Farrah v Brisbane City Council [2016] QPEC 19 [2016] QPELR 449

PLANNING AND ENVIRONMENT COURT OF QUEENSLAND CITATION: Farrah v Brisbane City Council [2016] QPEC 19 PARTIES: JEFFREY FARRAH (appellant) v BRISBANE CITY COUNCIL (respondent) FILE NO/S: 3627/2014 DIVISION: Planning & Environment PROCEEDING: Appeal ORIGINATING COURT: Planning & Environment Court of Queensland, Brisbane DELIVERED ON: 14 April 2016 DELIVERED AT: Brisbane HEARING DATE: 16, 17, 18 and 24 March 2016 JUDGE: RS Jones DCJ ORDER: 1. The appeal is allowed. 2. I will hear from the parties as to any consequential orders. CATCHWORDS: APPEAL AGAINST REFUSAL OF AN APPLICATION TO DEMOLISH TWO PRE-1911 HOUSES – where houses located in inner city suburb of West End – where houses located in a Demolition Control Precinct WHERE THE HOUSES ARE STRUCTURALLY UNSOUND – whether the houses are reasonably capable of being made structurally sound – where houses are located in an area of mixed development VALUATION EVIDENCE – where evidence of the value of the land and houses thereon of little assistance Sustainable Planning Act 2009 Craig Securities (No. 2) Pty Ltd v Brisbane City Council [2006] QPELR 601 Gould v Brisbane City Council [2001] QPELR 77 -- 1 of 19 -- 2 Ken Ryan & Associates Pty Ltd v Brisbane City Council & Ors [2008] QPELR 147 COUNSEL: Mr R Laidley for the appellant Mr M Williamson for the respondent SOLICITORS: McCarthy Durie Lawyers for the appellant Brisbane City Legal Practice for the respondent [1] This proceeding is concerned with an appeal against the respondent’s refusal to grant a Preliminary Approval to carry out building works and, in particular, its refusal to allow the appellant to demolish two pre-1911 houses. For the reasons set out below the orders of the court are: 1. The appeal is allowed. 2. I will hear from the parties as to any consequential orders. Background [2] The houses are located at 8 and 10 Amersham Street in the inner city suburb of West End. As is the case with a number of precincts within that suburb, the two dwellings are located in an area of mixed land uses. Mr Kamitsis, the valuer relied on by the respondent, described the suburb as an “eclectic” area.1 It would be fair to say though that these two houses are located in an area of more various land uses than many other locations within West End. [3] Amersham Street runs in a virtually north south direction and the two houses are located on the eastern side of the street. Accordingly, they face almost due west. Immediately to the south are two unit/flat complexes of different vintages with little aesthetic appeal. Immediately to the north is a timber unit/flat development, also of little aesthetic merit. To the immediate northwest is a similar complex and to the immediate southwest (if not, directly opposite) is a modern commercial radio station building and, slightly further to the west a large industrial complex.2 The two houses are located at the southern end of Amersham Street where it dead ends a short distance past the southernmost house. The northernmost house (8 Amersham Street) looks almost directly west down Ambleside Street where it intersects with Amersham Street. 1 Transcript (T) 3-97 LL 26-32. 2 See generally Exhibit 1, Volume 2, Tab 20, at pp 8 and 9. -- 2 of 19 -- 3 [4] It is not in dispute that both houses are in an extremely dilapidated condition and are not structurally sound. [5] The houses are located on Lots 8 and 9 RP11142. Lot 8 is 688m2 in area and Lot 9, 637m2. Total frontage to Amersham Street is approximately 30m. The land is located in the Low-Medium Density Residential Area and within a Demolition Control Precinct under the respondent’s City Plan 2000 (CP2000) and City Plan 2014 (CP2014). The land is also located within the boundaries of the South Brisbane Riverside Neighbourhood Plan and within the Boundary and Vulture Street Precinct. [6] On or about 19 June 2014, the appellant lodged a Development Application seeking, relevant to this proceeding, approval to demolish both houses. On 21 August 2014, the respondent issued a Decision Notice refusing the application. The grounds for refusal involved a number of reasons including, in particular, asserted conflicts with a number of Desired Environmental Outcomes and Performance Criteria and Acceptable Solutions under the Demolition Code of CP2000.3 On or about 17 September 2014 the appellant filed his notice of appeal. Consistent with the reasons for refusing the applications the notice of appeal raised a number of issues. Notwithstanding that, in the proceeding before me it was accepted by both sides that there was really only one “fundamental” issue to be determined. That issue was, whether or not the two houses were reasonably capable of being made structurally sound.4 In this context paragraph 7 of the notice of appeal provided:5 “The Applicant has provided sufficient evidence to show: (a) the dwellings are structurally unsound and would require extensive works including reroofing, re- flooring, restumping, reinforcement of roof trusses and replacement of corroded steel floor bearers; (b) the dwelling sustained significant termite damage from termite activity and borers, water damage and deterioration of structural bearers and supports; (c) the chimney in 8 Amersham Street requires major repair, at substantial cost; and (d) the dwellings are not reasonably capable of being made structurally sound. In that regard, the Applicant estimates that costs to bring the dwellings to a presentable and habitable state will be approximately $241,030.00 for 8 Amersham Street 3 Exhibit 1, Volume 1, Tab 10, at p 4. 4 Mr Laidley, counsel for the appellant, at T 1-3 LL 30-35. 5 Exhibit 1, Volume 1, Tab 11, at pp 5-6. -- 3 of 19 -- 4 and $266,770.00 for 10 Amersham Street…” (emphasis added) [7] As Mr Laidley, counsel for the appellant, acknowledged the relevant consideration is not the cost to bring the dwellings to a “presentable and habitable state” but whether, in circumstances where both the houses were structurally unsound, they were reasonably capable of being made structurally sound. The appropriate test [8] Both houses are subject to the operation of the Temporary Local Planning Instrument 01/14. Pursuant to s 102 of the Sustainable Planning Act 2009 (“SPA”) a temporary local planning instrument is a statutory instrument and has the force of law as provided under the Statutory Instruments Act 1992. Table 2 of that Instrument identifies that an “Additional Purpose” of the Code is to ensure the preservation of residential buildings constructed prior to 1911 and to only allow the demolition of such buildings in circumstances where they are incapable of being made structurally sound. The relevant Performance Criteria provides:6 “An engineering report prepared by a Registered Professional Engineer Queensland is submitted to Council which demonstrates to the reasonable satisfaction of Council, that the building is structurally unsound and not reasonably capable of being made structurally sound.” (emphasis added) No Acceptable Solution is prescribed for that Performance Criteria. [9] In Gould v Brisbane City Council7 this Court was concerned with proceedings involving the operation of the Heritage and Character Building provisions of the respondent’s planning scheme. Section 7.3.6.2 provided: “The Council may, on application made… waive the application… with respect to a particular building where: … (c) the building is structurally unsound and not reasonably capable of being made structurally sound…” [10] The words “reasonably capable of…” puts the focus on the state of the house in its unsound condition and what would be required/involved to make it structurally sound. The notional question that has to be answered is: “is what it would take 6 Temporary Local Planning Instrument 01/14 – Protection of Residential Buildings Constructed Prior to 1911. 7 [2001] QPELR 77. -- 4 of 19 -- 5 (including the costs) to make the house structurally sound reasonable in the circumstances?” [11] In deciding that appeal Quirk DCJ stated the appropriate test to be applied in the following terms:8 “ … That however does not provide an answer to the question that I face, namely is this building ‘structurally unsound and not reasonably capable of being made structurally sound’. That question must be answered objectively. The subjective inclinations of an individual owner provides no assistance in that respect. As stated, the structural unsoundness of this dwelling is not an issue. What has to be decided is whether the dwelling is ‘reasonably capable of being made structurally sound’. It is clear that, with unlimited resources, structural soundness might be achieved. What is important here is whether this could be done reasonably. By reference to what criteria is a distinction to be made between efforts that would be reasonable in this respect and those that would not? I have decided that the proper approach is to put one’s self in the position of a notional owner who is reasonable and prudent: certainly not one who has an aversion to old buildings and their preservation and certainly not one who has an eye upon maximum commercial advantage. A reasonable and prudent owner, nevertheless, would be one who would consider whether any expenditure involved in reinstating a particular building to structural soundness would be money wisely spent.” [12] His Honour was of course correct to observe that the test is an objective one and that it has to be viewed in the light of what is reasonable in all the relevant circumstances. One might, however, also be inclined to think that the “prudent” land owner would be a person who would have his eye upon maximum commercial advantage. [13] Following Gould, in Craig Securities (No. 2) Pty Ltd v Brisbane City Council9 Griffin SC DCJ was concerned with the operation of the Demolition Code of the respondent’s planning scheme insofar as it was concerned with a pre-1946 house within a Demolition Control Precinct. An Acceptable Solution to that Code relevantly provided that “an engineering report must be submitted demonstrating that the building is structurally unsound and not reasonably capable of being made structurally sound”. 8 Ibid paras [20]-[22]. 9 [2006] QPELR 601. -- 5 of 19 -- 6 [14] After identifying that the test was an objective one his Honour went on to say:10 “ In the context of structural repair to a ‘sound’ standard, the reasonableness of the repair work must not only be considered in the light of the physical ability to carry out that work, but also considerations of complexity and cost in the carrying out of that work. … In considering the extent to which a building may be made ‘structurally sound’, it is noteworthy that the Code does not provide, directly or, in my view, even by inference, a requirement that that standard of structural soundness meet present-day building codes and standards. The matter before me is not a building dispute and I am therefore not persuaded that it is appropriate, nor necessary, to deal with the repair items as documented by both engineers… on an item by item basis.” (footnotes deleted) [15] The next case to which I was referred in chronological order is that of Ken Ryan & Associates Pty Ltd v Brisbane City Council & Ors11 where Wilson SC DCJ (as he then was) was concerned with the operation of the Demolition Code concerned with pre-1946 dwellings. In determining that appeal his Honour identified that one of the two central issues in dispute was whether or not the subject dwelling was reasonably capable of being made structurally sound. His Honour then went on to say:12 “The test to be applied under AS1.2 is an objective one. It suggests, at first reading, an exercise which involves nothing more than bringing the house back to a condition of structural soundness, and that costs associated with repairs or renovations beyond that level will usually be irrelevant. The test will not, however, be immutable and each case must be considered in light of its own particular circumstances.” (footnotes deleted) [16] His Honour then went on to cite with approval the following passage from Craig Securities Pty Ltd:13 “It is trite to say that the reasonableness, in considering capability of structural soundness, will vary from case to case and will depend upon a variety of factors. The very nature of testing reasonableness itself will vary with the circumstances of each case and it is be impossible to set boundaries or attempt specific tests. ‘Reasonable’ is a word of common usage and should, in this legislation, be (sic) its ordinary, everyday meaning. In fact, it is a function of the notion of 10 Ibid para [29], [32] and [33]. 11 [2008] QPELR 147. 12 Ibid [15]. 13 [2006] QPELR 601 at para [26]. -- 6 of 19 -- 7 reasonableness that it must vary depending upon the particular circumstances to which it is applied.” [17] At first glance it would appear that there might be a difference between the reasoning of Griffin SC DCJ in Craig Securities and that of Wilson SC DCJ (as he then was) in Ken Ryan. In Craig Securities it was considered that the relevant tests did not require that the standard of structural soundness meet present day building codes and/or standards. However, in Ken Ryan it was observed that:14 “… here, the evidence shows that the decay giving rise to a need for restoration is very much at the higher or worst end of the scale, and that restoration to a level that is no more than ‘sound’ may not actually make the premises safe. It is inconceivable that the City Plan intended to accept, as appropriate and satisfactory, restoration to a level where premises yet lacked the capacity for safe occupation, and that must be a circumstance which is relevant to the application of the test proposed in the Code.” (emphasis added) [18] As to the observation of Wilson SC DCJ in Ken Ryan to the effect it would be inconceivable that the respondent would consider a structure to be structurally sound and yet be lacking the “capacity for safe occupation”. If his Honour was implying there that the test required that the structure be made habitable I would respectfully disagree. However, in saying that I am far from certain that that was what his Honour was in fact saying; “occupation” and “habitation” do not necessarily mean the same thing. In any event, while the requirement that a building be “habitable” might provide much more scope for debate about what was involved and the cost thereof, had the respondent intended such a meaning, as opposed to the requirement that the house be “structurally sound” it would have been relatively straightforward to set that as the benchmark. [19] I respectfully consider that Judge Griffin correctly articulated the appropriate test and that structurally sound includes making the structure waterproof and safe. However, I do not consider that the test requires the structure to be fit for permanent habitation. I should finally observe of this topic that, as Mr Williamson, counsel for the respondent, submitted, when regard is had to paragraphs [16] to [19] of Ken Ryan it seems tolerably clear that his Honour was addressing the need for a structurally sound and safe end result, not a habitable one. Mr Laidley, for the appellant, agreed with that analysis; as do I. Judge Wilson (as he then was) was, most likely, simply stating that a structurally sound house would also be one that was safe to be in or about. In 14 At [16]. -- 7 of 19 -- 8 this context I agree with the submission of Mr Williamson to the effect that “structurally sound” contemplates a state of engineering integrity and safety rather than structural perfection on restoration. [20] Before going on to consider the evidence I would also make the observation that obligations of the type involved here imposed on land owners have the potential to result in material financial disadvantage in the absence of compensation being payable. That is, limitations on the ability to deal freely with one’s land may well result in an owner being denied the opportunity to maximise his selling price by selling the land in a state capable of achieving its highest and best use. In circumstances where, by way of examples, an owner could not afford to carry out the works or simply refused to expend the necessary money, the end result may be that structures are simply being left to deteriorate further. Such an outcome would neither benefit the owner, the respondent, nor the broader community of Brisbane. In respect of the former example Mr Williamson said that the owner could simply sell the property. That may well be so but for whatever reason he may not want to. The engineering evidence [21] Both parties relied on engineering evidence, Mr Avery for the appellant and Mr Bligh for the respondent, to identify what works would be required to make both houses structurally sound. No doubt, with an eye to the reasoning of Griffin SC DCJ in Craig Securities, under the preamble to both reports dealing with each of the houses separately the engineers stated:15 “The authors are of the understanding that the structural repair works are those that are required to make the house safe and also to achieve weather resistance to avoid further degradation of the building structure. There is no intent to bring the structure up to current structural Standards or other Building Code Standards.” [22] Both engineers identified what “items” needed to be repaired in respect of both houses. Most of those items were agreed. However, in respect of 8 Amersham Street Mr Avery identified the following additional works:16  the rear door and associate joinery required replacement; 15 Exhibit 1, Volume 1, Tabs 14 and 15. 16 Ibid, Tab 14 p 4. -- 8 of 19 -- 9  rot damage to the timber window frames on the northern external wall required replacement;  “although not structural issues” the repair of the plumbing and electrical systems in the dwelling to safe standards was also required. [23] In respect of number 10, Mr Avery identified that, in his opinion, all timber sills, eight chamfer boards and a supporting bearer on the northern wall had to be replaced. He also again advocated for the repair of the plumbing and electrical systems despite them not being a “structural issue”.17 [24] It was conceded on behalf of the appellant that most of the costs associated with the repair of the plumbing and electrical systems were not required to make the houses structurally sound.18 This of course has necessary flow on effects concerning the cost of making the houses both structurally sound and habitable and those matters are dealt with below. [25] As to the other outstanding engineering matters, I accept that the rectification to the rear door as identified by the appellant in respect of 8 Amersham Street is necessary but I am unable to accept that it is necessary to carry out the works identified in respect of the window frames on the northern external wall of that house. That is, I am not satisfied that those works are required to make the house structurally sound and weatherproof. [26] As to 10 Amersham Street, it is sufficiently clear to me that having regard to Mr Avery’s careful inspection of this house that the replacement of the chamfer boards on the northern external wall ought to be replaced, including the supporting bearer. In this context I accept Mr Avery’s evidence that if those chamfer boards were not replaced then there would be an unacceptable risk of water damage to the timber framing behind those walls.19 The agreed estimate for those works was $2,052.00.20 I am not satisfied that all the timber sills need to be replaced to make this house structurally sound. [27] For the reasons that follow, it is unnecessary in my view to delve further into any remaining disputes between the engineers. 17 Ibid Tab 15, p 4. 18 T4-65 LL 27-45 and attachment to appellant’s written submissions. 19 T2-7 LL 17-30. 20 Exhibit 1, Volume 2, Tab 17, attachment 1 at p 2. -- 9 of 19 -- 10 The costing exercises [28] To determine the costs of making the houses structurally sound the appellant relied on Mr Lowry, a quantity surveyor, and the respondent on Mr Chapman, an experienced registered builder. Mr Lowry also went on to provide costings for bringing both houses to a “habitable” condition. The costs of bringing the houses to a habitable condition, while not directly relevant to the issue of making the houses structurally sound, was a matter addressed by the valuers. [29] Mr Lowry’s original estimate for 8 Amersham Street was $184,115.00 including GST and Mr Chapman’s estimate was $76,093.00 including GST.21 In respect of 10 Amersham Street their respective estimates were $249,858.14 including GST and $119,780.76 including GST.22 Those estimates are set out in some detail in Exhibit 3. However, as is often the case, compromises were made by the experts and, in the case of Mr Lowry, some confusion also arose in respect of some of his figures. At the end of the day, both Mr Lowry and Mr Chapman revised their estimates for both houses and Mr Chapman’s estimate in respect of 8 Amersham Street increased to $84,000.00 and in respect of 10 Amersham Street increased to $126,000.00.23 On the other hand, Mr Lowry’s estimates reduced to $130,000.00 in respect of 8 Amersham Street and to $176,000.00 in respect of 10 Amersham Street.24 [30] On balance, in respect of this topic I preferred the evidence of Mr Chapman to that of Mr Lowry. It is beyond doubt that Mr Lowry is a very experienced quantity surveyor but at times his evidence became confusing and, at one stage, his evidence had to be stood down to allow him to consider irregularities in his costings.25 On the other hand, Mr Chapman struck me as a witness who was not only experienced in costing such works but was also experienced in carrying out those works. In my view his evidence was more indicative of what the actual costs might be. In this context I should also observe that I accept that any complexities involved in making either of the houses structurally sound would not be beyond the capacity of a builder with similar experience and qualifications to that of Mr Chapman. 21 Exhibit 1, Volume 1, Tab 16, at p 5. 22 Exhibit 1, Volume 2, Tab 17, attachment 1 at p 3. 23 Exhibit 11. 24 Refer to attachment to Mr Laidley’s written submissions. 25 T2-95: 2-96. -- 10 of 19 -- 11 [31] That said, the evidence of a number of the witnesses made it tolerably clear to me that there are risks associated with trying to provide accurate estimates when dealing with houses as old and dilapidated as these. For example, Mr Avery, when being cross- examined about 8 Amersham Street, expressed the opinion that the scope of works could increase because it was not able to be said with any degree of certainty what the structural integrity might be behind the existing wall linings.26 Mr Lowry was of a similar view.27 Indeed, it was Mr Lowry’s opinion that uncertainties associated with what might arise during the process of making the houses structurally sound could well result in a number of variations to Mr Chapman’s notional building contract prices.28 In this context Mr Chapman’s costings were based on his company actually tendering to do the necessary works. [32] During the course of his cross-examination Mr Chapman acknowledged that his estimates did not provide for any “surprises” or “unknowns” and that in the event of such occurring there would either be costs to be borne by his company or to be dealt with with the owner as variations to the building contract.29 In his re-examination the following exchange took place between myself and Mr Chapman:30 QUESTION: Yes. But in a job like this, bearing in mind the state of repair, the age of the buildings, etcetera, etcetera, is this one where you would expect typically, from your experience, variations to occur? ANSWER: Well, these – this brief that the engineer has – has prepared is fairly straightforward, and each of the items on their own are fairly – fairly simple items to price. Now – now, it may well be that there would be some – some unforeseen has come into play, and certainly that might increase the price by a small amount. But, I mean, because they’ve – each item has been – been described and it’s been discussed a lot of times, there’s not a lot of grey areas. Where you do get grey areas on a – on a renovation job is that it’s pretty hard for every single element of the whole job to be described, and you would probably come across some more variations in that case. But because we’re only talking about select items and they’ve been discussed and – and looked at, I wouldn’t expect 26 T2-11 LL 28-35. 27 T2-74 LL 25-33. 28 T2-75 LL 35-45: T2-76 LL 1-13. 29 T3-5 LL 30-45 to T3-6. 30 T3-39 LL 23-47: T3-40 LL 1-4. -- 11 of 19 -- 12 there to be a – be a very big variation at all, your Honour. QUESTION: To put it this way, it’s – if I’m the owner and I say, ‘now, Mr Chapman, I want a fixed price contract. I don’t want to hear anything about variations at the end of this’--- would you change these figures and, if so, by – would it be five percent, ten percent, 20 percent? ANSWER: Well, that’s a hard question, because I would --- QUESTION: Well, don’t answer it if you don’t think you can, but- --? ANSWER: Yeah. Well, I wouldn’t be comfortable by just saying I just add another ten percent and you’ll be right, because I’m – I’m quoting on specific items and – and sometimes if you find a problem, you think gee wiz. I should have seen that. Well, I’ll have to cover that myself. And we do get that on occasions, you know, to keep a good relation with the owner. But if there is something that is totally unexpected by all parties, I think it’s fair and reasonable to raise that as a – as a potential variation… (emphasis added) [33] Notwithstanding my preference for the evidence of Mr Chapman I consider that, there being a not unrealistic risk of variations occurring, it is appropriate to factor that risk into his estimates. Doing the best that I can with the evidence before me I have reached the conclusion that the prudent owner would, in respect of 8 Amersham Street budget for in the range of $86,000.0031 to $96,000.00 and, in respect of 10 Amersham Street a range between $126,000.00 and $140,000.00. I have allowed a wider range for 10 Amersham Street because more works are required. I agree with Mr Williamson that, for the reasons given, it is more likely than not that the cost of making each of the houses structurally sound will tend towards the lower end of the range between the estimates of Mr Chapman and that of Mr Lowry. The valuation evidence and discussion [34] Broadly speaking, the valuation evidence of Mr Crawford, the valuer for the appellant, was intended to establish that the cost of making the houses structurally sound and/ or habitable would result in an overcapitalisation of the land and, therefore, be an unreasonable impost on the owner. On the other hand, the evidence 31 Mr Chapman’s estimate of $84,000 plus $2,050 for the chamfer boards at 10 Amersham Street. -- 12 of 19 -- 13 of Mr Kamitsis was intended to show that the carrying out the works would result in a financial benefit to the owner or, at the very least, be cost neutral. That is, not result in overcapitalisation of the land. [35] A difficulty in trying to reconcile the evidence of the valuers is that while they both purported to carry out an “as is” valuation, that is valuing each of the lots and houses thereon in their current state, in fact their starting points were quite different. According to Mr Kamitsis, his “as is” value for 8 Amersham Street was $970,000.00 and for 10 Amersham Street $920,000.00.32 According to Mr Crawford his “as is” value for number 8 was $750,000.00 and for number 10, $720,000.00.33 Mr Kamitsis’ “as is” valuation was predicated upon three critical assumptions:34 (i) The dwelling cannot be demolished; (ii) The property can only be used on a single residential basis (that is, as a single dwelling house); and (iii) Despite the LMR Zone, no further development potential exists on the land beyond the ability to renovate the dwelling. [36] Mr Crawford, on the other hand, described his “as is” basis as being the market value of each of the properties capable of being sold with vacant possession.35 [37] As identified above, Mr Lowry also prepared an estimate of bringing both houses to a habitable condition. In respect of 8 Amersham Street that cost was $220,576.0736 and in respect of 10 Amersham Street, $175,111.58.37 However, as a consequence of concessions being made concerning the scope of the works to make the buildings structurally sound in contrast to being habitable the appellant now contends that the cost of making each of those houses habitable would involve an extra $251,080.0038 and $228,313.00 respectively.39 [38] According to Mr Kamitsis:40 “… That money spent on the dwelling, whether it encompasses only works required to make the dwelling structurally sound or some 32 Exhibit 1, Volume 2, Tab 18, at pp 6/33 and Tab 19, at pp 6/33. 33 Ibid Tab 20, at pp 29/29. 34 Ibid Tab 18, at pp 6/33. 35 Ibid Tab 20, at pp 4/29. 36 Exhibit 1, Volume 1, Tab 16, attachment 2. 37 Exhibit 1, Volume 2, Tab 17, attachment 2. 38 I.e. $220,576.00 plus $30,504.00. In circumstances where Mr Chapman did not carry out a similar exercise and Mr Lowry’s evidence was not seriously challenged on this topic I consider it reasonable to adopt these figures. 39 I.e. $175,112.00 plus $53,201.00. 40 Exhibit 1, Volume 2, Tab 18, at pp 6/33. -- 13 of 19 -- 14 broader building renovation project, is unlikely to result in an over capitalisation given the location. That is, the majority of the cost of works is likely to be reflected within the value of the property once completed.” (emphasis added) [39] The same reasoning was said to apply to both number 8 and number 10. On the other hand, Mr Crawford’s opinion was that if both houses were renovated to a habitable condition the market value for number 8 would be $930,000.00 and for number 10, $900,000.00.41 That “habitable” value was premised on the basis that if both houses were structurally sound and habitable then the added value they would give to the land would be $180,000.00 for both.42 However, Mr Crawford concluded:43 “Mr Lowry assesses the difference in cost for 8 Amersham to make the house habitable in addition to the cost to make the house structurally sound of $220,577. He similarly assesses the cost in regard to 10 Amersham Street of $175,111. Considering the added value of the improvements for each house that is habitable over and above the land value is $180,000 it would be nonsensical to attempt to undertake a calculation that results in a value less than the value of the land suitable for a single lot dwelling.” [40] Mr Kamitsis, on the other hand, considered that even adopting Mr Lowry’s cost of making both houses structurally sound and habitable, the net worth of each property would be indicative of market value, having regard to the sales evidence and, in particular, the sale at 9 Mitchell Street, West End. Mr Kamitsis’ approached this exercise in the following way:44 “8 Amersham Street – “as is” valuation $970,000 plus cost of renovation $434,672 = $1,404,672 10 Amersham Street – “as is” valuation $920,000 plus restoration costs of $432,969 = $1,344,949” According to Mr Kamitsis:45 “9 Mitchell Street sold for $1,600,000 on a smaller allotment. Given it provides three bedrooms without views, the sale price provides strong evidence that the risk of over capitalisation is low even when adopting Mr Lowry’s ‘as if structurally sound and habitable’ cost. If Mr Crawford’s ‘as is’ figures were adopted, the subject property would be even more appealing as a renovation project when compared to the sale at Mitchell Street. The above mentioned analysis aligns with paragraph 10.8 of my trial report whereby I noted that ‘money spent on the dwelling, whether it encompasses only works required to 41 Ibid Tab 20, at pp 29/29. 42 Ibid Tab 20, at pp 27/29, para 5.3.2. 43 Ibid para 5.4. 44 Ibid Tab 21, at pp 21/23. 45 Ibid paras 89 – 90. -- 14 of 19 -- 15 make the dwelling structurally sound or some broader building renovation project, is unlikely to result in an over-capitalisation given the location. That is, the majority of the cost of works is likely to be reflected within the value of the property once completed.” (emphasis added) [41] The above figures used by Mr Kamitsis were those of Mr Lowry’s before the changes to the evidence and the concessions referred to above. Using Mr Chapman’s costs to bring the houses to a structurally sound condition plus Mr Lowry’s revised costs to bring the houses to a habitable condition would reduce his notional value for number 8 of in the order of $1,317,081.0046 and for number 10, $1,238,312.00.47 [42] Apart from his views concerning the risk or absence thereof, of over capitalisation, Mr Kamitsis did not place a dollar value on the added value to the land the houses in a structurally sound condition might bring. And, no real indication of what that value, if indeed there is any added value, might be is able to be discerned from the evidence. The highest sales evidence in this regard is that the house on the Early Lane sale, in a similar conclusion to the subject two houses, added no value48 and the sale at 16 Cordeaux Street revealed that a house in a superior state of repair also added little value to the land.49 [43] In addition to relying on the 9 Mitchell Street sale to support his valuation thesis, Mr Kamitsis also relied on the sale at 6 Early Lane to criticise the approach of Mr Crawford. After analysing that sale Mr Kamitsis opined:50 “Mr Crawford ascribes $145,000 to the value of these improvements despite them being uninhabitable and not structurally sound and yet only $180,000 to each of the subject dwellings ‘as if structurally sound and habitable’. I expect the reason for the apportionment here is that if Mr Crawford had a (sic) placed a realistic on the improvements like $0 or $10,000 this would have the effect of increasing the land value for this 506m2 allotment and would therefore be at odds with his ‘as is’ valuations for the subject land. A rational analysis of this sale would conclude it represents mainly land value.” [44] During the course of his evidence Mr Crawford reduced the value of the improvements of this sale from $145,000.00 to $115,000.00. Notwithstanding that, I 46 i.e. $970,000.00 + $96,000.00 + $220,577.00 + $30,504.00. 47 i.e. $920,000.00 + $140,000.00 + $175,111.00 + $3,201.00. 48 Exhibit 1, Volume 2, Tab 19, at p 15/33 and paras [44] and [45] below. 49 Ibid p 20/33 and paras [44] and [45] below. 50 Ibid Tab 21, at pp 17/23. -- 15 of 19 -- 16 accept this criticism. In circumstances where the house at Early Lane was neither habitable nor structurally sound, it could not sensibly be said to have a value of in the order of $145,000.00 or even $115,000.00. In this regard I accept Mr Kamitsis’ evidence about the state of repair of that house. [45] Land value of in the order of $845,000.00 for the Early Lane sale also sits relatively comfortably with the sale at 16 Cordeaux Street. While I am unable to accept Mr Kamitsis’ evidence that the house on this site had no value51 given the renovations being carried out52 by the owners, I do accept that the sale largely reflects land value. The difference between Early Lane at $845,000.00 for 506m2 and 10 Cordeaux Street at, say $1,000,000.00 for 405m2 is readily accounted for by reference to the former sale being a somewhat dated sale,53 being lower and flood affected54 and being located in a less desirable location overall.55 I also prefer Mr Kamitsis’ analysis of the sales at 61 Gray Road and 40A Drury Street to that of Mr Crawford.56 [46] On balance, I consider it very likely that Mr Crawford has materially underestimated the “as is” value of both properties. Further, it is far from clear how his value for both houses of $180,000.00 in a habitable state was derived. Accordingly, I am unable to give any weight to his assessment of the “as is” values. [47] I have concluded that Mr Kamitsis’ sales analysis, particularly of the Early Lane and 16 Cordeaux sales supports his “as is” valuations of $970,000.00 and $920,000.00 but that neither of the houses as they presently stand add any value to the land. In fact it could be said that they might stand as impediments to the owner maximising his selling prices. According to Mr Kamitsis, if vacant both lots could be sold together as one development site for “at least” $2,500,000.00.57 [48] As to Mr Kamitsis’ valuations on a habitable basis, even if correct, a matter I have some reservations about,58 it is not to the point to say that if an owner spent 51 T3-102 LL 10-25. 52 Exhibit 1, Volume 2, Tab 19, at pp 20/33. 53 Ibid pp 15/33. 54 T3-59. 55 Exhibit 1, Volume 2, Tab 19, at pp 15/33. 56 Exhibit 1, Volume 2, Tab 21 at pp 11 & 13. 57 T4-38 LL 1-14. 58 T4-22 to T4-24. -- 16 of 19 -- 17 $700,000.00 to $800,000.00 on improvements “there is a good chance you will get your money back”59 or that there would only be a low risk of over capitalisation.60 [49] As I have already said, Mr Kamitsis’ “as is” valuations may well be correct based on the three “critical assumptions” that he proceeded on: (i) neither of the subject dwelling could be demolished; (ii) neither of the lots could be used for any other purpose other than a single dwelling house; (iii) despite the zoning of the land no further development potential exists beyond the ability to renovate the subject houses. [50] However, in my view, those assumptions are not warranted. The first must be predicated on the notion that both houses are in fact reasonably capable of being made structurally sound. The second and third assumptions really just flow on from that. But for those assumptions the market value of Lots 8 and 9 combined would exceed to a material extent the values attributed to those lots by Mr Kamitsis. [51] For the reasons given, I have come to the conclusion that the valuation evidence offers limited assistance in determining whether, given the costs involved, it could be said that both houses are reasonably capable of being made structurally sound. The totality of the valuation evidence only goes so far as to lead me to conclude that the appellant would be required to expend large sums of money in circumstances where, while it being likely that the works would add value, roughly on a dollar for dollar basis, there is not an insignificant risk that it may not. [52] As Griffin SC DCJ observed in Craig Securities, the Planning Instrument is concerned with preserving character housing not with the financial circumstances of the owner, including those that might flow from having to have them preserved. That said, his Honour was also, with respect, correct in identifying that the actual costs involved was a “vital” component in the exercise a Court is required to carry out.61 [53] In Craig Securities, given the circumstances of that case the costs of carrying out the structural work, be it $53,000.00 or $32,000.00 was considered to be a “relatively modest cost”. In Gould it was found that the costs involved “would substantially 59 T4-32 LL 22-28. 60 Exhibit 1, Volume 2, Tab 21, at p 21. 61 At paras [30] and [31]. -- 17 of 19 -- 18 outweigh the costs of demolition and redevelopment”.62 That is certainly not the case here. [54] This case should of course not be decided on the basis of what was considered reasonable or unreasonable in other cases as, save for very rare cases, no two are the same. In this case the owner would be required to spend up to $96,000.00 for 8 Amersham Street and up to $140,000.00 for number 10 and up to $236,000.00 to make both houses structurally sound. To adopt the terminology of Wilson SC DCJ in Ken Ryan, they are large sums of money to spend to restore very dilapidated houses to a level which reflects nothing more than being safe.63 [55] In his written submissions Mr Williamson also contended:64 “The cost of the works to repair each building as estimated by Mr Chapman are not unreasonable once it is appreciated that the “as- is” value for each property exceeds $900,000…” [56] Mr Kamitsis valued 8 Amersham Street at $970,000 and Number 10 at $920,000. The submission has a certain degree of attraction but, in my opinion, only at a superficial level. The costs of the works for number 8 is in the order of 10% of the “as is” value but in respect of number 10 the ratio is increased by some 50% to 15% of the “as is” value. Further, as identified above, there is at least some risk that if the works were carried out the owner may not even recover those costs on any sale of the houses. Finally, the “as is” value does not reflect the vacant market value of the land. In my opinion the assessment of the “reasonableness” of the costs is not supported by any comparison with the “as is” values. [57] The evidence established first: to bring the houses to a structurally sound state will cost in the order of $96,000.00 and $136,000.00 respectively. Second: that while likely, there is still a risk that that expenditure would not be recovered if each of the houses were sold in the open market in a structurally sound condition. Third: at this state of repair, the houses are far from habitable and to bring them to a habitable state would require a considerable amount of further expenditure. It could not be said to be reasonable to require expenditure of the nature identified that would result in the situation where there would be two uninhabitable houses which, unless further 62 At para [26]. 63 At para [19]. 64 At paragraph [29]. -- 18 of 19 -- 19 significant funds were spent to make habitable, might be left to begin to deteriorate again. Conclusion [58] In my opinion the quantum involved results in the situation that neither house could be said to be reasonably capable of being made structurally sound. The extent of that unreasonableness is made more profound when viewed in the light of the owner having to make both houses structurally sound at a cost of in the order of $240,000.00. Orders [59] For the above reasons the orders of the Court are: 1. The appeal is allowed. 2. I will hear from the parties as to any consequential orders. -- 19 of 19 --