Jewells (Properties) Pty Ltd v Minister for Natural Resources and Minister for Mines
[2002] QLC 69
•29 August 2002
LAND COURT OF QUEENSLAND
CITATION:Jewells (Properties) Pty Ltd v Minister for Natural Resources and Minister for Mines [2002] QLC 69
PARTIES: Jewells (Properties) Pty Ltd
(applicant)
v
Minister for Natural Resources and Minister for Mines
(respondent)
FILE NO: LA2001/0681
DIVISION: Land Court of Queensland
PROCEEDING: In the matter of an appeal against the Minister’s review
decision under s.422 of the Land Act in relation to the purchase price of Perpetual Suburban Lease No 06/942 NCL (Lot 601 on SL 1836) for conversion to a Deed of Grant.
DELIVERED ON: 29 August 2002
DELIVERED AT: Brisbane
HEARD AT: Brisbane
MEMBER: Mrs CAC MacDonald
ORDER: The decision of the Court is that the review decision be set aside and that the unimproved value of the land as at 14 December 2000 is determined at Four Hundred and Sixteen Thousand Dollars ($416,000).
CATCHWORDS: Valuation – Valuation of particular properties –
contaminated land – worsement – unimproved value – need to determine highest and best use – no requirement to remove contamination if alternative remediation available – concrete capping – allowance for such if part also available for building works construction.
Statutory Valuations – Land Act 1994 –conversion – determination of unimproved value – condition of
contaminated land at time of conversion application – allowance for such.
Valuation – particular factors in valuation – restrictions on use – contaminated land – Integrated Planning Act 1992 – property listed on Environmental Management Register – need for Environmental Protection Agency concurrence before development application approved.
Valuation – valuation of particular properties – contaminated land – cost of remediation if removal of material required – allowance for contingencies – no additional risk allowance for areas not tested for contamination.
Valuation – valuation of particular properties – contaminated land – fill – prior clean fill amalgamated with contaminated material – fill no longer an improvement.
APPEARANCES: Mr GR Allan for the applicant
Mr J O’Rourke for the respondent
This appeal is brought pursuant to the provisions of the Land Act 1994 (the Act) against the decision of the respondent, the Minister for Natural Resources and Mines, as to the purchase price for the conversion of the tenure of certain land from leasehold to freehold title. The appellant is the owner of Perpetual Suburban Lease NCL 06/942 over Lot 601 on SL 1836, in the County of Stanley, Parish of Toombul. The land is located at 51 Noble Avenue, Northgate. The lease was originally granted on 1 October 1953, and was purchased by the appellants in 1988.
The appellant applied to convert the leasehold tenure to freehold tenure under Section 166 of the Act. Under s.170(1) of the Act the Minister is required to decide the purchase price for the conversion of the land to freehold land. Section 170(3) provides, so far as is relevant, that the purchase price is the unimproved value of the land being offered, as if it were fee simple. Section 170(4) provides that the unimproved value is to be calculated at the day the Minister receives the conversion application.
The Minister determined the unimproved value, and therefore the purchase price, at
$425,000 as at 14 December 2000, being the date the conversion application was received.
The appellant was dissatisfied with this decision and lodged an application for internal review of the decision under s.422 of the Act. The Minister subsequently confirmed the original decision. The appellant has appealed to this Court pursuant to s.427 of the Act. The appellant contends that the unimproved value of the land is $1,000. The difference
between the prices is substantially caused by disagreement between the parties as to the effect on the value of the land, of contamination of the site.
Section 429(2) of the Act provides that an appeal [under s.427] is by way of rehearing.
Under s.429(3):
“ The court may –
(a)confirm the review decision; or
(b)set aside the review decision and substitute another decision; or
(c)set aside the review decision and return the issue to the Minister with directions the Court considers appropriate.”
At the hearing, Mr KP Walsh, a registered valuer, Mr S Trainor, the State Manager of EGIS Consulting Australia (previously called CMPS&F), and Mr MJ Paton, an environmental scientist employed by OTEK Australia Pty Ltd, gave evidence on behalf of the appellant. Mr PM Jewell, a representative of the appellant also gave evidence, as a result of a subpoena issued by the respondent. Mr E Antoni, a registered valuer employed by the Department of Natural Resources and Mines gave evidence on behalf of the respondent.
Mr Antoni described the land the subject of the lease as situated at Northgate, approximately 10.5 radial kilometres from the Brisbane CBD, with a three street frontage to Noble Avenue, Bell-are Avenue and Crockford Street. The streets are bitumen sealed with concrete channelling and kerbing. There is access to the Gateway Motorway approximately two kilometres away, via Nudgee Road. The land is located within the Northgate industrial precinct, and is within the General Industry Area under the Brisbane City Plan 2000. The evidence was that the land is 7274 m² in area, although it is described on the title as 7,285 m². The difference has no significant effect on the value of the land.
Mr Walsh reported that since the commencement of the lease in 1953 the land has been improved by filling and levelling, together with structures including a large post-war industrial shed. The property is currently used for storage and maintenance of shipping containers. The lease was purchased by the appellant in 1988 for $230,000. The current rent paid by the appellant is $21,250.00 per annum. The evidence was that part of the land is occupied by Royal Wolf Trading Australia Pty Ltd which conducts the shipping container business and which pays the owner of the lease (the appellant) some $6,200.00 a month for use of the land.
The land is contaminated as a result of various activities that have been carried out on it. The site was investigated in 1997 by CMPS&F Pty Ltd who were instructed by the appellant to undertake a site contamination assessment to establish a remediation plan for the site. The report concluded (at pp 19 and 20) that:
·The site has been subject to a history of site processes which are inherently associated with contamination, namely foundry, sandblasting and painting operations. Due to irregular filling at the site, and excavations to depths which have not been recorded, the depth of contaminated soil is estimated with some uncertainty;
·Heavy metal contamination is evident at the site, both in the hardstand and the underlying material. The contamination has been estimated to a depth of approximately 0.3 metres over 45% of the site, giving a volume of contaminated soil requiring offsite disposal (for a ‘former’ reclassification) of approximately 1100m³, including the stockpiled soil from a previous excavation.
·Radiation levels at the site were measured at concentrations in excess of 250
µR/hr. The volume of soil with radioactive levels greater than 60 µR/hr measures approximately 250m³. The volume of soil with radioactive levels greater than 20
µR/hr but less than 60 µR/hr measures approximately 830 m³. These volumes are inclusive of the 1100 m³ of heavy metal contaminated soil.
·Leaching characteristics of the soil prevent it from being disposed at a Gold Coast City Council landfill site untreated. Of particular concern are lead, which exceeds Council allowable leaching concentrations by a factor of 80, and zinc, exceeding Council allowable leaching concentrations by a factor of 2.
·While the presence of radioactive sand below the slab areas (both internal and external to the site building) has been eliminated, the site history does not indicate whether these slabs were poured prior to the foundry process. As such, the potential exists for heavy metal contamination to extend to beneath these slabs. This will need to be investigated prior to undertaking final remediation of the site if a former reclassification is sought.
·Contaminated soil has been identified along the Noble Avenue nature strip. Both heavy metal concentrations and radioactive readings were found to be excessive in this area. Sampling indicates that the depth of the contaminated soil in this area is 0.1m.
·Removal of any soil from the site will require approval from the Department of Environment.
[10]The site is not listed on the Contaminated Land Register, however it is included on the Environmental Management Register. Both registers are maintained by the Environmental Protection Agency under the Environmental Protection Act 1994. The subject land has been included on the Environmental Management Register for the Notifiable Activity of Landfill – disposing of waste (excluding inert construction and demolition waste). If the owner proposes to sell or dispose of the property, the owner must give written notice to the purchaser of the fact that the land is on the register. Land which is listed on the Environmental Management Register for a Notifiable Activity does not have to be remediated and the current use of the land can continue. However, under the Integrated Planning Act 1997, development applications for material change of use and/or reconfiguration of lots of land on the Environmental Management Register are required to be referred to the Environmental Protection Agency as a concurrence agency. The Environmental Protection Agency may, inter alia, require that conditions be attached to any development approval.
Meaning of “unimproved value of the land”
Against this background, the unimproved value of the land is to be determined.
Section 434 of the Act provides that:
“(1) In this Act, the ‘unimproved value’ of land is the amount an estate in fee simple in the land in an unimproved state would be worth if there were an exchange between a willing buyer and a willing seller in an arms- length transaction after proper marketing, if the parties had acted knowledgably, prudently and without compulsion.
(2) …
(3) To remove any doubt, it is declared that the Valuation of Land Act 1944 does not apply to the meaning of unimproved value in this section.
(4)In this section -
‘unimproved state’ includes, if the value of improvements and development work to the land performed by the State has not been paid to the State, the improvements and development work finished before the lease started or the deed of grant was issued.
‘paid to the State’ does not include rent paid to the State.”
It is convenient, firstly, to consider the effect of s.434(3) of the Act. It has been held that there is a distinction between an unimproved value assessed for the purposes of a conversion application and that assessed under the Valuation of Land Act 1944. The latter
will always be conservative because it is for rating purposes. The unimproved value assessed for the purposes of a once only sale should reflect the fair market value which can be obtained for the land. (Application for Conversion of Tenure – Lessee: Universal Trade Broking Company Pty Ltd SL 51152, unreported, Land Court, 1 July 1997, at 5; Richardson v The Crown (1990-91) 13 QLCR 236). It has also been said that where the determination of unimproved value is undertaken for conversion purposes it is wrong to adopt as a basis of valuation either the unimproved value assessed under the Valuation of Land Act 1944 or relativity with valuations of other lands made under that Act (Application for Conversion of Tenure – Lessee: Davis (1998) 19 QLCR 247 at 253). There is also a number of differences between the provisions in the Valuation of Land Act and those in the Land Act which deal respectively with the determination of unimproved value. Where there are such differences, the effect of s.434(3) is that the provisions of the Valuation of Land Act do not apply.
However, although there are differences between the statutes, “the fundamental principles applied in assessing the unimproved value under the Act and the Valuation of Land Act 1944 are the same” (Universal Trade Broking Company Pty Ltd at 6). The definition of “unimproved value” in s.434(1) of the Act is essentially the same as that set out in s.3(1)(a) of the Valuation of Land Act and both may be seen as statutory expressions of the principles explained by Isaacs J in Spencer v The Commonwealth (1907) 5 CLR 418 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 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.”
It follows therefore that cases decided under the Valuation of Land Act which deal with those fundamental principles will be applicable to determinations made under s.170 of the Land Act as to the unimproved value of land for conversion purposes.
The effect of the contamination on the unimproved value of the land
The appellant’s valuer, Mr Walsh, said that in his opinion full remediation of the site would be necessary to achieve the “unimproved state” referred to in s.434 of the Act. In
his view, to achieve that state, the land would have to be returned to its original condition, that is as it was at the date of the commencement of the lease, 1 October 1953.
Mr Paton, the environmental scientist who gave evidence on behalf of the appellant, said that an alternative way to deal with the contamination would be to seal the site with a concrete cap, other than the area under the main building where a concrete slab is in place. As discussed subsequently in this decision, Mr Paton estimated the cost of doing this at $456,600 (including GST). Mr Walsh rejected this approach because, he said, it would not result in the land being restored to its unimproved state as defined in s.434 of the Act.
Mr Antoni’s written report did not disclose how he accounted for the effects of the contamination in determining the value of the land. However he did say at paragraph 20 that:
“While the extent, location and outcome of this worsement with respect to the subject property is yet to be determined, an allowance equivalent to the claim submitted by the current lessee has been made in the valuation. If this estimated cost provided by the applicant is not substantiated, the valuation would be different.
This valuation is subject specifically to the subject site being actually contaminated in it’s own right.”
In Brisbane City Council v The Valuer-General for the State of Queensland (1978) 140 CLR 41 at 51, Gibbs J said:
“… something done on or appertaining to land which reduces rather than enhances its value is not an improvement for the purposes of the Act, any more than it would be in the ordinary sense of the word.”
The evidence given on behalf of both parties was that the effect of the contamination on this land is to reduce the value of the land, not to enhance its value. The contamination is therefore not an improvement to the land and should not be treated as such. Normal valuation principle requires that when land is to be valued in its unimproved state any improvements on the land are to be ignored. However when the land is contaminated and the contamination has reduced the value of the land, the contamination should not be ignored for the purpose of determining the unimproved value of the land because it is not an improvement. Rather, the land must be valued “as is” (Marano v The Valuer-General (1978) 5 QLCR 194 at 200). The effect of the contamination or worsement cannot be dismissed on the hypothesis that the valuer is required to envisage a physical state prior to the occurrence of the operations that lead to the worsement, namely that as at the date
when the land was first alienated (Raynbird v The Valuer-General (1980) 7 QLCR 106 at 109).
It is accepted that Marano and Raynbird were decided under the Valuation of Land Act, whereas the determination of unimproved value in this case is to be made under the Land Act. However there is nothing in the Land Act to indicate that the fundamental approach to valuation of a contaminated site under that Act should differ from that applied under the Valuation of Land Act. In particular, there is nothing in the Land Act which states that the condition of the property at the date of commencement of the lease is to be considered. Section 170(4) provides that the unimproved value of the land is to be calculated at the date the Minister receives the conversion application, and there is no qualification to that principle to be found elsewhere in the Act. It follows therefore, that Mr Walsh’s suggestion that for the purpose of determining its unimproved value, the land is to be restored to its condition as at the date of commencement of the lease, cannot be sustained. The value to be determined is the unimproved value as at the date of valuation, 14 December 2000, and that value will be based on the condition of the land as at that date.
The question that is to be determined in this case is how much a willing buyer would have paid to purchase the fee simple in the land on 14 December 2000 assuming that it was in an unimproved state and assuming a purchase from a willing seller in an arm’s length transaction after proper marketing and assuming both parties were acting knowledgeably, prudently and without compulsion. The land must be valued as it stood at that date with no improvements but with all of its disadvantages, that is in its unremediated condition. (Caltex Oil (Australia) Pty Ltd v Chief Executive Department of Lands (1996) 16 QLCR 435 at 455).
Valuation Methodology
Mr Walsh’s methodology was to determine firstly, the unimproved value of the subject land on the assumption that it was free from contamination. He did this by comparison with sales of other unimproved properties in the area. Having determined the value of the land on that basis, at $655,000 (exclusive of GST) or $90 per square metre, he then made allowance for the contamination by deducting both a profit and risk allowance of $85,000 (15%) and a further $682,500 being the costs of remediation in accordance with the evidence of Mr Paton. The result was a negative figure and Mr Walsh adopted $1,000 as the unimproved value for conversion purposes.
The respondent’s valuer, Mr Antoni, adopted a similar approach to Mr Walsh in that he said that he had valued the subject property as if it were uncontaminated, by comparison with sales of similar properties in the area, and then he made an allowance for fill and the effects of the contamination. Mr Antoni’s evidence is considered in more detail later in this decision.
The land must be valued for its highest and best use. It was common ground between the valuers that the highest and best use of this land was for general industrial purposes. Mr Walsh also said that the land had the potential to be redeveloped with an office/warehouse complex. While both valuers agreed that the highest and best use of the land was for general industrial purposes, Mr Walsh stated that this was the highest and best use of the land in its unimproved state, which in his opinion meant the land free from contamination. As discussed above, it is not necessary to notionally restore the land to its pre-contaminated state, in order to determine the unimproved value.
Mr Walsh relied on the sales of six properties in the general vicinity of the subject land to support his conclusion that the value of the subject land, if uncontaminated, would be
$655,000 or $90 per square metre.
Mr Antoni valued the land, in his written report, at $58 per square metre for a gross area of 7,285 m² which equates to $425,000 (rounded up). The report indicates that that figure takes into account the effect of the listing of the subject site on the Environmental Management Register under the provisions of the Environmental Protection Act 1994. In oral evidence, Mr Antoni said that the way in which he reached the value of $425,000 was that, relying on the evidence of sales of properties analysed in his written report, he had valued the land as if it were uncontaminated, at $90 per square metre or $655,000 in total. He had then made allowances for the fill on the land and the effects of the contamination.
The general approach taken by both valuers was to determine a value for the unimproved land as if it were uncontaminated and then make an allowance for the adverse effect of the contamination. I have accepted that as an appropriate way in which to value the land. Since there is no disagreement between the two valuers as to what would be the value of the land if it were uncontaminated and unimproved, there is no need to detail the sales evidence here. I have concluded, relying on this evidence, that the unimproved value of the land if it were uncontaminated, would be $655,000 or $90 per square metre.
Allowance for Contamination
The next issue is to determine how the effects of the contamination are to be taken into account. Two options were identified by Mr Paton on behalf of the appellant. One was that the site could be completely remediated by removal of all the contaminated fill. The second was that the contamination could be managed by capping the whole of the site with concrete.
As discussed previously, it is not necessary for the purpose of determining the unimproved value of the land to envisage a physical state prior to the contaminated fill being spread across the site (see Raynbird at 109). However it is necessary to take the effects of the worsement into account in determining the unimproved value. The appropriate way in which this should be done is to determine in what way the existence of the worsement would affect the decision of the hypothetical prudent purchaser as to the price that he or she would pay for the land as at the date of valuation (Valuer-General v Marano (1978) 5 QLCR 194 at 200). It appears that there are no sales of similarly contaminated land available to demonstrate any differential value between such land and uncontaminated land (see Caltex at 443). While Mr Antoni’s Sale No. 5 concerned a site on the Environmental Management Register, there was no evidence as to the nature or extent of the contamination on that site, nor whether it was in any way comparable with that on the subject site. I have accepted that the subject land is contaminated in the way described earlier in this decision. While the land continues to be used for its present purpose of storage and maintenance of shipping containers there is no obligation on the appellant to remediate the land, or to take any steps to manage the contamination. The knowledgeable hypothetical prudent purchaser would know therefore that the existing use of the property could continue without the need to address the contamination.
Would such a purchaser consider that it would be necessary or prudent to remediate the site completely? Mr Walsh’s evidence was that the land had the potential to be developed for office/warehouse purposes. The effect of the Integrated Planning Act 1997 is that such a development would constitute a material change of use of the premises and therefore be an assessable development. It would be necessary to make a development application for permission to redevelop the land in this way, and the application would be referred to the Environmental Protection Agency (EPA). There was no evidence to establish that the EPA would impose a condition requiring the land to be fully remediated. Mr Antoni said that the EPA would require that the contamination be managed by fully capping the site with concrete.
The only evidence as to the cost of full remediation of the site was given on behalf of the appellant by Mr Paton, an environmental scientist. The respondent did not substantially challenge this evidence in so far as it quantified the costs of full remediation. Mr Paton said that full remediation of the site would require off-site disposal of radioactive and metal-impacted soil. Some of the leachable metal-impacted soil would require stabilization prior to off-site disposal. Because parts of the site were not accessible they were not tested and therefore Mr Paton added a further 30% ($157,500.00) to the cost of remediating that part of the site that had been tested, to provide for the costs of this additional work. He estimated the total cost of remediation, including the 30% allowance, to be $750,750 including GST.
Accepting that Mr Paton has supplied an accurate costing of full remediation, it is apparent that it would not be economically viable to remediate the site fully, given that the site would be worth only $655,000 if it were not contaminated. For the same reason, even if the EPA were to impose a condition requiring full remediation as part of a development approval for the construction of an office/warehouse building, the effect of such a condition would be to make the proposed redevelopment economically unviable. I have therefore concluded that no hypothetical prudent purchaser would buy the property with a view to remediating it fully. That being the case, the only conclusion to be drawn is that if full remediation is contemplated or necessary in order to construct an office/warehouse building, redevelopment of the site into an office/warehouse complex would not be the highest and best use of the site.
[32]This conclusion means that it is not necessary for me to deal with the claim by the appellant that a further deduction of 15% or $85,500 should be allowed on the purchaser’s capital outlay of $655,000 to cover the risk that there might be further contamination on the parts of the site that could not be examined. However, if it had been necessary for me to consider this aspect of the appellant’s case, I would not have made this allowance. Mr Paton’s calculation of the costs of full remediation includes a 30% contingency figure to cover the cost of remediating that part of the site that has not been investigated. The 30% allowance was based on the percentage of the area not investigated (45%) multiplied by the percentage of the impacted area relative to the area investigated (70%). I consider that these figures represent an expert’s opinion as to the probable costs of remediating that area, and therefore, I do not consider that it is necessary to make any further allowance for this contingency. Moreover, I do not consider that, as a matter of valuation practice, it would be appropriate to allow for a contingency of this nature by making a profit and risk allowance.
[33] The second option identified by Mr Paton for dealing with the contamination, was that the contamination be managed by capping the whole of the site with concrete, excluding the area under the main building. His estimate of the costs of capping that part of the site
with concrete 200 mm deep was $456,500.00 (including GST). This sum is made up as follows: Geo-technical investigation, design and testing $10,000.00 Earthworksforsitepreparation $40,000.00 Supplyandlay200mmconcrete $355,000.00 Preparation of Site Management Plan, EPA and Queensland Health liaison and project management $10,000.00 $415,000.00 GST $41,500.00 TOTAL $456,500.00
It should be noted that Mr Paton’s calculations take into account the fact that there is a concrete slab on part of the site.
As noted earlier, Mr Antoni’s written report did not disclose in any detail how he accounted for the effects of the contamination. Mr Antoni elaborated on his written report in oral evidence. He said that he was aware from the departmental file and from the OTEK report which was on the file at the Environmental Protection Agency that the site had been filled with waste material, in the past. Doing the best he could, he allowed a quantity of .75 metre over the whole site for fill. He estimated the cost of fill at $15 a metre which approximates to a total of $82,000. In addition, Mr Antoni said that he had allowed $150,000 for the effect of the contamination. Mr Antoni’s total allowances therefore were $231,956. He deducted that sum from $655,650 being his estimate of the value of the land if it were unimproved and uncontaminated, giving a balance of $423,694 which he rounded up to $425,000.
Mr Antoni’s evidence as to how he calculated the allowance of $150,000 for the contamination was somewhat unsatisfactory. Initially he said that he used the amount requested by the respondent as an allowance for the effects of the contamination as he (Mr Antoni) was not in a position to commission an independent expert to report on the costs of remediation. The first part of that statement is consistent with paragraph 20 of his written report. Subsequently, under cross examination, Mr Antoni said that he had considered that the appropriate way to deal with the contamination was to cap the site with concrete to a depth of 400 mm or 600 mm. He estimated the cost of this, by
reference to Rawlinsons, at $15 or $16 per square metre, which totals approximately
$110,000. On that basis Mr Antoni considered that he had been more than generous in allowing $150,000. Given the discrepancy between these accounts of the methodology adopted by Mr Antoni in calculating an allowance for the contamination, I consider that I am not able to rely on either of these accounts. I therefore have not adopted the sum of
$150,000 as an allowance for capping the site.
The only other evidence as to the costs of capping the site was that given by Mr Paton, which is set out above. This estimate totalled $456,500 (including GST) for covering the whole site, excluding the area under the main building, with a concrete cap 200 mm deep. I find that this is an accurate estimate of the costs of capping the site in the way described by Mr Paton.
However, I do not consider that this is the amount which should be allowed for the effects of the contamination, in determining the unimproved value of the land. It was pointed out in Caltex (at 464), that even when the costs of remediation, [or, I would add, the costs of management of the contamination] are precisely known, it is not necessarily correct to determine the unimproved value by subtracting that cost from the value of the land as uncontaminated land, although, the majority said, cost is a relevant consideration. In some cases (eg Watson v Chief Executive, Department of Natural Resources, unreported Land Court, 19 July 2001), a percentage has been allowed. The question to be determined here is how the hypothetical prudent purchaser would view the option of capping in deciding the price to be paid for the land in a case such as this, where the costs of capping are known.
Such a purchaser, it may be assumed, would buy the land with the intention of redeveloping the site to its highest and best use. It is noted that, by way of contrast with the costs of full remediation, a proposal to manage the contamination by capping the site would allow the redevelopment of the site to the highest and best use of office/warehouse as a fundamentally viable project. However, even if the site were uncontaminated, a purchaser who intended to construct an office/warehouse building on it would be faced with the need to cap at least part of the site to provide a base for the building. To that extent, the costs of managing the contamination would be subsumed in the necessary costs of redevelopment, and therefore, I have decided that the full costs of capping should not be allowed in determining the unimproved value of the land. It remains to determine what allowance should be made.
The evidence as to the extent to which a prudent purchaser might cap the site for the purposes of redevelopment was limited. There was no evidence as to what might be the
optimum design of any office/warehouse redevelopment on this land, nor therefore as to what area of the site might be occupied by such a building. Mr Antoni said that under the town planning legislation an owner is allowed to construct a building platform of about 50 to 75% of the site area. Doing the best I can, it seems to me that a reasonable purchaser would cap at least 50% of the site to establish a base for the construction of a new office/warehouse. In addition, it appears to be self evident that a further area would be concreted to provide driveway access and parking and I consider that a further 10% should be allowed for those purposes. I consider that a cap of 60% of the site is probably a conservative estimate of the extent of capping which a prudent purchaser might undertake assuming the site to be uncontaminated. It is possible that a purchaser might cap up to 75% for building purposes alone. Alternatively he or she might cap the whole site, to provide driveway access and parking areas in addition to the building site. Mr Antoni said that industrial entrepreneurs commonly cover the whole area with a concrete slab to have full use of the site. However, in the absence of any more specific evidence, I have concluded that a prudent estimate is that if the land were uncontaminated, a purchaser would cap at least 60% of the site to enable it to be used for its highest and best use for construction of an office/warehouse. Therefore, the additional cost which such a purchaser would incur, if he or she is required by the EPA to cap the whole site as a condition of development approval, is the cost of capping the remaining 40% of the site. That sum represents the allowance that should be made for the effects of the contamination.
Using Mr Paton’s figures, I have estimated the cost of concreting 40% of the site at
$234,000 calculated as follows:
Total area of site 7274 m²
Less area under main building (calculated using the site
map, Attachment 3 to the OTEK report). Approximately 1440 m²Mr Paton’s area to be capped 5834 m²
Mr Paton’s costs of concrete to cap 5834 m²
(excluding GST) $355,000.00
Cost of concrete per square metre $60.85 Cost of concreting whole site
7274 m² x $60.85 $442,622.90
Cost of concreting 40% of site (rounded)
Costs of geotechnical investigation etc and
$177,000.00 Preparation of Site Management Plan (allowed
in full because solely attributable to the contamination)
$20,000.00
Earthworks for site preparation (40% of site)
$20,000.00
Total allowance
$217,000.00
GST $21,700.00 Total
$238,700.00
Rounded $239,000.00
The unimproved value of the property should be calculated by allowing a deduction of
$234,000 from the estimated value of the property if it were uncontaminated. Unimproved value of the land if uncontaminated $655.000.00
Less allowance for capping $239,000.00
Unimproved value of land with contamination $416,000.00
These calculations ignore the fact that there was, at the date of valuation, a concrete slab of approximately 1,440 m² on the site. This has not been taken into account because the valuation of $655,000 is made on the assumption that the land is unimproved.
One other matter should be mentioned. Mr Antoni said that he had made an allowance of
$82,000 for the fill on the property. In most cases fill constitutes an improvement to property and therefore the value of the fill should be deducted to establish the unimproved value of the land. In this case, however, the overwhelming evidence was that the source of the contamination on the site is the fill. Some of the fill may not have been contaminated originally, but once it was placed on the site, it was mixed with the contaminated fill, and it is now impractical to separate the different types of fill. Although, therefore, the fill has some beneficial effect in that it levels the site, the net effect of it is that it reduces the value of the site and therefore is not an improvement. The result is that there should be no deduction for fill in determining the unimproved value of the land.
The decision of the Court is that the review decision be set aside and that the unimproved value of the land as at 14 December 2000 is determined at Four Hundred and Sixteen Thousand Dollars ($416,000).
CAC MACDONALD MEMBER OF THE LAND COURT
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