potential, the relatively small reduction in the area of the site would have less impact and he would consider that compensation would be nominal.
Mr Sandhoff assessed the value of the subject land before resumption to be $250,000, or approximately $20 per square metre. He therefore applied $20 per square metre to the resumed area of 1412 square metres to arrive at his estimate of compensation payable at $28,250.
As the basis for his valuation, Mr Sandhoff said that he relied on sales of rural residential properties in the area. His report contained the details of four sales of properties with areas of 1 hectare to 1.025 hectares, situated in Bridgeman Road, Priestley Road and Graham Road, which sold between March 1993 and February 1994, for prices ranging from $230,000 to $265,000. However, he stressed that they were only a cross-section of the large number of sales to which he referred.
While Mr Sandhoff conceded that all sales were in quieter locations than Albany Creek Road prior to resumption, he did not agree they were superior to the subject land. He said there was no evidence to indicate that a purchaser would pay less for a rural residential property on Albany Creek Road than he would pay for one situated in a quieter location.
The Evidence for the Respondent
Evidence for the respondent was given by Mr DE Brown, a town planning consultant, and by registered valuer, Mr MJ Slater.
In his report on the town planning considerations on the likely potential of the subject land for further subdivision, Mr Brown addressed the Brisbane City Council Town Plan generally, including the current Strategic Plan, the Council's planning policies and the zoning, in addition to the proposed amendments to the Town Plan. He made enquiries of the Brisbane City Council Department of Water Supply and Sewerage in relation to the possibility of sewering the subject land.
As a result of these enquiries, Mr Brown concluded that before it would approve subdivision of the subject land, the Brisbane City Council would have to change its strategic planning intentions for the area. In addition, it would have to make available sewerage connection from the subject land to an existing sewerage system by providing for sewerage in that catchment. That, he said, would require a substantial change to the Council's priorities and intentions. Mr Brown was of the opinion that it was unlikely that the planning direction of the Council would change in the next 15 years. Under cross examination, he agreed that if the subject land was combined with the two adjoining lots, Lot 3 and Lot 5, the prospects of a successful application would be increased, but only marginally.
Mr Slater assessed the market value of the subject land prior to resumption at $185,000. He considered that loss of land was the only real effect of the resumption. Mr Slater had not been able to ascertain when the road would become six-lanes, but he said that indications were that it would not be within the next ten years, and more like 20 years.
Mr Slater thought that convenient access to the west-bound lanes of Albany Creek Road had been marginally diminished by the construction of the median strip. However, he thought that safety had been improved with the construction of the turning slots at Bronson Street and Tiverton Place. He said that before resumption 13,000 to 15,000 vehicles per day used Albany Creek Road, with increased traffic volume since resumption and an annual growth of 2 percent.
While there was likely to have been a marginal increase in traffic noise at the dwelling, Mr Slater did not consider the house to add any value to the land, because it underdeveloped the site. He thought that the house was of basic size and materials, and poorly positioned relative to the road, both before and after the resumption.
In Mr Slater's opinion the highest and best use of the land was rural residential, redeveloped with a dwelling more in keeping with the quality of the neighbourhood and located towards the northern boundary. He considered that the subject land had no potential for any higher and better use in the immediate future.
Mr Slater rejected any suggestion that the land resumed should be valued on a pro rata square metre basis. He stated that the available evidence suggested that there was no discernible difference in site value between a 1.265 hectare parcel and a 1.123 hectare parcel. He referred to the sales of two adjoining parcels of land situated on Bridgeman Road as examples of how land quality, rather than land area, affects the price.
Sale 4, of 1.329 hectares, sold in July 1992 for $225,000, while the smaller parcel Sale 5, of 1.025 hectares, sold in March 1993 for $250,000, during a period in which the three valuers agree there was no movement in the market for rural residential land. Mr Slater's description of Sale 4 stated that the front of the block was cut by a gully.
Mr Slater went on to state that generally site values are not sensitive to area differences to any extent, being more sensitive to location, land form and aspect. He said that in his experience, all other things being equal, when the difference in area was sufficient to reflect a difference in value, the site value per square metre diminishes with any increase in area. The rate per square metre that could be applied to the additional land also diminishes. He included an annexure showing a graphical representation purporting to demonstrate that proposition.
Even though Mr Slater considered that the market value of the subject land was unaffected by the resumption, he thought it appropriate to allow a "nominal" amount to "recognise that land had been taken". He said that in order to achieve some consistency in a series of resumptions, he had applied 30 percent of the pro rata per hectare value of what he considered to be the market value of the subject land prior to resumption.
His assessment of compensation was:
1412m2 x (30% of $15 per m2) = $ 6,354
Adopt $6,500.
As a basis for his valuation of $185,000 for the subject land prior to resumption, Mr Slater relied upon eleven sales situated in Bronson Street, Bridgeman Road and Priestley Road. Those sales had areas between 1 hectare and 1.329 hectares, except for the sale of .4351 hectares of land in Bronson Street for $140,000 in January 1993. The remaining sales were for prices from $150,000 to $250,000, between September 1992 and October 1994.
Like the other valuers, Mr Slater could find no sales of comparable vacant land on Albany Creek Road. The sales were on roads which did not carry the same volume of traffic as Albany Creek Road prior to the resumption.
Mr Slater said that in his experience, rural residential properties that were situated on busy roads sold for prices which were generally 20 percent less than those situated in quieter locations. However, he conceded that he could not demonstrate that proposition by reference to sales evidence.
The Approach of the Respective Valuers
The three valuers approached the assessment of compensation in different ways. Mr Perkins was the only one to assess compensation by use of the before and after method of valuation. However, it was apparent from his evidence that the $48,000 difference between his "before" and "after" valuations was based on the fact that the subject land would be fronting what would become a six-lane highway. Mr Perkins virtually conceded that if the construction of the six lanes was not to be in the foreseeable future, then his valuation needed adjustment.
Although Mr Perkins thought that the house on the subject land added value to the property, the evidence of the other two valuers is more convincing. They considered that the house was totally out of keeping with the character of the area and therefore added no value. Mr Perkins appeared to have difficulty in recalling his reasoning for making his before and after valuations and I found his evidence to be of little assistance.
Mr Sandhoff arrived at his estimate of compensation payable on the basis that the subject land had potential for development into residential allotments. He conceded that the highest and best use of the subject land was as a rural residential site, but he felt that there was also an element of potential that a prudent purchaser would not ignore. Although he conceded that in normal circumstances the land resumed from a rural residential property should not be valued on a rate per square metre, he felt justified in applying a rate of $20 per square metre to the resumed area in this instance, because of its potential for development.
Mr Sandhoff readily conceded that if he was wrong about the potential of the land, then the loss of such a relatively small area would have no great impact upon the value of the subject land.
Whether or not the subject land had potential for further development depends on whether the Council would approve the rezoning of the land from "Rural Residential". The evidence clearly indicates that this would depend upon the Council changing its strategic intent for the area and for suitable arrangements to be made for sewering the subject land.
Despite the optimism displayed by Mr Jenkins, the evidence of Mr Brown was to the effect that any rezoning of the subject land is most unlikely, at least within the next 15 years. Mr Brown, an experienced town planner who once worked for the Brisbane City Council, had investigated all the relevant planning documents and made enquiries of the relevant departments of the Brisbane City Council. This can be contrasted with the lack of enquiry made by Mr Jenkins and by Mr Sandhoff, whose opinions lacked the sound foundation of those of Mr Brown.
I accept Mr Brown's evidence.
Therefore, since the valuation made by Mr Sandhoff was based upon the potential of the subject land for further development, I cannot accept that valuation.
That leaves the evidence of Mr Slater.
Mr Slater valued the subject land prior to resumption at $185,000. He did so by referring to the sales of eleven properties in the vicinity, all of which were situated on quieter roads than Albany Creek Road prior to the resumption. From his experience of rural residential properties throughout Brisbane he concluded that those that are situated on busy roads sell at some 20 percent less than similar properties situated on quieter roads.
Mr Slater did not use the before and after method of valuation. He reasoned that the subject land was situated on a busy arterial road prior to the resumption. The east-bound lanes only were constructed on the resumed land. The house added no value to the land. Mr Slater considered that there was no severance or injurious affection in this case. Any compensation would be for loss of land only.
Here he was faced with a dilemma. He considered that the sales evidence did not indicate any discernible difference for the loss of such a small area from the subject land. However, because he was assessing the compensation payable for a series of resumptions along Albany Creek Road, he had adopted a percentage of the pro rata per square metre value of the property prior to resumption. He was well aware that the value of rural residential properties does not vary on a per square metre basis, but he felt that the adoption of such an approach was necessary to achieve some consistency in the valuations for the land resumed from the various properties.
Using his percentage pro rata formula, Mr Slater valued the resumed area of the subject land at 30 percent of $15 per square metre, the rate per square metre of the value of $185,000 for the 1.265 hectares of the subject land prior to resumption. He arrived at a rounded figure of $6,500.
Mr Flanagan of counsel, who appeared for the respondent, referred me to the decision of the Land Appeal Court in Brisbane City Council v. RD and DE Lansbury (1977) 4 QLCR 502. There the Land Appeal Court considered the compensation payable in respect of land resumed from a rural residential property. In that case the valuer for the claimants had assessed compensation on a piecemeal approach, with separate assessments for loss of land, severance and injurious affection. In rejecting the piecemeal approach, the Land Appeal Court said at p.509
"... We are not prepared to accept the value of rural homesites varies on a per square metre basis or that such homesites are purchased on this basis. Contour, size, situation, access and aspect are factors influencing the mind of the prudent purchaser. It is unrealistic, in our opinion, to assign an average per square metre value to a rural homesite, and to assign that same per square metre value to a part which has been compulsorily excised from the central portion of the original property. "
That principle has been well accepted and applied in many cases. Indeed, all three valuers were aware of it. Mr Sandhoff had adopted a per square metre valuation solely on the basis that the land had potential for future development. However, in view of my finding in respect of that potential, I accept Mr Slater's opinion that any potential was too remote to be reflected in the valuation.
Although Mr Slater was well aware of the principle in Landsbury's case, he adopted what amounts to a variation of the per square metre method to arrive at a valuation of the resumed area of the subject land. Indeed, he seemed to be uncomfortable in adopting that method, but said that he had done so in order to achieve some uniformity in the valuations of a series of resumed properties.
While I can sympathise with the reasoning adopted by Mr Slater, there is no legal foundation for the approach.
The provisions of s.20 of the Acquisition of Land Act 1967 clearly require that in assessing compensation, regard is to be had to the value of the land taken and the damage caused by severance and injurious affection, offset by any enhancement in the value of the claimant's remaining land by the carrying out of the works or the purpose for which the land was taken.
In addition to the principle quoted above, Lansbury's case is authority for the proposition that the best method of assessment of compensation is by use of the before and after valuation method. Mr Slater argued that in the present case there was loss of land only. Therefore, he adopted a method which was expedient in the circumstances.
However, in my opinion, the before and after method of valuation should be adopted. I am not altogether convinced by Mr Slater's proposition that the value of the subject land prior to resumption should be discounted by 20 percent from the value disclosed by sales, because it was situated on a busy road. While there is certainly a degree of logic in his argument that a hypothetical prudent purchaser would pay less for a property situated on a busy road, I have no evidence before me as to how much less. His opinion of a discounting factor of 20 percent was not supported by the other two valuers.
Having regard to the whole of the valuation evidence and the sales relied on by the respective valuers, it is not unreasonable to conclude that the valuation of the subject land prior to resumption would be of the order of $210,000. This was the valuation of the land adopted by Mr Perkins, although he added to that what he considered to be the added value of the dwelling. I can find no justification in the sales evidence for the valuation of $250,000 adopted by Mr Sandhoff as his before valuation. On the other hand, I am of the opinion that Mr Slater's valuation of $185,000 is somewhat low.
The difficulty facing the Court as it did the valuers, is that there are no sales to indicate the value of the subject land after resumption. Each of them had to adopt reasoning which could not be supported by sales evidence. Mr Perkins and Mr Sandhoff are clearly wrong. Mr Slater's reasoning is much more convincing, but in the end to achieve consistency he had to adopt what he agreed was an expedient approach.
If Mr Slater's reasoning is correct, then there is no discernible difference between the valuation of the subject land before resumption and after resumption. He stated on a number of occasions that the market is not sensitive to small changes in area. He demonstrated that by referring to his Sales 4 and 5, where the smaller property sold for the larger figure. However, there was a complication because Mr Slater pointed out that Sale 4 was cut by a gully which would provide some access problems. There was a difference of some $25,000 between the prices of Sale 4 and Sale 5. It is fruitless to speculate just how that access difficulty might have affected the sale price.
If one looks at the totality of the sales evidence, it is clear that there is a significant variation in the prices paid for rural residential land and these differences cannot always be reasonably explained. The differences in sale prices simply illustrate the vagaries of the rural residential market.
In my opinion, that market cannot be so precisely measured as to confidently draw firm conclusions about small differences in value between parcels of land. They must, as in the present case, depend largely upon subjective reasoning.
What then is a reasonable assessment of value for the subject land after resumption? Here the property is 1412 square metres smaller, the highest and flattest land has been taken, the property no longer fronts a two-lane road with access in either direction, direct access can now be gained only to the east-bound lanes and access to the property is only obtainable from the east-bound lanes. In addition, a prudent purchaser would know that at some time in the future the road may well be further upgraded to six lanes. If Mr Slater's proposition is correct and a prudent purchaser would pay less for a property situated on a busy road, then it would be reasonable to assume that he would pay even less for a property situated on what might become an even busier road.
Having regard to all these factors, I have come to the conclusion that a prudent purchaser would pay $200,000 for the subject land after resumption. As I have found that the land was worth $210,000 prior to resumption, the amount of compensation payable is $10,000.
In addition there is the amount of $500 valuation fees agreed between the parties as disturbance.
Accordingly, compensation is assessed at $10,500.
Interest
I was advised that no advance was paid. Therefore, the claimant is entitled to interest on the compensation from the date of resumption.
Accordingly, it is ordered that interest at the rate of nine percent (9%) be paid by the respondent to the claimant on the amount of $10,500 from 31 March 1994, up to and including the date on which compensation is paid.
JJ Trickett
President of the Land Court
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