Lakes Investments Pty Ltd as Trustee for Lakes Unit Trust and Landel Pty Ltd as Trustee v Chief Executive, Department of Natural Resources

LAND COURT BRISBANE

12 FEBRUARY 2002

Re:V00-42, AV00-347 V00-527, 528 and 529

Appeals against Unimproved Valuations
Valuation of Land Act 1944

Local Government: Townsville

Lakes Investments Pty Ltd As Trustee For Lakes Unit Trust v.
Chief Executive, Department of Natural Resources (V00-42 & AV00-347)

AND

Landel Pty Ltd As Trustee v.

Chief Executive, Department of Natural Resources (V00-527, V00-528 & V00-529)

(Hearing at Townsville) J U D G M E N T

[1] These five appeals share a number of common issues, so whilst they were, to some extent, heard sequentially, the records were integrated by consent of the parties. One significant element of commonality between the appeals arises out of the fact that each is concerned with land situated in a development in Townsville known as "Lakes II". Each of the appeals arises under the Valuation of Land Act 1944 (VLA).

[2] The appeals brought by Lakes Investments Pty Ltd (Lakes Investments) concern Lot 1 on SP107568 with Appeal V00-42 relating to this land's valuation as at 1 October 1996 and Appeal AV00-347 relating to the valuation made as at 1 October 1999. I refer to this land as "Lot 1" in these reasons. In the case of the 1996 Lot 1 valuation the Chief Executive's figure is $330,000. Whilst in its Notice of Appeal the appellant contended for a valuation of $50,000 it led evidence to a value of $174,000. For the 1999 relevant date the Chief Executive completed a valuation of $375,000. The appellant maintained the figure of $50,000 in its Notice of Appeal but led evidence to a figure of $230,000. The appellant company is controlled by partners of a firm of solicitors, Boulton Cleary & Kern. The land was purchased pursuant to a

contract dated 29 May 1998. The firm now occupies commercial premises which have since been constructed on the site.

[3] The other three appeals were brought by Landel Pty Ltd (Landel). The company is controlled by Lawrence Lancini, a prominent land developer in Townsville. Appeals V00-527, V00-528 and V00-529 are against the valuations as at 1 October 1999 of, respectively, three substantially adjacent parcels being Lots 135 and 136 on SP116240 and Lot 38 on RP 893501 (referred to in these reasons as Lots 135, 136 and 38 respectively or the Landel lots collectively). For Lot 135 the Chief Executive applied a valuation of $640,000. The appellant contended for a figure of

$400,000 in its Notice of Appeal but provided valuation evidence to a figure of

$66,000. In the case of Lot 136 the Chief Executive's figure is $680,000. Whilst in the appellant's Notice of Appeal it included a figure of $289,500, evidence was led to a value of $50,000. For Lot 38 the Chief Executive applied a figure of $180,000, whilst the appellant's figure was $40,000. The appellant provided valuation evidence, however, to a figure of $49,000.

[4] All of the subject lands are located within the City of Townsville local government area. The Council developed a special town-planning instrument for Lakes II called "Lakes II Plan of Development". That plan has, during its life, been subject to some variation.

Witnesses

The following witnesses were called:
·Robert Neunhoffer, Technical Services Engineer employed by Townsville City Council (TCC) was called by the appellant to give evidence concerning flooding and drainage matters.
·Peter Logan and Keith Ronald Kern, both partners in the firm Boulton Cleary & Kern and directors of Lakes Investments, gave evidence concerning the purchase of Lot 1.
·Edward Neville Lawler, a civil engineer, gave evidence concerning the Lakes II development and the volume and estimated cost of fill on the subject lots. Mr Lawler is retired but was previously an employee of Maunsell McIntyre Pty Ltd, the engineers to the developer of Lakes II. He was not directly involved in the Lakes II project, but had an awareness of it and was able to research detail of it from Maunsell McIntyre's files. He was called by the appellants.
·John Robert Wake, a registered valuer, provided valuation evidence for each of the appellants.
·John Rowlands, a licensed surveyor called by the appellants, provided evidence with respect to flood levels on two properties.

·Daniel Ross Sampson, a solicitor employed by the firm Boulton Cleary & Kern, gave evidence concerning a flooding event in Townsville in January 1998.
·Anthony Douglas Hymus, a self-employed Project Development Consultant employed in the marketing of the Lakes II subdivision, gave evidence with respect to sales in that development and evidence concerning a flood event in Townsville in 1998.
·Dawson McPhail Wilkie, the Director of Engineering Services TCC, gave evidence concerning the Lakes II development. The respondent called him.
·Robert Arthur Noakes, a registered valuer, gave valuation evidence with respect to each of the Lot 1 appeals. He was called by the Chief Executive.
·Denis Arthur Schy, a registered valuer, was called by the Chief Executive to provide valuation evidence concerning the Landel lots.

[6] The appellant opened Mr Lancini as a witness. He was obviously within the appellant's camp and the failure to call him, it was submitted by the respondent, gives rise to an inference that his evidence would not have assisted the appellant's case: Jones v. Dunkel (1959) 101 CLR 298 at 308, 312 and 320 to 321. The respondent submitted that it is evident that Mr Lancini is a highly experienced businessman, developer and builder in the Townsville area and would have been able to give evidence regarding "a number of properties mentioned in the course of evidence".

This is a submission to which I cannot respond substantively. I was not taken to the "number of properties" which counsel had in mind. Nor was it made clear to me why Mr Lancini was the person who could shed light on the matter and who would ordinarily be expected to do so.
It was also submitted for the respondent that the appellant ought to have called a Mr Caleo, a valuer who had carried out two valuations of the land the subject of the three Landel appeals. The suggestion relied on the fact that Mr Wake did not ordinarily do valuation work for the appellant. It seems, however, that Mr Caleo was acting for the mortgagee, not for Landel, when he valued the Landel land. I cannot see what specific factual inference might be drawn by the failure of the appellant to call Mr Caleo, nor that it would have been expected that the appellant would call him. I assume that Mr Caleo is a free agent and could have been called by the respondent had it seen the benefit in following that course.

Grounds of Appeal

The grounds of appeal in each appeal were:
"1.The assessed unimproved value does not take into account the fact that this land was incapable of economic development without very substantial external and internal drainage works.
2.the valuation is excessive and unreasonable and is not supported by a proper analysis of the sales evidence.
3.The valuation is contrary to law and the precedents for assessment of valuations under the Valuation of Land Act.
4.The valuation does not take into account the costs of development and the costs of Council Headworks contributions necessary to procure development approvals nor does it take into account the cost of filling and compaction to bring the land to a stable flood free condition, capable of acceptance in the market place.
5.The Valuation does not reflect the restrictions on use imposed by the Zoning Scheme.
6.The Valuation does not properly reflect the reduced utility of the subject land by comparison with sales of land of similar zoning."

[10] In due course Ground 1 was abandoned. Ground 5, where "applicable" (according to the appellants) was also abandoned. Ground 6 was not pursued at the hearing of the appeals. The appellants also advised that Ground 4 would be relied on except for the reference to Council headworks. Subsequently the appellants advised particulars with respect to the volume of fill contended for on each of the lots and the suggested reasonable level to which each lot would need to be filled.

[11] In response to a submission by the respondent, I say that whilst the burden of proving each ground of appeal is on the appellant (s.45(4) VLA), this is not to say that an appellant fails unless it adduces sufficient evidence to address each ground appeal, each sub-issue of each ground and all of the particulars provided. Indeed, particulars may be amended with leave of the Court. In the end, the question of whether an appeal ought to be allowed turns on a consideration of the totality of the evidence and whether that evidence supports a ground of appeal. This topic is the subject of a comprehensive discussion in Van Amstel v. Chief Executive, Department of Lands (1997) 17 QLCR 27 at 41 to 46.

The Lakes II Development

[12] In broad terms the Lakes II development comprises a land area of approximately 35 ha located about 3 km from the Townsville Central Business District (CBD). The southern and western boundaries of Lakes II are constituted by Woolcock and Hugh Streets, whilst the northern boundary is effectively a railway line

running parallel to Ingham Road. With the exception of some parcels in the north- eastern corner which were not part of the development, the Lakes II eastern boundary was constituted by Kings Road.

[13] In company with counsel, I inspected the Lakes II development and its surrounding area, each of the subject properties and the main sales properties referred to by the parties' valuers. I also inspected drainage works in the vicinity of the Lakes II development.

[14] The development of Lakes II took place following an earlier development of what was referred to in evidence as "Lakes I" on the southern side of Woolcock Street. The Lakes II development was initiated when in about 1990 the TCC invited tenders to carry out the required works. The invitation to tender explained that it was intended to develop a second stage of the Woolcock Street Lakes Project along similar lines to Stage 1, which had resulted in the production of a lake and land for high quality residential, commercial and other purposes. The Lakes II development works were completed between September 1993 and March 1994.

[15] "The (Lakes II) site was badly degraded with minimal vegetation being restricted primarily to salt tolerant trees and grasses on the major parts of the area" (Exhibit 12). The man-made lake would provide an aesthetic improvement to the area and would form part of a stormwater management scheme of which Lakes I is part. There would also be an improvement in the use of the land, the subject of the Lakes II development, land which had partly been previously been used for recreation purposes and for a borrow pit in one part. Prior to the Lakes II development the land included a low-lying area subject to frequent inundation, however the extent of that area was a matter of debate between the parties. I discuss this later under the heading "Flooding".

[16] The arrangement between TCC and the successful tenderer, which was reduced to a Deed of Agreement dated 20 November 1991, was one where the successful tenderer would develop the land in accordance with the Council's requirements and in turn would, for a price, be given title to land "presently suitable for development" (in the words of the invitation to tender) and land improved to become available for development following the addition of fill, as required, to bring the land to a level acceptable to Council. The fill would come from the excavation of the lake. I will refer to the land "presently suitable for development" and the land to be filled for development, compendiously, as "development land". I will refer to the successful tenderer henceforth as the "developer". The original developer was Sabina

Ltd. Other companies whose names included "Sabina" replaced the original developer and, in due course, the mortgagee took control of the project. For simplicity I will refer to Sabina as the developer. The price for the land would take into account the estimated cost of development. A small part of the land was freehold held by TCC. Given, however, that the bulk of the land was held from the State as land reserved under the Land Act 1962, the arrangement between the TCC and the developer was linked with a Special Lease from the State which would allow the issue of freehold title subject to development being carried out in accordance with the agreement between TCC and the developer. The area accommodating the stormwater drainage works, including the lake, would remain under the control of the Council. I provide greater detail of these arrangements under the heading "Section 6(2)Issue", below.

The Scheme

[17] A report produced by the TCC engineering staff in March 1980 first canvassed the idea of the construction of large detention basins to store stormwater until it could flow out to sea at low tide. That idea blossomed into the Lakes I and Lakes II projects each of which Mr Wilkie said had stormwater detention as their pre-eminent purpose from the perspective of TCC.

[18] Lakes I is upstream from Lakes II and receives a high volume of water from a catchment said by Mr Wilkie to be 10 or 15 times larger than the Lakes II catchment. He said that Lakes II had a comparatively small catchment from the suburbs of West End and Garbutt. Water from Lakes I flows via culverts under Woolcock Street into the lake in Lakes II, now called "Paradise Lake", where it can be stored for eventual drainage down the Woolcock Canal which I discuss further, below. In addition to the under-road flow from Lakes I to Paradise Lake, Woolcock Street may be overtopped following certain rainfall events, thereby increasing the flow. The configuration of the finished Paradise Lake was such that water from Lakes I flows into that part of the lake near the commencement of the canal which is located at the south-eastern part of the overall Lakes II development. Water therefore drains directly from Paradise Lake down the Woolcock Canal. The lake might be described as being generally rectangular in shape with the rectangle being modified by graceful curves of land, which give it an attractive appearance. At the south-eastern part of that rectangle there is a somewhat narrower "throat" which leads into the Woolcock Canal. To the east of the throat are the Landel lots, whilst to the west is the larger part of the Lakes II development land, including Lot 1.

[19] The Woolcock Canal had been in existence before either of the Lakes projects were initiated. At its commencement the canal has been constructed parallel to Woolcock Street on its northern side and it is now partly bounded in the north by the existing Lots 135 and 136 of the Landel appeals. It continues to the east well past the Lakes II lands until it reaches Ross Creek at an area called "The Causeway". There is a Causeway Hotel near that point which I mention again later in these reasons. The canal has a tidal gate mechanism which, when closed, stops seawater flowing upstream. At lower tides the gate is opened allowing the detained water to flow down the canal into Ross Creek, then into the sea. That release of water allows further flow from Lake I into Lake II. The gate mechanism generally operates in automatic mode. I will now descend from this broad discussion of the scheme to focus more sharply on an aspect of direct relevance to the dispute between the appellants and the respondent.

Fill Levels

[20] The developer subdivided the developable land in the Lakes II project following completion of the works. As part of that subdivision two lots of interest in the case of the Lot 1 appeals were produced: Lot 8 and Lot 9. Prior to its purchase of the Lot 1 land, Lakes Investments made arrangements with the developer for Lots 8 and 9 to be amalgamated, then re-subdivided to produce Lot 1 leaving another Lot 9. The resultant Lot 1 was a little larger than the original Lot 8 whose area the new lot included, whilst the new Lot 9 was made correspondingly smaller. Exhibit 18 shows that Lot 8, prior to fill being placed on it by the developer, was at an average level of RL 3.8, whilst the original Lot 9 averaged RL 3.9. It seems, therefore, that Lot 1 in its pre-filled state averaged something higher than RL 3.8. The initials "RL" are employed instead of the full term "Reduced Level – Australian Height Datum" throughout these reasons.

[21] The TCC tender documents required the Lakes II land to be filled to a minimum level of RL 3.5, where fill was required. That was expressed as being 380 millimetres above the predicted Q50 flood level. Level RL 3.5 was therefore well in excess of the Council's broader policy of providing flood immunity up to the level that might be expected from a Q20 rainfall event, though consistent with its desire expressed in the year 2000 to move to a higher level of flood immunity. Designation of a particular rainfall event as, say, a Q20 event, is an indication of the frequency at which such an event might be expected to occur. Thus a Q20 event might be expected, on average, once every 20 years. The designation therefore indicates the dimension of the event with a lesser frequency indicating greater dimension.

[22] There was evidence from Mr Lawler which raised a query as to whether the RL 3.5 level was the level intended by the Council to be the minimum fill level, however, doubts raised by him were adequately addressed in the evidence of Mr Wilkie in my opinion. I need not relate the evidence in detail with respect to this matter, which was not pursued by the appellant in submissions. Indeed, it is implicit in the appellants' submissions that each of them accepts the RL 3.5 level as being the minimum fill level required by TCC.

[23] By way of a brief but important parenthesis, let me say here that given this fill requirement, it is my understanding that a building application with respect to any of the subject lots at RL 3.5 would have been approved by TCC if all other requirements were met. That is a clear implication of the adoption by the Council of a minimal level of RL 3.5. In support of that conclusion, Mr Neunhoffer gave evidence to the effect that as long as a block of land was naturally at RL 3.5 or was filled to that level, building approval would issue as a matter of course. That is knowledge which, importantly, the hypothetical prudent purchaser (Spencer v. The Commonwealth (1907) 5 CLR 418 (Spencer)) must be assumed to have.

[24] Whilst RL 3.5 was the level accepted by the TCC and the developer, the design prepared by the developer's engineers was to fill to a level of RL 4.2. The reason or reasons for the adoption of that level are not clearly explained in the evidence. Mr Lawler had not been involved in the project during his employment with Maunsell McIntyre, so was not able to provide a history by way of direct evidence. Evidence was not called from the engineers who were actually involved in the project.

During my inspection of the subject land I observed that the Lakes II land to the west of the lake throat is quite obviously above the level of other land in the area. Mr Lawler said as much. The Landel lots are less prominently elevated, but are still clearly above the prevailing level of nearby land put to a range of commercial uses. [26] The fill material placed on development land was won from the area which became the lake, however whereas a volume of 220,000 m³ was needed for fill, in accordance with the tender documents and the contract between the developer and TCC, the lake construction would yield 419,000 m³ of spoil. I note that the tender price was for the "excavation of material, dewatering, dredging, stockpiling, spreading and removal" of fill (my emphasis). In these circumstances the adoption of a design height of RL 4.2 would have provided an avenue for the disposal of excess material if it is the case that the 220,000 m² figure was based on a fill level of RL 3.5.

Unfortunately, it is not totally clear to me whether the fill volume of 220,000 m³ applied to a design level of RL 3.5 or RL 4.2, but it is at least clear that the developer was confronted with the need to dispose of excess fill whether a design level of RL

3.5 or RL 4.2 is assumed. This can be deduced from the fact that the development land to the west of the lake throat was eventually filled to about RL 5.2. It is also clear that the adoption of the original design level of RL 4.2 would have resulted in less surplus material won from the lake excavation needing to be disposed of off-site than if the required minimum level of RL 3.5 had been adopted. It would also be the case, I infer, that the developer would have proceeded on the basis that the added height would not have disadvantaged the land in the marketplace, but may well have enhanced it by, for example, making it more attractive to a particular segment of the market. To the east of Lot 1 and its neighbour Lot 9 to its rear there are lots both prepared for and devoted to residential uses. Residential uses overlook Paradise Lake. The added elevation of those lots from RL 3.5 to RL 5.2 would therefore afford an aesthetically improved outlook for the residential occupants. It is not, however, open on this evidence to conclude that a developer would elect to fill the subject lots to levels greater than RL 3.5 if confronted with the costs of so doing in an exercise independent of the lake construction process. Indeed, it seems that even as part of that process the developer would have preferred surplus fill to be disposed of off-site. In letters dated 14 and 23 August 1990 to TCC the developer indicated a willingness to reduce the tender price by $600,000 if TCC took responsibility to remove surplus material of 184,000 m³. This is a figure proximate to the difference between 220,000 m³ and 419,000 m³.

[27] Mr Wilkie said that it had been understood at the start of the project that the contractor would sell excess spoil to a third party. That opportunity did not, however, materialise so that during the early course of construction the contractor requested approval from the TCC to allow it to place the surplus material as fill on the development land areas. TCC agreed to that proposal and to the construction of a small retaining wall along the water frontage of development land to maximise the flat area that would be available for building. The placement of fill which is stabilised only by batters at a slope consistent with the natural angle of repose of the material used will reduce the plateau of land available for building. In the result, the developer applied additional material to the Lot 1 property and others in that area west of the lake throat, bringing the level of that land to about RL 5.2, but the developer maintained the original design level of RL 4.2 for the Landel lots. That additional

material was applied no later than June 1995, therefore was in place at the relevant dates of 1996 and 1999 in respect of each of the Lot 1 appeals before me.

[28] At the time of the Lakes I development the TCC proceeded on the basis that a Q50 flood would reach RL 3.0 and required developable land to be filled to that level at least. The developer adopted a level generally above RL 3.5 in its design. Mr Wilkie understood that the extra height was adopted in order that residential lots would have improved water views. In the case of Lakes I the lake excavation work produced greater fill than was needed to fill lots to RL 3.0, the balanced cut-to-fill approach yielding the level above RL 3.5. It is not improbable then, that the disposal of excavated material would have been a relevant consideration to the developer in the adoption of the higher level.

Lot 1

[29] Lot 1 faces onto Woolcock Street, a major arterial road which had, by the 1999 valuation date, become part of the Bruce Highway. As such, Lot 1 has what Mr Wake described as "very good exposure to a high volume of traffic". The lot also has frontage to Martinez Avenue, which is a road internal to the Lakes II development and to Sabina Street, which is a short street providing access off Woolcock Street into the development. Sabina Street meets Martinez Avenue at a T-intersection adjacent to the subject land. The land therefore occupies a corner position with exposure to Woolcock Street and to the less significant Martinez Avenue. Access to the Lot 1 land for traffic coming from the direction of the CBD is not available from Woolcock Street. Access from this direction is more readily obtained via Ingham Road, Hugh Street, then into Martinez Avenue via its intersection with Hugh Street. Inbound access off Woolcock Street is readily available via Sabina Street.

[30] Lot 1 has an area of 2,668 m² and is zoned "Particular Development" within the Plan of Development for Lakes II which was gazetted late in 1994. The land at each relevant date for valuation purposes is within Precinct 4A - Commercial Area. Prior to the original Plan of Development being consolidated and re-issued in December 1998, the subject was within Precinct 4B - "Fast Food/Family Restaurant Area".

[31] All of the Lakes II land was vacant at the 1996 relevant date, but some buildings had appeared by the time of the 1999 date. By October 1999 Lot 1 had been improved with a commercial building which was occupied by Boulton Cleary & Kern, Solicitors. Lot 9, which adjoins the rear of Lot 1, was vacant at each valuation date, but was proposed for a commercial development. Land on the opposite side of

Martinez Avenue from the Lot 1 property includes residential uses, while lots to the west, extending to Hugh Street, were either vacant or being used for commercial purposes.

At each relevant date all of the usual public utility services were in place. All roads were paved with bitumen and had concrete kerbs and guttering. Footpaths were initially earth but became grassed over time.

Lot 1 Valuations

[33] Both Mr Wake and Mr Noakes valued Lot 1 as at each relevant date on the basis of it having a highest and best use as a commercial site - its actual 1999 use. Such a use was available under the town plan at both the 1996 and 1999 valuation dates.

[34] Prior to the Lot 1 area being filled by the developer to a level of about RL 5.2, the land had been, as I said earlier, at an average level of something above RL 3.8. It was therefore at a higher level than the minimum level of RL 3.5 required by TCC and included in the contract for development of Lakes II. It was, presumably, part of the land described as "presently suitable for development" in the Invitation to Tender. Mr Noakes saw the Council minimum level requirement as being particularly relevant as he valued this land on the basis that it could be applied to its highest and best use without the addition of further fill. Mr Wake, on the other hand, valued the land as at both 1996 and 1999 on the basis that its highest and best use would be achieved with the addition of fill to the level actually in place at those dates. He understood that the fill was to a level of RL 5.2 and had relied on his understanding of Mr Lawler's professional work in that regard. Mr Lawler's evidence indicated that the level was actually something above RL 5.2, however, I do not see this small difference as being a matter of any moment in these appeals.
[35] Mr Wake's valuation approach was to value the Lot 1 land as filled, then to deduct the value of fill, as he saw it, to produce an unimproved value. The value of the fill, in his opinion, equated the estimated cost of placing it there at each relevant date, together with some additional allowances which I need not discuss at this stage. Mr Lawler provided evidence as to the estimated costs. In Mr Wake's view a hypothetical prudent purchaser, intent on putting the unimproved land to its highest and best use, would fill the land to its actual finished level of RL 5.2 for a number of reasons that I detail shortly.

Lots 135, 136 and 38

The appellant company purchased Lots 35 to 38 on RP 893501 in May 1997, lots which were subsequently reconfigured in the form of the Lots 135, 136 and 38, which are the subject of the present Landel appeals. In broad-brush terms these lots might be said to occupy three quadrants of a square: Lot 135 in the south-east quadrant, Lot 136 to the west of that and Lot 38 to the north of Lot 136. A parcel of land not concerned with these appeals occupies the remaining north-east quadrant. Kings Road is to the east of the square and Woolcock Street is to the south, being separated from Lots 135 and 136 by the Woolcock Canal. A cul-de-sac road, Woodman Court, runs from Kings Road along the northern boundary of Lot 135 to provide access to that lot and to Lots 136 and 38. Access onto Lots 136 and 38 is from Woodman Court, whilst Lot 135 has access from that street as well as Kings Road. All roads are full-width bitumen, paved with concrete kerb and earth footpaths. There is a pathway which runs between the cul-de-sac end of Woodman Court and the lake. This pathway separates the boundaries of Lots 136 and 38. The lake bounds the western sides of Lots 136 and 38.
The area of these lots are:
Lot 135  -             1.14 ha
Lot 136  -           1.328 ha
Lot 38  -          5,755 m²
In its pre-developed state Lot 135 had levels ranging between about RL 1.3 and RL 1.6. This lot was filled to the design level of about RL 4.2 as part of the Lakes II development works. The original design provided for a batter up from the top of a rock revetment wall which ran along the southern side of the lot where it fronted the Woolcock Canal. The top of that wall was at RL 3.5. At the top of the batter the fill was designed to reach a level of RL 4.2, though in fact the lot was filled a little higher than this towards the middle to allow cross-drainage of surface water. Mr Wake proceeded on the basis that the fill level was at RL 4.2 and ignored the level above that - this is not a matter of concern to me given my approach to the matter. Mr Lawler said that the adoption of RL 4.2 as the design level was not done to provide for the disposal of excess spoil produced by the lake excavation. Certainly, excess spoil to RL 5.2 was not placed on the Landel lots, but this is not to say that the adoption of a design level of RL 4.2 was not done with a view to the disposal of spoil that would have been available had RL 3.5 been adopted as the design level. Indeed,

as I noted earlier, a level just above RL 3.5 had been adopted for the Lakes I development.

[39] Prior to the filling of Lot 136, it had levels in the vicinity of RL 1.4 to 1.6. As part of the Lakes II development works it also was designed to be filled to RL 4.2 at the top of a batter, but was filled to a little above that for similar reasons to those which applied in the case of Lot 135. The rock revetment wall on the southern side of Lot 135 extended onto the southern boundary of this lot. On the west is a Windsor Link Wall designed to retain fill. Subsequent to the Lakes II development being completed, the appellant caused further works to be undertaken in the form of a retaining wall near the western boundary of Lot 136.
[40] Prior to the Lakes II development being carried out, Lot 38 was irregularly contoured exhibiting levels of about RL 1.25 in the west and about RL 2.2 in the north-east. The original Lakes II design proposed the filling of this lot in part only, to create a relatively small level area with the top of the batter being at RL 4.2. That level area battered down towards the north and the east, leaving low-lying unusable portions of land in those segments of the title beyond the toe of the batter. The batter to the west led down to the dedicated pathway which connected the cul-de-sac end of Woodman Court with the lake frontage. The fill was not battered to the south where the level was similar to Woodman Court and Lots 135 and 136. Following its purchase of the three lots, Landel altered the level of Lot 38 slightly by the process of grading the fill that was there and moving some of it to fill an area along the eastern boundary. A block retaining wall was constructed to retain that relocated fill. The result is probably that the overall level of the usable land on Lot 38 would be lower than RL 4.2, though Mr Wake said this is not fully clear as some of the extra fill may have come from the contouring of the car-park area. Nevertheless, fill from Lot 38 was used to fill an additional area, whilst this process did not take place on Lots 135 and 136. It follows that the fill level on Lot 38 was lower than on Lots 135 and 136.

Valuations - Lots 135, 136 and 38

Valuations of each of these lots were provided by Mr Wake for the appellant and Mr Schy for the Chief Executive. Both valuers proceeded on the basis that none of the lots was able to achieve its highest and best use without the addition of fill. Indeed, each lot would have been subject to regular inundation and local authority approval to build on them would not have been granted. In his valuations of the three Landel lots Mr Wake did not expressly propose fill to a particular level but said that a hypothetical prudent purchaser would require the lots to be filled "… above Q50 flood

level …". His valuation does not reveal what level is considered to be a Q50 flood level, nor why the TCC minimum level for a Q20 event ought not to be adopted. Nevertheless, in his reliance on Mr Lawler's fill figures and costs Mr Wake has clearly assumed a fill level to about RL 4.2. It will be immediately noticed that this is substantially below the level of RL 5.2 which he proposed as being the required level for Lot 1. He justified the adoption of different levels on the basis that in the case of Lot 1, which has been developed as an office for a firm of solicitors, there would be a greater need for flood immunity for the protection of documents, including wills, than would be the case in the Landel lots where retail premises have been constructed. I discuss this theory later. There is a "Retravision" store on Lot 38, a "Spotlight" (haberdashery) store on Lot 135 and a range of uses on Lot 136, including a paint shop, a "Crazy Clarks" and similar uses.

[42] Broadly speaking, Mr Wake adopted the level to which each lot had been filled at the relevant date, that is to RL 4.2 and placed a value on each lot as filled by comparison with sales. From that filled value he deducted what he saw to be the value of the fill to arrive at an unimproved value. Mr Schy's valuations were carried out in a similar fashion except that he assumed the lots to be filled to RL 3.5 only, on the basis that this was the minimum level required by the Council, but also on the basis that the application of fill above this level was "opportunity fill" available to the developer from the lake excavation. The fact that the fill was opportunity fill does not by itself, however, lead to a conclusion that a prudent purchaser of one of the Landel lots would not have required the filling of those lots to a level of RL 4.2 – assuming the fill would need to be paid for at commercial rates.

[43] Each of these lots is dealt with under the Lakes II plan of development which was first gazetted on 16 December 1994 and last amended in December 1998 following a consent order of the Planning and Environment Court. Each property is located in Precinct 1 (commercial and entertainment area) of the plan of development with the intention of this precinct being that the area is developed primarily for commercial purposes.

Mr Wake described the highest and best use in each of his valuation reports as "retail showroom type uses". Mr Schy did not expressly state in his valuations what the highest and best use was. He should have. "The first task of the valuer is to determine what that (highest and best) use is and then to value the land on that basis" (Adelaide Clinic Holdings Pty Ltd v. Minister for Water Resources (1988) 65 LRGA 410 and 415). Nevertheless, I infer from Mr Schy's valuation and sales evidence that

he proceeded on the basis of a commercial use similar to the use identified by Mr Wake.

Some Submissions on Valuation Methods

[45] Before I turn to discuss the main issues between the parties, it will be convenient if I dispose of some submissions concerning the method of valuation that ought to be employed in accord with the VLA. It will be useful if I first lay out the relevant law.

[46] Section 3(1) provides, in effect, two definitions of unimproved value, one with respect to unimproved land and one with respect to improved land:

"3.(1) For the purposes of this Act -

'Unimproved value' of land means -

(a)in relation to unimproved land - the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require; and

(b)in relation to improved land - the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist."

[47] No definition of unimproved land or improved land is supplied. However, an understanding of the meaning of these terms can be gained by consideration of what improvements are. For present purposes, I will refer to s.6(1):

"Meaning of 'improvements'

6.(1) 'Improvements means, in relation to land, improvements thereon or appertaining thereto, whether visible or invisible, and made or acquired by the owner or the owner’s predecessor in title, and includes all such destruction of suckers and seedlings as is incidental to the destruction of timber, and also includes the destruction of other vegetable growths and of animal pests on the land to the extent to which such destruction retains its utility, but does not include the destruction by any person of any such growths or pests which are allowed to establish themselves on the land during the ownership, except to the extent (if at all) to which it restores wholly or partly so much of the utility of a previous improvement in the nature of the destruction of such growths or pests as is, by the subsequent provisions of this definition, deemed to have been lost, and any improvement consisting of the destruction of such growths or pests, by whomsoever the same may be effected, shall be deemed to have lost its utility to the extent to which, after it has been

made, other growths or pests (as the case may be) are allowed to establish themselves on the land."

[48] At its relevant date for valuation in 1999 the Lot 1 land had been further improved with the construction of commercial premises which were then occupied by a firm of solicitors. Lots 135 and 136 were also improved with structures by 1 October 1999. Counsel for the respondent, Mr Quinn, noted that in Mr Wake's valuations each parcel of land had been valued as at that date by first valuing the land as filled, then deducing the unimproved value by deducting the value of fill. Counsel suggested that Mr Wake had therefore purported first to determine the "improved value" and, given this, had arrived at his valuation in a manner which was incompletely similar to that provided for in s.3(2) of the VLA:

"(2) However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act."

[49] The valuations of Lots 1, 135 and 136 were incomplete, it was submitted, because they did not take into account the value of the structural improvements, therefore Mr Wake had not really started from the correct point, that is the "improved value".

[50] Section 3(2)is expressed as a proviso to s.3(1), not as an independent provision, therefore s.3(1) is the governing provision. Neither s.3(1)(a) nor (b) prescribes a method of valuation. Section 3(1)(b) in particular does not by itself or in combination with s.3(2) say that an improved value must be found. All that s.3(1)(b) requires is that improvements be assumed as not being in existence. In most cases there will be little difficulty in notionally removing the improvements then valuing the land, as suitable valuation evidence will be available. Where sales of unimproved properties, comparable with the subject land viewed devoid of improvements, are not available, two particular options amongst others may be open for consideration. First, improved sales may be analysed to produce an unimproved value with the comparison being made between the subject property, unimproved, and the sale property also viewed unimproved. Second, the subject land may be notionally improved, for example by the addition of fill, then compared with sales which do not require fill. The added value of fill may then be deducted in a manner consistent with s.5 of the Act:

"5.(1) The 'value of improvements' means, in relation to land, the added value which the improvements give to the land at the time as at which

the value is required to be ascertained for the purposes of this Act, irrespective of the cost of the improvements, including in such added value the value of any hotel licence the value of which has been included in the improved value.

(2) However, the added value shall in no case exceed the amount that should reasonably be involved in effecting, at the time as at which the value is required to be ascertained for the purposes of this Act, improvements of a nature and efficiency equivalent to the existing improvements."

The method adopted by Mr Wake in each of these appeals is similar to the second option described above, except that he purported to value the fill actually in place on each of the subject properties at each of the relevant dates for valuation. What he did not do, however, was to value the structures that were in place as at the date of the 1999 valuations. He disregarded the structures and proceeded to value the land, first considering its value as filled. The respondent submitted that his disregard of the structures offends s.3(2). In considering this submission I will put aside, for present purposes, the issue of the level of fill. It seems to me that the unimproved value may appropriately be ascertained by deducting the value of the structures by assuming that they are not there, then finding the value of the land as filled, then deducting the value of the fill. The result will satisfy s.3(2). Indeed, this method will probably produce a more reliable result than an approach that took into account the value of structures.

[52] The method that I have described was employed by the Court in SGIO v. The Valuer-General (1981) 7 QLCR 171 (SGIO v. VG). In that case the Court was concerned with a parcel of land that had been part of a tidal flat, but had been improved by the removal of mud and the placement of sound fill. The site was then developed as a shopping centre. Sales of tidal flat land were not available, so the Court accepted and adopted an approach in which the estimated cost of effecting the fill improvements at the relevant valuation date were deducted from the value of the land as filled. The buildings on the land were disregarded in the manner required in s.3(1)(b). Had there been suitable sales evidence available, then the Court would, I suggest, have disregarded the earthworks also.
[53] There was another difficulty with Mr Wake's approach, according to Mr Quinn, and that was that the s.3(2) approach does not provide for the unimproved value as such, but simply provides a "floor value". The correct value could be greater

than that. Whilst this submission appears to be in conflict with the proposition just discussed, I will deal with it.

It is correct to say, in my view, that s.3(2) provides that the unimproved value must not be less than a figure arrived at by deducting the value of improvements from the improved value. This is not to say, however, that a valuation which utilises such a method is necessarily defective because all that has been done is to produce a "floor value" rather than the correct value. As I have said, s.3(2) is a proviso only to s.3(1) and it comes into play only when a valuation method produces a result which is demonstrated as offending the "floor value" requirement. Any valuation method could do this. In Dunlop Rubber Australia Ltd v. The Valuer-General (1957) QdR 189 at 193 it was held that where there is no evidence placed before the Court as to the application of s.3(2) (at that time a proviso to s.12(1)), the Court's duty is limited to dealing with the evidence before it and it should ignore the provision. Certain valuations were placed before me by a valuer who was not called to give evidence. These valuations purported to value some of the subject lots on an improved basis. Given the limited purpose for which these valuations were tendered they cannot be relied upon as being relevant to the application of s.3(2). I will therefore follow Dunlop Rubber and hold that I have no substantive need to consider s.3(2). I should point out, however, that the question as to whether Mr Wake's valuations are below the "floor" value turns on the question of whether he has applied too high a value to the fill on each of the lots. The answer to that question turns most directly on the question as to the level to which a hypothetical prudent purchaser would fill each lot, if at all. That is a central issue between the parties, which I will come to in due course.

[55] Sections 3(1) and 6 of the VLA, to which I referred above, are of importance with respect to the next submission I consider. A reading of those provisions reveals that unimproved land is land without improvements as described in s.6, whilst improved land is land with some such improvements on it. Section 6 assumes a general understanding of what would constitutes an improvement for the purpose of valuing land, an understanding which was given sharper meaning by the High Court in Brisbane City Council v. The Valuer-General (1978) 5 QLCR 283 in the leading judgment of Gibbs CJ at 296-297:

"In the first place, an improvement in relation to land must be 'thereon or appertaining thereto'. This means that the improvements, if not on the land, must be 'such as are in the strict legal sense "appurtenant" to the property and incident to its ownership': McDonald v Deputy Federal

Commissioner of Land Tax (N.S.W.), (1915) 20 C.L.R. 231, at pp. 234-
235. Secondly, 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. In Morrison v Federal Commissioner of Land Tax, (1914) 17
C.L.R. 498, at p. 503, Griffith C.J. said, in a passage which has frequently been cited:

'Any operation of man on land which has the effect of enhancing its value comes within the definition of "improvement".'"

Counsel for the respondent submitted that unless the valuation approach which he said is provided for in s.3(2) is employed (a matter I discussed above) then the correct approach in accord with the VLA is to value the land in its natural state. This is a submission that I take to apply with respect to the valuation of Lot 1 where Mr Noakes valued the land as it stood prior to fill being added. I do not accept the submission as correctly stating the requirements of s.3(1)(b) of the Act. That provision applies to "improved land" and requires the valuation to be carried out on the basis that "the improvements did not exist".
Having regard to what was said by the Chief Justice in Brisbane City Council

v. The Valuer-General, s.3(1)(b) therefore requires that the works of man which enhance the value of the land and which are visible or invisible (s.6(1)) be assumed not to exist. Now there are other works of man referred to by the Chief Justice that may not add value to a parcel of land or which by the effluxion of time and usage become transformed from being improvements to becoming a disability. The requirement in s.3(1)(b) that improvements be assumed not to exist does not extend to such works of man which have been described in the cases as "worsement" (See for example Marano v. The Valuer-General (1978) 5 QLCR 194). There will, therefore, be instances where the correct valuation approach is not to value the land in its natural state, but to value the land as if improvements did not exist but with any works of man that do not add value to the land remaining in place. There is therefore no fixed statutory requirement that the land must be valued in its natural state. Whether valuation of the land in its natural or unfilled state is the appropriate method in the case of Lot 1, turns on a consideration of other matters I will come to in due course. [58] Mr Traves for Lakes Investments submitted that for Mr Noakes' valuation method to be adopted I would need to find that any fill added to Lot 1 added no value to the lot. It will be clear from my reasoning above that this is a submission that I do not accept. If it is possible to produce a reliable valuation of the land on an

unimproved basis by valuing the land directly, as if devoid of improvements, then that should be done. Such a proposition is implicit in the reasoning of the Land Appeal Court in Clough v. the Valuer-General (1981-82) 8 QLCR 70 at 76:

"It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value."

[59] It will not always be possible to find sales that are comparable with the subject land because the available sales have been improved or are otherwise considered not comparable. In such circumstances the valuer will need, as both Mr Wake and Mr Schy did in the case of the Landel lots, to introduce adjustments in the form of an assumption that the land to be valued as unimproved is filled to a certain level. In Mr Wake's valuations he did not proceed on an assumption, but on the fact of the fill level, as he understood it, but this in no way erodes the underlying validity of such an approach if it is otherwise appropriate. The question which remains, however, and which separates the valuers in all of the appeals, is the level of fill (if any) that needs to be adopted to bring the subject properties to a condition that facilitates comparison with the sales evidence.

Is the Fill an Improvement?

[60] As I have indicated, the Chief Executive adopted the position that since the TCC required a minimum fill level of RL 3.5, Lot 1 required no fill because it was at a level of about RL 3.8 unimproved; and the Landel lots required fill to RL 3.5 only. The appellants proceeded on the basis that each of the lots required fill to the level of fill actually on them at the relevant dates for valuation.

The Chief Executive submitted that fill above RL 3.8 on Lot 1 and above RL

3.5 on the Landel lots was not an improvement for the purpose of the VLA. The appellants adopted the position that fill on each of the lots should be considered an improvement because the increased elevation brought about by the fill would improve the flood immunity and exposure of the lots and for other reasons in the case of Lot 1. [62] I suppose it is theoretically possible for a work of man to neither add to nor diminish the value of land, but I doubt that such a theory would often, if ever, be observed in practice. If the added fill over RL 3.5 is not an improvement, it will most probably constitute worsement and consequently need not be notionally removed as part of the statutory valuation process. No submission was made that the fill on Lot 1, or for that matter the additional fill over RL 3.5 on the Landel lots, constituted worsement, nor was there evidence to that effect. Rather, the submission of the

respondent is that fill over RL 3.5 is surplus to what would be required by a prudent purchaser of the land to achieve its highest and best use. That is a quite different proposition from the suggestion that such additional fill is not an improvement. Every instance of "overcapitalisation" in the real estate world is one where improvements in excess of those that would prudently be made to or on a parcel of land were actually made. The fact that there may have been overcapitalisation does not mean that the works of man are not improvements. It simply means that a prudent person would not expend moneys equivalent to the cost of making the improvements by improving the land in that particular way.

[63] Now in the present case added fill to Lot 1 and fill above RL 3.5 on the Landel lots would clearly add value to the lands for the reasons advanced by the appellants. I will discuss those reasons in detail for other purposes, but need not conduct that discussion now to draw such a self-evident conclusion. Indeed Mr Schy was content to concede as much. It follows that in accordance with s.3(1)(b) VLA the fill should be assumed not to exist for the purpose of finding the statutory value of the lots.

Fill above RL 3.5

[64] I now return to consider the question as to whether as at each relevant date I should allow for the filling of Lot 1 to about RL 5.2 and the filling of the Landel lots to about RL 4.2 in settling on the value of each lot. Now the level of fill required is the level that a hypothetical prudent purchaser would say was required to allow the lots to be put to their respective highest and best use. In saying that I have in mind what Isaacs J said in Spencer at 441 concerning a hypothetical prudent vendor and purchaser:

"… 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."

One of the circumstances that the parties agree prejudicially affects the value of the Landel lots is that, unimproved, each is at a level that would prohibit their application to their highest and best use. The TCC would not permit the construction of commercial buildings on these lots until each was appropriately filled. Clearly a hypothetical prudent purchaser would be prepared to fill these lots to a level that

would allow them to be put to their highest and best use. The question is: to what level?

[66] The respondent submitted that as the highest and best use of each of the subject lots could be achieved by filling to RL 3.5 only, no fill is needed on Lot 1 and fill above RL 3.5 is not needed on the Landel lots. But, of course, the highest and best use of these lots would be able to be realised at an infinite number of levels. The correct question to ask, in my view, is: "What level would the hypothetical prudent purchaser require?" – and the answer to that question lies in a consideration of the evidence that points to what the requirement of such an abstract purchaser would be in the Townsville market.

[67] A submission of the appellants on this question relied on McDonald v. Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 231 (McDonald v. DFC of Land Tax) at 235 to 236:

"But the material fact is that there they (the improvements) are, whatever they originally cost; and the question is how much their presence adds to the natural value of the land. And in ascertaining that, the cost of replacing them if they were then annihilated is a most material factor for a prospective buyer to consider in determining what he would give for the land, and, if for a buyer, so for the Court."

[68] It was submitted that this is authority for the issue being approached in this manner: the improvements must be taken as they are and the question asked, "What additional sum would a hypothetical prudent purchaser have paid for them?" Such an approach may be appropriate where the method of valuation employed is one of first finding the value of the land as improved, then deducting the added value of improvements. There is, however (as I said in para [50]), no requirement in the VLA for the improved value to be found first of all. After all, the object of the exercise I am confronted with here is to find the unimproved value. McDonald was also relied upon in support of the proposition that the value of improvements, that is the fill, is the estimated cost of the fill

[69] It may generally be the case that improvements will add value to a parcel of land equivalent to the their estimated cost less depreciation, where applicable, but this will not always be the case. See, for example, O'Brien Nominee Pty Ltd v. The Valuer-General (1979) 6 QLCR 280. In particular cases, therefore, there will be a need to inquire further to ascertain whether the general proposition applies.

[70] In most cases where fill is added to a piece of land it could readily be assumed that such fill adds value equivalent to its cost. Such an assumption cannot be readily made in the case of the subject lands because it is known that:

·fill on Lakes II was required by the TCC to RL 3.5 only;
·the developer deposited fill in excess of that level apparently as a means of disposing of surplus material won from the lake excavation;
·the fill levels vary between RL 5.2 in the area to the west of the lake throat and RL 4.2 in the case of Lots 135 and 136;
·the fill level of Lot 38 is below that of Lots 135 and 136;
·the Lakes II lots are clearly higher than the surrounding lands which have been developed for a variety of uses, including commercial uses.

I think that the correct approach to the matter is to proceed on the basis that there is no evidence of TCC requiring fill above RL 3.5 before it would give building approval and asking the question, "in view of this what would the attitude of the hypothetical prudent purchaser be?"
A hypothetical prudent purchaser would not be intent on filling the Landel lots to any level above RL 3.5 or filling Lot 1 at all unless there was some compelling reason for so doing. The prudent purchaser would be a person interested in commercial, not residential development, therefore would bring a hard-headed, not an emotional perspective to the matter. That is, such a purchaser would apply rational economics to the issue and would not fill to above RL 3.5 unless the addition of such fill produced a positive return in the form of an enhanced value of each particular lot beyond the estimated cost of the application of that additional fill.

[73] The estimated cost must be based on a commercial arrangement, not on an assumed fortuitous acquisition of fill material from a non-commercial source. It would be an imprudent purchaser who would price land in the hope of obtaining opportunity fill, whereas Spencer requires the assumption of a prudent purchaser.
[74] Now based on the position that a prudent purchaser would adopt, I conclude that prima facie Lot 1 requires no fill, whilst the Landel lots require fill to RL 3.5. It is therefore a matter for the appellants to demonstrate that this prima facie conclusion can be overturned. In attempting to do this Mr Wake advanced four reasons for the application of additional fill:

·it would improve the flood immunity of each lot to an acceptable level;

· the higher level afforded each lot improved exposure. In the case of Lot 1 there were two further reasons advanced:

·fill was needed in order that the land might drain to Martinez Avenue, then to Paradise Lake;
·without fill the land would be lower than the adjoining land to the rear and to the footpath on Martinez Avenue. (Mr Wake described this as being a "tank effect" based on his understanding that the adjoining land on Martinez Avenue and Lot 9 to the rear was at RL 5.2.)

I will now consider each of these reasons.

Flooding

[75] Mr Wake's valuation of Lot 1 was carried out on the basis that "had the subject land not been constructed to 5.2 AHD then the public would not have perceived it as being a safe level upon which to construct residential or commercial buildings". The highest and best use is agreed as commercial, so the reference to residential buildings can be disregarded for the moment. A similar reliance on his perception of public attitude was part of his valuation approach in the case of the Landel lots. It will be convenient, however, if I initially focus on his discussion of Lot 1.

[76] Mr Wake's opinion as to Lot 1 in its unfilled state being "flood prone", to use the appellant's language, was based both on what he understood to be a generally held view in the mind of the public and on certain flood information. Mr Noakes' understanding was that the public view was that part of Lakes II was historically subject to flooding, particularly the lower saltpan area.

[77] It would be inappropriate to base an important element of a valuation purely on an understanding of the public's perception of the land. I say this for three primary reasons. First, it lacks the level of objectivity or precision that ought to apply to such matters - it is too vague and impressionistic. Second, even if there is such a view abroad, it can be assumed to have no effect on the mind of a hypothetical prudent purchaser other than to induce them to make appropriate inquiries. Third - and this is a point that really embraces the first two points - in the test of value the hypothetical prudent purchaser and vendor must be assumed to "be perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially …" (per Isaacs J in Spencer at 441). To be so acquainted involves an inquiry into the available evidence as to flooding.
[78] Mr Hymus said that potential purchasers of land in the Lakes II development often inquired as to the flood susceptibility of the land. Such inquiries were probably prompted by the fact that the area of Lakes II before development (or parts of it) was generally known as an area that was subject to flooding. That general view may have been based on the fact that the low-lying area in the eastern and northern part of the

land notoriously flooded and was also subject to saltwater intrusion. Nevertheless, it seems this was sufficient for people to raise the question with Mr Hymus concerning the Lakes II land overall. Mr Hymus particularly recalled Mr Lancini saying that he would conduct further inquiries with respect to the question of flooding. It is a matter of record, of course, that Mr Lancini's company purchased the Landel lots.

Unfortunately, in the subject of flooding, the evidence is generally imperfect. That imperfection arises from three sources. First, there is the difficulty posed by the fact that no two rainfall events will exactly duplicate each other. There will be different intensities of rainfall over different periods and in different locations. Second, the ground conditions which each rainfall event encounters will usually differ. Variations will be brought about by such things as tide level, flood mitigation works, water catchment works such as dams, drainage works and developments which lead to less water being absorbed by the soil and, therefore, greater run-off. Tide levels can be influenced by cyclones which can lead to a storm surge - a phenomenon which leads to tides that are abnormally high for the given season. Third, information as to the actual flood levels, or even the presence of flood waters in a range of locations, will usually be dependent on the relevant Local Government assembling anecdotal information. That information will be supplemented by evidence of scum lines, however, scum line levels may have been exaggerated as a result of vehicles, particularly four-wheel drive vehicles, driving through water and creating bow waves. Mr Noakes suggested that this wave action may increase observable scum lines by "up to a couple of feet". Fourth, drainage systems in particular locations may fail to perform according to expectations as a result of blockages by debris or suchlike. As a result, areas which may not generally be inundated by flowing floodwaters become inundated as a result of unexpected back-up water.

[80] It can be a difficult matter for a person interested in a particular block of land upon which there is no direct evidence of flooding or flood immunity to deduce from the available evidence whether that land was inundated during a particular rainfall event. Such a difficulty would be more likely to apply to land that is neither at a level that clearly places it above the level of any foreseeable flood, nor at a level that indicates that regular inundation is to be expected. Lot 1 appears to be in that particular position excepting that the evidence points to this parcel being subject to inundation following quite rare rainfall events.

Much of the appellant's evidence as to flooding concentrated on a significant rainfall event in 1998. The respondent submitted that evidence of this event ought to

be disregarded with respect to the 1996 valuation of Lot 1, though it could be taken into account for the 1999 valuations of Lot 1 and for the Landel lots. CMB No. 1 Pty Ltd v. Cairns City Council (1999) 1 QdR 1 (CMB) is, I think, authority for the proposition that whilst there is no general licence in a case such as this for reliance to be placed on facts which occur subsequent to the relevant date, it is appropriate to have regard to such facts to the extent that "the subsequent facts confirm a foresight rather than prove a hindsight". (CMB at 21) There was evidence that the 1998 event was either a 1 in 100, 1 in 200 or 1 in 233 year event. It seems that considerable work and debate might be needed before the 1998 event could be firmly classified, however, the force of logic and the evidence leads me to conclude that at the relevant date in 1996 it was possible to foresee such an event - and that such an event would be so rare that it might not occur within a normal human lifespan. I conclude, therefore, that it is appropriate as at 1 October 1996 to take into account the prospect of such an event to the extent that such a prospect would have been considered relevant to a hypothetical prudent purchaser. The difficulty, however, is that whilst it is appropriate to take into account the fact of the 1998 event, it would not be appropriate to take into account any of the information gathered following the actual event. This is because, in my view, a hypothetical prudent purchaser would not have been expected, even with the best professional advice, to be able to predict the actual behaviour of the flood event. That behaviour, assuming for the moment no conflict in the evidence, could only come from observations made during or after the event. I come to these observations later.

[82] A hypothetical prudent purchaser as at 1 October 1996 would have had access to a map entitled "Townsville City Areas Flooded March 1990" (Exhibit 25). That map, which was diagrammatic only, was headed as indicating "Zones of Possible Flooding". The whole of the Lakes II land was included in a zone indicated as possibly flooding. There were also maps tendered showing what was understood to be the flooding effect following a 1968 and a 1977 rainfall event, however, the parties appeared to consider that for the purpose of the 1996 valuation of Lot 1 it was the March 1990 map to which a prudent purchaser would turn as it would have represented the latest evidence.
[83] The 1990 map included, prominently, a Townsville City Council disclaimer which said, amongst other things, that "the information shown on this plan was derived from observations and photographic evidence from the flood event and is not guaranteed as accurate or complete, but has been compiled from the best information

available at the time". It concludes by saying, "For more particular flooding details, discussions with residents who are longstanding in the area is recommended". Mr Neunhoffer described this 1990 map and similar maps as being general guides to the extent of flooding for particular events.

[84] Mr Wilkie said that the information available from TCC was confusing and uncertain with respect to flooding. He said also that neither in 1996 nor in 1999 did TCC provide information regarding particular levels for particular flood events. It seems it preferred to provide general advice only.
[85] Also tendered was a document described as "Emergency Action Guide", a map which shows the Lakes II area as part of a large area of Townsville described as an "evacuation area for a storm surge 4.0 metres above mean sea level". Evacuations would occur following police and State Emergency Service advice. The date of publication of this particular map was not clear, but I understand that it would have applied at each valuation date.
[86] It is difficult to draw any reliable conclusions from the abovementioned general sources as to the flood susceptibility of the subject lots. A hypothetical purchaser would know that the information was unreliable, but would be concerned that it indicated that the lots were subject to inundation from storm surges and from rainfall events such as had occurred in 1990, an event which I understand rated a Q20 designation. Indeed, these sources would provide such a purchaser with nothing more than the equivalent of the public perception of the Lakes II area. There was, however, more detailed information available concerning the Lakes I and Lakes II areas.

An Environmental Impact Statement (EIS) was prepared with respect to Lakes

II. It was finalised in August 1992 and was, from that date, available as a public document. The EIS was necessary in order that the TCC might rezone the land from its previous "Open Space" zoning to a "Special Facilities" zone which would allow commercial development of the development land in Lakes II. The EIS included information to the effect that after the completion of the Lakes II development the maximum expected flood levels for a Q20 event would become RL 3.44, whilst a Q50 event was, confusingly, said to become both RL 3.12 and RL 3.9. Elsewhere the EIS said that developed land adjoining parkland would be "filled to levels of approximately RL 4.2 AHD. This is well above the predicted Q50 flood levels and a 300 millimetre allowance for the possible impacts of the 'greenhouse effect'". I take the reference to RL 4.2 as being a reference to the design level adopted by the

developer which would be well above the Q50 level, plus 300 millimetres if the Q50 level was RL 3.12, but not if it was RL 3.9.

[88] The conflicting information contained in the 1992 EIS was partially explained by Mr Wilkie as being the product of an effective double counting of adjustments when the hydraulic model was calibrated. He said that once the error had been corrected it became clear that RL 3.5 was appropriate for a Q50 event. It is not clear to me just when that error was discovered. Further work on the hydraulic model following the Lakes I works indicated that a Q50 flood level would be close to RL

3.12. It has been engineering practice in Townsville for some time to add a free board of some 300 millimetres to cater for the greater water levels that the greenhouse effect is expected to produce. In the case of Lakes II this appears to have been rounded up to 380 millimetres which, when added to RL 3.12, produces a round figure of RL 3.5. No greenhouse effect allowance appears to have been added in the case of Lakes I. [89] Mr Lawler understood that a copy of the 1992 EIS was provided to his firm, but could find no record of that document having been received from TCC. I have no evidence as to if and when the developer was advised of the error described above by Mr Wilkie. There was no evidence that the developer sought to adjust its design except for the purpose of disposing of surplus material from the lake - a matter I mentioned earlier.

[90] The EIS prepared for the Lakes I development - "Keyatta Park" EIS was based on material contained in the 1980 TCC report referred to earlier (para 17). That EIS required residential development to RL 3.0 which was calculated on the basis of a Q50 event. In the tender documents for Lakes II the "Keyatta Park" EIS was made available, but it was qualified by a statement that "certain of the detail is no longer accurate". A hypothetical prudent purchaser considering a price for Lot 1 at October 1996 based on that document would therefore have reasonably entertained a doubt that RL 3.0 was correct for a Q50 event. The 1992 EIS prepared for the Lakes II development was a public document but, as I mentioned above, contained conflicting information as to the level suitable for a Q50 event. The prudent purchaser would, however, know TCC policy that the Q20 event was the standard generally employed and could have read in the 1992 EIS that a Q20 would have reached RL 3.44 following the completion of the Lakes II development. Lot 1 at something above RL

3.8 therefore would have been above a Q20 event on that reading of the 1992 EIS. The prudent purchaser would have also read that following the completion of the flood mitigation scheme, that is including the widening of the Woolcock Canal which

has not yet been carried out, the Q20 level would have been at RL 3.3, thus improving the position of Lot 1 with regards to such an event. Based on these same observations the Landel lots filled to RL 3.5 would also have been above a Q20 flood level.

Anecdotal evidence concerning flooding relevant to October 1996 came from a variety of sources. Mr Lawler provided such evidence, though with more of an expert eye than the usual passenger on the Townsville omnibus. He said that a Q20 event would have resulted in water being found on Woolcock Street, but that the level would be such that it would not block it for normal traffic. Floodwaters would be at the Kings Road intersection and on Charters Towers Road. Survey evidence provided by Mr Peter Simes (Exhibit 48) shows the Kings Road intersection to be lower by about 1 metre than the median strip on Woolcock Street adjacent to Lot 1. Mr Simes also said that RL 3.784 would be found on the northern side of the median strip of Woolcock Street, however, I cannot understand from the evidence exactly where the point of that reduced level would be.

[92] If a Q20 event would not have blocked Woolcock Street then the level differences are such that Lot 1 would not be flooded by back-up water coming, as it would, from Woolcock Street East. Mr Lawler observed that back-up floodwater came from that direction. The Causeway Hotel has notoriously been an early victim in the flooding process.

[93] It appears from the evidence of Mr Wake and Mr Lawler that overland flows come into Hugh Street, which abuts the west of the Lakes II development. Curiously, whilst Ingham Road is higher in elevation than the junction of Woolcock Street and Hugh Street, underground drainage is constructed so that water flows below Hugh Street towards Ingham Road, then spills into the north-western corner of Lakes II. Mr Wake suggested that as a significant factor, but I cannot draw from Mr Lawler's evidence a conclusion that a Q20, which I understand the 1990 event represented, would have caused flooding to Lot 1 from Hugh Street. In Mr Lawler's opinion the 1990 rainfall event would have made Hugh Street all but impassable for motor cars. I understood him to say that a Q10 event would cause similar problems, though I think he was describing the situation prior to the Lakes II development. Both Mr Noakes and Mr Wilkie suggested that Hugh Street was subject to flow from a very small catchment and that, accordingly, there would be little chance of Lot 1 being flooded from water coming from that quarter.

[94] Mr Lawler expressed the view that following a Q50 event "virtually the whole of" Lakes II area would have been flooded, assuming a Q50 to flood to RL 3.5. On

the basis of that evidence, Lot 1 at about RL 3.8 would not have been flooded prior to the Lakes II development having been carried out, therefore would have been in a less risky position in relation to such a flood event following the development of Lakes II and the improvement of water management.

[95] Mr Noakes was of the opinion that at the relevant date of October 1996, Lot 1 was not at risk of flooding from the types of events that a hypothetical prudent purchaser would take into account. He thought that at that relevant date the available TCC information concerning flooding, particularly in the form of the March 1990 flooding map, could not be relied on. He considered word of mouth inquiries would be pursued and would reveal that Lot 1 had not been subject to flooding at any level of frequency that would have been of concern to a prudent purchaser having in mind a purchase for commercial purposes. He suggested that inquiries of sporting people who had used the playing fields on the Lakes II area prior to its development and of real estate agents marketing land in the area, would have supported the opinion he formed concerning the flooding experience of Lot 1.
[96] In summary, the available evidence would have led a hypothetical purchaser of Lot 1 in October 1996 to believe that the land would have been flood free in a Q20 rainfall event, but that there would have been some uncertainty as to whether a Q50 event might have inundated the land. This abstract purchaser would know that Council approval would be forthcoming for Lot 1 given that it is above RL 3.5 and is also above an expected Q20 event – the Council's prevailing standard. Such a purchaser would have also been aware of the prospect of a much less frequent event such as a Q100 or Q200 inundating the land, however, would have had no detailed information about this. The question for me becomes one of considering how a hypothetical prudent purchaser would have taken into account the information gathered.

[97] It may be of use if, in the present context, I discuss also the flood event of January 1998 as some detail of that event would be presumed as being within the knowledge of the prudent purchaser as at the 1999 relevant date.
[98] The 1998 flood event was described in a letter from TCC to the respondent dated 9 August 1999 as an "extraordinary event and … well beyond what would normally be catered for in a local government's stormwater system". The description of it as a 1 in 100, 1 in 200 or 1 in 233 year event supports that statement.
[99] There was evidence in the form of a TCC record of data showing evidence of the flood having reached between RL 2.3 and RL 31.89 in 230 identified locations

(Exhibit 28). If I dismiss the RL 31.89 location as being quite outside the norm of the figures provided, the next highest level is RL 14.38. The difference between the highest and lowest identified point remains substantial. I imagine that part of that difference can be explained by the collection of data having been from anecdotal observation, part by the operation of wave action in certain locations modifying the apparent flood level and part by the fact that flooding of a parcel of land can result from overland flows in circumstances where the water will inundate a piece of land as part of the process of that water flowing to the lowest accessible point.

[100] Mr Wake located some geographic points from Exhibit 28 on a plan showing each of the subject parcels. Considerable debate ensued as to what conclusions might be drawn as to whether any of the subject parcels might have been inundated in 1998. That evidence focused in particular on a point at "Dick Smiths" located on the south- east corner of the Kings Road/Woolcock Street intersection (point 100 on Exhibit 28) and at point 109 located in Hugh Street near the entrance to a TCC facility, that entrance being located opposite the point where Martinez Avenue meets Hugh Street. Exhibit 28 recorded that floodwater reached RL 4.11 at point 100 and RL 4.51 at point 109. Assuming the accuracy of the lower level, each of the subject lots would have been inundated if Lot 1 was not filled to RL 5.2 and if the Landel lots were filled to RL 3.5 only. The accuracy of the data is, however, an unknown quantity.

[101] Kevin John Currie owns a house located in the Lakes I subdivision. During the 1998 flood his house was inundated to a level of 50 millimetres above the slab of the house. Licensed Surveyor Rowlands levelled the inundation point in Mr Currie's house to show that inundation had occurred there at RL 4.11. He also gave evidence that on that basis the flood level would have been about half a metre below the floor level of Mr Lancini's house which was at RL 4.59. That, however, takes the matter no further.

[323] Whilst Lot 135 is said by Mr Schy to have the benefit of an easement over Easement B on Lot 138 on Plan SB116221 of 2,911 m², his valuation of Lot 136 is said to be unaffected by such an encumbrance. As I understand it, Lot 138 largely became Lot 136 on reconfiguration and for some unexplained reason, the easement was not transferred to it. Mr Schy does, however, acknowledge the benefit of a 5,137 m² easement for car parking over Lot 135, though he applied a benefit of 2.5% of land value only based on his view of the utility of the servient area.

[324] Whilst Mr Wake's approach may have been influenced by the fact that at the relevant date each lot was in common ownership, it has the attraction of simplicity. Mr Schy's approach gives the appearance of being more consistent with principle, as

far as I can understand it; however, I do not wish to apply an approach that has the hallmarks of sophistication but which may lead to a wrong result. My comfort in adopting Mr Schy's approach is not enhanced by certain thoughtful submissions made by Mr Quinn suggesting certain further modifications – matters not put to either valuer. As a matter of prudence, therefore, I will adopt Mr Wake's method.

Jump-up Effect

[325] In my discussion of the unimproved state of Lot 1 I described how Mr Wake had identified what he called the tank effect (see para 126 and following). In the end I made allowance for what I called the saucer effect, but more importantly for present purposes, the jump-up effect. Such a jump-up effect would apply in the case of the present appeals also. Woodman Court is at a level of about RL 4.2, as I understand it, though cambered to allow water to be shed and drained. The adoption of RL 3.5 for the purpose of valuing each of these lots means that there would be a jump-up of about 0.7 metres where each lot adjoins Woodman Court and a similar jump-up where each of Lots 135 and 136 abuts the other. There would be a jump-up of about 0.7 metres where Lots 38 and 136 abut the pathway.

The reason why such a jump-up needs to be taken into account involves a two-step reasoning process. The first step is to ensure that the subject land is valued in accordance with Tetzner which requires that whilst the subject land be valued as unimproved, it be valued in its improved environment. Thus, for example, in the case of Lot 136, Woodman Court and the pathway are developed to about RL 4.2 as is Lot

135. Each of these features is, in fact, part of Lot 136's improved environment. Now in valuing Lot 136 each valuer first assumed the lot to be filled to a certain level (RL

3.5 in the case of Mr Schy and RL 4.2 in the case of Mr Wake) then deducted what each saw to be the added value of the fill and associated improvements to the adopted level to arrive at the unimproved value. On this basis the subject lot was valued as unimproved and in its improved environment, however, Mr Schy did not take into account that in that improved environment there would be a jump-up. It did not feature in Mr Wake's valuation because his assumption of fill was to about RL 4.2, therefore there was no jump-up in his visualisation of the land.

Given the costs associated with placement on the Landel lots of fill from RL

3.5 to RL 4.2, I conclude that a hypothetical prudent purchaser would not see the addition of the fill as being needed to address the minor jump-up effect.

In my initial consideration of the sales evidence I have not taken into account the jump-up effect, but deal with that later.

Valuations of Lots 135, 136 and 38

[329] I will commence this discussion with a consideration of the values of the Landel lots filled to RL 3.5. Following consideration of the improved values I will introduce the various adjustments associated with the value of the added fill to RL 3.5.

[330] Mr Wake placed an unimproved value on Lot 136 of $60 per m² for the 9,980 m² that he took to be usable. This produced a figure of $598,800. However Mr Wake rounded this to $600,000. Mr Schy started with an improved value of $74 per m² for the whole site of 13,280 m² or $982,720 overall.

[331] As an alternative to his valuation of Lot 136 at $74 per m² overall, that is taking into account the external land of an unstated area, Mr Schy proposed a valuation based on Mr Wake's measurements, but assuming fill to RL 3.5 only. On that basis the usable area would be 10,340 m², which he valued at $85 per m². This yields an overall value of $878,900. Whilst he had said that the external land would have a value of $5 per m², he did not in this alternative method add this figure in. He said that in adopting that usable area the fill volume would become 18,600 m³ instead of the 26,500 m² in his valuation, He was not challenged on this. It will be convenient for me to employ Mr Schy's alternative valuation in my consideration of the Lot 136 appeal.
[332] Mr Wake valued Lot 135 on the basis of its as-filled level to about RL 4.2. He valued the usable part of 10,200 m² on his calculations at $65 per m², giving a total of

$663,000. Mr Schy valued the whole of the land (11,400 m²) at $82 per m² on the basis of it being filled to RL 3.5. His improved value figure was therefore $934,800. Mr Schy did not provide an alternative valuation for Lot 135.
[333] Mr Wake valued the 2,530 m² of Lot 38 that was actually filled to a level something below RL 4.2 at $80 per m², giving a total improved value of a rounded
$200,000. Mr Schy valued the whole of the 5,755 m² at $52 per m². His improved value was therefore $299,260, though he provided a fresh valuation of this lot based on the filled area relied on by Mr Wake. I outlined that fresh valuation above (at para 310). Since that valuation proceeds on a similar basis to that of Mr Wake and given my comments at para 311, I will adopt this fresh valuation as being Mr Schy's primary valuation.

Mr Wake's Valuations

[334] Mr Wake valued Lot 135 first of all in the mental process that he employed, then compared Lots 136 and 38 in sequence. That is the manner in which evidence

was presented and cross-examination conducted, so I will largely adopt a similar approach.

[335] Lot 135 enjoys exposure to both inbound and outbound traffic along Woolcock Street and from Kings Road, which it also fronts. Both valuers agreed that its exposure is superior to that of Lot 136 which is less visible to outbound traffic along Woolcock Street and to traffic on Kings Road. Lot 38 to the rear enjoys some exposure to Kings Road over a lower profiled allotment which stands between that lot and Kings Road, but has reduced exposure to Woolcock Street. There was considerable debate concerning the comparative exposure of the Landel lots when considered against other lots in the Lakes II development, such as the Radio 4TO site. In short, Mr Wake suggested that the exposure enjoyed by Lots 135 and 136 was not as great as the 4TO site – a proposition with which I agree; though I do think that he has understated the exposure of Lots 135 and 136 to traffic travelling inbound. These lots are well exposed over the throat of the lake and over the Woolcock Canal. Whilst Lot 38 is clearly less prominent, the building on it also enjoys some exposure between the building on Lots 135 and 136 which are set well apart.

Sales Evidence

[336] Mr Wake included a schedule of 10 small hectare industrial lot sales as Schedule A in his valuations of the Landel lots, but agreed during cross-examination that these sales were not to be relied on in valuing the subject lands. He also included a number of sales transactions that had taken place in the Lakes II development itself, but placed no reliance on these also for reasons that I will come to more fully in due course. That schedule included the purchase of the land which now comprises the Landel lots, but in a previous configuration. That sale took place in May 1997 and involved a bulk sale of 30,500 m² for $875,000 which calculates to $28.70 per m². In Mr Wake's opinion the purchase of the subject land for that figure reflected the inappropriate zoning which existed at that time and the fact that the purchase was of an aggregation. Mr Schy included nine Lakes II transactions in his valuations. He also made reference to the relativity of the value that he placed on the Landel lots with five other Chief Executive values in the area. I explain briefly in due course that this relativity evidence was of no assistance to me.

[337] Mr Wake included a schedule of 10 sales that had taken place in Duckworth Street, Garbutt, and placed reliance on these sales in the valuation that he prepared of the Landel lots. Whilst some of these transactions were able to be jettisoned for individual reasons, the real debate between the parties lay in the question as to

whether it is the Duckworth Street sales or the Lakes II sales that provide the better basis for valuation.

Mr Wake's Sales 1 and 7 to 10 inclusive are located on Duckworth Street to the south of Bayswater Road, which runs roughly parallel to Woolcock Street to its south. South again of Bayswater Road is Dalrymple Road, which runs at an angle in a north-east/south-west direction. Mr Wake said that the area of the Duckworth Street sales is one where retail warehousing uses were emerging to displace previous industrial uses. Some such industrial uses remain on Duckworth Street, especially to the north of Bayswater Road, but also to the east and west of Duckworth Street, leaving Duckworth Street itself at the vanguard of this emerging use. Retail warehousing is also emerging in Dalrymple Park where it fronts the service road to Dalrymple Road, but to the rear of these uses the light industrial uses remain. Panel beaters and spray painters are to be found in one such location (Veness Court) referred to locally as "Gasoline Alley". These Dalrymple Park retail warehousing uses and those in the southern part of Duckworth Street therefore form a patchy, but emerging veneer of retail warehousing against a background of light industrial uses. [339] Lakes II, by comparison, and the Landel lots in particular, are to be found in a more cohesive commercial environment with an attractive residential backdrop, together with Paradise Lake. There are retail uses to be found near the Landel lots on Woolcock Street including the Castletown Shopping Centre on the opposite side of the street.
Mr Wake conceded that Woolcock Street afforded a better street frontage than Duckworth Street, but put that advantage as being slight only. I prefer the view that Woolcock Street was at the relevant date much superior to Duckworth Street and that the Landel lots obtained an advantage from their proximity to it. My conclusion applies equally to Bayswater Road which crosses Duckworth Street. Mr Wake's Sale 7, which transacted at $63.75 per m², is located on the corner of Duckworth Street and Bayswater Road – an inferior location to the Landel lots, in my view.

[341] Whilst my attention was drawn particularly to that part of Duckworth Street south of Bayswater Road in the context of a suggestion that this is the area where retail warehousing uses are clearly emerging, I cannot discern from Mr Wake's sales that the market has paid any premium for land in that area over the land in the north of Duckworth Street.

[342] Mr Schy said that the land in Duckworth Street had been Commonwealth land and that in October 1999 was still zoned for Commonwealth uses, including "Special

Purposes" zonings. Whilst he offered that as a criticism of Mr Wake's sales, I notice that Mr Wake's Sale 7 is recorded in his valuation of having a "General Industry" zoning at the date of sale in October 1999, thus indicating, I would think, that the local authority would be amenable to rezoning the land from the special zonings to zonings suited to development. The Duckworth Street area is designated as "Industry" in the Strategic Plan for the City of Townsville.

[343] Mr Schy had been involved in a land use planning project which included the Duckworth Street land and during that process became aware of the impact of aircraft noise on the area. He said that there is a "noise tunnel" which is projected through the Duckworth Street area from the Townsville Airport. Noise from aircraft landing and taking off affects the Duckworth Street sale lots substantially more than lots, for example, 100 metres to either side of the noise tunnel. He said - and I understood Mr Wake to agree with this - that the Duckworth Street area would be impacted more greatly from aircraft noise than would the Landel lots. Mr Schy said that noise is also generated from aircraft warming up or idling on the airstrip itself. The airstrip is used by the armed services and visiting services, as well as civilian aircraft. Mr Schy expressed the view that aircraft noise would be a material consideration for a purchaser buying, for example, the property the subject of Mr Wake's Sale 7 which has now been put to use as a "hardware house". This is a form of retail use in which hardware items stored throughout a large building are sold direct to the public.

[344] Clearly the disability of aircraft noise would be a major consideration in the case of a residential use, however, I accept Mr Schy's opinion that it would be a material consideration for a use such as a hardware house or other retail warehouse uses frequented by the public. Mr Schy said that "it is impossible to hear while planes are going overhead".

[345] In short, it was Mr Schy's opinion that it was preferable to employ sales in the Lakes II area rather than sales in Duckworth Street. I will come to his sales shortly, but will first mention Mr Wake's Sale 2. That property is located at 54 Duckworth Street, has an area of 11,220 m² and sold in December 1998 for $1,150,000, which analysed to an unimproved figure of $102.04 per m².

[346] It was put to Mr Schy that this sale was at a level greater than he had applied to any of the Landel lots, therefore, it would not be correct to categorise all of Duckworth Street sales as being noise-affected sites in a light industrial area. I accept Mr Schy's evidence, however, that Mr Wake's Sale 2 took place at a price that reflected its location. It is on the corner of Woolcock Street and Duckworth Street

and also enjoys a corner to Duckworth and Civil Street, as well as rear access from Carmel Street. According to Mr Wake, this configuration of the land was arranged by the purchaser during the process of subdivision of the land of which this lot was part. He was of the view that the purchaser paid a premium because his needs were known by the vendor, though the evidence points quite clearly to this sale property being the most valuable of all of Mr Wake's Duckworth Street sales. I accept that the price paid for this lot reflects its unique characteristics and background, setting it apart from the other Duckworth Street sales.

[347] Mr Schy said, in reference to Lot 135 which he said "stands out like a lighthouse", that Mr Wake's value of $60 per m² is not consistent with the less- prominent sales in Duckworth Street. The Duckworth Street sales south of Bayswater Road included Sale 1 at $51.47 per m², Sale 7 at $63.75 per m², Sale 8 at $48.15 per m² and Sale 9 at $55.10 per m². In comparison with these sales Mr Wake has, in my view, really adopted a floor value. The value of Lot 135, and consequently Lot 136 and 38, ought to be higher than that applied by Mr Wake.

[348] Mr Wake expressed the view that the Duckworth Street area was attractive because of the growth of retailing to the south-west of Townsville which was taking place whilst the CBD was undergoing difficulties. That is a broad proposition that is difficult to employ with any precision in my consideration of these sales. It seems to be an advantage of degree only, given that the Lakes II land is also in the area to the south-west of the CBD, though closer to the CBD. Similarly, I can make little direct use of the evidence that a proposed new bridge over the Ross River near the new hospital and the university precinct may divert substantial traffic away from Duckworth Street. The best that I can do is to proceed on the basis that each of these matters is probably offset by the other.
[349] Interestingly, whilst Mr Wake placed no reliance on the Dalrymple Park sales which appeared in his Lot 1 valuations only, I observe that the level of values evidenced by those sales is higher than those found in that part of Duckworth Street on which he placed most reliance. There were eight Dalrymple Park sales included in Mr Wake's Lot 1 valuations with price ranges of $90 to $171 per m², though five were at $125 per m² or lower. These sales had better exposure than the Duckworth Street properties. They had smaller areas and also enjoy a parking requirement benefit not generally available. These sales were not directly compared with the subject lots by either valuer, apart from one comparison I will come to shortly. What these sales do

indicate to me, however, is that the market has adjudged the Duckworth Street properties as being less valuable on a pro-rata basis than those in Dalrymple Park. [350] Mr Schy said that Mr Wake's sale at 233 Dalrymple Road supported his valuations. This sale was for an area of 8,013 m² with a sale price of $720,000, which analysed to $90 per m². As Mr Schy did not provide a detailed comparison, I am not able to form a complete appreciation of his reasoning. It does, however, appear to be consistent with that of Mr Wake who suggested that the values shown by his Dalrymple Park sales put a ceiling on the value of the Landel lots. Mr Wake said that he understood that the developers of Lakes II had hoped to sell what became the Landel lots to at least one of the users now at Dalrymple Park. He mentioned Super A-Mart as an example.

[351] I have earlier referred to Mr Wake's Sale 5 and Mr Noakes' Sale 8 in the Lot 1 cases. This is the property at 8 Ingham Road, West End. It was put to Mr Wake that his valuation of Lot 135 at RL 4.2 is not consistent with that sale. He rejected that suggestion on the basis that the sale took place in 1995 and the market has improved since 1996, thus making that sale too remote from the relevant date of 1.10.99 to make it useful. That response appears to be at odds with the facts that this sale was also included in Mr Wake's 1999 valuation of Lot 1.

[352] What particularly concerns me about this sale, however, is that it is at a level which places it in the higher priced group of his Duckworth Street sales. I have described the disadvantage of the 8 Ingham Road property earlier (para 149 and following). It seems to me that if this property would be assumed to have sold at a higher price than $65 per m² in October 1999, it points to the Duckworth Street sales as being at a lower level than ought to apply to Lot 135, even if I put aside that the Ingham Road property is a little smaller than Lot 135, but is fully usable.

Mr Schy's Valuations

[353] Mr Schy included nine sales in his valuation reports, each of which was the sale of a property in the Lakes II development filled to RL 5.2. Apart from his Sale 1 which has an area of 8,337 m², the sales were criticised by the appellant as all having areas that are too small to be directly compared with the Landel lots.

[354] Whilst direct comparison between Lots 135 and 136 and the smaller sales in Mr Schy's schedule with areas of between 1,002 m² to 3,377 m² would be difficult, these sales can be employed to indicate whether Sale 1 is generally in line. Mr Schy's alternative valuation of Lot 38 on the basis of a usable area of 2,700 m² means that it can be directly compared with the smaller sales. His Sale 1 took place on 11

November 1997 and Mr Schy's attention was drawn to the fact that that sale date was almost two years before the relevant date for valuation in the Landel appeals. Mr Schy expressed the view, however, that the sale was nevertheless appropriate. Mr Wake said that there had been a dearth of commercial sales in 1996 and that Morley, the purchaser in Mr Schy's Sale 1, could have taken advantage of the flat market to pay a lower price than he actually did. That may have been so, but, importantly, Mr Wake also said that there had not been a change in values between the sale date in 1997 and the relevant 1999 date. The Morley transaction may have played a role in setting the market levels for subsequent sales and it may have been that a lower level of value could have ensued had that sale taken place at a lower level. But those are not the facts. The Morley sale is part of the market and I think the level of value revealed by it is shown to be consistent with the other sales in Mr Schy's valuation. All other things being equal, I conclude that a comparison between Mr Schy's Sale 1 and Lots 135 and 136 is appropriate. This sale has the added advantage over other sales, such as Mr Wake's Duckworth Street sales, of being located in the same development as the Landel lots.

Mr Wake said that had he employed the Morley sale as his basis of valuation, his value for Lot 135 would have been much higher. He suggested that a value of

$100 per m² would have resulted, though I do not accept that as having been his considered view. It does, however, suggest that the level for Lot 135 adopted by Mr Schy is not inappropriate – with one qualification which I deal with below.

[356] Mr Schy's Sale 1 involved an area of 8,337 m² which sold at $700,000, which calculates to $84 per m² for the lot as filled to RL 5.2. The property was purchased for the purpose of conducting a funeral parlour. I accept that this is a different use from that of the Landel lots; however, the potential uses would have been similar in my view. In his comparison with Lot 135, Mr Schy said that the subject is superior in aspect and location, though he applied $82 per m² to Lot 135, reflecting the larger size of that property. I accept that comparison except that I think it does not adequately reflect the area of outside land on Lot 135. I will reduce the pro-rata value to $76 per m² to take account of that. The value of Lot 135 at RL 3.5 before adjustments are made below is $866,400 (11,400 m² x $76 per m²). I should mention that this sale property is subject to an easement for water and sewerage supply purposes in favour of TCC. I did not receive detailed evidence concerning this easement however conclude that the presence of the easement probably advantages the appellant in the comparison process.

[357] In comparison with Lot 136 Mr Schy said that the subject land was inferior to the Morley sale in aspect and location, though its smaller size would enlarge its per m² value. He applied $85 per m² to that lot in his alternative valuation. Certainly Lot 136 with a usable area of 10,340 m² is smaller than Lot 135 with 10,640 m² usable area, though I do not think that this difference fully offsets the superior exposure of Lot 135. I will, accordingly, adjust Mr Schy's figure of $85 per m² to $75 per m². Given a usable area of 10,340 m², this produces a value of $775,500 for Lot 136 before adjustments are made. I recognise that the figure of $75 per m² and that applied to Lot 135 of $76 per m² appear to be quite close. They are not close however, as I have valued Lot 135 on the basis of that figure applying to its whole area, not just its usable area as in the case of Lot 136.

[358] Lot 38 is substantially smaller in usable area than either Lots 135 or 136. That feature would tend to expand its pro-rata value, but such expansion would be moderated by its reduced exposure. I will adopt Mr Wake's view that the pro-rata value of the usable part of Lot 38 ought to be higher than Lot 136. I will not, however, adopt Mr Wake's relativity directly but will settle on a value of $80 per m². This is a figure that I find to be generally in accord with the smaller sales included in Mr Schy's valuation. Its value before adjustments are made is therefore $216,000 (2,700 m² x $80 per m²).

[359] Mr Schy accepted that fill above RL 3.5 would be an improvement and that the filled level of his sales at RL 5.2 was a positive feature over his assumed level of RL 3.5 for the Landel lots. He thought that the difference in level would not make much difference, but was not asked to put a figure on it. For his part, Mr Wake had suggested that the added elevation of the Landel lots from RL 3.5 to RL 4.2 would provide them with advantages with respect to exposure and improved flood immunity. In my opinion the differential in fill level between the sale property and the Landel lots ought to be taken into account. In addition, there is the jump-up effect to which I referred earlier.

[360] Neither of these aspects is as significant for the Landel lots as would apply to Lot 1. There are, however, larger areas in the case of Lots 135 and 136. Doing the best I can, I will allow $20,000 for these aspects for these two lots and $10,000 in the case of Lot 38. The net improved value of Lot 135 therefore becomes $846,400. That of Lot 136 becomes $755,500, whilst that of Lot 38 becomes $206,000.

Relativities

[361] Mr Schy was asked some questions during cross-examination concerning certain aspects of two of the five relativity properties included in his valuation reports. That cross-examination suggested that relativities (a) and (d) at $60 per m² and $65 per m² respectively showed Mr Schy's values of the Landel lots to be high. No comparison was provided by Mr Schy between any of the relativity properties and the Landel lots, nor did Mr Wake offer any comparison or criticism. I do not know how the relativities were valued. In short, I gain no guidance from these Chief Executive values which are not to be preferred in the face of the available sales evidence. In Grahn v. The Valuer-General (1992) 14 QLCR 327 and 328 the Land Appeal Court said:

"Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence (WM and TJ Fischer v. The Valuer-General (1983) 9 QLCR 44, at p.46)."

From the improved value figures I have settled on thus far, I need to deduct allowances for the fill improvement and the associated improvements I have discussed above, as well as the various allowances I have dealt with earlier.
Before I descend to the detail, I need to say that since I have decided that fill would be allowed to RL 3.5, I will adopt Mr Schy's fill volumes. In the case of Lots 136 and 38 the volumes are those for Mr Schy's alternative valuations based on fill to RL 3.5. In the case of Lot 135 I see no option other than to adopt Mr Schy's fill volume of 22,800 m³ as appears in his original valuation, even though I think this is probably a greater volume than would be needed to produce the usable area of this lot. [364] Lot 135

Improved value	$846,400
Less:
Costoffill:22,800m³@$10/m³	$228,000
Revetmentwall	$39,060
$267,060
Intereston50%ofdevelopmentcost
[email protected]%	$1,446
Administrationandoverheads	$1,000	$269,506
$576,894
Less:
Interestonland
[email protected]%	$6,249
Ratesandlandtax	$555	$6,804
$570,090

Rounded to $570,000

Lot 136

Improved value $755,500

Cost of fill: 26,560 m³ @ $10/m³	$265,600
Windsor Link Wall	$12,141
Revetment wall	$31,930
$309,671
Interest on 50% of development cost
for two months @ 6.5%	$1,677
Administration and overheads	$1,000	$312,348
$443,152
Less:
Interestonland
[email protected]%	$4,800
Ratesandlandtax	$550	$5,350
$437,802

Less:

Rounded to $437,000

Lot 38

Improved value $206,000

Cost of fill: 5,000 m³ $10/m³	$50,000
Retaining wall	$10,000
Interest on 50% of development cost	$60,000
for one month @ 6.5%	$162
Administration and overheads	$500	$60,662
$145,338
Less:
Interestonland
[email protected]%	$787
Ratesandlandtax	$100	$887
$144,451

Less:

Rounded to $144,000

Each of the appeals is allowed. The value of Lot 1 as at 1 October 1996 is determined at $315,000. The value of Lot 1 as at 1 October 1999 is determined at

$350,000. The values of the Landel lots as at 1 October 1999 are determined at:

Lot 135 $570,000

Lot 136 $437,000

Lot 38 $144,000

RP SCOTT MEMBER OF THE LAND COURT

[2002] QLC 9

12 February 2002