Paradise Springs Development Pty Ltd v Chief Executive, Department of Lands
[1997] QLC 363
•21 February 1997
[1997] QLC 363
LAND COURT
BRISBANE
21 February 1997
Re: Appeals against valuations of the Chief Executive,
Gold Coast City Council (Albert Division)
V95-372, V95-375
Paradise Springs Development Pty Ltd
v.
Chief Executive, Department of Lands
(heard in Coolangatta)
DECISION
Introduction
Paradise Springs Development Pty Ltd (the “appellant”) owns approximately 90 hectares of land at Kerrydale, on the western side of the Robina Parkway (the “subject land”).
In making valuations of all land in the area, the Chief Executive (the “respondent”) assessed the unimproved value of the subject land as at 30 June 1993 to be $8,000,000. The appellant objected and the objection was disallowed by the respondent. In its notice of appeal to the Land Court, the appellant contended for a value of $5,438,400. At the hearing, evidence was given on behalf of the appellant to support a value of $5,250,000.
The respondent assessed the unimproved value of the subject land as at 1 January 1995 to be $20,000,000. The appellant objected to the valuation and the respondent allowed the objection and reduced the valuation to $14,000,000. The appellant appealed against that decision, contending for a valuation of $6,131,900. At the hearing, evidence was given on behalf of the appellant to support a value of $8,000,000. In circumstances which will be described later in these reasons for decision, the respondent’s valuation was reduced to $11,500,000 in the course of the hearing.
The two appeals were heard together. Although the area of the land valued in 1993 was slightly larger than that of the land valued in 1995, the issues in each case were the same. I understand that there was little change in the area of that part of the land to which conflicting valuations have been assigned.
The Valuation of Land Act 1944 (the “Act”) provides that the unimproved value of land is the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require (section 3(1)). The Act also provides that:
• a notice of appeal shall state the grounds of appeal;
• the appeal shall be limited to the grounds so stated; and•the burden of proving any and every such ground shall be on the owner (section 45(4)).
Each notice of appeal contains eight grounds of appeal, including the appellant’s estimate of the valuation of the subject land. The grounds of appeal (apart from those figures) are the same in each case. Grounds 1 to 3 are in general terms. Grounds 4 to 7 are the most specific. They are:
“4. In arriving at the unimproved value of the said land, the Respondent has proceeded on a basis which is inconsistent with the meaning of “unimproved value” of land as that term is used in the Valuation of Land Act 1944-1994 in particular:-
(a) the Respondent has taken account of sales or value of allegedly comparable land made in such circumstances and under such conditions as to provide no good basis for assessing the unimproved value of the subject land;
(b) the Respondent has failed to make proper allowance for the limited economic use to which the said land can be put, particularly because of the zoning of the land under the Gold Coast City Council Town Plan, the designation of the said land under and the specific provisions of the Strategic Plan of the Gold Coast City Council relating to the said land, the topographical characteristics of the said land and the location of the said land in the Merrimac Flood Plain;
(c) the Respondent presupposed an unrealistic and undemonstrable level of profitability to be achieved from the development of the said land.
5. The Respondent has over estimated the suitability of the said land to be utilised for the purpose of residential development and has thereby concluded that the land has a higher value than is justified.
6. The Respondent has failed to take account of the fact that the land is situated in the Merrimac Flood Plain and that the said land has been developed in accordance with a Plan of Development approved by Gold Coast City Council and that the said Plan of Development is now part of the Town Plan for the City of Gold Coast and that the use of the said land is limited to the current Plan of Development.
7. The Respondent has failed to take into account and to give proper consideration to the Town Plan and the Strategic Plan for the City of Gold Coast so far as it relates to the said land and in particular has failed to take into account the objectives of Gold Coast City Council in respect of the Merrimac Flood Plain area and the desire of Gold Coast City Council to develop the Merrimac Flood Plain area as a major open space and recreational area.”
At the hearing it was apparent that the issue between the parties was confined to the value of that part of the subject land shown on a plan (Exhibit 3 Attachment B) as an 18 hole championship golf course and open space (the “low land”). There was no dispute about valuation of the remaining parts of the subject land, described on that plan as high rise residential and low rise residential, at $4 million in 1993 and $6.6 million in 1995 (see Exhibit 9 page 16). The dispute about the value of the low land arises from a difference of opinion about the highest and best use of that land. The appellant submitted that the highest and best use of the low land is as a golf course with the club house and ancillary facilities. The respondent submitted that the highest and best use of the low land was for residential development, with cut and fill being required to create sites suitable for realising its development potential. It is to the resolution of that dispute that the grounds of appeal just quoted are relevant.
The appellant was represented at the hearing by counsel, Mr R Needham, and evidence was given on the appellant’s behalf by Mr ND Grummitt, a civil engineer and planner, and Mr HW Bristow, an urban valuer. The respondent was represented by Mr P Grennan, a valuer with the Department of Natural Resources (formerly Department of Lands), and evidence was given on behalf of the respondent by another valuer employed by the Department, Mr AJ Gray.
The subject land
The subject land is a large parcel adjoining the Mudgeeraba Creek and the Robina Parkway. It is in the Gold Coast suburb of Kerrydale, approximately 3 kilometres west of the Pacific Ocean at Mermaid Beach and Miami and about 10 kilometres south-west of Surfers Paradise.
At the first date of valuation (30 June 1993) the land comprised Lots 1 and 4 on RP842335 and Lots 1, 145, 146, 500 and 501 on RP880434 in the Parish of Gilston, County of Ward. It had an area of 89.2925 hectares.
At the second date of valuation (1 January 1995) the land comprised Lots 1 and 4 on RP842335, Lots 1, 145, 146 and 501 on RP880434, Lots 103-113, 140-144 on RP886116, Lots 114-122, 132-139 on RP886117, and Lots 123-131 on RP886118 in the Parish of Gilston, County of Ward. At that date it had an area of 88.6601 hectares. The difference in the total areas of the subject land was not relevant to the determination of the issue in these proceedings.
The site lies on the eastern edge of the Merrimac Floodplain and has a boundary along Mudgeeraba Creek. The land has a moderate fall from road level for approximately one-third of its depth, levelling to a slightly undulating low lying flood plain.
The highest part of the subject land is its north-eastern corner. Spot heights within the higher section range from 2 metres AHD to 16.23 metres AHD. The majority of the north-eastern section was flood free in its unimproved state. The low land includes spot heights of between 0.5 metre AHD and 1.4 metres AHD. The mean height is in the order of 1.17 metres AHD. The majority of the subject land is susceptible to flooding with a recorded flood height of 4.5 AHD.
There are three drainage easements and one easement for power transmission purposes. Overhead power transmission lines bisect the property. The lower section of the property was excavated to develop permanent water courses and elevated land for golf course purposes. At the date of hearing, earthworks on the original high land areas had been completed and prepared for subsequent subdivision.
The subject land is situated on the western side of the Robina Parkway, a four-lane, two-way arterial road, bitumen sealed with concrete kerb and channel. The road is linked to the Pacific Highway and connects a number of major east-west arterial roads (Goodings Drive and Markeri Street). Vehicular access to the subject land is excellent and is by way of an access point provided direct from Robina Parkway. There are no other roads adjoining the property.
Reticulated town water, sewerage, stormwater drainage pipes, telephone and overhead electricity are available to the land.
In 1988 the subject land was rezoned from “Future Urban” to “Special Facilities” in the Town Planning Scheme for the Shire of Albert, effective as at each date of valuation. The “Special Facilities” zoning allows for Golf Course and Clubhouse, Recreation Centre, Tennis Centre, Accommodation Units (maximum 450), Resort (maximum 200 rooms). The zoning is the same under the town plan for the Shire which was put on public display and which was gazetted in its final form in February 1995.
At each relevant date of valuation, the subject land, known as “Paradise Springs”, was being used primarily for golf course purposes. The floodplain area of Mudgeeraba Creek was developed as an 18 hole championship golf course with ancillary facilities. The land above flood level (near Robina Parkway) was being prepared for subdivision for residential purposes and a hotel site. A function centre/clubhouse and tennis recreation facilities were established.
Surrounding development to the east comprises residential estates. To the west, most of the land in the Merrimac floodplain is vacant. The Robina Town Centre Development is on the fringes of the floodplain and the Robina railway is being built in the district.
The respondent’s valuation
Before the hearing, the respondent valued the subject land in each case on the basis that the low land has, in an unimproved state, the capacity for residential development on a nil pondage basis (no increase in flood compartment) yielding a useable area estimated to be approximately 15.9 hectares (as at 30 June 1993) and 15.78 hectares (as at 1 June 1995). The valuation reports prepared by Mr Gray in each case included calculations for the valuation of an englobo site with residential lots developed. The calculations for the value of the subject land as at 30 June 1993 led to a total of $8.9 million and Mr Gray concluded that the valuation should be left at $8 million (Exhibit 11). The calculations for the unimproved value of the subject land as at 1 January 1995 led to a total of $14.2 million and Mr Gray kept the original valuation at $14 million (Exhibit 12).
Having heard evidence called by the appellant, Mr Gray revised his figures. He amended the useable area of low land to 8.71 hectares in each case and reduced the value per hectare of the low land (that is land below RL 4.5) in each case. His revised calculations are as follows:
V95-372
Lots 4.076ha @ $370,000/ha = $ 1,508,120
High Balance Land 9.8769ha @ $250,000/ha = $ 2,469,225
Low Land (below RL 4.5)
75.2796ha @ $54,000/ha = $ 4,065,100
Total 89.2325ha = $ 8,042,445
Adopt: $8,000,000
V95-375
Lots 5.9066ha @ $600,000/ha = $ 3,543,960
High Balance Land 7.774ha @ $400,000/ha = $ 3,109,600
Low Land (below RL4.5)
74.9795ha @ 65,000/ha = $ 4,873,667
Total 88.6601 ha = $11,527,227
Adopt: $11,500,000
Although the figure of 8.71 hectares of potentially useable land was eventually adopted by the respondent for the purpose of its revised calculations, the figure must be accepted as a maximum area, dependent as it is on using vertical battering and maximising the area of low land available for excavation and for inundation as a lake. Those matters are considered later in these reasons for decision.
In summary, the values finally contended for by the respondent were $8 million (at 30 June 1993) and $11.5 million (at 1 January 1995). Sales evidence was tendered in support of each amount. The appellant submitted that the unimproved value of the land was $5,250,000 (at 30 June 1993) and $8 million (at 1 January 1995). Evidence about those amounts was given orally and in writing (Exhibit 9) by Mr Bristow, who pointed to some sales evidence but otherwise relied on valuations by the respondent of other large tracts of low lying land with permitted use as a golf course. He stated that the correct assessment of the flood prone low land should closely relate to the existing (and undisputed) assessments of other flooded golf courses.
There being no dispute about the valuation of the high land, the matter in issue was the value of the flood prone low land. In order to determine the value of that land, it is necessary to resolve the fundamental issue in these cases, namely, what was the highest and best use of the low land.
Highest and best use of the flood prone low landThe appellant submitted that the highest and best use of the low land is as a golf course with the club house and ancillary facilities. The respondent submitted that the highest and best use of that land was for residential development, with cut and fill being required to create sites suitable for realising its development potential.
There were various estimates of the area of the low land. Mr Grummitt explained that Lots 1 and 4 on RP842335 (Exhibit 6) have respective areas of 70.42 hectares and 4.9995 hectares. The latter parcel is a strip of land adjoining Mudgeeraba Creek and was to go to the Council. Mr Bristow relied on a plan annexed to his report (Exhibit 9 Annexure B) which shows Lot 502 as having an area of 69.98 hectares. He had not placed a separate value on the 5 or so hectares going into the creek, although it seems that he considered it as part of the whole area. I accept that it is unlikely that the Council would approve the excavation of that part of the low land comprising a strip adjoining the creek and that, as a consequence, approximately 5 hectares of the approximately 75 hectares of low land would not be used as part of any excavated lake in the hypothetical development of up to 8.71 hectares of reclaimed land for residential purposes. As I understand Mr Gray’s evidence, he, in effect, accepted that to be the case. Accordingly, I will proceed on the basis that the portion of low land potentially available for cut and fill has an area of 70.42 hectares, and that the remaining land would go to the Council.
The concept of highest and best use is fundamental to the valuation of land under the Act. Indeed the Land Appeal Court has stated that it is axiomatic that the law requires land to be valued for its highest and best use (see Caltex Oil (Australia) Pty Ltd v Chief Executive, Department of Lands, AV93-561, unreported decision dated 26 April 1996). The concept of highest and best use has been variously described but carries with it the notion that it is the use of the land that will realise the highest price (see Goode v Valuer General (1979) 22 SASR 247 at 256, cited with approval in the Caltex judgment). As Carter J said in Stubberfield v Valuer-General:“It is also a well recognised principle that land be valued for its highest and best use. What it can best be used for will be reflected in its true market value which takes account of any detriment the land possesses relevant to its use as well as any potential it has for its present or other use.” ([1991] Qd R 278 at 283, (1989) 12 QLCR 328 at 331)
There is no statutory definition of what constitutes highest and best use. It was described by Isaacs J as “the most advantageous purpose for which [the land] was adapted”. (Spencer v The Commonwealth (1907) 5 CLR 418 at 441)
It is also important to remember that the land to be valued has to be taken as it exists at the date of valuation and be valued in its unimproved state. That process involves assuming that any improvements on the land did not exist at the relevant valuation dates. In this case, one cannot start from the premise that the golf course works necessarily constituted improvements. It cannot be said whether those works enhanced the value of the land until the highest and best use of the land is determined. To do otherwise would be to assume the conclusion that the highest and best use of the low land was for golf course purposes.
In determining the highest and best use of the low land at the relevant valuation dates, it is appropriate to consider the zoning of the land at those dates, the 1995 re-zoning of the land, the uses permitted by the zoning, other factors which would influence any decision on an application for a change of use or zoning, and the cost of developing the low land for other purposes. The following discussion draws first on the extracts from relevant instruments which were in evidence in these proceedings.
Planning considerations
30 June 1993: The subject land was in an area designated as Open Space in the Strategic Plan. The relevant Objective 6(f) was:“To encourage the development of a major open space network, based primarily on existing Crown reserves, ridge tops and valley floors, and the Merrimac and Carrara flood plains.”
The objective was to be implemented as follows:
“(iii) The Merrimac and Carrara flood plain is intended to be developed primarily for intensive recreational activities which have an open character, consistent with hydraulic management goals. Such developments may include ancillary buildings, including accommodation.”
The 1988 Town Planning Scheme described the intent with respect to land in the Special Facilities zone as follows:
“The Special Facilities zone is intended to be used to accommodate a particular form of development of a particular site, where such development is considered in the circumstances to be desirable but where the inclusion of the land within any of the other zones could enable an undesirable form of development or a wider range of uses than that being considered. Consent may subsequently be granted for activities related to the primary activity. Permitted development may not be carried out other than in accordance with a rezoning agreement imposing reasonable and relevant development conditions, or a Plan of Development”.
Rezoning of the land as Special Facilities was approved in September 1988, subject to 15 conditions (see Exhibit 3 Attachment A) and the rezoning of the land was gazetted in December 1988. It seems that a drawing (3775-P13, reproduced as Attachment B to Exhibit 3) was recognised as an approved plan, possibly a Plan of Development, for the subject land. The drawing indicated that the flood plain land was designated as a golf course. Consequently, in terms of the 1988 Town Planning Scheme, any unrelated development could not be carried out without a rezoning agreement
The Guidelines for Development prepared by Council included various guidelines for drainage and stormwater flows. They stated, for example:
“• Land use shall be consistent with land periodically inundated.
•There shall be no loss of floodplain storage between natural surface or designated standing water levels and a plane at RL 4.5 m SD or such level as designated depending on the location of the development.
•Where credit to fill in the flood storage zone is sought for excavation of lakes, the minimum water level to which credit will be given shall be designated by Council. The availability of the credit will depend on the body of water returning to the designated level within 24 hours of the flood or drainage level falling below the designated level.
•Works in the floodplain, and within the flood storage range, shall be designed in a way that does not obstruct the passage of floodwaters and changes to flood levels at any property boundary due to the works shall be shown to be essentially zero over the range of floods 1 in 2 year to 1 in 100 year.”
As part of a review of conditions of approval, the appellant’s engineers, Weathered Howe, made approaches to the Council in mid-1989 with regard to the prospects of developing the land below RL 4.5 for residential uses. The enquiry was part of investigating various development options. The letter stated:
“The favoured option is still development of a golf course, however one other option would be the development of further residential area surrounding a lake.
The additional area for the residential development would be provided by reclamation to above the flood level of RL. 4.5, yet maintaining the present flood storage capacity of the site.”
The engineers calculated (apparently on the basis of inadequate or inaccurate data about levels in the low land) that an area of some 11.3 hectares could be prepared for residential development by using soil from the flood plain area. That land would be in addition to 13.3 hectares of land already above the flood level RL 4.5. A lake/waterway/park area of 66 hectares would be created.
The letter concluded by asking the Council to accept what was requested “which would allow our client to pursue the option of residential plus lake and park form of development.”
The Council’s reply, dated 29 June 1989, referred to the request for “Council to accept your philosophy regarding reclamation of an additional 4.5 hectares of land in exchange for a lake system which makes up for the loss of flood storage volume.” (The reference to 4.5 hectares may have been an error, but that is not of any consequence in these proceedings.) The letter continued:“It is believed that your proposal is sound technically and with due engineering investigation and design, should not affect the flood plain characteristics. Attention will need to be given to the shape of your proposed fill and the direction of flow.
Council is however presently investigating the flood plain and the effect of proposed development options. The results of this study will not be available for some time and therefore we can not give concrete assurances that your proposal would receive approval at this stage.”
(Exhibit 3 Attachment D, Exhibit 12)
The owners did not pursue the option of using the land for residential purposes. Rather, the golf course was developed on the low land (Lots 1 and 4 on RP842335) in accordance with the zoning.
A flood study to determine the design parameters for the golf course was undertaken by Max Winders & Associates, consulting engineers and scientists, in late 1990. The report utilised survey data which offered accurate site levels that had not been available previously and that differed from the assumptions used in the Weathered Howe letter of 9 June 1989. A letter from Winders to Weathered Howe dated 30 November 1990 referred to an estimate that 70.3 hectares of the site may be inundated by a “design flood” which would peak at approximately RL 4.5 metres AHD. The letter noted that a computer model of flooding in the Merrimac was expected to be developed in “the near future” and the model would be suitable for use to confirm that the proposed earthworks would conform to the guidelines established in the interim report on “Flooding and Drainage Requirements on the Merrimac Floodplain” issued by Cameron McNamara Pty Ltd in March 1990.
One of the conditions of the 1988 rezoning was:
“6. A report from a qualified engineer as to the extent and nature of fill proposed shall be submitted for the approval of Council, prior to filling operations commencing. Note:- An area of filling equal to the flood free land to be dedicated as roadworks will be permitted.”
In May 1991 the Council responded to a letter from the Project Manager and advised, with respect to Condition 6:
“Council accept 5% of the area subject to flood modelling by a hydraulic consultant to the satisfaction of the Shire Engineer.”
Mr Grummitt understood (although there was no evidence on this point) that the Shire Engineer had approved the finding of the Winders Study. The 5% allowance was used in the bulk earthworks of the golf course and clubhouse.
1 January 1995: As noted earlier, a Draft Town Planning Scheme was put on public display in December 1993. The draft documents were reviewed subsequently, and the final document was gazetted in February 1995. Although the 1988 Scheme was still in force on 1 January 1995, the parties agreed that the 1993 Draft Town Planning Scheme should be considered in determining the value of the land at that date.
The intent of the 1995 Plan is to “maintain the open character of the Merrimac flood plain”. Under the 1993 Draft Town Planning Scheme (and the subsequently gazetted scheme) the zoning of the land remained the same. The land was designated as a “Special Development Area” under the Strategic Plan. One objective for Special Development areas is to “provide for the appropriate future development of part of the Merrimac/Carrara Floodplain”, which includes the subject land. The introductory text to that objective refers to the complication for land use planning from “the need for some land uses to not significantly impede or divert flood flows nor to accelerate flood flows to the detriment of other land uses”. It also states that, from a flood hydraulics point-of-view, “Land use planning in these floodplains is already quite constrained as far as major flood flow paths and flood retardation areas are concerned. Geotechnical considerations may also constrain the pattern of development that can emerge.” Even where undeveloped land parcels offered flexibility in locating internal flow paths and retardation systems, those paths and systems needed to be linked “to optimise their floods hydraulics characteristics in the public interest”. To that end, it was necessary to develop an hydraulic master plan, a Floodplain Master Plan. The plan will be a “key determinant of the nature and pattern of preferred future land use in this part of the Shire”. Once the Floodplain Master Plan has been approved, a Merrimac/Carrara Structure Plan can be prepared to specify preferred land use and development parameters.
The draft plan included factors which Council would consider when assessing any development proposal for that area. For example, under the heading “Hydraulic Considerations for Development Proposals” it was stated:
“Before any development proposal is favourably considered by Council, Council will need to be satisfied that the proposal conforms with the Floodplain Master Plan for the southern floodplain of the Nerang River and the Merrimac and Mudgeeraba creek floodplains.”
Areas in which conformity was required were specified. Conformity of each development proposal with the Floodplain Master Plan would need to be demonstrated to the Council’s satisfaction by comparison of the results of testing the development on an approved flood model against those on the Floodplain Master Plan model for the 100 year ARI event.
Under the heading “Land Use Planning Considerations for Development Proposals” it was stated that the Council would seek certain features in the assessment of development proposals including the following:
“In order to achieve the desired character of development for the area, meet hydraulic criteria and minimise site filling, the appropriate composition of sites in the structure plan area will include components of waterways area, urban residential or tourist accommodation development and ‘dry’ open space areas.”
Urban development was to be clustered to maximise opportunities to provide large useable and/or visually prominent areas of open space, and a continuous open space linkage was to be provided along at least one side of the current Mudgeeraba Creek alignment.
The final document, as gazetted in February 1995, included the same provisions.
The town planning instruments referred to and quoted above indicate, in summary, that:•development of the low land would have had to be consistent with the character of the Merrimac flood plain including the periodic inundation of that land, and could not obstruct floodwaters in a way that would adversely affect other properties;
•development of the low land would be subject to various engineering and other constraints which would be imposed by the Council;
•although it may have been possible to put part or parts of the flood prone land to one of a range of uses other than a golf course, the conditions of any approval could have affected the financial viability of the use or uses.
As Mr Bristow noted, the zoning of the subject land as “Special Facilities” is site specific. The zoning sets a “strict definition of the uses permitted”. The zoning was continued under the 1995 Town Plan. The practical effect of the zoning of the land is that development is limited to the prescribed uses. Any substantial variation would require a rezoning application. Although the primary zoning would not change, the details of the approved plan of development would be different and would limit what could be done on the land. In Mr Grummitt’s opinion, a change from golf course and golf club house use to a lake residential development would be “quite substantial”.
Putting questions of financial viability to one side, the history and planning instruments just summarised show the planning and engineering difficulties confronting any proposal to develop the land for other than golf course or similar open space purposes.
Susceptibility to flooding
The demonstrated susceptibility of the low land to flooding highlights the engineering and financial difficulties facing a developer and the reasons for the planning constraints. As noted earlier, the mean height of the low land is about 1.17 AHD and the majority of the property is historically subject to flooding with a recorded flood height of 4.5 AHD. Consequently, the low land can be affected to an average depth of approximately 3.33 metres, although not all flood events are to 4.5 metres. Apparently the golf course is subject to “frequent inundation to a significant degree”. Play is impossible on average once or twice each year for several weeks at a time. Photographs of the inundated golf course in 1997 (Exhibit 9 Annexure C) clearly illustrate the physical extent of the problem.
The susceptibility of the land to flooding and the constraints on what remedial engineering work can be undertaken are evident from an exchange of correspondence between the appellant and the Council in mid-1996 (Exhibit 7). The appellant recorded that the golf course was closed due to flooding for the fourth time in two and a half years and stated that the “flooding problem needs to be addressed urgently.” It suggested that the construction of levee banks would provide a minimum of five year flood immunity. The Council replied that it could not give in principle consideration to the construction of levee banks because “the impacts on the hydraulics of the Merrimac/Carrara flood plain have not been investigated and assessed. As the Merrimac/Carrara flood plain is sensitive, Council cannot permit itself to be bound to allow this structure without considering all issues involved.” The Council requested that a hydraulic study be completed to investigate the effect of the proposed levee bank on various flood events. Although that correspondence was well after both of the valuations dates, it illustrates both the extent and frequency of inundation and the absence, after those dates, of a floodplain master plan to provide clear guidance for alternative forms of development.
Other factors
Mr Grummitt also referred to what he described as geotechnical and political constraints on the use of the land and to the effect of timeframes for approval of new developments. Each constraint was manifest in different ways at the dates of valuation.
Geotechnical constraints: As noted earlier, the introductory text to the objective for Special Development areas states that geotechnical considerations may constrain the pattern of development that can emerge. The geotechnical factor nominated by Mr Grummitt was the possible presence of acid sulphate soils on the low land. The evidence about acid sulphate soils was to the effect that the chemicals which give rise to the problem are harmless when present below the water table. Once they are disturbed and exposed above the water table they can form acids which are harmful to marine life. It is a condition that is peculiar to old stream deltas and can occur in sandy soils or marine clays. The release of the toxins occurs more quickly in sandy soils after a major rainfall event. Such soils can be treated in at least two ways. They can be treated with lime if they are to be used as land fill or they may be returned to below the water table once uncontaminated soil has been removed. Either way, there are costs involved in moving and treating the soils. Apparently, suspicions were raised in 1993 in relation to toxic acid conditions in the Merrimac/Carrara floodplain area. Although there may have been concerns about potential acid sulphate conditions in the area in 1993, Council did not require an assessment of the matter in an application until 1994 or early 1995. It seems that the low land includes, but is not entirely composed of, marine clays. Apparently there was no testing of the soils for acid sulphate at that time when the golf course works were undertaken. In Mr Grummitt’s opinion, however, there is a “high probability” of acid sulphate soil being present on the low land. He spoke of other subdivision proposals in the flood plain area in 1994-1995 where the issue of acid sulphate soils had to be addressed. He described a similar block some 400 metres upstream on the opposite side of Mudgeeraba Creek (Broadlakes) where the estimated cost for lime to neutralise the acid sulphates was $3.50 per cubic metre. In addition, soils have to be tested to ensure that neutralisation has been carried out and other works may be necessary, at a cost of about $2 per cubic metre. Such testing and treatment works would be part of an environmental management plan for a project of the type suggested by the respondent. Those costs are additional to the normal cost of earthworks in that area at about $5 per cubic metre. The basic earthworks cost was derived from the winning tenderer’s price for the Broadlakes project and was said to be the price at January 1995. To that could be added about $1 for fees and interest. Thus the cost of earthworks would be in the range of $5 or $6 to $11.50 per cubic metre.
The significance (if any) of the acid soils issue was not conceded by the respondent. Mr Gray did not dispute that, by January 1995, the problem of acid sulphate soil was acknowledged. He had not, however, seen any evidence of acid sulphate soil being on the low land. He did not concede that there is such an acid sulphate soil problem in the area, and so he contested the level of sulphate soils that he thought Mr Grummitt might be implying is present. Mr Gray did not know whether the Council would have taken acid sulphate into account. He acknowledged, however, that a hypothetical prudent purchaser would look at available evidence, such as surrounding developments, to estimate the likely levels of acid sulphate (if any) in the low land. In determining the unimproved value of the low land, Mr Gray had not expressly made allowance for acid sulphate but had relied basically on comparative sales.
Reference was also made to a Council report on an application in September 1995 for a 52 Lot Group Title subdivision on the subject land in which the Council stated: “Council has no record of potential acid sulphate soils in this area.” Mr Grummitt attempted to rebut the inference that might otherwise be drawn in respect of the low land by explaining that the observation may have related to the higher land to be used for residential purposes. One would not normally expect to see acid soils above the floodplain where the high water tables are located.
The evidence, such as it is, suggests that acid sulphate soils are probably present on at least part of the low land. The extent of such soils cannot be predicted nor can the volume of acid sulphate soils which it would be necessary to disturb for the purpose of creating 8.71 hectares of flood free land and the surrounding lake. It is reasonable to assume that a prudent purchaser would consider the risk of such soils being present and the potential doubling of earth treatment costs for at least some of the soils when considering the use to which the low land could be put and hence the price that the purchaser would be willing to pay.
Political constraints: Political constraints are no easier to predict precisely but are real nonetheless. The development of the Merrimac/Carrara floodplain has been of concern to people in the downstream canal estates in recent years. In general terms, land owners in downstream canal estates are concerned about the risk of flooding in their areas if rain water is not properly managed and stored on the flood plain land. Such people can be expected to have some support in the Council and to object to any proposed development which may detrimentally affect their interests. Such opposition could delay any rezoning and development approval. Knowledge that objection could be made and that such objection, even if ultimately unsuccessful, could significantly delay a project, could influence the land use options and the price which a prudent developer would pay for the land.
Time constraints: Third, the parties agreed that at each relevant valuation date the unimproved land would have had to be rezoned to permit the redevelopment of the low land and that, because of the particular factors involved in the rezoning, such a process would take considerably longer than normal rezoning applications would take to be resolved. Before a new development could proceed under the 1988 Town Planning Scheme, a hydraulic study into the impacts of filling on the floodplain would have been necessary. Mr Grummitt estimated that, as at June 1993, the periods to do what would be required would be 6-8 months for approval to be given to a rezoning application, 4-5 months for a flood study, 2-3 months for a subdivision application, 6-8 weeks for approval of engineering drawings and 1 month for the tender process. Some 12-15 months would be taken up with construction for bulk earthworks and the first stage of lot development works which would be necessary before the release of any survey plans for sale. A total of between 26.5 and 34 months would be taken before saleable allotments would be created.
Mr Grummitt also estimated that, if a rezoning application had been made as at January 1995, a period of between 2.5 and 4 years could have been required to obtain approval (if any). That estimate proceeded on the basis that, in light of the Draft Town Planning Scheme, Council would have been required to prepare a Floodplain Master Plan and the Merrimac/Carrara Structure Plan before considering any development. As the plan was not in place almost 18 months after the gazettal of the Scheme, it would be reasonable to expect a 2 year lead time before a rezoning application would be considered by the Council. Additional time could be taken with other technical investigative work and in dealing with likely objections to any applications concerning the floodplain.
The respondent contended, however, that the delays would not be as great as the appellant suggested. Mr Gray said that he had allowed 12 months for rezoning approval to be granted. By comparison, he stated that an application with respect to a normal dry block (without the additional considerations such as flood plain master plans) would take six months. The contrast between the parties’ position is not as great as may first appear. Although Mr Gray’s estimate related only to rezoning, Mr Grummitt’s included other matters which could delay the release of residential land for sale. Those delays together would add to the owner’s holding costs.
In summary, Mr Grummitt’s evidence was that:
•the zoning of the subject land at each relevant date of valuation severely limited development of the land;
•development of the floodplain portion for any other use would require a rezoning application which, had it been approved under the 1988 Scheme would have resulted in development of less that 8.71 hectares of residential land (and the remaining 61.71 hectares or more would have had little recreational value);
•the 1993 Draft Town Planning Scheme (and the 1995 gazetted Scheme) recognised the hydraulic constraints of the area and precluded any development until a Floodplain Master Plan and a land use Structure Plan were completed (neither of which had commenced almost 18 months after the gazettal of the Scheme);
•the tightened development assessment criteria for the area, coupled with the more resolute opposition of some Councillors and local environmental lobby groups had stopped any development in the floodplain area.
Mr Bristow considered that the existing use of the land as a golf course is the highest and best use of the property. He based that opinion on the following factors:
•the prospect of rezoning to any other uses within a reasonable time frame is remote.
•the costs of achieving a yield of 8% are out of proportion to the benefits;
•even if approved, the gain of development of about 7.5 hectares of residential land would have to be balanced against the certain loss of the golf course, and the consequent devaluation of the residential land.
In his opinion, the prospect of a rezoning to allow residential development was “so distant at both valuation dates (and dates of effect) that holding costs alone would largely negate any increase in gross value” (Exhibit 9 page 13).
The prospects that rezoning (if any) would be a lengthy process have been discussed and I accept it would have taken substantial periods to secure approval for the development of the low land for residential purposes. It is appropriate now to deal with the financial factors on which Mr Bristow relied.
Financial factors
Albert Shire Council building regulations require minimum floor levels for residential construction on flooded land to be 300 millimetres above recorded flood levels. Mr Bristow set out calculations for providing sufficient fill to create sites for residential development on the low land (Exhibit 9 pages 12-13). He estimated that up to 8.71 hectares of low land could be reclaimed to provide residential allotments. The calculation of the gross potential was in accordance with established principles for developing the Merrimac flood plain. During the hearing, the respondent accepted that evidence. There being no longer any dispute about it, I accept that a maximum of 8.71 hectares could be made available for residential use. Earthworks would be involved and the most practicable location would seem to be as an extension of the eastern residential estate.
Although calculations show that it would be possible to use 8.71 hectares of the 70.42 hectares, if the land is filled evenly to RL 4.5, those calculations would be modified if there was some variation to surface levels. For example, it may not be necessary for all the land to be elevated to RL 4.5. Some areas of parkland or road at a slightly lower area may be permitted, with a consequent small reduction in the volume of fill required. The area of 8.71 hectares was calculated assuming vertical sides to the reclaimed land. Because of the need for battering, however, each developed lot would be larger than usual. The shape of the reclaimed area of land and the slope of the batter would influence the amount of the water storage area and the size of the block of reclaimed land.
The respondent valued the 75 hectares of low land as at 1 January 1995 to be worth $4,873,667 on the basis that 8.71 hectares of that land could be reclaimed and developed for residential purposes. If the only marketable land was that smaller block then that developed land could be notionally valued at almost $560,000 per hectare. The valuation of the low land was said to have been made having regard to such things as the time it would take to develop the land, the holding costs, rates, land tax and associated costs. By comparison, the existing dry residential part of the subject land had been valued at $400,000 per hectare, though that was valued as golf frontage land not lake frontage. The shape of the developed land would influence the number of lake front properties that could be created from the developed land and the dry blocks. The location of the power easement and associated high voltage power lines across the middle of the subject land may also influence the shape of the developed land, the distribution of land uses (in particular the location of parkland) and the value of the residential blocks on that land. In addition to those factors, account must be given to the costs of creating the 8.71 hectares block and the surrounding lake or lakes.
The earthworks costs would be comparable to other sites so long as the fill is engineered. What those costs were would depend in part on the nature of the soils used and, in the case of marine clays, the volume of soil required for preloading, the time it would take for the preloading process to be completed, and the cost of relocating the top layer of soil used for that purpose.
Mr Bristow calculated that at least 900,000 m³ of fill would be required to construct the site and to create a lake with suitable water quality. Further calculations (on the basis that the low land has a mean height of 1.17 metres and that the lakes on the remaining 61.7 hectares would be excavated to a depth of 1.5 metres below the current water table level of 0.7 or 0.8 metres) show that some 1.2 million m³ of soil might have to be moved in the overall exercise. The cost of such earthworks would be in the range of $5 or $6 to $11.50 per cubic metre. For the project, the total earthworks costs could lie in the range of $6 million, (if there were no problems with the soil) to something in excess of $3.8 million (if extensive treatment of acid sulphate soil was necessary). Excess soil would have to be relocated off site. It may be an asset or a liability. The value, if any, of surplus soil cannot be accurately predicted as some of the soil may need costly treatment before it could be sold or relocated. Even if the earthmoving costs were $5 per m³ (a conservative figure which does not include any costs relating to the treatment of acid sulphate soils), the cost would constitute “an extremely high impost, almost certainly wiping out any positive value in the residential land.” The risk of having to treat at least some of the surplus soil and so not be able to sell it as a means of offsetting other costs would influence an informed prospective purchaser of the land.
The cost of that exercise, substantial as it is, must be compared with the cost of developing a golf course on the low land. Development of that land was not confined to minor shaping of the existing surfaces of the land in its unimproved state. All tees, greens and some fairways had to be elevated to make play practicable. The current golf course required some 184,500 m³ of fill for fairways, tees, greens and the maintenance complex. The volume of lake excavation was 89,900 m³. Apart from 2,000 m³ of sand for tees and greens, no fill was imported to the site. The works in the floodplain were designed not to obstruct the passage of floodwaters (Exhibit 3 Attachment E). As there was no testing for, or account taken, of any acid sulphate soils when the golf course works were carried out, there is no evidence by which to accurately assess the cost of such work at each of the relevant valuation dates.
Another expense at each of those dates would have been the costs of flood studies. In 1993 the cost (estimated by Mr Grummitt to be about $350,000) would have been borne by the land owner. Although a purchaser in 1995 may not have had to commission or pay for a flood study, a prudent purchaser may have wished to do so in order to obtain a second opinion in respect of any study done by the Council and, perhaps, to provide a basis for discussion with the Council about aspects of or conditions on the proposed development of the low lands.
The development constraints for further residential development on the site were summarised in Mr Bristow’s report in the following table.
| Issue | As at 30 June 1993 | As at 1 January 1995 |
| Maximum area capable of filling | 7.01-8.71 hectares | 7.01-8.71 hectares |
| Rezoning required | Yes | Yes |
| Flood study Required (Private) | Yes, Cost abt $250,000, expected 1996 at best | No, but other consultants costs abt $60,000 |
| Flood study required (Council) | No | Yes, expected 1998 at best |
| Environmental concerns | Emerging, non specific | Acid sulphates critical |
| Local Authority | Albert Shire Council | Albert Shire Council |
| Risks | Moderate to high | High to very high |
| Likely time frame for approval | 26-34 months | 30-48 months |
In broad terms, the appellant submitted that any residential development on the land would be confined to the 8.71 hectares and it would be necessary to create a lake over most of the remaining land, retaining the creek (perhaps by keeping a strip of land between the creek and the lake). The costs involved in creating the area suitable for residential development and the lake, together with the costs of delays in gaining relevant approvals for such a development (associated with such things as flood studies and rezoning), would be substantial. Consequently, when the costs to the owner are taken into account, the resulting value of the land developed in that way would be exceeded by the value of the low land as developed as a golf course.
One way of checking the financial factors just mentioned is to consider the relative values of comparable land. Although sales evidence was adduced by both parties for the purpose of ascertaining the unimproved value of the low lands, it is also relevant, in my opinion, to the evaluation of competing submissions about the highest and best use of that land.
Sales evidence
The respondent’s sales evidence: In support of the 1993 valuation, the respondent relied on the sale of “Sun Lakelands”, Lot 2 on RP862191, Robina Parkway, Merrimac. The land has an area of 36.85 hectares and was zoned Special Facilities. The zoning allows a wider range of sports facilities than can be built on the subject land.
It has similar attributes to the subject, being close by to the north with a frontage to Boowaggan Road. The land is flooded to a similar degree to the subject and requires a similar volume of fill as the subject. Mr Gray described the land as inferior to the subject due to constraints on development, but similar to the subject in its nature, elevation and location. Although it has little potential, it is within 1 kilometre of sewage treatment works and the opportunity to take water from the plant may have been an attraction to the purchaser.
The land was valued at $1,650,000 as at 30 June 1993 and $1,900,000 as at 1 January 1995. It was sold by tender to an adjacent owner in June 1993 for $2,400,000. Mr Bristow considered the sale to be an anomaly, the high price reflecting the ownership of the golf course on the other side of the highway. In his opinion, unimproved values for golf courses have not followed the precedent, nor have there been any subsequent supporting sales. Consequently, Mr Bristow placed little or no reliance on it.
Mr Gray, however, said that allowance had been made for the possibility that the purchaser paid a slightly higher amount because the land could be incorporated into existing holdings. He also noted that, on its own, the sale land was not very good for use as a golf course and that a significant cost would be incurred to ensure legal access between the sale land and the existing golf course land on the other side of the highway. Although the sale price was just over $65,000 per hectare, the unimproved value applied to the land was $45,714 per hectare in 1993 and $54,285 per hectare in 1995. Those figures indicate that the respondent considered the sale to have been at somewhat above the market price.
In support of the 1995 valuation, the respondent relied on three sales of land in Kerrydale. Each had multiple zonings similar to the subject land (Golf course, hotel, special residential) and each was described as having characteristics similar to the subject land, including some land above RL 4.5. The key characteristics of each property are summarised below.
Sale 1 (Lot 4 RP855155 and Lot 1 RP159336): The land has an area of 62.6301 hectares, approximately 12 hectares of which on the eastern side and 2.5 hectares on the west are above RL 4.5. The remainder of the property (about 77%) consists of low lying flood plain. The flood prone land has an average RL of approximately 2 allowing about 34% of that land to be developed by way of excavation within the flood compartment. Because there is a considerable flow of water through the property during times of flood, extensive excavation and widening are required to form an identifiable river profile to aid in the drainage of the property and surrounding area.
Mr Gray described the sale land and the subject land as comparable in nature due to their location in the Merrimac flood plain and similar proportions of high and low land. Both require similar methods of excavation within the flood compartment to fully optimise the site. In his opinion, the sale property was overall inferior to the subject land because of the sale land’s close proximity to the Pacific Highway and the steeper nature of the elevated land. The proximity to the highway reduces the values of lots that are established. The property generates a higher yield from the low land which is slightly offset by the reduced proportion of wet to dry blocks, but may require higher costs due to the large flow through the centre of the property. There was no evidence that the sale land included acid sulphate soils or that the purchaser expected that acid sulphate soils would be found there.
The land was sold in December 1994 for $11 million. Its unimproved value as at 1 January 1995 was assessed to be $900,000 (on a concessional basis) or $9 million (without concession).
Sale 2 (Lot 3 RP211830, Balance Lot 2 RP886223, Balance Lot 4 RP886223): The land has an area of 51.8723 hectares most of which consists of a low lying flood plain. About 2 hectares are above RL 4.5 and the other flood plain land has an average RL of approximately 2. Consequently, approximately 34% of the flood plain land can be made useable through excavation within the flood compartment. There is a considerable flow of water through the property during times of flood and this attribute requires extensive excavation and widening to form an identifiable river profile to aid in the drainage of the property and surrounding area.
Mr Gray described the subject and sale lands as comparable in nature due to their location in the Merrimac flood plain. He stated that they both require similar methods of excavation within the flood compartment to fully optimise the site. There was evidence from Mr Grummitt that, before the sale land could be developed, hydraulic requirements would have to be satisfied. There was no evidence that the sale land included acid sulphate soils or that the purchaser expected that acid sulphate soils would be found there. Overall Mr Gray considered the sale land to be inferior to the subject because of the close proximity of the sale land to the Pacific Highway. The higher yield that can be generated from the low land would be slightly offset by the reduced proportion of wet to dry blocks but may require higher costs because of the large flow through the centre of the property.
The Sale 2 land and the Sale 1 land form the total sale from Laver to Dong Ah Pty Ltd. The land was zoned Special Facilities, with a range of specified uses including golf course, hotel, country club and associated facilities and accommodation. The Sale 2 land was sold in 1996 (though was negotiated at the same time as Sale 1) for $5.5 million. Its unimproved value was assessed to have been $185,000 (with a concession) or $5,100,000 (without concession). According to Mr Gray, analysis through hypothetical subdivision and other supporting sales evidence supports a value of $300,000 per hectare for the land above RL 4.5 and a value of $110,000 for the low land. On my calculations those figures are a little high, especially for the Sale 2 land, but nothing turns on a precise mathematical calculation at this stage. More significantly, Mr Bristow pointed to the difficulty of valuing the land in that way given its “complex zoning description”. In his opinion, values would have to be ascribed to the various highly regarded permitted uses before it would be possible to arrive at a value for the low lying land. He did not make such analysis but expressed the view that the land would be superior to the residential flood free part of the subject land which had been valued at $400,000 per hectare. If the 2 hectares of high land were valued at $400,000 per hectare and the total area was valued at $5.1 million, the low land would have an unimproved value of about $86,000 per hectare.
Sale 3 (Lot 8 RP210994 and Lot 7 RP868025): The land has an area of 27.035 hectares, some 2 hectares of which are above RL 4.5. Most of the property is low lying flood plain with an average RL of approximately 2, allowing about 34% of that land to be made useable through excavation within the flood compartment.
Again Mr Gray described the properties as comparable but considered the sale land as overall inferior to the subject because of its close proximity to the Pacific Highway. The yield and offsetting characteristics were, in Mr Gray’s opinion, the same as described for the Sale 2 land. The Development Concept plan for the land (Exhibit 10), however, shows 2.03 hectares of land zoned Special Business. Mr Bristow stated that a wide range of highway related business uses would be suitable for that site, enhancing the value of that area.
The land was sold in June 1995 to Dong Ah Pty Ltd as the adjoining owner for $3,450,000. It forms part of a larger development in the area. Mr Gray took the amount paid as direct evidence of the value of low lying land in the area. He calculated the land above RL 4.5 to be worth $300,000 per hectare and the value of the low land to be $2,850,000 (at a rate of $113,000 per hectare). Mr Bristow, however, suggested that the value of the 2 hectares of higher land with commercial potential would be more in the order of $750,000 per hectare (or $75 per m²) with a consequent reduction in the value of the remaining land. If that be so, the low lying land would be valued at about $78,000 per hectare. Those figures should be treated with some caution because the site with commercial potential has to be filled and its potential has been reduced by roadworks on adjacent land. Consequently, it is difficult, on the evidence in this case, to assign with confidence a value per hectare to that land.
Although Mr Gray had analysed the value of the sales blocks by allocating different values to the portions of high land and flood prone land in each block, the flood prone land was valued on a rate per hectare basis in the expectation that a proportion of it could be reclaimed for use. Such evidence as there is about the proposed development of the Dong Ah land raises a serious doubt about whether the purchaser bought the land with such redevelopment in mind, and hence paid for that potential. Even if the respondent’s analysis is correct, it is relevant to note that the flood prone areas of the Dong Ah sale land gave a percentage yield of 34% following cut and fill. That was about three times the proportion of the subject low land that could be yielded by cut and fill. I accept Mr Bristow’s assessment that, because the low lying Dong Ah land has about three times the development potential of the subject low land, one would expect that it must be worth considerably more than the subject low land but it might not be worth three times as much on a pro rata basis as the low land. The significant difference must be taken into account in any comparison of the properties.
The appellant’s evidence: The appellant relied on the relative values of other parcels of land. Mr Bristow’s searches of the records of the then Department of Lands disclosed only one sale of land of comparable size to the subject land and which is subject to such severe flooding and similar town planning and engineering concerns - the “Sun Lakelands” sale described above. For reasons there discussed the appellant did not rely on that sale. Reference was also made to the sale of another block in September 1993, discussed below. There was, in the appellant’s submission, no sale of comparable land at or around the later valuation date. Consequently, the appellant relied on the respondent’s valuations of other large tracts of low lying land with permitted use as golf course. That course of action is acceptable where relevant sales evidence is not available.
The valuation evidence in respect of the other blocks and the sale land is as follows.
Parkwood Golf Course: The land has an area of 58.12 hectares and was zoned Special Purposes (Golf Course and retardation basin). Mr Bristow described it as a well located championship golf course with many similarities in location to the subject. In particular, it is close to the Pacific Highway and the Smith Street motorway, the Gold Coast railway and developing residential areas on the western fringe of the Gold Coast conurbation. The residential standard of the locality is somewhat inferior to that in which the subject land is located. The land is about 10 kilometres north of the subject land.
Although it is not on a flood plain, the course is considered to be a flood retardation basin. It is flood affected and has no identifiable alternative uses under its zoning. It does not, however, suffer the perennial minor flooding of the subject low land. The land in its unimproved state would be easier to develop for golf course purposes than the subject low land. Some parts would have only required minor shaping whereas all the tees and greens and some of the fairways on the subject low land had to be raised.
In Mr Bristow’s opinion, the Parkwood Golf Course land is “slightly superior” to the subject low land. Its unimproved value was assessed to be $1.3 million as at 30 June 1993 and $1.45 million at 1 January 1995.
Southport Golf Club: The land has an area of 45.37 hectares and was zoned Private Open Space. The zoning is restrictive but, in Mr Bristow’s opinion, is practically comparable to that of the subject land.
Mr Bristow described the property as a smaller quality golf course in a favoured central position, close to Surfers Paradise. Although the land is substantially higher than the subject low land, and is not in a flood plain, it was subject to minor flooding (of up to 1 metre over parts of the course) in 1974. The clubhouse is on dry land.
Although it is smaller than the subject low land, Mr Bristow’s opinion was that the land is superior to the low land. It was valued at $1 million as at 30 June 1993 and $1.25 million as at 1 June 1995.
Surfers Paradise Golf Course: The land has an area of 39.98 hectares and was zoned Special Facilities (Golf Course, recreation facilities including racing and trotting, 120 accommodation units). The zoning is far less restrictive than the subject and the land is in such a good location that the accommodation units are a reality. The units, however, are not on the golf course land.
Mr Bristow described it as a second smaller, though very well located, golf course, close to residential and resort areas. In 1974, only 200 mm of flooding occurred. Play has not been stopped on account of flood since.
In Mr Bristow’s opinion, the land is superior to the subject low land. The golf course land (but not the accommodation units land) was valued at $1 million as at 30 June 1993 and $1.6 million as at 1 January 1995.
Lot 1 on RP28400 and Lot 3 on RP92347, Hardys Road, Mudgeeraba: The land has an area of 38.84 hectares and was zoned Special Facilities (Resort 300 rooms, 112 accommodation units, 15 home sites).
The land has similar attributes to the subject. It is on the fringes of the Merrimac flood plain, fronting Bonogin Creek, some 4 kilometres south-west of the subject land in a more remote, less accessible location. It is smaller than the subject but with considerable development potential. About 85% of the land is flooded.
Mr Bristow considered the land to be superior overall to the subject low land, but stated that the value of the land is indicative of values of land subject to similar flood inundation. That value is distorted by the resort and residential approval. The purchaser intended to construct an equestrian centre.
The land was sold in September 1993 for $1,250,000. Its unimproved value was assessed to be $200,000 as at 30 June 1993 and $230,000 as at 1 January 1995. Mr Bristow agreed that, in light of circumstances surrounding the sale by the public trustee, it may have been a low sale. But he said that he had not placed great reliance on it because the land has higher potential for rural homesites. I see no need to rely on it.
Conclusion
There seems to have been no issue that a championship 18 holes 72 par golf course would require about 60 hectares. A minimum of about 45 hectares would be required for a more basic course. The low land is an ample size for such a development and the land (like other golf courses in the district) is proximate to a sewage treatment plant. Other golf courses have been constructed on flood prone land in the district and irrigation of the land is easier in those circumstances.
In making a comparison of the low land with the sale blocks, Mr Bristow used a site analysis rather than a rate per hectare analysis. On the basis that an area of 50 hectares would be sufficient for a championship golf course, with up to 10 hectares being used for ancillary features, he indicated that the value of additional hectares would “decline quite dramatically”. As earlier noted, Mr Gray took a different approach, preferring a rate per hectare rather than a site value and suggesting that any surplus land could be used for compatible uses such as tennis or bowling facilities. The alternative approaches could lead to different results. In my view, Mr Bristow’s approach is the better one if the highest and best use of the low land is as a golf course. But to decide the best approach before deciding what is the highest and best use would be to assume the conclusion that the highest and best use of the low land at the relevant valuation dates was for golf course purposes.
Mr Bristow chose the first three golf courses because they are in similar locations and have restrictive zonings which make them comparable to the subject low land. He did not take into account other golf course developments near to the subject land which are part of very large tracts of land and in respect of which it is very difficult to isolate the golf course land from a series of higher uses for other parts of the land.
If one proceeds on the basis that the highest and best use of the low land is determined by reference to the use to which reclaimed land could be put, and if the respondent’s sales are applied, it is appropriate to value the low land on a rate per hectare basis. The respondent valued the low land at about $45,714 and $54,285 per hectare for the 1993 and 1995 valuation dates respectively. It seems that the principal sale on which the respondent relied was the sale of the Sun Lakelands property or, at least, the applied rates per hectare as calculated for that property in 1993 and 1995, namely $54,000 and $65,000 respectively. It should be possible to check those values against the value of the low lying Dong Ah sale lands. In Mr Gray’s opinion the flood prone parts of the Dong Ah lands were worth about $110,000 per hectare. Although Mr Gray considered that the location and some other features of the sale land made it overall inferior to the subject land, it is clear that a much higher proportion of the flood prone areas of the sale land is potentially useable than the proportion of the subject low land. In light of the evidence given in respect of the Dong Ah sales, I am willing to accept that the values applied to the low land might be on the high side. For both reasons, an appropriate discount should be applied. Such a discount could support a valuation of $54,000 per hectare for the 1993 valuation of the low land and $65,000 per hectare for the 1995 valuation.
If, for immediate purposes, those figures are accepted, the calculations in respect of the 75 hectares of low land show a value in 1993 of $4,065,100 in 1993 and $4,873,667 in 1995. To the purchase price would be added the cost of earthworks and other costs and delays mentioned earlier in these reasons for decision. The evidence has been set out at length and I need not repeat it. In summary:
•the low land is flood prone and is substantially and regularly inundated;
• development of the low land cannot proceed without consideration of the implications of that development for other flood prone and neighbouring land;
•the zoning and other planning restrictions on the low land are such that any development would have to comply with various engineering and other constraints;
•development of part of the low land for residential purposes would require rezoning and other approvals;
•if such rezoning and approvals could be gained (and one could not be confident that they would be granted) they would come at a cost in terms of financial outlay and significant delay;
•the costs of developing the land (particularly if acid sulphate soils were present) together with holding and other costs would probably make the development of the 8 or so hectares commercially unattractive.
To that must be added the cost to a (notional) purchaser of removing those of the earthworks comprising the golf course which would not be part of the other development. It is possible that the low land could be reclaimed and recontoured for a residential and lake development. The cumulative effect of the evidence, however, is that, at each of the relevant valuation dates, the highest and best use of the low land was for golf course purposes.
It will be apparent from these reasons for decision that there is a greater than usual sense of artificiality about this exercise. Not only is there a lack of precise evidence about some relevant matters, the valuation of the low land in isolation from the remainder of the subject land focuses on an area which the appellant did not buy as a separate parcel and which the appellant has developed as a component of a larger project. Be that as it may, I am satisfied that the highest and best use of the low land is for golf course purposes. It is not necessary to go further. However, if this decision is relevant to the valuation of any other parcels of land, I observe that this case has been decided on the evidence about this parcel of land. Other factual circumstances and more evidence on some factors could lead to a different finding in relation to other parcels of land.
All that remains is to determine the unimproved value of the low land. Given that the parties agreed that the unimproved value of the remaining parts of the subject land was $4 million in 1993 and $6.6 million in 1995, the amounts contended for in respect of the low land were, in round figures:
30 June 1993 $1,250,000 (appellant) $4,000,000 (respondent)
1 January 1995 $1,400,000 (appellant) $4,900,000 (respondent).
I am satisfied that, because the highest and best use of the low land is for golf course purposes, it is appropriate to adopt a site analysis approach to the valuation. The golf courses to which Mr Bristow referred provide a suitable basis for comparison. Because it seems that the other parcels on which the respondent relied were valued on the basis that the low lying land had potential to be developed for some other purpose, the values ascribed to them provide a far less reliable guide to the value of the subject low land.
The description of the three golf courses shows that the Parkwood Golf Course is the most directly comparable in size and other features to the subject low land. The other two golf courses, though comparable in some other relevant respects, are smaller. The evidence supports the conclusion that the Parkwood land is superior in relevant respects to the subject low land. The Parkwood property seems to be at or about the ideal size for a championship golf course. The subject low land is, however, about 12 hectares larger (after land given to the Council is deducted) and, although that additional land may not have the same value on a pro rata basis as, say, the 58 or so hectares that would be most directly put to golf course purposes, it is not without use or value. Accordingly, I would allocate a slightly higher value to the low land than that put by Mr Bristow, namely $1,300,000 as at 30 June 1993 and $1,500,000 as at 1 January 1995.
OrderThe appeals are upheld, the valuations of the Chief Executive are set aside and the unimproved value of the subject land is determined at $5,300,000 as at 30 June 1993 and $8,100,000 as at 1 January 1995.
GJ NEATE
MEMBER
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