Rothcote Pty Ltd v Council of the Shire of Pine Rivers
[1998] QLC 94
•1 September 1998
|
BRISBANE
1 SEPTEMBER 1998
Re: Determination of Compensation -
Resumptions for Road and Environmental Purposes
Acquisition of Land Act 1967
A97-28
Rothcote Pty Ltd
v.
Council of the Shire of Pine Rivers
J U D G M E N T
Prior to resumptions by the Council of the Shire of Pine Rivers (the Council), Rothcote Pty Ltd (Rothcote) was the registered proprietor of two adjoining hectarage lots at Everton Hills, described as Lots 1 and 2 on Registered Plan 92216, Parish of Bunya, being the land contained in Certificate of Title Volume 4975 Folio 184.
In amalgamation the land was square in shape with area of about 16.297 ha. Lots 1 and 2 were individually surveyed in rhomboid shape. Lot 1 to the west, widened from north to south and contained about 8.113 ha. Access to Lot 1 was provided by Pepper Street, surveyed to the southern boundary, a short distance to the west of the extreme south-eastern corner. Lot 2 to the east, narrowed from north to south and contained about 8.184 ha. Garfield Terrace was surveyed to its eastern boundary near the south-eastern corner while King Street was surveyed from the east to near the centre of the eastern boundary.
Cabbage Tree Creek intersected the southern section of the amalgamation, flowing from the west through the south-western corner of Lot 1 in a north-easterly direction to the eastern boundary of Lot 2 between Garfield Terrace and King Street.
Lot 1 was vacant with a relatively small area of land (about 4039 m5) in the extreme south-eastern corner adjacent to Pepper Street above the southern Q20 flood line of Cabbage Tree Creek, then a relatively large area of land (about 6.524 ha) to the north of the northern Q20 flood line.
Lot 2 accommodated a prestigious dwelling and a "gatekeeper's dwelling" in the northern section with access off King Street, where there was an area of about 5.573 ha above the Q20 flood line. To the south off Garfield Terrace there was an area of about 1.352 ha above the Q20 flood line.
Both Lots 1 and 2 were encumbered by several easements none of which were identified as having relevance to the determination of compensation.
Background to Resumptions
Two Notices of Intention to Resume dated 21 July 1995 were served on Rothcote by the Council.
Resumption for Road Purposes
One Notice advised of the intention to take approximately 8,890 m5 and 8,135 m5 from Lots 1 and 2 respectively, for road purposes. The land was required to accommodate a section of a "distributor" road between Bunya Road to the west and Old Northern Road to the east. The route of the road through the subject properties commenced as a widening of King Street on the eastern boundary (from 20.117 metres to 45.95 metres) running in a generally south-westerly direction, adjacent or near adjacent to the northern Q20 flood line of Cabbage Tree Creek, in a reservation varying in width down to 34.35 metres on the boundary between Lots 1 and 2 then 42.726 metres on the western boundary of Lot 1, at a point 28.18 metres from its south-western corner.
Resumption for Environmental Purposes
The second Notice advised of the intention to take for environmental purposes areas from Lots 1 and 2 of approximately 1.667 ha and 1.466 ha respectively. This land immediately adjoined the southern boundary of the area proposed to be taken for road purposes. The southern boundary of the land was the Cabbage Tree Creek Q50 flood line.
Resurvey of Original Lots
As a result of the Council's resumption requirements, the original Lot 1 was subdivided by Plan 881958 into Lots 21, 24, 25 and 28, while by the same plan, the original Lot 2 was subdivided into Lots 22, 23, 26 and 27.
Land Taken for Road Purposes
From the date of proclamation published in the Government Gazette on 5 July 1996, Lot 23 (from the original Lot 2) and Lot 24 (from the original Lot 1) on Plan 881958 containing 7,760 m5 and 8,511 m5 respectively were taken for road purposes.
The land remaining at that date in the original Lot 2 comprised Lot 22 (4.736 ha) to the north of the road, and Lot 26 (1.412 ha) and Lot 27 (1.26 ha) to the south of the road.
The land remaining at that date in the original Lot 1 comprised Lot 21 (5.442 ha) to the north of the road, and Lot 25 (1.471 ha) and Lot 28 (3496 m5) to the south of the road.
Land taken for Environmental Purposes
It was not until 6 September 1996 when the lands required for environmental purposes being Lots 25 and 26 containing areas of 1.471 ha and 1.412 ha respectively were taken.
Subsequent to the resumptions for environmental purposes, the balance lands comprised the adjoining Lots 21 and 22 to the north of the road and Lots 27 and 28 adjoining the original southern boundaries of Lots 2 and 1, severed from Lots 21 and 22 by the various areas resumed.
Claim for Compensation
A claim for compensation covering all resumptions was filed in the Land Court on 12 June 1997 in the amount of $1,113,000, "representing diminution of the value of the properties" plus interest, legal fees and valuation fees.
During the course of the hearing, leave was sought, without objection, and granted for the first item of the claim to be amended to the amount of $1,250,000.
Finally, leave was granted for the claim to be further amended as follows:
(a) as a result of land taken for road purposes on 5.7.96 - $866,080
(b) as a result of land taken for environmental purposes on 6.9.96 - $441,600
Say$1,300,000
Plus:
Interest on the monies claimed to the date of payment of compensation
Costs of and incidental to the hearing and determination by the Land Court.
The Council's Valuation
As had been the claimant's, the respondent Council's valuation had initially been based on the assumption that the resumptions for road and environmental purposes were contemporaneous, and in some way interwoven. On that basis, the balance land had been seen to be enhanced to such a degree that compensation was assessed by the Council's valuer as being nil.
It was conceded however, that the resumptions, being for different purposes and at different dates, should have been considered as separate matters. On that basis, the final valuation put in evidence by the Council was as follows:
(a) for road purposes - Nil
(b) for environmental purposes - $197,250
The Town Planning Scheme
Zoning
At the relevant dates the land was zoned "Future Urban" under the Town Planning Scheme gazetted on 14 May 1988.
Strategic Plan
In the Strategic Plan which formed part of the Town Planning Scheme, the preferred dominant land use designation of the land was shown within an "Urban Area". In Part B of the Strategic Plan, Figure 5.1 indicated the route for a "Future Major Road Link" as traversing the locality of the subject land.
Development Control Plan
On 18 June 1992, the Planning Scheme was amended to incorporate "Development Control Plan No. 1 - The Hills District" (the DCP). The subject land is located within Precinct 12 of the DCP. Precinct 12 "is intended to accommodate the major part of new residential development in The Hills District".
Representations and Witnesses
Mr G.W. Diehm of Counsel appeared for Rothcote and Mr C Hughes of Counsel for the Council.
Witnesses called were as follows:
For Rothcote:
Mr P.M. Engeman - Civil Engineer
Mr A.R. Brown - Acoustical Engineer
Mr A.M. Avent - Traffic Engineer
Mr T.J. Connolly - Town Planner (Heilbronn & Partners Pty Ltd)
Mr P.R. Peterson - Registered Valuer
For the Council:
Mr S.M. Settle - Civil Engineer (John Wilson & Partners Pty Ltd)
Mr A.R. Opanowyzc - Town Planner and Civil Engineer (Manager Land
Development Services Pine River Shire Council)
Mr J.R. Wood - Registered Valuer
The Principal Issue
The principal issue which needs to be resolved before the question of compensation for the resumptions may be decided is, in essence, whether the development potential of the land, before the road resumption, is to be considered strictly in terms of the DCP, or whether certain development conditions and restrictions imposed by the DCP, particularly as they relate to the planned distributor road, are to be ignored.
It was the claimant's case that the scheme underlying the resumption for road purposes is the long-standing proposal by the respondent, to have constructed a major road between Old Northern Road and Bunya Road (Collins Road). It was submitted that any town planning considerations which relate directly to that scheme, in its entirety, are to be ignored in the assessment of the market value of the subject land immediately before the resumption for road purposes. In support of that submission reliance was placed on the principles established in Melwood Units Ltd v. Main Roads Commissioner [1978] AC 426 and Housing Commission of New South Wales v. San Sebastian Proprietary Limited (1978) 149 CLR 196. The respondent submitted that the extent of the scheme underlying the resumption for road purposes was to provide the road link through the subject property. It was submitted that the wider distributor road proposal, was an integral part of the Planning Scheme, although its inclusion in that scheme was not seen by the Council as a step leading to the resumption. The road proposal had been in existence for many years, at least since 1978, when it appeared in the Arana Hills District Development Control Plan. The highest and best use of the subject land was for residential subdivision, it was submitted, and that potential had been created through the planning process. However, that same planning process had recognised that urban development was to evolve through the creation of a road hierarchy, important to which was the planned distributor road. The DCP provided that subdivisional development of land through which the route of the distributor road passed, would have been conditional on not only the provision of the land to accommodate the road, but the construction of the section of road through the particular property at the cost of the developer. Mr Hughes drew attention to the fact that in Part B of the 1988 Town Planning Scheme Strategic Plan, the road proposal was identified as a "future major road link". In 3.1 of the Strategic Plan, Implementation (ix) of Objective (a) for the preferred dominant land use designation "Urban Area" relevantly stated:
" The road layout of residential subdivisions is to be used to enhance residential amenity by Council insisting that a clear hierarchy of roads, according to their function, is evident. This will ensure that through traffic is separated from local traffic and roads are adequately planned and constructed for the traffic volumes they are intended to carry.
A road network setting out that hierarchy is depicted in the Strategic Plan and in the Development Control Plans dealing with parts of the Area ... ."
Then, in the Hills District DCP No. 1, the distributor road proposal was again identified.
Under s.5 Para (13), Precinct 12 "is intended to accommodate the major part of new residential development in the Hills District ... ."
Implementation Guidelines under Para (13) (Precinct 12)(c) - "Traffic, Parking and Access" - as are relevant to the subject property, include:
"(i)The satisfactory completion of the planned residential street system shall be a requirement of the approval of any development proposals in the precinct.
(ii)It shall be a requirement of the Council in approving the development of land within the route of the planned distributor road, extending from Old Northern Road on the eastern boundary of the district to Bunya Road in the north-west of the district, that the section of this road within the land to be developed be constructed by the developer.
(v)Only two major road crossings of Cabbage Tree Creek are planned within the precinct, these are Francis Road and the distributor link between Hutton Road and Bunya Road. These road crossings shall be designed and constructed to pass a Q-10 flood level under the structure and to be trafficable in a Q-50 level of flooding.
(vi)Council shall not construct nor allow to be constructed for vehicle traffic purposes the following roads across Cabbage Tree Creek:-
(F)extend Pepper Street to the new road described in paragraph (13)(c)(ii) above.
(viii)As development of the lands adjoining the Cabbage Tree Creek flood plain proceed, bikeways/footways shall be constructed within the flood plain and connected to the street system and other areas of open space by the developers of the lands. The location and standard of construction of the paths shall be as indicated in Council's Bikeways Plan or in conditions of approval of development.
(ix)The satisfactory completion of the planned bikeway/footway system shall be a requirement of the approval of any development proposals in the precinct."
Mr Hughes pointed out that, for residential subdivision of the subject land to have been achieved at the date of resumption, a rezoning application would have been necessary. Pursuant to s.4.4(5A) of the Local Government (Planning and Environment) Act 1990, (the Planning and Environment Act) the Council:
"must refuse to approve the application if -
(a)the application conflicts with any relevant Strategic Plan or Development Control Plan; and
(b)there are not sufficient planning grounds to justify approving the application despite the conflict."
An application to rezone the subject land and to develop it for residential subdivision without provision for the distributor road, or by extending Pepper Street across Cabbage Tree Creek, would have been in conflict with the DCP and, it was submitted, there being no planning grounds to justify approving the application, it would have met with mandatory refusal.
Further, Mr Hughes drew attention to s.3.5(1) of the Local Government (Planning and Environment) Act 1990 the (P and E Act) which provided:
"3.5(1) Where a person -
(a) has an interest in premises within a planning scheme area and the interest is injuriously affected -
(i) by the coming into force of any provision contained in a planning scheme;
(ii) by any prohibition or restriction imposed by the planning scheme.
The person is, subject to compliance with this section, entitled to obtain from the local government compensation in respect of the injurious affection … and may claim that compensation in accordance with this section."
Subsection (2) of s.3.5 relevantly provides:
"(2)Where land under a planning scheme is -
(b) affected by a proposed road (including a road widening);
it is to be taken to be injuriously affected pursuant to subsection (1)(a)."
Subsection (7) provides:
"(7) The time within which a claim for compensation under this section may be made is three years after the date on which the claim arose."
The provisions of the DCP came into force on 18 June 1992. The prescribed period within which a claim for injurious affection may have been made had expired by the date when the land was taken.
It was submitted by Mr Hughes that pursuant to the P and E Act the land taken for road purposes was injuriously affected at the date of resumption. It is observed that Section 3.5(9) of the P and E Act provides:
"(9) Where compensation for injurious affection is claimed under this section the local government may at its option, but with the prior approval of the Governor in Council acquire the land pursuant to its power under the Acquisition of Land Act 1967 instead of paying compensation for injurious affection."
It is my opinion that where land is to be regarded as injuriously affected pursuant to the P and E Act, by a proposed road, and compensation for injurious affection has not been claimed, the principles of valuation which have evolved through judicial authority, do not deny an owner subsequently dispossessed of the land for road purposes, the right to receive compensation based on the value of the land unaffected by the scheme underlying the resumption.
Reference was made by both Mr Hughes and Mr Diehm to the principles discussed in the several Court hearings leading to the determination of compensation for the resumption of land adjacent to a turtle rookery at Mon Repos Beach, near Bundaberg. When that matter finally came before the High Court, The Crown v. Murphy & Anor. (1990) 71 LGRA 1, the Court, in allowing an appeal from the judgment of the Full Court of the Supreme Court of Queensland, said at p.4:
" Thus, in the view of the majority", (of the Full Court) "it was necessary to ask 'whether ..., quite apart from the resumption and the representations of the National Parks and Wildlife Service, the application for rezoning would have been refused.
The statement of principle by the majority in the Full Court and the statement of the necessary consequential inquiry are unexceptionable. One purpose of this principle is to ensure that a resuming authority does not employ planning restrictions to destroy the development potential of the land and then assess compensation for its resumption on the basis that the destroyed potential had never existed: Melwood Units Ltd v. Main Roads CMR [1979] A.C. 426, at p.434. The principle applies in cases where there is a direct relationship between the planning restriction and the scheme of which resumption is a feature and extends to cases where there is merely an indirect relationship, provided that the planning restriction can properly be regarded as a step in the process of resumption: Housing Commission of N.S.W. v. San Sebastian Pty. Ltd., at pp.206-207.
Of course, a characteristic or attribute of the land which affects its value must be taken into account in the assessment of compensation even if the planning restriction which is a step in the process of resumption is dependent upon or directed to that characteristic or attribute. The Land Appeal Court considered that the existence of the turtle rookery adjacent to the land was an attribute of the land which affected its value to the extent that the existence of the rookery itself militated against the rezoning."
Mr Diehm submitted that there was no characteristic or attribute of the subject land which demanded that the distributor road pass through it, at least when the scheme was first proposed. With the progression of time, the route of the road had become firmer, with actual construction moving westerly from Old Northern Road and subdivisional design making provision for it (at the developer's expense) easterly of Bunya Road.
I will come back to that later.
In Coastal Estates Pty Ltd v. Bass Shire Council (1993) 79 LGERA 188 at p.194, Gobbo J said:
"Nor is it to the point in my opinion that a statutory authority could have achieved its purpose by some other means short of compulsory acquisition, or more particularly, that it could have compelled some form of drainage provision as an exercise of planning powers. That may be relevant to assessing value."
The claimant submitted, and I agree, in resolving the issue of the constitution of the "scheme", that there is no relevance in the fact that some developers had accepted the responsibility of providing for and constructing Collins Road through their particular developments.
In Wilson v. Liverpool City Council [1971] 1 AllER 628, Widgery LJ said at 635:
"Whenever land is to be compulsorily acquired this must be in consequence of some scheme or undertaking or project. Unless there is some scheme or undertaking or project compulsory powers of acquisition will not arise at all, and it would I think be a great mistake if we tended to focus our attention on the word 'scheme' as though it had some magic of its own. It is merely synonymous with the other words to which I have referred, and the purpose of the so-called Pointe Gourde rule" (see Pointe Gourde Quarrying and Transport Co. Ltd. v. Sub-Intendent of Crown Lands [1947] A.C. 565) "is to prevent the acquisition of the land being at a price which is inflated by the very project or scheme which gives rise to the acquisition.
The extent of the scheme is a matter of fact in every case, as is shown by the decision of Fraser v. City of Fraserville [1917] A.C. 187 at 194), to which Lord Denning MR has referred. It is for the tribunal of fact to consider just what activities - past-present or future - are properly to be regarded as the scheme within the meaning of this proposition. The scheme will always exist in some shape or form by the time the notice to treat is served. It must, indeed, be in some shape or form at the confirmation of the compulsory purchase order itself, and then, as Lord Denning MR says, it may develop almost from day to day, and the ultimate question for the valuer is to decide to what extent."
The Scheme - Finding
The facts in this matter indicate to me that the scheme underlying the resumption for road purposes is the proposal to have constructed, a road, of distributor status (Collins Road), between Old Northern Road and Bunya Road.
Such a finding does not however resolve the primary issue in dispute.
Rezoning Potential - Highest and Best Use
Before Resumption for Road Purposes
It is a fact that the subject land, at the date of resumption for road purposes, required rezoning to permit residential subdivision. It seems reasonable to accept that rezoning to allow residential subdivision would not have been approved by Council, unless the development proposal accompanying the rezoning application set aside the land required for the distributor road and the applicant undertook to construct that section of road.
That was the actual situation had there been no resumption for road purposes but with the DCP in force at the relevant date. It was on that basis that the Council's valuation was founded. Although the Council did not seek to identify enhancement in the value of the land before resumption, flowing from the scheme as I have found it, there was an inference of the probability of enhancement for the reason that the highest and best use of the land was created by the planning process of which the road scheme was an integral part.
However, if it is correct in principle to remove from consideration the scheme to construct the distributor road, in its entirety, it becomes necessary to hypothesise the rezoning potential of the land in the absence of that scheme.
That was said to have been the basis on which Rothcote's valuation was founded.
Mr Connolly had been engaged by Rothcote to prepare a town planning report related to the highest and best use of the subject property before the resumption(s).
Mr Connolly, as would be expected, informed himself as to the actual town planning position. He was aware that both the Strategic Plan and the DCP had identified the need for a "future major road link" and the general route of that road. It was his opinion that the distributor road proposal was one of the main features of the DCP. It was his perception that, for the purpose of the exercise of determining compensation, if it was to be assumed that the road did not or will not exist, "then the Development Control Plan is to be disregarded".
In fairness, the evidence would seem to be that it was only any provisions in the DCP which had been perceived to be directly or indirectly related to the distributor road, which had been disregarded by Rothcote's professional experts.
Critical to the primary case of Rothcote was the acceptance that the restriction imposed by the DCP on the construction of Pepper Street northerly across Cabbage Tree Creek, was a direct and specific consequence of the selected route for the proposed distributor road, and was to be disregarded. It was Mr Connolly's opinion that in the absence of the distributor road requirement in the DCP, an application for rezoning of the subject land to allow residential subdivision, accessed by extension of Pepper Street across Cabbage Tree Creek and its flood plain, would have been successful. A subdivisional design was produced accordingly.
The evidence of Mr Avent was directed towards the appropriateness of traffic generated from a residential development of the subject land being directed along Pepper Street through the residential areas to the south.
Mr Opanowycz, for the Council, agreed that the reference to Pepper Street in paragraph 13(c)(vi)(F) of the DCP was specifically directed to the distributor road proposal. It had been considered undesirable for Pepper Street to connect to the proposed distributor road and as a consequence allow leakage of traffic through the residential areas to the south. Mr Opanowycz, not unnaturally, had difficulty in ignoring the reality of the distributor road proposal. However, as I understood his evidence, had there been no such road proposal, and no other DCP related considerations, the traffic generated from a development of the subject land alone may not have been in itself, a sufficient reason for rezoning not to be approved.
However, and in my opinion a relevant consideration in this matter, Mr Opanowycz did not see the distributor road proposal as a discrete scheme in the town planning sense but more an important feature of the overall road network planning which was integral to the planned urban development potential of Precinct 12. As identified in 3.1 of the Strategic Plan, the Council was required to insist, in enhancing residential amenity, that a clear hierarchy of roads, in the road layout of residential subdivisions, was evident, to ensure that through traffic is separated from local traffic.
As I see it, that road network planning requirement is not to be ignored in this exercise, only that part of it which involved the distributor road proposal. The evidence overall indicates to me that, until a suitable road network could be established, responsible town planning would not have promoted ad hoc subdivisional developments northerly of Cabbage Tree Creek, directing traffic through existing residential developments to the south of the creek.
Furthermore, as Mr Opanowycz pointed out, the DCP also provided for the establishment of an open space corridor along Cabbage Tree Creek. He saw it as desirable that, quite apart from the distributor road connections, vehicular accesses across the Cabbage Tree Creek flood plain be limited for reasons associated with environmental considerations, including interference with and concentration of water flow, potential erosion, upstream flooding, disturbance to wildlife and, not least, incompatibility with the desirable use by the public of such an open space corridor serviced by footpaths and bikeways.
While it is clear that the lands in this locality northerly of Cabbage Tree Creek were identified in the relevant Strategic Plan and DCP as having potential for expansion of existing residential development to the south, that potential was reliant on the planning process, in its entirety.
Because of the existing development in the locality, the logical route for the distributor road component of the necessary road network, was restricted to the area northerly of Cabbage Tree Creek. In that sense, those lands did have, in my opinion, an attribute which allowed first, the road scheme, and second, the planning process to be effected.
I am not convinced that it would have been appropriate for the Council to have approved the rezoning of an individual parcel within such a sensitive area, unless the development could have been shown to be complementary to a development strategy relevant to the whole of the locality. In the absence of the distributor road scheme, there would have been no such overall strategy in place and the development proposal should have been seen, in my opinion, to be inappropriate or at the very least, significantly premature.
The particular development proposal of Rothcote was designed to exploit the individual attributes of the subject lands. The proposal addressed, through the evidence of Mr Avent, the question of traffic impact on southern residential areas, but only as it related to the traffic expected to be generated from the subject lands. The designed layout, nevertheless, provided an internal road linking with King Street to the east through to the western boundary. Rothcote's proposal assumed that the DCP limitation on the extension of Pepper Street could be disregarded because of the association with the distributor road. It was not however open to Rothcote, in my opinion, to disregard other DCP strategies such as the open space corridor along Cabbage Tree Creek.
It might be arguable that, in the absence of the distributor road proposal, there was at least a speculative rezoning potential for the subject lands. However, even had that been the case, the value of the land, at least that part of it northerly of the creek, would have, in my opinion, remained dominated by its existing rural residential use in the foreseeable future. It follows that the highest and best use of that land, before the resumption, was in the absence of the scheme, its existing use.
Such a finding does not, as it happens, support the primary case of either party.
After Resumption for Road Purposes
Based on its valuation advice from Mr Peterson, Rothcote did not accept that, if the distributor road scheme became reality, as it did after the road resumption, the highest and best use of the land was then for residential subdivision. Mr Peterson's opinion was that the land was injuriously affected to such an extent after the road resumption, that development for residential subdivision would be unviable. Consequently, in his opinion, the highest and best use of the area northerly of the road declined from subdivisional development before the resumption to two large rural residential sites as surveyed, after the resumption. In reaching that conclusion he suggested that the effect of traffic noise necessitated a subdivisional design which increased the size of lots in proximity to the road, as a compensating feature for noise effect, thereby decreasing the yield possible from the development. Mr Peterson had adopted advice contained in the report by Mr Brown, as to expectation of traffic noise levels. The hypothetical subdivisional design adopted by Mr Peterson in his valuation considerations had been prepared by Heilbronn and Partners Pty Ltd (Heilbronn) but on instructions from and using lot size criteria suggested by Mr Peterson.
More will be said of the effects of the road resumption later.
It was the Council's case that the highest and best use of the northern section of the parent parcels both before and after the road resumption was for future residential subdivisional development, in accordance with the provisions of the DCP, including the provision of the road.
The question as to the highest and best use of the northern severance after the road resumption however may be resolved only by consideration of the conflicting valuation evidence.
There is no dispute that the southern part of the land, after the road resumption, had highest and best use for one large home site on the balance area of Lot 1, then townhouse development on the balance area of Lot 2.
Valuation Evidence
Before Road Resumption
In the before road resumption situation, Mr Peterson valued the parent parcel as having residential subdivisional potential. The design produced by Heilbronn obtained a yield of 105 residential lots, 104 of which were northerly of Cabbage Tree Creek, the remaining lot being located on the southern boundary in the original Lot 1. Opposite that lot to the east of the proposed Pepper Street extension, within both the original Lots 1 and 2 but predominantly Lot 2, were designed the group title sites for 50 townhouses. By direct comparison with in globo sales, five of which were tendered in schedule form, Mr Peterson valued the land as follows (excluding improvements):
13.415 ha of good land ripe for subdivision @ $150,000 $2,012,250
2.883 ha of lower land (subject to flooding) @ $10,000 $28,830
Total $2,041,080
To check his primary valuation, Mr Peterson conducted a valuation by the hypothetical subdivision methodology. Individual lots in the Heilbronn design were valued in the range from $74,000 to $87,000 with a gross realisation of $8,225,000 (by extrapolation averaging $78,333). The townhouse sites were valued at $15,000 each as part of the completed subdivisional development. Sales of three sites with townhouse development potential, were tendered. On the criteria adopted, which included an allowance of 35% for profit and risk of realisation, the improved property (with the added value of the improvements assessed at $327,000 from a gross $360,000) was valued at $2,471,000.
In an alternative exercise, which Mr Peterson titled "Assuming Development Control Plan Applies", the parent parcels were valued, on the basis of realignment of boundaries, at $930,000 (Exhibit 6E) including the improvements. That assessment was later amended to $1,085,000 on the basis of a different resurvey configuration in which the whole of the distributor road was contained in the northern lot (Exhibit 36). Before survey costs ($10,000) the large lot northerly of the creek was valued at $560,000 including both dwellings, as a rural residential site. The lot southerly of the creek was finally valued at $535,000, net of costs involved in gaining approval for 50 townhouse sites. (Gross value with approval $750,000).
On the values ascribed to the dwellings in the earlier discussed hypothetical development exercise, it can be assumed that the value of the land north of the creek, excluding the dwellings, after resurvey costs, was assessed by Mr Peterson in the amount of $200,000.
Mr Wood valued the land before the resumptions on the basis of it being worth $150,000 per ha overall, if it had been ripe for subdivision. That amounted to $2,444,655, excluding improvements, and was based on the evidence of six sales of in globo land, four of which sales had been common with Mr Peterson's in globo basis.
It was Mr Wood's opinion that in comparison with the sales, a valuation of $150,000 per ha made allowance for the DCP requirement to provide the land for the distributor road and also the cost of constructing the road, including drainage and bikeway requirements. At the time the valuation was conducted, some of those works had been completed by the Council, at its cost. The initial estimate to complete the remaining works had been $387,679. According to Mr Wood his valuation took into account, as well as the normal park contribution, the actual area required for the distributor road, together with the land below the Q20 flood line being most of the area required for environmental purposes, leaving a net developable area of 10.5962 ha.
At the date of resumption, the distributor road within the subject lands would have had no acceptable external connection until neighbouring land to the west, in particular, had been developed. That was beyond the control of a developer of the subject land. Mr Wood's investigations led him to believe that a delay of at least three years and possibly up to five years could have occurred before that external connection was available. A prudent purchaser would have, in his opinion, taken the more pessimistic, five year delay, view. The "ripe for development" assessment of $2,444,655 was then deferred for five years at an interest rate of 10%, with the resultant $1,517,935 adopted by Mr Wood as the before road resumption valuation.
While the onus on proving enhancement should rest with the constructing authority, Mr Wood set out to show that enhancement resulted only from the carrying out of the works for the purpose of constructing a distributor road within the subject land.
In summary, Mr Wood's before resumption valuation of the parent properties based on the provisions of the DCP was $1,517,935. Mr Peterson's valuation of the land before resumption, ignoring the DCP restrictions, was $2,041,080 or alternatively "if the DCP applies" (on my assumptions as to the added value of improvements assessed by Mr Peterson) $735,000, exclusive of those improvements.
It will be seen later that Mr Peterson's valuation of the southern severance, included in the above figure, based on its highest and best use being for townhouse development, was subject to dispute.
Mr Wood had not produced a valuation on the alternative basis that the highest and best use of the land northerly of the creek may have been for rural-residential purposes. However, Rothcote had been aware that Mr Wood had previously written a valuation in which he had considered the value of the whole property based on its rural-residential use existing at the date of resumption. That valuation was called for and tendered as an exhibit (Exhibit 39). While Mr Wood had subsequently changed his opinion as to highest and best use, I am assisted by the opinion he had given as to the existing use value of the land, before resumption, being $475,000.
After Road Resumption
Northern Severance
Mr Peterson's opinion that the highest and best use of the northern severance was not for residential subdivision, was based on a hypothetical development exercise. That exercise, in turn, was based on a subdivisional design which yielded 70 lots. Forty-one of those lots contained a minimum area of 1,000 m5. Designed lot sizes had been increased on the instructions of Mr Peterson, after he had considered the advice of Mr Brown as to the probable extent of traffic noise. Pine Rivers Shire Council Local Planning Policy LP 25 "Noise Attenuation on Residential Land" sets objective criteria for acceptable levels of road traffic noise intrusion onto residential allotments. It was Mr Brown's evidence that -"In summary, Council considers that L10 (18 hours) road traffic noise levels less than 55 dBA are generally acceptable and do not warrant any specific attention being paid to the construction of dwellings.
For lots subjected to road traffic noise levels of 55 dBA or greater, Council requires that property notes be placed on the Council's rate system alerting potential purchasers to the adverse impact of road traffic noise on the individual properties."
When assessing whether to place property notes on specific lots, Council interpretation of noise level limits is based on "facade reflection" conditions which has the effect of increasing noise levels by 2.5 dBA over "free field" conditions. On the basis that there was no shielding effect from primary residences, but a 2-metre high roadside barrier was constructed, Mr Brown calculated that under facade reflective conditions, "approximately 35 lots will lie between the 55 dBA and 63 dBA contours". That calculation was based on the design utilised by Mr Peterson which showed the 55 dBA noise level contour extending to wholly or partially include 39 lots in total, some being only marginally included.
In Mr Peterson's opinion, the whole of the residential estate as designed to yield 70 lots would be deleteriously affected by the road, regardless that almost half of the lots were external to the 55 dBA contour. He saw the existence of roadside noise barriers as highlighting the problem as exposed by the property notes on the Council rates system, downgrading the quality of housing which would otherwise have been attracted to the estate. The more elevated lots to the north, although outside the 55 dBA traffic noise contour, would, in his opinion, suffer the stigma of lesser quality development. He described the land as having a natural amphitheatre characteristic, the outlook from the northern elevated lots being to the south, over the distributor road.
In Mr Peterson's before resumption hypothetical development analysis with no distributor road, he had adopted maximum lot values of $86,000 and $87,000 for elevated cul-de-sac lots adjoining the State Forest park buffer. In the after distributor road analysis, the value of those same type of lots had been reduced, in his opinion, to $70,000. Lots of around 750 m5 valued in the range of $75,000 before the resumption, although having been increased in size to 1,000 m5, were valued at $58,000 when abutting the road or within the 55 dBA noise contour. Mr Peterson provided evidence of the sales of six lots backing on to the busy Bunya Road in Arlington Estate with roadside noise barrier protection, where the sale prices ranged from $57,500 to $60,500. One of those lots at the top of a cul-de-sac, with views, had an area of 970 m5 and sold for $59,000. Generally the sale lots sloped away from the road assisting in the mitigation of noise.
For the subject land, Mr Peterson assessed a gross realisation of $4,400,000 for the 70 designed lots, which equates, on the average, slightly less than $63,000 per lot. On the criteria which he adopted, including professionally estimated development costs; interest calculations on the completed development based on a cash flow basis related to his estimate of selling period; and a profit/risk allowance of 40% (increased from 35% before the resumption); there would have been no residual land value, proving to him that development was unviable.
Mr Wood also provided the Court with an after resumption(s) hypothetical development valuation exercise. He adopted a design produced by John Wilson & Partners Pty Ltd (Wilson) which yielded 87 lots north of the distributor road, the majority of which were 750 m5 in area but ranging up to 1,100 m5. Eighteen of the lots backed onto the distributor road. The Wilson plan was adopted as representing the subdivisional potential of the land both before and after the resumption. In the after resumption situation, Mr Wood valued the 87 lots to average $70,000 overall providing a gross realisation of $6,090,000. In his verbal evidence he said that, in his experience, the effect of road noise on market value did not extend beyond those lots immediately abutting busy roads, including those where noise barriers had been constructed. He did not accept that a prudent developer would increase the size of lots abutting and in proximity to the road, as Mr Peterson suggested should be done. In his opinion, the sale price of lots abutting the road in the development as proposed by Wilson would not need to be discounted, on the average, below $60,000. He believed that Mr Peterson had been somewhat optimistic in his before resumption lot valuation of the prime lots. In Mr Wood's opinion, the better lots would be limited in value to the range of $80,000. He did not accept that the road or any consequential effects would cause the better lots in the northern sector of the development to be in any way depreciated in value.
Mr Wood adopted a profit/risk of realisation allowance of 25% which he believed was the best the market would have allowed a developer of the land of this quality at the date of resumption. He saw the overall development as one which would be presented and sold in stages attracting some significant pre-release commitment. For the purpose of the exercise however he had calculated interest, where appropriate, over half the development and selling period of the entire development. He adopted an interest rate of 10% which he said was the commercial borrowing rate at the relevant date. After some necessary adjustment to the development costs, the residual value of the northern severance would have reduced from his assessment of $1,313,000 to about $1,270,000, based on the hypothetical development methodology.
The elements which cause the significantly different valuation results between Mr Peterson and Mr Wood are readily identified and are discussed as follows:
Yield
There were conflicting views expressed by Mr Avent, and Mr Settle, as to the adequacy of the Wilson design, particularly in that one access point only was provided from the proposed development onto the distributor road . The Heilbronn design provided two entry points. Again there was difference of opinion as to the adequacy of the distance between those distributor road intersections, as well as between potential intersections external to the property.
From a valuation aspect, it seems to me that the real issue involves the perception by Mr Peterson that there was need to provide larger lots abutting and in proximity to the distributor road. Mr Peterson had seen an analogy in the practice of developers providing larger than average sized lots to compensate for the negative features of steep topography.
I am not persuaded, however, that a prudent developer would forego a yield of 17 lots in a developable area of the size of the subject land, when there is evidence (including that from Mr Engeman relative to the adjoining Arlington Estate), that developers do not adopt the larger size lot approach to militate against the traffic noise problem. Indeed, it would seem that the denser the development adjacent to busy roads, the greater the potential for the eventual shielding effect to extend away from the road, once houses have become established. Of course, as Mr Peterson pointed out, initial land sales in an estate are made before dwellings are constructed and before any shielding effect can be gauged by potential purchasers.
While different designs are possible, I do not accept that the road should cause the loss in yield as promoted by Mr Peterson. In considering the hypothetical development exercise I will adopt the after road resumption design produced by Wilson.
Gross Realisation
Mr Peterson was critical of the adoption of an average lot value in calculating gross realisation. He had applied values to each individual lot in his calculations.
Mr Wood pointed out the difficulty in assessing individual lot values when precise lot boundaries were impossible to establish on the ground from a preliminary design plan. He saw it as more practical to adopt an overall average lot value, based on comparison with the range of values shown from sales in comparable subdivisional developments. His evidence was that in the Arlington Estate, immediately to the west of the subject land, the average size of lots sold in 1996 was 818 m5 and the average sale price $68,182, then in 1997, 832 m5 and $72,071 respectively. The average size of lots in the design of Wilson was 796 m5. Mr Wood adopted an average value of $70,000. In his opinion, the subject land had features superior to the developed stages of Arlington. His verbal evidence was that the lots abutting the road would have had market value at the date of resumption of $60,000 as a result of the road effects, and the upper range of value for lots adjacent to the State Forest would have been $80,000. The Wilson design indicated 16 lots immediately adjacent to the State Forest buffer. Of the total 87 lots, 54 would fall either fully or partially (some to a minor extent) within the 55 dBA noise contour.
Mr Peterson's methodology in adding individual lot values to obtain the gross realisation is, of course, technically correct. Average lot values could not be established with any accuracy unless estimates of individual lot values were considered. However, Mr Wood's evidence indicates to me that he had given consideration to the overall range of expected lot values in his averaging approach.
In this case it is not possible to compare valuations based on the same design criteria. There is polarised professional valuation opinion as to the extent of deleterious effect caused by this particular road resumption, leading, in the first instance, to the different subdivisional designs.
At the request of the parties the Court carried out an inspection of the locality of the subject properties and various other lands which were mentioned in the evidence.
On the design adopted by Mr Peterson, his suggestions as to the extent of deleterious effect on individual lot values, seems extraordinarily pessimistic, not necessarily on the lots abutting the road, but certainly on the balance of the estate. If such degree of deleterious effect on the value of lots removed from a major road was realistic, it would seem, with the number of new residential estates which have been developed in recent years adjacent to major roads, that there would have been a wealth of sales evidence available to support Mr Peterson's opinions and to rebut those of Mr Wood. The nature of the evidence presented to the Court proves little more than that the level of value of lots abutting the road would be expected to be no greater than $60,000 and probably a little less.
Specifically for the purpose of the exercise, based on the Wilson design, I will adopt a more conservative overall average lot value than that suggested by Mr Wood, reducing his estimate from $70,00 to $68,000. Indeed, although Mr Peterson had adopted an extrapolated average lot value estimate of slightly less than $63,000 in the 70-lot design, he gave evidence to the effect that in comparison with the Arlington Estate 1996 sales, an average of $68,000 for the subject land on the Wilson design, would have been more appropriate than the $70,000 adopted by Mr Wood (Transcript p.84).
Profit/Risk of Realisation
Both valuers in their before resumption considerations adopted a value of $150,000 per ha for the subject land, on the basis that it was ripe for subdivisional development and with no abnormal development conditions. The difference was that Mr Peterson adopted $150,000 for the flood-free land only while Mr Wood adopted that level of value over the total area. Both valuers referred to a direct comparison with sales of in globo land in arriving at their assessments. In the circumstances I do not see the need to discuss in any detail the in globo sales evidence.
When Mr Wood extrapolated that level of value to a net developable area basis and applied it to his after resumption value, his resultant valuation for the gross residual areas (including the southern severances) of 11.7876 ha was equivalent to $2,659,924 or $225,655 per ha. In his hypothetical development approach using a profit/risk allowance of 25% the valuation was only $1,529,000 or $129,715 per ha (including the southern severances) and even less when adjustments were made to the development costs.
If the southern severances were excluded, Mr Wood's hypothetical development exercise would have produced an in globo value of $1,313,000 for an area of 10.178 ha before park contribution, or about $129,000 per ha.
It is well held that the hypothetical development valuation methodology is best utilised as a check against direct comparison with sales of in globo lands. However the check by Mr Wood, in this instance, indicates such a significantly different end result, that either far too high an in globo hectarage rate was adopted by him in his direct comparison developable area approach, or the hypothetical development methodology was in some way seriously flawed. The criteria adopted by Mr Wood in the latter approach was subjected to close scrutiny. Mr Peterson clearly would have adopted a lower gross realisation had he utilised the Wilson design. In his opinion, the profit/risk allowance should have been 40%, and interest holding costs after completion of development calculated on a cash flow basis and using a rate of 12%. Even adopting Mr Wood's gross realisation, Mr Peterson's suggested criteria resulted in an in globo valuation including the southern severances, of about $1,141,000 or about $841,000 for the northern severance alone, equating about $82,630 per ha. I would, on the evidence, have had no confidence in Mr Wood's assessment based on net developable area and his interpretation of the in globo sales evidence. It is not possible to test, on his figures, the validity of a 25% allowance for profit and risk.
In Mr Peterson's primary valuation, based on exclusion of the road scheme, his overall in globo valuation based on direct comparison with the sales, would have equated about $125,000 per ha including the flood affected land. His hypothetical development exercise, using a profit/risk allowance of 35%, produced an in globo result equivalent to $131,734 per ha overall. Such a result would support, prima facie, his allowance of 35% for profit/risk.
However brought into question in that exercise was Mr Peterson's estimate of gross realisation and the selling period based on sales of eight lots per month. Although Mr Wood had anticipated pre-commitments of 15 lots, his selling period was then calculated as three lots per month, supported by his local research into the sales achieved in other developments. In the nine-month period in which Mr Peterson estimated sales of 71 residential lots, Mr Wood in comparison would have seen 42 lots having been sold.
If it was necessary to apply more precision to the calculation of interest costs, the cash flow methodology used by Mr Peterson might arguably give more accurate predictions in specific instances, than an allowance based on half the estimated construction and selling period. However, again bearing in mind the recognised imprecision of the hypothetical development method, matters such as the gross realisation and adopted selling period can impact heavily on the end result. It seems reasonable to accept that it would be highly unlikely for a development of the size of the subject, to be constructed and sold as one stage. Mr Peterson's assumption for the purpose of this exercise, was that interest would be accumulating on the total completed development until the cash flow eliminated the assumed debt. In staged development, it would be expected that interest on construction costs would accumulate for significantly shorter periods. In this particular case, while some queries should exist as to the "opening balance" on which Mr Peterson's cash flow calculations commenced; the net cash receipt for the townhouse site; whether the cash flow was calculated to commence at the beginning of each month rather than at the end; the matter of most significance is the adopted rate of sales. If Mr Peterson had been too optimistic in his estimate of gross realisation and the rate of sales, then interest costs would increase on his methodology leaving lesser profit for the developer.
It seems to me therefore that had the in globo sales evidence been capable of analysis, based on hypothetical development at the date of sale, then there was a real likelihood that the profit allowed the purchasers of most of those properties would have been less than the 35% allowed by Mr Peterson, in his initial before resumption exercise.
For the purpose of deciding the highest and best use of the northern severance, and giving the benefit of real doubt to the claimant, I will adopt an allowance of 33a% for profit/risk of realisation, in the situation where it could be argued that greater risk of realisation would exist after the resumption..
Interest Allowance
In further recognition of the basic imprecision which is the hallmark of the hypothetical development methodology, I see no reason to depart from the traditional method of calculation of interest holding charges as had been adopted by Mr Wood. Again, for the purpose of the exercise, giving the benefit of doubt to the claimant, I will adopt the rate of 12% as suggested by Mr Peterson.
Residual Land Value - Northern Severance
For consideration of the viability of subdivision and the consequent highest and best use of the northern severance after the road resumption the following criteria is adopted.Gross Realisation - 87 lots averaging $68,000 $5,916,000
Less:
Commission $187,050
Advertising $87,000
Legals $26,100 $300,150
Net Sale Proceeds $5,615,850
Less Profit and Risk Allowance 33a% $1,403,960
$4,211,890
Less Development Costs (as broadly agreed, with Council
responsible for distributor road construction)
Adopt $2,609,000
Interest 12% for half construction and selling
period of say 2.5 years $391,350 $3,000,350
Gross Land Value $1,211,540
Less Rates and Land Tax allow $20,000
$1,191,540
Less Interest 12% on land value for holding period
of two years plus half selling and construction
period of 2.5 years $334,315
Land Value including acquisition costs $857,225
Less acquisition costs $25,000
Residual In Globo Valuation $832,225
This equates $81,765 per ha for the whole area of the northern severance, before park contribution.
Summary of Valuation of Northern Severance
The valuation as suggested by the hypothetical development method is, in my opinion, the best case possible for the claimant. The result would have been clearly different and worthy of closer scrutiny had the Council not undertaken responsibility for the cost of construction of the balance of the distributor road. However, it is observed that as indicated by both valuers, good quality in globo land, in this general locality in the absence of abnormal features would be expected to sell for at least $150,000 per ha if ripe for development. If it was necessary to hold a parcel of in globo land, for say two years, until it became ripe for development, the value of $150,000 per ha, deferred for two years at 12% would reduce to about $120,000 per ha. The land with the disability of adjacency to the distributor road and development deferred for two years, has an indicated value of only $81,765 on the hypothetical development method. This suggests a discount in excess of 30% for the deleterious effect of the road. It would be seen as highly pessimistic for such level of discount to apply. It should be noted that an intentionally conservative approach was taken in adjusting Mr Wood's assessment of gross realisation; profit and risk allowance and interest rate. If the land was to be valued by direct comparison with sales and then discounted for the period before access became available for development purposes, a valuation in the range of $110,000 per ha would have otherwise be seen to make sufficient allowance for the injurious effects of the purpose of the resumption.
It is noted that by the time of the hearing the road construction had proceeded with the Council having completed construction to within the property from the east, shortening to about two years, the period from the date of resumption within which the future potential might otherwise have been realised. In Zoeller v. Brisbane City Council (1973) 40 CLLR 198 at p.204, the Land Appeal Court said when considering the effects of enhancement:"In our judgment, it is only good sense that such enhancement should be assessed according to the best evidence available to the court at the date of hearing."
It is seen as worthy of mention that if Mr Wood's interpretation of the highest and best use of the land before resumption had been found to be correct, he should have deferred the value for the shorter period as shown by subsequent events in the before valuations as well as the after.
For the purpose of the exercise, the importance of the amount of the valuation is not critical once the highest and best use of the northern severance after resumption becomes clear.
Mr Peterson had assessed the value of the northern severance in the after road situation as being, as I understood his evidence, no more than $400,000, the highest and best use being, in his opinion, for two rural residential sites of 5.442 ha (Lot 21) and 4.736 ha (Lot 22).
The valuation exercise, even on the hypothetical methodology, indicates that the highest and best use of the northern severance after resumption was for future development as a residential subdivision.
Value of Southern Severances - After Road Resumption
Once the matter had been considered by the Council there was no dispute as to the value of the southern severance of the original Lot 1 (Lots 25 and 28) containing 1.8206 ha being $120,000 on the basis of highest and best use as a rural residential site.
The balance of Lot 2 (Lots 26 and 27) with an area of 2.672 ha had agreed highest and best use as a townhouse development site. On this site the land available for building development was limited to the higher land (Lot 27). Permitted density of townhouse development was 17 townhouses to 1 ha, over the total area including the low land. This totalled 45 townhouses.
Mr Wood (Exhibit 38) valued the balance of Lot 2, before rezoning at $315,000 equivalent to $7,000 per unit.
Mr Peterson valued the 45 unit site at $15,000 per unit (Exhibit 34), after rezoning, then deducted rezoning costs, arriving at a valuation of $535,000.
Each valuer had, in the first instance, used three sales of townhouse development sites, showing widely varying levels of value, as evidence supporting their valuations. One sale, of a 17 unit site at 66 View Crescent, Arana Hills, showing a "Residential A" zoned value of $13,529 per unit site, was common to both. Mr Wood saw that site as overall comparable to the subject land although with superior aspect. Mr Peterson described the sale land as inferior requiring extensive earthworks. There was also professional disagreement as to whether unit site values decreased as the size of the development increased, which was Mr Wood's opinion. In terms of direct comparability, Mr Wood saw the sale of an adjoining 2 ha site in Pepper Street, all above flood level, with permitted development of 34 units, in February 1992, for $8,088 per unit site, as useful evidence. In his opinion the market had not increased for unit sites up until the date of resumption. However that sale was clouded by a resale in May 1992 for the equivalent of $20,652 per unit site. Mr Wood's inquiries indicated to him that the resale was not at arm's length.
Mr Wood had been aware of the sale of a site of 2.38 ha at 142 Bunya Road, Arana Hills which had a net developable area of 1.48 ha, on which 46 townhouses had been constructed (31 units per ha). The site had sold in January, 1992 for $290,000, equivalent to $6,300 per unit. He regarded the resultant development as being "cluttered" and the level of value per permitted unit as reflecting that negative feature.
Although the valuation evidence as to the value of the townhouse site appeared to be seriously at odds, a close analysis brings it more into perspective. First, Mr Peterson's $15,000 per unit site valuation appeared to be consistently maintained in the several exercises which were eventually necessary. That was on a rezoned basis. The cost of rezoning per unit varied with the size of the site involved but, as I understood the evidence, would not have been less than the headworks charges of $2,625 per unit ($44,615 per ha) where the permitted development on an area basis could be physically achieved. In Mr Peterson's initial hypothetical development exercise, he had valued a 50 unit site at $15,000 per unit, as rezoned and as part of a completed subdivisional development. On my calculations, assuming headworks rezoning costs of $2,625 per unit the value before rezoning reduced to $12,375 per unit before consideration of matters such as risk of rezoning, holding costs and the like. More importantly, however, Mr Peterson, in that exercise, also allowed a development cost of $200,000 or $4,000 per unit site, to provide recreational facilities on the "private open space" flood plain component of the townhouse development site. The reasoning was that the building development could not be spread spaciously over the whole of the site but was forced on to the land above flood level. It seems clear to me that such expenditure was intended to compensate for the cluttered development which would have resulted. In real terms the unit site value became $8,375 in comparison with other development sites where such recreational facilities were not required to overcome the relatively cramped developable area.
Even so, I am not convinced that in comparison with a much smaller, rezoned site for 17 units at 66 View Crescent, showing about $13,500 per unit site, admittedly for a site of steeper contour, Mr Peterson's valuation of $15,000 per unit or $11,000 before the provision of recreational facilities was supported by the evidence.
Furthermore, after the road resumption the access to the southern severance of the original Lot 2 was restricted to Garfield Terrace. Some Council rezoning resistance had been perceived as a distinct possibility by Mr Wood on the advice of Mr Opanowycz, if access had to be obtained via Garfield Terrace.
In the end result I have decided to adopt Mr Wood's after road resumption valuation of the southern severance areas which is as follows:
Lots 25 and 28 - $120,000
Lots 26 and 27 - 45 units @ $7,000 per unit (before rezoning) $315,000
$435,000
Less - Discount 5% for sale in one line (2 lots) $21,750
Net Land Value $413,250
Value of Hypothetical Southern Severance - Before Road Resumption
I deal with this out of the normal before and after sequence, because of my findings relative to the situation after the road resumption. Mr Wood had not given an opinion as to the added value of the hypothetical southern lot which could have been created by a resurvey.
Mr Peterson had adopted a townhouse development potential of 50 units. That had been based on Heilbronn's initial subdivisional design for the whole of the land. The permitted density would have been as high as 76 units, had there been sufficient land available above flood level to accommodate such development. Mr Opanowycz had calculated that a development of up to 54 units may have been physically possible on the higher land.
Mr Peterson had adopted the rezoned unit value again as being $15,000 but in this exercise the rezoning costs had risen to $215,000 ($4,300 per potential unit) leaving a residual land value of $535,000. Again, there was no allowance for the recreation facilities he had seen as necessary in his first overall hypothetical development exercise. There was no allowance for risk of rezoning, or holding costs. However, as I understood Mr Opanowycz's evidence, there would have been less Council resistance to this proposal as its access was capable of being designed off the existing Pepper Street.
For the purpose of relativity with the after road resumption valuation previously discussed, a higher unit value would recognise the lesser risk in obtaining rezoning. I will adopt an in globo unit value before rezoning, at the date of resumption of $7,500 but for 54 units, amounting to $405,000.
Added Value of Improvements
The evidence as to the added value of the improvements is of a broad nature. Mr Peterson found an added value of $350,000 for the main dwelling and its appurtenances, either on a secluded rural residential site or on two residential lots within the proposed initial subdivisional design (unaffected by the distributor road). The added value of the dwelling on a smaller rural residential site after the distributor road resumption, was reduced in Mr Peterson's opinion, by $100,000. Some works had been carried out by the Council in providing a new entrance to the dwelling off the distributor road. Mr Wood had, in his earlier deliberations, seen it as reasonable in the interests of privacy, for an appropriate screen fence to be constructed along part of the distributor road frontage, had the highest and best use of the land remained as the existing rural residential use, after the road resumption.
Although Mr Peterson had not found any difference in the value the prestige dwelling would have added to either a rural residential site in the first instance, or the equivalent of two residential sites, there would logically be potential for some loss in added value in the latter circumstances. There is seen as potential for further loss through the resultant proximity to the distributor road. Mr Peterson found a removal value of $10,000 for the "gatekeeper's" dwelling, and that was apparently seen as its added value in both the before and after valuations.
While it will be seen to have no effect on the end result, for the sake of completeness, I will adopt Mr Peterson' valuation of the prestige dwelling as $350,000 on land with highest and best use as a rural residential style site, then $250,000 after the road resumption but on land with residential subdivisional potential and in close proximity to the distributor road.
Total Value Before Road Resumption
Based on the results of my calculations and without discounting for the need to resurvey, I would find that the land value excluding improvements before the road resumption, would be as follows:Land -
North of Cabbage Tree Creek as a rural residential site $200,000
South of Cabbage Tree Creek with potential for rezoning
for townhouse development $405,000
$605,000
Added value of improvements say $350,000
Total $955,000
Value after Road Resumption
Northern severance - with rezoning potential to allow
development for 87 residential lots Adopt say $832,500
Southern severance as described $413,250
$1,245,750
Added value of improvements on two potential
residential lots say $250,000
Total $1,495,750
Adopt $1,500,000
Finding - Resumption for Road Purposes
Significant enhancement results from the purpose of the resumption which has been found principally to alter the highest and best use of the land northerly of Cabbage Tree Creek. No compensation is payable in accordance with s.s.(3) and (4) of s.20 of the Acquisition of Land Act which provide:
"(3) In assessing the compensation to be paid, there shall be taken into consideration, by way of set-off or abatement, any enhancement of the value of the interest of the claimant in any land adjoining the land taken or severed therefrom by the carrying out of the works or purpose for which the land is taken.
(4) But in no case shall subsection (3) operate so as to require any payment to be made by the claimant in consideration of such enhancement of value."
Resumption for Environmental Purposes
Before:
It is the southern severances only of the original lots "after the road resumption" which are affected by these resumptions. It was found earlier that the highest and best use and value of the southern severances after the road resumption was as follows:
Lots 25 and 28 (balance of Lot 1) $120,000
Lots 26 and 27 (townhouse site for 45 units) - (balance of Lot 2) $315,000
$435,000
Less Discount 5% for sale in one line (2 lots) $21,750
$413,250
It follows that this assessment then becomes the before resumption value of the land affected by the resumption for environmental purposes.
After:
The land remaining after the resumption is Lot 27 (from original Lot 2) containing 1.26 ha and Lot 28 (from original Lot 1) containing 3,496 m5.
Although Lot 28 had potential for separate sale as a large residential site, there was agreement between the valuers that the most efficient use of the balance areas would be in amalgamation as one townhouse development site of 1.6096 ha. This is precisely the same area which, on Mr Opanowycz's evidence, had previously been capable of physically accommodating 54 units. However, after the environmental resumption the permitted density of 17 units per ha now limits the development to 27 units. It follows the density of the development on the same area above the Q50 flood line, reduces by one half.
Mr Wood, in his final valuation placed before the Court (Exhibit 38) adopted a unit value of $8,000 per unit (before rezoning). It will be recalled that this increased from $7,000 per unit (before rezoning) for a larger development proposal of 45 units off Garfield Terrace.
His opinion was that, in comparison with the dense development previously permissible the development potential after the environmental resumption would be uncluttered, more attractive for townhouses for owner occupation and in keeping with the development on land immediately adjoining. Having primary access off Pepper Street, there was reduced risk involved in rezoning. Furthermore, in his opinion, the lesser number of units involved in maximum development would meet a more competitive market. In his earlier hypothetical development exercise he had valued the land as rezoned, at $10,000 per unit, then deducted an allowance of 20% for risk of rezoning and holding costs involved in obtaining rezoning. The evidence indicates to me that the rezoned valuation of $10,000 per unit is most conservative.
Mr Peterson's valuation approach was to now reduce the desirable development density from the 27 units permitted to only 20. Again, he valued those unit sites at $15,000 or $300,000 less rezoning costs for which he allowed $86,600 to arrive at a site value of $213,400 before rezoning. It will be seen that his end result, based on the maximum development potential of 27 units would extrapolate to $7,903 per potential unit, which is, in valuation terms, supportive of Mr Wood's valuation.
It is my interpretation of the evidence overall that a valuation based on $8,000 per potential site for the remaining area, with rezoning required, reflects a conservative approach by Mr Wood. The result is to the benefit of Rothcote.
I therefore adopt Mr Wood's after environmental resumption valuation of $216,000.
Finding
Compensation is determined as finally assessed by Mr Wood as follows:
Before resumption for environmental purposes $413,250
After resumption for environmental purposes $216,000
Compensation $197,250
Summary of Determination
Compensation for resumption for road purposes Nil
Compensation for resumption for environmental purposes $197,250
Disturbance - Costs
There was no claim finally before the Court for disturbance items such as legal and valuation fees expended by the claimant in compilation and lodgment of the claim for compensation. The final claim was formulated on the basis that Rothcote sought its costs of and incidental to the hearing.
Section 27 of the Acquisition of Land Act relevantly provides as follows:
"(1) Subject to this section the costs of and incidental to the hearing and determination by the Land Court of a claim for compensation under this Act shall be in the discretion of that Court.
(2) If the amount of compensation as determined is the amount finally claimed by the claimant in the proceedings or is nearer to that amount than to the amount of the valuation finally put in evidence by the constructing authority, costs (if any) shall be awarded to the claimant, otherwise costs (if any) shall be awarded to the constructing authority."
The determination of compensation is the amount of the valuation finally put in evidence by the constructing authority. It follows that the fetter on the Court's discretion, pursuant to s.27(2)of the Act, does not permit an award of costs in favour of the claimant.
Interest
It is ordered that the respondent pay to the claimant interest at the rate of 7 per cent per annum on the amount of $197,250 for the period commencing on 6 September 1996 up to and including the day immediately preceding the date on which payment of compensation is made.
RE WENCK
MEMBER OF THE LAND COURT
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