Launceston City Council v Shepherd
[2009] TASSC 71
•28 August 2009
[2009] TASSC 71
COURT: SUPREME COURT OF TASMANIA
CITATION: Launceston City Council v Shepherd [2009] TASSC 71
PARTIES: LAUNCESTON CITY COUNCIL
v
SHEPHERD, Douglas Claude
FILE NO/S: M94/2006
DELIVERED ON: 28 August 2009
DELIVERED AT: Hobart
HEARING DATE: 6, 7 April 2009
JUDGMENT OF: Evans J
CATCHWORDS:
Real property – Compulsory acquisition of land – Assessment – Part of land acquired – Service station.
Land Acquisition Act 1993 (Tas)
Aust Dig Real Property [1676]
REPRESENTATION:
Counsel:
Applicant: R W Pearce
Respondent: S P Estcourt QC
Solicitors:
Applicant: Douglas & Collins
Respondent: Page Seager
Judgment Number: [2009] TASSC 71
Number of paragraphs: 71
Serial No 71/2009
File No M94/2006
LAUNCESTON CITY COUNCIL v DOUGLAS CLAUDE SHEPHERD
REASONS FOR JUDGMENT EVANS J
28 August 2009
This is an assessment of the compensation payable by the Launceston City Council ("the Council") to Douglas Claude Shepherd for 150.2 square metres of land it acquired from him pursuant to the Land Acquisition Act 1993 ("the Act"). The acquired land is a portion of 1,152 square metres of land owned by Mr Shepherd on the north western corner of the intersection of Lindsay Street with Invermay Road in Launceston. The acquired land is at the point of that intersection and has a frontage on Invermay Road of 12.68 metres to its corner with Lindsay Street, and a frontage on Lindsay Street of 30.36 metres from that corner. The acquisition will remove an access to the site from Invermay Road virtually at the junction of that road with Lindsay Street and an access from Lindsay Street which is not far from that junction. The site retains one access from Esk Street which runs along its rear or western boundary, one access from Invermay Road at the northern end of that frontage and an access from Lindsay Street at the western end of that boundary. Compensation is to be assessed as at 29 June 2005, when the Council served a notice to treat; the Act, s35.
For many years prior to service of the notice to treat the primary use of the site had been as a service station known as Ampol No 1. For about four months prior to service of the notice to treat, the service station had been closed. The Council contends that this was because the site had ceased to be viable as a service station. Mr Shepherd disputes this and contends that when the notice was served, the highest and best use for the site was as a service station. This dispute is central to the parties' competing claims about the compensation that is due to Mr Shepherd, which turns, in part, on what was a fair market rental for the site when the notice to treat was served. It is not disputed that as the acquisition has removed two of the vehicular accesses to the site and reduced its size, the site is no longer viable for a service station.
The approach to the assessment of the compensation
As to the approach to be taken to the assessment of the compensation payable in a case such as this, I repeat much of what I set out in Sorell Council v Downie [2005] TASSC 2. In Spencer v The Commonwealth of Australia (1907) 5 CLR 418, Griffiths CJ, at 432, said of the approach to be taken to the assessment of compensation under the Property for Public Purposes Acquisition Act 1901 (Cth), s19(1):
"The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together."
Barton J, at 436 – 437, said:
"… a claimant is entitled to have for his land what it is worth to a man of ordinary prudence and foresight, not holding his land for merely speculative purposes, nor, on the other hand, anxious to sell for any compelling or private reason, but willing to sell as a business man would be to another such person, both of them alike uninfluenced by any consideration of sentiment or need."
Isaacs J, at 440 – 441, said:
"… the all important fact on [the date at which compensation is to be assessed] is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted. The plaintiff is to be compensated; therefore he is to receive the money equivalent to the loss he has sustained by deprivation of his land, and that loss, apart from special damage not here claimed, cannot exceed what such a prudent purchaser would be prepared to give him. To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.
… Having mentally placed itself in the position of the bargaining parties as on the critical date … the question for the tribunal is, what is the point at which the parties would meet; what is the sum the one would be willing to give and the other to take?"
In Commonwealth of Australia v Arklay (1952) 87 CLR 159, Dixon CJ, Williams and Kitto JJ, in a joint judgment said, at 169 – 170:
"Where the amount for which a vendor may sell and a purchaser buy is not controlled the Court poses a hypothetical problem, the answer to which supplies this value. It is a familiar rule which in Australia was authoritatively formulated in Spencer's Case (1907) 5 CLR 418. Shortly stated what is required is 'an estimate of the price which would have been agreed upon in a voluntary bargain between a vendor and purchaser each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business considerations' Commissioner of Succession Duties (SA) v Executor Trustee & Agency Co of South Australia Ltd (1947) 74 CLR 358, at p 367. It is simply an analysis of what in all the relevant circumstances would be the price that a willing purchaser would have to pay a vendor willing but not anxious to sell in order to obtain the land."
In my approach to this matter I have kept in mind the following. In Doherty v Commissioner of Highways (1974) 7 SASR 57, Zelling J said, at 83:
"Judges do not have to accept the valuations of the valuers of either side and frequently arrive at a figure or figures which constitute a modification or modifications of the figures submitted by one or more valuers. … They are guided in coming to their conclusion by the evidence of the valuers together with the other evidence in the case. The Judge's duty is … to assess the compensation payable … so as adequately to compensate the respondents for any loss that they have suffered by reason of the acquisition of the land. Everything else is simply evidence to be appraised by the Judge as all evidence is appraised, upon which he comes to his conclusions, …".
In Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541, Wells J said, at 559 – 560:
"A figure reached by the adoption of any given valuation method can only be regarded as an aid to fixing compensation: it is not the compensation, or even a pretence to be the compensation. As I understand the evidence and the authorities cited, such a figure can have relevance to this Court's task only because it represents, to use the words of Isaacs J in the same case [Spencer's case at 441] one of the 'ordinary business considerations', to be weighed along with all other circumstances of which the hypothetical buyer and seller are deemed cognizant, that 'might affect its value' in the hands of the owner. A reasonably prudent owner would ordinarily, for example, pay attention to comparable sales and the opinions of reliable valuers founded on them; would, no doubt, subject them and the land sold to careful analyses. But, in the last resort, they would not furnish him, as though they represented the material for a working formula, with a definitive figure to claim. He would pay close attention to the results of operating every method whose use he investigated but he would not regard any particular one as conclusive. What I have just said applies especially where the ingredients with which it is concerned are to a greater or less extent debateable."
And, at 578:
"The judicial task is to see the combined results of the valuer's work not as another valuer would see them, but as material fit to be used in the course of applying the principle laid down in Spencer's Case; the two roles of buyer and seller must, in my opinion, finally merge in the Court. I must bear in mind the conclusions of the valuers, and try to accord to each the sort of bearing and weight that would be accorded to them in the notional transaction of sale and purchase propounded by Spencer's Case."
Background
On the site is a brick building of approximately 275 square metres. Prior to the service of the notice to treat, this site had been subject to four separate tenancies. The main tenant had been the operator of the service station. The other three tenants each had part of the building. For relevant purposes, the acquisition only impacted on the viability of that that part of the site that had operated as a service station.
Mr Shepherd's involvement with the site began in 1983 when he leased the service station and he followed this by purchasing the site in 1985. He operated the service station until 1987 when he leased it to Ampol for five years. It was closed during the last two years of Ampol's lease and remained closed for what Mr Shepherd described as some years after the termination of that lease in 1992. His evidence about the duration of the period of the station's closure was very vague. He apparently operated the service station as an owner/operator for 3½ years prior to February 2000, when it was leased to Caltas Pty Ltd ("Caltas"). On this basis it seems that the service station was closed for five or six years between 1990 and 1996. In late 1999 and early 2000 Caltas and Liberty Oil Pty Ltd ("Liberty") competed in negotiations with Mr Shepherd to lease the service station. Liberty were anxious to break into the Launceston market and Caltas was anxious to keep Liberty out of that market. Caltas prevailed and Mr Shepherd leased the station to Caltas for a period of five years, commencing on 18 February 2000. The lease contained options allowing Caltas to extend it for two further periods of five years. The rental was $45,000 for the first year and was thereafter subject to annual increases (but no reductions) based on movements in the Consumer Price Index. The lease was prepared by Caltas. Clause 2(i) required that Caltas not use the demised premises for any purpose other than a service station and a handwritten addition to that clause (which I assume was made at Mr Shepherd's direction) required Caltas "not to allow the demised premises to become vacant".
Caltas was one of two distributors for Caltex Australia Ltd ("Caltex") in northern Tasmania. The other distributor was Seen Petroleum. Caltex only wanted one distributor in the area. It was accordingly in the interests of Caltas to increase the number of outlets it was supplying and thereby improve its standing in any consolidation of its business with that of Seen Petroleum. Apparently, to that end, at around the same time as Caltas leased Ampol No 1 from Mr Shepherd, it also leased a service station in Norwood. When Caltas leased Ampol No 1 it also had a fuel depot in Henry Street, Launceston, which was open to the public as a service station. Caltas bought out Seen Petroleum some time prior to December 2002 and at about this time they closed Henry Street to general customer access but kept it open as a truck stop on a 24-hour access by card basis. Thereafter they operated their depot out of the former Seen Petroleum depot which Mr Shepherd said was nearby in Gleadow Street. Others refer to this depot as being nearby in Dry Street, which seems correct as at about this time Caltas changed its postal address from Henry Street to 3/11 Dry Street. Caltas also had an interest in a nearby service station in Goderich Street which was run by a commission agent. Michael Madden, the sales manager for Caltas, said that this site was acquired during the term of Caltas' lease of Ampol No 1.
It was a term of Mr Shepherd's agreement with Caltas that he run Ampol No 1 as a commission agent for at least 12 months. In his affidavit, Mr Shepherd said that he ran the site as a commission agent between October 2000 and December 2002. It is unclear why he did not commence to do so from 18 February 2000 when the term of the lease began. It may be because it seems that the lease was not signed until 13 October 2000. Over the period of about 3½ years prior to the Caltas lease, Mr Shepherd had run the service station as an owner/operator and built up its fuel sales to little short of 1.2 million litres for the year which ended 30 June 1999. In the course of his evidence, Mr Shepherd agreed with the proposition that the average monthly volume of fuel sales from the site were as follows during the period of 12 months preceding the following dates:
To 30 June 1999 98,000 litres per month.
To 30 June 2000 95,000 litres per month
To 30 June 2001 85,000 litres per month
To 30 June 2002 80,000 litres per month
Michael Madden, from Caltas, said that fuel sales from the site were:
12 months to 30 June 2004 56,406 litres per month
7 months to 31 January 2005 69,819 litres per month
Terrence van Dyk operated the site as a commission agent from March 2004 until September 2004. He gave the following evidence as to the volume of fuel sales during the period of his involvement:
First month 45,000 litres
Second month 56,000 litres
Third month 76,000 litres
Last month 80,000 litres
Mr Shepherd terminated his commission agency agreement with Caltas with effect from 31 December 2002. He attributed the fall in the volume of fuel sales during the period that he was a commission agent to several factors. He said that Caltas had failed to fulfil promises made to effect site improvements and he complained that they had not introduced a card system for account customers. He believes that Caltas deliberately tried to attract customers from his site to other sites in the vicinity in which they had an interest. He said that in some instances this saved Caltas from paying him 4.4 cents per litre on fuel sold and it also reduced the number of fuel deliveries that they had to make to his site. It can readily be appreciated that if the site was run down to the point that it was no longer viable when the Caltas lease came to an end and the site was permanently closed, other sites in the vicinity in which Caltas had an interest would benefit. Mr Shepherd acknowledged that other factors that had some bearing on the viability of the site during this period were that Liberty had entered the market and was engaged in aggressive price cutting from a service station at Waverly in about 2001, and from a service station at Mowbray in 2002. Similarly Woolworths had taken an interest in service stations in Kings Meadows and Mowbray and was selling fuel at a 2 cent discount, a discount which had a significant impact on the market. In addition, a high volume service station, BP at Morteys, had opened in Wellington Street. Mr Shepherd agreed that with the impact of increased competition in Launceston since 2000, many small to medium-sized service stations disappeared. Whilst acknowledging that in this climate it was very difficult for a service station like his to compete on price, he said that "add ons" could make a difference. He said that Ampol No 1 had had the highest battery sales in Launceston and that he used to make reasonably good money from those sales.
Mr Shepherd's acknowledgement that many small to medium-sized service stations in the Launceston area had disappeared is consistent with the evidence of Graham Dash. Mr Dash operates four services stations in the Launceston area and one at Longford. He has been involved in the oil industry in the Launceston area since 1985. In an affidavit sworn on 26 June 2008 he identified 37 service stations that had closed in the Launceston area during the past 20 years and six service stations that had been opened during the last 10 years, four of which had opened in Woolworths Supermarket car parks. Mr Dash says that it has become increasingly difficult to earn a reasonable income from operating a service station since Coles and Woolworths entered the market as they can purchase fuel for less than he and other operators of small sites. He says that the volume of fuel sold by small operators has greatly diminished since they entered the market. One of his sites in the Launceston area has ceased to be viable due to its reduced volume of sales. He says that the trend in the closure of service station sites will continue.
From the outset of the lease of Ampol No 1 to Caltas there were concerns about the decline in the volume of fuel sales from the site. By letter dated 14 February 2001, Caltas wrote to Mr Shepherd detailing its calculation of the rental increase due on 18 February 2001 as required by the terms of the lease. The final substantive paragraph of that letter was as follows:
"site volume
Of some concern is the current site volume being achieved as the Annual Rental currently being paid has been calculated on a significantly higher volume. Our Sales and Marketing Manager, Mr M T Smith will be contacting you shortly to discuss ways of increasing the site throughput to a more viable volume which will be beneficial to both parties."
On 22 August 2002, at the office of Lloyds North, Mr Shepherd met with Grant Thurlow, the Sales Manager — Northern Region of Caltas and discussed concerns about the volume of fuel sales from the site. Following that meeting, Mr Thurlow wrote to Mr Shepherd on 26 August with proposals to address those concerns. At that time Caltas was about to close the service station it operated from its Henry Street site, and one proposal Mr Thurlow put involved an arrangement that would encourage customers from that service station to move to Ampol No 1; another proposal was that Ampol No 1 be opened on Sundays. Mr Shepherd did not take up these proposals.
On 19 October 2002, Mr Shepherd wrote to Caltas as follows:
"I am unhappy that you have still not addressed the outstanding problems associated with the operation of the service station and with respect to my commission arrangements.
At the beginning of two thousand I was offered the site on a commission agency.
At the time that happened certain representations were made. I was told that caltas would work to improve the volume of sales.
Far from improving the turnover I have calculated that the service station has lost ground since it was leased to them.
The reduction in volume has cost me so far about $30 000 00 in income and indeed, based upon the representations made, I always expected that my commission would indeed increase and it appears I have acted upon what I was told by Caltas to my detriment.
In short, Caltas has not lived up to its promises and I have suffered significantly as a result!
If I am to remain in this service station I require some concrete proposals as to rearranging the terms of my commission agency and I require those proposals to be put in writing and to be provided to me within 14 days, this was verbally agreed at our last meeting at Lloyds North Office.
I do not wish to go off and see my solicitor in relation to my dissatisfaction but I am anxious that the matter is resolved immediately."
On 24 October 2002, Mr Shepherd had a meeting with representatives of Caltas in relation to his concerns, but, as nothing eventuated, on 25 November 2002, he wrote terminating his commission agency arrangements with Caltas. In that letter he said:
"I wish to follow up our telephone conversation 21st November 2002 in regards to my resignation.
As you would be aware Caltas controlling the retail price along Invermay Rd and not being competitive with other sites has very much disadvantaged me financially. As a Commission Agent I have had two years of trying to negotiate a fair system. Obviously circumstances are not going to change therefore I hold Caltas fully responsible for my losses and my decision to leave.
My resignation will be effective from 31/12/2002.
On a final note I disappointedly have made this decision, I trust your offer to purchase my stock & plant still stands."
Mr Shepherd's termination of the commission agency arrangement prompted Caltas to write to him with a proposal as to them buying out the balance of their lease. That letter, dated 6 December 2002, is as follows:
"Further to your letter dated 19th October 2002 and your meeting with Mr Philip Molineaux and Mr Grant Thurlow 24th October 2002 we are now in a position to offer you a possible solution to the issues and concerns you have raised.
Caltas Pty Ltd share your frustration in relation to your site being unable to achieve the level of volume required to make it a profitable location for both parties.
Attempting to apportion the blame serves no purpose at this time our efforts are best spent trying to find a long-term solution.
Caltas Pty Ltd have an existing lease on the property, which expires 17th February 2005. In the short term we can see no changes to the market or the industry which will have any positive effect on your site.
We believe the only way forward is to spend some serious money on property improvements. An external make over and a redesigned shop would be high on the list. As a leasee [sic], with the prospect of facing the next two years of significant losses we cannot justify spending the sort of money required.
Our solution is for Caltas Pty Ltd to buy out the remaining period of the lease to allow you as the property owner the freedom to develop the site and the ability to set your own board price which you have flagged as one of your major concerns.
proposal for the future
·Caltas Pty Ltd to purchase the remaining period of the lease for an up front payment of $50,000.00.
·Caltas Pty Ltd to pay a property owners rebate of 1.50 cents per litre for each litre of product sold through the site.
·The property owners in conjunction with Caltas Pty Ltd to upgrade the exterior of the service station to Ampol level 3 standards on a shared cost basis.
·The property owners to use part of the up front payment to upgrade and extend the shop area to accommodate a convenience store with adequate floor space and facilities.
Caltas Pty Ltd would require a Supply agreement for five (5) years with one five (5) year option. This agreement to include a clause protecting Caltas Pty Ltd in the event of the property being sold or the agreement being terminated for any reason.
This protection being in the form of a pro rata repayment of the $50,000.00 based on the following formula — A (original payment) divided by B (original term) multiplied by C (term remaining) = D (amount to be repaid A ÷ B x C = D
Caltas Pty Ltd see this proposal as a direction for the future operation of your service station and for the future development of your property, any assistance or expertise Caltas Pty Ltd or Caltex Australia can offer would be available if required.
Once you have had the opportunity to review this letter we would be pleased to make time available to discuss any aspect of this proposal.
We look forward to continuing our association in the future and we assure you of our best attention at all times."
Mr Shepherd did not accept Caltas' offer to buy their way out of the lease for $50,000 as their proposal required him to contribute to site improvements which he considered were their responsibility under the existing lease and he was not prepared to tie himself to them for five years and give them what he described as a guaranteed income for five years. He also had concerns about dealing with the personnel at Caltas and said in the course of his evidence: "I also learnt a long time before that, that oil companies do things to suit themselves, they don't ever give anything away for nothing".
After a meeting on 14 July 2003, Caltas wrote to Mr Shepherd on 15 July 2003. That letter includes the following:
"Further to our meeting yesterday in relation to the above service station.
We confirm our verbal advice that unless a major change happens to the petroleum industry over the next 18 months Caltas Pty Ltd will not be renewing their option for a further 5 years.
You advised that you are currently exploring your options for the future operation of the site with the knowledge that Caltas Pty Ltd would be agreeable to relinquish the remainder of the lease immediately.
…
In relation to the property Caltas Pty Ltd are happy to cooperate and work with you to find a suitable solution for both parties, you do not want to end up with an empty service station in 19 months time, we would like to limit our losses by finding a solution as soon as possible."
In early 2004, Liberty renewed their interest in leasing or purchasing Ampol No 1. After meeting with a representative of Liberty, Mr Shepherd wrote to Caltas by letter dated 20 February 2004 advising that he had a possible new tenant and inquiring whether they would relinquish their lease and confirm that they would not be renewing it. By letter dated 25 February 2004, Caltas responded advising Mr Shepherd that they had found suitable commission agents, Terry and Jillian van Dyk, so they would not relinquish the lease. That letter included the following paragraphs:
"Caltas Pty Ltd has always remained optimistic that we could turn the site around and we have remained focused on finding a suitable Commission Agent operator to assist in that quest.
…
As you can see our situation has changed since our letter to you 15th July 2003, we now have a commitment from a CA operator and in fairness to them and you we would like to give it our best shot."
Terrence van Dyk gave evidence. He ran Mobil No 1 as a commission agent from March 2004 to September 2004. He was paid commission of 4.4 cents per litre and was not charged any rental. He increased the monthly volume of fuel sold from 45,000 litres to 80,000 litres during the period of his involvement. He said that when he went in he was very green about the fuel business but decided to get involved because it would support his taxi operations. His view was that he needed to generate fuel sales of 100,000 litres per month in order to make the site viable. He estimated that his taxis accounted for about 4,000 to 5,000 litres of the site's monthly fuel sales. He terminated the arrangement in September 2004 because he felt that Caltas had moved the goalposts. They had presented him with an extensive written agreement that he felt turned what was meant to be a simple arrangement into a very complicated one. They had requested that he insure the bowsers. As the bowsers belonged to Caltas, he considered this was their responsibility. During his time at Ampol No 1, Caltas had had an interest in other operations in the same vicinity, a fuel depot in Dry Street, and a service station at Goderich Street. He said Caltas encouraged his customers to purchase fuel from their wholesale depot through loyalty cards and discounts, and this benefited Caltas as it meant that they did not have to pay commission to him. Caltas offered a wholesale fuel card to one of his daily customers. The card could not be used at his service station so he lost the customer. He rang Caltas to complain and they acknowledged what they had done. He said that when he took on the commission agency, he understood that Caltas would try and support his efforts to get fuel sales up and would not take away his customers. When he found that Caltas was not supporting him, he decided that there was no point in continuing.
Shortly after Mr van Dyk terminated his commission agency arrangement, Caltas wrote to Mr Shepherd by letter dated 11 October 2004 advising that they would not exercise their option to renew the lease and would vacate the premises on 17 February 2005, but added: "We would be happy to discuss the future operations of the service station either on a supply only basis or occupation on a reduced rental". No discussions to that end took place. Mr Shepherd believes that Caltas did negotiate a new lease at a reduced rental with the owner of the service station at Norwood which they had leased at about the same time as they leased Ampol No 1.
Mr Shepherd's dealings with the Council
In late 2002, Mr Shepherd heard rumours that the Council might acquire a portion of the site of Ampol No 1 near the corner where Invermay Road and Lindsay Street intersect. He spoke to Richard Burk, the Council's Roads and Traffic Engineer, who told him that this was not so and wrote to him by letter dated 3 September 2002, advising:
"… this letter is to confirm that Council has no plans to further modify the Invermay Road / Lindsay Street corner in the medium term apart from the impending upgrade of Invermay Road this financial year."
The letter referred to works to be carried out at the intersection, and concluded:
"The above works will not involve any land acquisition on or near the corner."
In November 2004, Mr Shepherd engaged Robert Dixon, a valuer, in the words of Mr Dixon, "to provide valuation advice with respect to a potential acquisition of part of his service station land". Whilst there had been no mention by the Council of an interest in acquiring any part of the site, Mr Shepherd said that he had heard on the grapevine that the Council might be interested in such an acquisition.
In November 2004, Mr Shepherd and Mr Dixon approached Geoffrey Brayford, the Council's Group Manager, Infrastructure Division, and inquired whether the Council was interested in purchasing Mr Shepherd's service station, or part of the site. Mr Brayford advised them that he did not think the Council would be interested in the site while the service station was operating. He confirmed this in a letter dated 24 November 2004, to Mr Dixon, with a copy to Mr Shepherd, in which he said:
"If as advised there is a possibility that the use of the site as a service station may be terminated then I would welcome the opportunity to consider and advise Council about the need to acquire some land from the site for the purpose of installing a fully signalised intersection at the corner of Lindsay Street and Invermay Road.
I would not be prepared to consider a compulsory acquisition whilst there is a fully operational business on the site."
In this letter Mr Brayford referred to Mr Shepherd's wish to work towards a mutually satisfactory outcome and to that end he provided a "potential concept plan" showing the area of land that might be needed by the Council, and explained that the plan had been prepared solely to assist Mr Dixon to advise his client. At that time the area it was thought that the Council might need was estimated to be 172 square metres.
On 6 December 2004, Mr Dixon wrote to Mr Brayford in the form of a valuation report detailing his calculation of Mr Shepherd's entitlement for the area the Council was interested in, which he put at $370,000. His report included the following advice:
"The main lease on the property is for the operation of the Service Station. This is held by Caltas Pty Ltd with this Lease period due to expire on 17th February, 2005. Negotiations are yet to take place between Landlord and Lessee as to whether they are exercising their option.
…
We have been requested to re-confirm Mr Shepherd's position of preferred choice of action is to see the parcel of land acquired by the Launceston City Council. Failing negotiations, then Mr Shepherd will pursue discussions with the current Lessee in relation to exercising the options for two (2) further 5 year terms as per the terms and conditions of the current lease."
Mr Dixon's advice about negotiations that were to take place with Caltas on the exercise of their option under the lease was incorrect. Caltas had written to Mr Shepherd on 11 October 2004 informing him that they would not exercise their option to renew the lease and would vacate the site on 17 February 2005. The source of Mr Dixon's information must have been Mr Shepherd. Mr Dixon said that Mr Shepherd had not told him that Caltas had said they would not exercise their option.
Mr Brayford responded to Mr Dixon's report of 6 December 2004 by an e-mail of the same date, as follows:
"Thanks for the information Rob.
I am happy to have a meeting, but it is based on this valuation then there is not a lot, I surmise, that can be achieved.
This valuation sees Council, in my mind, paying the market cost of removing a service station and affecting an ongoing business, even putting the cost of cleaning up a former service station onto Council. This would be something that we could do now, or at any time in the future with the only difference being that there would be no compensation to the leaseholder.
At $2,150 per m2 this is simply too expensive for Council to even contemplate.
If you recall our discussions they were on the basis that :
If the service station lease is not taken up or terminated and a service station is then no-existent [sic] then Council would like the opportunity to negotiate the acquisition prior to any site redevelopment. Council is not prepared to pay any business interruption costs at this point in time.
On that basis Council would be prepared to negotiate around the unit price of land in this area as raw developable land, because that was what would exist if the service station was not operating. There may be a margin Council is prepared to pay for the co-operation and deliverable [sic] of mutual outcomes. Unfortunately your valuation does not indicate what the unit price of land would be in this situation, but I suspect that it is manifestly different to $2,150/m2.
Is there likely to be anything gained from a meeting. I am happy to have one if you request but it will only really be useful if there is some possibility of more closely approaching something like the above approach.
Please let me know."
On 15 December 2004, Mr Dixon met with Mr Brayford and he followed that meeting up with a letter dated 20 December 2004 in which he reiterated that Mr Shepherd's preferred option was that the Council purchase the 172 square metres it required, and noted that it was agreed that the site would no longer be operative as a service station after such a sale. The letter concluded with advice that if the Council did not acquire the land, "the alternative scenario is for Doug Shepherd to exercise the current option to lease with the existing tenancy or re-lease the site, and continue on in a capacity as landlord".
On 29 December, Mr Dixon wrote to Mr Brayford, again in the form of a valuation report, and put a revised calculation of Mr Shepherd's entitlement. In this report that entitlement was calculated at $290,000 (down from the figure of $370,000 put in his report of 6 December). This report repeated the incorrect advice contained in the earlier report about negotiations that were to take place with Caltas on the exercise of their option under the lease.
On 28 January 2005, Mr Brayford had a discussion with Mr Dixon in which Mr Dixon said Mr Shepherd had another party, namely Liberty, who wished to lease the site, and that a lease would be signed within the week. In the course of this conversation, Mr Brayford said that the Council would pay $150,000 for the land. That offer was not accepted. During February 2005 Mr Shepherd telephoned Mr Brayford and said that he was about to sign a lease and this was the last opportunity for the Council to negotiate. Mr Brayford advised Mr Shepherd that if he had a genuine tenant he should sign the lease and that the Council would wait for another opportunity.
On about 17 February 2005, Caltas vacated the site and the service station was closed.
In March 2005, Mr Shepherd engaged Terry Milburn, a real estate agent, to assist him in relation to the sale of the site and on his advice the property was put up for auction. By this time Grant Thurlow, who had previously been with Caltas, had started his own business transporting fuel. On 21 April 2005, Mr Thurlow negotiated a conditional agreement to purchase the site from Mr Shepherd. Mr Thurlow did not proceed with that agreement.
The site was auctioned on 28 May 2005. Mr Brayford attended the auction but no bids were made on behalf of the Council. The property was passed in.
On 29 June 2005, Council served a notice to treat. At this time the service station was still closed, it had not operated since Caltas vacated the site in mid-February.
The valuation evidence
Three valuers, Mr Dixon, Brian Mantach and David Saunders gave evidence.
Mr Dixon's report of 6 December 2004 includes the following:
"current site:
The property at 1-7 Invermay Road, represents a 'Going concern' Service Station situated on a high profile corner, being the north western junction of Invermay Road and Lindsay Street, Invermay. A service station has operated from this site for an extended period of time.
The property is currently occupied by three separate Lessees with one Lessee as a registered lease with the other two tenants being on monthly tenancies.
The main lease on the property is for the operation of the Service Station. This is held by Caltas Pty Ltd with this Lease period due to expire on 17th February, 2005. Negotiations are yet to take place between Landlord and Lessee as to whether they are exercising their option under the Lease. The current rental paid by Caltas under the Lease is $51,573 per annum with a further $15,846 per annum paid by the two Lessees on monthly tenancies.
The property currently represents a site of 1,152 square metres bounded by Invermay Road, Lindsay Street and Esk Street. As mentioned, the property enjoys good exposure and advertising potential for traffic heading along Invermay Road as well as being situated directly opposite the main access and egress from the Inveresk Precinct.
Under the Launceston City Council's 1996 Planning Scheme the property is currently zoned 'Commercial'.
The main building on the site includes a structure built in 1955 which contains an area of 275 square metres with a canopy of 104 square metres. This main structure is occupied by the three tenants and used for fuel sales outlet as well as workshop facilities.
proposed acquisition:
As per the concept plan provided, the extent of the acquisition would see a large corner of land of some 172 square metres acquired off the south eastern corner of the site.
This acquisition would have a considerable impact on the future use of the site. In our opinion, and the professional opinion of Service Station operators, the acquisition will end the use of the site as a 'Going concern' Service Station site. Site accessibility and reduced land area would result in a change of the Highest and Best use of the site from a going concern Service Station to a commercial site.
valuation methodology:
In determining the value of the parcel of land of 172 square metres, consideration has been had to the value of the site on a 'Before and After valuation methodology'.
The important aspect of the acquisition is the fact that it destroys the integrity of the site as a going concern Service Station.
value of the site prior to acquisition:
Currently the property is returning a rental income of $69,339 per annum. This is made up as follows:
·Peter Langridge $8,667
·Lapham Mechanic $7,169
·Vacant Shop $1,920
·Caltas $51,573
$69,339
The rental figure has been capitalised at 10.25% to arrive at the value of the site on a going concern basis of $676,468 which has been rounded to $675,000.
In determining the current market value, consideration has been had to the sale of a number of Service Station sites on a going concern basis which have both reflected yields in the vicinity of 10%. These sales include the following:
179 Ravenswood Road, Ravenswood
Sold $460,000 Date: July 2004
Going Concern Service station with 2 bay workshop and an adjoining retail shop occupied by a Fish & Chip Business. The purchaser advised us that the relevant rental income was $26,400 + Outgoings for the Service Station and $20,820 incl Outgoings for the shop. This equates to a Net rental of appox $42,000 pa or an Initial Yield of 9.1%
value of the property post acquisition:
Subject to 172 square metres being removed from the site, we are of the opinion that the site has a Commercial value based on the ability to achieve a rental on a non-going concern Service Station basis.
We are of the opinion that a fair market rental for the site post acquisition is $33,366 per annum. This is made up as follows:
·Peter Langridge 83m2 @ $105 $8,667
·Lapham Mechanic 67m2 @ $107 $7,169
·Store 16m2 @ $120 $1,920
·Vacant Land 600m2 @ $26 $15,600
$33,356
This rental assessment has been confirmed by the recent leasing of a site on Hobart Road, south of Kings Meadows for $30,000 per annum for a 5 year term with a 5 year option. It represents an ex-Service Station site in an inferior location than the subject property, but reasonably comparable.
On this basis we are of the opinion that the market value of the property, post acquisition, is $370,000.
other factors:
Other factors to be considered are:
·the cost of remediating the site, ie: removal or filling in of tanks by the current owner. Costings have been obtained for this work at a sum of $40,000.
·loss of rent figure for six months of the current rental has been adopted to reflect the vacant site factor during negotiations.
Value of Going Concern Service Station $675,000
Less Value as Commercial Site $370,000
Loss Incurred $305,000
Plus Cost of remediating the Site $40,000
Loss of Rent for Six Months $25,787
total value of parcel of land acquired $370,787adopt $370,000"
Mr Dixon's report of 29 December 2004 is in the same terms as his earlier report, save that:
· Under the heading "value of the site prior to acquisition", the following information has been added in relation to another sale:
"1 Norwood Ave, Norwood
Under Contract Date: Jan 2005
A Going Concern service station site in a high profile location. Sold on an expected initial yield of 10.25%. The property comprises a Fuel outlet, 4 Bay workshop and a new retail shop with fully equipped commercial kitchen."
·What appears under the heading "other factors" is as follows:
"Other factors to be considered are:
· the cost of remediating the site, ie: removal or filling in of tanks by the current owner. Costings have been obtained for this work at a sum of $40,000.
· loss of rent figure for six months of the current rental has been adopted to reflect the vacant site factor during negotiations.
· We as owners have accepted some responsibility for the reduction in value as a result of the 'Before & After' method.
Value of Going Concern Service Station $675,000
Less Value as Commercial Site $370,000
Loss Incurred $305,000
Acquiring Body accepts 75% Responsibility $228,750
Plus Cost of remediating the Site $40,000
Loss of Rent for Six Months $25,787
total value of parcel of land acquired $294,537
adopt $290,000
Represents $1,686/m2 on an area of 172m2"
Subsequent to the service of the notice to treat, Mr Dixon provided a report of 10 March 2006, which includes the following:
"As per the Plan of Survey provided, the land to be acquired is a total of 150.2 square metres…
current site
…
As at the date of the Notice to Treat it is noted that the service station component of the property was closed due to a decision by the owner not to re-enter into a new lease for the site due to the protracted discussions of the potential future acquisition. The site has been maintained to a level which would enable an operator to commence trading from the site.
The site has continued to attract interest from Service station operators during the past 12 months as it is recognised in the industry as representing a very high profile site which will achieve fuel turnover levels which the oil companies require to sustain profitability.
...
The main lease on the property was for the operation of the Service Station. This was held by Caltas Pty Ltd with this initial term of the Lease period expiring on 17th February, 2005. Due to the current circumstances of the pending acquisition, the option period under the lease was not exercised. The rental paid by Caltas under the Lease was $51,573 per annum with a further $15,846 per annum paid by the two Lessees on monthly tenancies.
The property currently represents a site of 1,152 square metres bounded by Invermay Road, Lindsay Street and Esk Street. As mentioned, the property enjoys good exposure and advertising potential for traffic heading along Invermay Road as well as being situated directly opposite the main access and egress from the Inveresk Precinct.
...
proposed acquisition:
...
Whilst specific details of future access and egress from the site have not been defined, the owner understands that there will be a significant change to the current status of the site. Any change to the traffic plans as a result of the acquisition (ie Limiting current access points, Turning lanes and traffic lights) will make the site less accessible for the large volumes vehicles that have previously accessed the site as a 'Going Concern' service station.
valuation methodology:
In determining the value of the parcel of land of 150.2 square metres, consideration has been had to the value of the site on a 'Before and After valuation methodology'.
The important aspect of the acquisition is the fact that it destroys the integrity of the site as a going concern Service Station.
value of the site prior to acquisition:
Previously, the property was returning a rental income of $69,339 per annum. …
Our discussions with the owner and our research into the factors behind Oil companies leasing strategic sites, has confirmed the marketability of the subject site as a Service station in the Launceston region.
The rental figure has been capitalised at 9.75% to arrive at the value of the site on a going concern basis of $711,169 which has been rounded to $710,000.
…
In determining the current market value, consideration has been had to the sale of a number of Service Station sites on a going concern basis which have both reflected yields in the vicinity of 10%.
A recent leasing has occurred on a high profile service station site located at 106 Bathurst Street. The leasing negotiations took place in 2005 for an extension to a lease from 1st March 2003 for a term of 17 years. The commencement rental negotiated was in the vicinity of $120,000pa.
value of the property post acquisition:
The Highest & Best use of the site needs to be firstly identified post acquisition. We are of the opinion that this may be reflected either of the following scenario's [sic]:
·the existing tenants continuing on, with the surplus land leased as commercial land and not as a service station.
·The property offered for sale as a Vacant re-development site.
Value based on its continual use:
Subject to 150.2 square metres being removed from the site, we are of the opinion that the site has a Commercial redevelopment site value based on the ability to achieve a rental on a non-going concern Service Station basis.
We are of the opinion that a fair market rental for the site post acquisition is $35,756 per annum. This is made up as follows:
·Peter Langridge 83m2 @ $105 $8,667
·Lapham Mechanic 67m2 @ $107 $7,169
·Store 16m2 @ $120 $1,920
·Vacant Land 600m2 @ $30 $18,000
$35,756
This rental assessment has been confirmed by the leasing of a site on Hobart Road, south of Kings Meadows for $30,000 per annum for a 5 year term with a 5 year option. It represents an ex-Service Station site in an inferior location than the subject property, but reasonably comparable.
On this basis we are of the opinion that the market value of the property, post acquisition, is $410,000.
Fair Market rental $35,756pa
Capitalise @ 8.75%
Value $408,640
Adopt $410,000
Value based on a re-development site
The value of the site post-acquisition may be assessed as follows:
Re-development Site Area (P1S) 1152m2
Less Area acquired 150.2m2
Land Area 1002m2 @ $450/m $450,900
Less Cost of Building demolition
275m2 @ $55/m2 $15,125
Value (Say) $435,000
Whilst we do not believe these figures have significant relevance to the Fair Market Value of property, the latest Valuation figures applied to the property for rating purposes were:
Capital Value $403,000
Land value $403,000AAV $23,840
Discussions by the owner with the valuer from LG Valuers indicated the property had been valued based on a re-development site.
Sales of redevelopment sites which have been analysed include the following:
Property Sale Price Date Site Area Brief Comments 74-80 Tamar Street $289,399 6/04/2005 642m2 Ex-Service station site 83-87 Invermay Road $320,000 27/05/2005 835m2 Ex-Service Station corner site 273 Wellington Street $575,000 08/09/2005 1287m2 Clean Ex-Service Station site Conditions apply other factors:
Other factors to be considered are:
·the cost of remediating the site, ie: removal or filling in of tanks by the current owner. Approximate costings have been obtained for this work at a sum of $40,000.
·loss of rent figure for twelve months from the lease expiring has been adopted to reflect the vacant site factor during negotiations.
Value of Going Concern Service Station $710,000
Less Value as Commercial Site $435,000
Loss Incurred $275,000
Plus Cost of remediating the Site $40,000
Loss of Rent for 12mths Service station $51,573
total value of parcel of land acquired $366,573
adopt $365,000 Net of GST
As can be seen from the calculations we have not considered any loss than an incumbent tenant may request as a result of the acquisition."
At the request of the Council, Brian Mantach prepared a report in relation to the acquisition. His report of 20 June 2006, includes the following.
"Proposed Acquisition
…
On the land to be taken is a carport type structure that was used as a carwash area. Within that carport area is a wastewater pit. The infrastructure was in place for the service station business.
There is also a large advertising sign on the corner of Invermay Road and Lindsay Street on the land to be taken.
The balance land formed part of the apron to the service station business that was conducted from the site.
...
Relevant Matters
a)Launceston City Council (LCC) advised me that Council was approached in November 2004 by the owner of the service station site at the corner of Lindsay Street and Invermay Road, enquiring whether they had any interest in acquiring part of the site. The owner was aware, over many years of negotiation, that traffic light [sic] intersection has been foreshadowed as necessary at this location at some point in the future.
b)In a letter addressed to Mr Rob Dixon, valuer of Esk Valuation Group (Esk) and representing Mr Shepherd, dated 24 November 2004, with a copy sent to Mr Shepherd, LCC via Mr Geoff Brayford, Group Manager, Infrastructure Division, advised that if there were a possibility that the use of the site as a service station may be terminated then he would welcome the opportunity to consider the need to acquire some land from the site. He also stated he would not be prepared to consider a compulsory acquisition whilst there is a fully operationally [sic] business on the site.
Comment — By this letter, the owner was told very clearly that there would be no compulsory acquisition while a service station operated on the site.
c)The main lease on the property was for the operation of the service station. It was held by Caltas Pty Ltd with their lease period due to expire on 17 February 2005. They had an option to renew the lease for two periods, each of five years. Caltas Pty Ltd did not take up their option for a further five year lease period and vacated the site.
d)In a report prepared on this matter by Esk and dated 6 December 2004, addressed to LCC, Mr Dixon (on behalf of Mr Doug Shepherd), stated that: 'This acquisition would have a considerable impact on the future use of the site. In our opinion, and the professional opinion of Service Station operators, the acquisition will end the use of the site as a "Going Concern" Service Station site. Site accessibility and reduced land area would result in a change of the Highest and Best use of the site from a going concern service station to a commercial site.'
e)In the letter to Esk from LCC dated 24 November 2005 the owner was told that Council would not move to compulsorily acquire the land while there was a fully operational service station business on the site.
In negotiations with the owner, Mr Brayford of LCC advised he might be interested in purchasing the land and leasing it back to the owner if he was guaranteed a service station would actually run on the site for five years, ie the first option period of the Caltas lease.
f)During negotiations with Mr Shepherd and Mr Dixon they have conveyed to Council that Liberty were interested in the site as a service station outlet. This was as early as January 2005. This was prior to the Caltas expiry date, indicating that Caltas had already decided not to renew their lease and that inquiries had been made with other companies re future occupancy.
Despite assurances that Council would not move to compulsorily acquire the land while a service station was operating for at lease [sic] five years, and despite the site being available since mid February 2005, Liberty nor any other operator has taken up occupancy.
g)The conclusion that the writer has come to is that the site has lost its appeal as a service station site. This could have been a consequence of any number of factors affecting the operation of a successful service station. Caltas were in occupation and could have remained so for at least another five year period and yet they chose not to. Liberty could have taken up a lease yet chose not to and instead purchased a site further along Invermay Road.
Valuation Methodology
The traditional method of arriving at compensation is by the use of the 'before and after' approach. This recognises the value of the property both prior to the acquisition and post acquisition and has been adopted by me.
Value Prior to Acquisition
In my opinion this site is ripe for redevelopment. That would probably involve removal of the existing structures and remediating the land from any potential contamination.
Following on from his report of 6 December 2004, Mr Dixon of Esk has prepared a further report dated 10 March 2006. Within that report he has also considered the value of the property as a redevelopment site. In his calculations he has allowed for building demolition of $15,125 (being 275sqm @ $55/sqm) and for site remediation of $40,000. I agree with these figures and have adopted them in my calculations.
In assessing value, I have considered the sale of two former service station sites that have sold recently. Both have had buildings removed and the land remediated.
The first was of a property at 273 Wellington Street, South Launceston, an ex Mobil site. It contains 1,287 square metres and sold in September 2005 for $575,000, reflecting a rate of $447 per square metre.
The second sale was of an ex Shell site at 139-143 Hobart Road, Kings Meadows. Land size was 2,220 square metres and the property sold in November 2005 for $1,115,000, reflecting a rate of $502 per square metre.
From these two sales I have adopted a land value rate of $500 per square metre.
The value of the land prior to the acquisition can therefore be assessed as follows:
Land 1,152sqm @ $500 = $576,000
Less building demolition
275sqm @ $55 $15,125
site remediation $40,000 $55,125$520,875
Adopt value pre-acquisition of $520,000
Value Post Acquisition
In my opinion this is assessed in exactly the same way, adjusting only for land size. There is an argument that the land has been further reduced (ie injuriously affected) in value as a result of the use to which the acquired land is to be put and this is also addressed. The value of the land post acquisition is therefore assessed as follows:
Land 1,002sqm @ $500 = $501,000
Less building demolition $15,125
site remediation $40,000 $55,125$445,875
Adopt value post acquisition of $445,000
Loss in value of land $520,000
$445,000$75,000
The land is being acquired by LCC to enable the future installation of traffic lights at this intersection. Ingress and egress of the site will clearly be affected from that currently enjoyed. The loss in value is very subjective in nature and difficult to measure. I have assessed the amount payable by taking 10% off the value of the property post acquisition. That should be of the land only, which was valued at $501,000, so the figure would be $50,100 or say $50,000.
Conclusion
My assessment of compensation is therefore the sum of $125,000 made up as follows:
Loss in value of land $75,000
Injurious affection $50,000$125,000"
At the request of the Council's solicitors, in March 2009 Mr Mantach assessed the pre-acquisition value of the site as a service station by capitalising what he determined to be its fair market rental. To determine that rental he relied on information he had obtained in relation to six service stations in northern Tasmania, one of which was in Launceston. Even if these service stations were comparable with Ampol No 1, this evidence would not assist, as, in all but one instance the information he relied on was recent and was not contemporaneous with the date of the notice to treat, 29 June 2005. I do however note that when he capitalised what he determined to be the site's fair market rental Mr Mantach adopted a rate of 9.75 per cent.
David Saunders prepared a valuation report at the request of the solicitors for Mr Shepherd. His report of 26 June 2007 includes the following:
"descriptive report — prior to acquisition
…
Land
…The site occupies a high profile corner position with two (2) developed entrances from Invermay Road, two (2) entrances from Lindsay Street and a single entrance from Esk Street at the rear. The site in my opinion has the key attributes required for a viable service station; namely a high profile, ease of vehicular ingress and egress and exposure to high traffic volumes.
Location
The property is located on the north-western junction of Invermay Road and Lindsay Street in Invermay. Invermay Road is one of the major outlet routes between the Central Business District of Launceston and the northern suburbs, East Tamar and port area of Bell Bay. The intersection is controlled by roundabout. Invermay Road carries high traffic volumes in a two way direction and land use in the near vicinity of the subject includes automotive related businesses, retail shops, bulky goods retailers, real estate offices, prefabrication garage/shed sales, etc. Significant new development is proposed for the Inveresk Precinct on the opposite side of Invermay Road to the subject. There is no evidence of excessive service station competition in the immediate vicinity and the subject is the first service station encountered when leaving the CBD and travelling to Invermay. We are aware the subject site was developed for a service station in the 1950's and continued to operate on this basis up until February 2005 when Caltas Pty Ltd failed to exercise a lease option.
Zoning
The subject property is zoned 'Commercial' pursuant to the City of Launceston Planning Scheme, 1996. Permitted uses within this zone include a local shop, service centre, vehicle parts and fitting centre. There are numerous discretionary uses including business premises, carpark, mechanical repair garage, plant sales and hire yard, recycling depot, take-away food shop, transport depot, vehicle hire and sales yard and warehouse.
Improvements
The site as previously noted was developed as a service station in the mid 1950's. The original service station building was substantially upgraded in the 1980's or thereabouts including a new external brick skin over the original rendered walls. The building has a gross measured floor area of 275m2 together with a large attached canopy over the petrol pumps with an additional area of 104m2.
The building is presently divided into three (3) separate tenancy areas; the service station sales outlet/store and two (2) independently leased workshops. Conveniences are shared. The building is of semi-modern appearance following the 1980's redevelopment and is judiciously positioned on the site to enable ease of vehicular ingress to and egress from the petrol service forecourt and pumps. Other improvements associated with the site comprise bitumen and concrete pavement, floodlighting, carwash bay, signage, underground fuel storage tanks and fuel lines. There are two (2) 9,500 litre tanks, one (1) 15,500 litre tank and one (1) 28,000 litre tank together with provision for six (6) petrol bowsers under the canopy.
Occupancy Details
As at date of Notice to Treat the subject property was partly leased and partly vacant. Lease of a workshop to Peter Langridge was on a monthly basis at a said rental of $160 per week gross plus GST. A second workshop lease to Lapham Mechanic was again on a monthly basis at a said rental of $200 per week gross plus GST. These tenants were entitled to park on the front concrete apron provided they did not obstruct access to the petrol bowsers. The service station sales outlet/store at date of Notice to Treat was vacant.
Prior to vacating the site Caltas Pty Ltd leased the service station for a term of five (5) years from 17 February 2000. Two further five (5) year options were available but not exercised. We are advised the rental paid by Caltas Pty Ltd in the final year of their lease was $51,573 pa plus outgoings. The rental commenced at $45,000 pa with annual adjustments based on movement in the Consumer Price Index (CPI).
descriptive report — after acquisition
...
The acquisition of this corner parcel in our opinion will … destroy the viability of the site as a service station.
I am aware the Valuer acting on behalf of the Launceston City Council has valued the subject site after acquisition on the basis of a commercial redevelopment site as opposed to a going concern service station and I am not in disagreement with this approach.
valuation methodology
A widely adopted method for determining compensation in cases of compulsory acquisition is the 'Before and After' approach. Fair compensation is represented by the difference between the 'before' and 'after' valuations together with any consequential losses.
offer of compensation — launceston city council
I have been provided with a copy of correspondence from the Launceston City Council dated 22 June 2006 which refers to an assessment of compensation prepared by Brian Mantach FAPI, Dip Val, Certified Practising Valuer. The compensation offer by the Launceston City Council based on Mr Mantach's assessment is the sum of $125,000 together with reasonable valuation and legal fees. Council to be responsible for all survey and title renewal costs.
I agree with the basic methodology adopted by Mr Mantach — 'Before and After' valuations and an end allowance for consequential losses. Mr Mantach's valuation prior to acquisition is based on highest and best use as a redevelopment site. He states this would probably involve removal of the existing structures and remediating the land from any potential contamination. Mr Mantach after considering the recent history of the site came to the conclusion that it had 'lost its appeal as a service station site'. He noted Caltas Pty Ltd were in occupation and had the option of a further five (5) year period which they chose not to exercise. He also noted Liberty were in negotiations with the owner but ultimately chose not to lease the site and instead purchased a site further along Invermay Road. Mr Mantach accordingly chose not to base his 'before' valuation on a going concern service station and instead nominated redevelopment as the highest and best use. I disagree with Mr Mantach's opinion as to highest and best use and will outline my reasons under a subsequent heading in this report. It is pertinent to note at this point that Mr Mantach did not base his opinion as to viability by reference to trade or the continuous operation of the site as a service station for in excess of 50 years up to February 2005. He appears to rely upon a decision by one tenant (Caltas Pty Ltd) not to exercise an option, without regard to the fact that subsequent to taking up their lease in Year 2000 Caltas Pty Ltd acquired Seen Petroleum and as a consequence inherited two nearby fuel outlets in Dry Street and Goderich Street. Mr Mantach appears to give no consideration to the fact that the subject site may well have been unviable to Caltas Pty Ltd but was still of interest to Liberty Petroleum and possibly other fuel distributors and potential owner-operators.
In respect of the post acquisition valuation by Mr Mantach he adopts a market indicator rate of $500/m2 applied to the reduced site area and adjusts downwards to take account of building demolition cost and site remediation. The resultant loss in value of the land is $75,000 to which he adds $50,000 for injurious affection for a total of $125,000. In adopting a market indicator rate of $500/m2 Mr Mantach places most weight on the sale of two (2) former service station sites that have sold and have had buildings removed and the land remediated. The sales are at 273 Wellington Street, South Launceston and a former Shell site at 139-143 Hobart Road, Kings Meadows. The respective analysed rates are $447/m2 and $502/m2. From these two sales Mr Mantach adopted a rate of $500/m2 for the subject site valuation.
My valuation under a post acquisition scenario places greater weight on the sale of 83-87 Invermay Road which is an ex-service station site which I regard as very comparable. This site sold for $320,000 on 27 May 2005 and on analysis discloses a rate of $383.23/m2. Mr Mantach's assessment of consequential losses at $50,000 relates to loss in value after acquisition due to clearly affected ingress and egress to the site. It is a straight 10% loss in the value of $501,000, which was his land value based on $500/m2. To reiterate, I am of the opinion a rate of $500/m2 for the subject site is too high and has been arrived at without consideration of the sale at 83-87 Invermay Road.
valuation prior to acquisition — d saunders
Background
…Unlike Mr Mantach I am not prepared to declare the subject site unviable simply because Caltas Pty Ltd failed to exercise an option. Caltas Pty Ltd as a major fuel distributor were willing to enter into a five (5) year lease agreement in Year 2000 at a commencing rental of $45,000 pa plus outgoings plus GST. Caltas subsequently expressed in writing their disappointment with fuel sales and by letter dated 15 July 2003 advised Mr Shepherd they would be unlikely to renew. Mr Shepherd by letter dated 20 February 2004 advised Caltas that he had a possible new tenant and asked whether Caltas would relinquish the remainder of their lease. Caltas replied quickly by letter dated 25 February 2004 stating that they had always remained optimistic that they could turn the site around and were still focussed on finding a suitable Commission Agent Operator to assist in that quest. Caltas in this letter clearly indicated that the situation had changed from 15 July 2003 as they now had commitment from a Commission Agent Operator. It was not until 11 October 2004 that Caltas formally advised in writing that they would not exercise the option and would vacate on 17 February 2005. However in this same letter they still continued to express an interest in either supplying fuel or remaining in occupation on a reduced rental. So as late as October 2004 Caltas were still interested in the site provided the rent was reduced. Ultimately neither Caltas Pty Ltd nor Liberty took up the lease of the subject site and it is entirely possible the known threat of future acquisition was a deterrent.
Finally, it is of some relevance to note Liberty in correspondence in 1999 offered to lease the subject site for $45,000 plus outgoings together with a payment of $20,000 for the business. Mr Shepherd at this time had the choice of Liberty or Caltas as tenant and ultimately chose Caltas at the same rental of $45,000 pa. We are further aware Ampol as far back as 1996 were leasing the site for $66,500 pa which we understand included the workshop now occupied by Latham Mechanic. It can be deduced that two major fuel suppliers were willing to lease the subject site for $45,000 pa some five (5) years before the acquisition.
Apart form the history of leasing associated with the subject site we are very much aware of its potential for an owner-operator. Mr Shepherd has some 25 years experience in the petroleum industry and in past years operated the subject site himself between a ten (10) year lease to Ampol and the lease to Caltas in 2005. Mr Shepherd has also operated a service station he currently owns and leases in North Launceston. Private owner-operators exercising good management and prepared to work long hours have been known to successfully operate service stations which are not of interest to the major distributors and/or oil companies. The major companies will frequently employ commission agents who do not have the business acumen or drive often characteristic of owner-operators. Without the threat of compulsory acquisition it is entirely possible Mr Shepherd could have commenced trading at the subject site himself and built the business back up to a viable and profitable level. In my opinion the subject site has the key attributes necessary for a successful service station and I have resolved to base my 'before' valuation on this particular use. It is of relevance to note in matters of compulsory acquisition that a principle to be adopted is value to the dispossessed owner. In my opinion it would be remiss not to have regard to the possibility of Mr Shepherd operating the site himself following the loss of Caltas Pty Ltd as tenant. However even putting this possibility aside I am firmly of the view given reasonable time the service station would have let to a distributor had it not been for the known threat of compulsory acquisition.
Methodology
I will adopt as my method of valuation the capitalisation of assessed net rental income. The rental value of the service station is a matter of some conjecture; it is frequently determined by reference to fuel sales which in this instance would require an estimate based on good/average management. I reject the adoption of fuel sales achieved in recent years under the Caltas tenancy due to certain of their alleged business practices including diversion of customer accounts to the nearby sites inherited from Seen Petroleum. Mr Shepherd was clearly unimpressed with Caltas management of his site and this is well documented. Estimating potential fuel volumes is fraught with margin for error and my preferred approach is to adopt the rental that both Caltas and Liberty were willing to pay in 1999-2000. Whilst I suspect the last rental paid by Caltas of $51,573 pa may be a little high I consider a dispossessed owner should at least be entitled to have his property valued utilising the rental offered by two (2) informed/prudent distributors some 5 years prior to acquisition. The dispossessed owner has stated he did not receive any rebate from Caltas and this in my view increases the affordability of a rental of $45,000 pa. I am aware of examples of freehold owners leasing their service station to a private operator and also receiving from the fuel distributor a rebate or property allowance of between 1.5 cents and 2.5 cents per litre.
My valuation calculation prior to acquisition is as follows:
Service Station Rental As above $45,000 pa
Peter Langridge 83m2 @ $100/m2 net $8,330 pa
Lapham Mechanic 67m2 @ $110/m2 net $7,370 paAssessed Net Rental Value $60,700 pa
Net Rent Capitalised @ 9.5% $638,947
Rounded to $640,000
post acquisition valuation — d saunders
My nominated highest and best use of the property post acquisition is based on its potential for redevelopment as a commercial site. Based on market indicator rates derived from analysis of sales I have adopted a rate of $450/m2. This rate applied to the reduced site area of 1002m2 produces a valuation of $450,900.
To achieve this figure on the open market I am of the view it would be necessary to demolish the existing building and remediate the site. Mr Mantach in his post acquisition valuation has allowed $15,125 for building demolition and $40,000 for site remediation. Mr Mantach accepted these figures based on a report by Mr Robert Dixon, Valuer, and I am also of the opinion the estimates are reasonable. Accordingly the value of the site post acquisition has been derived at as follows:-
Land 1002m2 @ $450/m2 $450,900
Deduct Building Demolition Estimate $15,125Site Remediation Estimate $40,000 $55,125
Valuation Post Acquisition $395,775
Rounded to $395,000
assessed compensation
Loss in Value
Loss in value of the subject property attributable to the acquisition is the sum of $245,000, calculated as follows:-
Valuation prior to acquisition ('Before') $640,000
Valuation subsequent to acquisition ('After') $395,000Loss in Value $245,000
Consequential Losses
In addition to loss in value the dispossessed owner is entitled to reasonable consequential losses. Due to the threat of acquisition the service station lay idle after 17 February 2005. Up to the date of Notice to Treat a lapse period of 4 months 2 weeks indicates loss of rental of $16,730. The combination of loss in value of the property and loss of rental is the sum of $261,730."
…
Pre-acquisition value of the site
In each of his three reports, Mr Dixon valued the site on the basis that the rental of $51,573 paid by Caltas for the service station was its fair market rental and it would continue to earn that rent. Having added that rent to the other rent being earned from the site he proceeded on the basis that a fair annual rental for the site was $69,339. In his reports of 6 and 29 December, he capitalised that rental at 10.25 per cent to arrive at a pre-acquisition value for the site as a going concern of $676,468, which he rounded off to $675,000. In his report of 10 March 2004, he capitalised that rental at 9.75 per cent to arrive at a value for the site as a going concern of $711,169, which he rounded off to $710,000.
Mr Mantach assessed the pre-acquisition value of the site on the basis that it had lost its appeal as a service station. He was of the view that its highest and best use was as a redeveloped commercial site and on the basis of comparative sales, he adopted a value for the site of $500 per square metre. In result he valued the site, pre-acquisition, as follows:
Land area 152m2 @ $500m2 = $576,000
Less cost of making good the site $55,125
Balance $520,875
Mr Saunders, like Mr Dixon, did not share Mr Mantach's view that the site was no longer viable as a service station. In Mr Saunders' opinion, the site had the key attributes necessary for a successful service station and he valued it on that basis. He said it had potential for an owner/operator and that he was firmly of the view that given reasonable time, it would have been let to a distributor had it not been for the known threat of compulsory acquisition. In his report of 10 March 2006, Mr Dixon said "Due to the current circumstances of the pending acquisition, the option period under the lease was not exercised." This is not correct and I am satisfied that the threat of compulsory acquisition played no relevant part in any difficulties Mr Shepherd had in re-leasing or selling the site, as there is no evidence that it did. Mr Madden said that he could not say whether he knew of the intention of the Launceston City Council to make a compulsory acquisition of a portion of the site before Caltas vacated it. It would be surprising if he did because, on the information before me, the Council did not decide to make the acquisition until after Caltas had vacated the site. Nonetheless, Mr Madden could say that the question of a Council acquisition was not discussed by him with other officers at Caltas in the context of whether Caltas would take up its option to renew the lease of the site. On the evidence the only person who was promoting the prospect of the Council acquiring a portion of Ampol No 1 was Mr Shepherd.
I do, however, agree, with Mr Saunders and Mr Dixon that when the notice to treat was served, it could not be said that the site was no longer viable as a service station. Because of growing competition from petrol discounters it was becoming increasingly difficult to earn a reasonable income from a service station and many small to medium sized service stations had closed in the Launceston area in the last 20 years. Whilst these trends were likely to continue, this did not mean that Ampol No 1 had yet reached the stage where it was no longer viable. Caltas' failure to exercise its option to renew the lease was quite explicable. When they had sought that lease, they had an interest in keeping Liberty out of the Launceston market. This was probably a factor in Caltas having agreed to a term as to rental increases that saw the rental under the lease increase to a level that made it unprofitable to maintain. As, subsequent to the lease, Liberty had secured outlets in the Launceston area, Caltas would have had a reduced interest in denying Liberty access to Ampol No 1. Moreover, bearing in mind that Caltas had an interest in other service stations in the vicinity of Ampol No 1, Caltas could derive some benefit from the closure of that service station. Although I accept that the site was still viable as a service station, in all the circumstances, I consider it unrealistic to suggest that a fair rental for the site was that which was being paid by Caltas when it terminated the lease, $51,573 per annum.
In effect the valuers assessed the post-acquisition value of the site as a commercial redevelopment site at about $396,000. Relating that value to a rental capitalised at 9.5 per cent (the capitalisation rate applied by Mr Saunders), the annual rental would be $37,606. On this basis Mr Shepherd could have reduced the site's rental to about that level before it could be said that it was no longer worth renting it as a service station.
As to what was a fair market rental for the service station when the notice to treat was served, Mr Saunders acknowledged that this was a matter of some conjecture and said that whilst it was frequently determined by reference to fuel sales, it would not be appropriate to adopt the sites recent fuel sales due to the problems with Caltas. He said that estimating potential fuel sales was fraught with error and he decided to adopt the rental that both Caltas and Liberty had been willing to pay in late 1999 and early 2000, $45,000 per annum, as that figure was based on negotiations between prudent parties, that is, Mr Shepherd, Caltas and Liberty. Whilst he accepted that the fuel industry was volatile, he was of the view that there was every possibility that the site could regain the same throughput it had achieved in 1999. In adopting that rental he took into account a rough mental check of applying 3.7 cents per litre to sales of 100,000 litres per month, that is 1.2 million litres per year, which produces an annual rental of $45,000. He said this was not the sort of assessment that he would put into a report as it was a "back of the envelope" check that was fraught with danger.
With respect to periods when the service station had been vacant, Mr Saunders said that Mr Shepherd had told him of periods of vacancy, but that he had not been given exact dates or exact periods. It seems clear that prior to Mr Saunders' preparation of his report dated 26 June 2007, he had not been told by Mr Shepherd that the service station had been vacant for a period of five or six years between 1990 and 1996, as in his report Mr Saunders twice said that the site had been in continuous operation as a service station for in excess of 50 years up to February 2005. That was not correct. Mr Dixon said that he had no recall of Mr Shepherd telling him that the service station had been vacant for some years but that from his own knowledge he was aware that it had been vacant for a period of time. As to the relevance of past periods of vacancy, Mr Dixon said that, as he was valuing at a particular point in time, past circumstances were often not relevant. However, he did not suggest that he knew anything about the period when the station had been vacant that made it irrelevant. Mr Saunders said it would not surprise him that a service station would lie idle for some time, and the fact that it had been vacant did not impact on the annual rental of $45,000 that he had adopted, as he presumed that Liberty and Caltas would have known of that vacancy when they offered to pay that annual rental. He made the point that they were in just as good a position, if not a better position, as him, to judge what was likely to happen in the future. That rental of $45,000, together with the other rent earned from the site, totalled $60,700 per annum which Mr Saunders capitalised at 9.5 per cent to $638,947 and rounded off to $640,000. Mr Saunders said he applied a capitalisation rate of 9.5 per cent on the basis of his general experience in the commercial sector, and because he did not have any good comparable sales information to justify applying a different rate.
Capitalisation rates
In his reports of 6 and 29 December 2004, Mr Dixon capitalised his estimate of the site's annual rental pre-acquisition at 10.25 per cent. In his report of 16 March 2006, he capitalised that estimate at 9.75 per cent. In his reports of 6 and 29 December 2004, Mr Dixon, by my calculation, capitalised his estimate of the site's post-acquisition rental at 9 per cent. In his report of 16 March 2006, he capitalised that estimate at 8.75 per cent.
Mr Mantach's capitalised his estimate of the site's pre-acquisition fair market rental at 9.75 per cent.
Mr Saunders capitalised his estimate of the site's pre-acquisition fair market rental at 9.5 per cent.
The discrepancy between the rates adopted by the valuers when capitalising estimates of the sites annual rental in order to determine its value is largely unexplained and can have a marked impact on the result. For example, if the highest capitalisation rate adopted by Mr Dixon, 10.25 per cent, was applied to Mr Saunders' estimate of the site's pre-acquisition annual rental, $60,700, its value would be $592,000, which is $47,000 less than the value of $639,000 arrived at by Mr Saunders, applying a capitalisation rate of 9.5 per cent. Mr Saunders adopted this rate based on his general experience in the commercial sector. He acknowledged that there was no formula that he could apply to account for volatility such as the volatility in the service station business, but said that capitalisation rates build in risk. It is pertinent that he adopted this capitalisation rate at a time when he was under the misapprehension that the site had been in continuous operation as a service station for 50 years prior to February 2005, and when he was not aware that it had been vacant for a period of five or six years between 1990 and 1996. The uncertainties in relation to the capitalisation rates adopted would have a bearing on the weight that the hypothetical parties to a negotiated sale and purchase would give to the various valuation reports.
Post-acquisition value of the site
In broad terms, the valuers are in substantial agreement about the post-acquisition value of the site, albeit that there are significant differences between the manner in which Mr Mantach arrives at his result and the manner in which Mr Dixon and Mr Saunders arrive at their results.
As to making the site good for commercial development, Mr Dixon and Mr Saunders agree with, and adopt, the following estimates made by Mr Mantach:
Building Demolition $15,125
Site Remediation $40,000
$55,125
For the purposes of determining its value if made good for commercial development, each valuer referred to sales of other service stations in Launceston. Mr Dixon referred to the following sales, as to which I have added my calculation of the price per square metre of the site.
Property Sale Price Date Site Area Price Per Square Metre 74-80 Tamar Street $289,399 6/04/2005 642m2 $450 83-87 Invermay Road $320,000 27/05/2005 835m $383 273 Wellington Street $575,000 08/09/2005 1287m2 $447 Mr Dixon concluded that as a commercial development site, Ampol No 1 would have a value of $450 per square metre.
Mr Mantach referred to the sale of 273 Wellington Street at $447 per square metre, and also the sale of an ex-Shell site at 139–143 Hobart Road, in November 2005. The latter related to an area of 2,220 square metres and the price was $1,115,000, that is a rate of $502 per square metre. From these sales he concluded that as a commercial development site, Ampol No 1 would have a value of $500 per square metre. In so concluding he made no reference to the sale of 83-87 Invermay Road at a rate of $383 per square metre.
Mr Saunders adopted a rate of $450 per square metre for the value of Ampol No 1 as a commercial development site. As to the difference between the rate he adopted and that adopted by Mr Mantach, he said that in his opinion the rate of $500 per square metre was too high and had been arrived at without considering the sale of 83-87 Invermay Road which he regarded as very comparable.
Whilst Mr Mantach gave the site a higher value per square metre as a commercial development site than the other two valuers, he alone reduced its value by $50,000 for what he described as injurious affection to compensate for the loss of ingress and egress to the site. He said of this allowance for injurious affection that it was very subjective and difficult to measure. It seems to me that the lower value per square metre given the site by the other two valuers took into account the reduced ingress and egress to the site as to which Mr Mantach made an allowance for injurious affection.
Extracting the figures referred to and applying them in a similar manner demonstrates that the valuers arrived at virtually the same result in assessing the post-acquisition value of the site:
· Mr Dixon and Mr Saunders
Land area 1,002m2 @ $450 m2 = $450,000
Less cost of making good site $55,125
Valuation post-acquisition $395,775
· Mr Mantach
Land area 1,002m2 @ $500m2 = $501,000
Less cost of making good site $55,125
$445,875
Less injurious affection $50,000
$395,875
In his reports of 6 and 29 December 2004, Mr Dixon arrived at a lower result when he estimated the rental that the property would have earned if not redeveloped and capitalised that amount. He estimated the rental for the vacant service station site at $15,600 per annum which, together with the other rental being earned, totalled $33,356. He capitalised that rental at, I calculate, 9 per cent to arrive at a value of $370,000. In his report of 10 March 2006 he reached a higher result by increasing his estimate of the rental that would have been earned from the vacant service station site to $18,000 per annum and capitalised the rental at 8.75 per cent. On this basis he capitalised the estimated annual rental of $35,756 at $408,640, which he rounded off at $410,000.
Claim for loss of rental due to site vacancy
In his reports Mr Dixon includes an amount which he says Mr Shepherd is entitled to for loss of rental "to reflect the vacant site factor during negotiations". In his reports of 6 and 29 December 2004, he puts this claim at $25,787 for six months' loss of rental. In his report of 10 March 2006, he increased this claim to $51,573 for 12 months' loss of rental. He does not explain in any of his reports why these amounts should be paid by the Council.
In his report Mr Saunders says that due to the threat of acquisition, the service station lay idle after 17 February 2005 until the date of the notice to treat, a period of four months two weeks as to which Mr Shepherd suffered a loss of rental of $16,730.
I will pay no regard to any of these claims for an allowance for loss of rental as I am not satisfied that the evidence shows that the threat of acquisition caused the service station to be left vacant. Counsel for Mr Shepherd did not suggest that there was any evidence to found this claim as advanced by Mr Dixon and acknowledged that as to the period between Caltas' vacation of the site and the notice to treat, there is no firm suggestion that anyone was prevented from running a service station because of the possibility of an acquisition. Whilst the claim was not abandoned, counsel did not strenuously pursue it.
Summary of comparison of the valuations
Mr Dixon valued the site, pre-acquisition, on the basis that the rental that Caltas was obliged to pay under the lease for the service station, $51,573, would continue to be paid by a new lessee. He valued the site, post-acquisition, at $450 per square metre. On the basis of the highest of the assessments he made of Mr Shepherd's entitlement, which is contained in his report of 10 March 2006, and ignoring any claim for loss of rental, he calculated that entitlement as:
Pre-acquisition value of the site $710,000
Less post-acquisition value of the site 1,002 square metres @ $450 per metre $450,900
$259,100
Plus cost of making good site $55,125
$314,225
Mr Mantach assessed Mr Shepherd's loss on the basis that the site was no longer viable as a service station when the notice to treat was delivered and that subject to making the site good for commercial development, it had a rental value of $500 per square metre. On this basis, he assessed Mr Shepherd's loss as 150 square metres @ $500 per square metre, that is $75,000. To this he added an amount of $50,000 for what he described as injurious affection, making a total entitlement of $125,000.
Mr Saunders assessed Mr Shepherd's entitlement on the basis that prior to the acquisition the site continued to be viable as a service station. He assessed the fair rental for the service station at $45,000 per annum. He capitalised the total estimated rental for the site at $640,000. He, like Mr Dixon, valued the site, post-acquisition, at $450 per square metre. In result he assessed Mr Shepherd's entitlement, ignoring any claim for loss of rental, as:
Pre-acquisition value of the site $640,000
Less post-acquisition value of the site 1,002 square metres @ $450 per metre $450,900
$189,100
Plus cost of making good site $55,125
$244,225
Spencer's case hypothetical negotiation
I approach this task conscious that: "In a case of compensation doubts are resolved in favour of a more liberal estimate ...", Commission of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358, Dixon J at 379. A reasonably prudent buyer or seller will pay due attention to the opinion of reliable valuers. However, in a case such as this, where the basis for some aspects of the valuations is not much better than informed conjecture, a reasonably prudent person would not consider any one valuation to be conclusive. That said, I consider that the hypothetical parties would have considered Mr Saunders' valuation to be the most reliable, subject to a doubt about whether the capitalisation rate that he adopted was too favourable to the vendor.
The hypothetical seller is not to be identified with Mr Shepherd. His personal attributes are irrelevant. This does not mean that the hypothetical seller is not aware of all that was known to Mr Shepherd in relation to the prospects of the site as a service station on the date when the notice to treat was served. There was a real prospect that in the foreseeable future the site could cease to be viable as a service station. Both the hypothetical seller and the hypothetical buyer would have been well aware of this. They would also have been well aware that if that eventuated it was likely that the site would have a reduced value and it would be necessary for its owner to expend an amount, currently estimated at $55,125, in order to make the site good for commercial development. If the relevant portion was sold after the site ceased to be viable for use as a service station the owner could only expect to be paid about $67,590, that is, 150.2 square metres at $450 per square metre. In the light of all the contingencies, I consider that the hypothetical seller would have been willing to sell at a significant discount to the amount of Mr Saunders' assessment and that similarly the hypothetical buyer would only have been prepared to purchase at a significant discount to that assessment. I conclude that the amount at which agreement would have been reached is $200,000.
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