Mercer v Western Australian Planning Commission - [2008] WASC 124

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: MERCER -v- WESTERN AUSTRALIAN PLANNING COMMISSION [2008] WASC 124

CORAM: JENKINS J

HEARD: 12 - 23, 29 & 30 NOVEMBER 2007, 3, 12 & 13 DECEMBER 2007, 20 FEBRUARY 2008

DELIVERED : 30 JUNE 2008

FILE NO/S: CIV 2597 of 2004

BETWEEN: ROBERT WILLIAM MERCER
RICHARD TAUNTON SAUNDERS
First Plaintiffs
MICHELLE JONNINE McALLISTER & CRAIG DOUGLAS McALLISTER as Executors of MABEL JOYCE PALMER
Second Plaintiffs
AND
WESTERN AUSTRALIAN PLANNING COMMISSION
Defendant

Catchwords:

Resumption or acquisition of land - Compensation - Valuation of land - Valuation methodology

Legislation:

Heritage of Western Australia Act 1990 (WA), s 11
Land Administration Act 1997 (WA), s 177, s 202, s 211, s 220, s 241, s 244, s 248
Metropolitan Region Town Planning Scheme Act 1959 (WA), s 37A
Railway (Jandakot to Perth) Act 2002 (WA)
Supreme Court Act 1935 (WA), s 142

Result:

Compensation awarded in the sum of $2,264,625 plus interest

Category: B

Representation:

Counsel:

First Plaintiffs               :     Ms L E Rowley
Second Plaintiffs           :     Ms L E Rowley
Defendant:     Mr B J King & Ms D E Quinlan

Solicitors:

First Plaintiffs               :     Deacons
Second Plaintiffs           :     Deacons
Defendant:     State Solicitor for Western Australia

Case(s) referred to in judgment(s):

Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174
Brewarrana Pty Ltd v Commissioner of Highways (1973) 6 SASR 541
Bronzel v State Planning Authority (1979) 21 SASR 513
Clifford v Shire of Busselton [2007] WASAT 89
Duffy v The Minister for Planning [2003] WASCA 294
Kenny & Good v MGICA (1999) 199 CLR 413
Mt Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273
Palmer v McAllister (1991) 4 WAR 206
Spencer v The Commonwealth of Australia (1907) 5 CLR 418
The Commonwealth of Australia v Arklay (1952) 87 CLR 159
Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295

TABLE OF CONTENTS

Introduction

Issues
Detailed description of the subject land and adjoining land
The Public Work
Heritage considerations
Town planning
Highest and best use

Valuation
Mr Terrence Dix
The approach to the remaining valuation evidence
Mr Duncan Cameron
Mr Graham Kennedy
Mr Keith Wilson
Conclusions as to value of the subject land
Acquisition costs in respect of a replacement property

Solatium

Interest

Conclusion

JENKINS J:

Introduction

This is an application, pursuant to the Land Administration Act 1997 (WA) (LA Act), s 202 and s 220, for compensation for the plaintiffs' interest in certain land taken under the LA Act, pt 9 on 5 September 2003 (the date of taking).
The land which is the subject of this application was comprised of two adjoining parcels of land. The first parcel was lot 7 on deposited plan 26511 and being the whole of the land contained in certificate of title vol 1228 folio 191. The parcel was 395 sqm and a building, known as the Commercial Building, was constructed on it. The Commercial Building was demolished on or about 4 October 2004 in order to progress the public work which was then being undertaken in the area. The parcel had a street address of 507 Wellington Street, Perth.
The second parcel was a portion of Perth town lot V19 and being the whole of the land contained in certificate of title vol 1219 folio 913. The parcel was 400 sqm and a building, known as the Saunders Building, was constructed on it. The Saunders Building was demolished at the same time as the Commercial Building. The parcel had a street address of 499 Wellington Street, Perth.
Whilst there are two parcels of land the subject of the application, the parties appear to agree that the compensation for their taking is best assessed by considering them together. Throughout these reasons I shall refer to the two parcels as the subject land, and to each parcel by its street address.
At the date of taking, the registered proprietors of the subject land were Robert William Mercer, Richard Taunton Saunders (the first plaintiffs) as joint tenants of a one half share in each parcel and Mabel Joyce Palmer as to a one half share in each parcel, as tenants in common. Mabel Joyce Palmer died on 27 September 2004, and Michelle Jonnine McAllister and Craig Douglas McAllister bring this claim in their capacity as the executors of her will (the second plaintiffs).

Issues

The plaintiffs' claim, as clarified by counsel, is for:
(a)the value of the [subject land] and the improvements constructed thereon at the [date of taking] calculated on the highest and best use of the [subject land] pursuant to s.241(2) of the LAA;
(b)a declaration that the Plaintiffs are entitled to acquisition costs in respect of property which may be purchased or acquired by the Plaintiffs to replace the [subject land] upon production of proof at any time whether before or after the final determination of this matter, that such replacement property has been acquired;
(c)solatium pursuant to s.241(8) of the LAA;
(d)interest on the aggregate of the foregoing amounts inclusive calculated at the rate provided by s.142 of the Supreme Court Act (1935) adjusted in respect of the advance payment already made for a period from the date of receipt of the claim to the date of payment of the compensation pursuant to s.241(10)(b) of the LAA;
(e)any GST determined by the Court to be payable by the Defendant on any of the foregoing amounts;
(f)such further or other relief as the Court considers fit either generally or pursuant to s.241(9) of the LAA.
The parties agree that GST is not payable on an award of compensation. Thus, that part of the claim does not succeed.
The defendant admits that the plaintiffs are entitled to adequate compensation 'in the manner contemplated' by the LA Act s 241 but denies that such relief includes the matters pleaded in (b) and (d) above.
On 26 July 2004 the defendant, pursuant to the LA Act s 248, paid the plaintiffs $1,796,860.43 as an advance payment pending the final determination of this claim. The parties agree that the payment included an adjustment for rates and taxes.
The LA Act s 241 relevantly states:
(1)In determining the amount of compensation (if any) to be offered, paid, or awarded for an interest in land taken under Part 9, regard is to be had solely to the matters referred to in this section.
(2)Regard is to be had to the value of the land with any improvements, or the interest of the claimant in the land, assessed as on -
…
(c)in the case of an interest to which paragraphs (a) and (b) do not apply - the date of the taking,
and discounting any increase or decrease in value attributable to the proposed public work.
…
(6)Regard is to be had to the loss or damage, if any, sustained by the claimant by reason of -
(a)removal expenses;
(b)disruption and reinstatement of a business;
(c)the halting of building works in progress at the date when the interest is taken and the consequential termination of building contracts;
(d)architect's fees or quantity surveyor's fees actually incurred by the claimant in respect of proposed buildings or improvements which cannot be commenced or continued in consequence of the taking of the interest; or
(e)any other facts which the acquiring authority, the court, or the State Administrative Tribunal considers it just to take into account in the circumstances of the case.
…
(8)If the interest in land is taken without agreement, an amount considered by the court or the State Administrative Tribunal or, for the purposes of making an offer, by the acquiring authority, appropriate to compensate for the taking without agreement may be added to the award or offer.
(9)The additional amount under subsection (8) must not be more than 10% of the amount otherwise awarded or offered, unless the court or the State Administrative Tribunal, or, for the purposes of making an offer, the acquiring authority, is satisfied that exceptional circumstances justify a higher amount.
(10)If the interest in land taken produces any rent or profits, then at the option of the acquiring authority, either -
…
(b)interest is to be paid on the amount of compensation for the same period, at the rate of 6% per annum, or such higher rate as the acquiring authority, the court, or the State Administrative Tribunal considers adequate having regard to the circumstances of each case,
but if the interest in land ceases to produce any rent or profits after the taking, interest is to be paid in accordance with paragraph (b).
…
(12)Subject to subsections (10) and (11) -
(a)when any amount representing an advance payment of compensation is paid to a claimant, interest on the total amount of compensation is payable only to the date of the first payment, and interest is payable thereafter only on the balance outstanding from time to time; and
…
The LA Act s 244 states:
(1)The State Administrative Tribunal or the court hearing the action for compensation may award one aggregate amount as compensation for a whole claim, or may divide the claim into several items and award a separate amount for each item.
(2)The State Administrative Tribunal or the court may determine that no compensation is payable in respect of the whole claim or in respect of any item.
(3)The State Administrative Tribunal or the court may attach conditions to the payment of the whole of the compensation or to the payment of the amount awarded for any item.
In accordance with the above provisions, the primary issue for determination is the value of the subject land, as at the date of taking. Sub‑issues involved in the determination of the primary issue include:
(1)determination of the highest and best use of the subject land; and
(2)determination of the appropriate method by which to value the subject land.
There is no evidence before me that the plaintiffs have acquired a replacement property. There remains an issue as to whether the plaintiffs are entitled to the declaration as sought in (b) above.
Other issues for determination are whether the plaintiffs are entitled, as a matter of law and/or fact, to:
(1)solatium and, if so, the amount thereof;
(2)an award of interest and, if so, the amount thereof; and
(3)any other relief pursuant to the LA Act s 241(9).

Detailed description of the subject land and adjoining land

Four hundred and ninety‑nine and 507 Wellington Street each had a frontage of 7.564 m to Wellington Street, making a combined frontage of 15.13 m. Five hundred and seven Wellington Street had a truncation of approximately 5 sqm at its south‑western corner. Otherwise, the two parcels were each long, narrow and rectangular in shape. They were at grade with Wellington Street. There is little evidence of the local topography. I assume that the lots were relatively level and suitable for development.
The parcels ran in a south‑westerly direction from Wellington Street. Their remaining boundaries were inside the city block bounded by William Street to the west, Forrest Place to the east and the Murray Street Mall to the south. Five hundred and seven Wellington Street was further west than 499 Wellington Street. Disregarding rights of way and carriageways (ROW), 507 Wellington Street had a north‑western boundary with the lot on the corner of Wellington and William Streets. A substantial four‑storey heritage building known as the Wellington Buildings was constructed on the corner site. At the relevant time the Wellington Buildings were occupied by retail outlets on the ground floor and a backpacker's hostel on the upper two levels. There was also a basement.
Five hundred and seven Wellington Street had a south‑western boundary with a lot which also had a frontage to William Street. It had a building on it known as the McLaren Chambers. The McLaren Chambers were occupied by retail outlets.
The subject land had rear, southern boundaries with deep lots fronting the Murray Street Mall, which were used for retail shops. Those lots had once been used as the Myers department store and were owned by the same entity, as I shall detail later in these reasons.
Four hundred and ninety‑nine Wellington Street had an eastern boundary with the Globe Hotel site. This site, known as 495 - 497 Wellington Street, was also a deep lot running contiguously with 499 Wellington Street. It had an area of 888 sqm. A three‑storey heritage building which, at the date of taking, was used as a backpacker's hostel was constructed on the site.
In the foregoing description of adjoining lots I have ignored a number of ROW which ran between the McLaren Chambers and the Wellington Buildings, between the McLaren Chambers and 507 Wellington Street, from the Murray Street Mall to the subject land and along the southern boundary of the subject land. These ROW gave access from William Street and the Murray Street Mall to the rear of the subject land, as well as to the adjoining lots. There was no ROW from Wellington Street to the rear of the subject land.
At the frontage of the subject land, Wellington Street was the major thoroughfare linking the western and eastern ends of the Perth CBD. The Perth railway station was on the northern side of Wellington Street. A major bus terminal was situated on the north west corner of William and Wellington Streets.
As at the date of taking, there was no direct pedestrian access from the railway station to the subject land. In order to gain access to the subject land from the railway station, pedestrians had to cross Wellington Street at a traffic light controlled pedestrian crossing to the east of the subject land, walk up a flight of steps to the level of Forrest Place, turn west, walk under the Wellington Street colonnade of Albert Facey House and, at the western end of Albert Facey House, walk down a shallow ramp to the Wellington Street footpath which then passed the subject land. Pedestrians were unable, due to driveways and related obstructions, to cross at the pedestrian crossing outside the railway station and walk immediately west to the subject land along an, at grade, footpath. However, from the northern side of the intersection of Wellington and William Streets, pedestrians could cross Wellington Street at a traffic light controlled pedestrian crossing and then turn east to access the subject land via the, at grade, Wellington Street footpath. Five hundred and seven Wellington Street was approximately 26 m from the south‑eastern corner of Wellington and William Streets.
William Street was a major one‑way street carrying traffic from the north to the south, through the Perth CBD. It provided vehicular access to the rear of the subject land via the ROW I have described previously. It also provided pedestrian access to the subject land along its footpath which intersected with the Wellington Street footpath. North of Wellington Street, William Street crossed the railway line, via the Horseshoe Bridge, and then continued through Northbridge.
The Murray Street Mall was a major pedestrian and retail mall which ran in an east‑west direction between William Street in the west and Barrack Street in the east. Forrest Place was a public open space which ran between Wellington Street to the north and the Murray Street Mall to the south.
At the date of taking, there was also pedestrian access to the subject land via upper level pedestrian walkways. One walkway crossed Wellington Street from the top of the Horseshoe Bridge on William Street to Albert Facey House and the second walkway crossed Forrest Place from the new Myer building to Albert Facey House. Pedestrians who then wished to access the subject land had to descend to the level of Forrest Place and access the subject land via the Albert Facey House colonnade along Wellington Street and the Wellington Street footpath, as I have previously described.
To facilitate the reader's understanding of the location of the subject land, its relationship to other lots and the various access routes to the subject land, I have included a locality plan at the end of these reasons (Annexure A). The plan and some of the information on it was attached to Improvement Plan No 32 ‑ William Street Station Precinct (IP32), which I will refer to later in these reasons. I have placed the handwritten annotations on the annexed locality plan.
The improvements to 507 Wellington Street comprised the Commercial Building, a two storey building built in the 'Federation Romanesque Style' in about 1899. As at the date of taking, the façade of the Commercial Building had some heritage value but the remainder of the building had no heritage or architectural value. The building had some income producing capacity. The ground floor of the building was used for retail trading and the first floor was part of a backpackers' hostel which was operated from the Globe Hotel.
The Commercial Building occupied only about half of the site. The rear of the property was used as a car park and to facilitate access to the rear of the Commercial Building and 499 Wellington Street.
The improvements to 499 Wellington Street comprised the Saunders Building, a two storey building. The Saunders Building occupied the whole of 499 Wellington Street. The building had no heritage or architectural value. It had some income producing capacity. As at the date of taking, the ground floor was used as a tourist information centre and the first floor was part of the backpackers' hostel which was operated from the Globe Hotel.
The usual services, including electricity, water supply, sewerage and telephone, were connected to the subject land.
The Saunders family purchased 499 Wellington Street in 1923 and 507 Wellington Street in 1956. The plaintiffs are members of that family. The business of John R Saunders Pty Limited started in Kalgoorlie in the 1890s as a general store and then became a menswear business. The business traded from the two buildings on the subject land. The upper floors of the two buildings were used as a warehouse for a number of its Perth, suburban stores. A retail shop was located downstairs.
At some point, the menswear business was sold to another retailer. The Saunders family retained ownership of the subject land and leased it to the new owner of the business. The buildings were kept in good repair during this time. In 1988, when the lease expired, the new owners vacated the premises. The buildings were then leased to a succession of tenants. It is not altogether clear, but it seems that it was easier to obtain reliable tenants for the ground floor of 507 Wellington Street but more difficult to obtain reliable tenants for the remaining portions of the buildings. Consequently, the properties were not maintained and became dilapidated. Furthermore, there were outstanding rents and some action was taken, unsuccessfully, to recover these debts.
On 1 April 1996 the owners of the subject land entered into a lease with Glowtime Pty Ltd to lease the buildings at a rental of $73,500 per annum upon terms that the lessee would carry out all maintenance and repairs and pay for insurance cover for the buildings. The lessors would be liable for paying rates and land tax. The term of the lease was seven years. The lease contained three options for the lessee to renew; each option was for a further four year term. There was provision for biennial rent reviews in accordance with increases in the Consumer Price Index. There was also a redevelopment clause providing the lessors with the option of terminating the lease, upon not less than six months' notice, if the lessors wished to redevelop the subject land.
The lessee, Glowtime Pty Ltd, was the trustee for the Globe Backpackers Unit Trust which operated the Globe backpackers' hostel from the Globe Hotel. The lessee used the upper floors of the buildings on the subject land for that business. It subleased the ground floors of the buildings and subleased the car parking spaces at the rear of 507 Wellington Street.

The hostel was well located for a backpackers' hostel, being opposite the Perth railway station and bus station. When Glowtime entered into the lease for the subject land, the buildings on it were very rundown and the rental reflected the state of the buildings. Glowtime spent approximately $250,000 on renovations, including re‑roofing, installation of bathrooms and installation of kitchens.
In May 2000 Glowtime Pty Ltd had administrators appointed. Up to then, the lessee had not been particularly reliable about paying rent due under the lease. This was due to the business practices of one of the business owners rather than the hostel's lack of viability.
In November 2000 the lease was assigned to a new lessee, Sanrosa Pty Ltd, which was operated by Mr Santos Ezcaray, a previous owner of Glowtime Pty Ltd. Sanrosa Pty Ltd, it appears, took over the operation of the Globe backpackers' hostel from Glowtime. Mr Ezcaray, who gave evidence in this matter, was not responsible for Glowtime's defaults under the lease.
In 2000 Mr Ezcaray expanded the capacity of the Globe backpackers' hostel and by 2001 the hostel was operating at near capacity. Mr Ezcaray had decided to attempt to expand accommodation on the subject land by altering the buildings.
The ground floors of the two buildings continued to be occupied by sublessees. As at the date of taking, the annual rent payable for the whole of the subject land was $93,892.20 per annum. Mr Cameron, one of the plaintiffs' valuers, assessed the net passing rent as being in the order of $65,000 per annum. Mr Dix, the other valuer called by the plaintiffs, assessed the net rental for the subject land as being $70,927.40 including GST.
The plaintiffs accepted the modest income for the subject land because Sanrosa was a reliable and long term tenant.
In 1988 the Saunders family considered selling the subject land. This was consistent with their sale of other family owned commercial property which had formerly been used in the family clothing business. I accept that some family members had a sentimental attachment to the subject land but that the plaintiffs' primary intention was to hold the subject land until they received an offer to purchase it which in their view reflected the market value of it as a redevelopment site.
Mrs Michelle McAllister, who gave evidence for the plaintiffs, suggested that the plaintiffs had considered and had not dismissed the idea of developing the subject land themselves. There is insufficient evidence to support the proposition that the plaintiffs were likely to develop the subject land themselves. I do not accept that they would have adopted such a course of action.
In order to understand the plaintiffs' approach to the potential sale of or development of the subject land it is necessary to know something about the ownership of other land in the area.
In the late 1980s, Alberni Pty Ltd, a member of the Pacific Group of companies, acquired a number of properties in the block bordered by Wellington Street, William Street, Forrest Place and the Murray Street Mall. Mr Peter George, the State Manager for the Pacific Group of companies in Western Australia and a qualified valuer, gave evidence for the defendant. In the late 1980s Mr George had instructions to attempt to acquire all of the properties in the block with a view to developing the block as one retail project with a major retail anchor tenant. Mr George was a reliable and credible witness.
By 1988 the Pacific Group of companies had acquired or were in a position to acquire or control, all of the properties in the block except for 124 William Street, 495 ‑ 497 Wellington Street (the Globe Hotel) and the subject land.
In mid‑1989 Mr George, on behalf of the Pacific Group of companies, made an offer to purchase the subject land. The offer was not accepted.
At this time there was an impediment to the sale of 499 Wellington Street because it was subject to a testamentary trust restraining its sale during the lifetime of the beneficiaries. Some time in 1990 an application was made by the beneficiaries to this court seeking a variation of the terms of the trust. On 25 March 1991 the court made orders varying the trust so as to enable the property to be sold: Palmer v McAllister (1991) 4 WAR 206.
In 1994, 1995 and 1998 the Pacific Group of companies made unsuccessful offers to purchase the subject land.
Over the same period of time, the Pacific Group of companies also unsuccessfully offered to purchase 124 William Street, Perth. Through a trust company, Patronus Pty Ltd, the Pacific Group of companies purchased the Globe Hotel in January 1995 for $740,000.
Mr George testified, and I accept, that the Pacific Group of companies continued to be in the market for properties in the Perth CBD into the late 1990s and early 2000. However, by 2003, the group was no longer planning to develop the whole of the block, including the subject land. I accept Mr George's evidence that the group was no longer willing to pay any figure above market value for the subject land.
In mid‑2000 Mr Ezcaray expressed an interest in purchasing the subject land. Ms McAllister told him that the plaintiffs' family regarded $3,000,000 as the correct price for it. Mr Ezcaray did not make a formal offer.
The formal offers received by the plaintiffs for the subject land in the 10 years prior to the date of taking are summarised in the below table:

Date of Offer

Offeror

Amount

Comments

July 1994

A member of the Pacific Group of companies

$380,000

Second half of 1994

An Alberni Nominee company

$1,200,000

Ms McAllister, produced an undated, unsigned draft contract of sale to prove this offer. Mr George did not give evidence in respect to it

January 1995

An unnamed Nominee on behalf of the Pacific Group of companies

$600,000

August 1995

Patronus Pty Ltd

$640,000

Offeror a member of the Pacific Group of companies

April 1997

Michael Power

$700,000

Offeror a Director of Glowtime

July 1997

Michael Power

$1,250,000

December 1998

A Nominee of the Pacific Group of companies

$1,400,000

April 2003

Tom Webster

$1,500,000

Offer by sublessee of 507 Wellington Street for that property only

In the 1980s higher offers were made by entities associated with the Pacific Group of companies. Given the age of these offers, they are not of particular relevance.
I view with considerable scepticism the offer of 11 April 2003, made by Mr Tom Webster, the operator of the compact disc library which subleased the ground floor of 507 Wellington Street. By that date the Perth to Mandurah railway project had been announced and realistically no sale could have taken place. I consider that it was an offer tainted by the imminent publication of IP32. Further, the financial capacity of Mr Webster to complete the sale has not been demonstrated. I am not satisfied that it was a genuine offer or, if it was genuine, that the amount of the offer was not attributable to the proposed public work the subject of IP32: LA Act s 241(2). For these reasons, I do not place any weight on it.

The Public Work

On 16 July 2001 the Western Australian State Government issued a media statement which, in part, stated that the State Cabinet, that day, had approved a redirection of the proposed rail line between Mandurah and Perth to bring it underground through the Perth CBD to the Perth railway station. The media release said that a 'masterplan' would be developed over the next six months during which time the precise route through the CBD would be determined. It is clear from government planning documents that at least from 2002 it was envisaged that the subject land would be affected by the Perth to Mandurah rail link. The plaintiffs were aware of this possibility as from the release of the media statement on 16 July 2001.
In or around late September 2002 the plaintiffs received a circular letter advising them of the 'City Rail Development Project' and that property acquisition for construction of a new station and platforms would occur. The reasonable inference available from the circular was that the railway would be partially constructed underneath the subject land but that the final plans had not been determined. In addition, it was not known whether the properties above the railway would be acquired by the government.
In December 2002 the Railway (Jandakot to Perth) Act 2002 (WA) was proclaimed. This Act confirmed the alignment and deviation of the railway line to be constructed under the Perth CBD, from the southerly projection of William Street, along that street in a northerly direction and then in a north westerly direction to a point about 0.9 kms along the Perth to Joondalup railway line.
In the subsequent planning for the railway, the government decided to acquire approximately 8,640 sqm of land in order to 'revitalise' the precinct bounded by Murray Street to the south, William Street to the west, Wellington Street to the north and Albert Facey House, the GPO and the Commonwealth Bank building to the east. The Government appreciated that there would be 'a significant shortfall upon the sale of the site following construction of the underground station' being in the region of $10.3 million. As a result, the defendant committed to contribute $10.3 million to the integrated railway and revitalisation project and the Government committed to leasing 22,000 sqm of office space for 15 years within a proposed development in the precinct to ensure early development and revitalisation of it.
On 29 April 2003 IP32 was published. IP32 referred to the route of the Perth to Mandurah railway and the fact that it would drop underground northwards of the Narrows Bridge to serve a new underground station beneath the Esplanade and new transfer platforms in William Street between Murray Street and the Horseshoe Bridge, joined to the existing Perth railway station.
IP32 [5] stated:
The new William Street station platform will be located generally below those properties fronting the eastern boundary of William Street. As construction of this station will be undertaken using the cut and cover method, there is a need to gain control over the area above the proposed station.
IP32 stated that the new railway would provide opportunities for redevelopment of the William Street station precinct, comprising the land bounded by Wellington, William and Murray Streets and the Albert Facey House, the Commonwealth Bank buildings and the GPO. The subject land was within this precinct. It spoke of the precinct being 'relatively blighted and in need of redevelopment'. Consequently, it said, 'there is a need to plan for the future long term land uses in the precinct and integration of the station' [10].
IP32 [13] stated:
To facilitate the acquisition of land within the precinct, the construction of the station and the orderly and proper planning of the precinct and to ensure the integration of redevelopment of the land above and adjacent to the station, it is also proposed to establish an improvement plan, pursuant to the provisions of section 37A of the Metropolitan Region Town Planning Scheme Act 1959, for the precinct.
IP32 was that improvement plan. On 7 April 2003 the then Minister for Planning and Infrastructure accepted the recommendation for the creation of IP32. On 15 April 2003 the then Governor of Western Australia similarly accepted the recommendation. Pursuant to the Metropolitan Region Town Planning Scheme Act 1959 (WA) (MRTPS Act) s 37A(2) the defendant could, in default of an agreement with the owner of land the subject of IP32, compulsorily acquire such land.
IP32 said that in accordance with the MRTPS Act s 37A a certificate and recommendation was attached to the plan. The status of the certificate is not clear to me. The certificate and recommendation stated as follows:
'Pursuant to section 37A of the Metropolitan Region Town Planning Scheme Act 1959 it is hereby
Certified that for the purpose of advancing the planning, development and use of all that land within the metropolitan region which comprises the area bounded by Wellington, William and Murray streets and the Albert Facey House, General Post Office and Commonwealth Bank buildings ('the Land') should be cleared, rehabilitated, consolidated, replanned, redesigned, developed and resubdivided and provision should be made for it to be used for such purposes as may be appropriate; and
Recommended to the Minister for Planning and Infrastructure and His Excellency the Governor that the land should be so dealt with and used and made the subject of Improvement Plan No 32 as depicted on Department for Planning and Infrastructure Plan numbered 3.1692 annexed hereto.
The express words of IP32 and the certificate and recommendation prove that the purpose of IP32, and thus the public work, was to provide for the planning and construction of the Perth to Mandurah railway and to provide for the acquisition, clearing, rehabilitation, consolidation, replanning, redesign, development and re‑subdivision of the land included in the William Street precinct, including the subject land. The precinct included land directly affected by the construction of the William Street station as well as land adjacent to the new station. The precinct did not include Raine Square, west of William Street or the Commonwealth Bank buildings on the south western corner of Forrest Place and Murray Street. The subsequent redevelopment of Raine Square was not part of the public work.
On 5 September 2003 a Notice of Intention to Take Land required for the purpose of IP32, including the subject land, was registered at the Office of Titles by dealing No I487306, pursuant to the LA Act s 177. The Notice of Intention to Take Interests for a Public Work lodged with the Notice of Intention to Take Land stated that IP32 was the purpose for which the land was proposed to be taken. It further said that the land was required for the construction of a subterranean railway station to service the Perth to Rockingham and Mandurah passenger railway and for works associated with IP32.
On the same date a notice to quit the subject land no later than 29 February 2004 was served on the plaintiffs.
On 2 March 2004 the plaintiffs lodged their claim for compensation in the amount of $4,840,000, pursuant to the LA Act s 211.
On 17 June 2004 the defendant made an offer of compensation in the sum of $1,590,000 together with solatium of $159,000 and interest at the rate of 6% per annum from 2 March 2004. On 12 July 2004 the plaintiffs refused the defendant's offer of compensation but accepted the offer of an advanced payment in the sum of the offer of compensation. On 20 July 2004 a Partial Discharge of Claim was completed by the plaintiffs and the defendant. On 26 July 2004 $1,796,860.43 was paid to the plaintiffs. This sum represented 100% of the offer of advanced payment for compensation, together with interest thereon at the rate of 6% per annum from 2 March 2004 to 26 July 2004, less an adjustment for outstanding rates and taxes.

Heritage considerations

There is an issue as to the extent to which, if IP32 had not been published, heritage considerations would have affected the development potential of the subject land. The determination of this issue reflects in the highest and best use and value of the subject land.
The plaintiffs' expert, Mr Ken Adam, expressed the following opinions:
1.Perth City Council (PCC) officers would have attempted to prevent the façade of the Commercial Building being demolished in any future development of the subject land;
2. If the developer resisted any proposal to retain the façade, the PCC would not have insisted on making its retention a condition of a development approval;
3.Heritage issues would have arisen in the assessment of an application to develop the subject land but, at the most, this would have resulted in the retention of the façade of the Commercial Building, if the applicant wanted to retain it;
4.Any potential development of the subject land would have obtained the maximum plot ratio bonus of 20% for conservation of the façade of the Commercial Building; and
5.Heritage issues would not have impacted on the height of any proposed development of the subject land. A building height equal to 8 commercial stories would have been acceptable at the street alignment rising to 'perhaps' 10 or 12 stories at 10 m from the street alignment and higher beyond that on a 45 degree rising plane.
Mr Adam's final hypothetical development of the subject land included only two stories at the Wellington Street alignment, 10 stories at 10 m from that frontage and 19 stories at the rear of the subject land.
The defendant's heritage expert, Ms Nerida Moredount expressed the following opinions:
1.The conditions of approval to redevelop 507 Wellington Street would have included a requirement to retain at least the façade and one structural bay depth of the Commercial Building;
2.The minimum retention of the façade of the Commercial Building and one structural bay depth may have achieved a small plot ratio bonus; and
3.Development of the subject land would have been restricted in height and scale to respect the heritage values of the façade of the Commercial Building, the neighbouring Wellington Buildings and the Globe Hotel.
In support of Mr Adam's position, the plaintiffs point out that prior to the date of taking the Commercial Building was not registered on the Register of Heritage Places maintained by the Heritage Council of Western Australia (HCWA). It was only listed on a non‑statutory list of heritage places maintained by the PCC and was not on its heritage register or its draft municipal inventory of heritage places.
The plaintiffs also point out that although IP32 refers to the facades of a number of buildings in the William Street precinct being worthy of retention, it does not include the facades of the buildings on the subject land. Furthermore, the whole of the Commercial Building was demolished for the public work, despite a number of buildings in the precinct being retained, even though the railway was built under or near to them. The façade of the Mitchell and Baird Buildings were removed with a view to their later reinstatement.
The defendant, in support of Ms Moredount, called Mr Peter Monks, the Director of Planning and Development at the PCC. Mr Monks also has considerable experience on the PCC Design Advisory Committee and, its predecessor, the Bonus Plot Ratio Advisory Panel. Mr Monks has extensive experience in planning polices and procedures at the PCC. He was a reliable and credible witness.
Mr Monks gave evidence that the PCC encouraged its officers to negotiate to retain as much of a building's heritage significance, as possible, and not to pursue façadism.
He said that if the Commercial Building had sufficient heritage significance to retain part of it, the most likely outcome would have been a requirement to retain the façade and the first structural bay.
If an application to develop the subject land had been submitted to the PCC, the location of the subject land next to the State heritage listed Wellington Buildings would have also resulted in the application being referred to the HCWA, under the Heritage of Western Australia Act 1990 (WA) s 11, for an assessment of the impact of the proposed development on the Wellington Buildings.
Mr Monks testified that an application for development approval under the City of Perth City Planning Scheme No 1 1985 (CPS1) would have been likely to attract a bonus plot ratio in return for the retention of the heritage façade and one structural bay. However, he said that, it was unlikely that this bonus would have exceeded the range of 6 ‑ 10%.
Each party criticises each other's heritage experts. The plaintiffs criticise Ms Moredount on three bases. First, they submit that she speculated about what the HCWA's approach to any application to redevelop the subject land, absent IP32, would have been. Secondly, they submit that her first report was superficial and inadequate. Thirdly, they submit that Ms Moredount's view became fixed when she prepared a conservation plan for the precinct covered by IP32. They submit that Ms Moredount did not have the impartiality required of an independent expert witness.

Ms Moredount is a heritage architect with considerable experience in the heritage of Perth and its suburbs. She is a member of the International Council on Monuments and Sites (ICOMOS) which is, I accept, the pre‑eminent association for experts in cultural heritage. The Australian chapter of ICOMOS developed the Burra Charter which guides heritage and conservation within Australia. Members of ICOMOS are bound to adhere to its Ethical Commitment Statement and to the articles of the Charter. These require members to perform a thorough information gathering process and assessment of each site about which they provide advice. Members are required to be personally and professionally responsible for the work which they author.
Ms Moredount is a member of various panels which provide advice to the Commonwealth, State and local governments on heritage issues. She also advises private land owners and developers on heritage issues.
Ms Moredount has had experience in working with the PCC to assess the heritage implications of development applications. The PCC has a standard procedure whereby development applications are referred to the HCWA if they are potentially affected by heritage issues. Ms Moredount is one of the experts to whom development applications are referred to for advice.
In respect to the three issues raised by the plaintiffs, I find that it was necessary for Ms Moredount, Mr Adam, Mr Monks and some of the other expert witnesses to speculate when they were asked to give opinions about what would have been the likely outcome of a development application in respect to the subject land. Such speculation does not negate the reliability of their evidence. In the end, I must make a judgment as to which opinion I accept, if any, based on the qualifications, experience and impartiality of the witness.
As to the second point, Ms Moredount's first report was brief but this deficiency was rectified in her subsequent report. I do not accept that I should give her opinion less weight because of the brevity of her first report.
In respect to the third point, in 2004 Ms Moredount was engaged by LandCorp to prepare a conservation plan for the precinct covered by IP32. I accept that Ms Moredount's view as to the heritage qualities of the subject land became fixed at the time she completed the conservation plan. However, I disagree with the plaintiffs that this reflects adversely on her credibility. As is apparent from the terms of the Burra Charter, Ms Moredount was required to perform a thorough information gathering process and assessment of the precinct when she completed the conservation plan. It is hardly surprising that as a consequence of that work she came to an opinion about the heritage qualities of the subject land that has not changed over time.
The evidence establishes that the decision to demolish the façade of the Commercial Building was made by the government authorities in the context of the logistical and financial requirements of the public work involved in IP32 and not on the basis of its lack of heritage value. That decision was made in a very different context to that the PCC would have faced if it had dealt with a development application in respect to the subject land, absent IP32. Whilst the ultimate decision to demolish the whole of the Commercial Building was a relevant matter for Ms Moredount to consider in preparing her reports and giving her evidence, the fact that it did not affect her view of the heritage values of the façade of the Commercial Building or what the likely decision of the PCC would have been does not mean that her opinion should not be given any weight.
I am satisfied that Ms Moredount has the expertise, experience and impartiality which is required to give expert heritage evidence. I find her to be a credible and reliable witness.
Mr Adam is a registered architect and is the sole principal of his planning and architectural practice. He is the chairman of CityVision, an independent group of professionals and others with extensive experience in dealing with and knowledge of, architectural and planning issues within the Perth CBD.
Mr Adam has many years experience in respect to planning issues affecting Perth. His advice in respect to such planning issues has been sought by the State Government, government agencies and private land owners. He was a consultant to the HCWA for a study to establish methodology and policy for heritage precincts in 1997. Mr Adam has been involved in some architectural projects which involved heritage issues and has done heritage studies in respect to some developments.
Mr Adam testified that he did not work as a heritage architect but that he had extensive experience in 'the heritage field', in heritage precincts and in the relationship of heritage buildings to their surroundings. He said that he was a heritage planner.
The defendant submits that Mr Adam does not have the expertise in heritage matters for his opinion to carry any weight.
I disagree with this submission because, in my opinion, Mr Adam has considerable experience in heritage issues. The fact that he does not practice as a heritage architect does not entitle me to disregard his views on heritage issues.
Nevertheless, it is clear to me that the opinion of Ms Moredount as a very well qualified and experienced heritage architect is of significant value in respect to heritage issues and, on balance, carries more weight than that of Mr Adam on such issues.
I accept that, if at the date of taking and absent IP32, a development application had been made in respect to the subject land, the application would have been referred to the PCC Heritage Advisory Panel comprised of heritage architects and the HCWA. The recommendations of these bodies would very likely have been to require the retention of the façade of the Commercial Building and one structural bay for heritage reasons. The PCC's officers would have negotiated with the developer, if necessary, to obtain an agreement whereby the façade was retained in exchange for some bonus plot ratio. That was very likely to have been the outcome of the negotiations.
The combined weight of the evidence of Ms Moredount and Mr Monks causes me to conclude that retention of the façade and one structural bay of the Commercial Building was by itself not likely to result in a 20% bonus plot ratio for the whole of the subject land under either CPS 1 or the City of Perth Planning Scheme No 2 2004 (CPS2). Despite this, the history of the PCC's development application approvals, in evidence, leads me to conclude that the PCC may have granted such a bonus for the retention of the façade combined with the provision of other facilities such as public art and public open space; although a purchaser of the subject land could not have assumed that this would have been the likely outcome as is evidenced by the fact that the PCC recently removed the ability to grant bonus plot ratio for installing public art as part of a development.

Town planning

The subject land was within the area subject to CPS2. CPS1 was in force and applied to the subject land until 9 January 2004. CPS2 was in force thereafter.
There is an issue between the parties as to which town planning scheme a prospective purchaser, as at the date of taking, would have considered applicable to a future development of the subject land. The importance of the issue is probably not proportionate to the time that the issue occupied at trial, but it is that CPS1 would have permitted more intense development of the land than CPS2, in terms of both plot ratio and height of development. Thus, the plaintiffs submit that if the development approval could have been obtained under CPS1, the value of the subject land may be greater.
Mr Adam contended that development approval could have been obtained before CPS2 came into effect. Mr Monks contended that that was unlikely. The plaintiffs tendered some PCC development approvals which supported their claim. Upon consideration of them, I am satisfied that they related to either straightforward applications which did not, for example, involve the analysis of heritage issues or that they were renewals of previously approved developments. The length of time taken for their determination was less than could be expected for an application to develop the subject land.
In any event, as I detail later in these reasons, I am satisfied that the highest and best use of the subject land was for redevelopment of it some five years or more after the date of taking. This means that it is highly unlikely that a hypothetical purchaser of the subject land would have sought approval of a development application prior to the commencement of CPS2 in January 2004 or placed any value on an ability to have obtained approval under CPS1.
Although CPS2 was not in force at the date of taking, a vendor and purchaser as at that date would have been aware of its terms and that it was the town planning scheme that was going to control the future development of the subject land. It was a 'seriously entertained planning proposal' as at the date of taking and the PCC was at that time considering its terms in respect to development applications made under CPS1. Accordingly, I will not detail the provisions of CPS1 which applied to the subject land.
Under CPS2, the subject land was within the Citiplace Precinct bounded by Roe Street to the north, the Mitchell Freeway to the west, the southern boundaries of properties on the south side of Hay Street to the south and Pier Street to the east. It included Perth's main retail area centred on the Hay and Murray Street Malls between William and Barrack Streets. The subject land was on the northern edge of the main retail area.
The Citiplace Precinct Use Group Table in CPS2 provided that preferred uses for the subject land were business services, dining, entertainment and retail. Contemplated uses included a wide range of other uses, including residential. There were no prohibited uses for the subject land.
As Mr Adam said, it is notable that the table did not mention uses such as hostels, hotels or serviced apartments, even though the subject land and the land in its immediate vicinity was being used for these purposes. The location of the Perth railway station on the northern side of Wellington Street encouraged such uses in the area.
CPS2 defined plot ratio to mean 'the ratio of the floor area of a building to the area of land within the boundaries of the lots on which that building is located'.
The subject land was in the 5:1 plot ratio area. Clause 28(2) of CPS2 empowered the PCC to permit an increase in plot ratio of up to 20% (bonus plot ratio). Consequently, if the full bonus plot ratio was granted the plot ratio for the subject land became 6:1. The 5:1 plot ratio permitted on the subject land, together with the possibility of obtaining bonus plot ratio, increased the development potential of the subject land.
Building height limits were more restricted under CPS2 than CPS1. There was much time taken at trial about the meaning of the building height provisions in CPS2 as they would have applied to a potential development on the subject land. I have decided that it is unnecessary for me to make detailed findings in respect to the issues between the parties about the building height provisions in CPS2.
It is sufficient for me to say that under CPS2 there was the potential to develop on the subject land a multistorey building, the upper storeys of which could have been used for office accommodation, hotel accommodation, hostel accommodation, serviced apartments or residential apartments.
Mr Adam identified three options for more detailed consideration. First, a budget hotel development, secondly, a serviced apartment development and, thirdly, an office building. All three options involved conservation of the Commercial Building's heritage façade. All options would have involved the joint development of the two parcels of land as one, because of what Mr Adam described as the natural advantages that accrued from the wider frontage and large site area. All options included a retail or café/restaurant/bar option at the Wellington Street frontage, and all allowed for future connection through from Wellington Street to the Murray Street Mall.
The budget hotel building featured:
(i)a semi‑basement car parking area, with 12 car bays, accessed from the rear laneway;
(ii)a ground floor comprising: public café/restaurant behind the retained façade of the Commercial Building; an entry forecourt serving also as an al‑fresco seating area for the café/restaurant; a hotel foyer and lift lobby; an atrium area; function rooms and other facilities for guests, and provision for future connection to Murray Street via the rear land; and
(iii)two blocks of hotel units above the ground floor, one of 19 floors, the other of 10 floors, each comprising lift lobby, service rooms, hotel rooms and bathrooms, with balconies to some, and totalling up to 203 double rooms.
Mr Adam's original plot ratio calculations for the budget hotel were in the order of plot ratio 5.9:1, calculated in accordance with CPS1 and a gross building area of the order of 8,400 sqm. The defendant disputes this plot ratio calculation and says that Mr Adam's development had a plot ratio in excess of 6:1. The defendant called an expert planner, Mr Stephen Allerding, who disputed Mr Adam's plot ratio calculations. After hearing from both experts, I remain in doubt as to whether Mr Adam's development was within a plot ration of 6:1.
The serviced apartments' option had precisely the same building envelope as the budget hotel option and a similar circulation layout. Mr Adam said that because of the inherent flexibility of internal layout many different combinations would have been possible, including:
-three serviced apartments on each level of each block, making a total of 87 serviced apartments (29 of them two bedroom); or
-three serviced apartments, as above, on each floor in the north block and on levels 12 to 20 of the south block and hotel rooms on the remaining south block floors. This would yield 57 apartments (19 of them two bedroom) and 70 hotel rooms; or
-a variation on either of these, with a large penthouse apartment with extensive balcony areas on the uppermost floor of each block.
The third option was an office development comprising:
(i)semi-basement, as for the budget hotel option, with 12 car bays;
(ii)ground floor comprising: public café/restaurant and entry forecourt (as for the budget hotel option); foyer and lift lobby; and sheltered courtyard area; and
(iii)13 floors of office above.
Mr Adam's view was that, like the first two options, the third option would conceivably have achieved the full 20% bonus plot ratio, for conserving and integrating the Commercial Building façade and part of its internal space into the development. He said that 'retention of the Commercial Building façade, with a plot ratio bonus, would have very significantly enhanced the development potential of the property'.
A fourth option of a retail development involving removal of the Commercial Building and construction of a retail dominated development, covering virtually the whole site on two or more levels was not fully explored in evidence.
The defendant disputes that a building the size and height of that proposed by Mr Adam could have been built on the subject land and at the same time complied with CPS2, even allowing for a full bonus plot ratio. Apart from the 20% limit on bonus plot ratio, there were no limits on the PCC's ability to relax other controls in CPS2.
In my view Mr Adam's indicative designs for a development on the subject land were, at the very least, at the upper boundary of what could have been permitted under CPS2 and probably exceeded what would have been permitted by the PCC. I find this even though the PCC was a pro‑development council and I accept that it would have been keen to facilitate the development of the subject land in an area of the city that had been moribund for some time.
The Citiplace Precinct statement of intent in CPS2 states that:
New development will be generally low rise, reflecting the traditional height and scale of adjacent buildings.
The tallest building in the area of the subject land was Albert Facey House which was eight storeys in height. I accept that the PCC would have been likely to require any development of the subject land to have a building height that was sympathetic to the adjacent heritage buildings, which were no taller than three storeys in height. Even if the PCC took into account the height of Albert Facey House, it is unlikely that the PCC would have regarded Mr Adam's proposed development as meeting the statement of intent. I accept that the PCC would have permitted a taller building height towards the rear of the subject land. These findings, when combined, mean that I am not satisfied that the PCC was likely to have approved a building of the height proposed by Mr Adam.
The provision of onsite car parking bays was restricted by CPS2 and this may have restricted development to 12 ‑ 16 onsite car parking bays. In any development of the site, these probably would have been provided in a basement car park.
CPS2 imposes no side or rear setback control. Whether the PCC would have imposed setbacks on any proposed development would have been likely to depend upon the intended use of the subject land and the design of the development. The PCC would have ensured adequate light, ventilation and noise control in respect to both the construction on the subject land and adjoining uses.

Highest and best use

In order to arrive at the value of the subject land as at the date of taking it is necessary to consider the price which the plaintiffs would have fixed upon with a purchaser, presuming the parties to be aware of all 'circumstances which might affect its value': Spencer v The Commonwealth of Australia (1907) 5 CLR 418, 441 (Isaacs J).
These circumstances include a knowledge of matters then known as being likely to affect the value of the subject land, including the development potential of the land.
The prospective uses and development potential of a piece of land are known as its highest and best use. The highest and best use of a piece of land is to be determined by what the parties knew and believed about the land, the market and the economy as at the date of taking; not any earlier or later date. This is because what is ultimately to be determined is the value of the subject land at the date of taking, taking into account the future prospects of the land: Kenny & Good v MGICA (1999) 199 CLR 413 [51] (McHugh J).
Development potential is not the only circumstance which will affect the highest and best use of the land and the value of the land, either advantageously or prejudicially. Other matters which might affect its value include, as Isaacs J said in Spencer (441):
… its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reasons soever in the amount which one would otherwise be willing to fix as the value of the property.
With these matters in mind, I turn to consider the highest and best use of the land.
The starting point must be the use of the land as at the date of taking. The ground floors were used for retail and related services and the upper floors were used for hostel accommodation. There was no immediate intention to change these uses. These uses, especially the hostel, were profitable for the lessee, although they resulted in a low yield for the plaintiffs. I consider that if there was a higher and better use of the subject land at the date of taking the plaintiffs would have been engaging in it or, at the very least, considering an imminent change to it; but they were not.

Also relevant is that privately held land in the immediate vicinity was being used for similar purposes. There is no evidence before me that these uses, absent the public work, were going to alter in the short to medium term.
The Pacific Group of companies were seeking a major retailer to become an anchor tenant in a redevelopment of property adjacent to and, perhaps, including the subject land. It had been unsuccessful in locating such a tenant because the two large department stores, Myers and David Jones, had established city sites by 2003. Whilst there was always a chance that the Pacific Group of companies would be able to secure another large retailer, there was no indication this was likely to occur in the short to medium term.
The plaintiffs contend that the evidence supports a finding that the subject land was 'ripe for development within a medium timeframe'. They say that there was potential for different types of development on the subject land that may have appealed to a potential purchaser including hotel, serviced apartments, office, retail or a combination of these.
In Mr Adam's written report he said that the subject land was ripe for redevelopment in the short term. In evidence, Mr Adam said that the subject land would have been ripe for development 'at about that time or in the very near future'. I take 'that time' to mean the date of taking. He said that it was a 'bit hard to predict' how quickly the market would have responded to, what he saw as, the opportunity to develop the subject land. It seems that in submitting that the land would have been ripe for development in the medium term, the plaintiffs recognise the weakness of Mr Adam's view.
Mr Dix, one of the plaintiffs' valuers, in his written report said that a 'prudent purchaser would be uncertain as to when the site would be economically developed but that the evidence was suggesting that it could be within three years of the resumption date'. Later, he said that the land would have been ripe for development in 2009 as office accommodation or a budget hotel. The plaintiffs other valuer, Mr Cameron, said that the land would be ripe for development in the medium term being in excess of five years from the date of taking.
Mr Kennedy, one of the defendant's valuers, gave evidence that he thought that a purchaser would have bought the property in 2003 for medium to long term development by which he meant in excess of five years. In evidence, he said that he thought that the 'more favoured' use of the subject land in 2003 would have been residential but that he did not believe that purchasers necessarily acquired development property in the CBD for a single purpose.
Mr Wilson, the defendant's other valuer, was asked about future retail development on the site. His view was that unless the Pacific Group of companies and a major retailer was involved there was no chance of a large retail development on the subject land and that the Pacific Group of companies had not been interested for a considerable period of time prior to the date of taking. Mr Wilson's valuation report of 6 October 2005 identified likely uses as retail or the like at street level, with other commercial or residential uses above ground level. In his responsive report he said that no multistorey development of the subject land 'other than perhaps residential units would have been viable'. Mr Wilson said that the number of alternative development sites in the CBD suggested to him that there was 'little or no pressure' for redevelopment of the subject land. Later, in his responsive report, he said that as the government seemed to be the only tenant prepared to take up leases of office area in the peripheral city locations and this suggested to him that the subject land was not ripe for redevelopment in 2003.
The defendant also called Mr Alan Boys, consultant to the tourism and hospitality industry. It is part of Mr Boys' job to advise potential investors of the market and economic feasibility of proposed hotel and leisure developments. Mr Boys has a Bachelor of Commerce degree and is an Associate of the Institute of Chartered Accountants.
Mr Boys has considerable experience in the subject area of his evidence. I find Mr Boys to be an independent, competent and credible witness.
Mr Boys was of the view that if he had been asked in September 2003 by a client for his advice he would have advised that a development of a budget hotel, serviced apartments or both on the subject land, like Mr Adam planned, would be unlikely to be viable even if the land was obtained for nil value either at that time or in the medium term (three years).
The plaintiffs criticise Mr Boys' opinion for being based on the costs of a higher standard of hotel than that proposed by Mr Adam and for being too conservative, rather than being the view of an entrepreneurial developer.
As to the first point, Mr Boys' opinion was given in respect to a 'budget hotel' development and the development costs which he estimated would be expected of such a hotel. To the extent that those costs depended upon estimates provided by another witness, Mr Silver, I will deal with this criticism of Mr Boys' evidence when I consider the reliability of Mr Silver's evidence.
Mr Boys mentioned, at the behest of the plaintiffs' counsel, feasibility studies he had carried out in respect to projects at the higher end of the market; but nothing in his evidence leads me to conclude that a budget hotel was outside his field of expertise or that he had not considered the 'budget' nature of the proposed development of the subject land when forming his opinion.
As to the second point, the relevant test I must apply requires me to consider what the level of knowledge and belief of a 'prudent purchaser' would be. I am not to consider what a proposed purchaser who was so anxious that 'he would overlook any ordinary business consideration' would pay for the land: Spencer 441 (Isaacs J). The plaintiffs submit that I should take into account the views of 'an exuberant' developer. To do so does not appear to me to be consistent with the approach required by law.
I consider that a prudent purchaser would have been likely to instruct an expert, like Mr Boys, to carry out a feasibility study into a proposed hotel development on the subject land and would have taken account of the study and the author's opinion before purchasing the subject land. Furthermore, Mr Boys said that financiers tend to be conservative in the financing of hotel developments. A purchaser would have been likely to have been forced to take account of a feasibility study, such as that conducted by Mr Boys, because of the inability to obtain finance unless the project was supported by the feasibility study.
The plaintiffs' final submission in respect to Mr Boys' evidence is that 'nothing in his evidence unearths any fundamental reason as to why a hotel or serviced apartment development would not succeed. All that is required is the right design'.
If I exclude economic viability as a fundamental reason why a hotel or serviced apartment development would not succeed, the plaintiffs' submission is correct. There were no town planning, geological, topographical, environmental or similar reasons why a hotel or serviced apartment development on the subject land would not succeed. Despite the absence of those types of restrictions, it is trite to say that economic feasibility is a determinant of the viability of a development. To suggest, as the plaintiffs do, that economic feasibility could be attained by simply changing the design of the building is far too simplistic.
Mr Boys' evidence was that there was a considerable amount of tolerance in the exercise he undertook. Yet, even using the lowest value of the subject land as assessed by the defendant's valuers, in his opinion a budget hotel on the subject land would yield only 4.2%, which would not support such a development. Mr Boys' opinion was that if asked at the date of taking his view would have been that the required yield would be in the range of 9 ‑ 12%. In order to produce such a yield based on Mr Boys' projected stabilised cash flow and the defendant's value of the subject land, the cost of the development would have to have been reduced by half of what he estimated it would be. There is no evidence before me to persuade me that this could be achieved by tweaking the design of the development.
The plaintiffs challenge Mr Boys' evidence on the basis that it in turn is based on the indicative costs provided by Mr Ian Silver, a quantity surveyor, who was called to give evidence on behalf of the defendant. Mr Silver has approximately 40 years' experience as a quantity surveyor. Generally speaking, Mr Silver struck me as an honest witness who is very experienced and competent in his field of expertise.
The plaintiffs criticised Mr Silver's use of costs that may have been more applicable to a 3 ‑ 4 star construction rather than a budget or 2 ‑ 3 star construction. That criticism has some merit but not enough, in my view, to significantly discredit Mr Silver's evidence.
Mr Silver was also cross‑examined on two letters and documents apparently prepared for and supplied to the plaintiffs by Mr Terry Merefeld, quantity surveyor. Mr Merefeld was not called to give evidence. The letters were dated close to the date of the hearing. The defendant objected to the tender and use of these documents in the cross‑examination of Mr Silver. The documents purported to give a summary of actual costs of the construction of apartments on Barrack Street in about 2006. The costs, if reliable, showed that the price per square metre of the construction was much lower than the indicative costs estimated by Mr Silver for a development of the subject land. I permitted the tender and use of the documents as a tool in the cross‑examination of Mr Silver but not as evidence of the proof of their contents.
After cross‑examination on the documents, Mr Silver said that until the figures were worked through in detail, and by 'figures' I believe he meant the figures apparently supplied by Mr Merefeld, it was dangerous to make any conclusion or assumptions about them. Mr Silver said that he stood by his view that his figures were indicative of the costs of the project proposed by Mr Adam, within a tolerance of plus or minus 15%. I accept Mr Silver's evidence.
I conclude that the highest and best use of the subject land as at the date of taking, was its use as at the date of taking with it becoming ripe for development at least five years after the date of taking. The likely redevelopment would have been mixed commercial development. That is, there would probably have been some kind of retail development on the ground floor with a budget hotel, office accommodation, serviced apartments or residential development on upper floors. Such development would have been likely to be multi‑storeyed with a height at the Wellington Street frontage that was sympathetic to the scale of nearby heritage buildings and with a greater height was the rear of the subject land. It would have been unlikely to have been as large as that proposed by Mr Adam.
I have already found that the Pacific Group of companies would not have been likely to pay a premium for the subject land, as at the date of taking. Nevertheless, as the Pacific Group of companies was waiting for the right time to redevelop those properties or to sell them to another developer, it was a possibility that at some time in the future the subject land would have had a premium on its value due to its position close to the properties owned by the Pacific Group of companies. A well informed purchaser would have known this but would also have known that the area surrounding the subject land was unlikely to have been redeveloped in a manner that would have promoted the development of, or increased the value of the subject land unless or until the Pacific Group of companies found an anchor tenant for a large development or the adjacent land was sold to another redeveloper. Until then, the area adjacent to the subject land and, thus, the subject land itself was likely to have remained blighted, as it was described in IP32. On balance I find that whilst as at the date of taking, the Pacific Group of companies would not have been prepared to pay a premium for the subject land, it may have been that another prudent purchaser would have been prepared to pay some small amount over what would otherwise have been the market value of the land because of its position close to the Pacific Group's land.
Another note of caution has to be sounded about the size of this premium in that I agree with Mr Wilson's comment that:
Mr Cameron observed the highest and best use can change with time, depending on the prevailing market conditions and demand for a particular land use type. I would agree, but must recognise the peripheral location of the [subject land] and one could not envisage changing market conditions in the medium‑long term.
A higher value based on maximum development potential of the property would have given an unrealistic low return on passing or expecting rents for a very long time, which in my opinion would have been unacceptable to investors in the property. Such approach also has no regard to actual sales evidence within the CBD, which must provide the best evidence of value.

Valuation

The parties each called two valuers. The plaintiffs called Mr Terrence Dix and Mr Duncan Cameron. The defendant called Mr Keith Wilson and Mr Graham Kennedy.
The range of valuations and their components were as follows:

Name of Valuer

Value per metre squared of Unimproved Land

Value of Improvements

Premium to Adjoining Land Owner

Total Value

Mr Dix (plaintiffs)

$8,615 (improved)

Included

Nil

$6,849,000

Mr Cameron (plaintiffs)

$3,500

$500/sqm

$300,000

$3,500,000 (inc improved land value rounded up to $3,200,000)

Mr Kennedy (defendant)

$2,000 (improved)

Included

Nil

$1,600,000

Mr Wilson (defendant)

$1,750

$200,000

Nil

$1,590,000

There is a difference of $1,750 per sqm of unimproved land between the valuation of Mr Cameron and the valuation of Mr Wilson and a difference of $6,615 per sqm of improved land between the valuation of Mr Dix and the valuation of Mr Kennedy. These differences highlight the difficulty for the court in assessing the value of the subject land. At face value it is difficult to see how such experienced valuers could arrive at such vastly different valuations.
Helpfully, the parties provided me with a table of comparable sales used by the four valuers. I have annexed the table to these reasons and incorporate it into them (Annexure B). In order to assist the reader to identify each property or the details of each property and its sale I have added some comments of my own to the table. Otherwise, the table is self‑explanatory. As the reader is able to refer to the details in the table, I will not repeat much of the information in it in narrative form.
There were a total of 36 properties used by the valuers as comparable sales. The sales took place over a period of six years. There is not one comparable sale that all four valuers relied upon.
Mr Dix used a novel method of valuation in which he compared the potential lettable or leasable area of the subject land with the actual or potential lettable area of other land in the Perth CBD. It is appropriate that I recount my findings in respect to this approach before I consider the evidence of the remaining valuers. In his written report Mr Dix referred to net lettable area but in evidence and in closing submissions it was more often referred to as gross lettable area. For consistency, I will use the latter term, gross lettable area (GLA).

Mr Terrence Dix

Mr Dix is the principal of T R Dix and Associates, licensed land valuers and compensation consultants. Mr Dix was admitted as an Associate of the Australian Property Institute (API) in 1983 having previously worked in the construction industry. After he qualified as a valuer, Mr Dix decided to specialise in valuations for compensation purposes, such as this case. Mr Dix has substantial experience in the valuation of property for compensation claims, he has given evidence in numerous compensation claims and has presented papers on the topic.
Mr Dix stated that the Perth office and retail market had softened during 2001 and 2002. After considering a number of CBD developments, he concluded that at the date of taking the Perth CBD property market was strengthening for both offices and retail uses. Mr Dix then considered six sales which he considered 'to some extent' to be comparable to the subject land.
The six sales considered by Mr Dix were of 124 William Street, 39 Barrack Street, 30 Beaufort Street, 166 Murray Street, Raine Square (September 2004) and 111 Wellington Street.
Mr Dix then considered a number of properties which were being offered for sale when he wrote his report in November 2004. These properties were 20 and 26 Queen Street, the corner of Murray Street and Milligan Street (not included in the annexed table) and 56 William Street. It is not clear to me why Mr Dix included an analysis of these properties, especially as he later opined that the owners of some of these properties appeared to be testing the market rather than genuinely offering the properties for sale.
Mr Dix decided that the subject land would be 'a pivotal site' in any redevelopment of the precinct because it abutted the rear ROW. He was also of the view that a prudent purchaser, after having taken planning and architectural (surprisingly, not financial) advice would be aware of the greater development potential of the subject land as compared to other properties and that this would be reflected in the value of the land.
Mr Dix analysed the sale of 124 William Street based on the advice of Mr Adam that the optimum development potential of the site was a development with a GLA of 1,680 sqm. He was of the view that this sale could be regarded as the most conservative basis for forming a view of the value of the subject land.
He assumed that the price of 124 William Street included a solatium of 10%. He considered that the improvements did not reflect the optimum development potential of 124 William Street and that the sale price reflected what a prudent purchaser would have paid for the land to hold it pending redevelopment.
Mr Dix applied the net land value of $2,181,818 to the 1,680 sqm of GLA available following redevelopment of the site. It is unclear how Mr Dix calculated the net land value as the sale price less 10% (solatium) would be $2,160,000. In any event, Mr Dix's analysis disclosed a rate of $1,298.70 per sqm of GLA which he rounded up to $1,300 per sqm of GLA.
Mr Dix then analysed the sale of 39 Barrack Street. He adopted a development potential of 600 sqm of GLA, based on advice from Mr Adam. The analysis of the sale price disclosed a rate of $2,200 per sqm of potential GLA. In Mr Dix's supplementary report he adjusted this figure to $2,809 per sqm of potential GLA. When Mr Dix applied the purchase price of $1,320,000 to the land area a rate of $7,811 per sqm was disclosed.
Mr Dix thought it likely that the market value of the subject land was somewhere between $1,300 per sqm of GLA and $2,200 per sqm of GLA. It was his view that no discount for magnitude was disclosed in his analysis of the sales of 124 William Street and 39 Barrack Street despite the differing size of the two sites. Mr Dix said that larger areas for both retail and office space were often sought by the market. It was also his view that no discount applied to the significant difference in size of the potential GLA. Somewhat curiously, given his valuation methodology, Mr Dix said that he considered the fundamental principle in the valuation of income producing property was a capitalisation of net income.

Thus, the plaintiffs' criticism of the use of the Globe Hotel has some, but not substantial, validity. The compensation paid for that site has considerable relevance except that, in the medium to long term, the property may not have supported the same intensity of development as the subject land and development of it may have been hampered by the heritage value of its improvements. Against this is the view that not all developers wish to put as large a building as possible on a site or view a heritage building as a negative characteristic of a parcel of land. There are two further reasons why the subject land and the Globe Hotel may not have been developed to their full capacity, having regard only to the applicable plot ratio. First, there is no evidence that such developments were economically viable in that area of the city and, secondly, the terms of CPS2 required that any development be sympathetic to the surrounding heritage buildings, in particular the Wellington Buildings.
I will draw my final conclusions on Mr Kennedy's valuation after I have commented on the final valuation, that of Mr Wilson.

Mr Keith Wilson

Mr Wilson is a director and senior valuer with Pember Wilson Eftos, property consultants. Mr Wilson has over 30 years experience in the real estate industry and is a Fellow of the API. He has valued Perth CBD office blocks, Perth CBD and suburban retail shopping sites and other properties in Perth for both government and private clients. Mr Wilson has the necessary experience to give expert valuation evidence in this matter.
Mr Wilson was instructed by the defendant's solicitors to prepare a valuation report in respect to the subject land. Mr Wilson, as with Mr Kennedy, was first instructed in 2003 to value the subject land. He also had the advantage of inspecting the buildings on it and the surrounding area prior to the commencement of the public work.
The plaintiffs challenge Mr Wilson's independence for similar reasons to those they use to challenge Mr Kennedy's independence. I repeat the comments and findings I made in respect to the allegations against Mr Kennedy. In essence I find Mr Kennedy and Mr Wilson, like Mr Cameron, to be very experienced, professional and independent valuers. I do not have any impression that their evidence was tailored to please the defendant.
The plaintiffs further criticise Mr Wilson's 2005 valuation report on the basis of his 2003 reports. First, they say that he failed to refer his earlier reports in either his latter report or his witness statement. Secondly, they say that in his earlier reports he used different comparable sales but came to the same value of the subject land. Thirdly, they say that some of the sales in the earlier reports were, he acknowledged, irrelevant to the value of the subject land.
The failure to disclose the earlier reports appears to me to be an issue for the defendant rather than Mr Wilson. I do not accept that I should be critical of Mr Wilson's valuation because of this omission.
In 2003 Mr Wilson was instructed by LandCorp to value all the properties to be compulsorily acquired in pursuance of IP32. He did that by accumulating a basket of sales which he used to value all the properties but not necessarily to value each of them. In each report he completed he included the whole of the basket of sales, whether or not he had used a particular sale to value the property the subject of the report. Mr Wilson testified that it was only when he was instructed to prepare the valuation report for the subject land for the purpose of these proceedings that he excluded references to sales which had little or no relevance to the value of the subject land, other than that they were sales of Perth CBD properties. Whilst Mr Wilson's methodology used to prepare the 2003 reports may have been simplistic, I see nothing incompetent or sinister about the preparation of the reports in that manner. The 2003 reports were prepared for a client which was aware that Mr Wilson was valuing a number of properties with different characteristics. Thus, different comparable sales would be applicable to each of them. Quite rightly, when he was instructed to prepare a valuation report for these proceedings he became more focussed and limited his report to those sales which were strictly comparable and relevant, in his opinion, to the valuation of the subject land. The question for me is whether I am satisfied that those comparable sales support his valuation. I do not believe that it is very useful to look at the 2003 report to determine that issue.
Mr Wilson prepared his valuation on the premise that Ms Moredount was correct in respect to the heritage issues affecting the subject land. Consequently, he assumed that the demolition of 507 William Street would not be approved, in its entirety, and that the scale of any development on the subject land would have to be sympathetic to the scale of the Wellington buildings. To the extent that he therefore underestimated the potential to develop a multistorey building which stepped back from the façade of 507 William Street and the Wellington buildings, his valuation should be approached with caution.
Mr Wilson assessed the improvements on the subject land to be in average condition and structurally sound.
Mr Wilson identified 18 sales of Perth CBD properties to which he had regard. He identified 12 of these sales which he said supported his valuations. These 12 sales are detailed in the following table:

Property

Date of Sale

Sale Price

Land Area sqm

$ per sqm

297‑305 Murray St

07/99

$6,270,000

1,593

$1,750

166‑170 Murray St

11/99

$57,200,000

3,740

$1,850

352 Murray St

03/02

$2,000,000

417

$1,860

868‑870 Murray St

05/00

$1,300,000

887

$1,650

413‑417 Murray St

08/01

$1,300,000

751

$1,685

442 Murray St

07/02

$1,200,000

981

$1,500

418‑428 Murray St

01/02

$2,500,000

1,846

$1,715

448 Murray St

10/01

$1,181,250

620

$1,800

575‑579 Wellington St

04/00

$1,650,000

914

$1,750

553‑561 Wellington St

01/02

$1,100,000

688

$1,795

374‑378 Murray St

11/03

$5,250,000

3,724

$1,409

145‑151 Barrack St

05/04

$1,230,000

362

$1,690

All, but two, of the above sales predate the date of taking. Two of the earlier sales occurred in 1999, two in 2000, two in 2001 and four in 2002. Of the two that post dated the date of taking one took place in November 2003, which is not so much after the date of taking to be of concern. The other sale of 145 ‑ 151 Barrack Street took place some eight months after the date of taking.
In respect to this latter sale, Mr Wilson adjusted the price by 10% to take account of the increase in value over that period. This is a substantial increase in eight months, especially as the property is nowhere near the IP32 precinct which may have been the subject of a greater increase in value due to the announcement of the public work.
The plaintiffs criticise the method by which Mr Wilson quantified the increase in value in the Perth CBD property market from December 2000 to December 2002 and then from December 2002 to December 2003. Mr Wilson said that in the absence of a reasonable cross‑section of sales and resales of CBD properties over these periods, he looked at near city residential suburbs to gain an appreciation of that increase. Mr Wilson provided figures for four such suburbs. He averaged the increases for the four suburbs and determined that the average increase between December 2000 and December 2002 was 12.27% per annum and between December 2002 and December 2003 it was 14.92%. He acknowledged that the rates of escalation for residential property may not reflect the rates of escalation applicable to CBD properties but he said that the information supported his contention that values increased over that time. Based on this information he felt confident that the rates adopted in his report, being increases of 10% per annum until 2002 and 15% per annum for 2003 were appropriate.
The plaintiffs make the point that this method of assessing the increase in value in the Perth CBD is unorthodox and is not supported by any of the other valuers. That may well be the case but it may be that an unorthodox methodology has to be adopted if there is no direct evidence available to establish the rate of increase. Mr Kennedy did not support Mr Wilson's approach but neither did he support Mr Wilson's view that there were substantial increases in value over this period of time.
Mr Cameron was of the view that given the absence of reliable market evidence of the rate of increase in value of Perth CBD properties between 1999 and 2003, the best market evidence of the value of the subject land were those transactions which took place as close as possible to the date of valuation. There is obvious sense in that approach. Even so, Mr Cameron's reliance on post date of taking sales in the Barrack Street area and his application of his own subjective view of the market movement, without any sales evidence in support of his views, is hardly reassuring or preferable to the approach of Mr Wilson.
There is a clear danger in determining the movement of the property market in an inner city office and retail area by reference to the movement of the property market in suburban residential areas. However, the question is whether the amount of the adjustment is correct no matter what method Mr Wilson used to arrive at it. In this respect, Mr Wilson's view is a lot more favourable to the plaintiffs than Mr Kennedy's opinion on the same issue.
Furthermore, Mr Wilson's view, as opposed to his method in arriving at it, is not directly contradicted by the plaintiffs' valuers. Mr Dix and Mr Cameron do not appear to have attempted to quantify the movement in the Perth CBD market over a similar period of time even though Mr Cameron used two sales which were 18 months prior to the date of taking and seven which were after it.
Thus, I do not reject Mr Wilson's assessment entirely. It appears to be the most reliable quantification of the rate of increase in property values over time that is in evidence. Despite that conclusion, I am of the opinion that I should be very cautious about relying upon Mr Wilson's valuation to the extent that it is based on comparable sales that occurred over 18 months prior to the date of taking.
The plaintiffs also say that in using the sales of substantially improved properties as comparable sales and then deducting the value of the improvements from the sale price, Mr Wilson has added another subjective element that has a significant capacity to adversely affect the reliability of his valuation. The plaintiffs say that if the value of the improvements has been overvalued then the underlying land value will have been undervalued.
There is much to be said for the plaintiffs' criticism. Only three of Mr Wilson's 12 most comparable sales were of vacant land. Of the remaining nine sales, most of them had substantial income producing improvements. Of the three vacant land sales, one was the Woolworths site, at 166 - 170 Murray Street, which had frontages to Wellington Street and the Murray Street Mall. The different values to be ascribed to the different frontages of such a large through site make it less than an ideal comparable sale. It was also an old (1999) sale.
Another vacant land sale relied upon by Mr Wilson occurred at 418 ‑ 428 Murray Street in January 2002. It sold for $1,354 per sqm or, according to Mr Wilson, $1,715 per sqm when adjusted for time. I note that this lot was 1,846 sqm, that is, over twice the size of the subject land. This brings into question the issue as to what discount if any, should be allowed for magnitude. This is another subjective variable.
The third vacant land sale relied upon by Mr Wilson of 374 ‑ 378 Murray Street sold in November 2003 for $1,410 per sqm. This was a very large site at 3,724 sqm. Unless there was a significant discount for magnitude, it is hard to explain why that site would have been less valuable per square metre than the property at 418 ‑ 428 Murray Street which was only a few lots away on the same side of the road.
The plaintiffs further say that Mr Wilson's adoption of $1,750 per sqm for the subject land comes close to the average of the value of the 12 properties which he said supported his valuation of the subject land at that price per square metre. The plaintiffs say an averaging methodology is not acceptable. I agree with the plaintiffs' second point but I do not accept the first. The average of the 12 sales Mr Wilson relied upon is about $1,704 per sqm. This is not Mr Wilson's valuation of the subject land. I do not believe that it is fair to Mr Wilson to draw any adverse conclusion about the reliability of his valuation simply because it is about $45 per sqm above the average of those 12 sales.
Lastly, Mr Wilson added $200,000 for the value of the improvements to the subject land. Hence, he valued the subject land at a total of $1,600,000 as at the date of taking being comprised of $1,750 per sqm for 795 sqm and $200,000 for the improvements.

Conclusions as to value of the subject land

For the reasons I have given I do not place any weight on Mr Dix's valuation of the subject land.
I am of the opinion that Mr Cameron, by relying heavily on the comparable sales that occurred after the date of taking, has overvalued the subject land. Mr Cameron's comment that 'recent land and underdeveloped property sales in eastern Wellington Street and Barrack Street indicated a prevailing land value in the range of $2,250 ‑ $2,750' was accurate. Having regard to my finding that Barrack Street was a superior area to that of the subject land, the underlying land value of the subject land should not be more than the lower end of the range given by Mr Cameron. The value of the improvements would then have to be added.
I find Mr Kennedy to be the most experienced and reliable valuer of Perth CBD property. I find that this method of using mostly vacant land sales as comparable sales to be preferable to using improved land sales because it removes the need to allow for both the value of improvements on the subject land as well as the improvements on each comparable sale. However, I am of the view that Mr Kennedy, by adding 'virtually nothing' for the value of the improvements to the subject land, has undervalued the improvements. Furthermore, I am of the view that this undervaluation is exacerbated by Mr Kennedy's failure to adjust older sales for time.
Lastly, I have concerns about the reliability of Mr Wilson's valuation because of his substantial reliance on older sales of improved land when there is no objective evidence to substantiate the value he placed on the improvements on those properties or CBD sales evidence to support his adjustments for time.
I conclude that I should rely substantially upon the valuation of Mr Kennedy but increase it to $2,250 per sqm to take into account my criticisms of it. This increase also takes into account a small amount of added value for the proximity of the subject land to a large development site.
I note that this valuation of the subject land brings the value within Mr Wilson's range of values for vacant land and underdeveloped land in eastern Wellington Street and northern Barrack Street. Given my rejection of his view of these areas being inferior to the site of the subject land, this seems to me to be appropriate.
As to the value of the improvements, I have already stated that I accept the view of Mr Cameron and Mr Wilson, as opposed to that of Mr Kennedy, that the improvements had some value to the owner as income producing assets in the medium term until the subject land was redeveloped. I am of the view that a hypothetical purchaser would also have given the improvements some value when negotiating the price for the subject land.
Mr Cameron valued the improvements at approximately $400,000 and Mr Wilson valued them at $200,000. Neither valuer satisfactorily explained the basis of this part of their valuation.
After considering all the evidence, I value the improvements at $270,000. I do so on the basis that generally speaking the plaintiffs were critical of Mr Wilson for overvaluing improvements and thereby undervaluing land. On this reasoning, Mr Wilson's valuation of the improvements would be at the liberal end of the range of values. I also take into account that Mr Cameron valued the improvements on 124 William Street at $460,000. Those improvements derived a significantly higher level of net income than the improvements on the subject land ($160,000 per annum against $65,000 per annum for the subject land). Consequently, it is difficult to understand how the improvements on the subject land could be valued at over 85% of the value of the improvements on 124 William Street, given that I accept that the value of the improvements in both cases lay in their income producing capacity in the medium term. This is so even though the improvements on the subject land were of slightly greater magnitude (1,140 sqm compared to 1,125 sqm). It would appear to me to be appropriate to value the improvements on the subject land at $270,000, which equates to 56% of the value of the improvements on 124 William Street, as valued by Mr Cameron.
When $270,000 is added for the value of the improvements to the unimproved land value, the value of the subject land, as at the date of taking, is assessed at $2,058,750.
I note that the resulting value of the subject land is considerably more than the compensation paid for the Globe Hotel, as at the same date. That is of some concern and causes me to reflect on the accuracy of my findings as to value. Having said that, the value of the subject land must not be based on one sale but on an evaluation of all the evidence. Taking into account all the evidence, including that the Globe Hotel had more limitations on its development potential than the subject land and that this may account for some of the difference in value, the sale price of the Globe Hotel does not make me change my findings.
There are a number of sales which support a greater value for the subject land than the price paid for the Globe Hotel. In respect to sales of vacant land there is the sale of 130 Barrack Street, some 18 months prior to the date of taking. Although that property sold for a slightly greater amount, it was in a superior position. Another vacant land sale is that of 146 - 152 Barrack Street which occurred three years and nine months prior to the date of taking. That property again is in a superior location on Barrack Street and on a corner. There is also the sale of vacant land at 403 ‑ 405 Wellington Street, which occurred at approximately the same time as the date of taking.
In respect to sales of improved land, which I view with some caution, I refer specifically to the sale of 145 ‑ 151 Barrack Street which is on the south west corner of the intersection of Barrack and Wellington Streets. That sale occurred some eight months after the date of taking. The sale price reveals a positive adjustment for both its superior location and improvements. Another sale of an improved property is that of 856 Hay Street to which I have already referred. This is also a superior property due to its location, improvements and rental stream.
For the reasons given earlier, I do not add any premium for the value of the land to the adjoining landowners.
I have considered whether the value I have accepted is tainted by any increase or decrease in value attributable to the public work proposed in IP32. Given that the vast majority of the sales of properties that I have regarded as being comparable occurred prior to the publication of IP32 and prior to any official announcement of the public work, I consider that the valuation is not so tainted.

Acquisition costs in respect of a replacement property

The plaintiffs submit that although they have not purchased a replacement property they are entitled to a declaration that they are entitled to compensation for the acquisition costs in respect of a replacement property should they choose to purchase one in the future.
It appears that this part of the plaintiffs' claim is based on the LA Act s 241(6) which provides that in assessing compensation regard is to be had to removal expenses and disruption and reinstatement of a business.
I do not allow this part of the plaintiffs' claim. First, the plaintiffs were not carrying on a business on the subject land, except to the extent they leased the premises to others who did so. Secondly, after the subject land was taken they incurred no removal expenses or expenses related to the disruption and reinstatement of a business.
Pullin J, considered a claim of this nature in Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174 [240] ‑ [246]. He declined to award compensation under this head of claim. Although the facts of this case are different to those in Arcus I agree with his Honour's comments about the nature of this sort of claim.
The LA Act s 241(6)(e) says that the court may also take into account in assessing compensation any other facts which I consider it just to take into account. The facts, as disclosed by the evidence, are that the plaintiffs have not purchased a replacement property in over four years since the date of taking. Neither is there evidence that the plaintiffs have any intention to do so. Taking these facts into account it would not be just to make the declaration as sought by the plaintiffs.
The plaintiffs' counsel relied on evidence which was given by Mr Hillyard, the defendant's representative, during the trial. Mr Hillyard was asked about the agreed compensation that was paid to the owners of 124 William Street when that property was compulsorily acquired. Mr Hillyard gave evidence that although the owners had not purchased a replacement property, it was part of the settlement agreement that they should be allowed the costs of doing so within a period following settlement or determination of the claim. Mr Hillyard said that he knew of no reason why the plaintiffs could not be similarly compensated.
In the case of 124 William Street that term was a condition of the negotiated settlement agreement between the parties. It does not follow that the landowners had a right at law to that compensation. Neither does it follow that the facts, which may have justified such an allowance in the compensation payable for 124 William Street, are the same as the facts in this case. In my view, the facts of this case do not disclose such a right.
Lastly, there is an interest in the finality of proceedings between the parties. The declaration sought by the plaintiffs would leave the financial rights and obligations of the parties in a state of uncertainty for some time into the future which would be contrary to such an interest.

Solatium

Under the LA Act s 241(8) and (9) the court is granted a discretion to compensate the plaintiffs for the taking without agreement of the subject land. Such amount must not exceed 10% of the amount otherwise awarded unless I am of the opinion that exceptional circumstances justify a higher amount.
No exceptional circumstances have been asserted by the plaintiffs. I am of the view that solatium at 10% of $2,058,750, being $205,875 should be awarded.

Interest

Under the LA Act s 241(10) and (12) the court has a discretion to award interest on the award of compensation. The provisions of s 241(12)(a) state that interest on the total amount of compensation is only payable to the date of the payment of the advance payment by the defendant and thereafter only on the balance outstanding from time to time. Interest is payable at the rate of 6% per annum. I will hear the parties as to the appropriate award of interest.

Conclusion

I award the plaintiffs compensation in the sum of $2,264,625 plus interest as calculated above. The amount of the advance payment must now be taken into account. I will hear the parties in respect to final orders.

Date of Offer	Offeror	Amount	Comments
July 1994	A member of the Pacific Group of companies	$380,000
Second half of 1994	An Alberni Nominee company	$1,200,000	Ms McAllister, produced an undated, unsigned draft contract of sale to prove this offer. Mr George did not give evidence in respect to it
January 1995	An unnamed Nominee on behalf of the Pacific Group of companies	$600,000
August 1995	Patronus Pty Ltd	$640,000	Offeror a member of the Pacific Group of companies
April 1997	Michael Power	$700,000	Offeror a Director of Glowtime
July 1997	Michael Power	$1,250,000
December 1998	A Nominee of the Pacific Group of companies	$1,400,000
April 2003	Tom Webster	$1,500,000	Offer by sublessee of 507 Wellington Street for that property only

Name of Valuer	Value per metre squared of Unimproved Land	Value of Improvements	Premium to Adjoining Land Owner	Total Value
Mr Dix (plaintiffs)	$8,615 (improved)	Included	Nil	$6,849,000
Mr Cameron (plaintiffs)	$3,500	$500/sqm	$300,000	$3,500,000 (inc improved land value rounded up to $3,200,000)
Mr Kennedy (defendant)	$2,000 (improved)	Included	Nil	$1,600,000
Mr Wilson (defendant)	$1,750	$200,000	Nil	$1,590,000

Property	Date of Sale	Sale Price	Land Area sqm	$ per sqm
297‑305 Murray St	07/99	$6,270,000	1,593	$1,750
166‑170 Murray St	11/99	$57,200,000	3,740	$1,850
352 Murray St	03/02	$2,000,000	417	$1,860
868‑870 Murray St	05/00	$1,300,000	887	$1,650
413‑417 Murray St	08/01	$1,300,000	751	$1,685
442 Murray St	07/02	$1,200,000	981	$1,500
418‑428 Murray St	01/02	$2,500,000	1,846	$1,715
448 Murray St	10/01	$1,181,250	620	$1,800
575‑579 Wellington St	04/00	$1,650,000	914	$1,750
553‑561 Wellington St	01/02	$1,100,000	688	$1,795

374‑378 Murray St	11/03	$5,250,000	3,724	$1,409
145‑151 Barrack St	05/04	$1,230,000	362	$1,690