Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads (No 2) [2018] QLAC 5

LAND APPEAL COURT OF QUEENSLAND CITATION: Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads (No 2) [2018] QLAC 5 PARTIES: Cidneo Pty Ltd ACN 105 454 064 (appellant) v Chief Executive, Department of Transport and Main Roads (respondent) FILE NOs: LAC008-17 Land Court No AQL325-10 DIVISION: Land Appeal Court of Queensland PROCEEDING: Appeal DELIVERED ON: 24 September 2018 DELIVERED AT: Brisbane HEARD ON: 6 and 7 March 2018 HEARD AT: Brisbane THE COURT: Dalton J FY Kingham, President of the Land Court PG Stilgoe, Member of the Land Court ORDERS: 1. The appeal is dismissed. 2. Leave to add a third ground of appeal is refused. 3. The parties must make submissions in writing as to the costs of the appeal, to be delivered by the appellant on 1 October 2018 and the respondent on 8 October 2018, with the appellant to provide any submissions in reply by 15 October 2018. CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL – GENERAL PRINCIPLES – FUNCTIONS OF APPELLATE COURT – ERROR OF LAW – ADEQUACY OF REASONS – where the Land Court did not give adequate reasons for accepting a valuer’s assumption as to the time taken to negotiate a transport infrastructure contribution – where the Land Court -- 1 of 35 -- 2 mistook the evidence about the staging of a hypothetical development used for a cash flow analysis, and therefore failed to give valid reasons for its finding –where the Land Appeal Court reheard and determined the issues in dispute REAL PROPERTY – COMPULSORY ACQUISITION OF LAND – COMPENSATION – ASSESSMENT – where the Land Appeal Court reheard the disputed evidence – where the evidence of the valuer for the respondent about the delay in construction and the staging of development in a cash flow analysis of a hypothetical construction was accepted Acquisition of Land Act 1967 s 20 Land Court Act 2000 s 56, s 57 Brisbane City Council v Mio Art Pty Ltd [2012] 2 Qd R 1, considered Kentwell v R (2014) 252 CLR 601, cited APPEARANCES: GJ Gibson QC, with DA Quayle for the appellant DR Gore QC, with J Brien for the respondent Anderssen & Company for the appellant Clayton Utz for the respondent [1] DALTON J: On 22 February 2008 just over 8 hectares of 100 hectares of land owned by Cidneo was resumed. The land was close to the intersection of the Ipswich Motorway and the Centenary Highway. The parties fell into dispute about the compensation which should be paid for the resumed land. [2] The matter was heard by Member Cochrane in the Land Court in November 2011. He delivered a judgment in July 2013.1 [3] Cidneo appealed from that judgment to the Land Appeal Court. There was a cross- appeal. The hearing took place on 25 and 26 November 2013. Judgment was delivered on 6 June 2014.2 The Land Appeal Court allowed the appeal essentially on the ground that Member Cochrane had not delivered proper reasons for his decision. The cross-appeal was dismissed. The matter was remitted to the Land Court for the determination of compensation. [4] The Department took its cross-appeal to the Court of Appeal. That appeal was heard on 20 November 2014 and judgment was delivered on 5 June 2015.3 The Court of 1 [2013] QLC 47. 2 [2014] QLAC 3. 3 [2015] QCA 96. -- 2 of 35 -- 3 Appeal allowed the cross-appeal in part. It remitted that subject matter to the Land Court for determination of compensation. [5] There was a further hearing in the Land Court before Member Cochrane in February 2016. He published a decision and reasons on 24 August 2017, ordering compensation in almost the same sum he had ordered in July 2013. [6] Cidneo again appeals, asking this Court to determine the correct amount of compensation. [7] It is necessary to look in a little more detail at the background to the resumption; the previous decision of the Land Appeal Court, and the decision of the Court of Appeal. Background to the Resumption [8] Prior to the resumption, in July 2006, Cidneo lodged a development application with the Brisbane City Council in relation to the subject land. The Department of Main Roads was a concurrence agency for that application. It gave notice of conditions it required in respect of the proposed development. One was the payment of $30 million in respect of upgrading interchanges on the major roads in the vicinity of the land, ie., as a transport infrastructure contribution (TIC). Matters progressed to the Planning and Environment Court. The Department of Main Roads modified its requirement to $27 million. [9] Then in February 2008, the land was resumed. It was resumed for the purpose of roadworks. As a result of the roadworks the Centenary Highway interchange was substantially altered with implications for the manner of development of the retained land, and road access to the retained land. [10] The undisputed evidence before the Land Court in 2011 was that as at February 2008 the highest and best use of Cidneo’s land was to subdivide it as an industrial estate (in a similar, but different, manner to the proposal put forward in the development application of July 2006). Cidneo proceeded to subdivide the land in a similar, but different, manner to both the 2006 development and the hypothetical development which the valuers regarded as the highest and best use. Before judgment was delivered in the Land Court, in December 2011, the amount of the TIC was agreed between Cidneo and the Department at a figure of $1,087,110. -- 3 of 35 -- 4 Land Appeal Court Decision 2014 [11] The Land Appeal Court decision of 2014 dealt with four grounds of appeal and two grounds of cross-appeal. [12] The valuers in the Land Court were agreed that the land before resumption was worth $60 million. Both valuers fixed this figure on the basis of comparative sales of en globo land. Both valuers agreed that the appropriate methodology to assess compensation was a before-and-after method using cashflow models of the subdivision posited as the highest and best use. [13] In undertaking the cashflow modelling, the valuers assumed different amounts would be required by the Department of Main Roads as a TIC. Mr Brett, for the Department, assumed a TIC of $3 million would be required before and after resumption. Mr Hamilton, for Cidneo, assumed that no TIC would be required before resumption, but that a $20 million TIC would be required after resumption. Both valuers gave evidence that they based their figures on what they thought a hypothetical purchaser would assume as the amount of TIC if buying the land in February 2008. [14] The first ground of appeal dealt with by the Land Appeal Court in 2014 was that Member Cochrane preferred the evidence of Mr Brett about the amount of TIC to that of Mr Hamilton, but made no reference to many parts of the evidence which bore on this topic, and did not give adequate reasons for his preference. The Court upheld this ground. [15] The second ground of appeal in the 2014 Land Appeal Court hearing related to the assumptions in the cashflow models as to the time allowed from the commencement of the project to the commencement of development works. Both valuers assumed 12 months in the before scenario. In the after scenario Mr Brett assumed 12 months, but Mr Hamilton assumed 18 months. His additional six months was to allow for a comprehensive traffic analysis and redesign of the industrial estate, having regard to the new roadways that would be in existence after the resumption. Again, the Land Appeal Court held that Member Cochrane’s reasons did not show that he had considered all relevant evidence, and did not amount to proper reasons for his preferring Mr Brett on this issue. -- 4 of 35 -- 5 [16] The third ground of appeal dealt with in the 2014 Land Appeal Court decision also concerned assumptions about timing in the cashflow models. Mr Brett assumed that after resumption the entire development of the land would take place in 62 months, whereas Mr Hamilton assumed 76 months. Of these 14 months difference, six were accounted for by the period the subject of ground 2 (above). There were various matters which accounted for the balance of eight months. Two of the major matters were that the valuers had different assumptions as to (a) rates of sale and (b) whether the construction of Stages 2 and 3 of the development would be undertaken in series, or would overlap. Once again, the Land Appeal Court found that the published reasons given by Member Cochrane did not explain his preference for the evidence of Mr Brett, and did not make reference to the evidence which was relevant to this topic. [17] The fourth ground of appeal before the Land Appeal Court in 2014 was unsuccessful, so need not be considered here. [18] The first ground of cross-appeal dealt with by the Land Appeal Court in 2014 was that once the actual TIC became known, it ought to have been taken into account in the before-and-after method of assessing compensation. The Land Appeal Court rejected this ground of cross-appeal. The Court of Appeal gave leave to appeal this point. [19] The second ground of cross-appeal was also rejected by the Land Appeal Court. No leave was obtained to pursue it in the Court of Appeal, so it need not be further considered here. [20] The order of the Land Appeal Court was to remit the matter to the Land Court for determination of compensation. The 2015 Court of Appeal Decision [21] The Department took its cross-appeal to the Court of Appeal. The Court of Appeal reversed the Land Appeal Court’s decision about the use of the TIC as agreed. The ground of appeal before the Court of Appeal was: “1. The Land Appeal Court erred in deciding: (a) That, for the purposes of s 20(1) of the Acquisition of Land Act 1967 … in considering the damage (if any) caused to the -- 5 of 35 -- 6 retained land of the Respondent, the Land Court was not entitled to take into account events subsequent to the resumption on 22 February 2008, in particular, the cost of external roadworks agreed between the Applicant and the Respondent on 6 December 2011 …” (underlining added). [22] The decision of the Court of Appeal was that the Land Court was entitled to take into account events subsequent to the resumption, including the agreement as to the TIC in December 2011. The Court of Appeal decision made it clear that the task of the Land Court was to determine a fair compensation. In doing so, it was not precluded from having regard to events after resumption, except if performing the valuation exercise specified at s 20(2) of the Acquisition of Land Act 1967. That is, the rule in Spencer’s case4 did not apply, except to the exercise specified at s 20(2) of the Acquisition of Land Act. [23] In this regard, the 2015 Court of Appeal decision followed the earlier Court of Appeal decision in Brisbane City Council v Mio Art Pty Ltd.5 Mio Art recognised that s 20 of the Acquisition of Land Act 1967 deals with two separate elements so far as compensation is concerned: the value of the land taken, and damage caused by severance, injurious affection and disturbance. While the value of the land taken must be assessed as at the date of acquisition, damage caused by the other three matters may be quantified according to post-acquisition events. The valuers in this case used an amount of TIC as an input to cashflows which formed part of a rolled-up before- and-after approach to assessing compensation. This exercise was not to value the land taken by the resumption (see s 20(2) of the Acquisition of Land Act 1967). Therefore, the Spencer prohibition did not apply, and the Land Court was not limited to evidence of events known to a hypothetical prudent purchaser as at February 2008. [24] There was no directive from the Court of Appeal that the agreed amount of TIC ought to be used to the exclusion of any other figure, or indeed any directive from the Court of Appeal as to how compensation was to be assessed on the remitter.6 Fraser JA said: “The choice of the appropriate assessment method in any particular case must be driven by the requirement to make a fair assessment of the allowable heads of compensation in accordance with s 20 of the [Acquisition of Land Act 1967]” – [42]. 4 Spencer v The Commonwealth (1907) 5 CLR 418. 5 [2012] 2 Qd R 1. 6 This is clear at [38], [43] and [46] of the Appeal Court’s reasons per Fraser JA, and at [50], [85] and [87] of my own reasons in the Court of Appeal. -- 6 of 35 -- 7 Further, it was clear from the reasons of Fraser JA at [46], and from my reasons at [87], that merely substituting the agreed TIC for the hypothetical figures used by the valuers would not necessarily produce the correct result; the valuers would need to revisit their evidence and spend some time ensuring that it was presented to the Land Court in a coherent framework consistent with s 20 of the Acquisition of Land Act 1967. In particular, if regard were to be had to the actual TIC agreed, other matters would arise for consideration, such as holding costs incurred during the period of actual delay in reaching agreement on the TIC. [25] The Court of Appeal ordered that the matter be remitted to the Land Court for determination of compensation. The Second Hearing in the Land Court [26] The matter came back before Member Cochrane on 22 February 2016. Submissions were made about the scope of the remitted hearing, and in particular the matters upon which Member Cochrane could now hear evidence. While these matters were in contest, there is no appeal which concerns them. [27] A Mr Peter McGregor gave evidence, apparently to establish that $214,000 was the amount spent by Cidneo negotiating agreement as to the TIC. It appears that the Member largely rejected this evidence – [126]-[141] of the reasons below – and settled on a figure of $100,000 as that cost. There is no appeal from this decision. [28] The two valuers, Mr Brett and Mr Hamilton, gave more evidence. They had, after the Court of Appeal decision, prepared new reports: Mr Hamilton on 4 November 2015 and 3 February 2016, and Mr Brett on 3 December 2015. [29] Notwithstanding what I have outlined at [22], [23] and [24] above, it appears that Member Cochrane saw the Court of Appeal decision as warrant for a mechanistic substitution of the agreed TIC into the reports of Mr Brett and Mr Hamilton, which meant that he did not have to consider the issue raised by ground 1 in the 2014 Land Appeal Court decision.7 In accordance with this reasoning, he refused to take cognisance of Mr Brett’s evidence that he had rethought the basis of his valuation.8 7 That is how I read the second sentence of [38] of the decision below. 8 [84] of the decision below, “I can see nothing in the Court of Appeal decision which entitles Mr Brett to do other than to incorporate the actual TIC figures into his report …”. See also [70] and [72] of the decision below. The latter reads, “The remitter clearly permits the contemplation of the actual -- 7 of 35 -- 8 Further, the Member refused to take cognisance of the cashflows numbered three and five in Mr Hamilton’s report of 3 February 2016 on the grounds that they did not use the agreed TIC – [76] and [124] of the reasons below. [30] This approach effectively took the matters which were the subject of the first appeal ground in the 2014 Land Appeal Court matter ([13] and [14] above) out of contention on the remitted hearing. That is the way the Member approached the remitted hearing. There is no appeal about that approach. [31] Further, at the resumed hearing Cidneo conceded the rates of sale used by the Department’s valuer, Mr Brett, so that the issue discussed at [16](a) above also fell out of contention at the resumed hearing. Current Grounds of Appeal [32] There were two grounds of appeal. I will deal with each ground in turn. Leave was sought to add a third ground. In my view, leave ought not be given for the reasons below at [113]ff. Ground 1. Failure to take into account actual time taken to negotiate TIC [33] As noted above, the original valuation evidence in 2011 before the Land Court was that a hypothetical amount for TIC was one of the expenses of development which should be fed into the cashflow models. Until December 2011 this figure had to be hypothetical for no TIC had been agreed. However, even once the amount of the TIC was agreed, first the Land Court, and then the Land Appeal Court, rejected the idea that it could be taken into account in the cashflow models prepared by the valuers. It was thought that the rule in Spencer’s case prevented its use because it was not part of the information which was available to a hypothetical purchaser of the land at the date of valuation. The decision in the Court of Appeal was that Spencer’s case did not apply to the before-and-after modelling used in this case. [34] Unsurprisingly then, in the resumed hearing before Member Cochrane it was argued on behalf of Cidneo that the actual time taken to reach agreement on the TIC ought to be taken into account. It was said that was best done by adopting Mr Hamilton’s figure of the TIC, but nowhere can I read into the reasons of either Court above a warrant for changing the methodology that was used by either party.” -- 8 of 35 -- 9 cashflow number one from his report of 3 February 2016. That cashflow allowed for a preconstruction phase of 24 months. The position Mr Hamilton presented at the remitted hearing was that this new 24 month period replaced the 18 months to which reference is made at [15] above. Mr Brett’s position remained that 12 months was sufficient time to deal with all preconstruction issues. That meant that the determination of this question effectively replaced the determination of the question remitted by the Land Appeal Court in 2014, and discussed as the second appeal ground at [15] above. Disposition of this Issue Below [35] Member Cochrane concluded that “antagonism and antipathy unnecessarily extended the period of time taken to reach agreement about the appropriate contribution for traffic infrastructure” – [45] of the judgment below. He said more than once in his reasons that fault lay on both sides in relation to this matter – [49] and [58]. He then said: “[61] In my view, there is no proper basis for regarding the period of time taken between the applicant and the respondent to reach agreement on traffic infrastructure contribution matters as indicative of what the prospective purchaser and prospective vendor may have done in a Spencer-type situation. [62] I am more comforted by the evidence of Mr Viney about the likely time that might be taken to reach agreement. [36] It is clear having regard to the whole of the evidence that when Member Cochrane referred to Mr Viney at paragraph [62] of his reasons, he meant Mr Beard, the traffic engineer who gave evidence for the Department.9 [37] Between paragraphs [63] and [176] of his judgment, Member Cochrane visited and revisited aspects of the case before him. He did not return to the issue of what preconstruction time ought be allowed in the cashflow models until at [177] he reiterated that fault on both sides caused the lengthy negotiation period, and said, “It is unnecessary to attempt to apportion blame”. He then said: “[178] In all of the circumstances I am satisfied that the contention by the respondent for a period of 12 months ought be preferred over the contention of the applicant for a period of 24 (or 25 months).” [38] Cidneo contends that in coming to this conclusion Member Cochrane erred in that he: 9 Mr Viney was the traffic engineer who gave evidence for Cidneo. -- 9 of 35 -- 10 1. did not have regard to the actual time taken to negotiate the TIC – paragraphs 1(a), 1(c) and 1(d) of the notice of appeal; 2. preferred a period of time in relation to the negotiation of the TIC based on the notion that the rule in Spencer applied – paragraph 1(b)(i) of the notice of appeal; 3. determined the period of time appropriate to be used in calculating the after- value by reference to the relative blameworthiness of Cidneo and the Department for the time taken to reach agreement on a TIC – paragraph 1(b)(ii) of the notice of appeal. [39] As discussed above, the Court of Appeal decision did not compel the Land Court, or the valuers, to use the actual period of time taken to negotiate the TIC. It is plain that the Member chose not to use it, but it is difficult to know why. While the Member made several references to what he considered an unreasonable length of negotiation, he nowhere explains what relevance this has to the matter he must decide. In this regard he has again failed to give proper reasons for his decision. I think it likely that Member Cochrane did simply adopt the 12 month period as preferable because of the Spencer rule – see [61] of the reasons below. If that is his reasoning, it is remarkable for being entirely contrary to the reasoning, and indeed the express provisions,10 of the 2015 Court of Appeal decision. [40] In my view, it is at least the case that the Member did not give adequate reasons. Ground 2. Preferring the Department’s Evidence as to the Timing of Construction of Stage 3 [41] Each valuer formed the view that the subject land was worth $60 million before resumption on the basis of comparative sales. Both valuers prepared cashflow models for the hypothetical highest and best use subdivision on two bases: before and after resumption. In the before scenario, both the valuers used their view of the value of the land – $60 million – as the price of the land on which this hypothetical subdivision was built. In the after-resumption cashflow models, the assumptions which fed into the cashflows were different. It was uncontested between the parties that after the resumption the subdivided land was worth less and development costs were higher.11 To account for these matters, each of the valuers fed new assumptions into their cashflows with the aim of achieving a similar internal rate of return to that produced by their before scenario cashflows. They then drew conclusions about value from the 10 Paragraphs [46] and [87] of the Court of Appeal judgment. 11 T 6-57 and T 6-73 (30/11/11) per Mr Brett. -- 10 of 35 -- 11 price at which the cashflows showed the land would have to be purchased to give that rate of return.12 [42] In their cashflow analyses, the valuers made assumptions as to when the four stages of construction development in the hypothetical subdivision would occur. In his after resumption scenario Mr Hamilton assumed a longer period to develop the land, so the value of the land yielded by his modelling was lower. [43] The point at issue relevant to this ground of appeal is perhaps best understood having regard to evidence that Mr Brett gave before Member Cochrane on 30 November 2011 as to the differences between assumptions he and Mr Hamilton had fed into their after-resumption cashflow models about the timing of construction of Stage 3: “Going to annexure 5 of Mr Hamilton’s report first, and on the commencing page of that spreadsheet it can be seen where the construction costs for the first stage, … begins in month 18 and continues through until month 30, and then the allotments in the first stage are released on completion of construction. Those allotments are sold out at month 34 but then there is a 3 month gap until month 38, when the following stage is released. … and if you then go midway down the spreadsheet under the – with the row which starts with Stage 2, you will see a construction period for Stage 2 which starts in month 30 and continues through to month 37 immediately before release of Stage 2, and the task here that Mr Hamilton’s undertaken is one which minimises an overlap between the construction – completion of construction at Stage 2, but that minimisation of overlap means there is a gap of three months before you get to release Stage 2. A similar thing happens in respect of Stage 3. The construction of Stage 3 starts in month 37, but the required time takes that construction through to month 50, and then the allotments for stage – for that third stage are released in month 51 which means that you have that gap without any stock between month – the end of the second stage ending at month 42 and the commencement of the third stage at month 51. Yes. And just to complete the picture then, you have mentioned that Stage 3 is released in month 51; for stage 4 does construction for that stage commence in month 58?--- Yes, it does. And what’s the position in relation to stock at that stage?--- Well, there is stock on hand from the preceding stage and there is – there is sufficient stock in that third stage that you need not overlap the construction periods, but still get a continuity of available stock from the third stage to the fourth. Looking now at your spreadsheets, your stage 1 sales commence in month 12?—Sorry, the Stage 1 construction? Construction, I beg your pardon?—Yes, starts in month 12 and that’s a difference between Mr Hamilton and myself.”13 “Yes?—That construction continues through to month 24 at which time you release the allotments from that first stage for sale, and those sales continue through until month 37 when the first stage runs out, but I have timed it so 12 Mr Hamilton, T 6-12 to T 6-13 (30/11/11), T 6-51 (30/11/11) and T 2-74 to T 2-75 (23/2/16); Mr Brett, pp 13 and 24 of report 15/11/11 and paragraphs 1.1-1.3, 2.4 and 2.12 of report 3/12/15. 13 This is the difference I refer to at paragraph [15] above. -- 11 of 35 -- 12 that you would have stock to sell immediately on completion of the second stage. In order to achieve that, though, you have to start construction at an earlier time than Mr Hamilton envisages, not only for the second stage but you will see maybe two-thirds of the way down the page also for the third stage. So you have this overlapping of the stages which exposes additional expenditure early in the piece before there is income coming in from the sale. I think if I heard you correctly you said that for the first stage stock is available till month 37. Could you just check that?—The first stage stock is available from month 25, running out in month 31. For the second stage sales start in month 32 and runs through to month 39, and then the subsequent stage takes over.” – T 6-59 to T 6-60. (my underlining). [44] The effect of these differences in approach meant that for three months after Stage 1 – months 35, 36 and 37 – Mr Hamilton’s model showed a gap where the developer had no stock on hand to sell.14 This gap apparently had little effect on value.15 However, there was a period of eight16 months – month 42 to month 50 – after all the stock in Stage 1 and Stage 2 had been sold when Mr Hamilton’s cashflow showed that there was no stock available for sale.17 At the time of this gap in Mr Hamilton’s modelling, the hypothetical developer had not repaid its financier, so that the delay in starting to sell Stage 3 (which was the biggest stage in the development) increased the life of the project at a time when interest was still running. This in turn meant that the hypothetical project was less profitable, which resulted in Mr Hamilton’s model generating a purchase price for the land after resumption which was lower; therefore his value after resumption was lower. [45] While Mr Hamilton was no doubt responsible for the preparation of his own cashflow, the persuasive burden of Cidneo’s case on this point rested more on the evidence of one of its directors, a Mr Whitelaw. Disposition of this Issue Below [46] The Member below appears to have considered this issue starting at [151]. He outlines some of the evidence of Mr Brett and Mr Whitelaw, and then remarks that Mr Whitelaw was not “an entirely aloof witness” by reason of his directorship of Cidneo and associated companies. However, that observation is apparently irrelevant to his finding at [164] and [165], which is based on his understanding that Mr 14 See also T 7-65 (1/12/11) per Mr Whitelaw. 15 Mr Brett, T 7-25, lines 15 to 22. 16 This is not the eight months referred to at [16] above – T 2-66 (23/2/16). The overlapping (or not) of the construction of Stage 3 accounted for five of the eight months mentioned in [16], see T 2-64 to T 2-68 (23/2/16). See also T 2-76 (23/2/16). 17 See also T 7-65 (1/12/11) per Mr Whitelaw. -- 12 of 35 -- 13 Whitelaw conceded the point under discussion in the Department’s favour during cross-examination. [47] The relevant passage of evidence is at T 7-65 to T 7-66 (1/12/11). Mr Whitelaw was cross-examined first about Mr Hamilton’s three month gap with no available stock between Stages 1 and 2 – lines 18 to 25. Then he is cross-examined about Mr Hamilton’s gap with no available stock between Stages 2 and 3 – lines 35 to 48. This is the eight month gap relevant to this point. Then the cross-examiner turns to Mr Hamilton’s gap with no available stock between Stages 3 and 4 – line 50ff. This is a seven month gap. It is in relation to that last, seven month, gap that Mr Whitelaw concedes that if Mr Brett’s sale rates are correct (which is now common ground between the parties) there is no justification for this last seven month gap between Stages 3 and 4. That is, the concession made by Mr Whitelaw was not in relation to the point of controversy which the Member had to determine.18 The gap between Stages 3 and 4 was never in issue between the parties.19 The Member below has mistaken the evidence and thus not given any valid reason for his finding. Role of this Court on Appeal [48] This Court is a statutory court which has power to decide appeals on the evidence which was before the Land Court, unless it admits new evidence – s 56 Land Court Act 2000. This Court may remit a matter to the Land Court or “affirm, amend, or revoke and substitute another order or decision for the order or decision appealed against.” – s 57(b) Land Court Act. [49] Neither the appellant nor the respondent to this appeal made the primary submission that this matter ought to be remitted again. In its written material the appellant asked this Court to substitute another decision as to compensation for the one made below, and in the alternative, asked for a remitter. However, in oral submissions the appellant abandoned this latter alternative.20 The respondent asked that the appeal be dismissed, but submitted that if this Court allowed ground 1(a), (b), (c) or (d), it should remit the matter for another hearing.21 18 The seven month gap between Stages 3 and 4 apparently did not matter much to value because, while its effect was to delay completion of the project, by this stage finance had been repaid. 19 See the third and fourth paragraphs of Mr Brett’s evidence extracted at [43] above. 20 T 2-28 of the hearing before this Court. 21 T 2-31 of the hearing before this Court. -- 13 of 35 -- 14 [50] Even accepting that cases about the valuation of property involve evaluative conclusions permitting some latitude,22 the appellant here has established appellable error so that this Court should rehear the matter or remit it. The appellant did not urge that this Court ought to conduct a rehearing in which it looked afresh at all the matters which were in issue at the hearings below. The appellant’s position was to assume that the decision below was correct except for the matters agitated in its appeal.23 In effect, the appellant proposed a limited form of rehearing. While the respondent contended that there was no appellable error shown, it did not contend for any different course as to the rehearing in this Court. The matters referred to at [27], [30], [31] and [34] above mean that the matters which are in issue before this Court are limited. [51] The determination of the issues in dispute on this appeal does require extensive examination of the evidence below. However, it does not require conclusions based on having seen and heard the witnesses. In my view this Court can properly, and should, rehear and determine the issues in dispute between the parties on this appeal and make its own determination of compensation as the appellant submits. Ground 1: Assumptions as to the Amount of TIC, and Time and Cost to Negotiate [52] At the remitted hearing there was no dispute between the parties that compensation ought to be determined using the agreed TIC in the after case cashflow models. Because there is no appeal from Member Cochrane’s rejection of Mr McGregor’s evidence – see [27] above – there is no controversy before this Court as to the cost of negotiating the TIC. It should be assumed at $100,000 in both the before and the after models. There was controversy as to whether or not the time actually taken to negotiate the TIC ought to have been used, rather than a hypothetical, reasonable time. There was further dispute about whether, if the time actually used to negotiate the TIC should be used, it should be used in the before and after models, or only in the before model. [53] To resolve these questions it is necessary to examine the evidence in the Land Court, both at the original hearing and the remitted hearing. As might be expected, the 22 Minister for Immigration and Border Protection v SZVFW & Ors [2018] HCA 30, [44], citing Norbis v Norbis (1986) 161 CLR 513 and House v The King (1936) 55 CLR 499, 504-505. 23 See paragraph 50 of the appellant’s written submissions. -- 14 of 35 -- 15 evidence about time to negotiate the TIC and whether or not different assumptions should be adopted in the before and after cashflows is bound up with evidence about the other aspects of the TIC, and was more the focus at the remitted hearing than the first hearing. [54] Mr Brett. Before the TIC was agreed between the parties, Mr Brett made the same assumptions, in his before model and his after model, about the amount of TIC, and the time taken, and cost to negotiate the TIC.24 He assumed that a traffic report would be necessary in both his before and after scenarios – p 12. Further, that this traffic report, and negotiations with the Department, would cost $100,000 in both the before and after scenarios – p 22. He assumed in both the before and after scenarios that this report was obtained, and negotiations were finalised, in the same 12 months as all other preconstruction matters and approvals – p 12 and p 22. That is, he assumed that construction could start in month 12. Mr Brett assumed that the amount of the TIC was $3 million in both the before and after models. This was a hypothetical figure based on Mr Beard’s estimate of the likely contribution – pp 12 and 22. [55] Mr Beard’s view was that before the resumption the southbound Centenary Highway approach to the land “had been operating at or beyond capacity since at least 1998”.25 Further, that “other traffic capacity issues would arise on the off-ramp to Kelliher Road; on Kelliher Road itself, and at its intersection with Boundary Road; at the intersection of Bakery Road and Boundary Road, and on the Bakery Road on- ramp.”26 [56] So far as the before scenario is concerned, Mr Brett notes Mr Beard’s opinion that there were two potential outcomes to negotiations with the Department of Main Roads. The first was that the Department would simply have refused the development, or delayed it until after their road planning (which resulted in the resumption) was further advanced. Mr Beard thought this was unlikely and thought that instead the Department was likely to have assessed contributions either on a “bring forward” basis towards the “eventual upgrading of the road system”, or required interim roadworks which might have included the construction of an additional southbound lane on the northern approach to the Centenary/Ipswich 24 Exhibit 7 before the Land Court. 25 This quotation is taken from p 9 of Mr Brett’s report. 26 This quotation is taken from p 10 of Mr Brett’s report. -- 15 of 35 -- 16 interchange so as to function as a bypass to the roundabout. He also thought it was possible that the Department may have required upgrading to the Kelliher Road off- ramp and the Bakery Road on-ramp.27 In fact, the $30 million TIC demanded in 2006 had been apportioned between different interchanges.28 [57] Clearly enough, the roadworks required in the after-resumption scenario would be different to those required in the before scenario. Again Mr Brett accepts Mr Beard’s view, to the effect that while the likely scenario before resumption would have been to require a contribution to work at two Ipswich Road interchanges, the after- resumption work would likely “concentrate its impacts at the Progress/Ipswich interchange”. Mr Beard’s view was that, “… if works at the Progress/Ipswich interchange of $3.0 to $5.0 million are required in the ‘after’ development scenarios, then it is entirely reasonable to also conclude that the works at the two interchanges [in the before scenario] would have been of similar (or marginally higher) value.”29 [58] So far as time taken to negotiate the TIC, Mr Beard said: “There is no traffic engineering basis for a claim that the time to negotiate an approval for the ‘before’ development scenario would have been less than that required for the ‘after’ development scenario. Given the difficulties associated with the heavily overloaded major road network in the ‘before’ development scenario … it is much more likely that the reverse would have been true.”30 [59] After the TIC was agreed, Mr Brett gave a further supplementary report dated 14 March 2012.31 In this report Mr Brett recalculated two versions of his earlier cashflow models: (a) one assuming a TIC of $2 million for the two intersections necessary to be upgraded in the before model, and a TIC of $1,087,110 for the Progress Road intersection in the after model, and (b) the second assuming a TIC of $1,087,110 both pre- and post- resumption models. [60] As to his alternative (a) he said, “This proceeds on the basis that if the after resumption cost for the Progress Road intersection alone is $1,087,110 then the pre- resumption cost for both the Progress Road and Centenary Highway intersections would be no less than $2,000,000” – p 4 of his report. He cited Mr Beard’s view 27 All these expressions of Mr Beard’s opinion are found at p 10 of Mr Brett’s report. 28 T 2-93 (23/2/16). 29 This information is taken from Mr Beard’s report and reproduced at p 11 of Mr Brett’s report. See also Mr Beard’s evidence to this effect at T 3-13 (24/2/16). 30 This part of Mr Beard’s opinion is found at p 11 of Mr Brett’s report. 31 This was Exhibit 9 in the Land Court. -- 16 of 35 -- 17 (above) that the before scenario TIC was likely to be higher than the after scenario TIC. [61] Mr Brett reasons as follows in support of his use of $2 million in the before scenario: “Applying the same percentage here: if the Progress Road interchange works of $1,087,110 are required for the after development scenario then 62.5 per cent of this could be anticipated for the before scenario. That amount is $680,000. Having spoken with Mr Beard it is apparent that, although difficult to quantify in the absence of appropriate traffic studies at about the resumption date, the pre-resumption Centenary Highway cost would be at least twice that for Progress Road, $1,360,000. The combination is $2,040,000, which I have rounded to $2,000,000.” – p 4 of his report. Mr Brett’s report does not express a preference for either alternative (a) or (b). However, there is not much reasoning to support his alternative (b). Mr Brett seems simply to have acted on a basis more generous to Cidneo, adopting the same figure in both the before-and-after scenarios – p 5 of his report and T 3-38 (24/2/16). [62] Mr Hamilton. In the 2011 hearing Mr Hamilton swore that compensation was best based on a comparison between: (a) a before scenario which assumed no TIC was payable, no traffic study was necessary, and no time or expense was necessary for traffic analysis, and (b) an after scenario in which a TIC of $20 million was payable; six months were necessary in order to perform a traffic analysis (in addition to a 12 month period where other development planning occurred) and a cost of $100,00032 was necessary for a traffic study before development could start. [63] Counsel for the Department put to Mr Hamilton that it was “inconceivable”33 that he would make the assumptions set out at [63](a) above in circumstances where the Department had been demanding a TIC in an amount of around $30 million in 200634 and had maintained that position through Court proceedings; where his cashflow analysis assumed a large, five year subdivisional project, and where he was aware that there was congestion on the Centenary Highway/Ipswich Motorway interchange at peak times.35 Mr Hamilton’s response was simply to say that he relied upon Mr Viney (Cidneo’s traffic engineer).36 That is, Mr Hamilton could offer no independent justification for what seem a set of extraordinary assumptions on his part. 32 T 6-29 (30/11/11) and T 6-51 (30/11/11). 33 T 6-26, in the context of cross-examination from T 6-21, (30/11/11). 34 Mr Hamilton notes this at p 51 of his November 2011 report and notes that the plan of subdivision proposed in 2006 “in many respects was similar to the highest and best use now agreed upon”. 35 T 6-27 (30/11/11) and p 22 of his report of 10 November 2011, ex 3 before the Land Court. 36 T 6-27 to T 6-28 (30/11/11). -- 17 of 35 -- 18 [64] On examination however, Mr Hamilton did not faithfully incorporate Mr Viney’s views into his cashflows. Mr Viney conceded that there would have been five areas to be assessed by a traffic engineer for any development application made in the before case.37 Mr Viney’s report had expressly noted that there was a traffic report in the 2006 development application and that $30 million TIC was demanded by the Department on that application.38 [65] Further, Mr Viney’s view39 was that there was no legitimate basis for the Department to ask for any amount by way of TIC before or after the resumption.40 Mr Viney would have advised a potential purchaser, and did advise Cidneo, that the Department might not accept his view, and that litigating the matter might take a year and cost up to $1 million.41 Apparently Mr Viney’s view was based on a conversation he had with a Departmental employee in 2005.42 That employee retired. Mr Viney’s view apparently persisted even after the 2006 demand for $30 million.43 It is clear that Mr Viney’s view was held with a degree of emotional attachment.44 It could not be regarded as a realistic basis for action after the Department demanded a TIC in the amount of $30 million, and persisted with the demand (in the amount of $27 million) through Court proceedings. Mr Viney knew the judgment in those court proceedings was that the proposed development would generate substantial volumes of traffic with implications for both local and state roads.45 [66] In circumstances where Mr Viney was of the view that no TIC was properly payable in the before or after scenario, Mr Hamilton introduces his own before scenario: “Mr Viney, retained by Cidneo Pty Ltd, considers in the before-resumption case there would not have been a requirement for a contribution towards transport infrastructure upgrading”. But then introduces his equivalent section dealing with the after scenario: “Mr Viney in the after resumption case, considers a significant monetary contribution could well be sought by the Department. This he argues is due to the significant increase in usage of vertical elements of the Progress Road interchange by 37 T 2-30 (23/2/16). 38 T 6-51 (30/11/11). 39 Which is noted in Mr Hamilton’s November 2011 report (p 51). 40 T 6-28 (30/11/11), see pp 51-52 of Mr Hamilton’s 10 November 2011 report. 41 See p 51 Mr Hamilton’s report of November 2011. 42 T 2-11 (23/2/16). 43 T 2-11 to T 2-12 and T 2-18 (23/2/16); p 52 November 2011 report. 44 T 2-11 to T 2-18 (23/2/16) 45 T 2-20 to T 2-21 (23/2/16). -- 18 of 35 -- 19 site generated traffic”.46 The contrast is not inspiring of confidence. Even more so when it is realised that the $20 million TIC Mr Hamilton assumes in the after scenario is calculated as a proportion of the $30 million demanded by the Department in 2006, ie., before the resumption.47 [67] In my view, the assumptions at [63](a) and (b) above both seem extraordinary on their face by reason of the difference in time and cost between them, even though the hypothetical subdivisions were not very different from each other, or from the subdivision proposed in 2006. On analysis, Mr Hamilton’s claim to have simply replicated Mr Viney’s view is not made out. Not only does Mr Hamilton not faithfully use Mr Viney’s views, he fails to mention that some of Mr Viney’s views are not consonant with known facts and further, that he, Mr Hamilton, has substantially departed from Mr Viney’s view in the after scenario. I note that the assumptions Mr Hamilton was prepared to feed into his cashflow modelling very much favour his client, as does his inconsistent use of Mr Viney’s evidence. The overall impression is that Mr Hamilton was not acting as an independent expert to assist the Court. [68] The value produced by Mr Hamilton’s original after-resumption scenario was noticeably distorted when regard was had to market evidence. It was $37.64m2, where every comparative sale showed a price of around $60m2. Mr Hamilton conceded in cross-examination that this had caused him to wonder whether or not the figures generated by his cashflow analyses produced an unrealistically low value in the after scenario.48 He had agreed in joint reports with Mr Brett, prior to delivery of his final opinion, that $30 million, or even $16.5 million, was an unrealistic amount of TIC for a purchaser to assume if paying a price of $60 million for a block of land.49 Mr Hamilton was unable to explain why these matters did not cause him to question the assumptions he had fed into his before-and-after cashflow modelling.50 [69] By the time of the remitted hearing, much of the heat had gone out of the issue concerning the amount of the TIC. However, the damage done to Mr Hamilton’s professional credit by reason of the matters outlined above cannot simply be ignored. 46 p 53 November 2011 report. 47 Report 10.11.11, p 53 and T 6-22 (30/11/11). 48 T 6-32 (30/11/11). 49 T 6-33 (30/11/11). 50 T 2-78 (23/2/16). -- 19 of 35 -- 20 This is particularly so where the matters which must now be determined by this Court involve considering differences in the evidence between Mr Brett and Mr Hamilton as to their cashflow models. And where once again Mr Hamilton swears that value is best determined by making assumptions which see the after scenario burdened with a TIC of $1,087,000 and 24 months preconstruction holding costs, while the before scenario is on the basis of 12 months preconstruction and no TIC at all. [70] Mr Hamilton swore he thought a 24 month period was warranted having regard to the actual timeline in which the TIC was negotiated. After resumption, Cidneo lodged a development application over the western part of its land. It had taken nine months (17 December 2009 – 15 September 2010) for the Department of Main Roads to respond to this application. The initial response was to ask for a TIC in an amount of $13.7 million. It was not until 15 months later, 6 December 2011, that Cidneo and the Department agreed on an amount of $1.087 million. A development application for the eastern portion of the land was lodged during this time (February 2010)51 so that when agreement on the TIC was reached, it was in relation to the whole of the land. [71] Mr Hamilton conceded in cross-examination that he thought the same amount of time ought to be allowed for the negotiation of the TIC in both the before-and-after cases.52 However, his cashflows only put this 24 month period into the after case.53 His before case showed 12 months. Mr Brett’s evidence was that if 24 months was adopted in the after case, it needed to be adopted in the before case, because he thought the time and cost in the before case would be “no less” than that in the after case.54 This was based on Mr Beard’s views, outlined above. [72] Mr Brett did not relinquish his view that 12 months, rather than 24 months, was appropriate for preconstruction – see T 3-43 (24/2/16). He continued to rely on the engineering advice he had before the TIC was actually agreed as showing 12 months was the appropriate time to assume in the cashflows. Mr Brett did not ignore the effect of the Court of Appeal decision. In fact it probably is the case that he understood it, and paid more heed to it than most other people connected with the 51 All these dates come from Mr Hamilton’s November 2015 report. 52 T 2-75 to T 2-76 (23/2/16). 53 See his reports of November 2015 and 3 February 2016. 54 T 3-39 (24/2/16). -- 20 of 35 -- 21 case, for it prompted him to perform an extra, piecemeal, valuation for the remitted hearing to see if the value he arrived at by his cashflow measure was supportable.55 His view was that the check method reinforced his value, which assumed a 12 month period to negotiate a TIC of $1.087 million in both the before and after scenarios. [73] In determining these issues it is necessary to consider the nature of the before-and- after cashflow modelling the valuers undertook in this case. I refer to paragraph [41] above. As counsel for the Department submitted on the hearing of this matter, the cashflow models prepared by the valuers were hypothetical. They were not modelling the development which has in fact taken place on the land. They were modelling the development of a subdivision which they viewed as the highest and best use for the land as at February 2008. In this case, a subdivision similar to that hypothesised by the valuers has taken place, but the valuers’ approach would have been the same even it had not. The cashflow models were hypothetical and the point of them was to assist in assessing a fair compensation for the land resumed. [74] The other matter to be borne in mind in considering this evidence is what was said in the Court of Appeal in 2015 – see [24] above. The effect of the Court decision was that Spencer’s case did not prohibit the valuers or the Court having regard to the amount of TIC actually agreed in assessing a fair compensation. This was in circumstances where Mr Hamilton had made the quite extraordinary assumptions referred to at paragraph [63] above, and Mr Brett had given evidence that to assess compensation on that basis would not be fair because it would produce a windfall for Cidneo – see [42] of the Court of Appeal decision. Recognising that on the earlier authority of Mio Art,56 the Land Court was not prohibited from looking at events after the date of valuation where the valuers assessed value by a rolled-up method, the Court of Appeal held that the Land Court ought to have had regard to the TIC actually agreed in this case: “Upon Mr Brett’s evidence, doing so in this case would affect the amount of compensation significantly and a failure to do so would result in an unmerited windfall to Cidneo. In those circumstances, a compensation method that did not take into account the actual amount would not fairly assess the compensation and should not have been used.”57 55 T 3-43 to T 3-46. 56 [2012] 2 Qd R 1, [30]. 57 [42] of the Court of Appeal decision, per Fraser JA. -- 21 of 35 -- 22 [75] By the time of the 2015 Court of Appeal decision, Mr Hamilton had delivered his March 2012 report which contended that time taken to negotiate the TIC ought to be taken into account in the after resumption scenario. The Court of Appeal recognised that the Land Court should have regard to this time.58 It was clear from the Court of Appeal judgment that the matter could not be resolved by simply substituting the actual figures of the agreed TIC and the actual time taken to negotiate it. Both were matters which the Land Court should have considered, amongst all the other evidence, in coming to its decision about fair compensation. [76] By the time of the remitted hearing, the parties had agreed that the amount of agreed TIC ought to be used in the after resumption scenario. Without that agreement its use would have been a matter to be considered by the Land Court Member. He may or may not have determined that the amount of TIC as agreed was appropriate to be used in the cashflow models. As it turned out, the parties relieved him of this decision. A question for his decision was whether or not 24 months ought to have been assumed as the preconstruction period so as to produce a valuation which would most fairly determine the compensation due to Cidneo. While issues about the amount of TIC ultimately agreed, and the time taken to agree it, might, in some cases, be very closely linked so as to make the use of one unfair without the use of the other, there could be no presumption that this was so. The evidence had to be examined. It had to be examined to see what weight should fairly be given to the time actually taken to negotiate a TIC in determining what assumptions should feed into the hypothetical cashflow exercise undertaken by the valuers. [77] Turning to the evidence about that issue, it is first necessary to look carefully at the words used by Mr Hamilton in his report of 4 November 2015. He says: “As set out above, there was a period of 24 months which elapsed between the date the western component Development Application was lodged and a negotiated settlement was reached for the TIC. I have been instructed to only take into account the actual time taken to resolve the TIC issue and to disregard the actual time taken to obtain Development Approval.”59 [78] Earlier in his report Mr Hamilton gives the dates which I have extracted at paragraph [71] above. That is, nine months between 17 December 2009 and 15 December 2010, during which the Department of Main Roads considered the development application 58 Court of Appeal decision, Fraser JA at [46] and Dalton J at [87]. 59 p 10 of his report. -- 22 of 35 -- 23 and made a response to Cidneo, and 15 months between 16 September 2010 and 6 December 2011, which Mr Hamilton describes (inaccurately, see below) as entailing negotiations to resolve the TIC. He then says, “For the purpose of the revised post resumption cash flow, I have adopted the actual timeframe to secure TIC agreement …”60 [79] I have already discussed how originally both valuers in the before scenario, and Mr Brett in the after scenario, showed a period of 12 months preconstruction. This was time when they assumed the developer was incurring holding costs, but was planning and obtaining approvals, so that construction could not start. In these scenarios construction was shown as starting in month 12. Mr Hamilton originally assumed a period of 18 months in his after resumption scenario, on the basis that this extra time was necessary because of more complicated traffic planning. In this scenario he showed construction starting in month 18. [80] To explain the effect of his allowing 24 months in the after scenario once the TIC had been agreed, Mr Hamilton said this: “This adopted 24 month period is in lieu of the 18 months adopted in my original after resumption case cash flow. The 18 months was the addition of the 12 months which was adopted in the before resumption case by each valuer plus an additional six months to allow for the changes to the staging of the development and to complete a traffic network analysis.”61 [81] Actually, in contrast to all other cashflows in the evidence, including his own, Mr Hamilton did not show construction starting in month 24 in his November 2015 scenario, but in month 25. He conceded this in cross-examination.62 He conceded in cross-examination that it decreased his after value (and thus the assessment of compensation) by about $300,000.63 [82] The next point of significance to understand is that, in the cashflow evidence Mr Hamilton produced, reflecting his 24 or 25 month negotiation, he assumes that the hypothetical developer waits for two years, while incurring holding costs, to begin developing the land only because that developer cannot agree a TIC with the Department. In his before scenario, all other preconstruction tasks have been able to be dealt with in 12 months. In fairness, having regard to his prior 18 month 60 p 8 of his report. 61 p 10, 4 November 2015 report. 62 T 2-55 to T 2-56 and T 2-82 (23/2/16). 63 T 2-57 (23/2/16). -- 23 of 35 -- 24 preconstruction period, it may be that something less than a full 12 months’ time and holding costs are assumed to be due to negotiating the TIC in this after scenario. Some part of this might be assumed to be taken up with traffic analysis.64 However, he is assuming the hypothetical developer waits for about 12 months to begin the development, after completing all other preconstruction tasks, while incurring holding costs. One only has to state this proposition to be dubious about it. [83] It is not in fact what occurred when Cidneo did subdivide the land. Cidneo lodged its development application on 17 December 2009, but it seems, immediately fell into argument with the Brisbane City Council about one aspect of it which was not resolved until March 2010. Once this aspect was resolved, the development application was promptly referred to the Department of Main Roads. That is, three of the 24 months Mr Hamilton characterises as referable to the negotiation of the TIC in fact were not so referable.65 [84] Next, the Department made an offer to resolve the TIC in December 2010. The only evidence was that the likely cost of the TIC, had Cidneo agreed with the Department at that point, was $3 million.66 That is, Mr Hamilton’s allowing 24 or 25 months as the negotiation period assumed that, at a time when all other preconstruction matters had been attended to, the developer incurred holding costs and did not begin the development for about 12 months because it would not agree with a proposal from the Department which was likely to cost $3 million. Again, simply stating the proposition makes it sound most unrealistic, and again it is not what happened in fact. [85] While Cidneo did refuse to accept the Department’s offer in December 2010, it was not ready to proceed with its development at that time. Far from it. The Brisbane City Council did not give its decision on the development application until 16 December 2010 (for the western side of the land only).67 There was no decision given by the Council on the eastern part of the land until 14 June 2011.68 On 24 December 2010 and 29 June 2011 (respectively), Cidneo challenged the conditions attaching to these two decisions in the Planning and Environment Court. Mr Viney’s evidence was that between 1 January 2011 and 17 September 2011 he was not actively engaged 64 But as to that see [90] below. 65 T 2-72 to T 2-73 (23/2/16). 66 T 1-100 (22/2/16); T 2-8 (23/2/16). 67 Affidavit Pollard, paragraph 3. 68 ibid, paragraph 4. -- 24 of 35 -- 25 in any negotiations with the Department of Main Roads as to the TIC because at that point he (and Cidneo) were preparing for a court case.69 He attributed the agreement on the TIC to the anticipation that that case would be set down. It can be seen that by an order of 6 September 2011 the matter was set down for hearing in the Planning and Environment Court on 7 December 2011.70 In fact it was not heard then, and on 15 December 2011 Cidneo obtained leave to amend its grounds of appeal substantially. It can be seen that those grounds of appeal relate to many matters other than the requirements of the Department of Main Roads.71 [86] In my view, the matters canvassed at paragraphs [80]-[86] above make it inappropriate to use the 24 month period between the lodging of the development application and Cidneo’s agreement with the Department on the amount of TIC in the way Mr Hamilton has in his cashflows. There were not active negotiations for all that period. There was no imperative for Cidneo to resolve that matter quickly, as there would have been for the hypothetical developer assumed by Mr Hamilton’s cashflow, ie., a developer who was ready to proceed with construction, was incurring holding costs, but had not agreed a TIC. [87] In addition, the evidence was that the negotiations between Cidneo and the Department were unreasonably long and unusually acrimonious. This is another reason in my view not to use the actual time taken to agree, but to use what the experts considered a reasonable time. It must be remembered that the valuers were performing an (essentially) hypothetical exercise designed to fix a fair compensation. In these circumstances it is fairer to use a reasonable time, rather than an unusually protracted time. Certainly there is no evidence that negotiations were actively carried on for the whole 24 months and no evidence that the passage of time had a causal effect on the TIC having been agreed in the amount of $1,087,000. To the contrary, the TIC seems to have been agreed upon in a commercial amount, at a time which suited the parties in the context of Cidneo’s wider, and on-going, litigation in the Planning and Environment Court.72 69 T 2-27 and T 2-28 (23/2/16). 70 Pollard, MMP-21. 71 ibid, MMP-24. 72 T 2-27 to T 2-29 (23/2/16). -- 25 of 35 -- 26 [88] In these circumstances, my finding is that the 12 months preconstruction period assumed in the after cashflow by Mr Brett is preferable to the period assumed by Mr Hamilton. This is the period which was preferred by Member Cochrane below. [89] Cidneo’s case, both before Member Cochrane on the remitted hearing, and before this Court, was that it no longer contended for the 18 month period which Mr Hamilton had used in his report of November 2011.73 Prophylactically, considering the history of this matter, I will record that were I faced with a choice between Mr Hamilton’s 18 month period and Mr Brett’s 12 month period, I would prefer Mr Brett’s evidence. Mr Brett’s 12 month period was supported by the civil engineers on both sides of the record and the evidence of Mr Beard and Cidneo’s town planner, Mr Cumming. The matters which I discuss at paragraphs [64]-[70], and [80]-[86] above incline me to prefer the evidence of Mr Brett to Mr Hamilton. Further, I think it was demonstrated in cross-examination that Mr Hamilton had a legally erroneous basis for his calculation of 18 months. Having allowed 12 months preconstruction in his before scenario, he then assumed another six months would be necessary because the hypothetical developer, who had prepared to construct on a pre-resumption basis, would require another six months to adjust that design, including attending to traffic matters, if a resumption then occurred.74 Ground 2: Timing of Construction of Stage 3 [90] The scope of this issue is set out at [43] and [44] above. The evidence as to the reasons for the difference between the parties on the question of when construction of Stage 3 ought start is found in the hearing before Member Cochrane in November 2011. [91] As to the timing of the construction of Stage 3 of the hypothetical subdivision project, Cidneo relied more on Mr Whitelaw than on Mr Hamilton. Mr Whitelaw was an accountant specialising in property development financing. He was a director of Cidneo and its related companies. Member Cochrane described him as not being aloof. I interpret this as meaning he was not an independent expert witness. I note that he does speak in the Court proceedings without being invited to do so.75 Further, 73 T 2-27 to T 2-28, hearing in the Land Appeal Court. 74 T 6-29 to T 6-30 (30/11/11). 75 T 7-63, lines 1 to 20 (1/12/11). -- 26 of 35 -- 27 he assumes the role of something of a commentator (if not advocate) in giving his evidence,76 eg., Mr Whitelaw said this about Mr Brett’s approach: “You’re looking here at construction periods in terms of the timing and duration and end of them?—Yes. … So what I’ve done is – this is commonly known as a Gantt chart or a – a Gantt chart will include not only construction items but will also include sales programs, and this is really a cut down version of a Gantt chart which looks at the construction time frames and compares in Mr Hamilton’s case his before-and-after, and in Mr Brett’s case his before-and-after, and – and looking at those in the context of – of the realistic programming of those when one takes into consideration the attitude of financiers. I heard Mr Brett’s evidence. The – I would suggest that – my view is that the proposition that stage three would commence, the construction of stage three would commence immediately on the first settlement of a stage one block is unbankable, “unbankable” as I refer to in page 5 of my appendix – of the appendices. The – what Mr Brett puts in his modelling, his cash flow model, is some sort of supply-driven developer, whereas – that is, keeping stock always available. Now, in no – at no point in time is Mr Hamilton’s model without stock. I’d suggest that in Mr Brett’s model he is overstocked, and – and one would not get finance for stage three without some proof that there is demand. Okay. We accept that it’s demand but demand in the form of real demand, being presales. I’ve had a look at the – the likelihood of presales commencing stage three in the after, two months after commencing construction of stage two in the after, and it’s my view that there would be no presales, on that basis there would be no finance at that time.” – T 7-58 to T 7-59 (1/12/11). [92] Much of Mr Hamilton’s evidence-in-chief as to this topic was, most undesirably,77 given by reference to an affidavit sworn by Mr Whitelaw.78 He was taken to propositions in the affidavit, and he swore that he agreed with them.79 It became very clear that there had been consultation between Mr Whitelaw and Mr Hamilton.80 Interaction between two independent experts is unobjectionable, but Mr Whitelaw was part of Cidneo, not an independent expert. [93] Mr Hamilton gave little independent evidence on the question now under appeal. He gave the general proposition, “Yeah, you would normally seek to spread the production to meet demand or anticipated demand. You don’t want to produce in 76 His affidavit contains a section headed “Commentary on GST” - ex 62 before the Land Court. 77 t 5-26ff; eg., at T 5-37, lines 15 to 30 (29/11/11); Mr Hamilton is taken to part of the affidavit of Mr Whitelaw, where Mr Whitelaw comments on Mr Hamilton’s report. Mr Hamilton is asked whether Mr Whitelaw is right in his commentary. Somewhat unsurprisingly he says that he is. 78 Exhibit 62 in the November 2011 hearing. 79 T 5-26 (29/11/11)ff. 80 T 5-11, T 5-27 (29/11/11) per Mr Hamilton, and Mr Whitelaw at T 7-62 (1/12/11), “I’ve quizzed him about that”. -- 27 of 35 -- 28 advance of demand.”81 In cross-examination, he said that he did not think a financier to a hypothetical purchaser in February 2018: “… would be prepared … to have such a condensed construction phase, because once you start construction obviously there is no holding back. The market can see that you have got – you are still selling Stage 1. You are building Stage 2. You have started Stage 3 and there is nowhere for the developer to go. He is going to have to finish these products, and he could in fact find himself in a position where he is overstocked. That is the difficult – that is why in this instance I have actually taken a more conservative view in the after, allowing overlaps but not to the extent that Mr Brett has done.” – T 6-8 (30/11/11). [94] Mr Hamilton feared that Mr Brett’s scenario was “aggressive’ and might see the project overstocked. That evidence was given at a time when Mr Hamilton assumed the 20 lots in Stage 3 would sell at one per month and Mr Brett assumed that they would sell at two per month. By the time of the 2016 hearing, Cidneo conceded that Mr Brett was correct about rates of sale. Stage 3 was the biggest stage in the hypothetical development. Logically, this concession must detract from any proposition that constructing Stage 3 in accordance with Mr Brett’s model would result in overstocking. [95] Mr Hamilton asked Mr Whitelaw to produce Gantt charts. They showed three peaks of available stock if Mr Hamilton’s model was used, and only two if Mr Brett’s was used. Mr Whitelaw said that, from his experience, three peaks would be more normal in a four stage development. The value of this evidence is limited. It is simply the expression of a generality by a witness who had a considerable interest in the outcome of the litigation. Furthermore, the witness was not a valuer and made that plain at least once in his oral evidence. [96] Mr Hamilton swore that he agreed with Mr Whitelaw about the Gantt charts, but added nothing of his own to the evidence. I do not find this adds to the persuasive value of the Gantt chart evidence, bearing in mind the matters at [64]-[70]; [80]-[86] and [93] above. [97] Mr Brett said that he would “not necessarily” expect to see three peaks of stock in a four stage development.82 Further, he did not think that a pattern such as this particularly bore upon value at the time of purchase: 81 T 5-28 to T 5-29 (29/11/11). 82 T 7-23 (1/12/11). -- 28 of 35 -- 29 “… It depends on the expectations of the purchaser’s forming in respect of the price he’ll pay for the en globo parcel, it’s not necessarily how an estate might change from that as the development progresses … in respect of what we’re dealing with here in February 2008 in what we’re expecting to be a speculative market driven by high expectations and an expectation of considerable demand for these allotments, what I see as being the purchaser’s attitude would be to keep the allotments available on the market to satisfy that demand, irrespective of how many peaks that might end up being – generating.” – T 7-23 (1/12/11). [98] Mr Whitelaw’s view about the difference between the valuers on construction of Stage 3 was set out in an affidavit, which was Exhibit 62 in the hearing in November 2011. He said: “19. A prudent developer who relies on bank funding to undertake development would, in my experience, usually only commence the next stage of a construction once they had achieved sufficient pre- sales of the prior stage and settlements of most lots in the stage prior to that. 20. Page 5 of the bundle is entitled ‘Lots Sold and Settled before commencement of next stage’ and shows that in the cashflow models prepared by Mr Brett and Mr Hamilton there is one significant item which does not meet these principles (highlighted blue), namely Mr Brett’s model whereby he suggests Stage 3 in the ‘after’ would commence so early that there would probably be no pre-sales and certainly no settlements of Stage 1. In my opinion that is ‘unbankable’, uncommercial and not the action of a prudent developer. 21. By the term ‘unbankable’ I mean that such a position would not be acceptable, in my opinion, to a financier lending to fund the construction of any given stage on generally accepted practices. 22. Based on my experience in property finance, I would concur with Mr Hamilton’s view that construction of stage 3 in the ‘after’ case would commence 5 months later than Mr Brett’s timing.” [99] In responding to this evidence Mr Brett said the following: “From your perspective as a valuer looking at the before-and-after hypothetical assessments in the subject case, what’s your basic response to the points that Mr Whitelaw makes in those paragraphs?-- All right. There’s a degree of realism in those comments. That they are matters that have been – that a financier and a developer would need to face up to. So that’s going to depend to a degree, and bearing in mind this is working out how much someone will pay for the land rather than how they’re going to develop it once they’ve got their feet on the ground there. Now, they have to anticipate that and they will have these things in mind when they do that. But in the kind of market that we had at the time, that there was there at the time where there was a degree of speculation, where there was an eagerness to get hold of the blocks of land, these technical issues, which can be drawn up with hindsight and demonstrate all kinds of things, tended to fall away in the background in those purchases. If we had purchases at the level that were referred to which drive a return on this site down to the level that either Mr Hamilton has or my lower level, it seems to me the market is putting a lower priority on these niceties, this kind of theoretical detail that you can draw up and point to.” – T 6-71 (30/11/11). (my underlining). -- 29 of 35 -- 30 [100] The appellants put much store on the first underlined sentence in the quotation above. However, it does not in context amount to a concession by Mr Brett that he accepts the Hamilton/Whitelaw point of view. That is made evident in the second underlined passage in the quotation above, and in the broader evidence in the case in which Mr Brett puts his view about assessing value in the market which obtained as at February 2008. That broader evidence is important in determining this issue. [101] As to the market in February 2008, Mr Whitelaw said that Mr Brett’s cashflow models were “unbankable”. Mr Whitelaw thought that Mr Brett’s assumed internal rate of return was so low no developer would buy the retained land for the price he arrived at in his after scenario.83 [102] I have already described how the valuers prepared the cashflow models in their before scenarios – [41] above. One of the numbers generated by that exercise was the likely rate of return to the developer. Mr Brett’s internal rate of return was around 15 per cent, but Mr Hamilton’s was between 20 and 25 per cent – T 5-33 to T 5-34 (29/11/11). [103] Mr Brett acknowledged his rate of return was “unreasonably low”.84 Indeed, he said so from his first report.85 It was below what a purchaser would accept if the purchaser was being driven by returns.86 However, he was left with the plain fact that as at February 2008 the market was paying $60m2 for en globo properties which were comparable to this one.87 Mr Brett described the market as at February 2008 as a speculative market, it was “very buoyant and was experiencing strong demand and price growth for investment property, en globo development land and developed allotments across all market sectors. At the time it was evident that a deal of this growth was speculatively based.”88 He said that in that market, financiers were in fact lending to developers who paid around 60m2 for comparable properties, and purchasers were buying developed stock.89 His rate of internal return reflected this. So did his timing of the construction of Stage 3, ie., it was driven by having stock on hand, ie., by the release of allotments, rather than having gaps, as Mr Hamilton 83 T 7-69 (1/12/11). 84 T 7-35 (1/12/11). 85 Report 15 November 2011, pp 22-23. 86 T 6-56 (30/11/11). 87 T 6-55 to T 6-56 (30/11/11) and pp 15, 16 and 22-23 of his November 2011 report. 88 Report 15 November 2011, p 15. 89 T 7-24 (1/12/11). -- 30 of 35 -- 31 assumed.90 Correctly, in my view, he saw his task not as thinking what a purchaser might do halfway through the project, perhaps after completing Stage 2, but what: “… he might judge in February 2008 of what he would do and given what is the perceived demand, given that the express sales rate for the various stages, it would seem to me that there would be a preference to get these allotments onto the market as early as you can and keep a continuity of stock there to satisfy the demand.” – T 6-59 (30/11/11). [104] Fundamentally, the difference between Mr Brett and Mr Whitelaw (at least) comes down to their appreciation of the market at the time of valuation. In this regard, Mr Brett is a valuer and had analysed the market in order to find comparable sales. While he used the cashflow method described to value the land, he attempted to ensure that his cashflow models did reflect the reality of the market ascertained by comparative sales. In both hearings below he had performed check valuations to try to ensure his cashflow modelling was realistic. For these reasons, I think Mr Brett’s evidence about the market is preferable to Mr Whitelaw’s. [105] Mr Hamilton’s view of the market was consistent with Mr Brett’s. He says at p 46 of his November 2011 report: “The Brisbane industrial market in February 2008 was experiencing buoyant conditions with land values having appreciated rapidly over the previous 3-4 years.” Mr Hamilton said he did not take subsequent events into account, and that he assumed the market stayed consistent throughout the period of the development.91 [106] When the method of valuation adopted by both valuers is considered – see [41] above – I agree with Mr Brett’s opinion that Mr Hamilton was trying to have it “both ways” in respect of the market he assumed.92 Mr Hamilton was content to adopt $60 million as the before value on the basis of comparative sales. That figure was based on the speculative market conditions as at February 2008; market conditions which, in Mr Brett’s view, would have produced low internal rates of return for purchasers of such en globo land and allowed, or required, a developer to construct the subdivision quickly so as to ensure a continuous supply of developed stock to the market. However, Mr Hamilton was also content (originally) to put a valuation of $37m2 as the value in the after resumption scenario, notwithstanding the market showed a price 90 T 6-58 (30/11/11) and T 7-23 (1/12/11). 91 T 5-31 to T 5-32 (29/11/11). Cidneo’s position in accepting Mr Brett’s increased rate of sales in Stage 3 is consistent (at least) with the notion that the market remained as it was. 92 T 7-24 (1/12/11); see also T 3-47 (24/2/16). -- 31 of 35 -- 32 around $60m2. By including the extraordinary, and upon analysis unjustifiable, assumptions listed at [63] in his cashflows, Mr Hamilton was in effect content to swear to a value which ignored true market conditions. He took a similar approach to the preconstruction period after the TIC was agreed – see [70] above. I think his evidence about internal rates of return, and the timing of construction of Stage 3 of the project can be seen in the same light. That is, his assumptions ignore the evidence of the market, notwithstanding he says he accepts it to have been buoyant. [107] As to his view that Mr Hamilton was trying to have it both ways, Mr Brett said: “All right. I’m – what I’m suggesting is that if you went to the financier with a proposal like that shown in page 4 of the attachments to Mr Whitelaw’s affidavit you’d have very little chance of getting finance for the project?-- All right. That needs to be viewed in the context of which – of the market at the time, and we can’t quite have it both ways. We’re dealing with a market where we’re running in the circumstance of a speculative market with an availability of finance, where financiers were keen to get their money out and where purchasers were keen to get hold of blocks of land. If it’s the case that these other sales, in globo sales on which we rely form the basis for the value, it’s the little disingenuous then to get involved in the detail and the niceties of this kind of thing which would undermine the very basis of the in globo sales on which we’re relying. So in the circumstances here where we’re – both parties are saying there is demand for the product, there is little competition in the area for the product, that we will achieve sales rates, even on my figures, at values and rates of sales which are historically high for Brisbane, on the basis of demand my view is both the purchaser and the financier would be preferring to run with that demand and satisfy that demand than to break it up and have these gaps between stages where there is an unsatisfied demand.” – T 7-24 (1/12/11). [108] Further on this topic he said: “This is – the market in February 2008 is predicated on the sales – [en] globo sales were occurring in 2007, so we’re all saying that that market continued through to February 2008. These things were bankable through 2007 because the market was speculative and because financier were keen to get their money out. Now, as the estate progressed, and perhaps the market changes, it may well have been unbankable when you go into the financier to get an advance, telling the financier, ‘I want another $10 million,’ but I’m talking about the view formed February ’08.” – T 7-26 (1/12/11). [109] And finally: “… I say it again, that if we’re going to proceed on the basis of the kind of market that prevailed in 2007, if we’re going to base our values on that, then, indeed, you have to also accept the nature of the financing in that market, and what drove a lot of that market was the readily available finance. I’ll say it again, you can’t have your cake and eat it. What you can’t do is look for a high in globo value based on the nature of the 2007 market and then get immersed in the detail of this kind of analysis to try and effect the after valuation on a more critical market analysis.” – T 7-28 (1/12/11). -- 32 of 35 -- 33 [110] I prefer Mr Brett’s evidence as to the timing of the construction of Stage 3. Mr Whitelaw’s lack of independence, and his lack of expertise as a valuer to properly assess market conditions mean that I give his evidence less weight than Mr Brett’s. Fundamentally, I think this question is one which turns on an assessment of the market as at the time of valuation. Further, for reasons which I have explained, I prefer Mr Brett’s evidence to Mr Hamilton’s. While Mr Hamilton says that the market in February 2008 was buoyant, I think that his timing of the construction of Stage 3 does not reflect this. The matters which I have canvassed above93 as to his lack of independence from his client, further incline me to accept Mr Brett’s evidence. [111] In preferring Mr Brett’s evidence on this point, I have come to the same conclusion as Member Cochrane below. Proposed Third Ground of Appeal: Use of the Agreed TIC in the Before-Resumption Models [112] I describe Mr Brett’s approach to the amount of TIC at [54]-[62] above. In his 2013 decision, Member Cochrane did not use either alternative (a) or (b) from Mr Brett’s 2012 report ([59] above), for he took the view that he could not have regard to the TIC actually agreed upon. In his decision of 2016 (under appeal), Member Cochrane adopted alternative (b) from Mr Brett’s March 2012 report. That is, he adopted an opinion which used the actual amount of TIC in both the before and the after scenarios. [113] That was a deliberate choice on the part of the Member – see [110]-[118] and [212] of the decision below. It is clear from these paragraphs that the Member was well aware that he was choosing a basis of valuation which assumed the amount of TIC as agreed in both the before and after scenarios. I cannot detect reasons for that choice, and it does seem to be against the weight of the evidence,94 but that is not the proposed ground of appeal.95 The proposed ground of appeal is that the Member below used the actual TIC of $1,087,000 in the before scenario when the 2015 Court of Appeal decision “did not authorise the substitution of actual, ‘post-resumption’ figures into 93 [64]-[70], [80]-[86] and [93]. 94 Mr Hamilton at T 2-48 (23/2/16), and Mr Brett’s report already canvassed at [59]-[62] above. 95 And would not be a ground of appeal advanced by Cidneo, for to act in accordance with the weight of the evidence would be to assume a $2 million TIC in the before case, which would be against Cidneo’s interest. -- 33 of 35 -- 34 the hypothetical cashflow analysis prepared in respect of the before-resumption case.”96 The appellant relied upon various stray comments of the Member below to the effect that the before case was “not the subject of any appeal”,97 and makes the submission that those comments were correct. [114] Those comments by the Member below, and the reasoning behind the proposed ground of appeal, misunderstand the 2015 Court of Appeal decision. The grounds of appeal in the Court of Appeal particularly made reference to both the before and after cases.98 There was no limitation in the Court of Appeal decision which required that the before case not be reconsidered by the Land Court. To the contrary, when regard is had to the express words of [40], [45], [46] and [87] of the Court of Appeal’s decision, it is clear that the Court contemplated that regard would be had to both before and after cashflow models at the remitted hearing. Indeed, in a case where the valuers had adopted a before and after methodology, one might think it would be impossible to fix a fair value without having regard to both the before and after models. [115] There is no merit in this proposed ground of appeal. For that reason I would not grant leave to add it. Disposition [116] Member Cochrane did not give proper reasons for his decision to prefer Mr Brett’s cashflow modelling and valuation and mistook the evidence as to the timing of Stage 3. Nonetheless, my independent view is that the compensation order which the Member made is the order which ought to have been made at the remitted hearing of this matter. In those circumstances,99 I would make the following orders: (a) Appeal dismissed. (b) Leave to add a third ground of appeal refused. (c) The parties are to make submissions in writing as to the costs of this appeal, to be delivered by the appellant on 1 October 2018 and the 96 See ground 1(g) of Annexure A and paragraph 47 of the appellant’s written submissions to this Court. 97 [69]-[72], [103] of the judgment below. 98 See paragraphs 1(a) and 3(a) of the Notice of Appeal at [25] of the Court of Appeal judgment. 99 cf Kentwell v R [2014] HCA 37, [42]-[43]. -- 34 of 35 -- 35 respondent on 8 October 2018, with the appellant to provide any submissions in reply by 15 October 2018. [117] KINGHAM P: I agree with the orders proposed by Dalton J for the reasons given by her Honour. [118] MEMBER STILGOE: I have had the benefit of reading Dalton J’s reasons in draft. I agree with her reasons, and her conclusions, and the order she proposes. ORDER: 1. The appeal is dismissed. 2. Leave to add a third ground of appeal is refused. 3. The parties must make submissions in writing as to the costs of the appeal, to be delivered by the appellant on 1 October 2018 and the respondent on 8 October 2018, with the appellant to provide any submissions in reply by 15 October 2018. DALTON J FY KINGHAM PRESIDENT OF THE LAND COURT PG STILGOE MEMBER OF THE LAND COURT -- 35 of 35 --