Old Coach Developments Pty Ltd v State of Queensland
[2008] QLC 49
•22 February 2008
LAND COURT OF QUEENSLAND
CITATION: Old Coach Developments Pty Ltd v State of Queensland [2008] QLC 0049 PARTIES: Old Coach Developments Pty Ltd
(claimant)v. State of Queensland
(respondent)FILE NO.: A2006/0800 DIVISION: Land Court of Queensland PROCEEDING: Claim for compensation payable consequent upon the resumption of land under the Acquisition of Land Act 1967 DELIVERED ON: 22 February 2008 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Mr RS Jones ORDERS: 1. Compensation is determined in the sum of Four Million, Eight Hundred and Eighty Thousand Six Hundred and Ten Dollars ($4,880,610).
2. The respondent is to pay to the claimant interest on the sum of Four Million, Eight Hundred and Seventy Thousand Dollars (4,870,000) at the rate of six (6) percent per annum from 8 September 2006 to the date of payment of the advance on compensation by the respondent to the claimant.
CATCHWORDS: Resumption of Land – Acquisition of Land Act 1967 – Real Property – Valuation methodology – Delay in availability of services – Risks associated with delays in development – Comparable sales – Best evidence of value – hypothetical subdivision valuation method discussed. COUNSEL:: Mr P Walker, for the claimant
Mr E Morzone, for the respondentSOLICITORS James Conomos Lawyers, for the claimant
Ms P Pavey, Crown Law, for the respondent
Details of resumption
This is a claim for compensation by Old Coach Developments Pty Ltd as the former registered proprietor of land described as Lots 2 and 3 on Registered Plan 108921 and Lot 663 on SL 8227, County of Stanley, Parish of Redcliffe, which was resumed by the State of Queensland on 8 September 2006 for school purposes.
The three resumed lots were contiguous, located on the corner of Wesley and Tesch Roads, Griffin and have a combined area of 6.787 hectares. Griffin is a suburb of the Pine Rivers Shire located on the eastern and western sides of the Bruce Highway about 30 km north of the Brisbane central business district. The subject land is on the eastern side of the highway.
Initial position of the parties
A claim for compensation pursuant to s.19 of the Acquisition of Land Act 1967 (ALA) was filed in the registry of this Court on 15 November 2006. The amount claimed was $7,602,175 exclusive of interest.
On or about 27 September 2006 the claimant received from the respondent $4,975.000 as an advance against compensation.
The positions of the parties at the hearing
On the first day of the hearing of this matter the claim was amended to $7,503,590 plus interest made up of $7,400,000 for the value of the land taken including improvements thereon and $103,590 under the heading of disturbance. The figure of $7,400,000 was supported by a valuation by Mr M Missingham, a registered valuer.
The final position of the respondent was that the appropriate level of compensation was $4,210,610 made up of $4,200,000 for the value of the land and improvements taken and $10,610 under the heading of disturbance. The figure of $4,200,000 was supported by a valuation by Mr Slater, also a registered valuer.
The position of the parties in this case is somewhat unusual because of the advance on compensation. Depending on my final determination of compensation (and interest thereon), the claimant could be required to refund monies to the respondent.
The Issues
In the broadest sense there are only two issues in this case. The value of the land taken including improvements thereon and the proper level of compensation for disturbance. However, not surprisingly in respect of the value of the land there are a number of issues in dispute between the parties. They are:
(i)the most appropriate valuation methodology.
(ii)the level of risk (if any) associated with realising residential subdivision of the land.
(iii)the best evidence of market value and the application of that evidence.
(iv)the value of the improvements on the land.
In respect of the disturbance claims the only remaining dispute is that concerning the claim for what is said to be "aborted expenditure"[1] of $92,880. The respondent does not dispute that these monies were expended for legitimate purposes but says that as a matter of principle the claimant is not entitled to be reimbursed.
Value of Land
[1] Claimant's written submissions (cs) at paras 94 – 96.
Valuation Methodology
At the date of resumption the land was zoned Future Urban under the Consolidated Planning Scheme for the Pine Rivers Shire Council. This scheme was and is referred to as the "superseded scheme". Pursuant to that scheme the Preferred Dominant Land Use on the council's Strategic Plan was identified as Urban Areas. On 15 December 2006, about two months after the date of resumption, the council's new planning scheme, known as the "Pine Rivers Plan", came into force. Under this plan the land remained in the Future Urban zone and was identified as an Urban Locality. The land also fell within the council's Griffin Structure Plan under which, but for the identification of the site as a future school, the land would have fallen within an area identified for residential development with an anticipated density of 12-25 dwelling units per hectare.
Consistent with the land use designations identified under its town planning schemes, on 26 May 2006 the council issued a Decision Notice which approved (subject to conditions) the development of 74 lots on the land and granted preliminary approval for medium density uses over two of those lots.[2]
[2] The 74 lots was made up of 69 single unit dwelling lots, 3 possible duplex sites and 2 medium density lots.
On page 1 of the Decision Notice it is clearly stated that the approvals were subject to "… the Developer entering into an infrastructure agreement with council, in relation to key infrastructure items as follows, …". Further at page 14 of the notice it is said:
"Should an infrastructure agreement as referenced above in Recommendation A, not be entered into within 6 months of the date of this decision then the application is refused on the grounds of prematurity."[3]
[3] The council's Decision Notice can be found in Appendix A of the engineering report of Mr McAnany – Ex.18.
With this town planning background in place and armed with the advice of other experts including town planners and civil engineers, Messrs Missingham and Slater carried out their valuations.
The primary method relied on by both valuers was to value the land by reference to the sale of other parcels of land within the general locality of the subject land also having potential for residential development. Both valuers also carried out calculations based on a hypothetical subdivision to check the results of their valuation based on sales evidence.
Before turning to the differences between the valuers concerning their sales comparison approach I propose to first deal with the hypothetical subdivision exercises.
Based on his "sales comparison" approach Mr Missingham valued the land at $7,400,000. His hypothetical check revealed a value of $7,034,821.[4] Mr Slater valued the land at $4,200,000 based on his sales evidence and at $3,425,000 based on a hypothetical subdivision of the land,[5] which was later revised to $3,615,000.[6]
[4] Ex. 1, p. 14.
[5] Ex. 16, p. 15.
[6] Ex. 29, Anx. D.
Both valuers made it abundantly clear in their written reports that their hypothetical subdivision calculations were only meant to provide a "check" of their primary method of valuation. At page 14 of his report (Exhibit 1), after pointing out that the direct comparison method tends to be more reliable, Mr Missingham went on to say:
"… the hypothetical development method requires numerous variable assumptions, including the unrealistic assumption that such a property would be sold at this stage of its development cycle."
In circumstances where Mr Missingham himself acknowledges that various assumptions, including an unrealistic assumption, underpin his calculations I do not have any confidence in his hypothetical subdivision exercise. I should also point out here that the market evidence concerning lot sales at or about the date of resumption leads me to the conclusion that Mr Missingham's gross realisation on the sale of the lots in his hypothetical subdivision is materially overestimated. The range of prices attributed to the various lots in the subdivision set out in his report at page 13 is simply not supported by any reliable sales evidence. Further, for reasons I will go into in more detail below, I am also of the opinion that Mr Missingham's profit and risk allowance of 17.5% is manifestly too low.
In Mr Slater's opinion, his hypothetical subdivision calculations would not be the appropriate primary valuation method "in the circumstances of the subject case."[7] By this I understand Mr Slater to be saying that the land was not immediately ripe for subdivision as at the date of resumption (8 September 2006) as, in his opinion, the first stage of a two-staged development of the land could not be completed before about January 2009.[8] At page 15 of his report Mr Slater also identifies that his calculations include elements which he considered to be "quite optimistic" including what in his opinion is an unrealistically low profit and risk allowance of 25%. Despite those optimistic elements being utilised Mr Slater's hypothetical exercise still results in a figure significantly less than that arrived at by his primary valuation method. For these reasons I also reject Mr Slater's hypothetical valuation exercise as reliable evidence of the value of the land taken.
[7] Ex. 16, p. 15.2.
[8] Ex. 16, p. 7 and p. 11.
Turning then to the primary valuation methods adopted by the valuers, Mr Missingham relied on the sale of five parcels of land in the general location of the subject. These sales were then analysed to an average price paid for each lot to be realised from the subdivision of that land. That average price per lot was then used as the basis for determining the average price for the residential lots approved by the council in its Decision Notice. On this basis Mr Missingham priced the 72 residential lots which could have been developed from the subject land at an average price of $90,000 per lot. He valued the 2 unit or townhouse sites at $300,000 each based on other sales which are dealt with below.
Mr Slater relied on 3 sales of land with subdivision potential to arrive at an overall rate for the subject land of $600,000 per hectare. The 3 sales relied on by Mr Slater were also relied on by Mr Missingham.[9] On a rate per hectare basis Mr Missingham's valuation reveals an overall rate of about $1,090,000 per hectare.
[9] Mr Missingham's sales 1, 2 and 3 are Mr Slater's sales 2, 1 and 3 respectively.
The fundamental difference in approach between the two valuers is that Mr Missingham analysed his sales and applied them to the subject land on an average price per developable lot basis whereas Mr Slater analysed and applied his sales on a rate per hectare basis. It was Mr Missingham's opinion that his approach was more consistent with what developers did in the market place. Mr Slater did not really dispute this assertion and considered that both approaches were reliable provided that they were carried out properly. By that he meant in particular that when comparing the physical characteristics of the subject land and/or lots to be developed thereon, proper adjustments had to be made to take account of any differences between the sale properties and/or the lots to be developed on those lands. That is any comparisons had to be made on a realistic "like with like" basis.
I agree with Mr Slater, both approaches are legitimate provided that they are properly carried out on a "like with like" basis.
The Risks of Development
Mr Missingham valued the land on the basis that it was essentially ripe for subdivision at the date of valuation. It was his opinion, supported at least in part on the advice of Mr Miller a director and shareholder of the claimant company, and of Mr Smith a civil engineer who was called to give evidence on behalf of the claimant, that any issues involving the availability of infrastructure to the land would be readily resolved. In this context I note that Mr Miller and Mr Smith have extensive experience in land development.
On the other hand, as I have already referred to, it was Mr Slater's opinion that the first stage of the development would not be completed before January 2009. In his opinion infrastructure, particularly water and sewerage, would not be available before the 2008/2009 financial year with some risk that all of the required water infrastructure might not be in place before 2010-2012.
The competing views of Mr Missingham and Mr Slater essentially arise out of the following facts. The approval to develop the land was subject to the claimant satisfying a number of conditions. Of particular importance are those relating to reticulated water supply and sewerage reticulation.
In respect of water supply, at page 3 of the Decision Notice it is said:[10]
[10] See at p. 3, App A of Ex. 18.
"Adequate Water Supply
The developer shall note that adequate water supply is not currently available for the development.
Council will not approve (sign and seal) plans of subdivision until an adequate water supply is available to the development.
At the time of issuing this decision, the following capital works trunk infrastructure must be completed and commissioned prior to the development proceeding:
Item Description Asset ID Number Programmed Construction Date Petrie Booster Pump Station PUP-01 2007/2008 750mm water main from Petrie booster to Kallangur water tower WM PK 01 2007/2008 Ogg Rd 300/375 mm water main WM DB 01 2010/2012 Brays Rd 375 mm water main WM BT 01 2008/2009 Tesch Rd 375 mm water main WM BT 01 2008/2009 Possibly additional reservoir storage at Boundary Rd and connecting water mains from Kallangur water tower WM BA 01 2007/2008
"
In respect of sewerage services the notice says:[11]
[11] Ibid at p. 5.
"Adequate Sewerage Services
The developer shall note that adequate sewerage service is not currently available for the development.
Council will not approve (sign and seal) plans of subdivision until an adequate sewerage service is available to the area.
At the time of issuing this decision, the following capital works trunk infrastructure must be completed and commissioned prior to the development proceeding:
Item Description Capital Works Program ID Number Programmed Construction Date Pump Station B and associated rising main. FPSB & RWMB 2007/2008 Pump Station PS 108 and associated rising main. PS108 & RMV108 2008/2009
"
Based on the timing of the Brays Road and Tesch Road water mains and sewerage pump station PS108 Mr McAnany, the civil engineer called on behalf of the respondent, formed the opinion that, as at the date of resumption, the prudent purchaser would consider it highly unlikely that subdivision plans over the land would be finalised before April/May 2009. It was also his opinion that because of the timing of the Ogg Road water main the prudent purchaser would consider that there was a definite risk that subdivision plans might not be finalised prior to 2012.[12]
[12] Ex. 18, p. 9.
The council's water infrastructure was under review before the resumption date. In July 2006 the council was in possession of a draft report prepared by consultants which relevantly identified that the Ogg Road main would not be required. However, this report was not accepted by the council until November 2006 and its Water Supply Master Plan was not formally amended until sometime later.
Mr Slater, after having regard to the reports and opinions of Mr McAnany nonetheless formed the view that the prudent purchaser would have been aware of the draft report (referred to as the MWH draft report) and, as at the date of resumption, would have relied on it to convince the council to set aside the requirement for the Ogg Road water main.
Mr Slater's valuation approach is summarised at page 7 of his primary report as follows:
"…Taking an optimistic view and resolving doubts in favour of the claimant, the assumption could be made that a purchaser might take the view that Council was likely to adopt the recommendations of the MWH draft report.
If the Ogg Road trunk main requirement was notionally removed from the conditions, the programme of works, as it was at the date of resumption in 2006, meant that the earliest a plan of subdivision would be sealed was the 2008/2009 year. …
In any event, the earliest date that could optimistically be anticipated, at the date of resumption, at which construction of the first stage of an estate on the subject land might be completed would be about January 2009 and significant risk on several fronts remained for the developer. …"
This approach formed the foundation of the submissions made on behalf of the respondent to the effect that, as at the date of resumption, the plans of subdivision would not have been able to be sealed until the first half of 2009, a delay of about 2½ years.[13]
[13] T. 316 – T. 317.
The risks which concerned Mr Slater are discussed in his primary report at pages 8 to 10 and summarised in his supplementary report[14] as follows:
[14] Ex. 29, p. 6.
"The risk in the subject case is multi-layered. The particular points following are heightened risk, they principally relate to the delay in development.
1. The risk of increased infrastructure charges bearing in mind that the temporary concessional rate is substantively below the adopted rate overall.
2. Construction risk. The longer the delay, the higher the risk of development cost increases.
3. General market risk. The reducing ability to confidently predict demand further into the future.
4. Competition. The prospect of substantial and high powered competition from the Stockland Freshwater estate.
5. Greater uncertainty in the predictability of required infrastructure being available on program.
6. At the relevant date there was the risk that the Ogg Road water main might not be removed from the conditions."
Leaving aside the sixth so-called risk for the moment, Mr Missingham agreed that many of them, which he described as "generic", were real risks associated with delays in the timing of any real estate development.[15] However, it is tolerably clear to me that Mr Missingham did not consider that there was any real risk of the development of the land being delayed by the availability of water and sewerage infrastructure because of the councils programmed construction date of 2008/2009. At page 136 of the transcript Mr Missingham said:
"… Yes. The way I view the subject property is it's a very good quality piece of real estate (in globo?) land. It's a very good design. It's got the development permit or preliminary approval in place, so that all the town planning issues have been covered as at the date of valuation – well, prior to the date of valuation it was apparent that to me that project would just roll on into the next phase and into further design and infrastructure agreements and so on. To me, the property in addition to the strength in the marketplace indicated a moderate risk venture. Had not there been some question marks over the external infrastructure and infrastructure charges, then I would have adopted a much lower rate, possibly in the order of what the Jennings sale showed. Most likely in the order of 10 to 15 per cent. However, those things existed and there were risks associated with those. And on balance I thought 17.5 was a reasonable number." (emphasis added)
[15] T. 196 – T. 197.
According to Mr Missingham, an additional allowance of only 2½% was sufficient to accommodate any infrastructure risks associated with the development of the land.[16] In my opinion such an allowance is manifestly inadequate. This is particularly so when it is borne in mind that when in determining his profit and risk allowance, Mr Missingham also had to take into account the requirement for the Ogg Road water main which was not programmed for construction by the council until 2010/2012.
[16] See also at T. 220 L 27– 45.
The evidence reveals that in early April 2006 Mr Miller was involved in discussions with representatives of the council concerning the future development of the land including infrastructure planning and availability.[17] Despite these discussions the Decision Notice included the infrastructure requirements identified above. That they were imposed was obviously somewhat of a surprise to Mr Miller. In response to a question from Mr Morzone in cross-examination Mr Miller said:[18]
"We were aware of what infrastructure was required. We believed that in fact what had ended up in our approval, particularly in relation to Ogg Road, was a mistake."
[17] T. 34 – 36.
[18] T.36 L 16.
It seems to me to be quite clear that Mr Miller did not see the infrastructure conditions imposed by the council as being as straightforward and easily resolved as did Mr Missingham.
According to Mr Vanderant, the principal development engineer for the Pine Rivers Shire Council, the infrastructure identified under the heading "Item Description" at pages 3 and 5 of the Decision Notice were "mandatory items" and the timing for their construction was meant to provide "…some finality and certainty and some guidance on when things are happening."[19] It was not suggested to Mr Vanderant these conditions were the consequence of mistake, inadvertence or any misunderstanding on the part of the council.
[19] T. 46 L 40 – 50.
According to Mr Smith the terms and conditions of the Decision Notice would be the "starting point" for any prudent purchaser[20] and the timing of the council's infrastructure works was critical to the timing of the development.[21]
[20] T. 74 L 40.
[21] Ex. 3, p. 3.
It is apparent to me that Mr Smith, at least in part, himself relied on the council's infrastructure construction programme to reach his conclusion that the plan of subdivision over the land would be signed and sealed no later than June 2009.[22] This is consistent with Mr McAnany's estimate of April/May 2009.
[22] Ex. 3, pp. 1 – 3.
The Ogg Road Water Main
During the course of these proceedings there was considerable debate about whether or not the timing of the Ogg Road water main in 2010 – 2012 would or could delay the development of the land. Given the concession made by Mr Slater in his primary valuation approach[23] I do not consider it necessary to finally resolve this dispute. However, I do consider it necessary to address it in respect of two matters.
[23] Summarised in para 32 above.
The first is that as a consequence of that concession, the Ogg Road water main requirement ought not still be treated as a potential risk of development save for consideration of the profit and risk allowance adopted by Mr Missingham in his hypothetical subdivision exercise. That is, when valuing the subject land by reference to the sales evidence it is not necessary to consider or make adjustments for the timing of the construction of the Ogg Road main.
Turning then to Mr Missingham's allowance of 17½% for profit and risk, while it is clear that at the date of resumption there was a genuine prospect the requirement would have been abandoned by the council, it was not certain. The evidence of Mr McAnany is clearly to the effect that any prudent purchaser would not treat this requirement lightly.[24] It is also my view that Mr Smith's opinion that the Ogg Road main would not be required was clearly influenced by what he described as looking at the issue "… in hindsight rather than as at the date", whereas based on the information available at the date of resumption the risks were more significant requiring further investigation.[25]
[24] Ex. 18, p. 9; T. 227 – 228; T. 241.
[25] T. 87 L. 1 - 40.
Conclusions about the Risks of Development
On the evidence before me I consider that the approach adopted by Mr Slater is a reasonable one. I am also of the view that Mr Missingham failed to have sufficient regard to the other risks associated with the timing for the development of the land. However, in my opinion the risks of and associated with any delay in developing the land are not as significant as the respondent contends. On the approach adopted by Mr Missingham development of the whole of the land would be "all but completed by April 2009."[26] According to Mr Slater the first stage of the development (37 out of 74 lots) would be completed by about January 2009. On balance I consider that while the likely timing of development and the associated risks need to be borne in mind when comparing the land to the sales evidence, any adjustments to take account of those risks would not be significant, to the extent of having only a minor bearing on the outcome of the case. In this context I agree with the submission made by Mr Morzone to the effect that the risks identified by Mr Slater are probably more relevant to the hypothetical subdivision exercise.[27]
[26] T. 218 L 5.
[27] T.317 L 1 – 10.
The Direct Comparison Valuation Approach
As I have rejected the hypothetical subdivision exercises of both valuers this leaves for consideration their sales evidence.
Locational Differences
According to Mr Missingham, that part of Griffin where the land is located is superior to the other residential areas in the vicinity including Mango Hill, North Lakes and Murrumba Downs, for reasons including open space areas and road and highway access particularly in a south-bound direction.
Mr Slater disagreed with Mr Missingham's assessment. In his opinion, the location of the land was not superior to any of those other locations. To an extent the evidence of Mr Slater is supported by the prices being achieved for residential lots in the various locations.
After considering the evidence on this topic I cannot accept Mr Missingham's thesis and intend to proceed on the basis that there are no material advantages in amenity and services in the location of the subject land when compared to the location of the sales. By this I am not saying that in all cases amenities and/or services are the same but that the various advantages and disadvantages of the different locations would tend to balance each other out. This is particularly so in respect of the sale relied on by both valuers and referred to as the "Pickard sale". Both it and the subject land are located in the area known as Griffin, are south of Fresh Water Creek and have access via Brays Road. However, there are physical constraints which affect the "Pickard" land which have to be brought into account when comparing it to the subject. These constraints are dealt with below.
The Sales Evidence
I have no hesitation in accepting as reliable sales evidence Mr Missingham's sales 1, 2 and 3. (Mr Slater's sales 2, 1 and 3 respectively).
Mr Missingham also relied on two sales not referred to by Mr Slater in his first report. These are his Sale 4 purchased by "Villaworld" (the Villaworld sale) and his sale 5 purchased by the Queensland Government for the Department of Education and Arts. (the DEA sale).
Subject to his concerns about the size of the lots to be developed on the Villaworld sale land Mr Slater did not say that this sale was of no relevance to this case.
The DEA sale is not so straightforward. After acknowledging that the sale was one entered into between the parties pursuant to the Acquisition of Land Act 1967 Mr Missingham went on to describe the sale in the following terms:
"… I have reviewed the material disclosed by the State of Queensland associated with this transaction and in my opinion this transaction is reliable as a fair representation of market value under such circumstances. Hence this transaction does not fulfil the market value criteria of prudent or not anxious vendor/purchaser, nevertheless it does however indicate a minimum 'floor' or 'forced' market price.…"[28]
[28] Ex. 1, p. 11.
The first sentence of this passage suggests that this sale provides reliable evidence of market value. However, that is immediately thrown into doubt by the second sentence.
Mr Missingham's other evidence concerning this sale is also difficult to follow. For example, he seemed to rely on this sale as evidence of an increasing real estate market between 2004 and 2006[29] and valuable supporting evidence.[30] Notwithstanding this, Mr Missingham later expressed the view that the sale price of $8,600,000 did not reflect market value.[31] The thrust of Mr Slater's evidence was that there was no real evidence to suggest that this sale was at less than market value and, if the sale price seemed low that was probably because of the recent and significant increases in the council's infrastructure charges.
[29] T. 110.
[30] T. 186 L 10.
[31] T. 187 L 30 – 45 and T. 188 L 25.
In final addresses Mr Morzone initially submitted there was good reason not to use the sale at all but concluded by submitting that it could be, but only with "some circumspection" and "caution". Mr Walker submitted that the sale "could be given some weight".
Having regard to the evidence and submissions of counsel concerning the DEA sale I have concluded that there are too many uncertainties associated with it for it to be considered reliable evidence of value. This is a disappointing result as it is the sale closest in time to the resumption date and is the only sale after the council introduced its significantly higher infrastructure charges in or about March 2006.
Application of the Sales Evidence
According to Mr Missingham his sales revealed the following average lot prices:
· Sale 1 $71,000/lot (the Brodie sale)
· Sale 2 $80,000/lot (the Kinsman sale)
· Sale 3 $63,100/lot (the Pickard sale)
· Sale 4 $90,000/lot (the Villaworld sale)
· Sale 5 $70,000/lot (the DEA sale).
In respect of the Brodie sale Mr Missingham adjusted his rate to $88,500 per lot to bring it to an "approved" average price per lot basis. This was necessary according to Mr Missingham because the sale was sold subject to approval whereas, at the date of resumption, the subject land had the benefit of an approval being in place. A similar exercise was carried out in respect of the Pickard sale to arrive at its average lot price of $63,100. For some reason no similar adjustment was made to the DEA sale. The Kinsman and Villaworld sales had approvals in place at sale and therefore did not need any such adjustment.
At pages 7 to 11 of his report Mr Missingham asserts that the average lot prices revealed by his sales evidence justified an average lot price for the subdivision proposed on the subject land of $100,000. It is clear however that he really meant to apply an average price of $90,000 to the residential lots and $300,000 for each of the "unit" lots.
I do not accept that Mr Missingham's price per allotment approach justifies an average price of $90,000 per lot. The average size of the lots in the development proposed for the subject land was about 595 m². Six lots are less than 400 m² in area, nineteen are between 400 and 500 m², five between 500 and 600 m², thirty-one between 600 and 700 m² and four lots between 700 and 800 m².[32]
[32] T. 143 L. 7 – 12: See also Ex. 29, Anx B.
Mr Missingham states in his report that the Brodie, Kinsman, Villaworld and DEA sale parcels were to be developed into "conventional lots". In cross examination Mr Missingham considered that a conventional lot for the Brodie sale would be about 650 m² in area. However, the term "conventional lot" is obviously a flexible one as, in respect of Kinsman and DEA sales it incorporates lots in excess of 700 m² and up to 750 – 850 m² for the Villaworld sale.
The evidence reveals a relationship between the prices being paid for residential lots and their size to the extent that for Mr Missingham's average price of $90,000 per lot to be correct, the larger residential lots in the proposed estate would have had to be worth, to the purchaser of the in globo parcel of land, materially more than $90,000. The evidence does not support such a level of value.
Mr Missingham did not, in my opinion, put forward any convincing evidence to support his average price of $90,000 per lot. In reaching this conclusion his evidence seeking to elevate the location and standard of the subject land and the proposed lots thereon in comparison with his sales is rejected. Also, I do not accept that there are any material topographical differences between the land and the sales. On this issue I prefer the evidence of the civil engineer Mr McAnany.
There is a further difficulty associated with the direct comparison approach of Mr Missingham that needs to be addressed. It is tolerably clear to me that he had not sufficiently considered the ramifications of the significant increase in the council's infrastructure charges between the date of the sales and the date of resumption.
Mr Missingham accepted that these charges increased by about $20,000 per developable lot and that it would be appropriate to bring that into account when comparing the analysed lot prices from his sales with the development proposed on the land. As far as I can tell from his report he did not bring them into account in his direct comparison valuation. However, in his oral testimony he contended that the increase in those charges would be offset by the increase in the prices being paid for residential lots and parcels of land with subdivisional potential between 2004 and 2006.[33]
[33] T. 191 – T. 193.
As I have already stated, I do not consider that there is any reliable evidence to support either the range of prices Mr Missingham attributed to the various lots within his hypothetical subdivision or his average price per lot of $90,000. These prices are manifestly too high in my opinion and are not supported by any evidence that between 2004 to 2006 the price being paid for comparable residential lots in the Griffin area had significantly increased. In this context, the "vacant land median price …" intended to be reflected in the bar chart which appears at the bottom of page 6 of Mr Missingham's report is as much explained by increases in the average size of the lots being sold between 2005 to 2006 as anything else.
Turning then to Mr Missingham's proposition that the market for in globo land had increased between 2004 and 2006. He acknowledged that the increase in infrastructure costs would tend to negatively impact on in globo land prices[34] and that there was "… no evidence in the local area which will readily show the increase in in globo land parcels …",[35] but went on to suggest that there had been resales elsewhere in south east Queensland which would support an increase in in globo land prices. However, no evidence was given to support that assertion and, perhaps more importantly, there is no evidence to suggest that these "resales" were in areas affected by large increases in infrastructure charges.
[34] T, 192 L. 32 – 50.
[35] T. 193 L. 7 – 15.
It was submitted on behalf of the claimant that the resale of the DEA land was evidence indicating an increase in the price being paid for in globo land between 2004 and 2006.[36] The land was sold to Villaworld in May 2004 for $6,905,000 and then on sold to DEA in July 2006 for $8,600,000. Mr Missingham, in his evidence in chief referred to this sale in support of his argument.[37] However, in cross-examination he did not seek to rely on it and conceded that there were no sales in the area which "readily" supported his theory. There is also evidence which might explain the increase in the price for this land quite apart from any general increase in the market. According to Mr Missingham, when the land was sold in 2004 it was sold without any development approvals in place. However, when the land was being sold by Villaworld to DEA, although there was still no formal approvals in place, Villaworld had provided to the government officers acting for DEA a copy of its development application, an amended plan of subdivision and costings.[38] That information caused an increase of the government's valuation up to $8,500,000.[39] There is also evidence which suggests that by July 2006 some, if not many, of the uncertainties concerning access to and from this land were being resolved as a consequence of the development of surrounding lands, particularly by Jennings.
[36] Claimants written submissions p. 16 para [79].
[37] T. 110 L. 20 -30.
[38] Ex. 9, email from James McKenna to Cameron Hurman dated 15 June 2006.
[39] Ex. 9, Natural Resources and Mines Office Memo dated 27 June 2006.
Having regard to all of the evidence concerning the sales of this land I do not consider they provide reliable evidence of a material increase in the relevant in globo market between 2004 and 2006.
The impact of the increased infrastructure charges is of particular relevance to the DEA sale. Mr Missingham was of the opinion that the sale price was negatively impacted by the threat of resumption. Mr Slater tended to doubt that that was the case and expressed the view that the decision by DEA to sell might have been as a consequence of Villaworld re-assessing the profitability of developing the land following the increase in charges. The differences between the two valuers about these matters was not satisfactorily resolved and gives more weight to the view that this sale should not be used.
For the reasons expressed above I reject Mr Missingham's direct comparison approach based on average lot prices. In conclusion on this topic I should point out that I consider this approach to be a somewhat superficial one in that the basis for the average price per lot for each of the sales is little more than the result of dividing the total sale price by the number of lots approved for subdivision. If for example the lots to be developed on the Pickard land were materially larger the lot yield would fall but the average price per lot would be significantly higher. On the other hand if the lot sizes for the Villaworld sale were materially reduced the opposite would occur. If these scenarios in fact represented the actual evidence; would the higher average lot price now realised from the Pickard sale justify an increase in the average lot price for the subject or would the lower average price now realised from the Villaworld sale require a price reduction or would it cause no change at all? The relationship or relativity between the average size and price of lots on the sales and those on the subject land was never satisfactorily explained.
Direct Comparison Approach on Rate Per Hectare Basis
In this case I consider that the valuation method applied by Mr Slater is the most reliable. An additional advantage of this approach is that it tends to bypass in the analysis of the sales, many of the difficulties that might arise because of a purchaser's/developer's personal preferences for larger or smaller lots. As I understand the evidence there is nothing to suggest that the sales relied on by Messrs Missingham and Slater could not have been developed with similar sized lots as that proposed for the subject land.
Dealing with all of the in globo sales relied on by the valuers on an "as is" or superficial basis they reveal the following approximate rates per hectare.
· Brodie Sale $650,000/ha
· Kinsman Sale $700,000/ha
· Pickard Sale $630,000/ha
· Villaworld Sale $810,000/ha
· DEA Sale $680,000/ha.
However, both valuers considered it necessary to make certain adjustments to the basic rates revealed by the sales. On Mr Missingham's approach the rate per hectare for the Brodie and Pickard sales would have to be increased to take account of the fact that at the time those sales took place, unlike the subject land, the land was not approved for subdivision. Mr Missingham's adjusted rate per hectare for the Brodie and Pickard sales would be about $800,000/ha. On the other hand, for the reasons set out in his primary report,[40] Mr Slater considered it necessary to adjust the Brodie and Kinsman sales downwards and the Pickard sale upwards to $600,000 per hectare, 675,000 per hectare and $690,000 per hectare respectively.
[40] Ex. 16, pp. 12 – 13.
On an adjusted basis, the valuers contend for the following approximate rates per hectare for each of the sales.
Mr Missingham Mr Slater
· Brodie $800,000/ha $600,000/ha
· Kinsman $700,000/ha $675,000/ha
· Pickard $800,000/ha $690,000/ha
· Villaworld $810,000/ha -
· DEA $680,000/ha -
According to Mr Missingham the subject land is worth $7,400,000 this equates to about $1,090,000 per hectare on an overall basis. In my opinion none of the sales relied on by the valuers supports that rate or anything close to it.
As I have already said, I do not accept Mr Missingham's evidence about the superiority of the subject land in respect of location, amenity or topography. In this context, when cross-examined about the Villaworld sale it is quite clear that Mr Missingham saw it as superior land to the subject in respect of its size and potential for immediate subdivision.[41] I agree. Once it is recognised that the subject land is not superior in location, amenity or topography it must be worth considerably less on a rate per hectare basis than this sale.
[41] T. 184 L. 25 – 35.
Overall, it is my opinion the Villaworld sale should not be relied on as evidence of value for the subject land other than for establishing a rate per hectare which could not be exceeded.
It is also my opinion that Mr Missingham materially over estimated the added value development approvals would give to the Brodie and Pickard sales. Mr Missingham's "effective approved price" rates per hectare for those sales are manifestly too high when compared to the Villaworld sale. This is particularly so in respect of the Pickard sale, which according to Mr Missingham, is exposed to the proposed north/south arterial road, affected by a major transmission line easement and will be expensive to develop.[42] In such circumstances, when compared to the Villaworld sale at $810,000 per hectare the appropriate rate per hectare for the Pickard sale even on an "approved" basis must be much less than $800,000 per hectare.
[42] Ex. 1 p. 9.
In respect of the Brodie sale I accept that some adjustment should be made to take account of the fact that as at the date of sale the land was not approved for subdivision. However, as at the date of sale that was clearly the inevitable end use of that land sometime in the near future. In the circumstances I do not consider that any adjustment to take account of the lack of approvals would be great and am inclined to think that this negative would probably offset the delay risks associated with the development of the subject land. I also accept Mr Slater's evidence that when comparing this sale to the subject, account has to be taken of the facts that the sale occurred prior to the change in infrastructure charges, the purchase price was paid progressively and that there were delays associated with water supply to the sale land.
This sale in my opinion tends to support a rate per hectare for the subject land as at the date of resumption in excess of the $600,000 per hectare adopted by Mr Slater but materially less than the rate per hectare Mr Missingham's valuation produces.
In respect of the Kinsman sale I will adopt Mr Slater's analysed rate of $675,000 per hectare as his evidence concerning the previous park contribution was not seriously challenged. When comparing this sale to the subject land it is also necessary to take account of the fact that as at the date of purchase it adjoined land already in subdivision (or in the process of being subdivided) and was itself immediately ready for development. This sale also occurred prior to the change in infrastructure charges but I accept Mr Missingham's evidence that its development required the developer to absorb some abnormally high development costs. On balance, I consider this sale to be superior to the subject on an overall basis but not significantly so.
Turning then to the Pickard sale, I will adopt the same approach concerning the subdivision approval and the risk of delay issues as that for the Brodie sale. That is, that they will roughly balance each other out. I reject Mr Missingham's evidence that the topography of this land required benching whereas the subject would not. On this issue I prefer the evidence of Mr McAnany.
However, I do accept Mr Missingham's evidence that the transmission line easement and proximity to the proposed arterial road had a negative impact on price. When asked about the impact of the transmission line easement he expressed the opinion that it would negatively impact on gross realisation by about 3 to 5%. Mr Slater, thinking that Mr Missingham's concession was for the proposed arterial road, considered that Mr Missingham's allowance of 3 to 5% was "… as a good a guess as any…" for the impact of that road.[43]
[43] T. 275 L. 40 – T.276 L. 10.
Taking this evidence into account, it is my opinion that Mr Slater's unencumbered rate per hectare for this sale should be adjusted upward by a further 3%-5% to bring into account the proximity of the proposed arterial road. This results in an adjusted rate of approximately $720,000 per hectare for that land notionally unencumbered by the affects of the transmission line easement and proposed arterial road.
However, I also accept Mr Slater's evidence that the development costs associated with this land are likely to be materially less than for the subject land. I also accept that this sale is superior to the subject, but in my opinion not significantly so, because as at the date of sale it was ripe for development. In this context the lack of any formal development approval over the Pickard land is tempered by the fact that it adjoined existing residential development and was sold subject to the purchaser obtaining development approval from the council.
In his primary report[44] Mr Slater said about the Pickard sale:
"… Purchased some two years prior to the relevant date, I consider the sale to be somewhat superior to the subject land because of the immediate development potential and markedly lower development costs, despite the presence of the power line easement."
[44] Ex. 16, p. 13.
As I understand Mr Slater's evidence about this, even with the transmission line easement in place, the other benefits associated with this sale made it still "somewhat" more valuable than the subject land. This is of course consistent with his applied rate of $600,000 per hectare for the subject land. It appears from his treatment of this sale that in reducing his analysed rate of $630,000 per hectare to an applied rate of $600,000 per hectare for the subject land, Mr Slater considered that the added value the potential and cost advantages gave to the sale land was worth about $30,000 per hectare. In the absence of any better evidence on this issue I will adopt that rate. Reducing the figure of $720,000 per hectare to take account of those advantages results in a rate of $690,000 per hectare.
When the subject land is not affected by transmission line easements or proposed arterial roads the best approach is to compare it with the sales evidence on an unencumbered basis. Such an approach is more consistent with the requirement to compare like with like.
Accordingly, it is my opinion that the best sales evidence reveals the following rates:
· Kinsman $700,000/ha - $675,000/ha (adjusted)
· Pickard $630,000/ha - $690,000/ha (adjusted)
On balance, I consider the subject land to be more valuable on a rate per hectare basis than the encumbered value of $630,000 per hectare for the Pickard land. In this context I consider that Mr Slater has tended to underestimate the combined impact of the transmission line easement and the proposed arterial road and overstate the delay risks associated with the subject land when determining that, even on an encumbered basis, the Pickard land was still "somewhat" superior.
On balance, I am also of the view that the subject land is slightly inferior to the Kinsman sale.
Having regard to the sales evidence and the other matters and evidence discussed above I propose to adopt a rate of $660,000 per hectare for the area of land intended to be developed for single unit lots or duplexes. Approximately 6.18 hectares.
The "Unit" Land
There was not a lot of evidence on this topic. Lots 73 and 74 of the proposed development were being considered for multi-unit or townhouse use. Lot 73 is 3360 m² in area and Lot 74 is 2727 m². Mr Missingham valued these lots at $300,000 each. About $100 per m². Mr Slater did not value each of these lots separately and, consistent with his direct comparison approach, attributed a value of $600,000 per hectare over the entire site including any potential "unit" sites. I think it is fair to say that Mr Slater had real doubts about successful townhouse or unit development of the land occurring at or about the date of resumption. There was an alternate development plan to subdivide these lots into 14 smaller residential allotments.[45]
[45] Ex. 1, p. 12.3.
Mr Missingham's valuation of these sites is primarily based on the sale of a site at 350 Dohles Rocks Road which revealed a per unit site rate of $44,000. After adjusting for on site works and traffic noise Mr Missingham adopted a rate of $50,000 per unit site. This is midway between the range of $40,000 and $60,000 that Mr Missingham considered indicative of value.[46] I should point out here that Mr Missingham's evidence about development costs and traffic noise was not seriously challenged and I accept it.
[46] Ex. 1, p. 13.5.
According to Mr Slater, the unit sites on the subject land had nothing in common with the Dohles Rocks Road property which was in an established residential precinct close to some retail shops. Mr Missingham seemed to generally agree with Mr Slater's evidence about this but considered the subject sites would be quieter and have the benefit of views across parkland.
On balance, I am of the view that the Dohles Rocks Road site is superior to the subject land because of its proximity to services and amenities including public transport. The subject land was relatively remote from such facilities at the date of resumption. I also consider that it is necessary to make some adjustment for the fact that as at the date of resumption the multi-unit sites only had preliminary and not final approvals in place. Accordingly, I am of the view that Mr Missingham has tended to over-estimate the value of these sites.
On the very limited evidence before me, taking into account the matters discussed above I propose to discount Mr Missingham's value for these sites by about 20% to $480,000.
Value of Improvements
As was the case with the unit land there was not a lot of evidence about the improvements on the land at the date of resumption. However, overall I was more impressed with the evidence of Mr Missingham concerning the value of the two dwellings still in situ. It seemed more considered than the evidence of Mr Slater on this topic. I do however accept Mr Slater's evidence that any prudent developer would take into account the fact that any estate would have to be designed to accommodate these dwellings and that any rental thereof would involve management issues which it would not ordinarily have to deal with. Mr Missingham did not have sufficient (if any) regard to these matters and to bring them into account I propose to discount his estimated value by 15% to $255,000. Mr Slater agreed that the worth of the house removed from the land was about $15,000. Accordingly, the value of the improvements on the land is determined at $270,000.
Value of Land and Improvements
For the reasons set out above compensation for the value of the land and improvements thereon taken is assessed at $4,855,000 made up as follows:
· 6.18 ha of single unit land at $660,000/ha = $4,078,800
· 6087 m² of multi-unit land = $480,000
_____________
$4,558,800
adopt $4,600,000· value of improvements $270,000
$4,870,000
In respect of the single unit residential land its value, based on 72 residential lots, translates to an average price per lot of about $57,000. Given the lot size mix proposed for the subject land this rate does not seem unreasonable in the overall scheme of the evidence. I should point out however that I do not place much weight on this result due to my concerns about Mr Missingham's direct comparison method on an average price per lot basis.
Disturbance
The first element of this claim for legal ($5,000) and valuation fees ($5,610) is agreed in the amount of $10,610.
The second element of this claim concerns what the claimant refers to as "aborted expenditure" in the amount of $92,880. In paragraph 96 of the claimant's written submission the following submissions are made:
"(a)Firstly, these costs are for planning applications and associated reports and by having carried out this work the claimant is in a superior position to that of a hypothetical purchaser with respect to knowledge about the subject property. Accordingly, the costs of this work represents an allowance that the claimant would sooner pay than lose the property and as such should be treated as a disturbance item.
(b)Secondly, the Court's have historically treated these types of aborted costs incurred by professional property developers as legitimate disturbance items." (Footnotes deleted).
By reference to the nature of the documents contained in exhibit 12 and the limited evidence of Mr Smith about this claim it appears to me that most of these expenses were incurred by the claimant during the process of having the proposed development of the land approved. I intend to proceed with this claim on that basis.
The respondent does not dispute that these expenses were legitimately incurred and paid but submits that they are not compensable as they contributed to the value of the land for which the claimant is already being compensated. That is, as the land is to be valued on the basis that it has development approvals and provisional approvals in place, the cost of achieving those approvals ought not also be recoverable by the claimant.
Mr Walker during his final address acknowledged that the works the cost of which are being claimed did add value to the land but nonetheless contended they were compensable as a part of the concept of special value or "special value disturbance".[47] In oral submissions Mr Walker referred me to the decision of the Land Court in Myer Realty Limited v The Commissioner for Railways.[48] In his written submissions he also referred to Myer Realty and two other cases including Yates Property Corporation Pty Ltd (liq) v Darling Harbour Authority.[49]
[47] T. 345 L. 20 – 40.
[48] [1980 – 81] 7 QLCR 87 at 96 – 98.
[49] (1991) 73 LGRA 47.
The Yates Property decision to which I was referred is a decision of the New South Wales Court of Appeal. From the judgment of Kirby P it is clear that, in respect of the claim before the Court, he considered the well known cases of Pastoral Finance Association Limited v The Minister[50] and Kennedy Street Pty Ltd v The Minister[51] to be persuasive authority.[52] This is similar to the approach adopted by the Member of the Land Court in Myer Realty in respect of a claim for, among other things, engineering, survey and rezoning costs. It is tolerably clear from the reasoning of the Member that in dealing with those claims he also considered Kennedy Street to be persuasive authority in favour of the disturbance claim (or at least part thereof) before the Court.
[50] (1914) AC 1083 at 1087.
[51] (1962) 8 LGRA 221.
[52]Yates Property at 52; some support for the principles enunciated in Kennedy Street also appears in the reasoning of Handley JA at 76 – 79.
However, in the more recent decision of the High Court in Boland & Anor v Yates Property Corp Pty Ltd[53] Callinan J considered that Kennedy Street was not correctly decided.[54] Gaudron J[55] and Gummow J[56] agreed. The Chief Justice, Gleeson CJ, referred to Kennedy Street as being a decision which had received mixed reviews.[57]
[53] (1999) 167 ALR 575.
[54] At [347] – [348].
[55] At [100].
[56] At [111].
[57] At [85].
In the light of what has been said about Kennedy Street by Gaudron, Gummow and Callinan JJ, I do not consider that it or the reasoning of the Court in Myer Realty or of majority of the Court of Appeal of New South Wales in Yates Property is longer persuasive authority.
In any event, in this case it is wrong to describe these expenses as "aborted expenditure". The work underlying the claim was not rendered worthless or aborted in the hands of the claimant by the resumption. They were directed at achieving subdivisional approval over the land, a significant factor which added to its market value of land and, accordingly, to the compensation to be paid by the respondent.
As was recognised by Callinan J in Boland v Yates[58] any prudent purchaser would insist on being properly paid for the benefit of such works including any approvals derived therefrom. In Thirty-fourth Philgram Pty Ltd v The Crown[59] the now President of this Court, in addressing a claim with similarities to that now before me, without the benefit of the reasoning of the High Court in Boland v Yates, made the following observations:[60]
"… Mr Coonan has quite correctly had regard to the already acquired consent approval, the $29,000 paid to Carnegie Hicks for its work in connection with that application and for further work on the more detailed plans to be submitted for building approval. Mr Coonan also estimated that 3 months had thus been saved in the overall development process. He said that these attributes were part of the market value of the land, as they were things that the market place recognised, and not part of special value to the owner. …
I agree with Mr Coonan that these are not attributes of special value but of market value, as they are not attributes which are 'peculiar to the claimant', and would be acquired with the land along with all its other attributes by any hypothetical prudent purchaser. They would thus have increased the market value of the land. …"
[58] At [336].
[59] (1992 – 93) 14 QLCR 13.
[60] At 39.
In my opinion, the observations of Callinan J and the President are applicable in this case. The works underlying the claim substantially added to the value of the land for which the claimant is to be compensated. To be then compensated for the actual cost of those works, which would be greatly exceeded by the additional value they gave to the land, would amount to a double dipping. Accordingly, this part of the disturbance claim fails.
Conclusions
Compensation under all heads is determined in the amount of Four Million Eight Hundred and Eighty Thousand Six Hundred and Ten Dollars ($4,880,610) made up as follows:
· Value of land taken = $4,600,000
· Value of improvements = $270,000
· Disturbance = $10,610
_________
$4,880,610In the circumstances of this case I can see no reason why the respondent ought not pay to the claimant interest on the amount of $4,870,000 from the date of resumption (8 September 2006) to the date of the payment of the advance. Interest is to be paid at the rate of 6% per annum.
Orders:
1.Compensation is determined in the sum of Four Million, Eight Hundred and Eighty Thousand Six Hundred and Ten Dollars ($4,880,610).
2.The respondent is to pay to the claimant interest on the sum of Four Million, Eight Hundred and Seventy Thousand Dollars (4,870,000) at the rate of six (6) percent per annum from 8 September 2006 to the date of payment of the advance on compensation by the respondent to the claimant.
RS JONES
MEMBER OF THE LAND COURT
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