Bortoli v Brisbane City Council [2011] QLC 75 (2011) 32 QLCR 375

LAND COURT OF QUEENSLAND CITATION: Bortoli v Brisbane City Council [2011] QLC 75 PARTIES: Igino Bortoli (Applicant) v. Brisbane City Council (Respondent) FILE NO: AQL181-09 DIVISION: General Division PROCEEDING: Application to determine compensation under the Acquisition of Land Act 1967 DELIVERED ON: 13 December 2011 DELIVERED AT: Brisbane HEARING DATES: 5, 6, 7 April 2010; 22, 23, 24 August 2011; Submissions finalised 15 November 2011 HEARD AT: Brisbane MEMBER: His Honour WA Isdale ORDER/S: 1. Compensation is assessed at One Million and Fifty Thousand Dollars ($1,050,000) in respect of the land compulsorily acquired. 2. Disturbance is assessed at the agreed figure of Thirteen Thousand Nine Hundred and Forty-two Dollars and forty-six cents ($13,942.46). 3. Interest is payable at the rate adopted for the relevant year in the table of interest rates published by the Land Court and calculated in accordance with section 28 of the Acquisition of Land Act 1967. 4. Costs of and incidental to the hearing and determination of the claim are awarded to the claimant on the standard basis. CATCHWORDS: Acquisition of Land Act 1967 Land with development potential – Stamp duty not able to be awarded Thirty-Fourth Philgram Pty Ltd v The Crown (1992-93) 14 QLCR 13 at 53, 54, applied -- 1 of 21 -- 2 Spencer v The Commonwealth (1907) 5 CLR 418, applied Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; 74 ALJR 209, 167 ALR 575, applied APPEARANCES: Mr SN Ure of Counsel, instructed by Flower and Hart Lawyers, for the applicant Mr ANS Skoien of Counsel, instructed by Brisbane City Legal Practice for the respondent Background [1] The applicant was the owner of two adjoining blocks of land at 180-182 Lutwyche Road, Windsor, on the western side of this major arterial road and just to the south of its intersection with Newmarket Road. [2] On the land were two Queenslander style timber houses with galvanised corrugated steel roofs. The houses were set up as five flats in all and these were let out to tenants. Together they returned $38,000 per annum gross. [3] The land, described as Lots 100 and 101 on RP80004 was resumed under the Acquisition of Land Act 1967 on 8 December 2006 for road purposes incidental to the construction of the tunnel now known as “Clem 7”. The fee simple estate in the land was vested in the respondent and the applicant gained the right to compensation for his loss. [4] The parties have been unable to reach agreement on the amount of compensation and this question has now been brought to the Court for determination. The extent of the dispute [5] The applicant claims that the value of the land taken, at the date it was taken, was $1,050,000 and also claims stamp duty which would be payable on a replacement property, since he was a property investor and the land taken was part of his stock-in- trade as an investor. He also claims interest on the compensation so as to preserve its value. [6] The value of certain disturbance items claimed has been the subject of an agreement and in the course of the hearing the Court was informed by counsel that the sum of $13,942.46 had been agreed in respect of this category of compensation. [7] The Court was also informed that on 27 February 2007 the respondent paid the applicant an advance against compensation of $650,000 plus interest of $7,541.78 being at a rate of 5.5% calculated for the period from the date of resumption until the date of the payment. This will be deducted from the amount of compensation determined. -- 2 of 21 -- 3 [8] The respondent contends that the value of the land should be assessed at $700,000 at the date of resumption. All of these figures exclude any Goods and Services Tax. The respondent also contends that there should not be any allowance for stamp duty. The Legislation [9] The assessment of compensation is to be conducted in accordance with the Acquisition of Land Act 1967 (the Act). Section 20 of which is in the following terms: 20 Assessment of compensation (1) In assessing the compensation to be paid, regard shall in every case be had not only to the value of land taken but also— (a) to the damage, if any, caused by any of the following— (i) the severing of the land taken from other land of the claimant; (ii) the exercise of any statutory powers by the constructing authority otherwise injuriously affecting the claimant’s other land mentioned in subparagraph (i); and (b) to the claimant’s costs attributable to disturbance. (2) Compensation shall be assessed according to the value of the estate or interest of the claimant in the land taken on the date when it was taken. (2A) However, in assessing the compensation, a contract, licence, agreement or other arrangement (a relevant instrument) entered into in relation to the land after the notice of intention to resume was served on the claimant must not be taken into consideration if the relevant instrument was entered into for the sole or dominant purpose of enabling the claimant or another person to obtain compensation for an interest in the land created under the instrument. (3) In assessing the compensation to be paid, there shall be taken into consideration, by way of set-off or abatement, any enhancement of the value of the interest of the claimant in any land adjoining the land taken or severed therefrom by the carrying out of the works or purpose for which the land is taken. (4) But in no case shall subsection (3) operate so as to require any payment to be made by the claimant in consideration of such enhancement of value. (5) In this section— costs attributable to disturbance, in relation to the taking of land, means all or any of the following— (a) legal costs and valuation or other professional fees reasonably incurred by the claimant in relation to the preparation and filing of the claimant’s claim for compensation; (b) the following costs relating to the purchase of land by a claimant to replace the land taken— (i) stamp duty reasonably incurred or that might reasonably be incurred by the claimant, but not more than the amount of stamp duty that would be incurred for the purchase of land of equivalent value to the land taken; (ii) financial costs reasonably incurred or that might reasonably be incurred by the claimant in relation to the discharge of a mortgage and the execution of a new mortgage, but not more than the amount that would be incurred if the new mortgage secured the repayment of the balance owing in relation to the discharged mortgage; (iii) legal costs reasonably incurred by the claimant; (iv) other financial costs, other than any taxation liability, reasonably incurred by the claimant; (c) removal and storage costs reasonably incurred by the claimant in relocating from the land taken; (d) costs reasonably incurred by the claimant to connect to any services or utilities on relocating from the land taken; (e) other financial costs that are reasonably incurred or that might reasonably be incurred by the claimant, relating to the use of the land taken, as a direct and natural consequence of the taking of the land; -- 3 of 21 -- 4 (f) an amount reasonably attributed to the loss of profits resulting from interruption to the claimant’s business that is a direct and natural consequence of the taking of the land; (g) other economic losses and costs reasonably incurred by the claimant that are a direct and natural consequence of the taking of the land. Example of costs for paragraph (g)— cost of school uniforms for children enrolled in a new school because of relocation from the land taken The stamp duty claim [10] The claimant seeks to have stamp duty, that would be required to be paid in connection with the purchase of a replacement property, added to his compensation. It will be observed that s.20(1)(b) of the Act requires that in assessing the compensation regard shall be had to the claimant’s “costs attributable to disturbance”. That expression is defined in s.20(5)(b)(i) to include stamp duty. [11] The respondent points out that these provisions were not in the Act at the time of this acquisition. They were inserted into the Act by amendments which commenced on 23 February 2009.1 [12] Before that amendment there was no specific reference to actual financial loss or the concept of disturbance in the Act. It was necessary to search decided cases for precedent in relation to what had been found to be included within the damage caused by the exercise of the statutory powers to take land. [13] The present specific references to stamp duty were inserted after the date of acquisition but before the commencement of assessing compensation, the process in which the Court is now engaged. It was not submitted on behalf of the respondent that the applicant would not in fact have suffered damage, due to the resumption, in the form of the liability to pay stamp duty on the cost of a replacement property of equal value. It was simply said, and correctly so, that the provision now found in s.20 in relation to stamp duty was not in the Act at the date of acquisition. [14] The position is compendiously set out in the Explanatory Notes to the Acquisition of Land and Other Legislation Amendment Bill 2008, which became Act 5 of 2009. It states as follows: Disturbance as a separate head of claim In the context of compulsory land acquisition, disturbance refers to those incidental costs which are the reasonable and probable results of the acquisition and are not directly reflected in the assessment of value of land taken, such as removal costs, electricity and telephone connections, mail redirect and valuation and legal fees. Disturbance is not referred to in the section of the Act that sets out the heads of claim to assess compensation. However, it has been recognised as of special value to the owner 1 Acquisition of Land and Other Legislation Amendment Act 2009 No. 5 pts 1-2. Date of assent 23 February 2009. Commenced on date of assent. -- 4 of 21 -- 5 and is currently assessed separately by constructing authorities in line with a substantial body of case law. As the law on disturbance comes from case law, claimants and their solicitors are often required to research the case law, thereby increasing the fees of a claimant’s solicitor and the time involved in reaching settlement for an acquired property. Consequential costs for investment properties The Act does not include specific reference to compensation being payable for the ‘consequential costs of the acquisition’. Stamp duty, legal and other consequential costs for the purchase of a replacement principal place of residence are compensable based on case law. At present the right to claim for consequential costs does not extend to consequential costs for the replacement of an investment property. The right to claim consequential costs for investment properties is a practice adopted by other Australian States. [15] The Act changed on 23 February 2009 to allow, from that date, stamp duty such as the applicant would be required to pay on the purchase of a property to replace what was compulsorily acquired from him. Were it not for the amendment, the position would have been that referred to by Member Mr Trickett, as he then was, in Thirty-Fourth Philgram Pty Ltd v The Crown.2 When considering a claim for legal fees, stamp duty, owner’s expenses and mortgage costs the learned Member observed that while the situation was different in the case of an owner-occupier of a house forced out by acquisition, in the circumstances like the present ones: “I am of the opinion that it is now well established that in the case of the resumption of an investment property the costs of acquiring a replacement are not compensable. I do not propose to allow this claim”.3 Decision on the stamp duty claim [16] The amendments to s.20 do not claim to have any retrospective operation and can operate without there being any necessity to contain an element of retrospectivity in order for them to work. Although the assessment of compensation is being made now, there is no basis to give sub-section (2) of s.20 any less than its plain meaning, that the applicant’s loss must be assessed as it was on the date of acquisition. In view of that, the subsequent amendment of the Act to allow for stamp duty to be included in compensation cannot apply in the present case. The applicable law will be as it was before the amendment and the applicant is not entitled to have stamp duty payable on an equivalent replacement property included in the compensation. That claim was for $40,800. 2 (1992-93) 14 QLCR 13 at 53-54. 3 (1992-93) 14 QLCR 13 at 54. -- 5 of 21 -- 6 The land [17] The two allotments have a total area of 845 m² fronting on to Lutwyche Road, a busy arterial road to which they had access. It was agreed between the parties that any development on the site would be unlikely to secure such access. In fact, the land adjoining to the north is already burdened by an easement in favour of the resumed land which will permit access to Newmarket Road. [18] The land falls from the north-east towards the south-west so that it is considerably lower at the rear and lowest at the south-west corner. When the Court conducted a view it was vacant and a high fence, clearly for noise reduction, had been erected on the eastern frontage to Lutwyche Road. [19] The adjoining land to the north is presently a retail showroom; the access easement runs through the car parking area of that business. To the south of the subject land is an area presently also vacant and two lots to the south of the subject is a combined Shell service station and McDonalds’ fast food outlet which includes a drive-through service area. [20] When the acquisition took place, the land was in a Character Residential Area and a Demolition Control Precinct. The improvements [21] The two Queenslander style houses that were on the land were built around 1920 and were nearly identical timber framed, metal roofed houses.4 The valuation evidence [22] Both parties obtained the assistance of registered valuers who provided reports, including a joint report, and gave evidence. Each was searchingly cross-examined by counsel. [23] When the valuers met to prepare their joint report for the Court they had the benefit of joint reports from the town planning consultants (planners) and from the traffic engineers engaged by each party. [24] The valuers were guided by the agreement of the planners who were of the opinion that the local authority, which also happens to be the respondent, would permit the existing structures to be demolished. They also agreed that it would be likely to permit a combined commercial and residential development to be built as the planning reality had, in their view, diverged somewhat from the restrictions. The planners were divided as to exactly what the local authority would be likely to approve. 4 Photographs appear in Exhibit 2, the valuation report prepared by Mr Johnston, registered valuer, on behalf of the applicant and in Exhibit 7, the valuation report prepared by Mr Jorgensen, registered valuer, on behalf of the respondent. -- 6 of 21 -- 7 [25] The valuers also considered the views of the traffic engineers, which diverged on the implementation of access via the easement at the rear of the land and the parking arrangements for hypothetical developments. I will return to these planning and access aspects. [26] The respondent’s valuer, Mr Jorgensen, stated in his joint report that he: “considers the list price of the property at $670,000 as being a primary element reflecting on the value of the property as at 2006.”5 [27] The applicant’s valuer, Mr Johnston, disagreed as his client informed him that the real estate agent did not have authority to list the property at that figure. In addition, the task was to assess the value at the date of acquisition.6 [28] The subject land was listed for sale on the internet website of Action Property at a price of $670,000.7 In his statement8 and in evidence, the applicant explained that in late 2004 he put these and other properties on the market to raise funds. When the sale of other properties met his need for funds to satisfy a Family Court order he was no longer interested in selling the subject properties for $670,000 and the internet listing faded from his attention, if not from the internet, where it languished until the respondent discovered it. The properties were not otherwise marketed. [29] Although Mr Jorgensen saw the list price of $670,000 as a “primary element reflecting on the value of the property as at 2006” the evidence of the applicant, who impressed me as a truthful witness and whose evidence I fully accept, was that the list price was a reflection of the pressure he was under to raise money and that once funds had been obtained from another source he would not have sold the subject land for that price. [30] The financial pressure on the applicant at the time he authorised listing the land for sale changed him from a person willing to sell for a fair price into a person desirous to sell because of the pressure then upon him.9 This has made the list price unusable as an indicator of value and I cannot place any reliance upon it. [31] The valuers agree “that concluded sales are the best test of market value”.10 The valuers examined sales but have no common sales. 5 Joint report of the valuers to the Land Court dated 14/10/10 and signed by both valuers. It is in Exhibit 1. See page 3, paragraph (b) of the report. 6 Ibid. 7 Exh. 15. 8 Exh 6. 9 Spencer v The Commonwealth (1907) 5 CLR 418 at 432 per Griffith CJ. 10 Exh.1 Joint report of the valuers, page 3, para (c). -- 7 of 21 -- 8 The respondent’s valuer’s sales [32] Mr Jorgensen selected six sales which he compared to the subject land. In view of the expert valuers’ agreement that concluded sales are the best test of market value I will consider each of them in turn. [33] Sale 1 - 221 Lutwyche Road, Windsor - sold in March 2006 for $690,000 with a land area was 467 m². In the month after the sale the local authority approved a new plan with a reduced area of 401 m². Once a bakery with a residence above, it is now a mirror shop. The land is level and flood free with good access from Legeyt Street. It is on the south-east corner of Legeyt Street and Lutwyche Road. It is a heritage place so while it could be refurbished and perhaps extended it is unlikely to be able to be demolished. Improved with a two level, metal roofed, brick building which looks to have originally been a house, Mr Jorgensen analysed its land value to $1,161/m² for an area of 467 m² and $1,353/m² for an area of 401 m². [34] About half the size of the resumed land, Mr Jorgensen’s analysed land value per square metre, when applied to the whole area, shows that he valued the land at $542,000. Unlike the subject, it has no potential to be redeveloped with a new building because of its heritage listing. Accordingly, I do not find it of assistance in order to value the subject land. [35] Sale 2 - 229 Lutwyche Road, Windsor - sold in May 2007 for $2,500,000 with a land area of 1,539 m². On the north-east corner of Legeyt Street and Lutwyche Road the site was formerly the Crystal Theatre and has been redeveloped with a six tenancy 720/m² retail and restaurant complex of recent construction. Good access is available from Legeyt Street. [36] With larger area than the subject it has superior zoning and at the date of sale was subject to leases for periods of one, three and five years, up to 2011. With an analysed land value of $1,079/m², it has been valued at $1,660,000 for the land. Mr Jorgensen recognised in his analysis that the existence of the leases dictated a holding period before any redevelopment. The length of the holding period from the date of sale and the extent of the modern developments on the land are suggestive of the centre having been purchased as a going concern rather than for any near-term redevelopment potential, a major attribute of the subject land. Accordingly, I do not find this sale useful. [37] Sale 3 - 300 Lutwyche Road, Windsor - sold in November 2006 for $590,000 with a land area of 546 m². A corner block falling away from its Lutwyche Road frontage, it has access to the side street. An older-style timber shop and residence, it is a -- 8 of 21 -- 9 commercial character building with restrictions on demolition. The land is subject to a driveway easement in favour of a unit complex to the north and an overland flow of water is expected through the rear of the land where the easement is. [38] With an analysed land value of $888/m² the land value is said to be $485,000. The contours are similar to the subject but the burden of the easement, overland flow potential and, most importantly, the demolition restriction adversely impacting the redevelopment potential makes this sale of no assistance. [39] Sale 4 - 159 Maygar Street, Windsor - sold in February 2006 for $443,000 with a land area of 349 m². This is a triangular corner site falling gently from its frontage onto Maygar Street. It has access to Gilbert Road. It fronts on to a roundabout so car parking will be from Gilbert Road. It is a commercial character building, a refurbished timber- framed metal roofed shop. [40] Mr Jorgensen notes in his analysis that approval for demolition and redevelopment is unlikely, due to the commercial character building listing. His analysed land value of $1,089/m² shows a total land value of $380,000. Maygar Street carries far less traffic than Lutwyche Road, into which it feeds and this location is not comparable to that of the subject for commercial potential. The inability to demolish the structure on this site so seriously diminishes its potential for redevelopment as compared to the subject that I am unable to obtain assistance from this sale. [41] Sales 5 - 3-7 Days Road, Grange - sold in March and July 2006, apparently in two parts, for $840,000 with a land area of 883 m². A corner site with access to car parking from Gilbert Road, there was formerly a house on the corner. It has been replaced by a three level strata titled commercial building with parking underneath at ground level. The combined shop/dwelling next to it has been required to be retained in the redevelopment and has been refurbished. [42] Access and contour are superior to the subject. The analysed unimproved value of $887/m² shows a land value of $783,000. One of the two lots that form the site and which is a substantial part of the total area, about half, so it appears, was not able to be demolished and so the opportunity to redevelop was only able to be realised on about half of the land. The area has reduced commercial use and exposure compared to where the subject is located. The size is slightly larger, but still comparable. The very substantial restriction on redevelopment potential will significantly reduce the usefulness of this sale in arriving at a value for the subject. Weighing these advantages and disadvantages, I find that this sale supports a value of the subject of at least $700,000 if half of the subject could not be developed. This weights against a value of -- 9 of 21 -- 10 this order for the subject and in favour of it being significantly greater as a development of the whole of the area of the subject land would allow greater flexibility than what could be done with half of it. [43] Sale 6 - 70 Kedron Brook Road, Wilston - sold in June 2006 for $630,000, with a land area of 804 m². The land is flat and level with good access to Kedron Brook Road. It sold with a single level house which has been demolished. It adjoins the start of MP4 zoned land in the Wilston Urban Village Precinct. It was sold unconditionally. There is the need to grant an easement for a driveway along the northern site boundary in favour of the adjoining commercial premises. The local authority refused planning approval for a 250 m² office and four units. A second application was made, this time for a shop and two units, later increased to two offices and four units with a gross floor area of 512 m². The local authority’s decision on this application was appealed to the Planning and Environment Court which in June 2008 led to approval for 66% site coverage. [44] The need to provide an easement in favour of adjoining land and the existence of an overland water flow path on the land are disadvantages while the contour is superior to the subject. The low to medium residential zoning of this land did not lend itself to a commercial redevelopment and since it was bought unconditionally it does not appear that the price reflected some commercial development potential. As the existing house was demolished, Mr Jorgensen has made no allowance for its value, calculating a land value of $784/m². Attributing no value to the existing house would be appropriate if the property was bought for redevelopment and the intention was to demolish it; the cost of doing so could be added to the costs of purchase to reflect the purpose of acquisition. To make no allowance for the value of the house is problematic in the present case as the contract was not conditional on any development approval and the zoning did not permit a commercial element in a development. The evidence shows that obtaining approval for a development with a commercial component was attended with considerable difficulty and uncertainty and was resisted by the local authority, the matter having to be resolved by a decision of the Planning and Environment Court. The approval was obtained two years after the purchase. This situation is distinct from that applying to the subject land, where the planners agree that demolition would be approved and the element of uncertainty is significantly reduced. In the circumstances of this sale, I am not able to be satisfied that the sale price reflects other than the value of the property as a residence and do not believe it is a safe guide to the value of the subject land. -- 10 of 21 -- 11 [45] Mr Jorgensen has relied on additional bases to support his valuation. I have considered the sales which he used for direct comparison to the subject first since the opposing valuers agree that concluded sales are the best test of value. It is useful to reflect the agreed primacy of sales and to consider the sales used by the applicant’s valuer, Mr Johnston. The applicant’s valuer’s sales [46] Sale 1 - 84 Lutwyche Road, Windsor - sold in June 2007 for $2,000,000, with a land area of 1,345 m². The land has the benefit of an easement to Victoria Street which runs behind it and parallel to Lutwyche Road. On the western side of Lutwyche Road it is close to the intersection with Northey Street, just to the north, and, like Northey Street, Victoria Street is subject to flooding from Enoggera Creek in this area.11 [47] Mr Johnston has allowed $1,487/m² for the land, making no allowance for the substantial brick commercial building on the site. The sale occurred in a rising market after the acquisition date so he has allowed for this by applying $1,200/m². In his view, his sales 1, 2 and 3 provide the “best guide”12 to the situation in the marketplace just after the resumption. It is necessary to carefully examine the basis for making no allowance for the building on this land as its value could be a significant element in the purchase price. [48] Mr Johnston’s file note13 records that he spoke with Mr Girdis, the person behind the purchasing company. Mr Girdis said that to his mind the buildings added no value. There had been a lease to a cabinetmaker in the rear and he did not expect that there would be major costs involved in demolishing the existing structures. He was aware that the property had the benefit of an easement to the rear. Mr Girdis said that he was aware that a new local area plan was being adopted and, being a developer, he had made inquiries. The contract, made in May 2007, settled in October of that year and that period allowed him to make inquiries. He was definite that the buildings added no value to him and that he had paid a redevelopment price.14 [49] In his sales reconciliation15 Mr Johnston notes that the lease was not an issue as a break clause applied after the initial lease term. In a redevelopment scheme, vehicle access would be over the property adjoining to the north, which has access to Northey Street. The land was zoned for general industry16 use at the time of the sale, but the purchaser, a 11 Exh.2 Annexure D. 12 Exh2, p.29. 13 Exh.18. 14 Exh.18. 15 Exh.2 p.22. 16 Exh.1 Joint report of the valuers, p.17 and Transcript Day 3 p.96 line 35. -- 11 of 21 -- 12 developer, was looking ahead and making an estimate of its potential based on the inquiries Mr Girdis made. Mr Johnston was of the view that the sales he used had the same potential for development as the subject land.17 [50] The buildings on the land and the existence of the lease was explored in cross- examination of Mr Johnston.18 There was a lease which continued until 2010, an option for a further five years and a clause allowing for a break of the leasing arrangement. The lessee, a cabinetmaker “Kitchens by Design”19 was paying about $70,000/annum20 so the purchaser would stand to receive about $250,000 income from the balance of the lease.21 It would also cost “quite considerable money”22 to demolish the building. Mr Johnston referred to the purchaser saying that any rent would offset the costs of clearing the site.23 While this is not included in exhibit 18 it is not inconsistent with it and Mr Johnston’s words in making this statement were closely preceded by a hypothetical statement by a purchaser “If he says to me”.24 It appears that his remarks which follow about offsetting retail income against demolition costs were not intended to be a direct quote and I take them to be more in the nature of what a developer may rationally be likely to be thinking. The underlying significant matter is contained in the contemporaneous file note,25 that to the purchaser, the buildings added no value. The witness was supported in his evidence by his file note and maintained his position under cross-examination. I accept this evidence as a truthful and accurate representation of what Mr Girdis told Mr Johnston. Mr Johnston stated that he was informed by the Main Roads Department that Mr Girdis paid $60,000 “key money” to buy out the tenant. This does not appear to be reflected in the valuation.26 [51] The $1,487/m² derived from this sale represents a premium over the $1,200/m² applied to the sale.27 He derived this $1,200 figure from his market movement indicator calculations graph.28 Examining sales in Woolloongabba, he deduced an increase of approximately 20% between December 2006 and June 2007. He was challenged on this in cross-examination29 on the basis that the sales were in Woolloongabba, were purchased by a party seeking to put together a large site and that not all of the purchases 17 Transcript Day 3 p.82, lines 10 and 45 in cross-examination. 18 Transcript Day 3 p.92 to p.96. 19 Transcript Day 3 p.94 line 40. 20 Transcript Day 3 p.95 line 50. 21 Transcript Day 3 p.95 line 55. 22 Transcript Day 3 p.95 line 45. 23 Transcript Day 3 p.96 line 10. 24 Transcript Day 3 p.96 line 5. 25 Exh.18 was made on 8 November 2010 and reflects a conversation on 4 November 2010. 26 Transcript Day 4 p.62 line 30 and lines 58-60 and p.63 lines 30-35. See also Transcript Day 5 p.30 line 50. 27 Mr Johnston states in Exh.2 at p.22 that it is 23%. It is closer to 24%. 28 Exh.2 p.26. 29 Transcript Day 3 p.86 lines 1-10 and 40-50. -- 12 of 21 -- 13 by that party were included. Had that been done, it was suggested30 that no such trend line would have emerged. Mr Johnston did not accept that he had chosen and excluded sales in order to manipulate the outcome but that he had looked at relevant times and lot sizes.31 He had excluded a sale that seemed out of line but was unable to say why he had excluded several other sales32 in the amalgamation. [52] I have considered this aspect as it arises on the application of this sale but will postpone drawing a conclusion until Mr Johnston’s other sales have been examined, when it will be able to be determined to what extent, if at all, this part of Mr Johnston’s reasoning needs to be considered. [53] Sale 2 - 88 Lutwyche Road and 10 Northey Street, Windsor - sold in May 2007 for $2,075,000, with a land area of 1,462 m². On the south-west corner of the intersection of Lutwyche Road and Northey Street. The steel warehouse at the rear has access to Northey Street and that part of the land often floods to a depth of about 2 metres from nearby Enoggera Creek. A small car yard on the corner of Lutwyche Road had land value only. [54] With an analysed land value of $1,407/m², or $2,057,000 only $18,000 has been allowed for the substantial steel warehouse, perhaps reflecting the exposure to flooding, a real and substantial hazard on this site. Agents report that they are unable to lease the warehouse and the purchaser’s business was flooded out. A 17% premium over the $1,200/m² applied to the subject was seen as reflecting the rise in the market since the date of resumption. The flooding on this site is a significant disadvantage compared to the resumed land. The contours are similar, both this sale and the subject land fall from Lutwyche Road towards their rear boundaries on the west. The sale has access to Victoria Street behind it but the street is quite flood prone at this, its southern end. [55] Sale 3 - 120 Lutwyche Road, Windsor is the physically closest sale to the subject land. It might be expected to be subject to the same influences in respect of its development potential. It has an area of 741 m² and sold in June 2007 for $1,300,000. Its rear access to Victoria Street is also subject to flooding from Enoggera Creek. [56] At $1,755/m² nothing has been allowed for the structures on the land. The purchaser advised that the buildings did not add any value in the purchaser’s view. This rate is 46% above the $1,200/m² applied to the subject land. Mr Johnston described it as his “primary sale”.33 At the time of the sale, and afterwards, there was a tenant in the 30 Transcript Day 3 p.86 line 52. 31 Transcript Day 3 p.87 line 45. 32 Transcript Day 3 p.88 lines 28-40 and p.86 lines 14-17. 33 Transcript Day 2 p.87 line 47. -- 13 of 21 -- 14 premises but the presence of the building added no value from the purchaser’s point of view.34 This sale is comparable to the subject land in location, size and development potential. The nearby location indicates that whatever the influence of perceived evolving development potential for the subject land, broadly the same potential would have been visible in the marketplace when this sale occurred. Subject to allowing for the difference in time as it may have impacted upon value in a rising market and any changes in market sentiment relating to how development potential may have been perceived to change in that time, this sale will be directly comparable. At the time of this sale the neighbourhood plan had not been released35 but with the passing of time it is more likely than not that a purchaser at the date of sale 3 would have been more confident of increasing development potential than at the time of the acquisition of the subject land. This, together with a rising market, would be likely to result in a higher price being paid than at the time of the acquisition. Even in view of both these factors, the 46% higher rate per m² of sale 3 than applied to the subject land appears to be a very conservative application of sale 3, particularly in view of its susceptibility to flooding. [57] Sale 4 - 96 Breakfast Creek Road, Newstead, with a land area of 760 m² sold for $990,000 in August 2006.36 It sold after auction. The purchaser had been the highest bidder at the auction. The land is flood free with river views. It does not have access to Breakfast Creek Road; access is by the street at the rear of the property. The large timber 1920s house had formerly been a police station and was in poor condition at the date of sale. The purchaser treated the purchase as if the land was vacant.37 Aware that it was heritage listed, the purchaser believed that this could be changed38 and bought it as an investment property,39 assigning no value to the improvements.40 The zoning is MP441 and the local authority will not permit the home to be removed.42 The purchaser has now spent $250,000 on renovating the house43 and it returns $40,000/annum rental as at 2010.44 It is used as an office by a charitable organisation.45 [58] With no value allowed for the improvements, which included the old cell-block, the sale shows a rate of $1,302/m². Mr Johnston pointed out that “potential” is what developers 34 Exh.17 and Transcript Day 4 p.68 line 55 and p.69 lines 1-10. 35 Exh.2 p.23. 36 Exh.2 p.21 shows August 2009, which I take to be an error. The joint report of the valuers in Exh.1 shows, at p.20, the date of sale as August 2006. 37 Exh.1 Joint report of the valuers, p.20. 38 Transcript Day 4 p.72 lines 1-10. See also Exh.1 Joint report of the valuers p.20. 39 Exh.1 Joint report of the valuers p.20. 40 Exh.1 Joint report of the valuers p.21. 41 Exh.2 p.23. 42 Exh.2 p.23. 43 Transcript Day 4 p.71 line 42. 44 Exh.1 Joint report of the valuers p.20. 45 Transcript Day 5 p.14 line 27. -- 14 of 21 -- 15 buy46 and that he endeavoured to use sales with the same potential47 as the subject. In this case, however, the purchaser proceeded on the basis of what turned out to be an erroneous estimate of potential. The house had to be retained whereas he believed that it could be removed. [59] There is no doubt that the purchaser knew of the heritage listing. It seems that an estimation that there were prospects of having it removed was operating so as to influence the decision to buy at the price paid. The evidence is that the purchaser believed that the listing could be removed. There is no evidence that this belief was more widely held. [60] In Boland v Yates Property Corporation Pty Ltd48 Callinan J said: “266. In Australia it has long been accepted that the various statements made by Justices of this Court in Spencer’s case[262] correctly formulated the principles to be applied in compensation courts. The most frequently quoted statement is that of Griffith CJ[263]. ‘In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring ‘What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’ … The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together.’ 267. I would emphasise the important phrase in his Honour’s judgment ‘persons conversant with the subject’. The formula suggested by Griffith CJ contemplates a prudent purchaser and one who would make a point of informing himself or herself of all of the relevant attributes and advantages that the property enjoyed so as to make that purchaser ‘conversant’ with the subject, meaning thereby not just the land in its existing state but also any profitable uses to which it might be put. 268. Isaacs J put the matter even more strongly. His Honour said that the hypothetical parties should be regarded as not anxious to trade and as being[264]: ‘perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property’. 46 Transcript Day 3 p.100 line 25. 47 Transcript Day 3 p.82 line 45. 48 [1999] HCA 64; 74 ALJR 209; 167 ALR 575. -- 15 of 21 -- 16 269. The comprehensive language used by Isaacs J is clearly capable of embracing matters with which perhaps courts of today have become more familiar, such as the value of highly restrictive or very advantageous planning approvals, the changing value of money over time and opportunity cost. … ______________________________________ [262] Spencer v The Commonwealth (1907) 5 CLR 418. [263] Spencer v The Commonwealth (1907) 5 CLR 418 at 432. [264] Spencer v The Commonwealth (1907) 5 CLR 418 at 441.” [61] As Callinan J stated at paragraph 267 of his judgment, as well as being thoroughly informed, the traditional formulation of the text contemplates a prudent purchaser. [62] In the case of this sale, the purchaser, though fully informed, appears to have gambled and lost, having placed reliance on his opinion as to the prospects of having the heritage listing removed. There is no evidence that this opinion was held by others in the marketplace at the time. Accordingly, I do not accept that there was a prudent purchaser in this case. I therefore cannot rely on this sale. [63] Sale 5 - 1 Thompson Street, Bowen Hills, sold in December 2005 for $450,000, was a vacant 405 m² area site. Zoned light industry it lacks the development potential of the subject. It is not subject to flooding and has good location and access for its potential use. A building approval in 2003 became superseded by one in 2006 for a building reduced in gross floor area by 55 m².49 [64] Mr Johnston made no allowance for clearing and by dividing the sale price into the land area obtained a value of $1,111/m². This vacant land only had the potential of its light industry zoning at the date of this sale which occurred a year before the acquisition. Mr Johnston’s evidence was that this sale provides an “absolute bottom line”, placing it “at the bottom of the heap when I start my comparing, my comparison”.50 He did not accept that the 2003 development approval, not current at the time of sale but which may have assisted the rapid approval which came later had added significant value.51 [65] In the joint report of the valuers,52 Mr Johnston notes that this sale occurred 12 months before the acquisition and in a rising market. Mr Jorgensen points to the small size being reflected in the rate/m² and he sees the zoning, location and access as superior to the subject. He has made a comparison so this is not a case where the opposing valuer has said this sale is not comparable to the subject land. Despite the significant time between this sale and the date of acquisition the valuers have been able to compare it with the subject land. Allowing for the 12 months of rising market on the one hand and the zoning, location and size on the other, I am prepared to accept this sale as being able 49 Transcript Day 5 p.5 lines 30-32. 50 Transcript Day 5 p.9 lines 10-20. 51 Transcript Day 5 p.8 line 38. 52 Exh.1 Joint report of the valuers, p.21. -- 16 of 21 -- 17 to be compared with the subject land so as to find its value at the relevant date. I cannot however accept that it would be a strongly comparable sale but rather it is capable of being corroborative of other information. [66] Sale 6 - 30 Jamieson Street, Bowen Hills, sold in July 2006 for $800,000 with a land area of 528 m². A level corner allotment not subject to flooding, it was purchased with a dwelling and is now vacant land. It was purchased by Queensland Rail, an adjoining owner. It is in a back street with exposure to Abbotsford Road. [67] Mr Johnston allowed nothing for the old Queenslander house or its cost of removal and calculated a value of $1,515/m². It is zoned MP353 so it has development potential. [68] The rate of $1,515/m² is 26% above that applied to the subject land. Allowing for the smaller size tending to show an increase in the rate/m² and the rising market between this sale in July 2006 and the acquisition date54 this sale is supportive of the $1,200/m² applied to the larger subject land at the date of acquisition in December 2006. It is consistent with Mr Johnston’s market movement indicator graph.55 The Market Movement Indicator [69] I have referred already, at [51] to this indicator used by Mr Johnston and noted the criticisms made of it in cross-examination, including Mr Johnston’s inability to explain why he had excluded several sales from it; which is of concern when considering its validity and reliability. It does appear that the market was rising from mid to late 2006 until late 2007 or March/April 2008.56 [70] Mr Johnston was of the view that the sales he relied upon had the same potential for development as the subject land57 and attempted to capture the increase in value of land with development potential in his graph. The properties he considered were character residential58 where there was development potential59 but where there was, as yet, no local authority development approval.60 This situation is strongly comparable to that applying to the subject land, which supports his approach. I am concerned by the inability to explain why some sales were omitted from the graph but persuaded, despite this imperfection, that the strong comparability makes this graph of sufficient validity and reliability to be used as Mr Johnston has used it. 53 Exh.2 p.24. 54 Exh.2 p.25. 55 Exh.2 p.26. 56 Exh.2 p.25. 57 See note 17. 58 Transcript Day 3 p.83 lines 35-45. 59 Ibid. 60 Ibid. -- 17 of 21 -- 18 Mr Jorgensen’s other valuation approaches [71] Mr Jorgensen, in addition to using the direct comparison method of valuation, employed a capitalisation approach to assess the market value of the commercial components within potential developments on the subject land. He used a selection of commercial sales for comparison. [72] Mr Jorgensen also had regard to commercial rental evidence, residential unit sales and the sales of residential flats. A significant difficulty with using costing of hypothetical developments on the subject land is that there was an absence of agreement on what precisely could be built and using costings of hypothetical buildings could result in wide variations on costs depending on the exact building assumed to be built. [73] The sales which were used for direct comparison suggested that the subject land was worth $825/m² when acquired. This led to the $700,000 valuation. I have already examined the sales so there is no need to return to that aspect. [74] The four feasibility analyses studied by Mr Jorgensen satisfied him that a commercial and/or residential development on the subject land was “simply not feasible”61 with any of the projects considered. This, in his view, cast “considerable doubt”62 over the viability of a commercial and/or mixed use development on the land at the relevant time. He concluded that the highest and best use of this land did “not readily appear”63 to be as a commercial and/or mixed use development site but was the former use of two blocks of residential flats.64 He initially confirmed this in cross-examination.65 [75] Relevantly, the following exchange occurred: “All right. I suggest to you, and I'll be suggesting this at the end of my cross-examination so I'll just, in a sense, forewarn you, that a purchaser would have come to the conclusion, taking all of these matters into account, all of the documents that were available with respect to planning intentions, and I suppose I should list those. That's the draft SEQ Regional Plan that came into in document '04?-- Mmm hmm. The actual SEQ regional plan that came into force in June '05, the Cityshape policy that came - strategy that was published in February '06 and all the other documents that were in the public domain at that time with respect to planning of this area. An experienced purchaser would have absolutely no doubt that the highest and best use of this land was purchased for a mixed commercial development, whether it be done that day or some little time afterwards. Do you agree or disagree with that proposition?-- There's no doubt that a purchaser via his town planner and his experts would consider all those factors and I agree. All that documentation in the public domain would be taken on board by his town planner. Yes, I agree with that. So you agree - I don't want to trick you?-- No, no, that's all right. 61 Exh.7, 23.5. 62 Ibid. 63 Exh.7, 23.7 64 Ibid. See also 23.10. 65 Transcript Day 6 p.12 line 5. -- 18 of 21 -- 19 What I put to you was, I suggest to you that that prospective purchaser would have been in absolutely no doubt that the highest and best use of the land was for one of these mixed use commercial developments?-- As long as it's feasible. That is the test.”66 [76] Mr Jorgensen accepted that in the gimlet-eyed view of the rational purchaser the land’s potential was for a mixed use development. His theoretical developments did not prove feasible, but naturally he has not considered all possibilities and the fact that those he did consider did not prove feasible does not show that none would be. The fact that the planners differed on what would be likely to be approved and that the traffic engineers differed on access and car parking arrangements, similarly does not show that nothing could be built that would be feasible and economical. It serves only to illustrate that these are matters appropriately left for the developer to work out rather than for this Court to speculate about. Its jurisdiction does not extend to planning approvals and it would be an error to proceed as if it did by purporting to determine exactly what could be built on the site. It is sufficient in order to determine compensation to find the land’s value by comparison with sales of land with like potential at or close to the relevant day. Mr Jorgensen was not able to find a hypothetical development that he believed to be feasible but such a consideration falls far behind the importance of his acknowledgement that the land had the potential for a mixed use commercial development; that is the key point and from it the value can best be determined by sales of land with like potential. The sales analysed by Mr Johnston are useful in that regard. [77] Mr Jorgensen stated that the houses on the land acquired would have a combined value of $20,000. This contrasts with the old Queenslander house, the former police station, on 96 Breakfast Creek Road which he valued at $216,750 and on which $250,000 was then spent post purchase and which afterwards returns an income of $40,000 per annum.67 The flats on the subject land returned about $38,000 per annum.68 The $20,000 allowed seems very low and I accept Mr Johnston’s allowance of $36,000 for the removal value of the dwellings. [78] Mr Jorgensen was asked about the market position for land like the subject land. It was suggested that it increased through 2006 and increased more steeply through 2007.69 His response was that: “I’d disagree with Mr Johnson’s 50 percent - 57 percent increase from March when the property was listed for sale for 670, I disagree with that strongly. I see 2006, and recall 2006, like I said yesterday, as a year of more plateau with a reduced volume of sales occurring, certainly longer selling periods.70 66 Transcript Day 6 p.14 line 1 to p.15 line 22. 67 Transcript Day 6 p.41 lines 22-45. 68 Exh.2 p.18. 69 Transcript Day 6 p.46 line 57. 70 Transcript Day 6 p.47 lines 2-7. -- 19 of 21 -- 20 It is noteworthy that the 57 percent increase with which Mr Jorgensen disagrees exists only if the $670,000 list price equates with market value at the time. This is an assumption that only Mr Jorgensen made and which I do not accept to be correct. He has proceeded entirely on an erroneous basis in his response to this question. [79] To a suggestion that the market for commercial property was strong in 2006 and into 2007, Mr Jorgensen said that it was in Spring Hill, Bowen Hills and Milton. That rentals went from $200 to $400 per m² in Spring Hill in 2007 but that: “I don’t believe it extended out to Windsor”.71 In my view Mr Johnston’s sales 1, 2 and 3 point to the contrary conclusion. [80] He also reverted to disagreeing that the subject land was available to be developed for commercial use72 although in the context of his earlier evidence I understand this to mean that he had not seen a feasible plan to do so. Conclusion on the valuation evidence [81] The direct comparison with sales has been accepted by the valuers as the best method to value the subject land. Mr Jorgensen’s sales have however not been of very much assistance and his other methods have not produced any result which could be said to be a reliable indicator of value of greater weight than the use of the direct sales comparisons relied on by Mr Johnston. The reliance on the listing by the applicant for sale at $670,000 has been a significant factor in Mr Jorgensen’s valuation and has fatally flawed it. [82] I accept Mr Johnston’s valuation of the subject land at $1,200/m² which with an area of 845 m² plus $36,000 for the dwellings results in compensation of $1,050,000. Costs [83] Costs of and incidental to this matter should follow the event as the applicant needed to pursue his claim after having had the land compulsorily acquired. In addition, the claim was fully successful.73 71 Transcript Day 6 p.47 lines 50-60. 72 Transcript Day 6 p.48 lines 7-8. 73 Acquisition of Land Act 1967, s.27. -- 20 of 21 -- 21 Interest [84] Interest ought to be paid in order to protect the real value of the compensation from being eroded by the passing of time. It should be payable at the rate applicable from time to time and as published on the Land Court website. [85] Interest rates applicable for calendar years are: 2006 5.50% 2007 6.00% 2008 5.75% 2009 5.00% 2010 5.50% 2011 5.25% In accordance with s.28 of the Act interest is payable in respect of the period commencing on and including the date on and from which the land was taken and ending on and including the day immediately preceding the date on which payment of compensation is made. Interest shall not be payable in respect of compensation advanced under s.23 of the Act. Orders 1. Compensation is assessed at One Million and Fifty Thousand Dollars ($1,050,000) in respect of the land compulsorily acquired. 2. Disturbance is assessed at the agreed figure of Thirteen Thousand Nine Hundred and Forty-two Dollars and forty-six cents ($13,942.46). 3. Interest is payable at the rate adopted for the relevant year in the table of interest rates published by the Land Court and calculated in accordance with section 28 of the Acquisition of Land Act 1967. 4. Costs of and incidental to the hearing and determination of the claim are awarded to the claimant on the standard basis. HIS HONOUR WA ISDALE MEMBER OF THE LAND COURT -- 21 of 21 --