The McKellar Development Corporation Pty Ltd v The Director-General, Department of Transport
[1996] QLC 66
•23 May 1996
|
BRISBANE
23 MAY 1996
Re: Determination of Compensation payable consequent
upon the resumption of land for Road Purposes -
Acquisition of Land Act 1967 - A93-76
BETWEEN:
The McKellar Development Corporation Pty Ltd
Claimant
ANDThe Director-General, Department of Transport
Respondent(Hearing at Cairns)
JUDGMENT
As at 6 November 1992, The McKellar Development Corporation Pty Ltd (McKellar) owned a triangular shaped lot of 5.406 ha at the north-eastern corner of the Captain Cook Highway and McGregor Road, Smithfield. The locality is in the Northern Beaches region of Cairns, the Central Business District of which is about 17 km to the south.
Smithfield at the date had developed as a satellite suburb, commencing at the junction of the Kennedy Highway and the Captain Cook Highway. The Smithfield Shopping Centre and Tavern was located at the north-western corner of the highways’ junction. Residential development and pockets of commercial development then extended to the north and west on the western side of the Captain Cook Highway. Land to the east of that highway was generally in its in globo state either as existing or previous sugarcane farms. The McGregor Road intersection is about 2 km to the north of the junction of the highways. North of McGregor Road on the western side of the highway was the site of the then proposed James Cook University Campus.
The McKellar land comprised the cleared, gently sloping balance area of a larger parcel which had been acquired from the Mulgrave Shire Council then largely developed as a residential estate. A 40 m wide drainage reserve, accommodating a now channelised drain, severed the residential area from this remaining land. At the time, the highway was of two-lane bitumen sealed construction, although the road reserve had been widened and the corner of the subject property truncated to accommodate further roadworks including a future roundabout. Traffic control at the intersection was by signage. McGregor Road, on the property frontage, was bitumen strip sealed with gravel shoulders.
On 6 November 1992, further land was taken by proclamation from the McKellar site for road purposes. The resumption was in connection with a scheme to upgrade the Captain Cook Highway to four-lane divided construction between the Kennedy Highway intersection and a point about 700 m north of McGregor Road. The land taken involved further widening, by varying width, of the previous highway reserve and truncation to McGregor Road.
The McKellar land, before resumption, was described as Lot 196 on Registered Plan 748699, Parish of Smithfield, County of Nares. The resumed area when surveyed became Lot 92 containing 9,478 m2, and the balance area Lot 196 on Registered Plan 855865, contained 4.458 ha. A copy of that plan is here included.
In June, 1992, McKellar had made application to the Mulgrave Shire Council, the local authority area in which the land was then situated, to have the balance area (eventually Lot 196) excluded from the “Rural C” Zone and to be partly included in the “Local Shopping” Zone and partly within the “Special Facilities (Multiple Dwellings)” Zone. The land still at that time to be resumed, was not included in the application. The application was withdrawn and fresh application submitted in August, 1992. The second application excluded an area which was designed as a proposed internal road, reducing the total area sought to be included in the “Local Shopping” Zone to 2.3167 ha. This area comprised one parcel of 1.721 ha in the immediate corner of the intersection and two severed parcels, on the eastern side of the proposed internal road, one of 2,957 m2 at the northern extremity adjacent to the highway, and one of 3,000 m2 at the southern extremity at the corner of McGregor Road. The area first sought to be included in the “Special Facilities (Multiple Dwellings)” Zone, contained an area of 1.182 ha, located on the eastern side of the proposed internal road, between the two smaller lots described above, all of which land then backed on to the drainage reserve. In the August application, an amendment was made to restrict the height of the multiple dwellings to a maximum of two storeys.
The August application was approved by Council on 30 November, 1992, with conditions - some of which were appealed against but settled between the parties. The application was formally approved pursuant to an order of the Planning and Environment Court on 12 July, 1993 and rezoning was gazetted on 19 November, 1993.
The internal road was subsequently constructed and the “Campus Shopping Village” constructed between that road and the major intersection.
There is no dispute between the parties to this action that, for the purposes of determining compensation for the taking of the land, the value of the land after resumption is directly related to the actual rezoning which occurred.
A copy of a plan showing the post-resumption rezoning now follows:
The parties are unable to agree on the rezoning potential of the land had the resumption not occurred. It should be said that the respondent does not argue that the remaining land was enhanced by the purpose for which the land was taken (see s.20(3) - Acquisition of Land Act 1967).
Basis of Claim:
McKellar’s case is that the design employed in the after resumption rezoning would have simply been expanded to the highway as it previously existed, the greater proportion of the additional area being incorporated within the “Local Shopping” Zone, as the primary corner site. The corner site, it says, effectively reduced as a result of the resumption from a potential area of 2.467 ha to that which was actually rezoned - 1.721 ha. The two severed “Local Shopping” Zone lots would have been similar both before and after resumption and the “Special Facilities (Multiple Dwellings)” Zone would have decreased from 1.283 ha before resumption to 1.182 ha after. McKellar says that the greater the area within the “Local Shopping” Zone, before resumption, the higher the pro-rata value of the land overall. Following is the plan which McKellar says represented the potential of the site before resumption.
The Claim for Compensation as filed with the Land Court was in the amount of $806,300. At the commencement of the hearing leave was sought and granted to amend the claim to the amount of $703,200, comprising $696,900 for loss of land and injurious affection and $6,300 for valuation and legal fees incurred in the compilation of the claim. Agreement was reached in respect of amounts of $4,500 for the valuation fees, the account for which had not been rendered, and $1,600 for the legal fees which had been paid on 9 March, 1994. The total amount of $6,100 under these headings will be awarded accordingly.
The amended claim was in accordance with a valuation carried out by Mr G. Coonan, a registered valuer in private practice in Cairns. His valuation had taken into consideration sales and resales of six properties, five of which were at highway or near highway locations south of Cairns and over a time period ranging from July 1987 through to May 1993. One sale close in time to the relevant date of resumption and of land in close proximity to the subject property, was of an 8.723 ha site with long highway frontage and relatively narrow depth, adjoining to the north the Smithfield Shopping Centre. That site (“Smithfield”) also adjoined residential development and was itself zoned “Residential A” although a previous application to rezone to “Local Shopping” had been approved and then allowed to lapse. It was anticipated by the purchaser that a fresh rezoning application would succeed. Mr Coonan commented that development of the “Smithfield” site required substantial external infrastructure expenditure for the provision of access. In addition, “Smithfield” could not be fully developed except with substantial on-site drainage works. The property was encumbered by a 1.8446 ha drainage easement. The property sold on 4 December 1992 for $2,300,000. (After resurvey and rezoning approval the site had resold in March 1994 for $5,000,000).
Mr Coonan’s inquiries indicated to him that the several persons involved in the “Smithfield” purchase in the first instance had expected external costs of development to be in the range of $1,100,000 to $1,500,000. No detailed engineering analysis had been conducted however at the date of sale. By methodology which he explained, Mr Coonan analysed the sale to show a level of value of $55.25 per m2 “for a constrained site with net area of 6.878 ha but with adequate access”.
Mr Coonan’s investigations indicated to him that the evidence provided by the sale was a level of value related to a “fall-back” position for a low-key development including fast food outlets and a balance land component. However, the potential existed for more intense local shopping development either on a stand-alone basis or in conjunction with the existing adjacent shopping centre. The purchase was seen to be speculative in terms of optimum use, the purchasers having entrepreneurial experience. In Mr Coonan’s opinion, the resale of that site, albeit at a later time and under superior market conditions, reflected a change in status from a fall-back level of value to the full potential having been exposed. In the meantime it had been estimated, based on professional advice, that the extent of external access required would involve capital cost of $2,000,000, but for a more intense development than the “fall-back” position.
From a valuation point of view, Mr Coonan was particularly concerned that the vendor had been under extreme pressure to sell. The transaction had not represented a mortgagee-in-possession sale but Mr Coonan had little doubt that the circumstances of the vendor were such as to create a forced sale influence. In Mr Coonan’s opinion, even though market conditions for commercial type real estate had not recovered from a long period of depressed conditions, there were, by the date of sale, positive indications of improvement. Historical market trends should have indicated imminent improvement at that time, in his opinion, to persons experienced in the local market. Mr Coonan set about providing the historical trends in the Cairns real estate market which, in his opinion, should have influenced a vendor free from financial pressure. As Mr Coonan saw it, such a vendor wishing to negotiate a sale at that date, for whatever reason, would have been seen to be imprudent not to have negotiated a sale price at a figure somewhat in excess of levels of value shown by sales made by vendors under “distressed circumstances”. Mr Coonan saw the extent of increase in sale price that was shown by the resale as being indicative not only of the superior market conditions at the later date of sale, or the entrepreneurial skills of the purchaser/vendor, in exposing the full potential of the “Smithfield” land, but also the lower than realistic level of value at the date of the earlier sale.
Mr Coonan analysed the later sale to show a level of value of about $97 per m2 for the land based on its ultimate potential. While he was not attempting to “adjust” either the first sale or the resale, consideration of the elapse in time and the entrepreneurial risks involved suggested to him that a level of value of about $70 per m2 would have been more realistic at the earlier date of sale, had the sale been made by a vendor free from financial pressure.
Mr Coonan also provided details of a site of 1.107 ha on the southern side of Cairns which had been purchased in May, 1993, with an intention for development of a “truck stop”, for $73 per m2. The proposal was later amended to one for a light industrial subdivision. Mr Coonan saw that site as inferior to the subject although the inferiority was in his mind offset by the smaller area of that site. The sale in his opinion demonstrated the value of land without the “distressed sale” implications. As Mr Coonan pointed out, most of the sales of land south of Cairns were difficult to compare with the subject land due to “discrepancy in dates and the potential uses”. Those sales prior to the relevant date were of land inferior to the subject land, although suggesting “a value for the subject property between $40 and $60 per m2". Some of the details of his analyses of the sales south of Cairns were challenged with some success, and generally I find the sales evidence from that locality as being of little assistance.
With the lack of evidence of sales of shopping centre sites in the Cairns region, Mr Coonan included in his report details of 1992 and 1993 sales of sites in the Gold Coast region. These sites had development potential for centres with floor areas ranging from 2,240 m2 to 5,500 m2. One sale which he described as a “distressed sale” showed $62 per m2 while the balance were in the range of $108 per m2 to $173 per m2 on a site area basis. Mr Coonan did not suggest that the sales could be adopted as a basis for the subject matter but he saw some similarities between the real estate market in the Gold Coast and Cairns regions. It seems that the sales gave Mr Coonan some comfort in his appreciation of the likely level of value for the site within the subject land which had the shopping centre potential. It is not clear however how this expressed itself in his valuation.
Mr Coonan felt that the first sale of the “Smithfield” site represented evidence related to land of close comparison albeit of slightly superior development potential and location. In his opinion that sale, analysed to show a land content on the basis previously described, of about $55 per m2, suggested to him a range of value of about $40 to $50 per m2 for the subject land overall, before resumption. He saw it as appropriate to adopt the higher end of the range, given the circumstances under which the sale had been negotiated.
As some support to his overall in globo valuation but not relied on as a valuation base, Mr Coonan provided a classification of values for the component parts of the in globo site including the internal road.
The classification check confirmed his opinion that the pro-rata value of the whole of the property before resumption was higher than the pro-rata value of the whole of the property after resumption.
He adopted an overall value of $50 per m2 before resumption and of $45 per m2 after the resumption.
His valuation was as follows:Before Resumption - 5.406 ha @ $50 per m2 $2,703,000
After Resumption - 4.458 ha @ $45 per m2 $2,006,100
Assessment of Compensation $696,900
Basis of Offer:
An advance payment in the amount of $190,000 had been made by the respondent constructing authority on 14 March 1994.
The valuation put in evidence was in the amount of $230,000, rounded from an assessment based on $240,000 per ha. The valuation was made for the respondent by Mr T.J. Gould, a registered valuer also in private practice in Cairns.
The basis of the respondent’s approach was that the local shopping content in the rezoning potential which the land possessed before resumption would have been no greater than that which was actually included in that zone after the resumption.
It was seen by the respondent as compelling evidence that the “after resumption” design and rezoning application did not seek any greater area to be included in the “Local Shopping” Zone. If it was to be argued that the site before resumption could have supported commercial demand for the suggested area of 3.0627 ha (through the expanded design) then such area could readily have been provided from within the “after resumption” site area of 4.458 ha. Indeed, it was suggested that the whole of the site after resumption was available for inclusion in the “Local Shopping” Zone had there been demonstrated demand for additional area.
On the assumption that any “Local Shopping” Zone demand had been fully demonstrated by McKellar’s own rezoning application, it was seen to follow that the area of land taken by the resumption, in practical effect, came from the bank of potential multiple dwelling land.
It was the respondent’s case that the actual after resumption “Local Shopping” Zone equivalent area could have, before resumption, merely shifted westerly to the existing highway frontage. Those advising the respondent saw it as a relatively simple redesign requirement which would have faced McKellar or, for that matter, any other developer contemplating the best use of the site had there been no resumption. It had not been seen as necessary to provide a “before resumption” rezoning and development design alternative.
As “demand” was one of the criteria important to the town planning considerations, need, or the lack of it, for additional “Local Shopping” zoned land became the crux of the respondent’s case.
Mr Gould’s consideration of “demand” was implicitly associated with his task of assessment of value. As I understood his approach, he interpreted the real estate market as suggesting that there was no demand for “Local Shopping” zoned land on the subject site, at least additional to that for which the application had been made. His response to examination indicated that he had come to that initial conclusion without the assistance of expert town planning support. Under cross-examination he agreed that if additional land within the site had been rezoned to “Local Shopping”, or had the potential for such rezoning, on town planning considerations, then he would have valued it accordingly. The value of such land would relate to the market perception of demand for the supply of land within, or potentially within, such zone. There was no indication that he had attempted to consider the “demand” for multiple dwelling zoned land in that particular location. Indeed, his evidence indicated that he did not consider the subject land as being ripe even for multiple dwelling development at the relevant date. Nevertheless, in his opinion, he had taken a generous, rather than conservative view as to the worth of an area of multiple dwelling land equivalent to the area of land resumed. He had not considered it necessary to approach the valuation task on a before and after resumption rezoning design. It was his valuation opinion that the loss to McKellar was restricted to the reduction in the bank of potential multiple dwelling land.
It could be said that if the rezoning potential for the land before resumption was limited to the degree that Mr Gould accepted, and if it was correct that there was no disadvantage flowing from the necessary redesign, then his assessment of $24 per m2 as the worth of potential multiple dwelling land was not seriously challenged. Mr Coonan had in his classification calculation adopted a level of value of $25 per m2 for land within that zone.
Town Planning Issues:
Town planning evidence was given for McKellar by Mr P. Robinson and for the respondent by Mr M.C. Challoner. Both are experienced in their profession - Mr Robinson having the local advantage of having been employed over a long period both directly and on secondment from private practice, by the Mulgrave Shire Council. Mr Robinson was the Manager, Planning Services, with that Council at the time that the actual rezoning application was made. He had taken to Council for decision, the report of the responsible town planning investigation officer.
The question of demand for local shopping facilities was one of the criteria analysed in the recommendation which went to Council. The “Town Planning Segment” dated 30 November 1992, as presented to Council, was tendered to the Court. The town planning report had concluded that, based on the criteria adopted, the subject site was, through the process of elimination, the most appropriate location for accommodating the existing and future retail floor area shortfalls “bearing in mind the future establishment of the University and the major tourist development of TNN at Reed Road”.
Mr Robinson offered the opinion that he would have expected that “the applicant/developer of the McGregor Road site” (the subject land) “would have considerable confidence that there was a justifiable need for a centre of the size proposed and possibly larger”.
Mr Robinson indicated that Council officers were well aware of the level and nature of objection received from local residents to the first (June 1992) application. (Apparently most of the objections were in connection with the multi-unit rezoning proposal.) In his opinion, the distance separation between the existing low density residential development to the east and the then proposed primary retail component, then the provision of an intervening two-storeyed multiple dwelling component, demonstrated a practical response to what was seen as desirable town planning principles. Mr Robinson agreed that no restriction on retail use could have been enforced on the two severed lots included in the “Local Shopping” Zone, but the Council had been aware that less intense use had been proposed for those two lots. He felt that the Council would have indicated resistance had preliminary inquiries been made regarding the Council’s attitude to the “Local Shopping” Zone boundary being coincidental with the drainage reserve for its full length.
On the other hand, Mr Challoner concluded that, at the relevant date “There might not have been any planning reason why the whole of the parent parcel could not have been developed for commercial purposes, subject to satisfactory provision for buffers, however the demand for commercial land in the vicinity would have been seen to be limited. Accordingly, the highest and best use of the balance of the parent parcel not proposed for inclusion in the Local Business (sic) Zone would have been usage for multi-unit residential development.” Mr Challoner saw it as following that the highest and best use of the land taken was for multi-unit residential development.
His conclusion as to demand for commercial land was clearly obtained first from his perception of the import of the actual area which had been included in the rezoning application by McKellar and second from the opinion expressed by Mr J. Norling, a retail analyst, who had been instructed by the respondent to investigate retail demand.
Mr Challoner’s comments relevant to the actual McKellar application included the following:-
“The fact that Local Business zoning was not sought for the whole site must suggest that the claimant saw no need for any more land to be included in the Local Business Zone than was applied for at that time.”
That was not as Mr J.A. Dowson, a shareholder in McKellar, saw the situation. He is an experienced developer of property in the region and had been involved in the original development and ownership of the Smithfield Shopping Centre. Mr Dowson saw the need for a mixed development of both commercial and multi-unit residential in the developing locality, but expressed the concern that, apart from his perception of design problems, too large a component of multi-unit residential would have created an undesirable “unitville” environment. It was his understanding at the time that the effect of a multi-unit buffering between the retail and the low-density residential would have been seen by the Mulgrave Shire Council as both acceptable and desirable. It was his perception that there would be demand for multi-unit development in that location but that such development would be complementary and supportive to the primary commercial component potential of the site. Mr Dowson was well aware of the potential commercial competition from other locality sites and was keen to be “first cab off the rank”. It had been particularly important to him from a timing point of view to be confident that the Council would be supportive of any overall proposal.
Mr Norling gave evidence for the respondent in his role as the expert “retail analyst”. His experience is wide and not limited purely to the study of retail property development. He had first been engaged in giving evidence for the respondent relative to a resumption claim that the property on the opposite (south-eastern) corner of the McGregor Road intersection had potential for development as a sub-regional type shopping centre. Part of that property had been resumed at the same date as is relevant here. Although Mr Norling had become involved in that matter late in the proceedings and allowed very limited time to meet his brief, he had gathered considerable local data relative to his consideration as to the need for such a sub-regional centre. He had also informed himself as to the potential capacity of the “Local Shopping” Zone on the subject property. The gross floor area capacity of competitive existing and potential centres is, as is logical, one of the criteria important to the subjective and somewhat futuristic forecasts involved in the estimation of the retail and commercial needs of a region. Mr Norling had, for this matter, seen the need to investigate the potential capacity of the subject site afresh. He agreed that since his investigations relevant to the previous matter, hindsight had played a role in adopted criteria, although he could not recall any significant occurrence which would have affected his opinion. In this matter he agreed that he had given weight to the potential 4,000 m2 of commercial area included within the University plan of development. That plan had been approved prior to the relevant date here. He was unable to recall whether he had been specifically aware of that component previously. In any event he suggested it would not have entered into his considerations relevant to the claim that the opposite corner was suitable for development of a sub-regional shopping centre. It was however of importance to the potential competition for a convenience type site like the subject.
In connection with his instructions in this matter, Mr Norling visited the site shortly after the completion of the shopping centre, in November 1995. Having not obtained building plans or accurate details of the tenancy areas Mr Norling estimated, by pacing, the approximate lettable floor area of the development, noted the tenancy mix and the then significant vacant space remaining. He calculated the development as constructed as providing a gross lettable area of 5,402 m2 (as opposed to gross floor area) of which he accepted, on existing tenancies, 687 m2 accommodated “professional services”. The vacant tenancy areas, on his calculations, amounted to 2,278 m2. He had not conducted any specific research as to regional demand for the professional services component which might be expected in a development of this nature. (Professional service tenancies were not included as being for retail use). On the basis of the existing tenancies however, he estimated the retail capacity of the existing development as being 4,715 m2. This pure retail area estimate was exclusive of the commercial capacity of the two additional sites severed by the internal road.
Copies of the building unit plans relevant to the main part of the shopping centre were tendered. It is clear from the evidence that Mr Norling had significantly over-estimated the lettable floor area capacity of the development which existed at the time of his inspection. His calculations had been used in the estimated capacity of the particular trade area, including the University proposal, the existing Smithfield Centre and the proposed extension (the “Smithfield” sale). Mr Norling’s report was summarised by the advice that had he been advising “a prudent investor on 6 November 1992" it would then have been his opinion that there was insufficient demand for a district level retail facility to be built on the subject land within the next 10-year period. A “large” district level centre was classified by Mr Norling as being one with a capacity in the range of 10,000 m2 gross lettable area (12,000 m2 gross floor area). The total before resumption site area of 5.406 ha was seen as having the physical capacity of providing 13,500 m2 gross floor area and the after resumption site of 4.458 ha, 11,100 m2 gross floor area. It seems that Mr Norling had perceived that the claim for compensation had been compiled on the basis of a commercial development of the total site.
For various reasons he concluded that the current portion of the site zoned “Local Shopping” was more than sufficient to satisfy the area’s needs for neighbourhood level facilities.
Findings relevant to potential rezoning:
Had proven need existed, the town planning opinion of Mr Challoner - that there might not have been any planning reason why the whole of the parent parcel could not have been developed for commercial purposes - could be accepted. While it seems obvious that the Mulgrave Shire Council would have resisted total rezoning to “Local Shopping”, I am not convinced that a successful challenge to a refusal on the grounds of the effect on residential amenity would not have been seen to be possible. It seems that suitable buffering could have been provided with particular assistance from the location and width of the adjacent drainage reserve.
However there is no argument that a mixed retail/commercial/multiple dwelling rezoning as occurred was not warranted in the after resumption situation. No criticism was levelled at the after resumption rezoning design. It seemed to be accepted by all that the developer had proposed - and the Council approved - a reasonable mix of land use. Apart from observations relevant to the buffering issue there was no real criticism of the actual rezoning incorporating the severed areas of local shopping. The multiple dwelling component was clearly ideally placed. It might have been expanded at either end to incorporate the severed local shopping parcels but it is accepted that there were good reasons for the higher commercial potential use of those sites, to be exploited.
The real argument against McKellar’s suggestion for the before resumption design, was that it would be unreasonable for the Council to have approved such a proposal because the demand for additional local shopping did not exist. The town planning evidence was silent on the need for additional multiple dwelling capacity on a site of this nature.
While Mr Challoner and ultimately Mr Gould relied on Mr Norling’s assessment of retail need, I am unable to do so. Mr Norling deals in an area of subjectivity but the weight which might be placed on such evidence would be fortified by precision when that is possible. Precision was demonstrably lacking with regard to the assessment of the capacity of the constructed development on the subject land. It seems to me that at the relevant date the potential commercial capacity of the University site weighed too heavily in Mr Norling’s expressed opinion. In November 1992 the subject land had a clear commercial advantage in comparison with the University site if for no other reason than its ability to be speedily rezoned and then developed to cater for existing and potential unsatisfied local need. The futuristic overall proposal for the University would have been seen as a positive feature, in my opinion, rather than a negative one. Even in hindsight that position should have been seen to remain rather than to have altered.
I have not been convinced that, on submissions such as those of Mr Norling to this Court as to insufficient need, the Mulgrave Shire Council would have rejected the “before resumption” McKellar proposal. It has not been demonstrated to me why a prudent developer would have preferred, in addition to that area actually approved, a larger component of multiple dwelling land. It is observed that in the McKellar proposal the prime corner retail site remained less in area than the 2.5 ha above which an environmental impact assessment would have been required. Had such an assessment been seen to be an impediment the evidence suggests to me that the potential existed, and it would have been prudent, for the proposed commercial uses of the two severed sites, in the before resumption design, to have been particularised within the “Special Facilities” Zone.
Basis of Valuation:
I accept McKellar’s before resumption rezoning design as representing the highest and best use of the land and a proposal which could have been seen at the relevant date to have the likelihood of receiving rezoning approval.
There are some doubts raised as to the circumstances surrounding the “Smithfield” sale, yet it is the only evidence which provides an indication as to the worth of land with local shopping use potential, within this section of the region, at the date of sale.
Mr Coonan analysed that sale to show about $55 per m2, not overall, but on the area capable of development after consideration of a drainage easement. If I understood his evidence correctly, he held the opinion that the true worth of the usable area of the “Smithfield” site was $70 per m2. Based on the mixed-use potential of the subject land which is clearly inferior to the overall commercial potential of “Smithfield”, Mr Coonan adopted an overall valuation of $50 per m2 before resumption and $45 per m2 after. Some support was gained for his valuation by the classification exercise of the component parts, where Mr Coonan adopted a classified in globo value of $70 per m2 for the prime commercial component of the subject site, $30 and $40 per m2 for the secondary commercial sites and $25 per m2 for the multiple dwelling component. He classified the internal road areas which were necessary to produce the component parts as having a value of $55 per m2.. The road has no residual value and Mr Coonan’s methodology seems to be in conflict with that which he adopted in the “Smithfield” site relative to the drainage easement. On its total site area, with the original range of estimates for external roadworks, “Smithfield” might have been argued to have shown, on my calculations, a level of value ranging from $39 per m2 to $43.50 per m2 depending on the cost of access. It needs to be remembered that there was a cost involved for external access to be provided to the subject land.
Mr Gould analysed the “Smithfield” sale to show about $60 per m2 based on professional engineering estimates and to allow maximum use of the site including the drainage easement area. In his opinion the “Smithfield” land was significantly superior in value to even the prime commercial component of the subject site. While he agreed that the vendor of the “Smithfield” site was suffering financial difficulties at the time, it was his evidence that the property had been exposed to the market for a long period and the only type of purchasers likely to have been operating in the market at the date of sale were speculators - as were the actual purchasers. In his opinion the price paid represented the best price obtainable at the time and as I understood his evidence, probably influenced by the potential for improved market conditions and the prospects of future capital gain.
The submission for McKellar is that a dispossessed owner should not be expected to accept the equivalent of forced sale level of value, simply because a difficult market existed at the date of resumption. While it is submitted that Mr Coonan had not attempted to value the land at any date other than the date of resumption, his verbal evidence was not so convincing at least with regard to the level of value which he suggested a dispossessed owner should be entitled to receive, at a date when the market had not recovered from depressed conditions.
The owner is entitled to receive the worth of his land at the date of resumption. A sale must then be assumed at that relevant date, but at a price at which both the vendor and purchaser would be willing to meet. Difficult as that figure may be to assess, the mental process required cannot, in my opinion, be better explained than as was done by Isaacs J in the decision of the High Court in Spencer v.The Commonwealth (1907) 5 CLR 418 at p.441:“To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.”
The evidence suggests that, at the relevant date, regardless of its larger site area, the “Smithfield” site was more valuable, on a pro-rata area basis, due to location and retail development potential, than was the prime commercial component of the subject land. The “Smithfield” sale, on Mr Gould’s analysis, which I accept, showed $60 per m2, with drainage and external roadworks costs assumed to have been paid. It does not seem an unreasonable submission, that, had the “Smithfield” vendor not been under financial stress, the purchaser may have been obliged to pay an increased price, rather than fail to obtain the land. In the market circumstances which existed, however, I find Mr Coonan’s application of $70 per m2 to the prime commercial component of the subject land, in his classification check, to be excessive. A more convincing argument would have been that the inferiority of the subject land might have been offset by the vendor circumstances in the “Smithfield” sale.
I would in Mr Coonan’s classification check exercise, alter his $70 per m2 to $60 per m2 for that prime component. It is also my view that it would be wrong in principle to apply a classified value for the equivalent area of an internal road which was necessary to facilitate the exploitation of the rezoning potential of the land.
I have decided to adopt a before resumption in globo value equivalent to $37.50 per m2 overall, and $35 per m2 overall after the resumption.
Determination of Compensation
Compensation is assessed as follows:Value before resumption - 5.406 ha @ $375,000 per ha $2,027,250
Value after resumption - 4.458 ha @ $350,000 per ha $1,560,300
Compensation - loss of land and injurious affection $466,950
Round to $467,000
Disturbance:
Legal Fees $1,600
Valuation Fees $4,500 $6,100
Total Compensation $473,100
Interest:
It is ordered that interest at the rate of 8.5% per annum be paid as follows:
(1)On the amount of $467,000 from 6 November, 1992 up to and including 14 March 1994 (when the advance payment of $190,000 was made) then from that date on the amount of $277,000 up to and including the date on which the final payment is made.
(2)On the amount of legal fees of $1,600 from 9 March 1994 up to and including the date on which the final payment is made.
RE WENCK
MEMBER OF THE LAND COURT
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