Kameruka Ridge Pty Ltd & Oakbrake Pty Ltd v Chief Executive, Department of Main Roads
[2001] QLC 54
•13 June 2001
|
BRISBANE
13 JUNE 2001
Re: A98-16, 17, 18 and 19 -
Determination of Compensation for Disturbance/Costs thrown away consequent upon the resumption of land for the purposes of:
(1) Transport Corridor (Motorway);
(2) Sale or otherwise being dealt with.
Acquisition of Land Act 1967 and Transport Planning and Coordination Act 1994.
BETWEEN:
Kameruka Ridge Pty Ltd and Oakbrake Pty Ltd
Claimants
AND
Chief Executive, Department of Main Roads
Constructing Authority
J U D G M E N T
Background
This determination is in respect of part of a claim for compensation consequent upon resumption of land at Stretton, associated with the Southern Brisbane By-Pass Motorway. The substantive hearing commenced in November 1999. Compensation for loss of land, injurious affection and severance and some items of disturbance was determined in a judgment delivered on 17 March 2000.
The large parent parcel had been subject of rezoning negotiations which had not been formalised at the date of the first of the two resumptions involved, the combination of which took a significant part of the original holding.
It was the claimants' case in the substantive hearing that the rezoning negotiations would have been successfully concluded with Brisbane City Council had it not been for the shadow cast by the emergence of the resumption scheme. The respondent had argued that issues other than those associated with the resumption scheme and particularly related to environmental considerations, had clouded the rezoning and development potential of the land.
It had been agreed between the parties that this component of the claim, for costs thrown away as a consequence of the resumption scheme, would be more appropriately left for argument until after the claim for compensation for loss of land had been decided. It was submitted that until that determination was made the claimants would not be in a position to identify which of the many items of actual expenditure had not increased the value of the land as determined and which, as a consequence, had been thrown away.
The substantive judgment decided significant issues in favour of the claimants. The significant issues are identified as:
·The developable area of the parent parcel.
·The assumption that, in the absence of the resumption scheme, rezoning would have been in place at the date of valuation.
·No "lead time" would have been required before construction of the subdivisional development might have commenced.
·In the post-resumption scenario, a holding period of two years, together with a "lead time" of six months had been considered necessary as a consequence of the development uncertainties caused by the resumption(s).
An observation was made in the reasons for the judgment that the parties' valuers had offered in their evidence "opinions as to the circumstances where the existence of items, such as engineering design plans, might be separated from the in globo value of land with developmental potential". It was expressly stated that "Any such costs, if thrown away, have not been a consideration in this determination".
The parties have placed different interpretations on the effect of the substantive judgment on this remaining issue.
The Claimants' Case
It is now the claimants' case that, on the basis of the before resumption valuation adopted in the judgment, as interpreted by them:·Expenditure associated with rezoning negotiations prior to the emergence of the shadow of resumption increased the pre-resumption value and was not thrown away.
·Expenditure associated with the failure of Brisbane City Council to process the rezoning application, subsequent to the emergence of the shadow, did not add to the value of the land and was thrown away.
·Expenditure associated with engineering planning and design prior to the emergence of the shadow was expressly not a consideration in the valuation and was thrown away.
·Expenditure associated with certain survey work was not a consideration in the valuation and was thrown away.
·The cost of clearing the land was not identified in the valuation and was thrown away as a consequence of the resumption and subsequent delays which necessitated re-clearing of the balance land.
·Various other expenditure as identified, was thrown away.
The Claim as Amended
The amended claim, for costs thrown away, is set out as follows:
(1) Engineering Fees $357,477
(2) Legal Fees - Solicitor $52,136
- Counsel $6,780(3) Architect Fees $5,220
(4) Economic Research $7,358
(5) Survey Fees $18,940
(6) Environmental Engineers $1,046
(6A) Department of Environment & Heritage $236(7) Clearing Contractor $36,959
(8) Freedom of Information application fees $109
TOTAL $486,261
Note:The components in (1), Engineering Fees, amount to $368,807 on my calculations. The difference is an amount of $11,330, identical to the invoice in Item (3) of the relevant claim. As I understood the evidence and submissions, that particular item had not been intended to be deleted. The adjusted total would become $497,591.
The Respondent's Case
It is the respondent's interpretation of the substantive judgment that market value as assessed in the before resumption scenario, with rezoning in place and no "lead time" required before construction might commence, would, as a matter of practicality, include all work related to that assumption. That work would have included the production of engineering design plans. If separate payment of compensation was made for expenditure on any such work, then it was submitted that double recovery would result.
The respondent accepted that if its interpretation of the basis of valuation involved a misunderstanding of the intent of the judgment, then some compensation for costs thrown away might be payable, but only after consideration of the salvage value, post-resumption, of some of the pre-resumption expenditure.
Other expenditure which did not increase the value of the land such as the cost of the claimants' attempt to formalise the results of earlier rezoning negotiations was seen by the respondent as not having been directly caused by the emergence of the resumption scheme, but a result of altered Brisbane City Council rezoning attitudes, particularly where environmental issues were involved.
Valuation Principles
Principles relating to matters such as the components associated with market value, as opposed to special value to an owner and aborted expenditure, were considered by the High Court in Boland v. Yates Property Corporation Pty Ltd (1999) 74 ALJR 209. At pp.265, 266 (paras 271 to 275 inclusive) Callinan J discussed these principles in the context of highest and best use of land with specific development potential. Particularly relevant to the subject matter were his Honour's observations in these paras:"[272] An intending prudent developer of a project such as the respondent here had in mind would inevitably require investigations, studies, plans and information of the kind to which I have referred and which would necessarily involve the services of professionals such as town planners, engineers and others, not only perhaps to obtain, or enhance the chance of obtaining, planning approval but also to place itself in a position to satisfy financiers if it has to borrow to complete the development, and prospective tenants or licensees that a tenancy or a licence in it would be an obligation worth incurring
[273] I mention these matters simply to show that there was nothing remarkable, or indeed, to use the word which I think has been variously used in these proceedings so far, 'special' about what the respondent did before the resumption. What it did it would have had to have done to gain planning and building approvals, and to attract licensees. In short what was done was necessarily done to demonstrate that the highest and best use of the resumed land was its development as a market. If what the respondent did not been done, then it would be unlikely that any purchaser would pay a price which included a component for the by now demonstrable, realisable, potential of the property for its highest and best use as a market. And a purchaser would have been in as good a position to take advantage of the site in its cleared state as the respondent. None of this is in disparagement of the respondent's efforts. But their site-specific nature meant that Yates would have no interest in withholding their fruits from a purchaser and every reason to provide them to 'talk up' the price of the land.
[274] Any vendor who failed to capitalise on this work by not extolling to a purchaser its consequential, demonstrable, realisable potential would be highly imprudent. And any reasonable purchaser would expect, and know that the price would reflect this potential. It is not a case of the purchaser's buying, as it were, the plans and the work done in respect of proving up the potential as one of the examples given by the Full Federal Court would suggest. It is merely that, to use the language of Griffith CJ in Spencer's case, each party to the transaction should be regarded as being fully conversant, or as Isaacs J said, perfectly acquainted with the subject, that is to say the subject land with all of its potential. It follows that the more work, the more proving up that is done by the vendor before the sale, the more any uncertainty as to the realisation of the potential will be reduced, and the higher the price will be. This fundamental concept the Full Federal Court touched upon in the passages I have quoted but failed to apply. What was described as special value by the Full Federal Court and by Handley JA in the Court of Appeal of New South Wales as the 'head start' advantage was no more than an element of the highest and best use of the land and a factor to be taken into account in assessing its value on that basis. A purchaser who made himself or herself conversant or perfectly acquainted with the property in the way in which he or she should be taken to do so as contemplated by this Court in Spencer's case would have been in no inferior position to exploit the planning and building approvals, the clearing work that had been done and the investigation of the demand for licences than the respondent."
Application of Principles to Substantive Judgment Reasons
Both the claimants and the respondent sought support for their submissions through the principles discussed in Boland.
The claimants submitted that the claim now under consideration was not one which relates to special value. They said it relates to expenditure which they were unable to identify as having had the effect of increasing the land value in the before resumption valuation adopted by the Court. Therefore, in their opinion, such expenditure should be categorised as having been thrown away.
The respondent submitted that on the assumption made by the Court, the expenditure necessary for the adopted potentiality to have been reached would have related to all components of market value and should have been included in the pre-resumption valuation adopted by the Court.
Both parties have misinterpreted, to varying degree, the basis upon which the before resumption valuation was founded.
First, the shadow of the resumption and its effect on the actual zoning of the land was intended to have been erased by the adoption of the assumption that, as at the date of valuation, the zoning as sought by the claimants was in place, when in fact it was not. Any relevant expenditure outlaid prior to the emergence of the shadow of resumption was accepted as having been sufficient to have achieved that assumed zoning position, increasing the land value to the level as was assessed in the before resumption valuation. Post-shadow expenditure was in fact outlaid in an unsuccessful attempt to formalise that assumed zoning position. While that expenditure was wasted, the assumption adopted in the Court's basis of valuation precludes such expenditure from qualifying as being a direct or natural consequence of the resumption. Double recovery would result if such post-shadow expenditure was accepted as a compensable claim. Had the land been valued as the respondent sought, on a lesser potential developable area, with uncertainty remaining as to Council's attitudes, before resumption, then not only would this post-shadow expenditure have been seen as wasted, and compensable, but much of the pre-shadow expenditure on rezoning matters would also have been seen as wasted, as a direct consequence of the resumption scheme.
Second, the judgment accepted that the parent parcel had potential for inclusion of a staged shopping centre development. Any added value attaching to that potential, over and above residential in globo value, was found to apply only to the area of land which would have accommodated the first stage of the shopping centre development, as at the relevant date of valuation. On the state of the valuation evidence, that added value was unable to be quantified. It was unnecessary for such quantification by the Court, because it was found that the potential for the first stage remained after the resumption and no loss, in the added value attributable to shopping centre potential, was sustained.
Third, the basis of valuation on the assumptions made, recognised that items such as engineering design plans would have been in existence as at the date of resumption for construction to have been capable of commencement in the absence of "lead time". However, it was also accepted that circumstances exist in the marketplace when the question of any increase in market value resulting from the existence of such items might appropriately be considered separately from the basic in globo value component. In the circumstances of this particular matter, the quantum of increase in value, if any, attributable to the existence of such items, or alternatively the question of wasted expenditure, had not been a consideration in the primary assessment of compensation. It had been agreed between the parties that such matters would be deferred for further argument and submissions and determination, if the parties were unable to resolve the issues themselves after consideration of the substantive judgment.
Consideration was given in that judgment to the basic in globo market value, based on sales of other in globo land, in circumstances where there was no evidence to suggest the existence of items which would have allowed immediate commencement of construction of the relevant subdivisional development potentiality. I see no deviation from correct valuation principles in the adoption of methodology which involved separate assessment, first of basic in globo value, then any increase in that value through the existence of items which could reduce or negate delays before construction might commence. That methodology permitted specific consideration of the claim for costs thrown away.
This was a case where only part of the parent parcel was resumed. A before and after resumption valuation approach was seen as the appropriate methodology in determining the quantum of loss in the land value as a component of compensation. That loss was capable of determination in the absence of finding "market" value inclusive of, as one example, the added value over and above residential in globo value which was attributable, both before and after resumption, to the area of land capable of accommodating the first stage of the shopping centre development. The circumstances surrounding this case may be distinguished in that sense, from Boland, where the total property had been subject of resumption. Full market value assessment is clearly necessary in the circumstances of total resumption.
The intent of the substantive judgment will be applied to the various headings associated with this aspect of the claim.
(1) Engineering Fees
Hughes McNaughton, a firm of consulting engineers, had been engaged by the claimants, in early 1990, to undertake the planning, for urban development, of the parent parcel of land which had been previously used in association with a quarrying operation. Mr BW McNaughton, a partner in that firm, was responsible for the day-to-day management of the project.
Planning and preliminary design investigation work was charged out to the claimants on an hourly fee basis while detailed engineering design work was charged out on the basis of 6% of the estimated construction cost of the particular development stage. There was no challenge to the level of hourly fee charged. As estimates of construction costs became more precise, in the lead-up to the calling of tenders, the total detailed design fee was adjusted accordingly.
Mr McNaughton had given evidence in the primary hearing. For this aspect of the claim, he had examined invoices which related either in whole, or part, to work which, in his opinion, was "no longer of any use or value as a result of the resumption". Where those invoices related to work associated with the rezoning process, prior to the emergence of the shadow of resumption, or to work which he accepted as having retained value post-resumption, he apportioned the relevant cost and deleted it from the claim. Such apportionment was made based on reference to a "schematic chronology" relating to the completion of major works; his own personal knowledge of the work carried out on the project; a review of the project files and diarised entries.
Copies of all invoices considered by Mr McNaughton to be relevant to the claim, covering the period from January 1991 through to September 1994 were included with his statement together with an explanation of the work involved in each invoice and the reasoning behind the work being apportioned as either claimable or not.
The invoices, all of which had been paid by the claimants, totalled $381,926 and the apportionment considered by him to constitute wasted expenditure totalled (on my calculations, as noted earlier) $368,807.
The largest single component of that amount ($225,000) related to the fees charged for the specific work involved in the preparation of engineering design drawings for the proposed Stages 1 and 2 of the overall development proposal. It was Mr McNaughton's evidence that it was quite common practice for such work to parallel the development approval process when no complications were anticipated in formalising that process.
As already mentioned, compensation was assessed in the substantive judgment on the assumption that the approval process would have been formalised as at the date of resumption.
Mr McNaughton's evidence was that, once the precise location of the Motorway Corridor had been established, his further planning had been directed towards salvaging as much of the detailed design work as might have been possible. Subsequent to the final resumption (of the severed area easterly of the Corridor) Mr McNaughton had taken up another engineering position and Mr MF McAnany had been engaged by the claimants as their consultant engineer.
In this matter much of the oral evidence and examination of Mr McNaughton and Mr McAnany who had also given evidence in the earlier hearing, related to their opinions that items such as the engineering design drawings were rendered worthless, post-resumption. Mr McAnany said that he would be unable to give the claimants any credit against previous expenditure on detailed engineering design. That is understandable in the circumstances which have since evolved, because the before resumption development design strategy has been altered significantly for the balance area.
It was the respondent's submission that the original design could have been revised with much of the original work salvaged. Mr PG Breene, the consulting engineer who gave evidence for the respondent in the earlier hearing, had come to that conclusion after undertaking the task of analysing each component of the claim associated with engineering fees. The respondent did not suggest that the claimants have been imprudent in abandoning the original basic design due to the changed circumstances since the relevant date of resumption(s). It was submitted, and I agree, that the changed circumstances which now exist are not entirely a direct consequence of the resumption scheme. For example, the original road design was required to complement potential subdivisional development of vacant land (Paratz's) to the north of Kameruka Street. That subdivisional development will not now proceed, not as a direct consequence of the resumption scheme but because, it appears, the Brisbane City Council has acquired the balance area of the Paratz land from the respondent for park purposes. As a consequence of that acquisition, the original road hierarchy requirements of the Council and construction requirement for the easterly extension of Kameruka Street have altered significantly. There are other road-related alterations, some beneficial to the subject balance area, others based on economic and marketing considerations. For example, the requirement for an internal road along the southern boundary no longer exists. A proposal to acquire a quarry reserve, bounded by the original holding, and to close a surveyed road which accessed that reserve, has now been abandoned, on the claimants' submission, for economic reasons. However, part of the redesign is arguably directly related to the resumption in the sense that it involves the provision of parkland adjacent to the Motorway as one of the strategies available to mitigate traffic noise problems.
I do not intend to discuss at length the opposing engineering opinions as to the salvageability of, for example, the engineering design drawings. Suffice to say that Mr Breene had considered the position, as far as he understood it, as at the relevant date of valuation. He had not read or considered the basis of valuations in the substantive judgment and would have been unaware of the valuation assumption that a delay of two years, then a "lead time" of six months would elapse before development of the balance area might commence. The post-resumption valuation was made on the assumption that the remnants of the quarry reserve and the access road to it remained available for acquisition and development in association with the balance area, at a predetermined price. That assumption had not been seen as a disadvantage, in monetary compensation terms, to the claimants.
I have no doubt that part of the engineering design work could have been salvaged had a developer set about adopting the original design as a base. However, that is not the only, or necessarily most appropriate, test for determining whether expenditure had been wasted.
Instead, questions which need to be considered, in my opinion, in determining the validity of the claim for items such as engineering design work include the following, with my responses:(i) Question:
On the assumption adopted in the before resumption valuation, would the engineering design work and the availability of engineering design drawings, increase the land value?
Answer:
Yes, as far as that work related to the proposed Stages 1 and 2. It was a specific finding by the Court that separate or parallel development of Lot 2 (and by inference Stage 5) was not complementary to the development of Lot 1.
(ii)Question:
Was any added value for such engineering design work included in the valuation adopted by the Court?
Answer:
No.
(iii) Question:
Why not?
Answer:
The parties had agreed that the claim for costs "thrown away" be argued separately. The value added to land as a result of various expenditure was recognised as requiring specific and separate consideration both before and after resumption.
(iv)Question:
On the assumption adopted in the after resumption valuation, did the before resumption engineering design work add value to the in globo land value?
Answer:
No.
(v)Question:
Why not?
Answer:
The assumption that a period of two years would elapse before the development potentiality of the land might be formalised, was indicative of the perceived uncertainties as at the relevant date of valuation. Furthermore, a "lead time" of six months was indicative of the perception that a prudent purchaser of the balance area would expect that fresh engineering design work would be required before construction of the development might commence. Even if part of the before resumption engineering design proved to be salvageable for development potentiality two years hence, it is seen as unrealistic to expect that a prudent purchaser, at the relevant date of valuation, would have paid some increased price over basic in globo land value for plans with uncertain use potential.
Other Considerations relative to Substantive Judgment
Proposed Stage 5 - Lot 2
The evidence in the earlier hearing suggested that much of the preliminary engineering design work for Stage 5 had been carried out specifically in relation to a sale proposal and separate development strategy for Lot 2. In the substantive judgment (p.29) the evidence had been found "unconvincing as to the potential for the separate management lots of the subject land (particularly Lots 1 and 2) to be sold as individual in globo parcels with potential to be developed and marketed as individual estates, complementary one to the other, through differing lot yield strategies". In that context, the expenditure on the proposed Stage 5 would be seen to increase the in globo value of the land only if the vendor's design and marketing strategy represented the highest and best use of Lot 2. In my opinion, that was not the case, as at the date of valuation. Therefore, while the expenditure would have been wasted through either its prematurity or design strategy, or both, that was not as a consequence of the resumption. Regardless of that opinion, I am influenced to accept, on the overall evidence, that, had the expenditure in fact resulted in an increase in the in globo land value, before resumption, the salvageability of much of the Stage 5 work would have been a possibility much stronger than for the salvageability of the detailed design drawings completed for Stages 1 and 2.
Project Management Expenditure
It is clear that a significant aspect of Mr McNaughton's work for the claimants was related to project management duties. I have endeavoured to identify and delete that component of work contained in any of the invoices to which Mr McNaughton has made reference. As I see it, project management is part of the process involved in "proving-up" the highest and best use of land and is an inherent component in the basic in globo value of land with immediate development potential.
The individual items in the engineering fees component of claim are discussed with relevant findings as follows:
| Item | Particulars | Claim | Award |
| 2 | Engineering Services relating to Stages 1 and 2 - Lot Layout, Electricity, Intersections. On Mr McNaughton's evidence a small part of this invoice related to work done on cost estimates and cash flows. That part, unidentified in terms of quantum, related in my opinion, to the "proving-up" process in establishing the in globo value as assessed. The major component, which I will adopt as about 90% of the invoice, in the absence of precise evidence, is considered to represent part of the cost involved in the production of the eventual engineering design, the added value of which was excluded from the before resumption in globo value. | $1,590 | $1,400 |
| 3 | Lot Layout, Land Use, Electricity. Mr McNaughton identified the expenditure in this invoice as "relating to work developing the subdivision layouts" for Stages 1 and 2 as well as potential uses of the land. However, the majority of the work appears to me to be of a nature more aligned to project management and the "proving-up" of the potentiality of the land as valued. In the absence of direct evidence as to the various cost components within the invoice I will allow 15% of the total claim based on the comments in paragraph 20 of Mr McNaughton's statement as work directly relating to engineering design, the added value of which was excluded from the in globo value. | $11,330 | $1,700 |
| 4 | Design of Allotments Stages 1 and 2. Considered fully related to the engineering design not included in the in globo value. | $3,650 | $3,650 |
| 6 | Design of Allotments Stages 1 and 2. Comments as for Item 4 above. | $3,455 | $3,455 |
| 8 | Design of Allotments Stages 1 and 2. Mr McNaughton identified the invoice as being "associated with coordination of marketing and modelling consultants". This is seen as a function of project management and "proving-up" the potential. In the absence of specific evidence as to the component costs within the invoice but having regard to paragraph 29 of Mr McNaughton's statement and the wording of the actual invoice, I will allow a rounded 85% of the claim, as relating to the engineering design. | $5,260 | $4,500 |
| 9 | Design of Allotments Stages 1 and 2. Comments as for Items 4 and 6 | $5,810 | $5,810 |
| 10 12 14 15 | Engineering Design and Planning Fees. The engineering and design fees were calculated on the basis of 6% of the estimated construction cost which was adjusted as more precision was possible. These fees as invoiced and paid amounted to $225,000. This is the major expenditure not included in the in globo valuation before resumption. The "planning" component of the claims was described in the invoices 10, 12 and 14 as "planning and liaison with Brisbane City Council for rezoning and subdivisional approval". Mr McNaughton's explanations in paragraphs 39, 41 and 45 of his statement indicate to me that expenditure amounting to $6,415 could be regarded as having been reflected in the before resumption valuation basis. However, "pavement design and testing" in Item 15 in the amount of $3,552 would, in my opinion fall within the engineering fees not included in that valuation. Mr Breen's opinion was that 63% of the expenditure in Items 2, 3, 4, 6, 8 and 10 was capable of salvage. He was also of the opinion that as the design fees were directly related to the estimated cost of construction of Stages 1 and 2 those fees should have been adjusted back to the actual (lower than estimated) tender price eventually accepted, when a credit should have applied. He also was of the opinion that 81% of the design and planning fees was capable of salvage if the basic original design had been adopted after resumption, with redesign for only that part of the land adjoining the Motorway Corridor. I have already given reasons for rejecting Mr Breene's opinions relative to the worth, after resumption, of the before resumption engineering work. | $234,937 | $228,550 |
| 19 | Cost Estimates. In paragraph 57 of his statement, Mr McNaughton described the content of this invoice as involving cost estimates for checking tenders when received; costings for proposed development of Stage 5 in Lot 2 and thirdly considering submissions regarding marketing and landscape design. It is my opinion that this work relevant to Stages 1 and 2 went either to "proving-up" the potential of the land and/or project management which was reflected in the in globo valuation adopted before resumption. I have already discussed my view as to the work carried out in Stage 5 as not having been wasted, if it was entirely, as a direct consequence of the resumption. It is my opinion that no allowance should be made for expenditure on the work to which Item 19 relates. | $5,425 | Nil |
| 20 21 | Tenders Stages 1 and 2. The claim for work relating to these invoices included not only work associated with the calling of tenders and the tendering process generally, but also further preparation of cost estimates including for Stage 5, and further design work in Stages 1 and 2. While it is my opinion that some of this work would add value not included in the in globo valuation basis it is an unidentified but probably small proportion only of the claim. Bearing in mind Mr Breene's analysis of the recommended tender price, it is accepted that some design fee credit could be argued on the basis of the actual tendering result. Mr Kleinschmidt gave evidence that he had paid the fees and had the development proceeded he would not have expected any credit based on the actual tender prices, because included in Mr McNaughton's work for Stages 1 and 2, was design work external to the property as part of the Council rezoning negotiations. The reasons given earlier for not allowing compensation for expenditure said to have been wasted with regard to Lot 2 are relevant to the Lot 2 component in these invoices. All things considered I make no allowance under these items. | $6,760 | Nil |
| 17 22 | Vegetation Protection Orders and Quarry Reserve. The work involved in these invoices relates to matters which would be involved in the "proving-up" process associated with the basis of valuation adopted in the primary judgment. | $3,486 | Nil |
| 16 18 23 24 25 26 27 28 29 30 | Stage 5; Contamination Investigations; VPO's. Work claimed in these invoices as is relevant to Stage 5 in Lot 2 is not allowed for the reasons given earlier. Any expense involved in establishing that the land was free from contamination is reflected in the valuation which assumed such status. The invoices indicate some minor proportion of some of these invoices could be related to compensable engineering related issues but any arguable credit relative to design fees would in my opinion counter the compensability perception. No allowance is made for the claim under these items. | $23,179 | Nil |
| 33 | Progressing Subdivisions Stages 1, 2 and 5 and Contamination. Reasons have been given for not allowing work in Stage 5. Also there has been a discussion as to the compensability of expenditure subsequent to the emergence of the shadow of resumption, bearing in mind the assumption made in the valuation basis. The balance of the work claimed under this invoice (ie progress of subdivisions in Stages 1 and 2) is also reflected in the valuation basis adopted. | $6,296 | Nil |
| 34 | Advices and Attendances on Meetings - Subdivision Stage 5 and Shopping Centre Rezoning. The component in this invoice as relates to Stage 5 is disallowed. As I understand the claimants' case, the substantive judgment has been interpreted by them as having disregarded the shopping centre potential. The reasons for that being a misinterpretation have been discussed earlier. The expenditure relating to the shopping centre rezoning procedure was not wasted, because the adopted highest and best use potential recognised the shopping centre component. | $4,347 | Nil |
| 38 | Subdivisional Applications Rezoning Applications Shopping Centre, Resumption Impact, VPO's, Town Planning Appeal Process, Contamination Report, Clearing Organisation. Reasons have been given why no allowance will be made for work related to Lot 2 or as a result of the emergence of the resumption scheme. There is no evidence as to the proportion of work involved in organisation of the clearing but it seems reasonable to assume that that work would relate to only a small proportion of the claim under this item. I will discuss the question of wasted expenditure on clearing under that specific heading but I see it reasonable to allow a nominal amount for the organisational work particularly in relation to Lots 1 and 2 under this item. | $10,476 | $1,000 |
| 39 | Various Work of a Project Management nature including organisation of clearing and negotiations associated with the resumption scheme. Project management work associated with Lot 1 is considered to be reflected in the before resumption valuation and not further compensable. I have discussed the organisation of the clearing and made an allowance which I believe to be sufficient under the previous item. | $5,095 | Nil |
| 40 | Resumption Scheme Effects, Planning Lot 2, Shopping Centre Rezoning, Lifting VPO's. For reasons discussed earlier none of the expenditure as claimed in this invoice is considered compensable. | $8,442 | Nil |
| 42 43 45 48 48B 48C 49 50 51 52 55 58 | Resumption Scheme Effects - Town Planning Appeal - Road Closure. The road closure component is reflected in the valuations while other matters are associated with the town planning appeal strategy, the compensability of the expenditure on which, is negated by the before resumption valuation assumption. | $29,269 | Nil |
| TOTAL | $368,807 | $250,065 |
(2) Legal Fees
The legal fees claimed relate to a total of 40 invoices. Invoices which were described as comprising solicitors' fees "arising out of the Brisbane City Council failure to process claimants' rezoning application" amounted to $36,986. Further invoices related to "matters associated with Planning and Environment Court appeals" and amounted to $15,150. There was an invoice for Counsel fees related to Judicial Review proceedings in the amount of $6,780.
Mr GV Skelly, the claimants' consultant solicitor, gave evidence in the substantive hearing and also in this matter.
It was the claimants' submission that the expenditure on these specific legal fees would not have been outlaid had it not been first, for the shadow of resumption, then later, the initial resumption. They say it was wasted expenditure as it did not increase the value of the land.
The strategy employed was designed to force the Brisbane City Council to formalise the earlier rezoning negotiations. However, as discussed earlier in the reasons, the before resumption valuation in the substantive judgment was made on the assumption that zoning negotiations had been formalised as at the relevant date of valuation.
Double recovery would result if legal fees involved in attempting to achieve that situation were allowed as being compensable, when the land had been valued on the assumption that rezoning was in place. As discussed earlier it would have been a different matter had the land been valued excluding the increase resulting from that assumption.
None of the items claimed under the heading of "Legal Fees" are considered compensable.(3) Architect's Fees
These fees were outlaid for the architectural design of the shopping centre development before resumption and as I understood it were produced to complement the relevant rezoning application. The fees totalled $5,220, in accordance with invoices described as Items 13 and 37.
The before resumption valuation recognised potential for shopping centre development and the expenditure related to that approval process was not wasted. That potential was found to increase value above the in globo residential land value, but only so far as the area of land required for the first stage of development. The evidence as to the practical need for regular review, through economic research, of shopping centre potentialities, leads me to the conclusion that architectural plans for other than the first stage would also have been the subject of regular review. Any increase in value attaching to the architectural plans would, on the findings in the substantive judgment, relate first to the rezoning process and then to the use to which the plans for the first stage of development could be put.
It follows that if the first stage potential remained after the resumption, as was a judgment finding, then any residual value of the plans subsequent to the rezoning process should also have remained unaltered after resumption.
Mr Kleinschmidt's evidence was that current planning for development of the balance land did not provide for a shopping centre, for reasons associated with the loss of market catchment and position within that reduced catchment, first as a direct consequence of the resumption scheme, then as a result of the altered staged development strategy for the balance area, then the emergence of competing developments in the immediate locality.
Some of those considerations led to the finding in the substantive judgment that the overall and futuristic original shopping centre potential would have been altered as a result of the resumption. However, factors such as revised marketing strategies and particularly the increased competition are not accepted as being a direct or natural consequence of the resumption.
The added value of the expenditure on these fees is not seen as representing costs thrown away as a direct or natural consequence of the resumption. No award is made accordingly.(4) Economic Research
The claim under this heading is in the amount of $7,358 being invoices described as Items 5 and 7. The expenditure was outlaid to obtain a report from Mr J Norling in 1991 to analyse the potential for a shopping centre/commercial development within the overall project.
While it was not capable of identification, in monetary terms, in the before resumption valuation, the shopping centre potentialities were recognised in the substantive judgment. For reasons already discussed, the added value of that potentiality was found not to have altered as a direct or natural consequence of the resumption. The economic research would, on the evidence of Mr Norling, who was a witness in both hearings, have required regular review even in the absence of the resumption.
I am not persuaded that the cost involved in obtaining the original report, which led to acceptance of the shopping centre potentiality, was wasted. No award is made under this heading.(5) Survey Fees
Item 11
Detailed surveying of an area of about 23.4 ha for the Digital Terrain Model, detailed lot calculations for Stages 1 and 2 ($23,000); surveys of Gowan Road and Kameruka Street ($3,000); survey of Lot 4 ($2,500) were the subject of an Invoice 2742 issued by Donald Thallon (Surveys) Pty Ltd dated 8 August 1991.
Mr JM Brewer, Cartographer and Managing Director of the relevant surveying firm, had been involved in the development project since 1991 and had been responsible for drafting the invoice. He gave evidence as to the work involved. Some of the detailed survey work in connection with the Digital Terrain Model had related to land which had subsequently been resumed. On a proportionate area basis he calculated that $4,209 of that work had been wasted, as would be another $1,000 as the estimated cost of checking the balance of that original work, after resumption. It was his opinion that the lot calculation survey work which he estimated as comprising $5,445 for 121 lots in the Stage 1 and 2 design had no post-resumption salvage value. Due to development in the locality since the original work he saw the need to resurvey the Gowan Road and Kameruka Street areas, the original $3,000 expenditure for that work having been thrown away, in his opinion. His calculation of the expenditure wasted totalled the $13,654 as claimed for this particular item.
Mr Brewer has been involved in post-resumption planning and survey work and the current development strategy makes no use of the original Stage 1 and 2 lot calculations.
However as with the engineering design drawings, Mr Breene was of the opinion that only part of the original lot calculations would be wasted as a direct consequence of the resumption.
I accept that, had it been recently performed as at the date of resumption, the work in the invoice to an amount of $26,000 as part of the engineering design requirements, would have increased the in globo land value on the before resumption assumption. That increase has not been included for reasons similar to those relating to the engineering work with which these fees are directly associated. However, on Mr Brewer's evidence, it would seem that due to the time elapse since the work had been undertaken (commencing in 1991) the rechecking estimate ($1,000) and the resurvey of Gowan Road and Kameruka Street ($3,000) would have been required in any event on the valuation assumption adopted, at some time prior to the relevant date of valuation. It is my view that the added value of the survey work at that relevant date, based on Mr Brewer's oral evidence, would have been $22,000.
The before resumption valuation assumption, included the existence of Lot 4 as one of the negotiated rezoning conditions. Mr Brewer, correctly, had not considered the cost of surveying that lot, as included in the invoice, as having been wasted expenditure.
For reasons similar to those relevant to the engineering design drawings, I do not accept that, after the resumption, a prudent purchaser would have been prepared to pay any premium above the relevant valuation adopted, for the earlier lot calculation work. However, on the assumption adopted for the after resumption valuation, and on Mr Brewer's evidence, the apportioned cost of the detailed survey work involved in the Digital Terrain Modelling, less the cost of the lot calculations ($5,445) for Stages 1 and 2 would be salvageable expenditure.
Based on my calculation of the added value before resumption under this item ($22,000) and the area Mr Brewer apportioned to the balance land (81.7% of the surveyed area) the added value after resumption would be $17,974 less $5,445 or $12,529. The wasted expenditure would be $22,000 less $12,529 rounded to $9,470. That amount will be awarded under Item 11.
Item 44
This item related to Invoice 5845 dated 31 January 1994 for work performed by the surveying firm Saunders Havill Associates. The work was associated with Stage 5 in Lot 2 and was apportioned as lot calculations ($5,286); Digital Terrain Model ($1,370); and "location of paper barks reduction of information and provision of plan" ($1,281).
Mr Brewer gave evidence in relation to this work. In his opinion the lot calculation work was of no value after resumption due to the effects of the resumption and the different design strategy now adopted. He found the balance of the work salvageable. Mr Breene was of the opinion that only part of the lot calculation work was wasted.
For reasons similar to my considerations as to the compensability of engineering fees associated with Stage 5 in Lot 2, the claim for survey fees associated with the lot calculations is not allowed. The balance of the work in this invoice would be regarded as having equivalent added value both before and after resumption and was not therefore wasted expenditure. No allowance is made for Item 44.(6) Environmental Engineers
Mr McNaughton gave evidence to the effect that, as parts of the parent parcel had been used for fuel and chemical storage in connection with the original quarrying operation, a contamination report had been seen as necessary. The work cost $1,772 but Mr McNaughton was of the opinion that only that part which related to the land resumed was claimable.
However, the in globo valuation was based on the land being free of contamination, through comparison with sales evidence of uncontaminated land.
The expenditure was a necessary part of that associated with "proving-up" the potential of the land as adopted in the valuation.
The claim in the apportioned amount of $1,046 is not allowed.
(6A) Department of Environment and Heritage
The proposal to have the land registered as free from contamination involved fees to the relevant Department in the total amount of $400. The claim for $236 represents the proportion applicable to the resumed land. Considerations in this item are similar as for the previous claim (6) and no award is made.(7) Clearing
Although in Mr McNaughton's statement (paragraph 92) it was suggested that the invoice for clearing (Item 41) related to "the clearing of Lot 1 and 2 in preparation for the development of the land for subdivision into residential lots" the evidence indicates to me that Lots 1, 2 and 3 of the parent parcel with the exception of areas covered by Vegetation Protection Orders were subject of the clearing. The total cost of that clearing was $36,959.
It was the evidence of Mr Kleinschmidt that about 21.7 ha of the balance land after resumption had been re-cleared in 1999 at a cost of $21,789. It was the claimants' submission that the original clearing had been carried out as part of the development process and due to the delays caused by the resumption procedure and the subsequent regrowth which had occurred on the balance land the original expenditure was wasted, not only on the resumed land, but on the balance area as well.
Mr Breene had been of the opinion that the extent of clearing was in excess of that required for the earlier stages of development. He did not know why the clearing had been carried out in the first place but did not go as far as to say that the claimants had acted unreasonably in having either the original or subsequent clearing effected. His point was that, from an engineering perspective, the clearing was excessive if in fact regular re-clearing prior to development stages became necessary.
It is obvious that the nature of country and original vegetation cover was such that heavy regrowth occurred subsequent to clearing. Mr Breene's opinion as to the extent of clearing necessary for the initial development work is seen as being relevant to the question of wasted expenditure, at least as it relates to the consequences of the resumption.
In the substantive judgment, the assumption was made that construction could have been commenced within Lot 1, at the relevant date of valuation. Development of Lot 2 was not seen as having immediate competitive development potential as at that date. It is accepted that the clearing of land ripe for subdivisional development would increase its market value. However, for reasons associated with the manner in which the question of abortive expenditure was to be argued, the added value of clearing was not a consideration in the before resumption valuation. Nevertheless, any increase in the before resumption valuation resulting from clearing would have been limited, on my acceptance of Mr Breene's evidence, primarily to Lot 1 decreasing with its regrowth potential on Lot 2 which was not considered ripe for development, then with no added value to Lot 3 which had quite distant development potential. No apportionment of the areas of clearing from lot to lot were provided to the Court, but consideration of the aerial photography in Exhibit 20 (as at 17 September 1993) tendered in the earlier hearing, suggests to me that, of the total clearing cost of about $37,000, slightly less than half of that cost, say $16,500, would have been attributable to Lots 1 and 2. Of that amount no more than $10,000 would be apportioned to Lot 1.
Based on the findings in the primary judgment relative to the after resumption valuation and leaning to the claimants in terms of providing benefit of doubt, I will accept that the original cost of clearing Lot 1 and part of the original cost of clearing Lot 2 (say 50%) was wasted as a direct consequence of delays occasioned by the resumptions. The balance of the original clearing if it was effected as part of the development process, as submitted, and for no other reason, would have been largely wasted due to the prematurity of the work relative to that development potential and the regrowth propensity of this type of country. In accordance with that reasoning I will award the amount of $13,250 under this heading.(8) Freedom of Information Application Fees
Fees paid for application for documents in an attempt to establish the proposed route of the Motorway "so that the applications before Council could be resolved" are not considered compensable bearing in mind the valuation assumption made in the before resumption scenario.
Summary of Claim and Award
Claim Award
(1) Engineering Fees $368,807 $250,065
(2) Legal Fees - Solicitor $52,136 Nil
- Counsel $6,780 Nil(3) Architects' Fees $5,220 Nil
(4) Economic Research $7,358 Nil
(5) Survey Fees $18,940 $9,470
(6) Environmental Engineers $1,046 Nil
(6A) Department of Environment & Heritage $236 Nil(7) Clearing Contractor $36,959 $13,250
(8) Freedom of Information application fees $109 Nil
TOTAL $497,591 $272,785
Orders
In addition to compensation ordered to be paid and interest thereon in the judgment dated 17 March 2000, it is further ordered as follows:
(1)The respondent pay to the claimants the amount of $272,785 for costs thrown away consequent upon the resumption.
(2)The respondent pay to the claimants simple interest at the rate of 6.75% per annum on the amount of $272,785 for the period commenced on and including 3 March 1995 ending on and including the day immediately preceding the date on which payment of compensation determined in this judgment is made.
RE WENCK
MEMBER OF THE LAND COURT
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