Rea v Director-General, Department of Main Roads
[1998] QLC 155
•22 December 1998
LAND COURT
BRISBANE
22 DECEMBER 1998
Re: Claim for Compensation Resumption for Road Purposes Acquisition of Land Act 1967 (A97-64) RB, GAF, & JA Rea and RM Denning
v.
Director-General, Department of Main Roads
J U D G M E N T
1. Background
This is a claim for compensation of certain lands under the provisions of the
Acquisition of Land Act 1967 (the Act). By agreements of 3 and 5 April 1997 between Glen Andrew Fyfe Rea and Jill Ann Rea, Royalin Margaret Denning and Royal McGregor Bannerman Rea (the claimants), and the Director-General, Department of Main Roads (the Department), the following lands were resumed for future road purposes:
(i) about 1.230 ha (including about 89 m² from Easement C on RP197067) being part of Lot 2 on RP108531;
(ii) about 1.410 ha (including about 1,478 m² from Easement G on RP194469) being part of Lot 147 on Crown Plan S31118;
(iii) about 4,192 m² (including about 3088 m² from Easement H on RP194471) being part of Lot 1 on RP 14623;
(iv) about 1.376 ha (including about 3,145 m² from Easement J on RP194471) being part of Lot 2 on RP 14623;
(v) about 1.952 ha (including about 1,893 m² from Easement G on RP194442) being part of Lot 17 on RP 14620;
(vi) about 2.238 ha (including about 1.170 ha from Easement F on RP194442) being part of Lot 20 on RP 14620;
(vii) about 3.095 ha (including about 3,957 m² from Easement L on RP194471) being part of Lot 23 on RP14620;
(viii) about 1.37 ha (including about 473 m² from Easement E on RP190207 and about 4,262 m² from Easement D on RP208237) being part of Lot 143 on Crown Plan S31118;
(ix) about 1.845 ha being part of Lot 146 on Crown Plan S31118.
The Government Gazette of 16 May 1997 contained a proclamation of 15 May 1997 vesting the above lands in the Chief Executive, Department of Main Roads, as constructing authority for the State of Queensland. The date of 16 May 1997 then becomes the date at which compensation is to be assessed.
2. The Claim:
Claims in conjunction for compensation (three) dated 11 June 1997 were served on the respondent (the Department) by the claimants totalling $502,000, plus disturbance.
At the hearing the claimants sought leave to amend the claim to $549,875, plus disturbance. Evidence was also supplied that advance payments from the Department to the claimants were paid as follows:
•
to Mr Royal McGregor Bannerman Rea on 12 September 1997 an amount of $118,700;
• to Royalin Margaret Denning on 12 September 1997 an amount of $13,700; • to Glen and Jill Rea on 12 September 1997 an amount of $18,450. With the agreement of the parties a joint inspection was undertaken.
Mr EJ Morzone of counsel represented the claimants, instructed by Deacons Graham & James, Solicitors. Mr RS Jones of counsel represented the Department, instructed by Crown Law.
3. The Nature of the Land:
The overall land of the claimants is variously described as coastal forest country, which was substantially cleared in the past, but is now subject to fairly heavy regrowth. The land is bordered on the northern boundary by the Brisbane River, and then rises steeply to the south to the top of a high ridge near the river which provides good outlook to the north across the river, and, subject to some clearing of the regrowth timber, towards the south and the Flinders Range.
From the top of that elevated ridge the land then falls generally towards the south into a broad gully flowing from north-west to south-east, before rising again to a lower ridge across the southern part of the land fronting Junction Road. There is another gully passing through the south-western corner of the land.
The total land comprises 20 separate parcels in various ownerships of the claimants and the family, and containing a total area of 95.844 ha. The land has been in the ownership of the family for over 50 years, and there is an existing dwelling upon Lot 146. Overhead powerlines run diagonally across the subject from north-east to south-west, and these powerlines are included in easements vested in "Powerlink" (formerly Queensland Electricity Commission), and "Energex" (formerly South-East Queensland Electricity Board). There is a further easement across the south-western and north-western corners of the land in favour of the Ipswich City Council for a 20- inch trunk water main. A relatively minor part of the total area of 95.844 ha towards the centre of the area was affected by flooding during the 1974 floods.
The land is accessible from both Brisbane and Ipswich by well-developed road systems, and Junction Road along the southern boundary is bitumen sealed. Rea Road along the western boundary is generally formed gravel for the southern 500 metres and then deteriorates into a vehicle track only. There is some restricted access from Dan Street to the intersection with Rea Road at the western side of the subject. Access from the end of the formed gravel roadway in Lewis Drive, parallel to and north of Dan Street, is cut by a gully between Langlands Street and Rea Road, which also cuts Rea Road between Dan Street and Lewis Drive.
For the purpose of considering the impact of the road resumptions, the overall land has been assessed to include the following family land owned by Helen Aaron, which is contiguous to and located to the south-west of the subject, but which is not directly impacted by the resumption:
• Lots 7 to 10 on RP 14620 (area 6.456 ha).
Part of the total land (95.844 ha) also includes other lands of the claimants
which are not directly impacted by the resumption.. land, except for the potential impact of former gravel extraction workings which exist along the main ridge line to the north.
4. The Proposed Roadworks:
The resumption of the subject lands (the subject) comprises an area of 15.0661 ha, and was acquired for the construction of the connection of the Moggill Pocket Arterial Road to the Warrego Highway. There is currently no timetable for construction of that road.
5. Planning Impacts:
Planning evidence was supplied by town planners Mr GL Vann (for the claimants) and Mr D Brown (for the Department). Both planners agree that, at the time of resumption (16 May 1997), the land was strategically located near to a proposed future district centre in the planning regime for the new Ipswich City Council area, which was formed by the amalgamation in 1995 of the old Ipswich City Council and the former Moreton Shire Council. While there was no consolidated town planning scheme in existence at the time of resumption, the former Moreton Shire Council documentation needs to be considered as still relevant for the area. Subsequent to the resumption, a consolidated planning scheme for the area was placed on public display in April 1998.
In the context of the draft Moreton Shire Strategic Plan, Mr Vann argues that, whilst not formally gazetted, it represents a recognised formal statement of the forward planning strategy for the area. The Strategic Plan also depended upon the development of Development Control Plans and an infrastructure strategy. The subsequent draft planning scheme for the amalgamated Ipswich City area reinforces that strategy, and provides the underlying zoning proposals required as part of an official Town Plan.
In both of the above plans the Karalee locality, immediately to the west of the subject land, is designated as a "district centre" for the prioritised future growth area of the Chuwar-Blacksoil area, which includes Karalee and Karana Downs. The strategies predict that over a possible time frame of some 15 years, that local region was likely to develop by the year 2011 into a population of some 25,000 people. The current population of that area is approximately 13,000.
There is agreement between Mr Vann and Mr Brown in respect of the probable composition of such a district centre, and how it was likely to develop. Certainly such a centre, if it eventuates, is anticipated to provide approximately 10,000 to 25,000 m² of retail and office space, and to attract major departmental stores and supermarkets, and other entertainment and business facilities. Mr Vann argues that the current draft Ipswich Planning Scheme envisages the possible development of high density housing around such a centre.
Mr Vann also notes that the old Moreton Town Planning Scheme of 23 October 1982, continues to remain the statutory planning document for the subject land at the date of resumption, and continues in force with the formal gazettal of the new draft plan for the amalgamated city area. Under the old Moreton Town Plan the area of the subject land was zoned as part "Park Residential" and part "Rural". The current Karalee Shopping Centre on the corner of Junction Road and Langlands Street is zoned "Commercial" and the surrounding area to the north and west of the shops is "Future Urban".
In the end the only difference between Mr Vann and Mr Brown lies in Mr Vann's conclusion that, had the resumption not proceeded, there was some possibility for the land in the south-western corner of the subject to have had some potential for "closer settlement" at higher density than exists for park residential purposes. However, both planners agree that at the date of resumption the subject land could have been developed as park residential.
The key to whether there was any likelihood of "closer settlement" around the district centre lay in whether sewerage services were to be available in the medium term. It is agreed that Ipswich City Council engineers have indicated that the area was remote from existing sewerage, and the current Tivoli sewerage treatment plant is nearing capacity, and requires major upgrading to provide increased capacity. None of that was seen to occur within a reasonable time frame. Any local sewerage for that area would need to be demand driven from existing or growing developments.
The current park residential developments, which are predominant in that locality, have all proceeded on the basis of there being no sewerage required. The minimum lot size in "Park Residential" and "Residential" low density zones is 4,000 m², and it is typical for Council to not require sewerage in those areas. It is also noted that the objective of the "Park Residential" zone under the Town Plan of 29 May 1992 is "to accommodate residential development to the general exclusion of other types of land use".
It was also agreed by Mr Vann and Mr Brown that once an area is developed into lots less than 1 ha in size, such as in the park residential areas, it is very difficult for further "in filling" at higher density to occur at later times. This is particularly so in the Ipswich area where the price of lots tends to be lower than in the adjoining Brisbane City area, where "in filling" is now occurring.
Mr Vann agrees that in his concluding that there may be some potential for higher density use near the future district centre, he had not considered any market feasibility in that assumption. He also notes that any possible privately funded local sewerage treatment works that might service a district centre, would have to satisfy the quality tests of the Planning and Environment Act, at the date of resumption, for discharge into the Brisbane River. Because of subsequent changes to the legislation, those tests are now more stringent.
6. The Method of Valuation:
In seeking to value the land for its highest and best use, Mr PD Beasley (a registered valuer for the claimants), and Mr M Slater (a registered valuer for the Department) both initially sought to adopt a "before and after" analysis on a hypothetical subdivision approach. Those approaches were considered on the basis that the highest potential of the land would appear to be for subdivision into lots of minimum size of 4,000 m², consistent with the zoning.
Mr Beasley initially adopted his hypothetical subdivision upon a design proposed by engineers Wade Lester Consultants Pty Ltd on 23 May 1994. However, after further consultation with the Department's agents, it was agreed to adopt, for comparison purposes, the design of Mr PG Breene, a consulting engineer for the Department. The outcomes of Mr Breene's analysis are discussed later in this decision.
Having analysed the hypothetical subdivision, Mr Slater then concluded that, in his opinion, a subdivision of that order would have questionable viability. He concludes that the modest land value returns from a hypothetical approach would provide lesser gross realisation than the value which might be returned to the claimants from sales of the individual aggregated existing parcels. On that basis Mr Slater determined his "before and after" approach for compensation on the basis of an assessment of aggregated values for existing lots.
In the event that this Court might find that the appropriate method of assessing compensation might be as a hypothetical subdivision, Mr Slater also provides an estimate for comparison purposes in the "before situation" with Mr Beasley's approach. Mr Beasley subsequently provides an alternative analysis on a before and after assessment as aggregated existing lots, for comparison purposes only with Mr Slater's determination.
7. A Hypothetical Subdivision
In an attempt to narrow the issues on a hypothetical subdivision approach, the valuers agreed to adopt the common design and engineering costs of development as proposed by Mr Breene. Mr Breene has determined a total of 158 new lots in the "before" situation, and 123 new lots in the "after" situation. Both valuers adopted an averaging approach to determining the hypothetical selling prices of the new lots, noting in particular the inherent difficulties in such a method of assessing value. It was also agreed that the actual building pads may not strictly follow the contours but, generally speaking, building sites were seen to occupy the higher parts of each new lot.
Both valuers are aware of the judicial caution that has been applied to such an approach in assessing compensation, and the need for careful adoption of certain inputs. There was also agreement that the easements owned by Energex (the southern overhead power easement) had no wires in place and were no longer required by that authority. The total surrender value to the claimants for those easements was $15,350 as follows:
Easement C on RP 197067 - $150 Easement D on RP 208237 - $12,000 Easement E on RP 197069 - $1,900 Easement J on RP 208238 - $1,300 $15,350
While the release of those easements allows increased flexibility in the "before and after" subdivision, only Easement C and parts of Easement D are actually within the area resumed. Mr Slater also agrees that the hypothetical subdivision approach, even with its inherent difficulties, is a commonly used method of assessing value of land for subdivisional purposes in the marketplace.
(i) The Before Situation -
Mr Beasley has determined the new lots on a stratified approach as follows:
26 lots @ $90,000 = $2,340,000 72 lots @ $70,000 = $5,040,000 40 lots @ $65,000 = $2,200,000 20 lots @ $50,000 = $1,000,000 Estimated gross realisation = $10,580,000
Mr Jones notes that figure included a mathematical error for the lots at $65,000, which should have totalled $2,600,000, giving a revised gross realisation of $10,980,000. Mr Beasley's assessed value of the land in the "before" situation is $2,163,110, or $22,569 per ha.
By comparison, Mr Slater determines as follows:
20 lots @ $80,000 = $1,600,000 138 lots @ $57,000 = $7,866,000 Gross Realisation = $9,466,000
Mr Slater also provides separate "before" hypothetical subdivisions for the northern and southern parts of the subject land:
| Area | Gross Realisation | Cost, Profit and Interest | Value of Land |
| Northern | $6,605,000 | $6,129,498 | $475,502 |
| (111 lots) | Adopt $460,000 |
| Southern | $2,820,000 | $2,572,874 | $247,126 |
| (47 lots) | Adopt $250,000 |
| Northern | $9,466,000 | $8,836,618 | $629,382 |
| plus | Adopt $630,000 |
| Southern | or $10,044 |
| (158 lots) | per ha |
While there are differences between the valuers in respect of the period of development, the appropriate interest rate, and the profit and risk factor to apply, a key difference is also the estimated value of the new lots.
(ii) The Value of New Lots -
Both valuers have principally sought guidance from current estate developments to the east of the subject, which provide a history of sales and prices obtained. In comparing those individual sales, Mr Slater believes that the riverfront lots on the subject are inferior to those on Willow Downs and Riverside, where there are more selective river views, and eventually they have a greater area of river frontage for development than does the subject lands. He argues that the current two estates may well be all that the current market can support in the Karalee area.
Mr Beasley argues that the proposed 26 riverfront lots on the subject will be in excess of the seven riverfront lots at Willow Downs, and most of those will also have extensive mountain views to the north across the Brisbane River. Both valuers agree that river views add considerably to the value of the lots and, noting the evidence of sales at Willow Downs, there would appear to be a premium of some 40% to 50% between lots with river views over other lands. However, Mr Beasley notes that riverfront lots on Willow Downs average $100,000 per lot, and comparable riverfront lots at Riverside Estate are selling as high as $165,000.
Mr Slater argues that the 20 riverfront lots on the subject are much steeper, and subject to more visual restrictions from existing vegetation, than either Willow Downs or Riverside, which were formerly open grazing lands. The matter of timber clearing is discussed later. However, from the inspection it would appear that, while the Brisbane River is narrower fronting the subject and less navigable, once selective clearing occurs, it would be reasonable for excellent vistas to be created, providing attractive riverfront aspects.
On that basis the 26 riverfront lots at an average of $90,000, would not appear an unreasonable expectation. While there would be some possible flooding along the river frontage, it is unlikely to have any serious impact upon living areas on any of those 26 lots. There was some discussion about the impact of noise from traffic crossing the river at Mt Crosby Road to the north, but both valuers agree that would have minimal impacts.
On the balance of the lots Mr Slater has taken a broad averaging approach, noting the steeper nature of the subject land, and its need for rehabilitation after gravel extraction operations in many places. He argues that buyers initially seek less steep sloping lots, where building sites are easier to obtain. He notes the experience of Willow Downs where the agents advised that the steeper sites were the cheapest and the slowest to sell. He feels that while some of the cheaper lots at an average of $57,000 would have views to the south, he feels the steepness of the land would tend to keep the values low. He used a sale of land (4,000 m²) at Junction Road at $54,000 as a guide to his average value at $57,000.
Mr Beasley's average estimates have been taken on a more selective basis, grading down from the higher lots at $70,000 (72 lots) to the base level lots at $50,000 (20 lots). In adopting an average of $70,000 for all of the 72 lots immediately to the south of the riverfront lots, Mr Beasley has provided only a premium on average of some 20% for the riverfront lots. Because the higher lands in that $70,000 range will clearly be dearer than the lower and steeper lands, it is inevitable that he has virtually provided a very small margin between the internal lots and the riverfront lots, suggesting that his estimates for that range of parcels may be a bit high. However, I accept that the average for the 26 riverfront lots may even be too low at $90,000.
Both Mr Slater and Mr Beasley agree that the value of lots towards the middle of the subject area and in the gully between Junction Road and the northern ridge, would have the lowest values. Mr Slater also advises that, while he has provided two "before" approaches based upon a northern and southern area, those estimates make no allowance for any impact of the resumption. The reason for examining the land in that manner followed the previous application for subdivision of the northern part by the claimants to the Ipswich City Council
(iii) The Impact of Tree Clearing -
In considering the relative average value of any new parcels, the potential to improve vistas and general views was considered. If selective clearing was permissible, it was reasonable that views from all of the higher lots would be enhanced. While it is agreed that the Council has a general resistance to total clearing of any lands, evidence was given of the general guidelines proposed by Council in their approval of the proposed subdivision of part of the northern portion on 12 May 1997 (Exhibit 23). The approval covered 103 proposed new lots in six stages. The Council approval established that vegetation clearing was to be treated as follows:
| • | vegetation was to be disposed of under a series of agreed strategies; |
| • | building envelopes are to be approved and must have a clearance of 6 metres from the front boundary and 1.5 metres from the side boundaries; |
| • | the limits of clearing are to be marked prior to clearing, and subject to Council inspection. |
The town planners, Mr Vann and Mr Brown, agree that generally in park residential areas, the intentions of "building envelopes" apply with some flexibility. The areas are usually large enough to include a dwelling, outbuildings and swimming- pools, and generally about 25% (or 1,000 m²) of a standard 4,000 m² is cleared. Those living areas are further influenced by the location of the dwelling, and the potential to enhance selected vistas. In addition to that selective clearing, the roads tend to follow ridge lines, and further open up the area. As a consequence of sensible selective clearing, it is reasonable to conclude that views from the new lots would add to their attractiveness and price.
(iv) Costs of Development -
As noted previously, both parties adopted the design and estimated development costs supplied by Mr Breene in his Figures 8 and 11. While the general level of internal costs for the "after" situation of 123 lots indicates a proportionate reduction on the "before" situation (158 lots), there were some increased costs, presumably due to additional requirements following amendments to the design in the after resumption. The major additional costs in the "after" situation includes:
• Internal roads - $18,000
• External water connections - $42,000
• Access driveways - $17,250
As a consequence of those additional costs and the lesser lot yield, the resulting development costs per lot in the "after" situation were considerably higher than in the "before". The impact of this additional burden in the "after" situation almost makes potential subdivision non-viable. However, to choose not to apply an "after" situation as concluded by Mr Slater, ignores the loss of potential held in the total land prior to resumption. However, that must be understood as being subject to the highest and best use of the land being seen to be within the realm of probability, and an option within the imagination of a particular purchaser. Mr Slater believes such a scenario is not practical. In seeking to determine the highest and best use of the land, we must refer to its market value to a prudent purchaser, and not conclude any special value to the owner. (Cieslinski v. Minister of Works (1978) 20 SASR 55; and [1978-80] 39 LGRA 332, at 337).
Mr Breene adopted the applicable subdivisional engineering standards of the Ipswich City Council, and in particular those conditions outlined in a subdivisional approval of 12 May 1997 for the northern part of the subject land. Mr Breene also adopted a "before and after" approach for his development proposals, providing also the development of the northern section in accordance with the subdivisional approval from Ipswich City Council of 12 May 1997 for that area. An analysis of his costs are as follows:
Northern Section Whole Estate
Before After Before After
| Development Cost | $3,482,631 | $2,988,901 | $4,945,050 | $4,474,063 |
| Lots | 111 | 97 | 158 | 123 |
| Costs/Lot | $31,375 | $30,813 | $31,298 | $36,374 |
Mr Slater allowed 16.2 months' development time and Mr Beasley 24 months. I will Willow Downs and Riverview, Mr Slater relies upon discussions with those developers, and his extensive experience in the Ipswich and Brisbane areas. He notes that, relatively speaking, there is not a great difference in development costs between Ipswich and Brisbane areas, but the relative selling prices of the lots in Ipswich place pressure upon the margin of profit for developers in that area. Those lower margins, coupled with a slower selling rate for the lots, in his opinion, eventuates in park residential estates "not performing well" in the Karalee area. Based upon this perception, he concludes that a hypothetical subdivision is not the most advantageous approach for compensating the claimants on the subject land.
allow 20 months in the "before" and 18 months in the "after" development times.
As part of his detailing of costs, Mr Breene provided $50,000 for allotment
improvement in order to allow for minimal grading and topsoil to overcome a
shortage of topsoil due to former extraction of gravel deposits over the land.
However, he noted that such costs would, indeed, be minimal, due to the "prohibitive"
cost of replacing all topsoil on the estate, and the lack of full topsoil for the entire area
should be reflected in the asking price of the lots. Adopting Mr Breene's figure of
$315 per lot for topsoil as a minimum estimate, it may be appropriate to assume that
the selling prices of the subject lots could be up to $2,000 per lot less than estates
where a higher level of presentation is achieved.
During his inquiries, Mr Breene also sought comparison with the development
costs of the Bernborough Estate to the south of the subject on Junction Road. From
discussions with Council engineers on the relative standards of development of the
two areas, and using the same development basis, Mr Breene determined costs at the
Bernborough Estate at $23,747 per lot.
In comparing the two estates, Mr Breene concluded that development costs
would be easier on the Bernborough Estate but, in his opinion, both estates seemed to
be comparable, and both should be capable of excavation with normal earthmoving
equipment without ripping. Because of the extent of former gravel extraction from
the subject lands, and under present engineering requirements for road base material,
Mr Breene calculated his costs on the basis of importing materials as the most cost
effective method of development.
(v) The Method of Calculation -
In his initial determination of the hypothetical subdivision approach, Mr Beasley agrees that he has applied the allowance for "profit and risk" after deducting the costs of development, and interest due on those development costs. As such, he has followed a method common to him in his experience as a valuer in the finance industry. His reason for such an approach lies in his conclusion that any profit was going to eventuate from the history of sales, rather than from the development costs. However, he concedes that in hindsight the more appropriate method for development purposes, would be to allow for profit and risk upon the entire costs of the estate.
While it was argued by Mr Jones that such a fundamental flaw in Mr Beasley's calculation cast great doubt upon its credibility, Mr Morzone argues that any arithmetical errors in Mr Beasley's calculation, in fact, are more favourable to the respondent than to the claimants. In the end it was agreed that the method to be used by the Court, if applicable, would be that outlined in the literature and as favoured by the Courts.
In arriving at an appropriate "profit and risk" factor, Mr Beasley has adopted 50%, and Mr Slater 45%. Mr Beasley's reasons for his figure are based upon his logic that it would be unreasonable to use a rate below 40%, and in his experience he believes 50% is appropriate. In arriving at that figure he accepts that in order to subdivide the land into park residential lots, it would be unnecessary to seek any rezoning of the land, particularly in the knowledge of the previous approval to subdivide the northern part on 12 May 1997.
In allowing for interest to be charged at 12.5% Mr Beasley's reason for adopting that figure was as a result of his experience with the finance industry. Mr Slater has adopted a rate of 8% based upon his experience of current commercial interest rates. Mr Beasley also agrees that he has not allowed for rates, land tax and other outgoings for a developer in his calculation. He also argues that, in his opinion, while it would take four years to develop and sell the new lots in the estate, he has only based his estimate of interest paid upon one year, which represents half of the selling period during which there would be no income returning to the developer.
(vi) The Period of Development and Sale of Lots -
There is disagreement between the valuers in respect of the likely period for development and sale of lots. Mr Beasley has adopted a time frame of four years, while Mr Slater uses nine years. Mr Beasley agrees that current sales of park residential parcels in that area for the period 1995 to 1997 were greatly influenced by the Willows Downs and Riverview Estates. Mr Slater provides evidence of sales records as follows:
Estate Period Total Sales Rate per Month
| Willow Downs | 10.01.95-05.11.97 | 52 | 1.53 |
Riverview 01.01.95-07.10.97 19 0.57
Mr Beasley provides sales in the period March 1996 to February 1998 showing 44 sales in Willow Downs and Riverview, together with a further 36 sales elsewhere in the Karalee area (i.e. 80 sales in 24 months). The sales varied from $120,000 to $46,000.
Mr Beasley argues that, based upon those sales of subdivision land, plus other similar type of land in the area, there is a demand for some 40 lots per year (three lots per month). Based upon a total yield of 158 lots, he concludes that it would take four years to develop and sell the subject land. He concludes that nine years is an unreasonable period to develop the subject. Mr Slater agrees that it is not common for a period of nine years to apply to a subdivisional development of that size with only 158 lots, although he claims it is not uncommon for estates of, say, 500 lots to be sold over 10 years, giving a selling rate of four lots per month.
Mr Slater concludes that Mr Beasley has been overoptimistic in claiming that the subject land could command nearly all of the current market at 40 lots per year, also noting that the nearby Benborough Estate (45 lots) has still to come onto the market. Mr Slater argues that the current Riverview Estate is hardly a viable proposition, due to its slow rate of sales. That proposition is refuted by Mr Morzone, who then asks if the estate is not viable, why is the balance of the land not sold off for disposal? It is Mr Slater's conclusion that a reasonable rate of sale of the subject lots would be one per month, bearing in mind the competition from Willow Downs and Riverview alone. He also notes that Willow Downs is spending $3,000 per lot on marketing, which indicates some slowness in the marketplace.
Mr Beasley argues that the agent had informed him that there were six current contracts upon lots in the Bernborough Estate, although he agrees that there were no recorded sales at present. Development on that estate has been delayed by the developer, who was having some problems with financing the project. Mr Beasley counters the argument about the slow rate of sales, by arguing that the best land at Riverview and Willow Downs has yet to be developed. He argues better quality land attracts a more competitive market.
(vii) The "After" Situation -
Mr Beasley has again adopted Mr Breene's design showing a return in the "after" situation of some 123 new lots as follows:
26 lots @ $90,000 = $2,340,000 72 lots @ $70,000 = $5,040,000 25 lots @ $66,000 = $1,650,000 Estimated gross realisation = $9,030,000
Mr Beasley provides estimates of development and selling costs, plus interest and profit and risk at $7,416,765, with a value of the land at $1,613,235, or $19,971 per ha. Based upon his calculated "before and after" figures, Mr Beasley concludes:
Value of land before = $2,163,110 Value of land after = $1,613,235 Estimate loss by resumption = $549,875
However, in arriving at these figures in the "after" situation, Mr Beasley's calculations would appear to contain several arithmetical errors in respect of selling costs, development costs and interest. It should also be noted that in accepting Mr Breene's road design in the after situation, he has assumed that access to Lewis Drive will not be restricted. It was noted by Wade Lester Consultants Pty Ltd that the extension of Lewis Drive may become a limited access distributor, due to flooding along Junction Road (Exhibit 6, s.6.2). Mr Breene's design would therefore appear to possibly err to the benefit of the claimants.
8. The Sale of Existing Lots.
As a completely alternative approach to that of Mr Beasley, Mr Slater has adopted a "before and after" approach for the sale of the aggregated existing parcels of land as follows:
Before:
Gross Realisation (16 lots) $1,020,000 Less: Selling and legal costs $60,200 Profit and risk (20%) $159,967 Development costs plus interest $85,675 Holding charges (21 months) Rates and land tax $14,000 Interest on land (8%) $37,541 Acquisition costs
$25,480 382,863 Value of land $637,137 Adopt $637,000
After: Gross Realisation (15 lots)
$840,000
Less:
Selling and legal costs $52,950 Profit and risk (22.5%) $144,560 Development costs and interest $107,665 Holding charges (17 months) Rates and land tax $12,000 Interest on land (8%) $33,809 Acquisition costs
$18,800 $369,784 Value of land $470,216 Adopt $470,000
Before situation (16 lots) $637,000 After situation (15 lots) $470,000 Loss $167,000 Plus Sale of Lot 146 (G & J Rea):
Before situation $210,000 After situation $160,000 Loss $50,000
Plus sale of Lot 143 (R & M Denning):
Before situation $85,000 After situation $40,000 Loss $45,000
Total loss due to resumption $262,000
Lots 146 and 143 were treated separately, not so much because they already had physical access, but mainly because they were separately owned. Mr Slater believes that, in his opinion, the most advantageous way of disposing of the 16 parcels would be to construct access where required, and then to sell the lots with separate titles. Where the resumption severed some lots, the remaining parts of lots were amalgamated to provide a usable parcel, together with any necessary road costs in order to provide satisfactory access.
As a check on Mr Slater's approach, Mr Beasley provided the following comparison of values of the existing 16 lots:
Before $1,650,000 After $1,235,000
In his "before and after" assessments of the aggregated existing lots he concluded:
Before:
Gross Realisation $1,650,000 Less Lots 146 and 143
$340,000 $1,310,000
Balance Less selling costs $59,900 Profit and risk (20%) $208,350 Development costs and interest (12.5%) $68,870 Holding charges $15,000 Interest on land (12.5%)
$59,880 $412,000 Value of land $898,000 Plus Lots 146 and 143 $340,000
Total $1,238,000 After:
Gross realisation $1,235,000 Less Lots 146 and 143 $185,000 $1,050,000
Balance
Less:
Selling costs $51,300 Profit and risk (20%) $166,450 Development costs and interest (12.5%) $71,655 Holding charges $10,000 Interest on land (12.5%)
$46,915 $346,320
Value of land $703,680 Plus Lots 146 and 143 $185,000 Total
$888,680 $1,238,000
Total loss due to resumption Less $888,680 $349,320 9. Comparison of Sales
Basic to either the hypothetical subdivision approach or the "before and after" analysis of the sale of existing lots, is the comparison of sales in the area. In analysing his estimates for in globo sales, Mr Beasley provided the following sales:
•
Sale 1 - (Junction Road, Karalee - Lots 1 and 2 on RP 886788). This is the sale of 20.58 ha for the Crawford to Bernborough Developments (Qld) Pty Ltd in April 1997 for $560,000 ($27,210.88 per ha).
•
Sale 2 - (Summerville to Transtate Ltd - Lot 5 on RP 154713 and Lot 9 on RP 154684). This is the sale of 73.73 ha for the Willow Downs Estate in September 1993 for $1,000,000. That sale was analysed at $13,563 per ha, but it was noted that there were two other parcels also involved in the total estate (Lots 1 and 2 on RP 123572, area 1.012 ha). Those two latter parcels were part of four lots, one given to each of Mr Summerville's daughters, and subsequently developed with brick veneer dwellings. The dwellings on Lots 1 and 2 were demolished for the Willow Downs Estate. That sale occurred in April 1994 for $130,000, and when that price is added to the remainder of the Willow Downs land purchased in September 1993, the analysed price per ha was $15,200.
Mr Beasley notes that the rate per ha needed to be considered in the context that a significant area through the centre of Willow Downs was to be subsequently set aside for future road purposes. It was not known whether Transtate would have been aware of the proposed roadway at that time, but as experienced developers, it would be a reasonable conclusion that they were adequately informed.
• Sale 3 - (Northern part of the subject). This was a contract of sale over 59.65 ha in July 1996 for $1,600,000. Terms of the sale included settlement of $535,000 in 12 months, $535,000 after two years, and the balance of $535,000 at the end of three years. Interest was established at 7%, providing a present value of $1,399,909, or $23,468.70 per ha. The sale obtained approval to subdivide on 12 May 1997, but the sale did not proceed.
During the hearing Mr Beasley sought to provide a further 17 sales (Exhibit 16) but agreed that only one of those sales had any relevance to the subject, as follows:
• Sale 4 - (40 Gledson Street, Booval, Lot 450 on SL3583). This was a 3.809 ha parcel bought by Devon Developments Ltd from the Queensland Government in April 1995 for $190,000. In seeking comparison with Sale 4 as an existing parcel, Mr Beasley agreed that Sale 4 has subsequently been the subject of a rezoning into "Residential A" land for subdivisional purposes.
Mr Beasley agrees that Mr Slater's sales, while not easily comparable, are better than the sales offered by himself. Mr Slater provides the following sales for his comparison for the sale of existing lots:
•
Sale 1 - (Grace Street, Karrabin - Lot 441 on CH31188). This is an 8.78 ha parcel sold in March 1995 for $96,000.
•
Sale 2 - (Boyles Road, Pine Mountain - Lot 313 on CH3124). This is a 4.13 ha parcel sold in April 1996 for $72,500.
•
Sale 3 - (Graham Street, Blackstone - Lot 1 on RP 22473). This is a 4.68 ha parcel sold in May 1996 for $65,000.
•
Sale 4 - (Blackwall Road, Chuwar - Lot 13 on RP 125283). This is an improved 3.83 ha parcel sold in February 1996 for $125,000.
•
Sale 5 - (Blackwall Road, Chuwar - Lot 14 on RP 125283). This adjoins Sale 4 and has an area of 3.92 ha and sold in January 1998 for $85,000.
•
Sale 6 - (Junction Road, Chuwar - Lot 1 on RP 108531). This is a 0.4047 ha parcel, adjoining the subject land to the south, which sold in January 1998 for $54,000.
•
Sale 7 - This is the same sale as Mr Beasley's Sale 2, the sale was provided as a check on the in globo value of the land in the "before" situation.
(i) The In Globo Lands -
In seeking comparison of in globo lands for his hypothetical subdivision, Mr
Beasley has analysed:
Sale 1 (Bernborough Estate - 20.58 ha) $27,210 per ha Sale 2 (Willow Downs Estate - 73.73 ha) $15,200 per ha Sale 3 (Contract of Sale - 59.65 ha) $23,468 per ha.
Mr Beasley notes that his Sale 1 is a much smaller parcel than the subject, and has the advantage of significant external roadworks, which would assist in reducing the development costs. However, Mr Slater believes that the purchaser of the Bernborough land, in his opinion, had unrealistic expectations as to lot prices which might be obtained. Mr Slater based that view upon personal discussions with the developer (Mr Quinn). Mr Beasley agrees that he has not placed much weight upon his Sale 3 as it was not a completed contract.
In also discounting the use of Sale 2 (Willow Downs), Mr Slater has relied upon hearsay observations by Transtate staff, casting some doubt upon the veracity of their purchase of that land. However, without the benefit of further collaboration by Transtate, I can place little reliance on such observations. Mr Slater also notes that in comparing Sale 2, any impact of the future road upon the subject must be ignored.
In his comparison in the "before" situation for the subject land, Mr Beasley has concluded a rate of $22,569 per ha, while Mr Slater has adopted a rate of $10,044 per ha. In the "after" situation, Mr Beasley has concluded $19,971 per ha.
(ii) Aggregated Existing Lots -
In seeking relativity between the existing lots on the subject and his Sales 1 to 6, Mr Slater has sought to balance the respective characteristics of each lot. He agrees that there are not a lot of comparable sales occurring in the Ipswich area, but notes that his Sale 6 (Junction Road) is on top of a ridge, falls gently to the west and, in his opinion, represents land quality equivalent to about 80% of any of the lots on the subject.
In aggregating his existing parcels, Mr Slater has estimated site values of the parcels in the "before" situation as follows:
Table 1:
Parcel Lot Area (hectares) Site Value A 143 4.694 $85,000 B 146 4.694 $210,000 C 147 4.694 $80,000 D 158 6.328 $110,000 E 15 4.047 $50,000 F 17 4.057 $45,000 G 18 4.047 $45,000 H 19 4.047 $45,000 I 20 4.047 $35,000 J 21 11.594 $125,000 K 22 14.478 $135,000 L 23 8.129 $85,000 M 1 on 14623 2.023 $30,000 N 2 on 14623 2.023 $30,000 O 1 on 14754 6.035 $110,000 P 2 on 108531 4.452 $95,000 Q 7 1.647 $45,000 R 8 1.647 $35,000 S 9 1.518 $25,000 T 10 1.644 $25,000
Total $1,445,000
However, Parcels Q to T (total $130,000) were included merely in order to assess the highest and best use of the aggregation, and form no part of the claim. That leaves a balance of $1,315,000 for the 16 lots shown on Exhibit 9A, Annexure M. The detailed "before and after" figures were as supplied previously in Section 8 of this decision. In the end, the method of assessment of the site values of the existing lots was unchallenged by the claimants except, as Mr Jones noted in his address, to consider whether Mr Slater has underestimated appropriate levels of value to each lot. Mr Beasley, as a check, argues that Sale 6 (Junction Road) would represent, in his opinion, the lowest price you could anticipate for a 4,000 m² lot in that area. He notes its qualities, but also its deficiency of access being located on the top of the ridge with limited line of sight for approaching traffic. In respect of Sale 1 (Karrabin) he argues that is an inferior locality, particularly with noise from the Saddlers Crossing Bridge on the railway line, and its proximity to the Leichhardt ex-Housing Commission Estate. He also argues that aircraft noise from low-flying aircraft into and out of the Amberley Air Force Base impacts Sale 2 (Pine Mountain Road).
In comparing Sale 3 (Blackstone), Mr Beasley notes that sale is prone to flooding from Bundamba Creek. Mr Beasley also argues that Sales 4 and 5 (Blackwall Road) are at the lower end of the market in the Chuwar area. He also notes that Sale 4 had an existing colonial dwelling upon it, which had been somewhat restored subsequent to the sale.
Based upon his assessment of the sales of Mr Slater, Mr Beasley believes that more realistic estimates of site value were as follows:
Table 2:
Parcel Site Value (Before) Site Value (After) A $120,000 $85,000 B $220,000 $100,00
(includes dwelling)
C $120,000 $90,000 D $120,000 $120,000 E $50,000 - F $50,000 $35,000 G $50,000 $45,000 H $50,000 $40,000 I $50,000 $30,000 J $160,000 $160,000 K $200,000 $200,000
(large homesite)
L $150,000 $80,000 M $35,000 $60,000 N $35,000 - O $120,000 $120,000 P $120,000 $70,000 Total $1,650,000 $1,235,00
In seeking comparison of the existing parcels, it is to be noted that those parcels are to be valued, after allowing for the provision of access roads and electricity. In arriving at his estimates of the site values, Mr Beasley has used a wider range of sales than now supplied, relying upon other sales provided during his "without prejudice" discussions with the respondent's earlier valuer, Mr Denham.
After it was found that Mr Denham may have had a potential conflict of interest, the respondent engaged Mr Slater, who was not aware of those previous discussions. Mr Morzone notes the possible confusion for the respondent, but argues that Mr Slater should have been informed of those earlier sales supplied, and the claimants were entitled to consider Mr Beasley's wider experience of sales in his conclusions.
Decision: parties lies in the amount of remedial treatment required to remedy current scarring as a result of gravel extraction. In the end Mr Breene has supplied a minimum estimate of cost of $50,000 to overcome that deficiency, although it is agreed that final presentation of the lots would be at a lower level than on adjoining estates where open grazing land had formerly existed prior to development.
(i) Planning Impacts -
In considering the planning evidence, I note that Mr Vann has sought some additional support, for the potential for higher density housing near to the proposed district centre, from the draft Moreton Shire Strategic Plan. He agrees that the Strategic Plan was not formally gazetted, but argues that it provides a clear intention of the local government at that time.
In seeking guidance on what weight should be placed upon the draft Strategic Plan, I note the decision of the Full Court of Queensland in JR and DM Stubberfield v. The Valuer-General (1988-89) 12 QLCR 328. In that matter the Land Appeal Court had upheld a decision of the Land Court in disregarding the possible effects of an amended rezoning of the land in a new proposed town plan for the shire. At the time of the valuation of the land, the proposed new town plan had not been officially gazetted and the Land Appeal Court had found that the new town plan did not have the force of law. However, in the Full Court Carter J found at p.331:
" They complain however that there is no provision in the general law nor any statutory provision in the Valuation of Land Act which permits the Valuer-General in the circumstances of this case to ignore or leave out of account in assessing value the facts and circumstances relating to the published intention of the local authority to rezone the land.
It seems to me that the proposal to rezone land in a way which will impact unfavourably upon its use should prima facie be seen to detrimentally affect its value. Whether it will do so in a particular case is a question of fact and it is therefore unnecessary to address that question here even were it competent for this Court to do so."
In the end the Full Court overturned the decision of the Land Appeal Court and remitted the matter to that Court for further decision. The Full Court held that the Land Appeal Court should have considered what effect the prospective rezoning might have upon the mind of the hypothetical purchaser and the effect it might have on a sale price.
There is an analogy between Stubberfield and the current matter in that if a proposed down zoning of the land may impact the value of the land, then by inference so also should a proposed increase in the zoning have impact upon the value. It would therefore be unreasonable to conclude that, merely because the Moreton Strategic Plan was only in draft form, that its conclusions for the district centre should be ignored.
There is also guidance to be found in the decision of the Court of Appeal in Osterley Pty Ltd v. Caboolture Shire Council, 22 June 1994 (1996) 2 QdR 34. In that matter the Court of Appeal found that there is no principle that the existence of a draft Strategic Plan, consistent with a rezoning proposal under the Local Government Act 1936, is a reason for the refusal by the Planning and Environment Court. The Court of Appeal noted that it is the Governor-in-Council which has the ultimate decision both as to whether the rezoning should be made and as to whether the draft Strategic Plan should become law.
The inference from Osterley is that it is not the task of this Court to ignore the relevance of the draft Moreton Shire Strategic Plan or its implications. However, the weight to be afforded that draft Strategic Plan is to be found in the evidence provided. The planning evidence in this matter supports the view that the subject land was suitable for development as park residential at the date of resumption. It also supports the conclusion that the area immediately to the west was likely to become a future district centre, with an increase in the size and complexity of commercial activity, centred around the existing shopping centre on Junction Road.
The prevailing land development in that part of Chuwar and Karalee is for park residential land of minimum lot size of 4,000 m². It is also agreed that once residential occupation of that density is proliferated throughout the area, it is unlikely in that locality for "in filling" at higher density to occur. On that basis highest and best use of the land would be either as park residential type subdivision, or for continued use as the existing parcels of land.
In the absence of any proposal for the development of a local sewerage treatment plant, it is unlikely that sewerage will occur until local demand makes such a scheme economically viable. The lower density of the prevailing park residential use, and in particular the current trend to develop without sewerage, make the provision of sewerage services in the area remote in the medium term.
(ii) The Method of Valuation -
At the heart of this matter is the different approaches adopted by the two valuers. Both valuers have adopted a "before and after" approach to their methods. Such an approach is commonly used in matters of compensation, particularly where the land is severed, such as with the current resumption for roadworks. Support for the "before and after" method may be found in the decision of CF Stanfield v. Commissioner of Main Roads (1969) LAC 36 CLLR 76, where the Land Appeal Court adopted the method based upon a hypothetical subdivision, and also in Brisbane City Council v. RD and DE Lansbury (1977) 4 QLCR 502. Both of those matters involved the severance of the property, similar to the current matter.
The "before and after" approach was also preferred by the Land and Environment Court in Gwynvill Properties Pty Ltd v. Commissioner for Main Roads (1981-83) 50 LGRA 322; and also in HA & SB Shann v. The Commissioner of Water Resources (1986-87) 11 QLCR 194. In the Gwynvill Properties matter the comparison of sales method was rejected because of a paucity of sales and the "before and after" method based upon a hypothetical subdivision was preferred. While there is some analogy with the current matter, the Gwynvill Properties can be distinguished as in that matter there was no market for the land being truncated by the resumption.
The method of "before and after" was also considered in Riverbank Pty Ltd v. The Commonwealth of Australia [1974] HC 48 ALJR 483 (also 31 LGRA 244). In that matter the appellants argued that a loss of productive capacity of the land should be the basis of assessing compensation, while the respondent used the method of comparable sales. In the end, the method of comparable sales was finally adopted. In considering whether there had been any loss in the remainder of the land after resumption, Stephens J in the High Court of Australia said at p.487:
" This loss has not, in my view, been shown to have reduced in any way the value of the unacquired area. It is for this reason that I have thought it unnecessary to approach the problem of assessment of compensation on a 'before and after' comparison basis."
However, Riverbank Pty Ltd can be distinguished from the current matter as the value
of the land is diminished by the current resumption.
The "before and after" method was also rejected in favour of the conventional
approach of comparable sales in Brewarrana Pty Ltd v. Commissioner of Highways
No. 1 (1973-76) 32 LGRA 170, where Wells J said at p.201:
"A consideration of all the difficulties of valuing by the method of the hypothetical subdivision has persuaded me that I should find that, until a wholly new method is presented, embodying figures that are, or claim to be, characterized as realistic, I should incline towards the approach that has hitherto been accepted in theory and, I infer, used in practice - the conventional or orthodox approach."
In that matter the Court had some difficulties in comparing the appropriate interest and profit and risk rates, and costs and expenses; as well as an approach at averaging sales, issues with some analogy to the current matter.
However, the Land Appeal Court followed the "before and after" method in PG Zoeller v. Brisbane City Council (1973) 40 CLLR 198, at p.201; as did the Land Court in GE & EM Riechelmann and Others v. The Council of the Shire of Pioneer (1958-59) 27 CLLR 93 at p.96.
However, in the current matter, in following the "before and after" approach, each valuer has sought a different method in seeking the highest and best use for assessing compensation to the claimants in the current matter.
(iii) A Hypothetical Subdivision -
I consider first Mr Beasley's approach as a hypothetical subdivision, and also as check for "highest and best use" by Mr Slater. In adopting such an approach I accept that it would maximise the development of the land if the claimants acquired the easement rights from Energex at a total cost of $15,350.
However, I also note that only Easement 2 ($150), and part of Easement D (about 45%) are actually impacted by the resumption. On those figures I believe a figure of some, say, $6,000 ($150 plus $5,450) represents the value of easements impacted by the resumption. However, in order to achieve the full potential of compensation, the claimants will be out of pocket by an additional $15,200 to acquire the easement rights from Energex to all of the land.
Before moving to analyse the hypothetical subdivision, I note first that Courts have expressed some concern with how the method should be applied. For example, in B Geyl & Others v. The Crown (1981-82) 8 QLCR 118, the findings of the Full Court of the Supreme Court of New South Wales in Minister for Public Instruction v. Turner (1955) 55 SR (NSW) 310, were discussed in respect of the use of certain aspects of the hypothetical subdivisional approach.
In the Turner matter the need for careful consideration of the "profit and risk" factors were analysed. It was held by the Full Court in that matter that the owner of the land (Turner) made no allowance in his calculations for all the risks involved in subdividing the land. The Court said at p.320:
" For the plaintiff it was submitted, before the Land and Valuation Court and also on the hearing of this case, that the compensation which should be paid to the owner should be ascertained, on this subdivisional basis, at the then value of the expected net return from the sale in subdivision with no provision for risk of realization, except to the extent to which the anticipated rise in subdivisional costs were involved in that risk, and with no provision for the subdivider's anticipated profit.
… This submission ignores the risk of realization which, of course, is a real factor and ignores the profit which a purchaser of the land would have expected to realize for his enterprise in subdividing it. It appears to us that it ignores the time-honoured test for ascertaining the value of land on resumption altogether. … He is entitled only to receive the value of the land to him, and that value, in the circumstances of this case, can only be ascertained as being what he would have received on selling it to a hypothetical purchaser at the date of resumption. He is not entitled also to receive an estimated profit which he might have made had he undertaken a course of dealing with the land which he did not undertake in fact."
On appeal to the High Court of Australia in Turner v. The Minister of Public Instruction 95 CLR 245, Dickson CJ said at pl.268:
" The formula, the use of which apparently has become so familiar in valuing land suitable for subdivision, contains a number of factors all of which seem to depend on little or nothing more than opinion and it may be supposed that widely different results may be produced by variations in detail, though no given variation may itself seem considerable. It would appear natural therefore for a judicial valuer to seek to check his result by reference to as many sources of information and inference as may be found, even if he might consider that they would not provide him, had they stood alone, with a satisfactory independent basis for an ultimate conclusion."
In considering further the matter of the "risk of realization" Dickson CJ said
at p.264:
" To no small extent the 'risk' is of the estimate of the net proceeds of subdivisional sale proving too low. The result may be found in the estimate of the prices for blocks being too high, the sale of the blocks being too slow, the estimated costs attending subdivision and sale proving too low or in any or all of such causes. It is therefore evident that the degree of faith felt in the estimates, whether by the court or the hypothetical purchaser, must bear upon the fixing or allowance of the percentage. In coming to a reliable determination there is no reason why it should not be done by fixing provisional figures and then reducing them, but it would seem that there is equally no reason why it should not be done by making definitive estimates in the first place. It must be borne in mind, of course, that while the estimate of the expenditure may prove too high and the estimate of the return may prove too low, the contrary is equally possible."
Clearly there is seen to be an interrelationship between the anticipated selling price, the extent of marketing and presentation of the lots, the profit and risk factor and the period of development of the estate. The risk for any potential developer who might undertake the hypothetical subdivision must weigh all of the above factors. His dilemma was perhaps capsulated by Taylor J in Turner who said at p.298:
" In endeavouring to assess the value of a parcel of land by reference to the amount which a subdivisional sale will realise at some future time the estimated cost of subdivisional expenses must be taken into account. But they are only estimates and other factors, more or less speculative, such as the state of the market, must also be taken into account. The allowance for risk of realisation is made by way of overall adjustment with respect to the contingencies involved in these matters and though, if a purchaser's estimates prove correct, the making of the allowance will be reflected in his ultimate profit, it is an allowance which is made, in the first instance, not with that end in view, but as a contingency against possible losses. Over and above an appropriate allowance for this purpose a purchaser is, of course, entitled to look for a profit."
The impact of those factors, and in particular the "profit and risk" component, was also outlined in Closer Settlement Ltd v. The Minister (1942) 17 LGR 62, where Roper J said at p.65:
" It is of course clear that a person purchasing land in globo for the purpose of subdividing it would not pay the sum of money which is the present equivalent of that estimated return. Many factors in the calculation are speculative: the land in subdivision may not realize the prices which are at present expected, and the subdivision may take longer to realize than is at present anticipated. To compensate for the risk involved in the venture the purchaser would certainly discount the estimated returns."
(iv) The Value of New Lots -
Bearing in mind the balance to be achieved between realistic selling prices, the profit and risk factor, and the anticipated development and selling period, I consider first the anticipated selling prices.
Following the inspection of the subject lands, I agree that the 26 lots near the river will provide both attractive vistas of the river and excellent mountain views. In line with the current prices being obtained for similar land at Willow Downs and Riverview, I see no reason why Mr Beasley's conservative estimate of an average of $90,000 per lot should not be achievable. Within that range of the lots shown on Exhibit 14, half may well exceed $100,00, while the remaining half may bring something less than $90,000. On balance of those 26 lots shown at $90,000 average, those lots with direct river frontage are likely to exceed those in the re-entrant gully without river frontage by margins of some 20% to 30%, not inconsistent with the experience at Willow Downs.
However, before considering further the likely value of the remaining new lots, I note the difficulty confronting the valuers in arriving at average prices for the lots. While the valuers in this exercise are charged with placing estimated values upon hypothetical new lots, they are constrained by having only Mr Breene's design, and the available contour mapping. Final presentation of individual parcels would highlight the advantages of individual building sites, with considerable variations in asking price. The method of averaging a broad range of land types adds to the difficulties in assessing value, and accentuates the lack of preciseness of the hypothetical subdivision approach.
The difficulties confronting the valuers were outlined by Roper J (later CJ) in Closer Settlement Ltd v. The Minister (1942) 17 LGR (NSW) 62, and later noted in Turner v. The Minister of Public Instruction (supra) at p.260, where Roper CJ was quoted as saying:
" Many factors in the calculation are speculative: the land in subdivision may not realize the prices which are at present expected, and the subdivision may take longer to realize than is at present anticipated."
In the current matter in adopting an averaging approach, Mr Beasley has sought to supply four levels of average value to his determination of total gross realisation, while Mr Slater has chosen only two levels of average value. In seeking to gain some level of confidence in the two approaches, I note that the process of averaging is merely to seek to obtain an arithmetic mean figure for an array of values of parcels.
Where there is some homogeneity of the new parcels, the "average" or mean value of the lots will tend not to diverge greatly from either the maximum or minimum values of the lots in that range. The art of selecting an appropriate range of values is to seek to identify changes in the quality and attractiveness of the new parcels.
For example, an average value determined would bear little relationship to the range of parcels, if the average were struck between say riverfront land with views at $100,000 per lot, and internal flat lands at $50,000 per lot. The reliability of the averaging process is improved if lands of similar type are separately analysed. This is really a process of weighted averaging, a method regularly adopted in statistical analysis. Indeed, the science of econometrics deals specifically with such approaches. The use of average values was, however, seen as a useful check by Chamberlain J in Robson and Jarvis v. The Minister of Education (SA) (1964) 18 The Valuer 486, where he said at p.490:
" I recognise that the unscientific use of averages is a fruitful source of fallacy, but where there are a number of sales at about the same time of more or less identical blocks at somewhat different prices, an average may provide a useful check."
In the current matter, Mr Slater's broad approach tends to classify all parcels as similar, other than riverfront lands. From the nature of the land, such an approach would appear over-simplistic, bearing in mind the steeply sloping lots south of the ridge to the north, and the flatter lands to the middle of the subject. By comparison, Mr Beasley's approach of adopting four levels in his "before" analysis, and three levels in his "after" analysis, makes some allowance for the different land types.
However, while I might concur more with Mr Beasley's numbers of levels of value, I have some difficulty with the mean average values adopted. I accept his average value of $90,000 for the better lands, and agree that the inferior land in the centre of the subject may average something less than the $54,000 paid for Sale 6 on Junction Road. While I note that the asking price for the lots on the Bernborough Estate near Junction Road are in excess of that figure, those sales have yet to be achieved. Because of the nature of the land and the restriction upon extensive views from lands near the centre of the subject, I believe a reasonable estimate of gross realisation in the "before" situation would be:
26 lots @ $90,000 = $2,340,000 112 lots @ $60,000 = $6,720,000 20 lots @ $50,000 = $1,000,000
Total = $10,060,000
In considering the average values of the lots, I have allowed for the minimal lot presentation outlined by Mr Breene, and that impact upon the selling prices compared to Willow Downs and Riverview. In considering Mr Beasley's "after" situation, I believe the gross realisation should more reasonably be:
26 lots @ $90,000 = $2,340,000 72 lots @ $60,000 = $4,320,000 25 lots @ $50,000 = $1,250,000 Total = $7,910,000
Because of the impact of the road resumption, I see little justification for enhancing the average value of the lots in the "after" situation. While the averaging of sales in arriving at values has been discredited by the Courts (Daandine Pastoral Company Pty Ltd v. Commissioner of Land Tax (1943) 7 The Valuer 299, at 305), its use in certain matters such as this hypothetical subdivision is not contrary to law (Robson and Jarvis v. The Minister of Education (SA) (1964) 18 The Valuer 486).
(v) The Method of Calculation -
In calculating the value of the land in his hypothetical subdivision, I note that Mr Beasley has in fact used an incorrect method of applying the "profit and risk" factor, together with certain arithmetical errors in the calculation. Such an approach was taken by the valuer in B Geyl & Others v. The Crown (supra), where he sought to allow a 40% risk of realisation only upon the costs of developing the land, and not on the costs of the land as, in his opinion, his client already owned the land. In that matter the learned Member (later President) followed the principle established by the High Court in Turner v. The Minister of Public Instruction (supra), and disallowed the valuer's method, seeking to adjust the exercise accordingly.
While Mr Beasley has argued in the current matter that it is the costs associated with the sale of the land which should be impacted, he has in the end conceded that the correct method is as followed in the literature. (See Land Valuation and Compensation in Australia by Rost and Collins, pp.155-161; and also Geyl p.125).
(vi) The Profit and Risk Factor -
I turn then to the appropriate allowance for the "profit and risk" factor. I note that Mr Beasley believes that 50% is appropriate, while Mr Slater adopts 45%. Both valuers agree that there is no requirement for risk in seeking rezoning of the land prior to subdivision, and the risk would be associated more with the potential prices to be paid for the lots, and the likely selling period required.
In seeking guidance on a suitable "profit and risk" factor, I was referred by Mr Jones, on another matter, to the findings of this Court in IR Hall and PJ Hedge v. Chief Executive, Department of Transport (A95-33), 14 November 1997, unreported. In that matter the valuers utilised three methods of valuation to determine the value of the land. A direct comparison of sales was compared with a hypothetical subdivision, together with a discount cash flow (DCF) method. The two former approaches parallel the approaches taken in the current matter. In the Hall and Hedge matter two valuers adopted a "profit and risk" factor of 40%, while the third, Mr Slater, adopted a factor of 45%. In his assessment of those rates the learned Member noted at p.71:
" If I put aside the DCF figures, I find some apparent agreement between Mr Brett and Mr Hamilton for a 40% figure for a hypothetical subdivision in the instant case though, of course, the allowance selected depends on how one structures the project. On the basis of what I heard, I would think that Mr Slater was too high at 45% for the prices he allowed for lots and his low selling rate of five lots per month. Such a rate may be appropriate, however, for a hypothetical subdivision based on Mr Brett's project proposal. I would think on the evidence put before me that a project of the type revealed by the adjustments that I have made, on the evidence, would include a profit and risk allowance higher
than that proposed by Mr Hamilton but less than that proposed by Mr
Slater."
In the end the Member adopted 42.5%. continued his policy of a conservative selling period and prices, and I would see no reason to discredit his factor of 45%. Mr Beasley, by comparison, has been less conservative in his selling prices and selling period, but has allowed a higher "profit and risk" factor at 50%. Based upon my concluded value of the lots, I believe a "profit and risk" factor somewhere between Mr Beasley and Mr Slater would be reasonable. I will adopt 47.5%.
(vii) The Rate of Interest -
If I then move to an assessment of the appropriate rate of interest to apply in the calculation, I note that Mr Beasley has adopted 12.5% for consistency, and Mr Slater has adopted 8% based upon his commercial experience. In the environment of current competitive banking, even allowing for risky ventures such as subdivision, and noting the interest rates adopted by this Court for compensation awards during 1996-97 (8%), I will adopt 8% for interest to be calculated in the value of the land, which is close to the commercial long-term bond rate.
(viii) The Period of Development and Sale - that sales from the total of the three estates would represent 75% of those sales, the subject land could reasonably be anticipated to provide for about 13 sales per year (or 1.1 per month). It is also noted that a further 45 lots on the Bernborough Estate will further impact the supply of new lots.
That then leaves the matter of the development and sale period for the
hypothetical subdivision. Mr Beasley proposes four years and Mr Slater nine years.
The total sales of this type of park residential land in the Karalee area during the
period 1996 to February 1998 was demonstrated at 80 sales in 24 months, or 40 sales
per year. Slightly more than half of those sales have occurred in the Willow Downs
and Riverview Estates. While the development of a third major estate on the subject
land would increase competition, and potentially increase the total sales of lots, it
would be optimistic to conclude that the subject land would capture most of the total
market.
However, while a simple mathematical calculation would suggest that only 13 sales per year might be expected for the subject land, that conclusion makes no allowance for the vagaries of the marketplace. Because of the lower price structure for the subject lots, and their closer proximity to the shopping centre and Ipswich City Centre, its share of the market may increase at the expense of the other areas. Allowing for such variations, and giving some benefit to the claimants, I will allow 18 parcels per year (1.5 sales per month).
In considering the impact in a hypothetical subdivision of an unrealistic rate of sales, I note concerns about reliance upon nothing more than opinions was expressed by the Land Appeal Court in RH Hutchins & Others v. The Council of the Shire of Woongara [1992-93] 14 QLCR 286 at p.298:
" In the case before us, there are a number of factors in the hypothetical exercises which depend on little or nothing more than opinion and as supposed in the Turner Case, widely different results may be produced by variation in detail. The adjustment of Mr Browning's hypothetical exercise substituting the more likely selling prices of the allotments and making adjustments for the matters conceded for by Mr Browning will produce a very different result as set forth later in this judgment."
Based upon the above conclusions I will adopt a development and sale period of eight years, for the before approach (158 lots), and six years for the after approach (123 lots). If I then rework Mr Beasley's calculation, I conclude:
Table 3:
Before (Total area 95.8 ha)
• Gross realisation $10,060,000 • Less: Selling costs
Commission 158 lots @ $2,250 $355,500
Legal costs 158 lots @ $400 $63,200 Advertising 158 lots @ $2,000
$316,000 $734,700
• Net Realisation $9,325,300 • Less profit and risk of realisation 47.5% $3,003,063 • $6,322,237 • Less: Development costs
158 lots @ $31,298 $4,945,084 Interest on half development
period of 20 months @ 8% $329,672 $5,274,756 $1,047, 481
• Less holding charges:
Rates (accept Mr Slater's) $48,977 Land Tax (accept Mr Slater's)
$30,055 $79,032
• Value of land in globo plus interest $968,449 • Less interest on land - Half development and sale period
of 8 years @ 8% $256,611
• Value of land $711,838 Adopt $712,000 Table 4:
After (Total area 80.7 ha)
• Gross Realisation
$7,910,000
• Less:
Selling costs
Commission 123 lots @ $2,250 $276,750 Leal costs 123 lots @ $400 $49,200 Advertising 123 lots @ $2,000
$246,000 $571,950 $7,338,050
• Net realisation
• Less profit and risk of realisation 47.5% $2,363,101 $4,974,949
• Less:
• Less holding charges:Development costs
123 lots @ $36,374 $4,474,002
Interest on half development
period of 18 months @ 8%
$268,440
$4,742,442 $232,507
Rates and Land Tax (Mr Slater) for proportionate area after resumption
81 ÷ 96 x $79,032 $66,683
• Value of land in globo plus interest $165,824 • Less interest on land - Half development and sale period
of 6 years @ 8% $34,188
• Value of land $131,636 Adopt $132,000 In summarising the hypothetical subdivision approach, I find:
Table 5:
Before After
Total Area 95.8 ha 80.7 ha Number of lots 158 123 Gross realisation $10,060,000 $7,910,000 Net realisation $9,325,300 $7,338,050 Profit and risk $3,003,063 $2,363,101 Development costs $5,274,756 $4,742,442 and interest
Holding charges $79,032 $66,683 Interest on land $256,611 $34,188 In globo value of land $712,000 $132,000 Estimated loss by resumption = $580,000
As noted previously, the relatively higher development costs, and the rather long period to develop and sell the new lots in the "after" situation, together with the relatively small size of the estate (123 lots), severely impedes any practical viability to subdivide at a fair profit for all parties.
The size of the "profit and risk" factor is clearly a major disincentive for the current owners, who previously had a contract for the sale for development of the northern part of the land at some $1,600,000. However, that contract was in effect no more than a formal offer to buy, and in accordance with principles laid down in the High Court, is not normally admissible as evidence. (McDonald v. Deputy Federal Commission of Land Tax (1915) 20 CLR 231 at 239). However, it is also noted that that principle is not inflexible, and some weight may be given to consideration of the offer in accordance with Goold v. Commonwealth (1993) 79 LGERA 407. The test is to compare the reliability or genuineness of the offer. In the current matter the $1,600,000 would appear to be out of line with market expectations.
(x) The Sale as Aggregated Existing Lots -
In comparing the alternative method of providing minimum road development, and seeking to sell the existing lots in aggregation, I find:
Table 6:
Mr Beasley Mr Slater
Before After Before After
| Gross realisation | $1,650,000 | $1,235,000 | $1,020,000 | $840,000 |
| Selling costs | $59,900 | $51,300 | $60,200 | $52,950 |
| Profit and risk | $208,350 | $166,450 | $159,967 $144,560 |
| Development costs | $68,870 | $71,655 | $85,675 | $107,665 |
| Holding charges Interest on land Acquisition costs | $15,000 | $10,000 | $14,000 | $12,000 |
| $59,880 | $46,915 | $37,541 | $33,809 |
- - $25,480 $18,800
| Value of land | $1,238,000 | $888,680 | $637,000 $470,000 |
| Loss by Resumption | $349,320 | $167,000 |
| Plus sale of Lots 146 & 143 | (Allowed) | $95,000 |
| Total Loss | $349,320 | $262,000 |
In comparing Mr Slater's allocated values, I believe he has been conservative, particularly noting Mr Beasley's concerns with Mr Slater's Sales 1, 2 and 3.
Summary
Having considered the alternative methods of estimating the market values, I am left with the following values for the land resumed:
Method Loss
Hypothetical subdivision "before and after" $580,000
($38,497 per ha)Aggregated existing lots (Mr Beasley) $349,320
($23,186 per ha)Aggregated existing lots (Mr Slater) $262,000
($17,390 per ha)
In seeking to determine the appropriate level of compensation due to the claimants, I note that s.20(2) of the Acquisition of Land Act 1967 dictates that the amount shall be the value of the estate taken at the date of resumption, and s.20(3) directs that any offset of that figure, as a result of any enhancement to the value, shall also be considered. In adopting the "before and after" method, both of those directions have been addressed. The purpose is to reimburse the claimants with the full money equivalent of the land which they are now deprived. (Nelungaloo Pty Ltd v. Commonwealth (1948) 75 CLR 495).
In arriving at the level of value to be applied, I note also that any doubts should be resolved in favour of the claimants. (Commissioner of Succession Duties (SA) v. Executor Trustee and Agency Company of SA Ltd (1947) 74 CLR 358, at 374). However, if I adopt the hypothetical subdivision approach of Mr Beasley, I must ask the question whether a prudent person desirous of subdividing the land in the "after" situation, would be prepared to undertake the process? And further I must also ask the question: would the current claimants be prepared to sell the whole of the remainder of the land after resumption for an amount of only $132,000? The answer to the latter question, I feel, is likely to be in the negative, and I therefore conclude that it is really not in the realm of probability to conclude an "after" situation for such a comparison as a highest and best use of the land.
Should the claimants decide to undertake the role of developer themselves, they would of course then have access to the "profit and risk" component. However, that is not a matter for consideration in a hypothetical subdivision exercise to determine the highest and best use of the land. In such an approach the separate roles of owner and developer must be identified in order to assess whether the approach has a commercial viability.
In deciding whether it is appropriate to adopt a hypothetical subdivision approach in this matter, I note that Courts have accepted the method (Turner v. Minister for Public Instruction (supra)). I note also that, particularly where proper sales evidence is very hard to find, the Courts have accepted the method as of some assistance as a check against a comparison of comparable sales. (Crouch v. Minister of Works (Supreme Court of South Australia (1976) 36 LGRA 254). In Crouch the subject land was seen as fit and ripe for subdivision, and "land owned by the estate was being subdivided and several other areas of land in the neighbourhood had also been, or were being, subdivided" (p.255). The analogy with the current matter is quite clear.
However, in deciding to use the hypothetical subdivision method, after considering evidence of an alternative process to check the proposed lot values, Wells J said at p.258:
" The formulation of a provisional value for the subject land by this means, if it does no more, is of some use in suggesting the basis for a rough comparison with figures arrived at by a different method, and to sound a note of caution if those figures appear over sanguine. I do not think that any valuer, in these days, should or would, except in extreme circumstances, discard any reasonably based method for checking a valuation figure reached by a hypothetical subdivision."
Wells J further noted his concerns that the hypothetical subdivision of the subject land in Crouch had several uncertainties about its eventual outcome, particularly in respect of the likely approach by the Council, where he said at p.262:
" Consequent upon the foregoing analysis of the planning prospects, I am satisfied - and I find - that the hypothetical subdivisions proposed by both valuers ought, at the very least, to be treated with caution, and upon a decidedly conservative basis."
The principle to be adopted from Crouch is that where there are uncertainties about whether the hypothetical subdivision is likely to proceed, then its outcome should be treated with caution, and mainly used as a check against a more direct comparison of sales, if available.
The method was also found not to be appropriate where the land in question was not seen as ripe for subdivision. For example, in Cienda Pty Ltd v. South Australian Urban Land Trust (1988) 65 LGRA 419, both parties had sought to value the land on the comparable sales method, seeking to use a hypothetical subdivision approach as a comparison. Because of the wide divergence in the opinions of the valuers, and, noting the words of Wells J in Brewarrana Pty Ltd v. Commissioner of Highways (No.1) (1973) 32 LGRA 170, at p.203, where he said:
" I am, and have been, throughout this judgment, mindful of the judicial mistake of taking several figures arrived at by experts, respectively, and by some averaging process, of fixing a figure for compensation."
Matheson J in Cienda also found that the hypothetical subdivision approach in that matter was not appropriate, noting that "there are always problems with such a method" (p.422).
The approach was also criticised in Gwynvill Properties Pty Ltd v. Commissioner for Main Roads (1984-85) 28 The Valuer 68, where Cripps J said at p.69:
" The hypothetical development method is normally suspect because it depends on a number of assumptions and a number of estimates, e.g. cost of building, estimated gross rentals obtainable, probable outgoings and, most significantly, the rate per centum of return which could be expected and the profit and risk factor expressed in percentage terms."
However, in that matter the Court had to determine compensation for the resumption of a small area of 70 m² caused by a resumption of a corner truncation for road purposes. As there was obviously no market for a separate parcel in the area, Cripps J found at p.70:
" I am of the opinion, therefore, that I should adopt the hypothetical development method and should not discard it merely because one comparable sale shows that if a unit rate per square metre were applied over the whole site it would lead to a significantly lower figure on a 'before and after' basis."
In seeking to compare valuations based upon a comparison of sales and a hypothetical subdivision method, Stein J in Gubbay & Ors v. The Minister for Education (1986-87) 29 The Valuer 232 noted, that while the quantum of the valuation differed, in the end the resulting loss determined by the two methods was within $3,000, in an overall determination of some $487,000. For that reason Stein J adopted both methods as suitable in that matter.
In seeking guidance in Gubbay it was noted that Else-Mitchell J in Kaljo v. The Minister (1962) 8 LGRA 137, when dealing with a hypothetical subdivision approach which took no account of the risk of realisation, said at p.139:
" I think it is clear that the approach made by him to the valuation is not a proper one, for the authorities establish that the criterion of value of a tract of unsubdivided land is the price which a hypothetical purchaser would on the relevant date have paid for it as a whole, and the potentiality of subdivision and sale is merely one of the advantages or possibilities which the land possesses and which will be reflected in the price obtainable on the market for the whole (Turner v. Minister for Public Instruction; Maori Trustee v. Minister for Works). But since the subdivision, development and sale of land is a normal business pursuit conducted for profit, the value of an unsubdivided tract of land can be ascertained by inquiring what those engaged in these pursuits might be prepared to pay for it in the market. This inquiry requires the assumption of a subdivision, the sale of the subdivided lots, and the deduction from the total price realized of the costs of subdivision, roadmaking and the like, as well as a profit and risk factor and some other items. Such a process was described by the former Judge of this Court, Roper J, as 'a familiar and appropriate method' of arriving at the valuation of land suitable for subdivision (Closer Settlement Ltd v. The Minister) but it must not be overlooked that it is merely a means of ascertaining what the unsubdivided land would bring at a hypothetical sale in the market on or about the date of resumption."
An important principle to be obtained from Kaljo is the concept of a "normal business pursuit conducted for profit". Else-Mitchell J focused upon values that developers in the land development industry would be prepared to pay for land, and the commercial risks they would be prepared to consider. Such a conclusion lends support to placing some doubt upon the commercial viability of the "after" hypothetical subdivision approach in the current matter.
The need to differentiate between the roles of an investor/developer, and an owner, was also identified in Closer Settlement Ltd v. The Minister (supra), where it was noted that a factor for the "risk of realisation" must be allowed and where Roper CJ said at p.62:
" Such a deduction for investor's risk must be made even though the owner is a person whose business it is to subdivide land, in the absence of evidence that other land suitable for subdivision is not available to be acquired and subdivided, or that the owner cannot continue to carry on such business as fully and effectively as if the resumption had not been effected."
However, while the above precedents have made certain use of the hypothetical subdivision approach, there are others where the method has been seen to be of little use, particularly where the estimates by the opposing valuers were in disagreement. In the matter of Myer Realty Ltd v. The Commissioner of Railways (1980-81) 7 QLCR 87, the learned Member (later President) said at p.92:
" Once again, it is brought home to me, the problems which continue to arise when the hypothetical subdivisional method of valuation is relied upon as the basis presented to the Court as acceptable to determine an award of compensation. I have grave doubts as to its practical utility in other than the most simple of cases. The result should always be compared, if possible, with some sales."
In seeking analogy with the current matter it is noted that the Member in Myer
found at p.93:
"The rate of disposal of allotments in other nearby subdivisions leads me to believe that Mr Kidston is over optimistic in anticipating that this land would pass through all stages until finally disposed of in a mere two years. Once I doubt this, I would then have to consider whether a rate of 30 percent for risk of realisation and profit is appropriate. The variables make the task a formidable one which I can avoid."
In analysing the balance of the land in the "after" situation of that matter, the Member noted at p.94:
"It is untenable to suggest that any prudent vendor would be prepared to sell the balance of land at less than $5,000, a figure less than small residential allotments are bringing in that area. The exercise is of no assistance to me.
The other approach made by Mr Kidston is to do a hypothetical subdivision for 51 lots covering the land remaining after resumption. In this exercise, he arrives at a value of the land after resumption of $13,977. When this exercise is adjusted to include items of expenditure which have been omitted from the exercise by way of Titles Office Fees, Survey Costs, Council Fees, Legal Fees and Stamp Duties on purchase of the in globo land, interest on the purchase price of the land and the adjustment of the development costs of 15 percent from January 1977 to August 1978, the result only indicates that it would not be economic to develop the balance land in this way after resumption. Thus this exercise is of no assistance to me in my task and I must look to some other method of valuation."
In the current matter it would be difficult to conclude that the current owners would be prepared to sell the balance of the land in the "after" situation, for an amount of $132,000, which is not much more than the value of any one of three individual lots, or less than the value of two other individual lots, in the "after" determination (see Table 2).
Finally, I believe that the use of a hypothetical subdivision approach must always be seen in the context of its use as a check upon values determined by the more direct approach of comparable sales. In Para Vale Estates Pty Ltd v. The Minister of Works (1966) 12 LGRA 19, Napier CJ said at p.23:
" As I see it, this method of estimating the market value can be used as a check upon the values suggested by the sales of comparable properties, but I think that it introduces an additional element of speculation and uncertainty, namely, what profit would the subdivider look for and expect. This must necessarily vary, according to the circumstances and the risks inherent in the particular case. In the result the method is, at best, no more than an indirect way of reaching a conclusion, which can, in the ordinary course of things, be reached more directly and satisfactorily by a consideration of comparable sales."
In the current matter Mr Slater, and subsequently also Mr Beasley, have provided a comparison of the values of aggregated existing lots, which provides a more direct approach, without the uncertainties of establishing viability of the subdivision. On that basis I will adopt that approach.
In analysing the sales evidence for comparing the existing lots, Mr Beasley has provided, in his opinion, values which better reflect certain disabilities of the sales. Mr Beasley's determination of the value of the total 16 lots is $1,650,000 in the "before" situation, while Mr Slater's estimate is $1,445,000. While both valuers are experienced professionals in this area, I am drawn to the level of value applied by Mr Beasley, particularly in view of his use of a wider range of sales evidence discussed during the without prejudice conference with Mr Denham. While the contents of those discussions are confidential to the parties, and not a matter for consideration by this Court, the experience of Mr Beasley was clearly influenced by the wider evidence at that time.
| Based upon the proportionate ownership of the lands, the apportionment to the Disturbance: | respective claimants is: arguments in this matter, I am also conscious of the guidance supplied by the High Court in Builders Licensing Board v. Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 where Roper J said that, in the absence of statutory directions a Court may rehear a matter de novo or on the further evidence supplied. The adoption of the appropriate course by the Court would involve the exercise of judicial direction applying principles of fairness and reasonableness (pp.625-629). Having considered the special circumstances of this matter, it was decided to re-open the matter solely for the purpose of obtaining evidence about the level of disturbance claimed. | Royal McGregor Bannerman Rea | - | $195,000 |
| Royalin Margaret Denning | - | $35,000 | ||
| Glen Andrew Fyfe Rea and Jill Rea | - | $120,000 | ||
| Total | - | $350,000 |
In considering then the values of compensation determined by Mr Slater ($262,000) and Mr Beasley ($349,320), I note that Mr Beasley has relied upon his knowledge of a wider range of sales evidence, and he has also raised some concerns in respect of Mr Slater's sales. Mr Beasley agrees that Mr Slater's sales submitted are more comparable than his single sale offered to support his determination on an aggregated existing lot basis (Mr Beasley's Sale 4). However, he raised concerns with Mr Slater's Sale 1 in respect of inferior locality and noise; Sale 2 in respect of low flying aircraft noise; and Sale 3 in respect of flooding. On balance, I would believe that Mr Slater has been very conservative in his comparison of the subject, noting, however, that the available sales evidence was less than optimal.
For the reasons outlined in Executor Trustee (supra), in matters of compensation, where there is any doubt in respect of the value of the loss to the claimant, the matter should be resolved in favour of the claimant. In the current matter there is some scope for latitude as a consequence of the lack of very comparable sales. In exercising their professional judgments the two valuers have concluded different comparisons with the sales. On the balance of the evidence I am more favourably disposed to the opinion of Mr Beasley, and I will adopt Mr Beasley's analysis of the market for determining the values of compensation based upon existing lots.
Having rejected the hypothetical subdivision approach, I turn to the two estimates of value based upon an aggregation of existing lots. Allowing for the difference in size, and its location, I feel the value of $349,320 (15.066 ha - $23,186 per ha) provides a fair and reasonable comparison with the in globo land for the Bernborough Estate (20.58 ha - $27,210 per ha), and the in globo land for Willow Downs (74.74 ha - $15,200 per ha). On that basis I determine compensation at $350,000, plus disturbance.
Following further discussions, both parties have subsequently agreed that an amount of $7,000 for disturbance in full and final settlement is appropriate.
Subsequent to the hearing, I am now advised that a further advance of $89,150
was paid by the Department to the claimants on 27 August 1998.
Conclusion:
I determine that an amount of compensation under all headings in the sum of
Three Hundred and Fifty-seven Thousand Dollars ($357,000) is awarded. It is further
ordered that interest at the rate of 6.25% per annum be paid on the amount of
$357,000 from 16 May 1997 up to and including 29 September 1997 (the date of
payment of the initial advance). Then on the amount of $206,150 (being $357,000
less the advance of $150,850) from 29 September 1997 up to and including 27 August
1998 (the date of payment of the second advance). Then on the amount of $117,000
(being the amount of $206,150 less the second advance of $89,150) from 27 August
1998 up to and including the day immediately preceding the date on which the final
payment of compensation is made.
NG DIVETT
MEMBER OF THE LAND COURT
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