Chapman v Brisbane City Council [1998] QLC 362

LAND COURT BRISBANE 18 DECEMBER 1998 Re: A97-87 Determination of Compensation – Resumption of Easements for Water Supply Purposes - Acquisition of Land Act 1967 JR and KL Chapman v. Brisbane City Council J U D G M E N T By Notification of Resumption published in the Government Gazette on 9 July 1993, the Brisbane City Council declared that easements were taken, on and from that date, for water supply purposes, over lands described as follows: Lot F in Lot 2 on Registered Plan 218548 on Plan 852684, containing an area of 1084 m², being part of the land in Certificate of Title Volume 8003 Folio 235 and Lot E in Lot 3 on Registered Plan 218548 on Plan 852685, containing an area of 1,226 m², being part of the land in Certificate of Title Volume 8003 Folio 236 both County of Stanley, Parish of Moggill, City of Brisbane. The registered proprietors of Lots 2 and 3 at the date of resumption were Joseph Ronald Chapman and Kay Lorraine Chapman as joint tenants. The land is situated on the northern frontage of Lather Road, Bellbowrie, bounded on the north by Pullen Pullen Creek. Lot 2 contains an area of 4.004 ha and Lot 3, 4.292 ha. The land was zoned "Non-Urban" and at the date of resumption was used by the owners as the Bellbowrie Turf Farm. A dwelling was located on Lot 3. Water, electricity and telephone services were available and Lather Road had a bitumen strip surface. Lot 2 as the eastern lot, is of highest elevation in its south-eastern corner, then falls gently in a westerly and northerly direction to a gully which first drains across the lot then in a northerly direction to the creek. The gully has been dammed in two [1998] QLC 362 -- 1 of 20 -- 2 places and the overflow runs, from the western side of the second dam wall, to the creek. Lot 3 is a hatchet-shaped lot with an access strip surveyed to Lather Road. It also enjoys the benefit of an easement for access surveyed over the south-western part of Lot 2, to Lather Road. The land slopes to the rear with cross slope to the east and north-east. The resumed easements are surveyed as a strip 10 metres wide commencing in Lot 2 on its eastern boundary in close proximity to Pullen Pullen Creek, traversing Lot 2 then Lot 3 in a generally north-westerly direction, at a widening separation from the creek, being about 107 metres distant on the western boundary of Lot 3. The easement traverses a section of gully between the dam wall and the creek from the western boundary of Lot 2. At the date of resumption the balance of both easements, being an area of about 1,800 m² comprised a developed section of the turf farm. Subsequent to the resumptions, a large (1,670 mm diameter) trunk water main was laid underground within the easements. Three manhole covers identified by sawn post markers are located on the ground surface along the line of the water main, together with a steel pipe post near the eastern boundary of Lot 3 which identifies the location of a "test point". The resumed easements are fully located within previously existing easements registered on the relevant titles as follows: Lots 2 and 3 Easement G on RP 172729 in favour of Queensland Electricity Commission (first registered 7 April, 1981). Lot 2 Easement B on RP 218548 in favour of Brisbane City Council (registered 23 July, 1990). Lot 3 Easement D on RP 218548 in favour of the Brisbane City Council (registered 23 July, 1990). Easement G encumbers a wide strip of land including land developed as part of the turf farm, at the northern end of the property, accommodating electricity transmission lines supported on steel tower structures. -- 2 of 20 -- 3 Easements B and D were granted by the claimants "[I]n compliance with conditions of approval imposed by the Brisbane City Council in respect of RP 218548" for "Overland flow and Access". They encumber a strip of varying width from the creek extending generally about midway into the width of the electricity easements, also including developed sections of the turf farm. CLAIM FOR COMPENSATION The Claim for Compensation as lodged in the registry of the Court was in the amount of $351,828.36 apportioned as follows: Improvements $125,000.00 Injurious Affection $219,227.36 Legal and Valuation Fees $ 7,601.00 Amount of Claim $351,828.36 During the hearing, counsel for the claimants sought leave, without objection, to amend the claim as follows: Blot on Title $5,000.00 Injurious Affection $163,152.50 Lost Income $ 74,000.00 Legal and Valuation Fees – as agreed (to include interest) $ 6,600.00 $248,752.50 RESPONDENT'S VALUATION The valuation finally put in evidence by the constructing authority was interpreted by counsel for the respondent as being in the amount of $96,636, apportioned as follows: Diminution in value of land $5,000.00 Reinstatement Costs $50,400.00 Lost Profits $34,636.00 Legal and Valuation Fees as agreed (to include interest) $ 6,600.00 Total $96,636.00 EVIDENCE Evidence was called through the following witnesses: For the Claimants: Mr JR Chapman Mr RW Anderson, Chartered Accountant -- 3 of 20 -- 4 Mr DR Thomas, Registered Valuer Mrs JG Eggar, Director and Secretary of Markdale Pty Ltd, trading as Chase Earthmoving. For the Constructing Authority: Mr JR Wood, Registered Valuer Mr LGF Wright, Business Broker and Business Valuer. Appearances Mr MK Conrick of Counsel appeared on behalf of the claimants and Mr M Hinson of Counsel on behalf of the respondent constructing authority. SUMMARY OF EVIDENCE Mr Chapman's evidence was that the turf farm development had commenced in the late 1970's. Raw grassland was initially cut for sales of "cover" grass then the development progressed through B-grade blue couch, the quality of which is downgraded by the presence of some other grasses, to A-grade turf of pure blue couch. At about the time of resumption, the cultivated turf comprised about 4.1 ha of A-grade (including about 1,800 m² of the subject easement areas) and about 1.5 ha of B-grade turf. At no time in its developed history had there been utilisation of the full production capacity of the farm. Under normal growing seasons the cultivated area was capable of 1½ to 2 cuts – one in early spring, season permitting, another in summer, with full cover being re-established by about May. The May cover was then maintained to provide the first spring cut in the following season. The turf was cut in strips retaining a narrow strip between runs. Runners from those retained strips together with regrowth from the root stock remaining under the cut, combined to provide the new couch cover. Mr Chapman said that the development of the land as a turf farm had been regarded as an investment providing interim cash flow, but aimed initially to achieve full development with A-grade turf. The intention had been to then dispose of the turf farming business as a fully developed going concern including established stock. Although it was not included in Mr Chapman's evidence, it seems from a perusal of the documentation in Mr Wood's valuation report that the original area was, within the development period, subdivided into Lots 2 and 3. The subdivisional plan was registered in 1990. In 1990 an unsuccessful attempt was made to dispose of the property. In February, 1991, Lot 3 was sold at auction at a contract price of $402,000, -- 4 of 20 -- 5 not conditional on finance but with a three month settlement period. The sale price included the registered business name "Bellbowrie Turf Farm", the right to lease Lot 2, except for a 1 ha building site, for three years with a three year option, and various plant and equipment. The sale did not settle. It took nine months for the sale to be rescinded. During that period, according to Mr Chapman, the turf farm was not worked. However, once released from their contractual obligations, the claimants once again worked the farm. At about that time the electricity authority proceeded to carry out some reconstruction of the electricity transmission lines within the relevant easement. Damage was caused to turf stock but restricted in extent through what Mr Chapman acknowledged as mutual co-operation and satisfactory supervision. Agreement was reached as to compensation for unavoidable damage and subsequent loss, in the amount of $12,000, according to Mr Chapman. Then "while that was going on" the respondent Brisbane City Council "started sending in surveyors, geologists …" and about a dozen survey pegs were placed "through the middle of the A-grade Turf", remaining there for nearly two years "before the job was started". On 7 September, 1992, Notices of Intention to Resume the easements were served. The owners exercised their rights of objection. According to Mr Chapman, the claimants unsuccessfully sought to have the rights of access to the easement area suitably confined. Subsequent to the 9 July 1993 Notice of Resumption, the constructing authority commenced work on the property in "September/October 1993". The work was not completed until "Easter 1994". The easement was excavated, topsoil to a depth of about 1 metre removed from the site and the clay subsoil used as backfill once the pipe had been laid. A "smear" of topsoil was then placed over the backfill and left bare of turf. In Mr Chapman's opinion, the disturbed area as "reinstated" with inadequate topsoil, was unsuitable for re-establishing turf. Clause 1 of the terms of the easement sets out the various rights acquired over the surveyed easement area. Clause 2 then is as follows: " For all or any of the purposes aforesaid Brisbane City Council its engineers, surveyors, servants, agents, licensees, contractors, subcontractors, workmen and others authorised by Brisbane City Council with or without vehicles, equipment, machinery, tools and materials shall have the right: (a) of ingress, egress and regress to and from the said land over the land of the Registered Proprietor adjoining or adjacent to the said land to permit access to the nearest surveyed road or to such other point on the land of the Registered Proprietor as -- 5 of 20 -- 6 Brisbane City Council shall consider convenient or necessary to enable Brisbane City Council its engineers, surveyors, servants, agents, licensees, contractors, subcontractors, workmen and others authorised by it with or without vehicles, equipment, machinery, tools and materials to obtain access to and from the said land, and (b) To use such land of the Registered Proprietor immediately adjacent to either side of the said land as may reasonably be required by Brisbane City Council in connection with all or any of the purposes aforesaid." Mr Chapman's evidence was that, in their preliminary objections and discussions with representatives of the respondent, the claimants had expressed concern as to the potential disruption and damage to the turf farming operation, if the rights to use the additional lands were invoked. However, according to him, their protestations were ignored, the rights were utilised to the fullest and relatively large areas of land external to the pipeline easement were traversed by vehicles including heavy vehicles, plant and machinery. Those external surface areas became compacted and rutted and contaminated with foreign grass seeds. Affected areas had been identified by Mr Chapman on a section of an orthophoto map, then measured by scale by a licensed surveyor. The identified affected areas were as follows: 1.8 ha (including 1,800 m² of easement) of A-grade blue couch turf; 1.0 ha B-grade turf. An area of 2.3 ha of A-grade turf was said by Mr Chapman to have been unaffected by vehicle movements, although efficient management of that area had been disrupted by damage and interference to the irrigation infrastructure and summer watering requirements of the turf. That otherwise unaffected area was located over the boundary between Lots 2 and 3 and was said to have been about equally distributed on each lot. The claimants sold Lot 3 by contract dated September, 1993 (settled January, 1994). The date of contract was subsequent to the resumption but, it seems, prior to the construction work commencing. It was Mr Chapman's evidence that there was an agreement, in writing, between the claimants and the purchaser under which the claimants retained the right to grow and harvest turf. The agreement was not produced. However, it is not disputed that the claimants continued their turf farming operation on the 2.3 ha unaffected by the constructing authority's activities, until 1996 when the business was closed down. -- 6 of 20 -- 7 Mr Chapman said that no couch had been harvested from the damaged areas on either Lot 2 or Lot 3 subsequent to the construction works. It was explained that when damaged by compaction of the soil, grass growth was retarded and cutting impeded. The wheel track ruts caused breakage of rolls making the turf unsaleable. The claimants did not commence the reinstatement said to be necessary, because, as Mr Chapman said, he had "already put 12 years" into developing the turf and was clearly discouraged by the potential for lack of control over any future construction or access requirements of the two constructing authorities. Prior to construction and indeed, prior to the formal Notification of Resumption, the claimants had obtained and no doubt passed on to the respondent, reports from a Mr Faulkner, Senior District Adviser – Land Conservation, Department of Primary Industries and a Mr Williamson, manager of another turf farm, advising the potential for damage to the turf farm and the remedial works which might be necessitated by uncontrolled vehicle and machinery access. When the claimants failed to receive satisfactory assurances from representatives of the respondent that their turf farming operation would be protected from damage, they took the decision in May/June 1993 not to renew for 1994, a longstanding prominent (and expensive) advertisement in the Yellow Pages Directory. Payment for that advertisement would have been necessary by June 1993. The advice received from Mr Faulkner had been that reinstatement of damaged areas could involve preliminary deep ripping of those areas, fumigation to eliminate weed and foreign grass seed contamination, rotary hoeing, levelling, grading and consolidation, then replanting of couch. Mr Chapman was of the opinion that due to the sloping nature of the affected areas and the extent of earthworks required, the normal practice of sprigging with couch would be impractical due to erosion risk. In his opinion, total cover with rolled turf would have been necessary. On the actual easement area, as a result of the backfilling with clay subsoil, Mr Chapman suggested that a quantity of 920 m³ of that material should be re-excavated and removed from the site then replaced with clean garden soil, with 1,800 m² of surface area to be ripped, fumigated, rotary hoed, levelled, graded and consolidated, then fully returfed. In addition, where the easement traversed the area behind the dam wall it was suggested that the resultant erosion required 90 m² of spillway to be stone pitched to prevent potential damage to the dam wall. -- 7 of 20 -- 8 Mr Chapman had requested a quote from Chase Earthmoving for the remedial work considered necessary. This quote, at costs prevailing in 1994 when the construction work had been completed, was as follows: "Turf Farm 1. Rip 26,200 m² of soil $1,500.00 2. Gas soil @ $2.50/ 3 m² $21,832.50 3. Rotary hoe - $60/hour $ 1,200.00 4. Level, Grade and consolidate $ 4,000.00 5. Returf $94,160.00 Total $122, 692.50 Easement Rip 1,800 m² soil $180.00 Gas soil @ $2.50/3 m² $ 1,500.00 Excavate 1 m x 4 m (920 m³) $ 4,000.00 Remove soil from site $ 8,800.00 Replace with clean garden soil $14,260.00 Rotary hoe $60/hour $ 80.00 Level, grade and consolidate $ 3,000.00 Returf $ 6,840.00 Stone pitch or concrete spillway 9 m x 10 m $ 1,800.00 Total $ 40,460.00 Total for Turf Farm and Easement $163.152.50 " Mrs Eggar had been called to confirm the basis upon which the quote was given. Expressed in the written quote signed by Mr Eggar was an opinion that the "site would not be stable and commercially usable as a turf farm for two growing seasons (two years)", subsequent to the remedial works being effected. Mrs Eggar advised that the quote had been calculated on quantities as supplied by Mr Chapman. Mr Anderson had prepared a report calculating the loss of income which could result from the destruction of 1.8 ha of A-grade turf and 1 ha of B-grade turf on the assumption that three cuts per season were lost, for as long as it took for reinstatement to be effected. Briefly, he calculated that each cut had the potential to gross $60,000, based on sales at $2.50 per m² for A-grade and $1.50 per m² for B-grade. As all of the direct expenses associated with the production of turf had been historically -- 8 of 20 -- 9 covered by sales, he suggested that the amount of loss incurred by the claimants would equal the estimated gross receipts. In the end result, the amended claim was not based on Mr Anderson's calculations. Instead the assessment made by Mr Wright for the respondent was used as a base, then adjustments made as had been considered to be fair by the claimants. As it happened, the final claim did not rely either on the valuation of Mr Thomas who had assessed compensation, excluding any loss of goodwill, in the amount of $196,700. He had understood, at the time of writing his report, and seen it as significant "that some 6 months after the subject easements were resumed and 4 months after the commencement of excavation works on the site the owners of the property were forced to sell Lot 3." (emphasis added). In fact, the contract of sale for Lot 3 was signed about two months after the Notification of Resumption, before or at about the time that construction commenced. Mr Thomas assessed compensation for Lot 3 as the difference between its value as part of a turf farm, in his opinion $350,000, and then the price received as a small acreage homesite with residential improvements - $285,000. That indicated a loss of $65,000. He then assessed the value of Lot 2, before resumption, with no structural improvements as $210,000 as part of the turf farm, before resumption and $150,000 after, as a rural residential site, indicating loss of $60,000. He then estimated the loss of income for an area of 1.418 ha of turf on Lot 2, which had been damaged as equivalent to two cuts at a net income of $1.50 per m² ($42,500). The cost of repairing that same area over a one-year period was estimated as $2 per m², which estimate he said was based on a quote of $5,150 per ha plus the cost of fertilisation, poisoning, watering and wages for a period of one year after which production could recommence. He had also included an item of $1,200 as the cost of repairs and relocation of a water pump and fences. The actual claim for "blot on title" was, however, in accordance with the total valuation of Mr Wood, prepared for the respondent. Mr Wood's opinion had been that the highest and best use of both lots before consideration of the in situ value of the turf, was as rural residential sites. As part of individual sites, the highest and best use of the area encumbered by the easement was then for recreational purposes, being within the creek flood plain; the flood regulation line and the areas already -- 9 of 20 -- 10 encumbered by easements for overland flow and access and also for electricity transmission purposes. It was Mr Wood's assessment of the rural-residential site market that an area of about 1 ha could be regarded as a standard homesite requirement. There was a number of sales of sites of such area indicating a consistent level of value of between $135,000 and $140,000. He then analysed sales of larger "Non-Urban" zoned sites, which indicated added value for land additional to the 1 ha notional homesite, in the range of $20,000 to $40,000 per ha. He had analysed the sale of Lot 3, for example, to show a land value of about $185,000 or $120,000 for a notional 1 ha site and $65,000 for the additional 3.29 ha, being a rounded $20,000 per ha. The sale of a site of 8.94 ha, with potential for further subdivision, had shown a maximum $40,000 per ha for the land additional to a notional site. Another site which had very limited homesite potential, if any, due to easement encumbrances and flooding, sold for about $30,000 per ha, three and a half years after the relevant date, but on a relatively static market. Mr Wood adopted $30,000 per ha as the value of the subject land before the resumption, with the existing easement encumbrances. In his opinion, the effect of the subject easements on land with highest and best use for recreational purposes would not exceed 10% of the before resumption value. That amounted to a rounded $700 for the total 2,310 m² of surveyed easement. Mr Wood envisaged the potential for rights of access to be exercised occasionally, after the initial construction phase, particularly as there were some surface installations (air valves and test point) on the easements. In his opinion the "blot" on each title, caused by the easements and their conditions, would cause some additional deleterious effect on the value of each lot. He assessed the total diminution in land value as being $5,000 which he apportioned as being $4,300 for the blot on titles and the above $700 for specific effect on the surveyed areas. Mr Wood did not quibble with the suggestion that the land developed as a turf farm was more valuable than as a pure homesite with additional area, but in his opinion the additional value related to the value of the grass in situ as the stock-in- trade of the turf farming business. He did not see any additional premium attaching to a "highest and best use" land value as indicated by the market for rural-residential sites. In his verbal evidence, Mr Wood referred to a sale in 1996, of a turf farm at Rochedale which, on his analysis, showed that no premium had been paid over and -- 10 of 20 -- 11 above the market for comparable land in the locality used for other non-urban, including rural-residential homesite purposes. However, in that transaction, cultivated turf had been separately apportioned in the contract as having a value of $2 per m². Mr Wood did not become involved in the question of loss suffered as a consequence of damage to areas of cultivated turf on the subject land. That aspect had been left to Mr Wright. Mr Wright's valuation report, apparently on instructions, dealt with the following aspects: "1. Cost of reinstatement of turf due to damage during construction/works. 2. Loss of profits attributable to the disruption of Business from works carried out by or on behalf of the Brisbane City Council." Reinstatement Mr Wright had been aware of sales of turf farms where specific apportionment had been made to cultivated marketable stock at the date of settlement. He referred to a sale of a turf farm at Maryborough in 1995, the "Rochedale Lawns" property at Rochedale in 1996 (the sale referred to by Mr Wood) and a listing for sale of a turf farm at Coominya which sought additional payment for "stock at value". That evidence indicated to him "that the turf farm industry does not treat marketable cultivated stock as being incorporated in the value of the property and its improvements but treats marketable stock as an asset of the business". He saw it as rare for a turf farm to have its total capacity of cultivated turf available for sale at any one time. He saw it as usual for a level of stock not exceeding two-thirds of the total area under cultivation, available for sale. He interpreted the market as indicating that grass stock is usually valued at $2 m², in situ. Mr Wright had received instructions in this matter about 2½ years after the construction work had commenced. By that time the turf farming operation had ceased. He had been advised by Mr Chapman of the sequence of events "leading up to the destruction of the turf farm". He had been made aware of the advice given to Mr Chapman that "The area of turf affected by compaction will need to be deep ripped, cultivated, replanted and fertilised", and had been "advised that cost of repairs to reinstate the turf to a marketable cultivated standard has been calculated by an expert to be $2 per m²." Mr Wright therefore adopted "reinstatement costs of $2 per m²" … "to be applied to an area to be determined." -- 11 of 20 -- 12 It was Mr Wright's verbal evidence that he had understood that the $2 per m² reinstatement cost would have been an average cost over the whole of the area traversed by vehicles and machinery. He had not understood that the whole of those areas would be treated as requiring full reinstatement commencing with deep ripping. He had expected that some of the damaged areas would have required instead top dressing and levelling over the existing couch cover. He was not surprised that the quote obtained by Mr Chapman indicated that full reinstatement as had been suggested would have cost $4.68 per m² ($122,692 for 26,200 m²). However, in his opinion, of the total area traversed, a proportion of it would more than likely have been capable of effective reinstatement at very little cost. He expected that "the expert advice" as to a reinstatement cost of $2 per m², as had been suggested to him (and as it had been also to Mr Thomas) would have been the likely averaged cost ranging from total reinstatement of parts to minimal repairs in other parts. From his experience, and he had made observations of procedures in turf farm developments in the Rochedale area in particular, the period required to bring the damaged area back to a saleable condition would have been six to nine months, depending on the season. He agreed that the Rochedale developments of which he had some knowledge were in frost-free locations, while the subject area was susceptible to frost and consequent retarded growth. Loss of Profits On the basis that profits could have been lost in the 1993-94 and 1994-95 financial years, Mr Wright investigated historical trading results of the Bellbowrie Turf Farm business, back to 1988-89. The results indicated gross sales/profits of $36,638/$36,054 in 1988-89; $34,820/$33,141 in 1989-90; $22,827/$21,445 in 1990- 91; $32,084/$31,537 in 1991-92; $40,244/$38,405 in 1992-93; $32,758/$31,931 in 1993-94; and $13,081/$12,661 in 1994-95. Those figures demonstrated declining sales from 1989 through to 1991 when the business "began to achieve solid growth in the 1991/92 and 1992/93 financial years" then a decline in 1993-94 and 1994-95 financial years. Mr Wright interpreted the latter decline as appearing to be "as a result of the subject resumption and damage caused by works conducted by BCC contractors on the land containing the subject business, between September 1993 and March 1994." -- 12 of 20 -- 13 Mr Wright also suggested that "[T]he sale of Lot 3 which we are advised was no longer able to sustain cultivation of turf without considerable expenditure, may also have contributed to the reduction of the capacity of the business to cultivate turf." The increase in gross sales from 1992 to 1993 (25.43%) was considered by Mr Wright to have been in keeping with the statistics relating to the increase in new home buildings which were started in Brisbane during that period (23.1%). He accepted that new home productions were "the primary market supplied by the subject business". Mr Wright decided to adjust the figures by building in a growth factor to establish maintainable gross sales "reflecting the growth trend from the 1991 year through to the period of resumption and an historical reduction in regrowth capacity due to frost damage." Mr Wright had not been aware that for a period of nine months subsequent to February 1991, the property had not been farmed due to perceived obligations related to the February 1991 contract of sale. The rate of growth in sales which may have occurred from 1991 through to 1993, had normal operations been maintained in the absence of the contract of sale, is unknown. However it follows that, if the base in 1991 should have been higher than actual sales, then the rate of growth, through to actual 1993 sales, would have been less than actual growth adopted by Mr Wright. I am satisfied therefore that an estimate of maintainable sales of about $48,000 per annum, as adopted by Mr Wright, would be an optimistic assessment of the trading potential of the business, based on historical performance. Clearly there was potential for sales to increase dramatically had there been sufficient demand for the full production capacity of the farm. As a matter of mathematics, if seasonal conditions allowed two cuts of the developed area of 5.6 ha per annum, with say 90% efficiency, 100,000 m² per annum should have been available for sale. If sales averaged even $2 per m², (when the A-grade price was said to have been $2.50 per m² and B-grade from $1.50 to $2 per m²) Mr Wright's estimate of maintainable gross sales would have required an annual cut of only 24,000 m². Such a quantity, at two cuts per annum, could have been produced from a developed area of say 1.35 ha with 90% cut efficiency. Nevertheless, even with the expensive Yellow Pages advertising prior to the date of the subject resumption, the Bellbowrie Turf Farm had never achieved sales at the level adopted by Mr Wright. It was the evidence of Mr Chapman that at least up until the time of the work being carried out in upgrading the powerlines, the business plan had been directed towards -- 13 of 20 -- 14 achieving full development for investment purposes, rather than being directed to maximum sales. Then, in 1992, it was Mr Chapman's evidence that, realising the effect of easement conditions, the claimants decided to farm the property to its full potential rather than to sell it. Nevertheless, while potential sales are a factor which influence the value of the business component, past trading results cannot be ignored. Mr Wright accepted, again based on actual trading results, that the gross profits in the 1993-94 year would have represented 97.5% of the estimated maintainable gross sales of $48,300, being $47,093. Actual gross profit was $31,931. He considered that the loss of gross profits in the 1993-94 financial year was therefore $15,162. On the basis that reinstatement of the damaged areas would take nine months, and apparently accepting that the areas requiring reinstatement were not capable of specific isolation from the whole farm, Mr Wright assessed loss of profits for 1994-95 as being $19,474. The methodology adopted was to assume that, of maintainable gross sales again of $48,300, gross profit of 96.8%, (based on the actual 1994-95 trading result), would have been $46,754. He assumed that 90% of the gross profit would have been earned in a nine-month, or 273-day, period through spring, summer and autumn. That indicated a gross profit of 90% of $46,754 ÷ 273 or $154 per day through that period. The actual gross profit had been $12,662, which on the same basis of calculation was $41.74 per day. The loss was estimated to be $112.26 ($154 – $41.74) per day. Using similar methodology the difference between the estimated and actual profit for the three-month winter period was calculated as being $37.06 per day. Mr Wright considered that reinstatement should have commenced in May 1994, after the construction work was completed and would have required nine months for the damaged turf areas to be once again saleable. Having already calculated the loss of profit up to 30 June 1994, he then calculated the loss on a daily basis for the winter months of July and August 1994 at $37.06 per day then the spring and summer months at $112.26 per day to the end of January 1995 when the reinstatement should have been, in his opinion, effective. The daily rate calculations produced the total assessment of $19,473.50. The final claim for loss of profits as submitted by Mr Conrick on behalf of the claimants, accepted the base methodology used by Mr Wright. However, the claimants did not accept that the reinstatement period would be only nine months. Instead a period of two years was adopted. To the rounded $35,000 total loss assessed -- 14 of 20 -- 15 by Mr Wright for 1993-94 and 1994-95, Mr Conrick suggested an additional loss of $15,000 should have been added to the 1994-95 year and $24,000 (half the estimated full year sales) for 1995-96, until reinstatement would have been effective. Those additional sums provided the basis for the claim of $74,000 under the heading of Loss of Profits. CONCLUSIONS Diminution in Land Value The land encumbered by the subject easements was already encumbered by easements, conferring, on the relevant grantees, rights which had the potential to interfere with the turf farming operations, not only on the easement areas as surveyed, but on the land of the claimants external to those surveyed areas. The existing easements in favour of the Brisbane City Council, for the purposes of overland flow and access, conferred on the respondent the right to do various things as it saw fit on that substantial easement area – "doing as little damage as may be but being responsible or held liable only for such damage or inconvenience to the owners or occupiers … as may be caused or suffered by reason only of the neglect or default of the Grantee and its … contractors, subcontractors, agents, servants and employees." However, the additional purpose for which the subject easements were taken, extended the respondent's interests in the land and the extent of potential for damage. I am satisfied, as clearly were the claimants in their final claim, that Mr Wood's assessment of $5,000 representing the deleterious effect of the "blot on title" caused by the encumbrances together with the effect on the surveyed easement areas, is reasonable and is adopted accordingly. Injurious Affection The respondent has accepted that in the exercise of its statutory powers it has injuriously affected land of the claimants other than the encumbered land (see s.20(1)(b) – Acquisition of Land Act 1967) and damage which is a reasonable and natural consequence of such injurious affection is compensable, as was found in the judgment of the Land Appeal Court in Barns v. Director-General, Department of Transport, dated 15 August 1997 (as yet unreported). The expert advice (Mr Wright's) which the respondent sought and relied upon, found that the claimants had sustained loss of profits in the financial years 1993-94 and 1994-95 and that an unidentified area of land, but not limited to the easement areas, required reinstatement to its former condition, as a result of damage caused by the respondent's activities on the claimants' lands. -- 15 of 20 -- 16 Reference was made earlier to Mr Wright's comment about the sale of Lot 3. It had been his advice that, subsequent to the resumption, Lot 3 was "no longer able to sustain cultivation of turf without considerable expenditure" and that the sale "may also have contributed to the reduction of the capacity of the business to cultivate turf". (See his report Exhibit 14, p.7). With regard to Lot 3 the facts are, on the evidence: (1) Lot 3 was sold prior to the physical damage being sustained. The sale settled during the construction period. (2) The claimants retained the right, under a written agreement, to continue to cultivate and sell the turf existing on Lot 3. (3) An area of about 2.3 ha (identified as "Brown dashed" on Exhibit 6) was about equally contained within Lots 2 and 3; was not damaged by the respondent's activities, except for temporary interference to irrigation infrastructure; and was utilised by the claimants during and subsequent to the respondent's activities on both lots. (4) Sales in the 1993-94 financial year could have been affected by the interference to irrigation. It is seen as important that apart from the temporary interference to irrigation, the claimants retained sufficient undamaged area to produce more than sufficient turf to meet the maintainable earnings estimated by Mr Wright. The claimants were prepared to accept Mr Wright's estimate of maintainable earnings as the base for their estimate of loss of profits. One of the reasons given for the decline and eventual demise of the business was that a prominent Yellow Pages advertisement was discontinued as a result of the perceived effects of the intended subject resumptions. Understandable as it may be that the claimants had become disillusioned as to their lack of control over land encumbered by easements, through their initial experience with the easement for electricity purposes, the decision to discontinue an advertisement important to the business was not necessarily, on the facts, a prudent one. It was, on Mr Chapman's evidence, a decision taken as a consequence of the subject resumptions, or intended resumptions, based on the perception of damage which would occur. That perception was proved factual by subsequent events, and damage was a consequence of the resumption. However, when the past trading results of the business, with the benefit of the advertisement, are considered, together with the productive capacity of the farm, even in a damaged condition, the decision to discontinue the particular -- 16 of 20 -- 17 advertisement is not accepted as being a natural or reasonable consequence of the subject resumptions alone, or in association with the existing encumbrances. Mr Wright had gone through some complex calculations to assess the loss of profits in 1994-95, which could have been caused had there been the need for reinstatement of damaged turf, before the estimated maintainable sales could be achieved. In fact, two months of a notional estimated reinstatement period of nine months, was attributed to part of the lost profits estimate for 1993-94. However, Mr Wright's assessment, particularly with regard to the 1994-95 financial year, assumed that reinstatement would have been necessary for sufficient supplies of turf to be available. That assumption may have reflected inaccurate advice given to him regarding the consequences of the sale of Lot 3. In any event, I do not accept for the reasons given, that insufficient supplies of turf were available in the absence of reinstatement of the damaged areas. It follows that I am unable to accept that loss of profits was occasioned through lack of reinstatement, either in the 1993-94 or 1994-95 financial years. I am able to accept that the interference to the availability of irrigation, for broken periods of about 6.5 weeks, on the advice given to Mr Wright, caused a compounding loss of sales over a longer period. For the purpose of this determination I will accept that, based on the methodology used by Mr Wright, loss of profits in the range assessed by him for 1993-94 could have been caused by the interference to the irrigation infrastructure. I will allow a rounded amount of $15,000 as the loss of profits caused by the respondent's activities in the 1993-94 financial year, but no loss due to the respondent's activities in 1994-95. Reinstatement The respondent offered no rebuttal evidence as to the extent of areas of cultivated turf damaged by the construction activities. Mr Chapman had identified damaged areas by marking them on a plan. On that fairly broad basis, areas had been professionally calculated. The quote for reinstatement of damaged areas was said to have been based on procedure suggested in the expert advice initially received. That advice had been given in May 1993, well before construction work commenced, obviously without reference to actual damage but on the potential for damage as envisaged. There was no evidence before the Court as to any expert advice having been sought based on the actual damage which occurred. No reinstatement was attempted. When Mr Wright gave his opinion that it -- 17 of 20 -- 18 was unlikely that, for example, deep ripping and the procedure leading to full cover returfing would have been necessary over the whole of the area, there was objection from Mr Conrick on the basis of Mr Wright's lack of expertise in matters relating to reinstatement of damaged turf. Mr Chapman's evidence as to the repairs necessary had not been challenged during cross-examination. Mr Chapman's evidence was however that he sought a quote for repairs based on his interpretation of the initial expert advice received. I do not accept that the broad initial advice received from Mr Faulkner, should have been construed to the effect that compaction would have occurred on the total area identified as having been traversed. In any event, the recommendation from Mr Faulkner did not go so far as to suggest that, for example, returfing, rather than more intense than usual sprigging, would have been necessary over the whole of the area traversed. In the absence of Mr Faulkner, or anyone else with his expertise, giving advice as to the remediation recommended, based on an assessment of the actual result of the construction works including compaction, rutting and potential grass seed contamination, it is difficult to accept that total redevelopment of such a large area of existing couch stock would have been a practical response in the circumstances particularly if erosion was a consideration. Mr Wright may not be an expert in turf farming or reinstatement of damaged turf, but he has sufficient knowledge of the problems associated with compaction and wheel rutting in turfed areas, to see the logic in the whole area identified by Mr Chapman not requiring full redevelopment and total returfing. Of the full redevelopment cost quote which equated, in 1994 costs, about $4.70 per m², the full returfing component accounted for $3.60 per m². Mr Wright had accepted that an average cost of $2 per m² for reinstatement, based on the information given to him, and apparently also to Mr Thomas, by Mr Chapman, would be realistic. There is no evidence to suggest that the quote of $38,660 to reinstate the 1,800 m² of turf on the easement area, was unrealistic. No reasonable person would be expected, however, to expend that amount of money to reinstate an area which represented about 3.2% of the total stock which, on the best evidence available, had in situ value of about $112,000 ($2 per m² overall). The practicality is that if the area of 1,800 m² was incapable of producing saleable turf in the condition in which it was left, and in the absence of the reinstatement suggested, it would be written-off as part of the turf farm, which had, in any event, never been utilised to its full capacity. -- 18 of 20 -- 19 It seems to me that the worst case for the respondent would be reflected in a consideration of the hypothesis that a total area of 2.8 ha of a 5.6 ha turf farm had been destroyed. The evidence suggests that if that land was unsuitable for turf farming it would lose no capital value, its worth as recreation area attached to a rural residential site, commanding equivalent value. The theoretical loss would equate the loss of the turf stock as part of the stock of the business. The evidence is that the in situ value of that stock was $2 per m². Some proof of that value is provided not only from the sale of the Rochedale Lawns turf farm as referred to by Mr Wood and Mr Wright, but also the marketing history of the subject lands. In 1991, the claimants were prepared to accept for Lot 3, on the basis of a sale with a secure lease over Lot 2 except for a homesite area, together with stock, goodwill, plant and machinery, an amount of $402,000. Two years later on a market which was said to be relatively static, Lot 3 was sold for $285,000 purely as a rural residential site, the rights to the turf retained by the claimants/vendors. By deduction, that would suggest that the value of the business, including stock, goodwill and plant/machinery was $117,000. Mr Chapman during cross-examination, agreed that such an assumption was realistic. In turn, that would suggest that the turf stock in situ was worth no more than $2 per m² or $112,000 when there was also plant and machinery included in the original sale. If a total of 28,000 m² of couch stock including the couch on the resumed easement, had been totally destroyed, the loss in market value of stock in situ would not have exceeded $56,000. While it is difficult to accept that the damaged area of turf was rendered completely worthless, it would seem reasonable to accept that reinstatement as suggested by Mr Wright, at a cost of $2 per m², averaged over the whole area, would have been at least economically justified. I do not accept that there is any reasonable basis for adjustment of the estimate of the areas damaged by the respondent's activities (an arbitrary reduction of 10% having been suggested by Mr Hinson). The history of this matter suggests that the respondent had more than adequate warning of the potential for a claim of some monetary magnitude to have resulted from its activities and to have either limited the extent of the damage; established the extent of the actual damage and the nature of remedial work required; and/or satisfactorily remediated the area based on its own expert advice. -- 19 of 20 -- 20 I will allow an amount of $56,000 under the heading of "Damage to Turf Stock", including the turf stock on the easement area. Erosion Prevention The evidence leads me to the conclusion that the respondent has no intention of repairing the actual erosion damage behind the dam wall. Eventually, if repairs are not effected as proposed, damage could extend to the dam wall itself. I will allow an amount of $1,800 under this heading in accordance with the quote received. DETERMINATION OF COMPENSATION Compensation is determined as follows: Diminution in land value including blot on titles $ 5,000 Injurious Affection: Loss of turf stock – 28,000 m² @ $2/m² $56,000 Loss of profit $15,000 Erosion prevention stone pitching or concreting below dam wall $ 1,800 $72,800 Disturbance: Legal and valuation fees (as agreed including interest) $ 6,600 Total Compensation $84,400 INTEREST The Court was advised that no advance payment of compensation had been made. The assessment of compensation is intended to reflect the loss sustained at the date of resumption, except for the agreed amount under the heading of "Disturbance", which includes an interest component. It is ordered that the respondent pay to the claimants interest at the rate of 7.75 per cent per annum on the amount of $77,800 commencing on and including 9 July 1993, ending on and including the day immediately preceding the date on which payment of compensation is made. RE WENCK MEMBER OF THE LAND COURT -- 20 of 20 --