Lowry v Coordinator-General
[2012] QLC 26
•15 June 2012
LAND COURT OF QUEENSLAND
CITATION: Lowry v Coordinator-General [2012] QLC 0026 PARTIES: David Lowry
(applicant)v. Coordinator-General
(respondent)FILE NO: AQL204-11 DIVISION: General Division PROCEEDING: Claim for compensation payable pursuant to the Acquisition of Land Act 1967 as a consequence of the taking of land pursuant to the State Development and Public Works Organisation Act 1971 DELIVERED ON: 15 June 2012 DELIVERED AT: Brisbane HEARD AT: Gladstone and Brisbane MEMBER: Mr PA Smith ORDER: 1. Compensation is determined in the initial amount of Nine Hundred and Sixty Seven Thousand, Six Hundred and Ninety One Dollars ($967,691).
2. In addition, I award further compensation, to be agreed between the applicant and the respondent as regards disturbance costs of stamp duty-purchase of equivalent, transfer fees and financial and administrative costs to be agreed as between the parties or, failing agreement, to be brought back before the Court.
3. Interest on the amount determined by the Court, taking into account the relevant dates upon which costs were incurred and taking into account advances made by the respondent, to be agreed as between the applicant and the respondent or, failing agreement, to be determined by the Court.
CATCHWORDS: Resumption – acquisition of land by agreement pursuant to State Development and Public Works Organisation Act 1971 – inclusion of land in the Gladstone State Development Area – determination of compensation under s.20 Acquisition of Land Act 1967
Highest and best use – rural residential homesite – San Sebastian principle – land use designation under the development scheme for the Gladstone State Development Area to be ignored
Valuation methodology – direct comparison method vs. summation method – comparability of sales evidence – added value of improvements – reinstatement/replacement costs – over capitalisation – depreciation rate
Principles of valuation – Point Gourde principle – consideration of events/circumstances prior to date of acquisition
Special value – where dwelling incomplete – potential labour cost savings to an owner builder – whether claimable
Evidence – expert valuation evidence deficient – analysis of sales evidence by the Court – determination of appropriate value by the Court
Evidence – expert evidence – false evidence under oath – allegations of perjury
Disturbance – whether costs incurred prior to acquisition agreement recoverable – legal and valuation fees – whether “reasonably incurred” – whether quantum of costs reasonable – owner’s time – lack of evidence – Acquisition of Land Act 1967, s.20(5)
APPEARANCES: Mr G Allan of Counsel for the applicant
Mr D O’Brien of Counsel for the respondentSOLICITORS: Mr D Ellerman and Ms M Tilbrook of Anderssen Lawyers for the applicant
Ms C Gill of Corrs Chambers Westgarth Lawyers for the respondent
Background
This is a claim for compensation by David Lowry (the applicant) for compensation consequent upon the taking of the applicant’s land by the Coordinator-General (the respondent) for the purpose of the inclusion of the Targinie Precinct, within which the subject land is located, into the Gladstone State Development Area (the GSDA), pursuant to the State Development and Public Works Organisation Act 1971 (the State Development Act).
Prior to the taking of land by the respondent, the applicant was the registered owner of Lot 2 on Crown Plan MPH 40001 (the subject property). The subject land comprises 3.98 ha and is improved with a single dwelling house and ancillary ground improvements.
The resumption
A detailed history of events leading up to the taking of the subject land is set out later in this decision. For current purposes, it is sufficient to indicate that the subject land was included, for planning purposes, in the GSDA in 2002. On 13 April 2010, pursuant to s.82 of the State Development Act, the applicant and the Coordinator-General agreed that the subject property be taken for the purposes of establishing industry and infrastructure corridors within the GSDA.[1]
[1] See Exhibit 14.
On 15 October 2010, by Taking of Land Notice (no. 12) 2010[2] published in the Queensland Government Gazette, the whole of the subject land was taken by the Coordinator-General pursuant to s.82(1) of the State Development Act.
[2] See Exhibit 13, document 2.
The compensation payable by the Coordinator-General to the applicant as a consequence of the taking of the subject property falls to be assessed under s.20 of the Acquisition of Land Act 1967 (the ALA).[3]
[3] It should be noted that the version of the ALA as at the date of resumption, 15 October 2010, was reprint 5E of the ALA.
The claim for compensation
By originating application filed in the Land Court on 20 May 2011, the applicant claims compensation as follows:
“Loss of land and improvements $1,310,000
plus special value $ 106,000
plus disturbance $ 174,150
TOTAL $1,590,150together with interest at the prevailing Land Court rates.”
As regards the claim for disturbance, the sum of $174,150 is broken down as follows:
“(a) solicitors fees $29,563.21
(b) barrister’s fees $23,507.00
(c) valuer’s fees $23,540.00
(d) quantity surveyor’s fees $3,795.00
(e) owner’s time claim $38,260.00
(f) relocation costs $32,296.00
(g) stamp duty based on the replacement value of $52,840.00
$1,4615,000.”One comment must be made immediately regarding the claim for disturbance. Throughout the applicant’s material, it is referred to as $174,150, which is a rounded figure. This amount first appears in the applicant’s originating application to the Land Court of 20 May 2011 on page 2.[4] Further, in the applicant’s claim for compensation of 13 April 2011, not only is the disturbance amount of $174,150 referred to, but a detailed schedule of disturbance costs is attached totalling $174,144.71 rounded to $174,150.[5] The applicant’s outline of submissions to the Court refer to a disturbance total of $174,150.[6] In the applicant’s supplementary submissions,[7] the applicant’s claim for disturbance is again referred to as $174,150.
[4] See Exhibit 13, document 2.
[5] See Exhibit 13.
[6] See paragraph 13, page 4, of the applicant’s outline of submissions.
[7] See paragraphs 3 and 5 in particular.
It is only when one considers in detail the disturbance schedule compiled by the respondent and filed in the Land Court on 20 May 2011 that the actual position regarding disturbance items becomes clear. Although throughout the applicant’s material, disturbance items includes a claim of $38,260 for owner’s time claimed for preparation of the claim pursuant to ss 20(1)(b) and 20(5) of the ALA, the rounded sum of $174,150 actually excludes the claim for owner’s time. It is indeed regrettable that, despite the significant legal and valuation costs incurred by the applicant, that such an error should have found its way into the applicant’s originating application and remained seemingly undetected by the applicant or his legal team even when the supplementary submissions were filed in December 2011.
It is clear enough from the figures provided by the applicant in support of his claim for disturbance that it has always been the applicant’s intention since commencing these proceedings to claim an amount of approximately $212,000 for disturbance costs. The respondent has not made any specific issue of this error in the applicant’s claim. Accordingly, I will treat the applicant’s claim for being the total sum of $212,405, rounded, including the claim for owner’s time.
For its part, the Coordinator-General made an advance to the applicant for loss of the subject land and improvements in the amount of $690,000 on 18 July 2011. Subsequently, on 20 July 2011, a further advance was made by the Coordinator-General to the applicant with respect to disturbance in the amount of $56,726.90. Accordingly, in total, the Coordinator-General has advanced the sum of $746,726.90 to the applicant[8].
[8] See applicants submissions, paragraph 14
Preliminary comments regarding the proceedings
This matter first came on for directions hearing before the Land Court on Wednesday, 22 June 2011. At that directions hearing, Counsel for both the applicant and the Coordinator-General agreed that the claim for compensation was quite straightforward and was ready to proceed, and would require a total of only three days for hearing, including one full day of inspections in the Gladstone vicinity. Acting on the assurances of Counsel, the matter was listed for hearing in Gladstone on Thursday, 28 to Friday, 29 July 2011. As matters transpired, this case turned into nothing like a simple hearing of a compensation matter. Including the inspection and oral submissions, the hearing ended up occupying seven Court sitting days. It was necessary for the Court to deliver two decisions on procedural points during the course of the hearing.[9]
[9] See Lowry v Coordinator-General [2011] QLC 0058 and [2011] QLC 0073.
The manner in which Counsel for the respective parties has conducted the proceedings could not be more starkly different. Mr O’Brien for the Coordinator-General has conducted what he considers a relatively simple, straightforward compensation case under the ALA. He complains that Counsel for the applicant has made a simple case unnecessarily lengthy and complex. Conversely, Mr Allan for the applicant contends that a simple compensation matter has been made complex because of the manner in which the respondent presented its evidence before the Court, and particularly as regards the respondent’s expert valuer. Mr Allan contends that the nature of the evidence of the Coordinator-General’s expert valuer, Mr Litherland, is such that I should refer his evidence to the Director of Public Prosecutions for the criminal charge of perjury for deliberately giving false evidence under oath.[10]
[10] See applicant’s supplementary submissions at paragraphs 70-84.
In addition to lengthy oral submissions, both Counsel have provided the Court with detailed written submissions and reply submissions.[11]
[11] See applicant’s submissions of 26 October 2011 and applicant’s supplementary submissions of 6 December 2011 and respondent’s submissions of 26 October 2011, respondent’s supplementary submissions of 6 December 2011, respondent’s executive summary filed 7 December 2011, respondent’s reply submissions of 13 December 2011, together with the respondent’s disturbance schedule handed up in Court on 26 October 2011.
In light of the relatively strange nature of the way the proceedings unfolded and the diverse views of both Counsel, I requested that each Counsel provide the Court with a two page executive summary setting out the essence of their respective cases. The executive summary provided by Mr Allan of Counsel for the applicant is as follows:
“Summary
120. The Court had requested a 2 page summary of the findings sought by each party - the following non-exhaustive and incomplete list is accordingly provided. The Court is referred to the AOS and the earlier submissions herein which include the numerous findings which are sought by the Applicant. It is respectfully submitted that the following principal findings should be made by the Court.
121. The market value of the subject property as at the date of taking, 15 October 2010, is best determined by employing the summation method in conjunction with the direct comparison method to determine the land value component of the subject property.
122. Whilst the direct comparison method is the traditional primary method of valuation, it is only to be used if it is the best way to estimate the value to the owner of the resumed land. The attributes of the subject property (as set out at paragraph 10.2.1 of the Cupitt Report) and the absence of any sales of rural residential properties that could be safely relied upon within the Targinnie Valley and of comparable properties within the Gladstone locality generally has the result that the direct comparison method does not afford the most reliable evidence of value of the subject property.
123. Both valuers (Mr Litherland for the Respondent and Mr Cupitt for the Claimant) did not rely upon any sales to the State/Coordinator-General (effectively the only purchaser in the market place since December 2002) because those sales did not meet the willing buyer / willing sell concept as articulated in the Spencer test. The valuer’s evidence in that regard should be accepted.
124. The lack of comparable [improved sales] is a sufficient reason in the present case to justify the use of the summation method and the departure from the conventional method of valuation using comparable sales.
125. The market value determined by Mr Cupitt for the subject property in the amount of $1,310,000 should be accepted because:
(i)the vacant land sales he has relied upon (together with the sale at Woodstock Road, O’Connell which Mr Litherland first referred to in cross-examination) support his assessed land value in the amount of $500,000;
(ii)the evidence as to the added value of the improvements has been reliably ascertained by the value derived from the depreciation of the reinstatement cost of the improvements prepared by a quantity surveyor.
126. Mr Cupitt has undertaken his valuation in accordance with a proper application of the assumptions to be made under the Woollams principle (see Woollams v The Minister (1957) 2 LGRA 338), which assumptions (agreed to by the Respondent) include:
(i)that the Oil Shale Plant was operational for the period of 1999 to approximately July 2004;
(ii)that from December 2002 (approximate commencement date of the Scheme of Resumption) to July 2004 when the Oil Shale Plant closed down, residents in the Targinnie Valley (excluding Mr Lowry) experienced adverse environmental impacts from the Oil Shale Plant from odour/noise which affected the general amenity of the valley;
(iii)that the demolition of houses and the introduction of a ‘rental market’ into the Targinnie Valley following the declaration in December 2002 were attributable to the Scheme of Resumption and should be ignored and the subject property should be valued on the basis that:
(a)the houses - since demolished - were in existence at the date of resumption (15 October 2010) and were well maintained;84 and
(b)the short term renters did not occupy the remaining houses that were not demolished following their purchase by the Coordinator-General;85
(iv)that most properties contained well maintained fruit farms/orchards;86
(v)that the subject property was situated approximately 400 metres from the Targinnie shop;87
(vi)school bus services were available to the Yarwun school;88
(vii)locally grown fruit and vegetable were sold at the Targinnie shop and the Yarwun Cooperative;
(viii)that following the closures of the Oil Shale Plant in July 2004 and ignoring the Scheme of Resumption, the amenity, economic and social environment of the Targinnie Valley would have ‘progressed quite substantially’ during the period from July 2004 to the date of resumption, 15 October 2010, because it is a ‘pristine valley’89 that would have become a sought after area by purchasers in the rural homesite market as it had been previously - in the early 1990s.90
127. On the evidence, the Scheme of Resumption that must be ignored when valuing the subject property when applying the Pointe Gourde principle commenced in or about July 2002 or at the latest, approximately December 2002, when the Governor-in-Council approved the extension of the GSDA to include the Targinnie precinct.
128. The precursor of the Scheme in Resumption (the taking for a ‘public purpose’ was the impacts on residents of the Targinnie Valley (including the Claimant’s land) of the environmental nuisance caused by the Stuart Oil Shale Project which was operated from plant situated outside the land designated as part of the Gladstone State Development Area.
129. In terms of the application of the Pointe Gourde principle in the present case, it is the restraint which has been imposed on normal market activity within the Targinnie Valley - with the consequential diminution in values - that must be ignored when valuing the subject property and applying the Pointe Gourde principle. Mr Cupitt undertook his valuation giving proper regard to the Pointe Gourde principle (Exhibit 3, page 30).
130. Having regard to the relationship between the operation of the Oil Shale Plant, a hypothetical prudent purchaser of the subject property as at the date of taking -
(i)would be aware the Oil Shale Plant closed down in July 2004;91
(ii)was not operational and being dismantled in July 2009;92
(iii)if it became operational in the near future it would be using new more ‘environmentally friendly’ technology (Paraho II);93
(iv)would be aware of the Environmental Authority issued to Queensland Energy Resources Ltd (the new owner) on 23 December 2009 which would regulate any future operation of the Oil Shale Plant;
(v)would reasonably conclude that based on the history of the problems with the operation of the plant between 1999 and 2004 that the Department of Environmental and Resource Management (DERM) would maintain vigilant regulatory control over the operations to ensure that such problems of odour and noise nuisance would not re-occur;
(vi)would in any event be aware, based on enquiry, that the subject property because of its location was unlikely to experience any odour or noise problems from any future operation of the palnt.94
131. The claim for special value in the amount of $106,000 should be accepted for the reasons explained in the Applicant’s Supplementary Submissions.
132. The items claimed for disturbance as set out in the Schedule to the Claimant’s Statement (Exhibit 1) are recoverable for the reasons explained in the Applicant’s Supplementary Submissions.
133. Mr Litherland was a most unsatisfactory witness. His evidence included the following deficiencies:
(i)failure to inspect properly the subject property and review the accuracy of his report;
(ii)he gave false evidence under oath as to carrying out an internal inspection of the houses for his Sales 2 and 5;
(iii)he was evasive, non-responsive, inconsistent, irrational and dogmatic during his cross-examination;
(iv)he failed to inspect properly or at all the sales evidence that he relied upon;
(v)he failed initially to include relevant vacant land sales in his report when assessing the land component of the subject property using his ‘check method’ - the summation approach;
(vi)he demonstrated bias by adopting and maintaining his initial value of the subject property - $690,000 - notwithstanding an earlier valuation on 21 November 2007 (Exhibit 45) of the subject property in the amount of $750,000 whilst conceding during cross-examination that between November 2007 and October 2010, the level of value for all homesites in the Gladstone locality did not reduce over that period;
(vii)he adopted an entrenched irrational approach to the application of the direct comparison method as the primary method of valuation and the use of five (5) sales he relied upon, notwithstanding the characteristics and attributes of the subject property (having regard to the assumptions in accordance with the Woollams principle pursuant to which it was to be valued) had the consequence that the direct comparison method was not the most reliable method to use when valuing the subject property;
(viii)he did not understand and was in breach of his duty to assist the Court and his valuation report did not contain all of the information upon which his opinion was based.
134. In respect of Mr Litherland’s primary method of valuation using the direct comparison method, that method and the value derived using that method of $690,000 should be rejected.
135. In respect of Mr Litherland’s use of the summation method, that method and the value he derived of $750,000 (T5-5) should be rejected as it is not the product of Mr Litherland’s own opinion and provided no reliable basis to check the value he derived using the direct comparison method.
G R Allan
Chambers
6 December 2011
________________________________________
84See Exhibit 1, paragraph 60, Lowry Statement.
85Exhibit 7, Document 2 - Aerial Photo August 1999 - with annotations.
86See Exhibit 1, paragraph 60, Lowry Statement; see Exhibit 7, Document 1, Aerial Photo August 1999.
87See Exhibit 7, Document 15 - History of Targinnie - at page 91: ‘By the late 1990s Targinnie had developed once again as a small township with a number of houses and even a shop.’
88T1-35, l35-50.
89Mr Cupitt does not express an opinion in his report about the likelihood of such improvement in the absence of the Scheme of Resumption - in his evidence in chief he does - T1-62, l1-13.
90See Exhibit 17, letter from David Lowry to the Coordinator-General, 9 December 2002.
91See Exhibit 40.
92See Exhibit 21.
93See Documents 2 and 3, Exhibit 40.
94See evidence - David Lowry - 1-49 to 1-50.”
Mr O’Brien of Counsel for the Coordinator-General provided the following executive summary:
“RESPONDENT’S EXECUTIVE SUMMARY
1. This is an application pursuant to the Acquisition of Land Act 1967 (Qld) (the Act) for compensation arising out of the taking of land by the Respondent (the Coordinator-General) pursuant to the State Development and Public Works Organisation Act 1971 (Qld) (the State Development Act).
2. On 13 April 2010, pursuant to section 82 of the State Development Act, the Claimant (Lowry) and the Coordinator-General agreed that certain land owned by Lowry, namely Lot 2 on Crown Plan NPH40001 (the Land), be taken for the purposes of establishing industry and infrastructure corridors within the Gladstone State Development Area (the GSDA). The Land was resumed following the inclusion of the Targinie precinct (within which the Land is located) into the GSDA in December 2002.
3. On 15 October 2010, by Taking of Land Notice (No. 12) 2010 published in the Queensland Government Gazette, the whole of the Land was taken by the Coordinator-General pursuant to section 82(1) of the State Development Act.
4. The Land is situated at 491 Targinie Road, Targinie and has an area of 3.98 hectares. At the time of the taking of the Land it had constructed on it a single dwelling house.
5. The Land was zoned ‘Rural’ prior to its inclusion in the GSDA in 2002. Both parties proceeded on the basis that the San Sebastian principle is applicable so that the Land should be valued on the basis of the zoning that was in existence prior to the introduction of the GSDA.1 There is no dispute between the parties that the highest and best use of the land as at the date of taking of the Land was as a single rural residential residence.
6. Lowry referred his claim for compensation to the Land Court by filing an Originating Application on 20 May 2011 seeking the sum of $1,590,150 apportioned as follows:
(a)loss of land and improvement (including special value $1,416,000.00
$106,000); and
(b)disturbance $174,150.00
7.The disturbance component of the claim included the following elements:
(a)solicitor’s fees $29,563.21
(b)barrister’s fees $23,507.00
(c)valuer’s fees $23,540.00
(d)quantity surveyor’s fees $3,795.00
(e)owner’s time claim $38,260.00
(f)relocation costs $32,296.00
(g)stamp duty based on the replacement value of $52,840.00
$1,4615,000.
8. For reasons elaborated on in the Respondent’s Submissions, much of Lowry’s claim is misguided. The main difficulties with the claim are:
(a)The use of an unreliable valuation methodology: Lowry’s claim for the market value of the Land (including its improvements) was based solely on the summation method, a valuation methodology well recognised as being fraught with potential difficulties. The unsatisfactory nature of that methodology was confirmed by the fact that the market value derived by Lowry’s valuer, Mr Dennis Cupitt (Cupitt) using the summation method ($1,310,000) was almost 40% to 50% higher than the most expensive residential or rural residential property sold in Gladstone or the Gladstone region in the last 3 years. On no view does that fact reconcile with the location, state and other characteristics of the Land and the dwelling on it. The unsatisfactory nature of Cupitt’s opinion as to value was compounded by the fact that Cupitt did not do any cross-check valuation.
(b)The appropriate valuation methodology to adopt was the direct comparison method, a methodology accepted by the Courts as being the most reliable for sales of residential property. That was an approach adopted by the valuer called by the Coordinator-General, Mr Wayne Litherland (Litherland). There were a number of comparable sales able to be used. Applying this conventional and well established methodology, Litherland derived a market value for the Land of $690,000, a figure which sat comfortably in the overall residential market in Gladstone and the Gladstone Region.
Litherland also undertook a summation method cross check valuation which confirmed the opinion of value he had derived from his direct comparison valuation.
(c)The Land does not have any Special Value: Lowry’s claim for special value is unsupportable as a matter of law and fact. It is clear from the High Court’s decision in Boland v Yates that the matters relied upon by Lowry do not support a claim for special value;
(d)The legal and valuation fees are excessive and unreasonable: On no basis can it be accepted that approximately $53,000 in legal fees is reasonable for the preparing of the claim. It is the antithesis of reasonableness. The case should not have been complex. It a conventional claim arising out of the taking of a residential property. There was no dispute over the highest and best use of the land.
The fees claimed are unjustifiable and should not be allowed. The same can be said in relation to the valuation fees in the sum of $23,640.
Further, a substantial component of the fees were in fact incurred prior to their being any agreement for the Land to be taken and should therefore be disallowed; and
(e)Owner’s time is not recoverable as a matter of law. It is well established that owner’s time is not compensatable: 34 Philgram Pty Ltd v The Crown (1993) 14 QLCR 13 at 52 and Heavy Lex No 64 Pty Ltd v Chief Executive, Department of Transport (1999) 20 QLCR 296 at 453.
9.Lowry’s claim is overblown and should be rejected.
10. Compensation should be assessed in the sum of $690,000 for the taking of the Land taken and in the sum of $56,726.90, rounded to $56,750.00 for disturbance items.
________________________________________
1 The San Sebastian principle (Housing Commission (NSW) v San Sebastian Pty Ltd (1978) 140 CLR 196) applies where restrictions are placed on the land as a prior step to its resumption. The principle requires that the effect of those restrictions be ignored for the purposes of assessing the market value of the land.”
Mr O’Brien of Counsel is to be commended for getting close to the two page limit imposed by the Court. Unfortunately, Mr Allan was able to get nowhere near the page limit. This is regrettable, as no one is in a better position than Counsel for the applicant to comprehensively, and coherently, summarise the applicant’s case.[12]
[12] I note that, by Mr Allan’s summary, it is necessary to read that summary in conjunction with his lengthy written submissions; that is, the summary is not a stand alone summary of the proceedings.
The Hearing
As already indicated, the hearing of this matter occupied seven sitting days, including an extensive day inspecting both the subject property and over 20 sales properties. At the outset, I should indicate that the view was of considerable assistance to the Court in determining this matter.
The applicant was represented by Mr Allan of Counsel, instructed by Anderssen Lawyers. The Coordinator-General was represented by Mr O’Brien of Counsel, instructed by Corrs Chambers Westgarth. Mr Lowry gave evidence at the hearing, and expert evidence on his behalf was also provided by Mr Denis Cupitt, a registered valuer.
The Coordinator-General only relied upon the expert evidence of a registered valuer, Mr Gregory Litherland.
The applicant sought to lead rebuttal evidence. This was opposed by the Coordinator-General. Following my ruling on the application,[13] I allowed the applicant to call rebuttal evidence, subject to a ruling as to the admissibility of that rebuttal evidence in my ultimate decision in this matter. The applicant consequently called rebuttal evidence by Leo Lucht, Wendy Lucht, Lesley Jones, Desmond Jones, Donald Robertson, Robert Long, Beverley Long and Todd Jones.
[13] See Lowry v Coordinator-General [2011] QLC 0073.
It is appropriate at this point to make reference in particular to the cross-examination of Mr Litherland. Bearing that the matter was listed for three sitting days, with one of those days occupying a view, it is noteworthy that Mr Litherland commenced his evidence and cross-examination on the third sitting day as his cross-examination was not concluded, the matter was listed for a further sitting day on 16 August 2011. Mr Litherland was in cross-examination for the entire day. Subsequently, the matter was listed for a further additional sitting day on 31 August 2011. Again, that day ended with Mr Litherland still under cross-examination, although to be fair to Mr Allan a general application was also heard and an ex-tempore decision given that same day.[14] Mr Litherland finally concluded his evidence on 25 October 2011, day six of the hearing, following which Mr Allan brought his application for rebuttal evidence as already referred to. The rebuttal evidence and oral submissions were subsequently heard on 26 October 2011. I will make further reference to the time during which Mr Litherland was subject to cross-examination when I evaluate his evidence.
[14] See Lowry v Coordinator-General [2011] QLC 0058.
The subject property
Much of the dispute in this matter can be traced to various opinions as to the attributes of the subject property. Mr Cupitt, for instance, considers that the subject property is of such a unique nature and character that there are simply no comparable sales in the whole Gladstone area sufficient for him to value the property using a direct comparison approach, as a result of which he relied upon the summation method. Mr Litherland, however, considers that there are many sale properties in the Gladstone area that are appropriate to use and analyse in accordance with the direct comparison approach. Although the subject land was taken on 15 October 2010, an application of the Pointe Gourde principle established clearly enough that key events post 2002 are to be disregarded. As already set out, in 2002 the subject land, and the great majority of the Targinie locality was incorporated into the GSDA. There followed a lengthy period of negotiation between the Coordinator-General and property owners in the affected Targinie area, one of which was the applicant. Over time, the Coordinator-General purchased more and more properties, and the core nature of Targinie fundamentally changed. Such changes are to be disregarded.
The applicant purchased the subject land in 1991[15]. At the time of purchase by the applicant, the subject land was leasehold. This is of some importance as the land was subsequently converted to freehold, the deed of grant issuing on 8 September 1995.[16] The freeholding of the leasehold land is relevant as the amount payable by Mr Lowry for the conversion of the property was subject to dispute. The conversion issue was subject to Land Court proceedings, leading to a determination by the Land Court on 3 September 1993.
[15] See Exhibit 1, paragraph 22.
[16] See Exhibit 1, paragraph 26.
My understanding of the history of the Targinie district has been enhanced by the published history of the district as contained in Exhibit 7, part 15. In simple terms, in the early to mid 1990s Targinie was a distinct community comprised of rural home sites and market gardens, flavoured by a deep Russian cultural history dating back to the earlier parts of the twentieth century. By the 1990s, the establishment of direct road access to the nearby industrial estates and Gladstone City Centre greatly enhanced Targinie as a rural retreat yet offering close, easy access to significant employment opportunities and city amenities. That changed, however, later in the 1990s with the establishment of the oil shale project in the Targinie locality. Extensive material has been provided to the Court in this case regarding the oil shale project.[17] For present purposes, sufficed to say that the oil shale project, after initially being relatively well received by the community after commencing operations had significant problems resulting in major environmental and health concerns. Those concerns ultimately lead to the decision by the Queensland Government to include the Targinie vicinity in the GSDA in 2002. The oil shale plant subsequently closed in 2004.
[17] See, for instance, Exhibits 34, 39, 40 and 41.
With this short history in mind, I return to the attributes of the subject land as at the date of acquisition, but read in light of the GSDA. Taking into account all of the evidence before me regarding the subject land, and noting my own observations during the view of the property undertaken on the first hearing day, I am satisfied that the evidence of the applicant as set out in Exhibit 1 fairly, with some reservations, describes the property. I note in particular the following extracts from the applicant’s statement in Exhibit 1:
“18. The views from 491 Targinie Road to the east are of Curtis Island, the Narrows, Targinnie Creek, mangroves and the ocean. At night you can see the lighthouse at Cape Capricorn flashing in the distance. In winter when there is fog in the valley and the narrows it seems as if you are on top of clouds with only the peaks of the hills on Curtis Island protruding above the fog.
19. While views and vistas are admittedly matters of personal taste, I think there is no more attractive view in the Gladstone region.
20. I could see that no 491, while smaller than no. 501, would also suit me because it provided an opportunity to create a home site which would be very private and set well back from the road and neighbours.
21. The lower parts of the land were suitable for establishing a domestic orchard.
22. It was obvious that it would be a challenging place to build a house as the topography was steep and it was strewn with granite boulders. I knew that it would be a long and difficult project. However, I saw an opportunity to create something special for my future and decided to pursue it. Accordingly, I purchased the land on 21 May 1991 (my father actually attended the auction on my behalf and was initially registered as the owner but it was subsequently transferred to my name).
…
35. From the outset I had a basic design concept of the house I wanted to build however I spent considerable time researching publications and inspecting other houses for designs and materials.
36. I had also engaged a draftsman to assist with the design and was informed that because of design of the house and its location, it would be required to meet a category 1 cyclone rating which required additional engineering elements to be incorporated into the design. These included larger than usual framing elements, stronger windows and window frames, tie down rods etc, all of which were required to provide sufficient resistance to maximum wind loadings.
…
39. For the frame of the house I decided to construct the house from hardwood (which was becoming unusual at that time) for added termite protection.
40. In terms of what I tried to achieve in the design:-
•the home incorporated a large east facing verandah to make the most of the views;
• the verandah wrapped around the northern and eastern sides of the house to enable access to the rear yard, pool area, lounge and master-bedroom;
•the kitchen, formal lounge, dining room and master bedroom were also designed with large windows to also enjoy the views;
• the house was intended to be child friendly with informal family areas near the kitchen and to provide separate more formal living and sitting areas;
• when finished, the house was to comprise three levels - a double garage on the ground floor; an office built on a mezzanine over the garage together with another bedroom and storage area on the middle floor and most of the bedrooms and living areas on the top floor; and
•the home was to be visually integrated into its bushland setting with landscaping and rock retaining walls.
41. I wanted the house to blend into the environment and decided to clad the house with western red cedar imported from Canada. I used exposed laminated beams around the veranda, green trims for handrails and gutters and timber internal features throughout such as the architraves, doors and polished timber floors in the formal area.
42. I wanted my home to be a quality home that would last and for that reason I used high grade materials, finishes and fittings, for instance:-
•any internal flooring that was not tiled or polished was covered with 100% wool carpet to increase fire protection;
• the internal staircase was hand built on site due to their size by my father and I and made of quality imported timber of thicker than normal specification;
• the granite bench in the kitchen was sourced in Brisbane and is twice the thickness of granite generally found in kitchens;
• as the house features exposed timber (architraves, doors, formal lounge/dining floor, external western red cedar) I decided to use laminated beams for the veranda roof bearers. As I could not locate the quality I was after, at the time I purchased a 24 inch bed thicknesser from Adelaide to manufacture the beams myself;
• the veranda was covered with heavy fibro flooring (rather than decking boards) to enable the area underneath it to be enclosed at a later date as it would be easy to waterproof;
43. As mentioned above, in order to blend the house into the environment, instead of building block retaining walls I used the granite boulders on the land. I also cleared sections of my land of boulders for various improvements such as water tanks, swimming pool, sheds, driveways, a tennis court, pool and an area for an orchard.
…
46. I created a level area above the house so that water tanks could gravity feed to the house to minimize pumping requirements and electricity usage. The positioning of the tanks in this location also suited my plans to establish an orchard on the lower parts the land to be watered using our grey water tank. The system of tanks I have installed have meant that we have never run out of water. Only on one occasion since building the house have I bought in water and that was done as a precaution.
47. The pool was constructed in 1998.
48. I created a tennis court site with north/sough alignment in a location so that it would be over looked from the house.
…
50. By approximately 2000 the house, in its current state, had been constructed. Work was however ongoing and I intended to continue to improve it by:-
• enclosing the garage under the verandah by laying a slab, fixing walls and roof. The roof of the garage would form the mezzanine floor of the area below the deck which would also be enclosed for an office or study;
• to extend the existing enclosed area in the middle level of the house to create further room for a bathroom/storage area and games area;
•to establish the tennis court and orchard;
•boundary fencing had to be completed - I had put in the strainer posts but had not yet strung the fence;
•to concrete various driveways and pathways.”
Given the nature of this case, I consider it also important to repeat the stated evidence of the applicant as to why he chose to live at Targinie[18]:
[18] See Exhibit 1 paragraphs 52-54.
“52. I have woken visitors from overseas in the mornings to watch wallabies boxing below our veranda, and enjoyed a range of other native wildlife including possums, eagles, black cockatoos and white cockatoos.
53. I loved living in Targinnie for a number of reasons which I have tried to summarise below:-
• I have always liked a rural residential style of living and Targinnie offered this in a picturesque and peaceful area framed by the backdrop of Mount Larcom and granite ranges;
•the valley floor was comprised of a mixture of fruit farms and well tended rural residential style homes;
•it was in close proximity to the ‘Narrows’ - the passageway between the mainland and Curtis Island;
•elevated land in the area had had views north and east over the Narrows and beyond over an attractive natural landscape;
• there was a friendly and close-knit local community which held functions regularly at the community hall and oval, a local Bush fire brigade and Yarwun-Targine Fruit Growers association;
•there was a local shop and post office nearby in Yarwun, and in later years Targinnie also had a local shop;
•there was a well regarded primary school of about 70-90 students in Yarwun where my girls went to school;
• there were employment opportunities for someone with my trade at the Yarwun Industrial estate (10 minutes away) and in Gladstone itself (20 minutes);
•Targinie Creek offered easy access for boats and fishing at Phillipesses landing; and
• the area had an interesting history of gold mining and an active Russian community which gave the valley a unique and interesting character.
54. In short, we enjoyed and participated in community life with all that the area had to offer in terms of employment, education, recreation and convenience.”
I completely accept the applicant’s evidence set out in paragraphs 52 to 54 of Exhibit 1 above as a truthful account of the reasons he chose to live at Targinie in the 1990s. However, those attributes do not paint the full picture, as although the GSDA must be disregarded, the existence of the oil shale project from 1997 onwards is a relevant factor that must be taken into account in considering the lifestyle and amenity of Targinie in general and the subject land in particular. In short, the applicant’s concept of the land is, in my view, more appropriate for the mid 1990s than for 2002. This was essentially conceded by the applicant during cross-examination.[19]
[19] See T1, pages 33-35
The valuation evidence of Mr Cupitt
It has been strongly submitted by Mr O’Brien for the Coordinator-General that I should reject Mr Cupitt’s valuation methodology as unreliable. For the reasons that follow, I agree with Mr O’Brien that the conclusions reached by Mr Cupitt as to his valuation of the subject property are unreliable.
Mr Cupitt’s position can be readily ascertained by reference to his valuation report.[20] Relevantly, he had this to say:
[20] Exhibit 3.
“10.0 VALUATION RATIONALE
10.1Methods of Valuation
10.1.1The accepted method of valuing a rural homesite is the Direct Comparison method on a site basis and not according to a uniform rate per hectare.
10.1.2Further, as the property is a relatively small block of land we have adopted a site value in preference to a rate per hectare basis. It is considered that the local market regards blocks of land of this size and larger in size that are too steep, hilly, rocky or affected by some other constraint as having a site value only.
10.1.3From my research and investigations I have found that there are no recent sales of properties with the similar attributes and features of the subject property.
Accordingly, in my opinion, the Direct Comparison method does not afford the most reliable guide to determining the value of the subject property. I have investigated sales of other rural homesites; rural residential/park residential improved properties to provide some indication of the range of the level of values of residential dwellings on larger parcels of land within the Gladstone locality. However, given that the accepted method of valuing rural homesites is on a per site basis - in my opinion the differences in comparability between the improved sales and the subject property and the extent of adjustments necessary to ascertain the value of the subject property means that the Direct Comparison method - comparing sales of improved properties - should not be adopted as the preferred method of valuation in this case.
10.1.4Therefore, to arrive at a market value that reflects the special attributes and features of the subject property I have adopted the Summation Method and used that method in conjunction with the Direct Comparison approach to determine the vacant land value whilst making allowances between the subject property and sale properties for the vacant land value.
10.1.5In using the Summation Method I have used the Direct Comparison method for land plus a depreciated value for the structural improvements.
…
10.3Sales Research and Market Review
…
10.3.2We have not been able to locate an elevated block of land with similar views, seclusion, aspect, ambience, rural services, close to shops and school in the Gladstone environs. Accordingly, adjustments have necessarily been made in using the Direct Comparison method to take account of the differences between the subject land and vacant land sales.
10.3.3A number of local real estate agents were approached who were unable to suggest another similar vacant or improved property that had sold or is ‘for sale’ in and around Gladstone.
10.3.4Agents have advised of renewed interest in all types of properties since the LNG projects received Federal Government approval.
10.3.5During my sales research/inspections I attempted to locate sales of vacant land and improved properties that were or could be used as rural homesites. The sizes varied depending on the use of the property i.e. the property being steep, unsuitable for intensive uses such as small crops, fruit trees, heavily vegetated, flood prone, larger blocks of land with use restrictions and dated site value sales.
10.3.6A search of vacant rural homesite blocks of land throughout Beecher, Burua and Wurdong Heights during the months prior to October 2010 show blocks sold between $220,000 and $260,000 with one block fronting the Esplanade along the Calliope River realising $365,000. These properties do not have any of the attributes as referred to above. It is considered that all of the sale properties in Beecher, Burua and Wurdong Heights are inferior to the subject property (refer to sales 4, 5 & 11).
10.3.7There are two (2) larger size blocks of land within the closer Gladstone environs which have sold during 2010 for $520,000 and $500,000 respectively and one for $315,000 (refer to sales 1 to 3).
10.3.8There are a few vacant blocks around Gladstone City which could provide privacy, seclusion, perhaps some views (mainly westerly over residential developments) however the majority of those properties are the steeper or last stages of residential subdivisions. The developers, when carrying out cost benefit analysis, have found difficulty in making a profit as the sale price of blocks of land do not support a profit in the current economic climate.
10.3.9In an attempt to locate sales of vacant and improved properties that may have some similarity to the features of the subject property I also inspected residential and park residential properties within Gladstone township (refer to sales 6 to 10). Most of these properties are smaller blocks of land. However they have one or more of the special features as detailed previously in section 10.2.
10.3.10The town properties have some ocean or river views and are improved with renovated Queenslanders or extended basic weatherboard/fibro dwellings. There are however some major deficiencies attaching to them e.g. closeness to neighbours, smaller blocks of land, noise, smells/odours from smelters, coal dust, light intrusion, slower moving traffic, indirect routes to CBD/place of work/destination, larger schools with larger classes or inability to enlarge the existing dwelling.
10.3.11With respect to improved properties in the areas searched my research revealed that most improved properties were of rendered/brick construction on flat to gently undulating blocks of land. These properties did not offer any of the special features that the subject property offered.
11.3Summation Method Assessment of Market Value - Vacant Land
11.3.1As previously stated the acknowledged method of valuing vacant and improved rural homesites using the Direct Comparison method is on a site basis.
11.3.2I have relied on vacant land sales in and around Gladstone (refer to sales 1 to 3) and have considered the special features of the subject property when comparing the sales with the subject property.
11.3.3I have considered a number of vacant land sales in and around Gladstone City and its environs. My comments in respect of each sale are recorded in Section 12, sales 1 to 3 of this report and valuation.
11.3.4The sales considered in preparing my assessment of value are located within the triangle formed by the Gladstone - Mount Larcom Road, Bruce Highway and Gladstone-Benaraby Road and are within a 20km radius of Gladstone City.
11.3.5Generally, vacant rural homesite sales range from $220,000 to $365,000 with the lower end sales being gently undulating and uninteresting to the higher end sales which have some additional features.
11.3.6There are two (2) larger size blocks of land within the closer Gladstone environs which have sold during 2010 for $520,000 and $500,000 respectively and one for $315,000 (refer to sales 1 to 3).
11.3.7After consideration of each of these sales, their positive and negative attributes and features as compared to the subject property, I consider that the subject land has a market value as at date of resumption of $500,000.
11.4Summation Method: Determination of the Added Value of the Improvements
11.4.1As stated previously I was unable to locate sales of improved properties that could be considered as comparable or similar to the subject property.
11.4.2The subject dwelling, as has been detailed previously, has many special attributes and features that places it above the usual style and construction of the sold properties listed within section 12 of this report and valuation.
11.4.3To assess a value for the subject dwelling I have considered the replacement value of the dwelling less an allowance for depreciation of the structural improvements.
11.4.4The difficulty when assessing the appropriate depreciation is that in order to adopt a percentage as the basis of depreciation, regard must be had to the fact that the dwelling was completed structurally in approximately 1995 however there have been ongoing works up to December 2002 when the enlarged GSDA scheme was approved.
11.4.5Generally, when considering depreciation, three (3) related components are considered:-
(1)Age
(2)Physical deterioration (wear and tear)
(3)Functional obsolescence (change of community attitude to style, materials, or other society factors.)
11.4.6In this instance I consider that only the age and physical deterioration should be taken into account. In my opinion, there is no functional obsolescence because the dwelling is of modern design with a modern functional fit out that is compatible with that of newly constructed houses.
11.4.7The depreciation allowance for residential dwellings for taxation purposes is 2.5% per annum which equates to a total life of 40 years for a dwelling. I consider that a more realistic life span for a dwelling of this style and construction would be 60 years. In my opinion, a figure of 1.35% per annum should be adopted as the depreciation rate considering the additional standard of construction used (W60 rating), the material used to construct the dwelling, the quality of fit out and the on-going construction programme.
11.4.8Therefore, adopting the estimate of construction costs in the QS Report (appendix 18) the cost to replace the dwelling was assessed at $1,012,000 inclusive of GST ($920,000 plus GST).
11.4.9Adopting a current used life for the dwelling of 15 years depreciated at 1.35% per annum then the added value of the improvements is assessed at $807,070 inclusive of GST ($733,700 plus GST).
11.4.10In Section 11.3.7 I have already assessed the vacant land value to be $500,000.00. Therefore, using the Summation Method the subject property has a market value of $1,307,070, adopt $1,310,000.
Mr Cupitt also expressed his expert opinion that there should be an assessment of compensation for special value of the subject property which he has calculated in the sum of $106,000.[21]
[21] See Exhibit 3 pages 34 and 35.
In his submissions of 26 October 2011, Mr O’Brien mounts a sustained, compelling attack on Mr Cupitt’s evidence.[22] I agree with Mr O’Brien’s criticisms. I will attempt to summarise those criticisms in the following paragraphs.[23]
[22] See respondent’s submissions paragraphs 37-77.
[23] The paragraphs that follow are largely taken from Mr O’Brien’s submissions. I consider it appropriate to formally acknowledge my significant reliance upon his work in this regard.
As set out above, Mr Cupitt acknowledged that the accepted method of valuing a rural home site is the direct comparison method. He went on to state, however, that his research and investigations lead him to find that there were no recent sales of properties with the similar attributes and features of the subject property. Mr Cupitt did not explain in his valuation report why the differences were so great such that the sales could not be said to be comparable.
I am concerned that there was no proper explanation from Mr Cupitt as to why the direct comparison sales methodology has not been used. As Mr Cupitt himself conceded it is well established that the direct comparison methodology is the most reliable methodology to derive the market value of residential land. In my view, there is a long line of authorities warning against the use of the summation method.
In The Commonwealth v Arklay[24] at 170 Dixon J, William J and Kitto J stated that:
“Where land has no special suitability for some business or activity carried on by the owner and has no added potential value to put to some better use, the value in a free market is usually its market value. The best evidence of this value is that of comparable sales of other land either before or after the date of acquisition….”
[24] (1951) 87 CLR 159.
Consistent with that approach, in Yalgan Investments Pty Ltd v The Council of the Shire of Albert[25] Member Scott stated that:
“The view has frequently been expressed by this Court and other jurisdictions that the most suitable method of valuation involves the use of comparable sales often referred to as the direct comparison method. (Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151; Riverbank Pty Ltd v Commonwealth (1974) 48 ALJR 438.)”17
[25] (1997-1998) 17 QLCR 331.
At 361.
How the methodology is to be applied was addressed by Wells J in Brewarrana Pty Ltd v Commissioner of Highways[26] as follows (with emphasis):
“It is general valuation practice for sales characterized as comparable sales to be used as bases for the valuation of lands said to be similar. But allowances must always be made before such sales can be so used. No two parcels of land are identical in all respects: the sale price of any given piece of land is not necessarily the price at which it ought to have been sold, or the same things as its true value. Before using any allegedly comparable sale, therefore, the valuer must consider whether, having regard to the circumstances (using that word in its broadest sense) appertaining to the parcel of land in question, and to the transaction of sale, there are sufficient similarities to the circumstances appertaining to the subject land and to the notional sale presupposed by the test formulated in Spencer v Commonwealth (1907) 5 CLR 418 and in later case to warrant a court’s reasoning from the sale price paid under the allegedly comparable sale, with or, without other evidence, to a value for the subject land. Adjustments must, of course, be made every time reasoning of that kind is undertaken. For example, in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography location, size, shape, slope, view, land use (actual and potential), scope for, and difficulties of, development, services and amenities; and in relation to the transaction of sale, the valuer must weight such tings as the character, business and relationships of the parties, their motives, the terms and conditions in their contract of sale, and any other special considerations that induced or may have induced them to conclude the contract at the selling price agreed, as well s the date when the contract of sale and the transfer were concluded or effected. I do not for a moment pretend that I have been exhaustive. What I am concern to emphasize is that, as I understand the evidence, and according to the inferences that I feel I can safely draw from it, there is no hard and fast rule by the application of which a valuer m ay, whatever the circumstances, draw the line that clearly separates the sale that are comparable from those that are not. It is, in my view, all a matter of degree: some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning, process in the comparable sales method. Just where the line is to be drawn is, it seems to me, the very sort of question that is fit for the expert valuer to determine; the assessment of the risks of adjustment is peculiarly within his sphere of skill. The valuer must use his skill to winnow out the element of comparability if it is there, and use it with discretion.”
[26] (1973) 32 LGRA 170 at 179-180.
Similar comments were made by the Court in Crompton v Commissioner of Highways[27] (with emphasis):
“Upon reading some works on comparable sales, one might be pardoned for supposing that, within narrow limits of tolerance, sales of land similar to the subject land must fall into two rigid categories: comparable sales and non-comparable sales. Such a supposition would, in my opinion, be an over-simplification and could lead to error. It seems to me that, ideally, the valuer should, in the first instance, look at the sales of land over a wide geographical and temporal range, and from these select those that appear potentially useful as a basis for comparison. Those selected should then be carefully analysed by reference to an extensive list of characteristics of land sales the compilation and assessment of which fall clearly within the province of the experts. Whether or not one or more of those sales is, and how it or they ought, to be compared with the subject land becomes then a matter of degree, and a final decision is reached, often by those same experts drawing a series of nice distinctions. Obviously, no two sales of land will be found to be the same, or even similar in all respects. Those that bear a close similarity to the assumed sale of the subject land will be more reliable than those whose similarity is less proximate and in respect of which adjustments or allowances must be made before they can be safely introduced into the valuation process. At a particular point it ceases to be safe or sound to treat them as sufficiently similar to the assumed sale of the subject land, and they must thenceforward by rejected.”
[27] (1973) 32 LGRA 8 at 23-24.
What these cases show is that the appropriate process to be adopted for the direct comparison or comparable sales methodology is an analysis of the comparable sales to ascertain, as a whole, the comparability of the comparable sales with the subject land. This involves the expert applying his or her detailed experience and knowledge to form an overall impression of the comparability of the comparable sales with the subject land. The valuer should express that view as to the overall comparability of each of the comparable sales to the subject land. This is invariably done by the valuer expressing an opinion as to whether the comparable sales are “inferior” or “superior” (either to a significant or slight degree) to the subject land. That that is the correct approach and was confirmed many years ago by Sugarman J in Best v Housing Commission of New South Wales[28] where his Honour stated:
“The correct approach is to assign the subject land by comparison to its proper place in the scale of values disclosed by the sales proved.”
[28] (1949) 17 LGR (NSW) 129 at 130
As Mr O’Brien so aptly put it:[29]
“46. Despite asserting that none of the sales were so comparable as able to be used to derive value, Cupitt identified eight sales (sales 3 to 11 in his report). He identified the attributes (both positive and negative) for each of the sales and also rated them as whether they were superior or inferior (though all of them were rates as inferior). Despite the identification of these sales and this analysis, he asserted, surprisingly, that not one of these sales were sufficiently comparable to be able to be used to derive a value by use of the direct comparison method. No reasoned explanation was proffered by him as to why he could not use these identified sales with appropriate adjustments to derive a value by using the direct comparison method. Nor was there any such explanation as to why none of the additional four sales (there was one common sale) identified by Litherland could not be used.
47. It is apparent from a consideration of Cupitt’s use of the direct comparison methodology to derive the market value for the land component for his summation methodology that the reason why Cupitt did not identify any comparable sales for the subject house and land was because his notion of what is ‘comparable’ is incomprehensible. To derive the land value component, Cupitt only had regard to three sales: sales 1 to 3 in his report.
48. Sale 2 was substantially less than sales 1 and 3. Its sale price was $315,000, though was for a substantially larger block being an area of 5.03 hectares, but with a similar zoning, namely ‘Rural’. With an appropriate adjustment for size, the sale has some relationship to the $220,000 value derived in the cross check summation method used by Litherland. It is readily apparent that the sale could not have been the basis on which the value was derived for the subject land by Cupitt, namely $500,000. As much was conceded by Cupitt in cross examination.
49. The other two sales, sales 1 and 3, were for $520,000 and $500,000 respectively. It is clear that it is those sales that have been the key to the market value derived by Cupitt for the land component. However, even the briefest analysis of sales 1 and 3 reveal that they have no comparability to the subject site. The subject site, but for the State Development Area Declaration, would have been zoned Rural. As much is accepted by all parties. The subject Land had, as Rural land, no subdivisional potential. That is the exact opposite to what sale 1 and 3 had. Sale 1 (1 Matson Crescent, West Gladstone) was zoned ‘Residential’. It had as of right subdivision potential. The fact that it had that potential is not only borne out by the Planning Scheme but also by even the briefest analysis of where the land is located. At page 37B of Cupitt’s report an aerial photo shows that the land described as sale 1 is in fact immediately abutting large scale existing residential subdivision. It is impossible to compare that land to the subject land which is far removed from the city, has no subdivisional potential and has significant development restrictions. The sale is located in Gladstone suburbia and is, as was conceded by Cupitt, located close to the heart of town and had all retail and other services within a short distance.
50. The same difficulties are encountered with sale 3. It also has significant subdivision potential. It is zoned ‘Urban Expansion’ and had in place a 13 lot residential subdivision approval dated 3 December 2008. The aerial photo at page 39B of Cupitt’s report shows that the land immediately abuts existing residential subdivisions. It has no comparability to the subject land. Cupitt’s reference at page 39 to the fact that the current owner has ‘no intention to subdivide’ is irrelevant. The land clearly has substantial residential subdivision potential. Its zoning reflects that. It has no relationship or comparability to the subject land.
51. Cupitt tried to cast doubt on the subdivision potential of sale 3 on the basis that it had been bought by an individual t develop as a home site. But, as Mr Litherland pointed out in his evidence, that purchaser had to compete in the market. There is no evidence to suggest that the sale was other than an arm’s length transaction. The purchaser of sale 3 had to compete with others in the market who would have been considering the land for its highest and best use, which clearly is residential subdivision. When challenged about this in cross examination, Cupitt suggested that the purchase of the Land by the individual purchaser for a house site suggested that subdividing the land was economically unviable. But there was no basis for that suggestion. He conceded that in fact he had no information to suggest that the development of the land was not viable.
52. The two primary sales used by Cupitt are not comparable at all. The fact that Cupitt maintains that they are, but insists that none of the 5 sales identified by Litherland are comparable and that there is not a single comparable house and land sale in all of Gladstone and the Gladstone region able to be used, suggests that the problem lies not in the want of useful sales evidence but Cupitt’s inability to, or difficulty in, grappling with what is ‘comparable’.”
[29] At paragraphs 46-52 of the respondents submissions
I now turn to my analysis of the summation method. In my view, this method which is fraught with difficulties. In Marcus Clarke & Company Limited v Commissioner for Railways,[30] Sugarman J said:
“The defects of the method do not need elaboration. As a method of comparison it appears to be less reliable…”
[30] (1949) 29 LVR 96 at 137.
That difficulty was emphasised more recently in West & Taylor v Chief Executive, Department of Natural Resources[31] where Member Divett repeated again the difficulties with the summation method and in particular ascertaining the added value that improvements bring to the land.
[31](1999) QLCR 124.
As Mr O’Brien stated:[32]
“56. Even the briefest review of this market analysis suggests that the market value derived by Cupitt is out of all proportions with the rural residential and residential market in Gladstone and the Gladstone region. For rural residential properties with a site area of 5,000m² to 10 hectares there have been some 121 sales in the last three years. The highest sale price achieved for those sales is $949,000. The market value derived by Cupitt for the subject property is approximately 50% higher than the most expensive rural residential property sold in Gladstone or the Gladstone region in the last three years. It is difficult to conceive how the subject property is 50% more expensive than the most expensive rural residential property sold in the last three years. This sales evidence suggests that the summation method adopted by Cupitt has resulted in a value for the subject property which is unreliable.
57. The same can be said in relation to the sales in relation to residential and rural residential dwellings above $600,000. There have been nearly 170 sales in the last three years over $600,000, but the most expensive of those properties was still $250,000 less than the market value derived by Cupitt for the subject property. This market analysis confirms that the summation method adopted by Cupitt has gone awry.
58. If any confirmation was required of how the value derived by Cupitt was out of kilter with the residential market in Gladstone and Gladstone region, one need not go further than the sale at 5 Mallard Court, South Gladstone. That property sold for $1,080,000. It was a modern executive style residence, fully completed and well presented with all the modern conveniences that one would want. It had substantial water views and was in an upmarket estate, close to the city and all relevant services. The view, in particular, were far more proximate to the water than the Land’s views and were impressive. Despite all of this, Cupitt surprisingly contended that the Land was in fact $250,000 more expensive than this property. His explanation for that view when questioned, was unconvincing. The best he could put forward was ‘ you - you’ve assumed that everybody will like that type of house. Now I don’t agree with that. The - the subject property is a different style of property.’
59. Even the briefest inspection of the property at 5 Mallard Court, South Gladstone reveals that something has gone drastically wrong with Cupitt’s valuation.”
[32] At paragraphs 56-59.
In my view, the value of the land component derived by Mr Cupitt is flawed. The primary sales used by him do not support a land value for the land of $500,000.
I also agree that Mr Cupitt’s assertions as to the value of the improvements on the subject land have been determined by use of an unjustified depreciation rate. There is no dispute between the parties as to the cost to replace the dwelling as at the date of the acquisition, which is $1,012,000 inclusive of GST.[33]
[33] See Exhibit 6.
It is important in terms of assessing the cost of improvements in determining the value of land for compensation purposes to keep in mind the statements of Gibbs J, as he then was, in Collins v Livingstone Shire Council:[34]
“[Where] the relevant statute requires compensation to be assessed with reference to the value of the land acquired, evidence of the cost of improvements (whether of actual cost or of what the cost would be at the date of valuation) may be relevant to the value of the land in its improved state, but it is the value and not the cost that is the matter for ultimate determination. Some improvements increase the value of land to a greater extent than the cost, but in other circumstances the cost of an improvement may greatly exceed its value, e.g., because its wasteful design renders it unnecessarily expensive to construct, or because it is redundant or out of place and cannot be put to profitable use having regard to its situation. Moreover, the cost of a partially completed structure may exceed its value because additional expense may be occasioned by commencing construction afresh and the total cost of a structure erected in two stages may be more than if the construction had proceeded from the beginning without interruption. In the present case, where it is necessary to imagine that at the date of resumption the portion of the reservoir on the resumed land was the only part in existence, the valuation has to be made on the assumption that the respondent when it acquired the land could only get a useful reservoir by extending the walls and base on to the adjoining land. In making a valuation on the basis it would be relevant to consider evidence as to the feasibility of completing the unfinished reservoir in this way, as to any engineering or constructional difficulties that would be likely to be presented and as to what extent, if any, the costs of linking the notionally existing portion with the newly constructed portion would diminish the value of the existing structure. It was erroneous for the Land Appeal Court to regard the cost of construction as to the proper measure of value; the cost was only one of the facts to be considered in arriving at the value and the weight to be given to it would depend on the other evidence, including any evidence as to the matters to which I have just referred.”
[34] (1972) 127 CLR 477 at 500-501.
I agree with Mr O’Brien’s proposition that Mr Cupitt repeatedly focused in his valuation on improvements which were expensive to undertake without questioning whether the market would perceive any advantage or value from the additional expense.
I was particularly unimpressed by Mr Cupitt’s evidence regarding over capitalisation. I found his evidence in this regard to be not only particularly unhelpful, but actually evasive. I have no doubt whatsoever that, as an experienced expert valuer, Mr Cupitt well knows the standard of the words “over capitalisation”. Put simply, the clear meaning is that over capitalisation occurs when an owner spends more money on improving a property than the improved property could be expected to realise if the property was sold. I note in particular, that in various draft valuation reports he had referred to the subject land as being over capitalised. In particular, I note his comments in Exhibit 27, which is a draft valuation report completed shortly after Mr Cupitt had visited the property. The attributes of the property would clearly have been forefront in Mr Cupitt’s mind at that time. Relevantly, Mr Cupitt said that[35]:
“The overall construction was an overdesign and overcapitalisation of a property. The owners did not intend to move again.”
[35] See page 8
The fact that the subject property has been over capitalised has clearly been accepted by the applicant. In this regard, little more needs to be done than to refer to Exhibit 17 which is a letter that he wrote on 9 December 2002 to the Coordinator-General:
“I have stopped looking after the property, have not completed construction of house to what was planned, have sold off building materials at reduced prices as I cannot pour more money into a property that I have already over-capitalised on. The over-capitalisation would have been worth the life style to be enjoyed in Targinnie without the current problems.”
I am also not satisfied with Mr Cupitt’s rate of depreciation. Even if his starting rate of 2.5%, based on taxation scales, is relevant, in my view he has not provided adequate justification for reducing that rate to 1.35%. His reduction is, at best, arbitrary. At worst, his reduction has been calculated for no other reason than to inflate the value of the improvements.
The arbitrary manner in which Mr Cupitt has fixed on the depreciation rate of 1.35% is highlighted by the fact that he had in an earlier draft report relied upon a depreciation rate of 2%. His explanation during cross-examination was far from convincing:[36]
“Can I suggest to you that there is no relevant difference which would justify - no relevant difference between the date this report was prepared and your Court report assessing the date of - as at the day of resumption? There’s no relevant difference which would justify the change from two per cent in this report to 1.35 per cent?-- It was ongoing draft situation. I’m working through these things all the time. Two per cent - I was still considering whether the building had 40 years or 60 years or 80 years lifespan-----
Mr Cupitt, are you-----?-- -----yes-----
-----seriously suggesting that in - on the 19th of January this year, that you were still forming views about what the state of the house really was?-- The state of - yes. The state of the house hadn’t changed. It’s how to - how to assess it and how to consider all of the issues that have been raised in that previous instruction that you gave me. And I do a number of drafts and I play around with them. I more - just replace things, try and reassess things. I think that’s pretty standard.”
[36] See T2-48.
This case would be relatively easy to determine, having comprehensively rejected the valuation conclusions and methodology adopted by Mr Cupitt, if the expert valuation evidence of Mr Litherland for the Coordinator-General was sound. Unfortunately, in this regard, I am in agreement with the submissions of Mr Allan for the applicant that Mr Litherland has made some fundamental errors in arriving at his value of the subject land.
Mr Litherland’s evidence
Mr Litherland’s expert valuation report is Exhibit 11 in these proceedings. There is little difference between Mr Litherland and Mr Cupitt when it comes to issues relevant to the description, etc of the subject land. As already indicated, the fundamental difference between Mr Litherland and Mr Cupitt is in their valuation methodology.
Mr Litherland explains his determination as to the value of the subject property in the following way:[37]
[37] See Exhibit 11 pages 32 to 33.
“7. Valuation Analysis
7.1 Introduction
Our primary method of valuation is by direct comparison with available sales evidence after making allowance for differences with the sales evidence.
In carrying out comparison matters to be considered include:
(i) Location factors.
(ii) Topography and land characteristics.
(iii) Quality and utility of improvements.
(iv) Quality and utility of allotment improvements.
(v) Market at relevant date of assessment.
As the subject acquisition is a complete take of the property there is no need to consider injurious affection or severance.
Disturbance items should also be consider in any compensation claim.
7.2 Highest and Best Use
We consider the use of the property as at the date of the taking of the land as improved rural homesite to be consistent with the highest and best use of the land at that time and have based our assessment accordingly.
The property does not possess any further subdivisional potential.
7.3 Direct Comparison Approach
Given the nature of the property we have adopted a direct comparison approach as our primary method of valuation.
Individual comparisons are contained in earlier sections of the report. Our workings on this basis are shown below.
The direct comparison is summarised below:
Sale No Location Sale Price Comparison 1 22 Knights Place Calliope $520,000 Inferior location, Inferior improvements. Overall Inferior to Subject
2 78 Kardum Road Wurdong Heights $700,000 Superior location, Smaller inferior dwelling, Similar allotment improvements. Overall slightly superior to subject
3 453 Haddock Drive O’Connell $700,000 Superior in location, Smaller dwelling with less amenity, Similar allotment improvements. Overall slightly superior to subject
4 32 Lincoln James Beecher $775,000 Superior location and dwelling with superior presentation. Overall far significantly superior to subject
5 30 Wyndham Rd, Beecher $650,000 Superior to subject with regard to location. Dwelling is far smaller and lesser in amenity and quality of fittings than the subject. Sale has far more extensive ancillary improvement than the subject. Overall inferior to the subject
Subject (Adopted Value) $690,000 The subject comprises a rural lifestyle property located further from Gladstone than all scheduled sales. The dwelling on the subject is larger and of superior amenity than all sales except sale 4. The subject will lose appeal in the market because of the unfinished car accommodation and difficult access to the site.
7.3 Direct Comparison Approach Contd
We would consider the subject is superior to sales 1 and 5 and inferior to sales 2 to 4. In comparison a valuation of $690,000 is adopted.
7.4 Summation Approach
As a second approach to value we have adopted a summation method to assist the valuer in forming an opinion.
This approach allows the valuer to assess the individual components of the property. The various rates applied to both land and buildings are taken from our analysis of sales and building costs after applying a rate for depreciation and obsolescence. Often the asset under valuation may be less attractive than the cost of the modern equivalent because of age, obsolescence or over capitalisation. An adjustment is therefore required to a replacement cost to reflect the current value
We have adopted land values based on analysis of sales in rural residential areas predominantly the developing areas of Beecher and Burua on the southern outskirts of Gladstone. Our land value represents a site value as improved and includes the extensive site works undertaken on the subject site as preparation for the on site dwelling.
Our workings on this basis are shown below.
Component Adopt Land as retained and benched $220,000 Improvements/Other $485,000 Site Area Improved $705,000 Adopt $700,000 (m2) Added Value Rate Per m2 Value Rounded Dwelling Main 271 $1,350 $365,850 $365,000 Dwelling Lower 65 $500 $32,500 $32,500 Patios 127 $400 $50,972 $51,000 Site Improvements $36,500 $36,500 Total $485,000 7.5 Valuation Conclusions:
The direct comparison basis forms a more appropriate method of valuation with the second approach primarily used for support.
The market approach considers the strength and health of the overall Gladstone market particularly the limited sales activity in the upper levels of the market which occurs above $800,000.
Based on the available evidence and the assumptions and qualifications contained within this report we have adopted a value of $690,000.
We have adopted a valuation for acquisition purposes of $690,000. Our assessment excludes disturbance items (professional fees, relocation costs, stamp duty etc).”
It should be noted that, during cross-examination on 25 October 2011, Mr Litherland increased his valuation under the summation approach to $750,000. Mr Litherland stressed, however, that this remained a check method only, with all the difficulties inherent in the summation approach, and his adopted valuation of $690,000 under the direct comparison approach remained.
Mr Allan of Counsel in his primary submissions[38] makes a detailed criticism of Mr Litherland’s evidence. His criticism falls under the following headings:
(a) failure to properly inspect the subject property and review the accuracy of his report;
(b) he gave false evidence under oath as to the nature and extent of his inspection of his sales 2, 3 and 5;
(c) failure to inspect properly or at all the sales evidence he relied upon;
(d) failure to include relevant vacant land sales in his report when assessing the land component of the subject land for his check method (the summation approach);
(e) adopting and maintaining his initial value for the subject property of $690,000 notwithstanding an earlier valuation of 21 November 2007 (Exhibit 45) of $750,000;
(f) failing to consider that an alternative primary method of valuation was appropriate having regard to the characteristics and attributes of the subject property;
(g) breach of duty to assist the Court and breach of requirements of Rule 428(2)(b)(c) of the Uniform Civil Procedure Rules; and
(h) selective and inconsistent application of the direct comparison method.
[38] At pages 31-36 of the applicants submissions
In the applicant’s supplementary submissions, Mr Allan continued his attack on Mr Litherland. Leaving to one side Mr Allan’s allegations as to perjury, the additional criticisms made of Mr Litherland are headed as follows (my identification used to run on from the numbering in Mr Allan’s primary submissions)[39]:
i putative reliance on vacant land sales: Beecher and Burua: Exhibit 61; and
j Mr Litherland’s spreadsheet - the “comparative and sustitical analysis” contained in Exhibit 54.
[39] At pages 24 and 25 of the applicants supplementary submissions
Having closely considered all of Mr Litherland’s evidence, I am inclined to agree with Mr Allan’s criticisms with respect to headings a, c, d, e and i. Further, I accept some of the points made by Mr Allan with respect to b and j. However, I do not believe that Mr Allan was able to sustain his criticism founded on f and g.
It is clearly appropriate that I make some observations regarding my findings on Mr Litherland’s evidence in the preceding paragraph. Mr Allan makes extremely strong criticisms of Mr Litherland, to the extent that Mr Allan believes that Mr Litherland committed perjury before this Court. I am satisfied that some of the evidence given by Mr Litherland was factually incorrect. However, I do not believe that Mr Litherland sought to deliberately deceive the Court. In my view, he was simply, in all likelihood, mistaken. Mr O’Brien in his submissions referred to the nervous disposition of Mr Litherland and urged me not to take that nervous disposition as being that of a person concerned to be found out in a lie. I agree with Mr O’Brien. In my view, having observed him in the witness box for a considerable period of time as detailed earlier in these reasons, Mr Litherland from the outset was a very nervous witness. Despite his clear expertise, he was decidedly uncomfortable in the witness box. I was left with the clear impression that it was, in effect, the last place on earth that he would like to be. This was supported by Mr Litherland’s evidence, which I accept, that he had only given expert evidence in Court on perhaps two occasions in the previous decade. Mr Litherland clearly, in my view, does not make his living out of being an expert witness in Court proceedings. Rather, his expertise is in working on various valuations as part of a team environment, in a senior position, with his employer.
I am satisfied beyond any reasonable doubt that Mr Litherland did carry out inspections of many of the sales properties he referred to. However, I am also satisfied that he relied upon data base entries of sales analyses of some sales properties contained on the computer system of Herron Todd White. I am also satisfied that he did not disclose that reliance on the work, essentially of other valuers. However, in my view, at the time that Mr Litherland produced his report which is Exhibit 11, it simply did not occur to Mr Litherland to make any specific reference to that fact. This partly, in my view, flows from Mr Litherland’s senior position in Herron Todd White, and the fact that he was, in effect, the supervisor for the bulk of the report he had referred to. In practical terms, it appeared to me that Mr Litherland had himself at both a corporate and personal level, assumed ownership of those other analyses and reports.
______________________________________________
1 Wilson v Ipswich City Council [2011] QLC 008 at [261]; see also LGM Enterprises v Brisbane City Council [2009] QLC 0178 at [46].
2 Some of the evidence in relation to that before the Court includes:
• Exhibit 1, paragraph [57] where Lowry says ‘I requested almost immediately to have my home purchased by the Respondent’;
• Exhibit 16, paragraph [3] which states ‘…it is the Coordinator-General’s intention to negotiate to purchase properties at least until December 2007, after which compulsory acquisition might ensure;’ and
• Exhibit 16 page 3, paragraph [3], which states ‘If your client rejects any revised offer, he may continue to live on his property until at least December 2007 without interference from the Coordinator-General. If your client is keen to move from the area, I remain willing to enter into an agreement pursuant to section 15 of the Acquisition of Land Act 1967 (Qld).’ (emphasis added)”
I agree with Mr Allan’s contention that, in order to properly construe the provisions of s.20(5) of the ALA, it is necessary to give consideration to the natural and ordinary meaning of the words contained in the section in accordance with the usual principles of statutory construction. In essence, this is the test as set out in Project Blue Sky Inc v Australian Broadcasting Authority.[66] However, whilst I accept that that is the appropriate test to apply, I do not agree with Mr Allan that such a test leads to the narrow construction that he contends for. In my view, the clear and plain meaning of the provisions in s.20(5) of the ALA are that disturbance costs in order to be properly claimed must be reasonable, and that the question of that reasonableness relates both to the issue of whether or not it was reasonable to incur that nature of cost, and whether the quantum of the cost was reasonable or not.
[66] (1998) 194 CLR 355 at paragraphs 69 - 71.
Because of the manner in which Mr Allan has approached the meaning of reasonable in s.20(5) of the ALA, the evidence led by the applicant in this matter goes to show, at least in the majority of cases, that the disturbance costs claimed by the applicant were costs actually incurred by the applicant, and that it was reasonable of the applicant to incur costs of that nature, but not specifically of that quantum. Although Mr Allan contends that the respondent has not led evidence as to what reasonable costs could properly be claimed by the applicant that of course misses the point. It is a matter for the applicant to make out his claim for compensation in accordance with the provisions of the ALA. In my view, it simply is not sufficient for the applicant to give evidence, such as he did as regards his incurring of solicitor, barrister and valuation expert fees that he simply relied upon the expertise of those providing the service and paid the bill accordingly. Such evidence contains no proper analysis as to whether or not the costs incurred were reasonable.
Further, it would have been a very simple matter for the applicant to have provided the Court with affidavit or like evidence from the professionals who provided the legal and valuation services to the applicant, detailing in a claim by claim manner why each element of the costs incurred were both reasonable to incur, and why the quantum of each such cost was also reasonable in light of prevailing legal and professional standards in light of the complexity or otherwise of this case.
Another point should also be made. It is relatively settled law that a claim for disbursement costs relates to those costs reasonably incurred for the preparation of a claim to the Land Court from the date of receipt of a notice of intention to resume.[67] Mr O’Brien contends[68] that in the case at hand the agreement to take land is the equivalent of a notice of intention to resume. Mr Allan in his supplementary submissions contends that the appropriate date which should be applied for calculation of disturbance costs is December 2007 and not the date of entering into the agreement. Mr Allan contends that it was from that date that the applicant knew that his land would be compulsorily acquired if there was not an agreement to purchase the land. As Mr Allan puts it “the claimant was under threat of resumption as and from December 2007 and it is that date that should be adopted for the purposes of s.20(5)(a) of the ALA”.[69] I tend to favour the approach taken by Mr Allan, but with some reservations. As the history of Targinie shows, the manner in which the acquisition by the State of the various properties in the Targinie Valley proceeded was somewhat unusual, occurring as a consequence of community protests regarding the impact of the oil shale plant on the Targinie community. This resulted in the establishment in 2002 of the GSDA, and a politically imposed five year time period for the respondent to negotiate the purchase of properties with various landholders. Quite properly, in my view, Mr Allan has not sought to claim any of the costs incurred during this five year period. However, between December 2007 and the agreement to take the land, the evidence before me suggests that a dual process must have been occurring; that it, the applicant would reasonably have had some apprehension that he may ultimately proceed through a formal resumption process, but it would seem the applicant and the respondent also continued negotiations which had commenced in 2002 and ultimately led to the taking of the land by agreement on 13 April 2010. In my view, for the time period between December 2007 and 13 April 2010, when both negotiations were ongoing and work starting for preparation of a claim to this Court, it is obviously essential that detailed evidence be provided to the Court by the applicant in whatever form, and from whatever persons, that the applicant can call upon to show the nature of the disturbance costs incurred and the way in which those disturbance costs relate directly to the preparation of the claim for compensation. The failure of the applicant to provide any meaningful evidence as to the nature and appropriate quantum of much of the disturbance costs is ultimately to his grave detriment.
[67] See Stanfield v Brisbane City Council (1990) 70 LGRA 392 at 417.
[68] At paragraph 115 of his submissions.
[69] See applicant’s supplementary submissions, paragraph 40.
Helpfully, Mr O’Brien of Counsel has provided to the Court a disturbance schedule setting out in detail the amount claimed by the applicant under various heads of disturbance costs and the amount that the respondent considers appropriate to pay for disturbance costs, and the submissions in support thereof. I note, of course, that the schedule also includes a column showing the applicant’s disturbance costs which are supported by invoices, but that period is restricted to the time between the agreement and the lodging of the claim, which I have found above to be too restrictive given the somewhat peculiar circumstances of this matter.
Looking firstly at the first three pages of the respondent’s disturbance schedule, I am in agreement that each of the disturbance costs which are agreed as between the applicant and the respondent should be paid. In summary, these costs are quantity surveyor fees of $3,795, legal costs claimed for replacement land of $3,500, and connection costs of $1,000. Further, the parties accept that stamp duty costs for purchase of an equivalent property and transfer fees will of necessity have to be calculated in accordance with my determination of value of the subject property in this case. Likewise, the respondent contends that financial and administrative costs should also be determined on the basis of the actual determination of value of the subject property. I agree.
That leaves a number of items to be dealt with, some of which are much more readily ascertainable than others. I will turn first to economic losses, travel and associated costs to consult with experts and legal advisors. Arguably, the applicant has provided few details in support of this claim. However, in my view, he has sufficiently established that he did incur the sum of $1,144 under this head. However, from the evidence in this case, it is impossible to tell what quantum of these costs have been reasonably incurred for the preparation of the claim. Whilst arguably it is open to me to make no allowance under this head, adopting a liberal approach, and on the basis that the rather complex history of the Targinie Valley which featured rather prominently in the evidence would have been necessary for the applicant to research and instruct his legal advisors on for the purposes of preparing his claim, I am prepared to allow 50% of the economic losses actually incurred by the applicant, which I round to the sum of $600.
I now turn to the question of relocation costs, claimed in the sum of $32,296. The respondent proposes a payment of $20,000 under this head, as in the respondent’s view that amount is supported by quotations whilst the balance of the claim is not.
In my view, the respondent is being too restrictive with respect to this element of the applicant’s claim. I have no reason to doubt the essential truthfulness of the applicant when giving evidence before the Court. Specifically with respect to this head of disturbance costs, Mr Lowry indicated that whilst he had been successful in obtaining quotes for many of his anticipated relocation costs, it was extremely difficult to obtain quotes for all the required work given the shortage of such services in the Gladstone vicinity as a consequence of the well publicised boom in Gladstone in recent years. However, Mr Lowry went on in his evidence to explain the manner in which he arrived at his estimates of costs, such as $1,000 for moving his grand piano. Having had the benefit of actually viewing his grand piano and full sized indoor snooker table, and taking into account all of Mr Lowry’s evidence as to the manner in which he arrived at his costs for relocation, I consider it reasonable that he would incur costs in the order of $32,296.00, and allow his claim in full.
I now turn to the difficult elements of the disturbance costs, being the claim for legal and valuation fees, and the claim for owner’s time for preparation of the claim. I will deal firstly with the legal and valuation claims.
Mr Allan valiantly attempts to found his claim for legal and valuation costs both under s.20(5)(a) of the ALA and s.20(5)(g) of the ALA. Despite his efforts, in my view his attempt to found the claim under s.20(5)(g) is misconceived. On any fair reading of s.20(5) there is a specific statutory reference to legal and valuation costs in sub-paragraph (a), whilst (g) generally refers to other economic losses reasonably incurred. The general provision cannot override the specific statutory provision set out in 20(5)(a). Accordingly, in my view the applicant is limited to legal costs and valuation and other professional fees reasonably incurred in relation to the preparation and filing of the applicant’s claim for compensation. The applicant claims the sum of $29,563.21 for solicitor’s legal costs, $23,507 for barrister’s legal costs, and $23,540 for valuation costs. The respondent, for its part, contends that only $5,000 is properly payable with respect to solicitor’s legal costs, nothing with respect to barrister’s legal costs, and $5,000 with respect to valuation costs. I have already commented that the applicant provides no real evidence as to how the quantum of the claims for solicitor, barrister and valuation costs are reasonable. However, likewise, the respondent has set out no evidence in support of its assertion that $5,000 only is payable with respect to solicitor’s costs and valuation costs respectively. I find this circumstance that I am placed in most unsatisfactory.
My difficulty is that disturbance costs with respect to at least solicitor’s legal costs and valuation costs are conceded to be properly payable to the applicant by the respondent. Accordingly, it would be quite inappropriate for the Court to award $nil under those heads by reason of the unsatisfactory nature of the evidence. To resolve this issue, all that I can do is take note of the acquisition cases determined by the Land Court in the last 10 to 20 years generally, and the last five years in particular, to assist in formulating what the Court has considered as appropriate and legal valuation costs in other cases. Further, I have the benefit of a judicial career dealing with valuation and compensation matters now in excess of 12 years, prior to which I practiced law for approximately two decades, during which time I had substantial experience in, amongst other things, personally undertaking highly complex taxation of costs in the High Court and lower courts. I can but bring that expertise also to the case at hand, as given the circumstances and facts of this matter, I have little else to go on.
I am much more inclined to Mr O’Brien’s view that the claim for compensation in this matter was a relatively straightforward one as opposed to Mr Allan’s view as to the complexity of the claim. It is noteworthy that issues relating to the highest and best use of the land were not contested. Although clearly very important to the applicant, at the end of the day this claim does only relate to a rural residential property resumption. It is hardly a unique form of resumption. That said, there are certainly elements of this case which are far from usual. I accept, for instance, that the applicant would have required a detailed legal analysis of the Pointe Gourde principle in order to determine key attributes of the resumption. The fact that this issue was not a point of major contention at the hearing is not relevant; what is relevant in my view is that it would clearly have been necessary for proper legal consideration to have been given to the Pointe Gourde principle in preparation of the claim. Likewise, it would have been necessary for a detailed understanding of the history of the GSDA and the development of the oil shale plant to have been researched and understood by the applicant’s legal advisors. All of this incurs cost. Given these features alone, I consider that a solicitor could quite reasonably seek the services of Counsel to both advise on the preparation of the claim, and to settle same.
Doing the best I can, and being, in my view, rather liberal to the applicant, I am prepared to allow solicitor legal costs in the sum of $12,500, based on roughly 25 hours of solicitor’s time at roughly $500/hour.
Unfortunately for the applicant, I find it impossible to be liberal as regards as Counsel’s fees. As indicated, I consider it reasonable to have sought Counsel’s advice regarding certain aspects of the preparation of the claim, as well as obtaining Counsel’s services in settling the claim. Being as generous as I consider I can be given the nature of the evidence before me, I am prepared to allow a total of $6,000 for barrister legal costs, roughly comprised of approximately $4,000 for claim preparation advice, including reading time, and $2,000 for settling the claim. As regards valuation costs, the applicant seeks $23,540 and the respondent considers an amount of $5,000 appropriate. I have already provided detailed reasons as to why I consider the applicant’s valuation evidence to have been misguided in many respect in this case. However, that does not mean that it was not reasonable for the applicant to both obtain the services of an expert valuer and pay reasonable costs. I cannot accept that the total amount claimed for expert valuation expenses in this case is commensurate with the size or relative straightforward nature of the applicant’s claim. Taking such guidance as I can from previous disturbance costs for valuation costs of preparing claims allowed by this Court, and again erring on the side of generosity to the applicant, but accepting the thrust of the submissions of the respondent in all aspects as regards the valuation fees save for the time period in which they may be recoverable, I am prepared to allow the sum of $8,000 for valuation costs.
That just leaves the issue of owner’s time to be considered.
In his response submissions, Mr O’Brien submits as follows:[70]
“Owner’s Time
22. This Honourable Court inquired as to whether there was any case law post the February 2009 amendments to the Acquisition of Land Act 1967 (Qld) (the Act) that have considered s.20(5), and in particular owner’s time. The Court also enquired as to whether the second reading speech or explanatory notes made any reference to allowances for the owner’s time.
23. Neither the Second Reading Speech, nor the Explanatory Notes to the amending Act made any reference to the allowance for owner’s time. The Coordinator-General is unaware of any helpful case law since those amendments which addresses this issue.
24. As detailed in the Coordinator-General’s primary submissions, the case law before the amendments to the Act clearly did not allow owner’s time. That is not just the law in relation to compulsory acquisition. It reflects the law of damages at common law. Unless the Plaintiff can point to actual expenditure, or actual lost profits, damages cannot be received.
25. There is nothing to suggest that the amendments to the Act intended to change that position.
26. For the reasons articulated in the Coordinator General’s primary submissions, there was simply no evidence in this case of any lost profits or other economic loss suffered by Lowry. The fact that Lowry spent time on the resumption does not, of itself, translate into compensation.”
[70] At paragraphs 22 - 26.
In his response submissions Mr Allan claims that the claim for owner’s time is recoverable under s.20(5)(g) of the ALA. Specifically, Mr Allan submits as follows:
“52. Further, or in the alternative, it is wrong to stage, as the Respondent has (paragraph 103, OSR) that ‘… it is well established that the owner’s time cannot be recovered in this Court.’ In Heavey Lex the Land Appeal Court having considered the authorities held that ‘the approach previously taken in this state to claims [for loss of owner’s time] may be unduly restrictive’ (at paragraph [54]). The claim was subsequently disallowed by the Land Appeal Court in Heavey Lex because of want of evidence.”
I agree with Mr Allan’s submission that it is possible under the ALA for an applicant to make out a claim for owner’s time, relying upon the authority of Heavey Lex together with the clear provisions, in my view, contained in s.20(5)(g) of the ALA. However, I also agree with Mr O’Brien’s submissions that any claim for owner’s time must be a subject of specific evidence detailing the nature of economic loss suffered by the landholder as a consequence of the taking of the land, provided of course such costs are reasonably incurred.
It is appropriate to also consider the submissions of the respondent at paragraphs 106 to 111 of the respondent’s submissions. In those submissions, Mr O’Brien had this to say:
“106. In Lowry’s evidence he stated that ‘the time which I have spent to date (and will spend in the future) in relation to this disturbance claim is time I could spend earning money by my electrical contracting business.’ It appears as if in an effort to skirt around the clear rule against recovery of owner’s time, Lowry seeks to categorise the claim as a claim for effectively lost profits. There are a number of problems with this re-crafting of the claim.
107. First, it is clear that the claim is stated to be a claim for owner’s time, not a claim for lost profits, As such, the cases referred to above squarely against such a claim apply.
108. Second, to make a claim for lost profits a claimant must lead evidence of actual lost opportunities to do work. There is no such evidence in this case other than mere assertion. There is no detailed evidence, documentary or otherwise, from Lowry that he in fact lost the opportunity to earn money from other work. It is difficult to take seriously this claim when one see the basis on which it is calculated. For example, the largest portion of the claim for owner’s time relates to the time that Lowry has said that he spent trying to resolve the claim. He estimates that he has spent ‘approximately 2 hours each fortnight for 4 years’. That translates to the loss of 1 hour per week. This is at a level which can properly be characterised as ‘de minimis’. It is difficult to accept that spending 1 hour a week on trying to resolve the resumption claim in fact led to the loss of opportunity to derive earnings or profits from work. The fact that Lowry can produce no documentary or other detailed evidence of actual lost work tends to support the notion.
109. Third, it is clear that the business for which the ‘lost profits’ were claimed either are effectively non-existent or were in fact losses by persons other than Lowry. The lost profits claimed appeared to relate to two businesses. The first is the alleged electrical contractors business. It is a business in name only. Lowry conceded in cross examination that the business does not advertise, it has no phone number, it is not registered for GST, there is no ABN and that the total sum of invoices delivered was $1,100. To make matters worse, of the two invoices one produced was to his father. Lowry’s claim, therefore, for a total sum of $14,560 for the lost opportunity to work on this business is made on the basis of a business which has the characteristics detailed above and which has billed a total sum of $1,100. The reality is that the electrical business is, for all intents and purposes, non-existent. No compensation could be payable for nay lost opportunity to that business.
110. When challenged about this, Lowry suggested that the loss was in fact suffered in relation to his kitchen re-selling business. However, he soon conceded that the business was in fact owned by a company, namely Latitude International Pty Ltd. When cross-examined further in relation to that, and shown his tax returns and the financial statements for Latitude, Lowry conceded that he in fact had received no income from either the electrical contractor’s business or from Latitude in the June 2007, 2008, 2009 and 2010 financial years.
111. The notion that the resumption had caused lost profits to Lowry is completely unsustainable and should be dismissed.”
Cases as such as Heavey Lex do show how difficult it is for an applicant to sustain a claim for owner’s time. In my view, an owner cannot be compensated for time that he or she may spend simply opening correspondence or doing background research on the claim. A value has to be put on the owner’s time based on some quantifiable formula with some linkage to some form of economic loss. For instance, if it was considered necessary and reasonable for an owner to be present while a valuer undertook a full inspection of the landholder’s property, and in order to be present it was necessary for the owner to take leave from work, then that would be a cost to the owner which would be easily, and reasonably, quantifiable. Likewise, there have been many cases in this jurisdiction under the Mineral Resources Act 1989 (MRA) where landholder’s time has been compensated when various mining tenements are placed over the landholder’s property. The authorities in this regard commenced with the Land and Resources Tribunal of Sullivan & Anor v Oil Company of Australia LTD & Anor.[71] Generally speaking, the costs recoverable by landholders for owner’s time in claims under the MRA are quantified by specific reference to the activities that the landholder must undertake in light of the mining activity on his or her property. Such activities involve travelling to the vicinity of the mining activity on a time period relevant in light of the nature of the mining activity so that the landholder can check that gates are being left open or shut as appropriate, fencing is in order, and there are no dangerous substances assessable to cattle or the like. Whilst undertaking those activities, the landholder is not doing other work on their property and thus is losing productive time which would otherwise be engaged in earning an income. As such, they are relatively easily ascertainable, and it is a matter for the evidence of each particular case as to what activities are reasonable, and what level of remuneration is reasonable.
[71] [2003] QLRT 2 at paragraphs 87-92.
Even taking as liberal approach as possible to Mr Lowry in this case, I cannot find any true loss that he has suffered with respect to owner’s time. He has not detailed any loss of actual paid employment, and I fully accept the submissions made by Mr O’Brien regarding Mr Lowry’s claimed electrical contractors business or kitchen re-selling business. In short, Mr Lowry has failed to adequately provide evidence as to his loss with respect to owner’s time and accordingly his claim must be rejected.
Rebuttal evidence
During the course of the hearing of this matter, an application was brought by Mr Allan on behalf of the applicant seeking leave to call rebuttal evidence. This was opposed by Mr O’Brien. I delivered an Ex tempore` decision at the time[72] allowing the rebuttal evidence to be called subject to a final ruling as to admissibility.
[72] See [2011] QLC 0073
I remain less than impressed with the applicants need to call rebuttal evidence in this matter. In my view, difficulties with this case can be traced back to both Counsel in June 2011 advising that the matter was ready to proceed quickly to hearing and that the hearing would only occupy three days including a day for inspection. Had normal preparation times and activities been undertaken I would expect that the need for the rebuttal evidence should have been identified and called by the applicant in the normal way as part of his case. If there is to be blame in this regard, it must be borne by both Counsel.
At the end of the day, apart from establishing further error on the part of Mr Litherland, the nature of those further errors does not alter the determination reached as to the compensation payable. Further, as already indicated, I do not believe that the rebuttal evidence causes concerns of perjury to arise as regards Mr Litherland’s evidence.
Taking all factors into account, I am reluctantly of the view that, in the peculiar circumstances of this case, and bearing in mind the provisions of s.7 Land Court Act 2000, the applicant should be granted leave to call the rebuttal evidence. Leave is so granted.
Determination
In summary, I make the following determination with respect to the applicant’s claim for compensation in this matter:
Loss of land and improvements $900,000.00
Special Value $Nil
Disturbance costs
Solicitors legal costs $12,500.00
Barristers legal costs $ 6,000.00
Valuation costs $ 8,000.00
Quantity Surveyor fees $ 3,795.00
Economic losses, travel and associated costs $ 600.00
Relocation costs $32,296.00
Legal costs for replacement land $ 3,500.00
Connection costs $ 1,000.00
Owner’s time $ Nil $ 67,691.00Total $967,691.00
In addition to the payments referred to above, it will be necessary for the applicant and the respondent to either reach agreement as to the appropriate stamp duty, purchase of equivalent costs, transfer fees and financial and administrative costs in the light of my valuation for loss of land and improvement of $900,000 or, failing agreement, to come back before the Court with affidavit or other evidence in support of their contentions.
The applicant’s claim also includes a claim for interest. Certainly, interest is payable with respect to this claim in accordance with the rate specified in the appropriate Land Court schedule. The quantum of interest payable must also take into account the advances made by the respondent. Accordingly, the exercise is purely mathematical and I leave it to the applicant and respondent to agree as to the formulation of interest payable in light of my determination in this matter and, in the event that agreement cannot be reached, to come back before the Court for a determination of appropriate interest.
Orders
- Compensation is determined in the initial amount of Nine Hundred and Sixty Seven Thousand, Six Hundred and Ninety One Dollars ($967,691).
- In addition, I award further compensation, to be agreed between the applicant and the respondent as regards disturbance costs of stamp duty-purchase of equivalent, transfer fees and financial and administrative costs to be agreed as between the parties or, failing agreement, to be brought back before the Court.
- Interest on the amount determined by the Court, taking into account the relevant dates upon which costs were incurred and taking into account advances made by the respondent, to be agreed as between the applicant and the respondent or, failing agreement, to be determined by the Court.
P A SMITH
MEMBER OF THE LAND COURT
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