Nguyen v Chief Executive, Department of Main Roads
[1999] QLC 58
•2 June 1999
|
BRISBANE
2 JUNE 1999
Re: A98-35
Determination of Compensation consequent upon
the taking of land for Transport Purposes -
Acquisition of Land Act 1967
Xuan Thu Nguyen and Thi Thu Hang Le
(Claimants)
v.
Chief Executive, Department of Main Roads
(Respondent)
JUDGMENT
By proclamation published in the Government Gazette on 20 June 1997, the chief executive took from that date, for transport purposes, the following described lands:
County of Stanley, Parish of Oxley
(1)An area of 1.84 hectares being the whole of Lot 1 on RP 90004, contained in Title Reference 13147031.
(2)An area of about 3,569 square metres being part of Lot 36 on RP 50038, contained in Title Reference 12796104.
By proclamation published on 27 March, 1998, the description and area of the land taken in (2) above was amended to Lot 29 on Plan SP100595 containing an area of 3,615 square metres.
The registered proprietors of the land taken were Xuan Thu Nguyen and Thi Thu Hang Le.
A claim for compensation in the total amount of $3,000,000 was served on the constructing authority. During the course of the hearing, with leave of the Court, the final claim was amended to the amount of $626,000, calculated as follows:
Land and Improvements $543,000
Business Loss $75,000
Disturbance – Professional Fees $8,000
Total $626,000
The amount of the valuation finally put in evidence by the constructing authority was in the amount of $453,000 calculated as follows:
Land and Improvements $445,000
Disturbance – Professional Fees $8,000
Total $453,000Appearances: Mr MD Hinson SC appeared on behalf of the claimants and Mr R Jones for the respondent.
Witnesses
Evidence for the claimants was given by Mr JJ Olive, registered and certified practising valuer, Mr LGF Wright, business broker and valuer, the joint claimant Mr XT Nguyen. A town planning report by Mr G Vann was tendered.
Mr JD Horrigan, registered and certified practising valuer and Mr KB Cooper, certified practising accountant, gave evidence for the respondent. A town planning report by Mr VG Feros was tendered.
Background
The resumed land is situated at No. 265 (Lot 1 RP 90004) and No. 239 (Lot 36 RP 50038) on the northern frontage of Progress Road, Richlands, about 17 km radially south-west of the Brisbane CBD. Richlands is bordered by the suburbs of Darra to the north, Inala to the east, the satellite suburb of Forest Lake then Ellen Grove to the south, Carole Park and Wacol to the south-west and west. Progress Road is a busy connector road linking Inala and areas to the east with Wacol and Ipswich Road to the west.
The immediate locality of the resumed land comprises older style subdivision with lot sizes in the range generally from a minimum of 1 ha up to about 2 ha. Land usage comprises low intensity, mixed quality residential together with small-crop farms and vineyards.
Lot 36 and land easterly to Inala is within the "Future Urban" zone while Lot 1 and an area to the west is within "Non Urban" zone. The immediate area is not sewered and is unlikely to be in the medium-term future. The lack of sewerage is accepted as a significant constraint upon the future development of the area for intense urban use.
At the date of resumption, the subject properties were fully developed, and used in conjunction, as a small-crop farm. The evidence was that Lot 1 had been farmed by the claimants and Lot 36 was farmed by the female claimant's brother. Soils were described as being of good quality sandy loam with a slight cross-fall and gentle slope away from the street frontage. Irrigation infrastructure was connected to the town water (Council) supply.
On Lot 1 was a modern steel-framed colorbond packing and storage shed with a concrete floor area of about 300 m². Enclosed within the shed was a large coldroom with associated refrigeration equipment. An old three-bedroom dwelling, in poor condition, detached metal garage, rough lean-to carport, storage shed and fencing were also located on Lot 1. The whole of Lot 1 which contained an area of 1.84 ha, of a somewhat irregular fan-type shape, was resumed.
On Lot 36 which, before resumption, contained an area of 1.89 ha, was an old style dwelling and associated sheds and outbuildings which remained after the resumption. A new chain-wire security fence was erected by the respondent along the new western boundary. The land taken from Lot 36 comprised a triangular shaped strip containing 3,615 m² adjacent to Lot 1 on its eastern side. The apex commenced at the immediate south-western street frontage, with the strip widening to about 40 metres on the rear (northern) boundary. The original rectangular shape of Lot 36 has been altered to a rhomboid shaped balance area described as Lot 30 on SP100595, containing 1.536 ha.
The claimants owned, or have acquired subsequent to the resumption, several other properties in the immediate locality. They reside on a site of 1.819 ha at the corner of 87 Government Road and Orchard Road, which they had purchased in January 1995. Adjoining that land to the north at the corner of Progress Road and Orchard Road is a site of 1.638 ha which the claimants had purchased in 1994. The claimants had purchased, also in January 1995, No. 54 Progress Road, a 1.639 ha site one lot removed to the east from the south-eastern corner of Orchard Road. They had then purchased, on 21 June 1997 (one day subsequent to the date of resumption) and on 27 September 1997, Nos. 120 and 112 Progress Road respectively, adjoining to the west of their land at the corner of Orchard Road. Each of those sites contained an area of 1.639 ha. In February 1998, they purchased No. 335 Progress Road containing 1.012 ha, situated on the northern side of the road, one lot to the east of Teraba Street, and in close proximity to the new road construction for which the subject lands were resumed. Finally, in August 1998, the claimants purchased No. 344 Progress Road containing 1.712 ha, on the southern street frontage, opposite No. 335 referred to above.
The claimants, in partnership, apart from being farmers are directors of the companies Queensland Fresh Food Supplies Pty Ltd (QFFS) and Thang Long Pty Ltd, both of which companies are wholesale suppliers of fresh produce to major retailers, QFFS being the principal supplier and Woolworths its major customer.
The Court was informed that the claimants and their business entities have been, for many years, growing and supplying some of the "Choy" range of Asian vegetables, together with herbs, to major retailers. In 1991 they commenced developing Lot 1 and grew Ong Choy, Bok Choy, Pak Choy, Gai Choy and Choy Sum. Lot 36 was purchased in 1993. The claimants were the first and have remained the principal local supplier of the Choy vegetables to Woolworths. Although Woolworths is their main customer, the product is also sold to Coles and Franklins. The claimants have "production arrangements" for a range of vegetables, with other farmers and tenants of some of their properties. The large packing shed and coldroom facility was constructed on Lot 1 in 1994, with Brisbane City Council approval. All produce sold by QFFS and Thang Long Pty Ltd was refrigerated and stored at this coldroom facility before distribution to customers. In this matter there was no dispute that the use of the subject lands for agriculture and the ancillary use of the building as an agricultural shed for the storage of any produce resulting from that agriculture, was a permitted use in the "Future Urban" and "Non Urban" zones. However, the component of use of the land and shed which included the reception, temporary storage and distribution of produce grown elsewhere would fall into the Town Plan's definition of a "Transport Station" (in Mr Feros' opinion) or either "Transport Station" or "Warehouse Premises" (in Mr Vann's opinion). Both of those defined uses are prohibited in the "Future Urban" and "Non Urban" zones.
Valuation Evidence – Land Resumed
Mr Olive
Mr Olive assessed compensation for the land resumed as follows:
Before Resumption:3.73 ha @ $160,000/ha $596,800
Improvements:
Packing Shed and Coldroom $100,000
Old Home at added value of $20,000
Irrigation Works $10,000
Fencing $5,000 $135,000
Total Value $731,800
After Resumption:
Land – 1.54 ha @ $120,000/ha $184,800
Irrigation Works $4,000 $188,800
Compensation $543,000
It was Mr Olive's opinion that the highest and best use of the land as at the date of resumption was as developed, as a small-crops farm, although he saw the medium-term potential of the land to be for intensive urban use.
In assessment of the value before resumption, he had given consideration to the sales of 13 properties, some of which had been acquisitions by the respondent in connection with the subject resumption scheme. It became evident during the hearing that his primary evidence of value had been obtained from two sales of rural-residential properties in the nearby Government Road, together with sales to the claimants, of four of their properties in Progress Road. More will be said of the sales evidence later.
In Mr Olive's opinion, size is an important feature of market value, when the highest and best use of land is for agricultural activities. He had analysed the sales to establish the land content and then equated that component to a unit of value per ha. The upper range extrapolated from the sales evidence was $160,000 per ha and "having regard to the location and long-term future potential of the site" considered "that the upper end of this range is appropriate for the site". He adopted a before valuation of $160,000 per ha, accordingly.
In the after-resumption valuation he had valued the balance area at the reduced figure of $120,000 per ha, his reasoning being that the future development potential of the land had suffered as a result of the smaller area; its location adjacent to a major arterial road with greater exposure to increased traffic noise. In his verbal evidence he said that he had not been aware, at the time of writing his report, of Mr Vann's opinions, from the town planning perspective. However, he had taken comfort from the expressed opinion of Mr Vann that "the resumptions have reduced the practicality and desirability of the remaining land as a location for residential development due to its reduced size and location next to a major road". It had been Mr Olive's perception that Progress Road traffic had also become more congested as a result of the works associated with the resumption scheme.
He agreed that the indefinite delay before sewerage might become available made it difficult to identify any premium in value at the date of resumption, which might have attached to land in this locality due to its future development potential.
In his verbal evidence he said that, after discussions with the claimants, he had formed the opinion that the balance area of the land had also been injuriously affected, in terms of its small-crop farming usage. He accepted the opinion of the claimants that the land had become more difficult to work as a result of the remaining shape and size. The claimants had altered their farming practices from east-west cultivation with the contours, to north-south across the contours, because tractor and machinery manoeuvrability had become difficult adjacent to the new high fence on the western boundary. Cultivation parallel to that fence had minimised the loss of productive land.
Mr Horrigan
Mr Horrigan's inquiries of the Brisbane City Council, indicated to him that it would be unlikely that sewerage infrastructure would become available to the subject lands and their immediate locality for at least 10 years from the date of resumption. Potential for intense urban development was dependent on the availability of sewerage. In his opinion the dominant use potential of the rural-residential type existing subdivisions was for residential dwellings and associated residential orientated activities. His interpretation of the sales evidence, indicated to him that there was no difference in the rural-residential site value between those lands in this locality zoned either "Future Urban" or "Non Urban".
In Mr Horrigan's opinion, the relatively small size of the surveyed sites throughout the locality provided insufficient area for individual viable agricultural usage. He conceded that small-crop farming, in conjunction with a dominant residential component, would be regarded as meeting the criteria for highest and best use of a rural-residential site.
However, regardless of ancillary uses, in his opinion the market value of sites such as the subject was dominated by the single dwelling residential component and variance in lot size had relatively insignificant impact on the basic site value. He saw it as not only inappropriate, but against his interpretation of the principles of valuation, to value such lands on the basis of a pro-rata unit of area value, as Mr Olive had done.
Mr Horrigan's basis for rural-residential site value had been obtained initially from some 17 sales in the Richlands/Ellen Grove locality. By the time of the hearing, he had included in his basic evidence, the two sales, in 1998, to the claimants (Nos. 344 and 335 Progress Road), to which earlier reference has been made.
Mr Horrigan's valuation, on the basis that there was to be no relocation of the coldroom component from within the agricultural shed, and on the best information he was able to obtain regarding the irrigation infrastructure, was as follows:Lot 1:
Land $235,000
Improvements $140,000
Compensation $375,000
Lot 36:
Land excluding structural improvements
Before Value $240,000
After Value $180,000
Compensation $60,000
Allowance for irrigation equipment $10,000
Total amount of compensation payable $445,000
In the after-resumption valuation, Mr Horrigan had been of the opinion that the resumption and the purpose for which the land had been taken had no injurious effect, but if anything, some potential to enhance the futuristic development prospects of the balance area. He saw the possibility of some commercial influence emanating from the increased traffic exposure. However, because any potential for enhancement was futuristic and imprecise, he had decided to exclude enhancement considerations from his after-resumption valuation. He had been informed that a traffic study undertaken by the respondent had indicated vehicle movements of 9,900 per day in Progress Road prior to the resumption. It had been estimated that, as a result of the resumption, and primarily due to the alteration of local traffic movements associated with the resumption scheme, an increase of up to 2,200 vehicles per day could be experienced in Progress Road in the vicinity of the subject balance area. Mr Horrigan did not see a traffic increase of that proportion as injuriously affecting the site value of the remaining land, when Progress Road was clearly quite busy before the resumption. He had visited the immediate locality on a number of occasions before and after the resumption and the construction of new roadworks and had not observed any significantly increased congestion in Progress Road except possibly when there had been temporary interruptions to the local traffic flow.
With the initial roadwork on the resumed land being below the surface level of the balance area and not visible from it, Mr Horrigan was of the opinion that the highest and best existing use of the balance area was not injuriously affected by the works on, or proposed to be constructed on the land resumed from the subject properties. He did not accept that the security style fence erected on the western boundary or the residual shape of the balance area would cause any greater interference to agricultural use than would have been previously experienced. Lot 1, before its resumption, had been fenced on its western boundary and had not been of regular shape.
Sales Evidence and Valuation Considerations
The parties agreed during the hearing that the following sales should be regarded as the evidence of value to be considered by the Court.
(Mr Olive's Sale 4). 54 Progress Road – Lot 47 RP 50038 – 1.639 ha – zoned "Future Urban" – purchased by Le and Nguyen (the claimants) – 31 January 1995 for $250,000 – cleared land, previously cultivated, vacant except for some old sheds with little added value.
Mr Olive analysed this sale to show $152,532 per ha as land suitable for the agricultural use to which it had subsequently been placed.
Mr Horrigan had been aware of this sale but because of its earlier date had not included it in his schedule. He agreed that the sale could be adopted as representative of market value as at the date of resumption. As he had interpreted the market, the sale showed a rural residential site value of $250,000. In his opinion it was a superior site to the lower elevation subject lands, as it rose above Progress Road and enjoyed fairly wide northerly views. Furthermore he believed that its closer proximity to existing sewerage infrastructure could be seen as having some long-term advantage as residential development could be expected to eventually progress from the east.
(Mr Olive's Sale 9, Mr Horrigan's Sale 4). 120 Progress Road – Lot 43 RP 50038 – 1.639 ha – zoned "Future Urban" – purchased by Le and Nguyen (the claimants) – 21 June 1997 for $340,000 – improved with modern brick and tile dwelling with double garage under main roof line, detached large brick shed, cleared for cultivation, situated on southern side of Progress Road.
Mr Olive analysed the sale to show the cleared land content as being $260,000 or $158,663 per ha, having assessed the added value of the improvements as "approximately $80,000".
Mr Horrigan had analysed the sale to show a land content of "around $245,000" as a rural residential site, slightly superior to either of the subject sites.
(Mr Olive's Sale 10, Mr Horrigan's Sale 3). 112 Progress Road, adjoining Sale 2 above, on its eastern side – Lot 44 RP 50038 – 1.639 ha – zoned "Future Urban" – purchased by Le and Nguyen (the claimants) – 27 September 1997, for $340,000 – improved with a low-set concrete block dwelling with an iron roof, detached double garage, cleared for cultivation.
Mr Olive analysed the sale to show the cleared land content as being $260,000 or $158,663 per ha, having again assessed the added value of the improvements as "approximately $80,000".
Mr Horrigan analysed the sale to show a land content of "around $260,000" as a rural residential site. He saw the land as being very similar to the adjacent Sale 2 but the improvements as being clearly inferior. In his opinion, the higher analysed land content could have resulted from the adjoining owner influence.
(Mr Horrigan's Sale 19). 335 Progress Road – Lot 102 RP 70545 – 1.012 ha – zoned "Non Urban" – purchased by Le and Nguyen (the claimants) – 16 February 1998 for $248,000 – improved with a large modern brick and concrete tiled roof dwelling with garages and detached garages/sheds.
Mr Olive had not considered this sale prior to the hearing. In his opinion events subsequent to the date of resumption relative to increased traffic and the disclosed intention of the Brisbane City Council to widen Progress Road may have had a deleterious effect on this property and its substantial improvements.
Mr Horrigan analysed the sale to show a site value "cleared to grazing use" of "around $110,000". In his opinion that level of value was reasonably consistent with the overall evidence at or about the date of resumption for sites of about 1.012 ha and supportive of his valuation of the subject lands, although he had not been aware of the sales at the time he had written his valuation.
(Mr Horrigan's Sale 18). 344 Progress Road, opposite Sale 4 above – Lot 89 RP 77110 – 1.712 ha – zoned "Non Urban" – purchased by Le and Nguyen (the claimants) – 3 August 1998 for $290,000 – improved with a low-set chamferboard dwelling with iron roof, detached five-bay metal shed.
The same comments apply to this sale as for Sale 4, as to Mr Olive's evidence.
Mr Horrigan analysed this sale to show a site value, cleared and used for cropping, of "around $234,000". Again, he had not been aware of this sale at the time of writing his report but saw it as reflecting "a fairly similar level of value to the original sales" – being those sales herein described as Sales 3 and 4. He did not accept that there was any indication of either increase or decrease in value since the date of resumption.
(Mr Olive's Sale 3). 87 Government Road, Cnr Orchard Road – Lot 50 RP 50038 – 1.819 ha – zoned "Future Urban" – purchased by Le and Nguyen (the claimants) – 23 January 1995 for $385,000 – improved with a rendered brick and tile dwelling and swimming pool.
In his written report Mr Olive suggested that the value of improvements were considered to be $80,000 but by extrapolation, it appears that he had applied $100,000 to the improvements, having analysed the sale to show a cleared land content of $156,679 per ha or $285,000. It was his evidence that the land had, at some time in the past, been cultivated.
Mr Horrigan had been aware of this sale but had not adopted it as a basis, due to its early date. He had not carried out a precise analysis of the sale but suggested that the added value of the improvements would be at least $100,000 and that would be a conservative estimate. The land as a rural residential site was significantly superior to the subject lands being quite high in elevation above Progress Road and with views extending to the City high-rise developments.
(Mr Olive's Sale 11, Mr Horrigan's Sale 5). 260 Government Road – Lot 6 RP 84375 – 1.093 ha – zoned "Future Urban" – Freeleagus to Guse – 26 October 1997 for $241,000 – improved with low-set brick dwelling with iron roof; aged weatherboard and iron roofed cottage; inground swimming pool; detached metal garage/store and carport; "cleared grazing".
Mr Olive analysed the sale to show a cleared and fenced land content of $147,301 per ha ($161,000 land – improvements $80,000).
Mr Horrigan analysed the sale to show a land content site value "of around $130,000".
(Mr Olive's Sale 13, Mr Horrigan's Sale 6). 182 Government Road – Lot 12 RP 84375 – 1.093 ha – zoned "Future Urban" – van Dijk to L & W Qld Pty Ltd – 29 June 1998 for $180,000 – improved with mid-set timber framed dwelling with asbestos cement roof; inground pool; backs onto Forest Lake Estate, mainly uncleared at date of sale.
Mr Olive analysed the sale to show a land content of $146,386 per ha (land $160,000 – improvements $20,000).
Mr Horrigan analysed the sale to show a land content site value "of around $123,600".
Mr Olive's inspection of the sales evidence which he had initially considered and included in his report in schedule form, was, where improvements were involved, generally unsatisfactory. Sale properties other than those purchased by the claimants had been inspected from the road. He apparently was loath to seek permission to enter the relevant properties and in several instances was not aware of the extent or nature of the improvements.
Where he relied on sales to the claimants, he suggested that he had applied values to improvements in accordance with the claimants' opinions of their added value to them.
Mr Horrigan, where he was permitted, carried out thorough inspections and his evidence as to the added value of improvements on sale properties was far more convincing and, where relevant, will be adopted.
As it affects this matter, the main area of dispute related to whether the land content in the sales evidence should be considered as representing "site value" or a "pro-rata value" on a unit of area basis. Mr Horrigan took the view that the market for lands comparable to the subject, related to dominant use as rural-residential sites and the sales should be interpreted accordingly. Inherent in his appreciation of factors affecting market value was that once a value was established for a relatively standard sized site, then additional area did not add value on a pro-rata area value basis.
Mr Olive agreed that where the highest and best use of hectarage land was limited to that of a single dwelling house together with ancillary residential activities, then the residential "site value" was the dominant feature of that relevant market. However, he did not agree that the immediate locality of the subject lands should be regarded as predominantly a rural-residential location. Instead, he saw the Progress Road locality as having been originally dominated by small-crop farms and vineyards with some reversion to rural-residential use, but with an underlying medium-term (which he described as a period from five to 10 years) potential for intense urban development once sewerage became available. That potential included, in his opinion, not only pure residential development, but also where applicable, development for commercial and industrial uses. In such circumstances, where the highest and best use of a particular site was for small cropping in the short to medium term before potential ripened for intense urban development, then, in his opinion, the actual area of the land was a feature which directly affected market value on a pro-rata basis. In his opinion, sites in the Progress Road locality were bought and sold with the size of the site being a component of value which was directly reflected in the sale price, and capable of verification when the sales were analysed to show the land component expressed on a value per unit of area. Indeed, in his opinion, the primary evidence of value in this locality had been established by the claimants themselves. It was his understanding of their acquisition strategies that they sought the land component first and foremost and were less concerned with the improvements. Furthermore, in his opinion, sites of smaller area, the present or future potential of which were limited by size, were less valuable, even on a pro-rata basis, than the larger sites with more viable usage potential.
It seems to me that the sales evidence in the subject locality supports Mr Olive's opinion. Sales 4, 7 and 8 are each of sites of about the same size – 1.012 ha; 1.093 ha and 1.093 ha respectively. Those sales showed site values on Mr Horrigan's analysis of around $110,000; $130,000 and $123,600 respectively. For the purposes of comparison the sales reflected pro-rata hectarage values of around $109,000, $119,000 and $113,000 respectively. Then, Sales 1, 2, 3, 5 and 6 are "sites" of 1.639 ha; 1.639 ha; 1.639 ha; 1.712 ha and 1.819 ha respectively. Those sales showed site values, on the analyses which have been discussed, of around $250,000; $245,000; $260,000; $234,000 and $285,000 respectively. Again, for the purposes of comparison, the sales reflected pro-rata hectarage values of around $152,500; $149,500; $158,500; $136,500 and $156,500 respectively.
While each of the latter sales are to the claimants, there is no argument to suggest that the claimants were anything but prudent purchasers who were required to meet the market. Their acquisitions indicate a strategy of aggregation and the sales evidence indicates a willingness to pay a premium in the land value component when acquiring adjoining lands. Each of the latter sales shows a significantly higher site value, as well as a higher pro-rata unit of area value, than each of the sales of the smaller sites.
Indeed, Mr Horrigan himself has, by extrapolation, applied higher pro-rata values than were shown by the sales of the smaller sites, in the before-resumption values ascribed to the subject lands – ie $235,000 or about $127,500 per ha to Lot 1 and $240,000 or about $126,500 per ha to Lot 36.
In Mr Horrigan's opinion, the sales to the claimants at the dates subsequent to the resumption (Sales 4 and 5 above or his Sales 19 and 18) showed "no increase or decrease" in the level of values indicated by the earlier sales. To the contrary, both of those sales indicate lower levels of value, for whatever reason, either as sites or on a pro-rata unit of area. It was Mr Olive's opinion that, subsequent to the resumption, there has been an increasing perception locally that the Brisbane City Council will be widening Progress Road, to the detriment of those properties where dwellings are close to the existing road frontage (as were those in Sales 4 and 5). Furthermore, it was his opinion that the increasing traffic density in Progress Road is a factor deleteriously affecting value. It is observed that Sales 4 and 5 are both in relatively close proximity to the major roadworks for which the subject lands were resumed. I am persuaded that these sales could not be confidently adopted as offering untainted evidence of value in the before-resumption considerations. If the works proposed by the Brisbane City Council in widening Progress Road is a factor affecting the subsequent market, as Mr Olive suggests, then these sales should also be disregarded in the after-resumption considerations.
The sales of the smaller sites in Government Road, the potential use of which is seen to be more aligned to the residential component, do not, in my opinion, provide strictly comparable evidence of value for the larger subject sites which were used at the relevant date for agricultural purposes.
It should be said here that at the request of the parties, the Court inspected the subject lands and the sale properties in the company of the valuers. The inspection was helpful in understanding the valuation evidence.
It seems to me that, as individual sites, with highest and best medium-term use for small cropping, a valuation of the subject lands on a pro-rata unit of area value does provide an appropriate interpretation of the evidence indicated by the marketplace itself.
I can accept that the residential site value may well be one of the factors influencing the level of market value of land in the Progress Road locality. However, it seems to me, that where highest and best present use (small cropping) or future use (urban development) is linked directly to the size of a site, then a significant premium over and above a basic rural-residential site value, is demonstrated by the sales evidence.
As individual sites, and with particular regard to Sales 1 and 2, I would see a "cleared for cultivation" (including added value of fencing) pro-rata value of $150,000 per ha being supported. There is consistency in the valuation evidence that, within the parameters of lot sizes available in the locality of Progress Road, the larger the area available the more viable is use for agricultural purposes. As has already been mentioned Mr Horrigan saw the adjoining owner influence as a reason for the higher land value (by about 6%) in his analysis of Sale 3 in comparison with Sale 2.
The subject land then has the positive feature of being in aggregation and its soil qualities are clearly well suited and highly developed for small-cropping use. Mr Nguyen as an experienced farmer, gave evidence to the effect that soils became lighter and more exposed to prevailing winds as the elevation rose above Progress Road to the south. It was that elevation and the availability of views to the north which made the land southerly of Progress Road and in parts of Government Road, more attractive for the residential component of use.
All things considered and although Mr Olive's disclosed basis was not as persuasive as it might have been, I have decided to adopt a before-resumption valuation of $160,000 per ha for the subject lands on the basis that they were in aggregation and fully productive for small-cropping purposes.
In the after situation, I am inclined to the view that with the existing highest and best use of the land remaining as before, the valuation should, before considerations of shape and/or drainage disabilities revert to $150,000 per ha as a smaller individual site. It is true, as Mr Horrigan has pointed out, that the aggregation before resumption was not of purely regular shape, but I am able to accept that any shape disability of the balance area as compared with the before-resumption aggregated area, has been accentuated by the smaller balance area and the existence of the high security style fence on the western boundary. I also accept that the post-resumption practice of cultivating across the contour was influenced by the desirability of cultivating parallel to the boundary fence rather than rendering cultivation areas adjacent unusable through the difficulty in tractor manoeuvrability. As a consequence however, it stands to reason that cultivation across the contour has caused some erosion and lower elevation drainage disabilities. I have decided to adopt an after-resumption valuation of $142,500 per ha. This results in a valuation higher than those of either Mr Olive or Mr Horrigan. However, it is my opinion that Mr Olive has discounted the before valuation too heavily and for reasons associated with future highest and best use rather than the existing use. Mr Horrigan's discounting exercise commenced, in my opinion, at too low a before valuation, on the basis that the highest and best use of the original Lot 36 was as a rural-residential site.
Loss in land value and injurious affection to the balance area is therefore calculated as follows:Before Resumption –
Lot 1 and Lot 36 –
3.73 ha cleared, cultivated and fenced
as developed small-cropping land
@ $160,000 per ha in aggregation $596,800
After Resumption –
Lot 30 on SP100595 (balance Lot 36) -
1.536 ha cleared, cultivated and fenced
small-cropping land with some shape
and/or drainage disabilities @ $142,500/ha $218,880
Loss in Land Value $377,920
Adopt $378,000
Improvements
Mr Olive valued the improvements on Lot 1 comprising the old house and the shed/coldroom at $20,000 and $100,000 respectively, totalling $120,000. Mr Horrigan without breaking up the individual components valued those improvements also in the amount of $120,000 but on the basis that the claimants would remove and retain the coldroom and refrigeration equipment. When he gave evidence as to the rental value of the packing shed/coldroom, Mr Horrigan advised that, in his opinion, the structure including the coldroom and fittings added value of $120,000. The shed was located at the street frontage with security fencing on the sides and rear, enclosing an area which he estimated as containing approximately "1,000 m²-1,200 m²".
Mr Wright had observed that in the relevant tax return for the financial year ending 30 June 1994, the actual cost of the packing shed/coldroom had been reported as being $108,863. He had been advised (by the claimants) that the total in situ cost was approximately $125,000 and in his opinion that estimate would be reasonable "including approvals, professional costs, inspections, etc".
It seems to me that, in the end result, the better evidence as to the added value of the packing shed/coldroom in situ came from Mr Horrigan supported by the evidence of Mr Wright as to the estimated cost of the structure.
I will adopt an added value of $120,000 for the structure, including fixtures, fittings and the security fencing.
There seemed to be no dispute that the added value of the dwelling was $20,000.
Mr Olive valued fencing (on Lot 1) in the amount of $5,000 but gave no cogent evidence as to the nature of that fencing. It will be observed that the determination of land value in this judgment has been made on a fenced and cleared basis.
Mr Olive valued the irrigation infrastructure in the amount of $10,000 before resumption and $4,000 after, the loss under that heading being $6,000. Mr Horrigan clearly had difficulty in obtaining accurate information as to the actual loss sustained and doing the best he could, made the more generous allowance of $10,000 in his report. I will adopt Mr Olive's estimate which no doubt was based on accurate advice received from the claimants.
In summary, compensation for improvements is determined as follows:
Packing shed/coldroom including fixtures,
fittings and the security fencing $120,000
House $20,000
Irrigation infrastructure $6,000
Total $146,000
Loss of Profits
I do not propose to discuss, in detail, the evidence given by Mr Wright. He had established that QFFS had neither achieved the level of growth in sales in the 1997/98 financial year, as had been experienced in the two preceding financial years, nor the level of growth experienced by the major customer, Woolworths, in its fruit and vegetable division. Mr Wright saw the reduced level of actual sales as compared to projected sales, as a consequence of the loss of production from Lot 1, together with the reduced gross profit margin caused by replacement purchases from other suppliers. There was a suggestion that inability to supply some of the Asian vegetables previously grown on Lot 1 had resulted in another farmer taking from QFFS a small share of the Woolworths custom. That aspect had not been included in the claim. Mr Wright calculated that the lost projected gross profits for 1997-98 were equivalent to a rounded $1,250 per week. He estimated that the claimants would have been faced with a 60-week period within which no profit would be made, had they set about redeveloping suitable alternative virgin land to the same productive capacity as the land taken – hence the claim of $75,000, being the equivalent of 60 weeks lost gross profits at $1,250 per week.
Mr Cooper had been engaged by the respondent, not so much to undertake an assessment of lost profits, but to analyse the assessment methodology adopted by Mr Wright and to provide a critique of the assumptions on which that assessment had been made.
Clearly many hours of time were spent, first by Mr Wright in researching and providing his "Certificate of Determination" and then by Mr Cooper, under severe time constraints, in considering that assessment and providing his critique. However, I have not been convinced that the claimants are entitled to receive compensation for loss of profits from farming activities, in addition to compensation for loss of land based on its highest and best use for farming purposes.
As Lord Moulton said at pp.1088-1089 in Pastoral Finance Association Ltd v. The Minister [1914] AC 1083:
" That which the appellants were entitled to receive was compensation not for the business profits or savings which they expected to make from the use of the land, but for the value of the land to them. No doubt the suitability of the land for the purpose of their special business affected the value of the land to them, and the prospective savings and additional profits which it could be shown would probably attend the use of the land in their business furnished material for estimating what was the real value of the land to them. But that is a very different thing from saying that they were entitled to have the capitalised value of the savings and additional profits added to the market value of the land in estimating their compensation. They were only entitled to have them taken into consideration so far as they might fairly be said to increase the value of the land. Probably the most practical form in which the matter can be put is that they were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it. Now it is evident that no man would pay for the land in addition to its market value the capitalised value of the savings and additional profits which he would hope to make by the use of it. He would no doubt reckon out the savings and additional profits as indicating the elements of value of the land to him, and they would guide him in arriving at the price which he would be willing to pay for the land, but certainly if he were a businessman that price would not be calculated by adding the capitalised savings and additional profits to the market value."
Mr Hinson submitted that consideration of loss of profits is necessary, at least to establish the special value which the land had to the claimants.
While it is indicated in Mr Wright's estimation, that gross profit in the order of $52,000 per acre (about $128,500 per ha) per annum was capable of being achieved by the claimants in growing Asian vegetables, the sales evidence indicates the level of value which land suitable for growing such vegetables brings in the marketplace in cleared for cultivation condition. It is true that there is work and expense still required to bring that type of land to full production, but the forthright evidence given by Mr Nguyen, indicates that existing cultivation land is capable of being brought to full production even with the methods employed by the claimants, in a small fraction of the time suggested by Mr Wright to redevelop virgin land. Even if the taxation returns of the claimants and QFFS could be interpreted as Mr Wright did, and the claimants' interests supported a claim for loss of projected profits, the assumptions on which Mr Wright's assessment were made are open to serious challenge, as Mr Cooper's evidence indicated. Consideration of the risks involved in the projections being fulfilled and the time period required for reinstatement of the cultivated areas should have, in my opinion, resulted in a significant reduction in the assessment supplied by Mr Wright.
The question of special value to the claimants, of the land taken, will be further considered under the heading of "Disturbance".
Disturbance
The parties reached agreement as to an amount of $8,000 being compensable for professional costs outlaid by the claimants in compilation of the final claim for compensation. That amount is awarded.
Special Value to the Owner
The claim for loss of profits has not been allowed. The compensation awarded under the heading of "Land and Improvements" is considered to represent the market value of productive small-crop land and associated improvements, as part of an aggregated parcel.
Although it was not a matter addressed specifically during the hearing, it seems to me that, in mitigating the effect of the resumption on their business, the claimants would reasonably have sought to replace that land and the associated improvements. They did in fact acquire other land used for small-cropping purposes, at about the time of the resumption. The costs of acquisition of a replacement property, equivalent in market value to that of the land taken would, in my opinion, form part of the value of that land and improvements to the claimants.
I will therefore award an additional amount of $18,000, under the heading of "Disturbance", being the estimated legal fees and stamp duty involved in the acquisition of replacement property to the rounded value of $500,000 calculated as follows:2.2 ha developed small-crop land @ $160,000/ha $352,000
Improvements including irrigation $146,000
Total $498,000
Determination of Compensation
The determination of compensation is summarised as follows:
Land – including injurious affection
to balance area
Before Resumption $596,800
After Resumption $218,880
$377,920
Adopt $378,000
Improvements $146,000
Total Land, Injurious Affection
and Improvements $524,000
Disturbance
Professional Fees $8,000
Special Value to Owner –
Acquisition costs of
replacement property $18,000 $26,000
Total Compensation $550,000
Interest
An advance payment of compensation in the amount of $425,000 was paid to the claimants on 9 March 1999.
There is some dispute as to the dates when occupation of the cultivation areas on Lot 1 was relinquished by the claimants. It was suggested by the respondent that the claimants had remained in occupation of the whole of Lot 1 until late in 1997. Mr Nguyen gave evidence that on 8 May 1997 technicians employed by the respondent had entered the land to carry out soil testing. A letter dated 15 May 1997 from the claimants to their solicitor was tendered. As I understood his evidence, he had received and adhered to advice that he should not continue to farm Lot 1. He said he had harvested some crops that had been already planted but results had been poor due to damage to irrigation pipes.
There seems no dispute that the area taken from Lot 36 had continued to be farmed by the claimants until the last crop was planted in February 1998, and harvested at some time prior to 20 July 1998 when the new road boundary fence had been erected.
There is also no dispute that the claimants had remained in occupation of the packing shed/coldroom. Apparently they had not been requested, to the date of the hearing, to terminate that occupancy nor had there been any rental arrangement negotiated.
The respondent called evidence through Mr Horrigan as to the rental value of the shed. His assessment was $24,750 per annum. He valued the improvement (including refrigeration equipment of $60,000) at $120,000. The enclosed associated area of land was approximately 1,200 m². He valued that notional separate site at $30,000. His total valuation of the land, shed and refrigeration equipment was $150,000. In his opinion, as an investment property, a prudent owner would seek a rental which would return 12.5% on the capital value of $150,000 or $18,750 per annum. Furthermore that prudent investor would also "require an additional return for the replacement of the plant and equipment" which additional return he assessed as being 10% per annum of the value of that equipment, ie $6,000 per annum. The total rental assessment was $24,750 although he suggested a rounding to $2,000 per month.
Mr Wright, in his assessment of profits, had not seen it as being necessary to offset the rental value of the shed as he had concentrated on gross profits rather than net profits. However, he offered the opinion that a rental value of between 10% and 12.5% of the value of the shed including the refrigeration plant, but excluding any land value, would have been seen to be reasonable.
It seems to me that this is not the type of situation where a rental value should be assessed on an investment basis. On the town planning evidence the only use to which the shed could be legally placed was one ancillary to the small-crop farm. I do not accept that an open rental market would have existed for this particular structure. In a practical sense the only opportunity available to the respondent had he set out to find a tenant for the highest and best use of the shed and its equipment, would have been to negotiate with the claimants themselves.
Had they been immediately deprived of occupation, the claimants' business could well have suffered significant losses through disturbance to part of their business activities during any reinstatement period. It is my opinion that, in those circumstances, a claim for business losses, apart from the loss of production from the resumed land, would have been sustainable although clouded in terms of quantum, by the town planning position relevant to the illegality of use for some of the activities conducted from the structure.
It seems therefore that the respondent had acted prudently in permitting occupation of the structure to continue for a period in which the claimants should reasonably have had the opportunity to obtain or provide alternative shed/coldroom premises. To now seek a commercially orientated rent from a captive tenant, during the period of occupancy, is not seen as reasonable. By the same token, it would be unreasonable for the claimants to receive interest on unpaid compensation for a structure and the land which accommodated that structure, while they remained in occupation, free of rental.
I have decided to apply a rental for the building and land occupied by the claimants, which equates a return to the respondent equivalent to my calculation of the Commonwealth Bond rates for the relevant periods of continued occupation by the claimants. Those rates are also employed in calculation of interest on the amounts of unpaid compensation. It seems to me that neither the respondent nor the claimants are disadvantaged by that approach.
A difficulty I have is deciding, on the state of the evidence, when the claimants discontinued the use of Lot 1 (except for the area enclosed to accommodate the shed) for practical farming purposes. I will adopt the date of resumption, which date resolves any doubt to the benefit of the claimants.
There is no evidence before the Court as to the dates of any payments of the professional fees.
It is ordered that the respondent pay to the claimants:
(1)Interest at the rate of 6 per cent per annum on the amount of $542,000 for the period commencing on and including 20 June, 1997, ending on and including 8 March, 1999.
(2)Interest at the rate of 5.25 per cent per annum on the amount of $117,000 commencing on and including 9 March, 1999, the date on which the advance payment of $425,000 was made, ending on and including the day immediately preceding the date on which final payment is made.
(3)Less the rental amounts calculated as follows:
(a)rental at the rate of 6 per cent per annum on the amount of $138,000, being $120,000 as the value of the shed including refrigeration plant and the fencing enclosure and $18,000 as the pro-rata value of the enclosed 1,200 m² of land from Lot 1, the rental commencing on and including 20 June, 1997, ending on and including the day immediately preceding the date on which final compensation is paid or, if earlier, the day on which vacant possession of the shed was given to the respondent.
(b)Rental at the rate of 6.5 per cent per annum on the amount of $51,500 being the rounded pro-rata value of the area of 3,615 m² resumed from Lot 36, commencing on and including 20 June 1997, ending on 19 July, 1998, the day immediately preceding the day on which occupation of that land ceased.
RE WENCK
MEMBER OF THE LAND COURT
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