Despot v Council of the City of Thuringowa [1998] QLC 109 (1998) 19 QLCR 204

LAND COURT BRISBANE 28 SEPTEMBER 1998 Re: A97-14 Determination of Compensation - Resumption by the Council of the City of Thuringowa Acquisition of Land Act 1967 George, Jean D and Mate Despot Claimants v. Council of the City of Thuringowa Respondent J U D G M E N T The claimants own land located in the City of Thuringowa which has been the subject of a resumption by the respondent of an easement for stormwater drainage purposes. The parcel of land has an area of 4.92 ha and the area subject to the easement (called the "easement area") is 4,848 m. The Notice of Intention to Resume the easement was issued on 21 December 1994, whilst the resumption took effect from 5 May 1995. The claimants lodged with the respondent a Claim for Compensation dated 2 July 1995 in which they claimed for loss of land in the amount of $167,500 and disturbance in the amount of $10,075. Leave was granted for the loss of land component of the claim to be amended to $180,000. The claim for disturbance was made up of owners' time ($500), owners' travelling costs ($500), valuation fees ($2,400), engineer's fees ($675) and legal fees ($6,000). For reasons not known to me, but possibly owing to an oversight, evidence concerning these items of disturbance was not tendered before me, nor were submissions made with respect to them. I cannot, in the absence of evidence or an agreement between the parties, allow any amount with respect to the claim for disturbance, though the list of items does contain expenses which are frequently allowed when supported by evidence. I note also that the list includes some matters not previously allowed by this Court. In the circumstances, it may be that the parties can agree with respect to the claim for disturbance or part of it and if not, the claimants may wish to seek leave for a rehearing to allow appropriate evidence to be adduced. I draw the claimants' attention to s.43 of the Land Act 1962. [1998] QLC 109 -- 1 of 31 -- 2 Valuation evidence in support of the claim for loss of land value of $180,000 was provided for the claimant by Chris Caleo, registered valuer. The respondent's position is that this item of compensation should be assessed at $74,000 and valuation evidence in support of that figure was provided by Craig James Stack, also a registered valuer. Mr Caleo had, as part of his valuation, prepared hypothetical subdivision exercises of the parcel before and after the resumption and he relied in those exercises on costs provided to him by Lesley Cecil Johnstone, a civil engineer. Mr Johnstone was called in support of his cost estimates. The respondent called Brian Edward Bailey, the Deputy Director of Engineering Services for the local authority, to respond to the cost estimates provided by Mr Johnstone and, in particular, to deal with the issue of the anticipated costs of drainage downstream from the claimants' land. Ian Cramb Hamilton, also an engineer and a director of Parkside Developments Pty Ltd, ("Parkside") gave evidence regarding a trunk drainage scheme adopted by the local authority and which includes the particular drain which is the focus of the easement resumed by the respondent. Whilst the term "drainage scheme" was used throughout evidence, it will be convenient, given my use of the word "scheme" later in these reasons, to refer to the "trunk drainage plan". Parkside owns the land both upstream and downstream of the claimants' land. The evidence was that there were no plans at the date of resumption to develop the upstream land (called by me the "eastern Parkside land") which was designated for residential development under the prevailing Town Plan. On the western or downstream side of Vickers Road which runs along the frontage of the claimants' land, Parkside was in the process in May 1995 of arranging for the development of part of its land there (called by me the "western Parkside land") into the "Vickers Industrial Estate". I was not given evidence as to how many stages are proposed, nor the anticipated timing of development. The Claimants' Land The claimants purchased the land in 1976. At the date of proclamation the land was zoned "Residential A" under the then Thuringowa City Town Plan, though it was redesignated "Residential 1" under the December 1996 new Town Plan with, however, similar opportunities and restrictions concerning usage and development. Mr Caleo wrote in his valuation report that the land "is located on the eastern side of Vickers Road adjacent to its southern termination and junction with Smith Road. The property is approximately 350 metres south of Herveys Range Road and approximately 1 kilometre south-west of the Thuringowa Central Post Office." The property is within a developing urban area and is situated approximately midway between "The Palms" residential subdivision about -- 2 of 31 -- 3 200 metres south of the land and "The Willows" residential subdivision about 400 metres to the north. The land immediately to the north of the claimants' land and that on the western side of Vickers Road has been designated for industrial development, whilst land adjoining the claimants' land to the east is designated for single unit residential subdivision. Vickers Road comprises a narrow bitumen strip service road connecting Herveys Range Road to other service roads in the vicinity and had for some time provided quite a busy connection between Herveys Range Road and areas to the south. Beck Road to the west has, however, been designated for future upgrade as a western collector road, will become the main service road for this area and will act as a duplication of Ross River Road which lies some distance to the east of the claimants' land. Land immediately abutting the claimants' land to the south forms part of a by-pass route for the Bruce Highway which at the date of proclamation of the resumption was not expected for development until 2011. The claimants' land has all usual services available and has a bus service, primary and secondary schools, "The Willows" regional shopping centre and the Thuringowa Central Post Office all within a 2 km radius. The land is of even rectangular shape having a frontage to Vickers Road of about 365 metres and a depth of about 135 metres. The land is generally level, though has a very slight slope from east to west. Towards the north of the parcel there is an area which is somewhat low lying in comparison to the balance of the parcel and it is over that low-lying section that the stormwater and drainage easement area is located. The land is lightly timbered, though has been partially cleared in the past and was at the date of resumption subject to a fairly heavy undergrowth of chinee apple. The land is improved with a house described by Mr Caleo as being a "conventional lowset brick dwelling" of about 10 years of age located near the northern boundary of the land. Both valuers agreed that the house could be easily accommodated in any residential subdivision of the land. The Easement The easement, the subject of the resumption, comprises a 36 metre wide section bisecting the claimants' land in an east-west direction. The location of the easement severs the land into an area of about 7,700 m to the north and about 3.67 ha to the south of the boundary of the easement area. The Trunk Drainage Plan -- 3 of 31 -- 4 In November 1992 the respondent local authority adopted the trunk drainage plan which covered the area surrounding the subject land, including land to the north to Herveys Range Road, to the east to Ross River Road, to the south to Gollogly Lane and to the west to the Bohle River. The area the subject of the trunk drainage plan is very large, with the claimants' land and the resumed easement being a small part of the plan only. The trunk drainage plan was shown graphically on a drainage plan map put into evidence and prepared by Ariotti Hamilton & Bruce, consulting engineers. The trunk drainage plan was devised jointly by that firm, in particular Mr Hamilton, and by Mr Bailey from the local authority. It was not made clear to me which features of the plan were proposed in 1992 and which were already in existence, though it appears that the plan did capitalise to some extent on certain existing features, one of which I later refer to as the "downstream easement". The trunk drainage plan map provided amongst other things for a drain (I call this complete drain "the planned drain") flowing through the claimants' land from undeveloped land to the east, then through the western Parkside land which was generally undeveloped and to the major Condon drain. The evidence was that the overall trunk drainage plan, and in particular the planned drain had dual purposes of the mitigation of flooding over land to the north-east of the Despot's land and the facilitation of the full development of land in the area the subject of the plan. The drainage plan map shows an easement with a width of 10 metres over the western Parkside land. That easement joins the western boundary of Vickers Road, then runs west to the Condon drain. The location of that easement (which I will call the "downstream easement") is such that it would provide downstream flow from the easement resumed on the claimants' land and from the eastern Parkside land which was not yet, in May 1995, encumbered by a similar easement. I note that the resumed easement has a width of 36 metres, whilst the downstream easement is only 10 metres wide. During the process of my deliberations on the matter of the claim for compensation, it became important that I know with some certainty the date of granting of the downstream easement. I sought further evidence from the respondent as to the date of the grant on resumption of this easement and was advised that the easement was resumed by the Council of the City of Thuringowa on 9 June 1990. Evidence given during the hearing of this matter was to the effect that a shallow (300 mm) drain was excavated by the local authority in 1990 to provide drainage from Vickers Road. It seems to be the case, therefore, that the downstream easement came into existence not as part of the trunk drainage plan, but that this plan took the -- 4 of 31 -- 5 opportunity that the presence of the easement presented. Of course, it would have been the case that the natural topography played a part in the location of the downstream easement, but that does not change the sequence of events. This sequence is of importance to my consideration of "The Pointe Gourde Issue", below. I have already referred to the area on the claimants' land which was of lower profile than the surrounding land. This area appeared to be designed to accommodate water flow from the east. Whilst Mr Stack described what I will now call this "drainage strip" as "a low-lying area", evidence from Mr Caleo and Mr Johnstone which went unchallenged was to the effect that the strip was man made. This seems to be so as water flowing west then enters a downstream drain located on the downstream easement and there is evidence that this downstream drain was man made. The Pointe Gourde Issue There was a suggestion raised by Mr Bailey that, in the absence of the subject resumption the local authority would have attempted, as part of any subdivision application and approval process, to negotiate an easement or drainage reserve of the type and dimensions actually resumed or of a narrower width if the subdivider of the land and the local authority agreed to construct a concrete drain instead of a grassed drain. That evidence was supported in somewhat stronger terms by Mr Johnstone who had provided Mr Caleo with costings of a 53- lot subdivision of the claimants' land on a before resumption basis. Mr Johnstone readily agreed in cross-examination that the 53-lot proposal would not have been approved by the local authority because of the existence of the trunk drainage plan. Mr Hamilton said in answer to a question from me that he doubted that the 53-lot subdivision proposal would be approved and said that he thought that a plan indicating a subdivision layout with the resumed easement in place would have been preferred by the local authority. The suggestion raised by Mr Bailey was not reflected in Mr Stack's valuation. He explained that he was careful to value the land in its pre-resumption state on the basis of there being no easement, in fact, or assumed. He arranged for officers of the local authority to prepare a subdivision layout over the claimants' land. That plan also yielded 53 lots. Mr Stack was not, however, aware at the time that he carried out his valuation of the existence of the trunk drainage plan map prepared by Mr Hamilton's firm and adopted by the local authority. He said that had he been aware of that plan he would have taken it into account in his valuation as it would have raised a question in a hypothetical developer's mind concerning the risks that -- 5 of 31 -- 6 any proposed subdivision might have confronted. Some reduction in value would have resulted. Mr Hill, for the claimants, submitted that on the authority of Pointe Gourde Quarrying and Transport Co. Ltd. v. Sub-Intendent of Crown Lands (Trinidad) [1947] AC 565, I should put out of my mind the trunk drainage plan for it is that plan which gave rise to the need for the resumption. Therefore, he argued, I should not take into account the suggestion that the local authority would have required the easement as indicated in the drainage plan as a condition associated with subdivision. Pointe Gourde is authority for the proposition that the value of the resumed land may not, for compensation purposes, be increased having regard to any enhancement resulting from the scheme of which the resumption is part. In Melwood Units Pty Ltd v. Commissioner of Main Roads (1978) 5 QLCR 145 the Privy Council said in reference to the Pointe Gourde principle: "In their Lordship's opinion it is part of the common law deriving as a matter of principle from the nature of compensation for resumption or compulsory acquisition, that neither relevantly attributable appreciation nor depreciation in value is to be regarded in the assessment of land compensation." (at 153) Both the Pointe Gourde case and Melwood Units cases were concerned with a project involving some form of positive act on the part of the resuming authority in the form of a project which would have a public benefit, these projects being a naval base and a highway respectively. There is a stream of cases in which the Pointe Gourde principle, as it has been called, has been considered relevant where projects such as a hospital, school, highway or such like have been involved and in such cases the project has been held to be the "scheme" whose effect on value of the resumed land had to be disregarded. The concern in such cases is that there is a potential that some foreknowledge of the scheme would have an effect on the value of the resumed land and that, therefore, not only the scheme but such foreknowledge ought to be disregarded. In other words, the dispossessed owner is entitled to have his land valued in accordance with a method and assuming a market environment which would produce a price that the land would expect to achieve in the marketplace as if it was being offered for sale untainted by the presence of the scheme associated with the resumption. The Pointe Gourde principle is therefore designed to preserve the right of the dispossessed owner to compensation which is consistent with the measure of his loss, had the scheme not been thought of and the resumption had therefore not taken place. -- 6 of 31 -- 7 There is another stream of cases flowing from the same fountain of principle which gave rise to the Pointe Gourde case and this second stream is concerned not directly with a public project influencing value but with a land use zoning being placed on the resumed land as part of the process leading to resumption. In Housing Commission (NSW) v. San Sebastian Pty Ltd (1978) 140 CLR 196 the High Court was concerned with this issue and Jacobs J, with whom the other Members of the Court agreed, said this: "Restrictions on land use, so that, explicitly or practically, use is restricted to a use for a public purpose for which the land might be resumed, are commonly imposed as a result of consultation with or direction by the public authority concerned with the carrying out of the particular public purpose. In such a case where there is a direct relationship between the restriction on land use and the proposed establishment of the public works the effect on value of the zoning or restriction ought to be ignored (at 206)." Further on His Honour dealt with the type of circumstance where zoning may take place as part of the normal process of planning and not with an eye to, or in anticipation of, a resumption taking place: "Assume an area of land on the outskirts of existing settlement, and assume a planning authority concerned to designate land uses in a planning scheme. The land is designated open space. Thereafter it is resumed for the purpose of a public reserve. The fact that the land was zoned as open space may have depreciated its value. Does the resuming authority pay compensation at the depreciated value of open space or at some other value? The question cannot be correctly answered without knowing whether there was any connexion between the zoning as open space and the subsequent resumption. If the zoning was done with the intent or in anticipation that the land should be resumed for a purpose such as a public reserve or if the zoning was proposed or dictated by the resuming authority then s 124 requires that the zoning be ignored. It is only a step in the process of subsequent resumption. But in other circumstances the resumption may be unconnected with the act of zoning. It may be that the resuming authority selects the land for resumption as a public reserve because it is zoned open space; if it does so it is doing no more than ensuring that it, as well as others, conforms to the planning scheme. In those circumstances there is no relevant relationship between the zoning and the public purpose. No public purpose, existing or anticipated, intended, or urged by the zoning authority, leads to the zoning; rather, the zoning leads to the public purpose and consequent resumption ( at 206-7)." "Section 124" referred in the above quotation is a provision in the Public Works Act 1912 (NSW), a provision under consideration in the San Sebastian case. It was observed by the Court, however, that the statutory provision was merely a recognition of a common law principle, hence the authority of San Sebastian in Queensland is not diminished in any way. -- 7 of 31 -- 8 In The Crown v. Murphy and Covehouse Australia Pty Ltd (1990) 13 QLCR 90 at 94 the joint judgment of the High Court states: "One purpose of this principle is to ensure that a resuming authority does not employ planning restrictions to destroy the development potential of the land and then assess compensation for its resumption on the basis that the destroyed potential had never existed; Melwood Units Ltd v Main Roads Cmr [1979] AC 426 at 434. The principle applies in cases where there is a direct relationship between the planning restriction and the scheme of which resumption is a feature and extends to cases where there is merely an indirect relationship, provided that the planning restriction can properly be regarded as a step in the process of resumption: Housing Commission of NSW v San Sebastian Pty Ltd, at 206/207." As part of the documentation, including the recommendation from the relevant officers to the Thuringowa City Council concerning the adoption of the trunk drainage plan in 1992, these words appear: "1. An easement will need to be acquired from the Parkside land to Vickers Road." I understand this to refer to the claimants' land. Thus, it is quite clear that the trunk drainage plan was adopted as part of the process which resulted in the resumption and that the resumption was contemplated at the time of the adoption of the plan. No question of the bona fides of the local authority arises, simply the presence of the connection between the resumption and the trunk drainage plan. The inclusion of the claimants' land in the trunk drainage plan is an action of a different type from the zoning of land. To my mind the development and adoption of the trunk drainage plan by the local authority can be seen as a valid exercise of its planning role designed to deal strategically with a drainage and flooding problem within a broad area of which the claimants' land is part. It bears some similarity to a zoning of land, therefore by analogy San Sebastian would apply and would bid me to disregard at least that part of the trunk drainage plan touching the claimants' land. Before I leave consideration of San Sebastian, I should mention one other thing that the High Court said in The Crown v. Murphy and Covehouse Australia Pty Ltd, at 94: "Of course, a characteristic or attribute of the land which affects its value must be taken into account in the assessment of compensation even if the planning restriction which is a step in the process of resumption is dependent upon or directed to that characteristic or attribute." It would be quite wrong to assign the initiative of the trunk drainage plan to the pigeon hole of being part of the lottery of land ownership - to say that the land just happened to be suited to be part of a trunk drainage plan and to then say that the resumption took place because the land was so designated. It is important to note that the easement area is designed to accommodate not just water concentrated from development of the claimants' land, together with that drained -- 8 of 31 -- 9 onto the land naturally, but also a volume of water generated from anticipated development of land to the east and the redirection of flood waters which previously flowed to the north. It would make no difference to my mind if it was clearly the case that the claimants' land provided the only route for the drainage flow. Indeed, that may well have been the case. All of the evidence I have is to the effect that the trunk drainage plan was devised on the basis that proper and skilled engineering investigations showed that there was a need for the surface water to be drained in the direction of and past the position of the claimants' land. I accept that the drainage strip area on the claimants' land which accommodated drainage shows evidence of improvement by the hand of man, but it would, of course, usually be the case that such activities would take place in an area suited to such works. In other words, the drain was probably put there because it appeared to be a suitable spot. If I view the trunk drainage plan as being more akin to the foreshadowing of a public project than to a zoning of land, then Pointe Gourde would require me to proceed on the basis that the trunk drainage plan, or at least part of it, did not exist. That is, the anticipated public "scheme" or project should be put out of consideration in determining compensation. I say this even if it was the case that the respondent local authority intended that the bulk of that project would be created in physical form on the ground at the expense of land developers and as a condition of their developments. It is not of relevance that such a scheme might be effected by means other than an expenditure of public moneys. Counsel for the respondent submitted that the Pointe Gourde principle does not assist the claimants in this case as their purchase of the land was pre-dated by the scheme. He referred to Toffolutti and Pitt v. The Council of the City of Townsville (1989) 10 QLCR 81. Now, apart from my understanding that the claimants purchased the land in 1976, that is, many years before the trunk drainage plan was adopted, it is my appreciation of the cited case and Melwood Units that even if the scheme pre-dated the purchase, there would be no effect on the application of Pointe Gourde as I have described it. The Scheme What the Pointe Gourde principle requires me to do is to put out of my mind the "scheme" of which the resumption is part. I need to now consider, for present purposes, that that "scheme" is. Useful reference may be made to Wilson v. Liverpool City Council [1971] 1 All ER 628 where Widgery LJ Said at 635: -- 9 of 31 -- 10 " The extent of the scheme is a matter of fact in every case, as is shown by the decision of Fraser v City of Fraserville [1917] AC 187 at 194, to which Lord Denning MR has referred. It is for the tribunal of fact to consider just what activities - past, present or future - are properly to be regarded as the scheme within the meaning of this proposition. The scheme will always exist in some shape or form by the time the notice to treat is served. It must, indeed, be in some shape or form at the confirmation of the compulsory purchase order itself, and then, as Lord Denning MR says, it may develop almost from day to day, and the ultimate question for the valuer is to decide to what extent the dead ripe value of the land on the day on which the valuation is to be made has been increased by reason of the existence of the scheme." I have already broadly described the trunk drainage plan adopted by the local authority in 1992. The Notice of Intention to Resume included under a heading entitled "Reasons for Resumption": " In November, 1992 the Council adopted a Trunk Drainage Scheme for the Condon/Vickers/Kern Drain system. This included many drainage paths that are required to be constructed to enable the full subdivision potential of the Condon catchment area to occur. One of those drainage paths will cross the subject land as indicated in the drawing attached to this Notice of Intention to Resume, enabling stormwater to discharge via an existing easement system westward to the main Condon Drain and thence across Herveys Range Road to the Kern main drain. The Condon Trunk Drainage Scheme indicates that this drainage path will take all flows from the southeast Condon area, and the resumption of this easement would enable an interim temporary drain to be constructed to divert flows from a catchment on the eastern side of Condon that currently discharges across parkland to Shirleen Crescent. This would then intercept a natural drainage path and would reduce the frequent flooding in the Gregory Street area." (emphasis added) A practical view of the facts is that the "scheme", of which the resumption is part, comprises the planned drain as being the relevant part of the trunk drainage plan which impacts on the value of the claimants' land. The evidence indicates that the "drainage path" which is part of the trunk drainage plan is an identifiable feature in the overall plan. I will, for the moment, proceed on the basis that the downstream easement did not exist at the date of resumption. This is a somewhat metaphysical exercise, but is done to preserve the purity of the application of principle. The option of holding that the scheme is simply that part of the planned drain found on the claimants' land does not recommend itself to me for two reasons. First, it would be inconsistent with principle in that it would provide to the claimants the advantage of being able to assume drainage downstream of the claimants' land through the easement which the trunk drainage plan shows located there. Second, to sever that part of the -- 10 of 31 -- 11 drain on the claimants' land from that part of the planned drain on both the upstream and downstream sides and treat the part on the claimants' land only as being the scheme has an air of artificiality quite outside those examples that I have read about in the authorities. One of those authorities (Coastal Estates Pty Ltd v. Bass Shire Council (1993) 79 LGERA 188) is worth considering further. In that case the resuming authority took land for the provision of a "retarding basin" as part of a wider drainage scheme. That drainage scheme had been substantially developed and the resumption from the land in that case was concerned with the development of the third stage. Gobbo J held (at 194) that he should disregard the Stage 3 part of the overall drainage scheme as being part of the very proposal which gave effect to the acquisition, but that it did not follow that the whole of the drainage scheme had to be disregarded. Reasons are not provided in the report as to why His Honour selected Stage 3 as being the scheme and not Stages 1 and 2 as well. I think, however, that the conclusions that I have reached and that in Coastal Estates are easily reconciled. I would understand the Stage 3 part of the drainage scheme considered in the Coastal Estates case as being a supplementary activity and not one essential or integral to the operation of Stages 1 and 2. The scheme for the purpose of resumption in that case was therefore confined to the activity intended to be undertaken on the resumed land. In the case before me that part of the planned drain located on the Despot land may not be seen as supplementary to the drain which will traverse land to the east and to the west of the resumed easement, but must be seen as complementary or integral to the balance of the drain. I am, therefore, comfortable in my conclusion that the correct approach in the instant case is to put out of my mind the existence of that part of the trunk drainage plan which involves the drain running from the eastern Parkside land through the Despot land and then through the western Parkside land. It may be that were there further evidence concerning the operations of the balance of the trunk drainage plan, a necessary connection between the drain to which I have referred and other parts of the plan might be demonstrated. If this were so, then it may be necessary for me to make a decision concerning the exclusion of other parts of the trunk drainage plan from my considerations in this matter. As I understand the evidence as it was put before me, however, the drain in question may be seen as a stand-alone part of the scheme for my purposes and it is therefore the whole drain which I should exclude from consideration. Let me now re-introduce the fact that there was a downstream easement and drain in existence at the date of resumption: an easement which pre- dated the "scheme" as I have identified it. In the peculiar circumstances of the present case the easement taken in 1990, and the drain constructed at that time are not matters that I should -- 11 of 31 -- 12 disregard. These were matters that I simply set aside earlier to allow me to focus on what the "scheme" was. There is no evidence that that easement was resumed in 1990 as part of the "scheme". As I wrote earlier, the trunk drainage plan "took the opportunity that the presence of the easement presented". The ultimate conclusion of this discussion is that I accept Mr Hills' submission that it would not be appropriate to accept that the local authority might in reliance on the trunk drainage plan, have insisted on a drainage easement or reserve over the claimants' land as a condition of subdivision approval. I also conclude that the downstream easement and drain may be treated as being in existence at the date of resumption and therefore available for lawful use. Normal Drainage Requirements My first conclusion recorded above does not lead to the position that the claimants' land should be valued on the basis that the legitimate drainage requirements of the local authority may be disregarded. It would, however, be inappropriate for me to proceed on the basis that the local authority would have lawfully imposed as a condition of subdivision an easement of the type resumed and which is designed to take drainage from developed land to the east together with redirected water which previously flooded land to the north. I say this even if I assume the local authority to be so prescient as to foreshadow such a requirement in circumstances where the trunk drainage plan prepared by Mr Hamilton had not yet come into existence. Importantly, there was no suggestion by Mr Bailey that the local authority would have had an expectation that such an easement or drainage reserve to its full width would have been a lawful condition as being "relevant or reasonably required in respect of the proposal" (Local Government (Planning and Environment) Act 1990 ss.6.2(1)(c)). Without doubt, a development of the Despot land would, however, involve the drainage of water from that land both as concentrated as a process of development, and that naturally flowing onto it from the undeveloped land to the east. Mr Johnstone accommodated these flows through pipes under the Despot land in the before resumption situation, and though Mr Bailey was in passing critical of the capacity of the pipes to take the required flow the respondent did not take this criticism through in a concerted way. Mr Johnstone relied on the disposal of this water downstream by way of the downstream easement and this would appear to be a lawful use of the easement. Downstream Drainage Costs -- 12 of 31 -- 13 As I have mentioned, Mr Caleo as part of his valuation carried out hypothetical subdivision exercises of the claimants' land before and after resumption and relied, in those exercises, on costs supplied by Mr Johnstone. Those costs were challenged by the respondent on two important bases. First, that the costs of downstream drainage were based on a misapprehension as to the depth of the shallow drain located there at the date of resumption. Second, that the downstream drainage costs were based on the provision of a temporary drain, whereas a permanent drain would be required. It therefore becomes necessary to understand something of the history and circumstances touching on these issues. I have already mentioned that the downstream drain was excavated to a depth of about 300 millimetres by the local authority in 1990 to drain surface water from Vickers Road and that this was apparently done in connection with the resumption of the easement over the western Parkside land. I proceed on the basis that the drain and the easement were in place, though the depth of the drain at the date of acquisition is a matter that I will deal with in further detail. Mr Bailey prepared costings for a downstream drain and these were based on the 1990 level of excavation, as were his comments on Mr Johnstone's costings. Deepening of the 1990 drain excavation took place in January 1996 for the Vickers Industrial Estate. It was still a temporary drain but full development to permanent specifications was secured to the local authority by way of a bond. It is unclear as to whether there was a time frame within which that drain was required to be made permanent, however, there is a policy of the local authority that temporary drains be allowed to persist for a maximum of three years commencing from the date that works are accepted into "maintenance" by the local authority. Mr Hamilton said that the type of final structure was a question of economics and no decision had been made on that. Nevertheless, it is of interest to note that Parkside took into account the full cost of constructing a permanent drain as part of the development of the Vickers Industrial Estate. In December 1996 a company called Kumali Developments Pty Ltd deepened and widened the downstream drain further to protect their subdivision at "Cannon Park" from a Q50 flood. That development is not adjacent to the downstream easement area, but is land fronting Herveys Range Road to the north. Mr Johnstone had designed a downstream temporary drain, to service the hypothetical subdivision of the claimants' land. His costs were based on his understanding that the depth of the existing drain was approximately 1 metre, whereas the evidence that I have outlined above shows that it was 300 millimetres at the date of resumption, some deepening having occurred later by Parkside, then Kumali. It may have been to a depth of 1 metre at some stage in 1996 -- 13 of 31 -- 14 and, whilst the evidence with regard to that depth is imprecise, I accept that this was probably the case. In any event, it is quite clear that Mr Johnstone's costings of the earthworks required for the downstream drain were based on a misapprehension of the facts and that a further 700 millimetres of excavation would be needed. That 700 millimetres excavation would taper from its maximum depth at the drain outlet under Vickers Road to a point where drainage would naturally flow downstream. I should mention that at one stage Mr Bailey suggested that the shortfall was not 700 millimetres but 500 millimetres, however, I find no support for that measurement. Mr Johnstone included costs of excavation in the amount of $25,000 in his overall cost estimate of $40,000 for the downstream drainage and it is my understanding that that excavation was to deepen the assumed 1 metre deep drain by a further 1.5 metres. I was not assisted as to how I might assess the cost of carrying out further excavation should I find that to be indicated, however, it seems to me that a pro-rata calculation of costs would be a reliable method. I conclude, therefore, that a further $11,500 approximately would be needed to construct the temporary drain to its full 2.5 metres depth. This brings the temporary drain costs to a total of $51,500. I will turn now to the second basis of challenge of Mr Johnstone's costings. Mr Bailey prepared some costings which were based on the hypothetical developer of the claimants' land constructing a permanent drain downstream as if the land comprised a stand- alone development. His evidence included three options, with the cheapest option being costed at $246,725. Mr Johnstone agreed that this option at this cost was an appropriate engineering solution if one proceeded by eschewing the temporary drain option and constructing a permanent drain at the outset. He said that Mr Bailey's costings were, if anything, conservative and that he would have added a further sum to provide for more manholes. I will, however, accept Mr Bailey's costing figure. Mr Johnstone accepts two important matters regarding the question of downstream drainage. First, the local authority has a policy of allowing temporary drains a life of three years only. Second, he agrees that the eventual construction of the permanent drain would be bonded. I take judicial notice that such bonds are usually in the form of a bank guarantee provided in favour of the local authority and that the client usually pays a fee on an annual basis for such guarantee, the total sum of which is frequently secured in some manner. If the local authority were flexible with regard to the maximum three-year life of temporary drains, and the evidence indicates that it is not, the risk associated with developing -- 14 of 31 -- 15 the temporary drain would be lowered in accordance with the measure of that flexibility. On the other hand, if another developer or developers intend to develop land which would benefit from the drain in question, then the hypothetical developer of the claimants' land can seek a contribution arrangement with such developers. There was evidence that Townsville developers will frequently enter into agreements to contribute to the construction costs of drains and where such agreements are expressed in the form of a deed, they are recognised by the local authority in the arrangements it requires regarding the construction of such drains. The local authority does not become a party to such arrangements. The evidence as to the basis upon which developers settle their respective share of drainage costs is unclear. Mr Hamilton said that the method of cost sharing turns largely, on the development requirements of the individual developers at the time of the making of the agreement. No doubt this factor would feature in the negotiating strength of the parties considering such an agreement. Apart from this, it was suggested that agreements as to how such drainage costs might be shared could be based on the level of run-off generated, the catchment area, the number of lots to be produced or, I would surmise, the size of the lands benefited. I am not aware of the precise mechanism under which such agreements operate having regard to the three-year policy for temporary drains and requirements for bonds, however, the parties both acknowledge the efficacy of such arrangements when in place. Mr Johnstone suggested that were an agreement made between the developers whose land would benefit from the downstream drain, that the developer of the Despot land would contribute about $30,000 to the permanent drain. This figure was calculated on a catchment area basis and although the calculation itself was not challenged, it was certainly suggested that Mr Johnstone's initial approach was not based on the assumption of an agreement coming into existence, but rather on a temporary drain providing an adequate solution in respect of downstream drainage from the claimants' land. Nevertheless, Mr Johnstone suggested that, given his $30,000 estimate of a reasonable contribution towards such drainage costs, the $40,000 cost estimate, and presumed expenditure, included in his figures would be seen by another party as having provided a reasonable contribution to these drainage costs. It follows that my figure of $51,500 would be considered even more reasonable. Now such an argument is based quite clearly on a developer emerging who would happily enter into such an agreement and that that agreement would be based on Mr Johnstone's reasoning regarding the acceptance by such a developer of the $40,000 or $51,500 already spent or to be spent on the construction of the temporary drain. -- 15 of 31 -- 16 I need to make it clear that in Mr Johnstone's evidence he did not specifically suggest that an agreement with Parkside was the probability that his rationale had in mind. Indeed, it seems to me that he proceeded on the basis that his client was in a no risk position regarding such a suggested agreement. The respondent, through Mr Bailey, presented evidence of costings on the basis that no agreement was predictable and that the claimant would be required to pay the full cost of a permanent drain sufficient to service his land. As is so often the case in such matters, the position most cogently supported by the evidence lies between the positions adopted by the parties. It is important that I stress that the analysis that I am about to present concerning the position of a hypothetical prudent purchaser of the claimants' land would find himself in at the date of acquisition is mine and was not suggested directly to me by the claimants who preferred to suggest in general terms only the prospect of an agreement of this type emerging at some stage before the Council would insist upon the construction of a permanent drain. The hypothetical prudent purchaser of the claimants' land is in the fortunate position of having one developer only to deal with, that is Parkside. At the date of resumption, had an intending purchaser approached Parkside, he would have easily discovered that the company had received subdivisional approval for Stage 1 of the Vickers Industrial Estate and whilst that approval contained standard conditions relating to drainage, it did not direct Parkside to utilise the downstream easement. According to an internal memorandum of the respondent local authority, Stage 1, which involved either two or seven lots, was released without works being completed other than allotment fill and part only of that stage was bonded. Stage 2, which I understand was for nine lots, was approved for subdivision in April 1995 and the final works approval issued in December of that year, that is after the date of resumption. The hypothetical purchaser would, however, have known of the application regarding Stage 2 and, based on the experience with Stage 1, would have been inclined to the view that the Stage 2 application would have a good prospect of approval of the proposed works. I should mention that part of what I have set out above differs in some respects from oral evidence from Mr Hamilton, however, I have adopted the evidence from the local authority's memorandum as it appears to be the result of considered research of Council records. The hypothetical purchaser may also have learnt that Parkside was proceeding on the basis of constructing a temporary drain to service its downstream requirements, that it expected the construction of a permanent drain to be bonded and that it included in its costings the requirement to construct a permanent drain. He would easily have discovered that Parkside had no intentions at that time of developing its land the east of the claimants' land. -- 16 of 31 -- 17 In such circumstances, the intending purchaser would have entertained a hope that an agreement could be entered into, however, there would be uncertainty as to the terms and timing of that agreement. That is, Parkside may not have been in a position to finalise the agreement until its position was settled with the local authority and the terms of its works application for Stage 2 known. There would have been the risk that Parkside might have delayed entering into an agreement for an indeterminate period. More importantly, Parkside might have argued that its present needs were for nine industrial lots only, therefore the 53-lot subdivision of the Despot land should shoulder the bulk of the drainage costs. It may have pointed out that its costs of constructing a permanent drain for Vickers Industrial Estate would be less than for a development of the Despot land. The purchaser of the claimants' land would possibly argue that Parkside could save money by entering into an agreement regarding drainage. Nevertheless, the purchaser would have no clear view as to the financial contribution that he would have to make to drainage or even if an agreement would result. In the real world an intending purchaser with such an issue to confront would probably have waited on the outcome of the Parkside subdivision application and would have settled an appropriate agreement following that. The purchaser would have entered into a contract at the date of May 1995 conditioned appropriately to deal with the downstream drainage issue. Such approaches are, however, not available to me in such a case (Crouch v. Minister of Works (1976) 36 LGRA 254) as I must determine value at the date of acquisition on the basis of a concluded, unconditional agreement and taking into account what the parties might reasonably be assumed to know (Spencer v. The Commonwealth (1907) 5 CLR 418). In different circumstances where there was no evidence of other proposed development which would benefit from the downstream drain and where there were a number of landholders with different competitive positions, it would be a brave, if not foolhardy, purchaser who would proceed to purchase land in the hope that an agreement might emerge. A hypothetical prudent purchaser would in such a case factor in the anticipated full cost of such a drain on the basis that such an eventuality was foreseeable and he would strike a price for the land accordingly. Indeed, Parkside did just this in costing the development of the Vickers Industrial Estate and, as will be shown in due course, such an approach is reflective of the way in which Mr Caleo analysed various sales he referred to. The hypothetical prudent purchaser in the present case does have the advantage, however, of the position of Parkside and would, I think, pay a price for the land on the basis that an agreement with that company was possible. I have already adverted to the risks that are attendant with such a position, however, and unlike Mr Johnstone, -- 17 of 31 -- 18 I would suggest that such a hypothetical prudent purchaser would allow for such risks and not in a token way. I will proceed on the basis that the hypothetical prudent purchaser intending to subdivide the claimants' land would proceed on the basis that he would need to pay for the temporary drain and would settle on a purchase price based on the prospect of an agreement emerging but discounted by the associated risks. In the context of a hypothetical subdivision exercise, he may cater for such risk by inflating the profit and risk allowance that otherwise might be acceptable. I will, instead of adjusting the profit and risk allowance suggested by Mr Caleo, have regard to the additional costs that might need to be paid by the hypothetical developer were he required to construct a permanent drain, that is $195,225 ($246,725  $51,500) and will apply a risk factor to that of 20% producing an additional risk sum of $39,000, which I will add to the profit and risk allowance that I adopt later in these reasons. I have, in the circumstances of this case, had no assistance from the parties' respective experts concerning the adoption of this risk allowance, however, I have had regard to the range of profit and risk allowances discussed in evidence and have made a judgment based on that evidence and on my appreciation of the risks involved. Mr Caleo's Valuation Both Mr Caleo and Mr Stack employed the "before and after" method of assessing compensation for loss of land value (See Brisbane City Council v. Lansbury (1977) 4 QLCR 502). Mr Caleo said that the highest and best use of the claimants' land was for subdivision into single-unit residential lots. He valued the land on the basis that prior to the taking of the easement the land had the potential for subdivision into 53 allotments, whilst after resumption the yield was reduced to 42 lots. There was a suggestion during cross-examination that after resumption the land may have been best subdivided into two sites, one on each side of the easement area. As this suggestion did not lead to a useful conclusion, I will not discuss it further. The initial step in Mr Caleo's valuation was to strike a value for the Despot land as it stood prior to the resumption. He said that he employed a direct comparison with sales evidence as his primary method and supported that by reference to a hypothetical subdivision exercise. I will now summarise the evidence concerning the six in globo sales referred to by Mr Caleo. His Sale 1, which was also referred to by Mr Stack in his valuation, involved the sale of the balance of "Willows Estate", an estate which had been quite successful, averaging sales of approximately 170 lots per annum. The in globo parcel was severed by "Kern Drain" which occupied approximately 5.2 ha at the date of sale. The land has an extended frontage to The -- 18 of 31 -- 19 Willows Golf Club development on its western boundary, having 40 potential lots in that location. The land had an area of 105.59 ha and sold in May 1994 for $5,570,000 and was purchased by the Defence Housing Authority who arranged a joint venture development with the Delfin Group, with the Authority purchasing about 25% of the developed lots. The land is situated above the "Council development line" which is a line indicating the extent of flooded and undevelopable land, however, the purchased land does require selective filling, according to Mr Caleo. A bridge estimated to cost $350,000 at the date of purchase and external drainage of $500,000, together with filling costs of $300,000, were known and required at the date of the transaction. A further allowance of $50,000 is required for the crossing of Martello Drive/Evergreen Drive. Mr Caleo analysed the sale to show $52,746 per ha overall, which compares readily with Mr Stack's figure of $53,333. Mr Caleo added that after taking into account the various external costs, the analysed figure would be approximately $63,362. Mr Caleo readily agreed in cross-examination that the Despot land is inferior to his Sale 1 land in that the latter has the advantage of the golf course nearby and does not suffer the prospect of industrial development occurring in its vicinity. Mr Stack said that the sale is of limited use in valuing the claimants' land given both the difference in size and because of the joint venture arrangement which means that there is substantial risk sharing in the development of the sale land. It was put to Mr Stack that this sale might have been lower than market given that it was sold by a receiver, however, Mr Stack responded by saying that the property was presented to the market and marketed in the manner of a normal property. Mr Caleo's second sale also comprised the balance of a subdivision, in this case called "Annandale Estate", which sold in conjunction with other properties held by the vendor in an overall purchase of approximately $47,000,000. I take it that the sale price allocated to the land in question resulted from an apportionment by the parties of the overall sale figure and on that basis I would question whether the sale price properly reflects a transaction suitable for striking a valuation. The area remaining at the date of sale was approximately 104.8 ha suitable for subdivision into approximately 716 further lots together with a 7.13 ha commercial site. The contract bore a date of December 1996 and provided for the continued sale of developed lots until the date of settlement. At that date 26 developed lots remained unsold. Mr Caleo analysed the apportioned sale figure to show $75,000 per ha and noted that the land was a much -- 19 of 31 -- 20 larger parcel than the Despot property and was considered superior in location. In addition, it was in an active subdivision with a proven successful market history. Sale No. 3 in Mr Caleo's valuation took place in August 1992 and involved the sale of 17.27 ha of "Residential A" zoned land for $680,000. The land located at Burnda Street, Kirwan, was able to be developed free of internal drains and no parkland was provided in the resulting subdivision. There were external costs of the order of $250,000 to $400,000 perceived to be required at the date of sale. Having regard to these figures, Mr Caleo analysed the sale to $39,375 per ha, however, he increased that figure to $62,536, having regard to a worst case scenario with respect to the external costs. Mr Caleo said that the sale land was superior in location to the claimants' land. Mr Stack also included this sale in his valuation and he said that this sale, together with two others which I will come to in due course, comprised the best evidence of value because of the date of sale, the size of the land and the similarity and potential, together with the fact that each of these sales and the Despot land are located in Thuringowa. Mr Caleo's fourth sale is located at Smiths Road, Condon, and comprised a 29.45 ha "Residential B" in globo parcel with an estimated yield of 270 lots. The sale for a price of $1,100,000 took place in August 1996 and analyses to $37,351 per ha. The sale was conditional upon the purchaser obtaining a rezoning to "Special Facilities Retirement Village",. External charges, together with infrastructure involved in the western collector road and internal designated drainage areas resulted in Mr Caleo increasing the analysed sale price to $45,840 per ha or $53,045 per ha, depending on which charges are taken into account. The difference in analysed per ha value was not explained fully to me. Mr Caleo noted that the sale land was a much larger parcel than the claimants' land, is slightly inferior in location, has similar topography and access, has a frontage to the future by- pass and will also front the upgraded western collector road. He observed that the date of the transaction was some time after the date of acquisition, but proffered the view that whilst there was a downturn in the volume of residential sales, there was no evidence of a reduction in in globo land values during that period. Whilst Mr Stack was concerned to rely on sales with dates close to the date of resumption, he did not directly disagree with Mr Caleo's appreciation of the state of the in globo market. The main concern raised by the respondent with respect to this sale was with the conditional nature of the contract. Mr Caleo acknowledged that such matters needed to be -- 20 of 31 -- 21 taken into consideration, but maintained the view that the transaction provided a suitable sale to be employed in his direct comparison method. The fifth sale included in Mr Caleo's valuation took place in July 1994 and involved an area of 6.063 ha in Allambie Lane, Rasmussen. The land was purchased by the Diocese of Townsville Roman Catholic Trust for the development of a primary school and is within close proximity to an existing State School, child-minding centre and associated facilities. It adjoins existing residential development to the east, though at the time of sale was zoned "Rural Residential". External infrastructure upgrades were required at an estimated $60,000 at the time of purchase and Mr Caleo analysed the sale price at $59,376 per ha, or $69,273 per ha after the external works were taken into account. The land is about 8 km to the south of the claimants' property in an inferior location, but was said by Mr Caleo to be similar in size and topography. Mr Caleo said in cross-examination that there was no shortage of land in Rasmussen for school purposes. On this basis it may well be the case that the purchaser purchased land in the same market as those wishing to acquire land for residential development and that there was no separate market for school purchasers as such, therefore the price might be taken to indicate that which would be obtained were it sold to a residential developer. I assume, although it was not said, that the land was capable of rezoning for single-lot residential usage. A further sale was provided by Mr Caleo as a supplement to his original five sales and this sixth sale involved a property of 6.9093 ha of "Residential 1" zoned land comprising an amalgamation of 68 titles over undeveloped residential lots. The sale land is located within the existing residential suburb of Wulguru, a stables area with mostly modest quality older timber- framed houses. A railway line adjoins immediately to the north. Six of the potential residential lots would be lost to a drain in the development, thus resulting in a yield of 62 lots which would be quite inexpensively developed, given the lot titles and some services being in place at the time of sale. Development costs were estimated at $13,500 per achieved lot, which compares very favourably with the figure for the resumed land which on a before resumption basis was close to $22,000 per lot using Mr Johnstone's figures. This Sale 6 took place in March 1995 for $500,000, representing $72,366 per ha. Mr Caleo did not expressly select any of the sales as being more suitable than any other for comparison purposes, but had regard to the sales overall in concluding that the value of the claimants' land prior to resumption was $60,000 per ha or $300,000 overall excluding the house. -- 21 of 31 -- 22 This figure was supported by his before hypothetical subdivision exercise which I will come to shortly. He also carried out an after resumption hypothetical exercise which yielded a residual figure of $120,000 and he made reference to that figure saying, "This value is commensurate with that of a large site". He then referred to sales of large home sites. His form of words tends to indicate that for his after resumption valuation he relied on his hypothetical exercise as his primary method, then checked this by reference to sales. His assessment of $180,000 for compensation is the mathematical product of his before resumption value ($300,000) less his after resumption value ($120,000). I will now deal with his hypothetical exercises in further detail. There was no disagreement between the valuers concerning the potential of the land before resumption to produce 53 lots. Mr Caleo provided a layout plan and proposed sale prices for each lot, with prices of $36,500 (2 lots), $37,000 (11 lots), $38,000 (7 lots), $39,000 (3 lots), $39,500 (11 lots) and $40,000 (19 lots). The lower prices allocated were for those fronting Vickers Road and the proposed by-pass upgrade at the southern end of the claimants' land. In settling his lot values, Mr Caleo had regard to the size of his proposed lots as being larger than the average in the vicinity; the by-pass factor that I have already referred to; the proposed industrial uses to the west; and the fact that the lots fronting Vickers Road suffer the usual disadvantages of such a location. Mr Stack said that he thought more discount should be allowed for the by-pass detriment, however, Mr Caleo's view was that, as at the date of acquisition the by-pass was not planned for completion until 2011, the market would not be as harsh on price as Mr Stack suggested. He said also that he understood that noise amelioration works would accompany the by-pass construction. Mr Caleo's values were supported by a number of allotment sales in his valuation. His gross valuation figure was $20,058,500, resulting in an average price of $38,840, however, there was a mathematical error in this and the correct figure should be $2,057,500, showing an average value of $38,820. Mr Stack suggested that sale prices for the proposed subdivision would average $36,000. He included in his valuation a collection of figures indicating the range of sale prices being achieved in a number of estates, however, did not provide individual sales, as Mr Caleo had. I think on the evidence that the lot prices identified by Mr Caleo are supported and I will not interfere with his corrected gross realisation of $2,057,500. In deciding this, I am also influenced by the consistency shown by Mr Caleo in the adoption of his lot values in the subdivision proposed after the resumption of the easement. -- 22 of 31 -- 23 In that after design there are 42 lots, the bulk of which are 750 m to 800 m with two larger (920 m and 1,040 m) on the south side of the easement area and four lots of 1,645 m to 2,015 m on the severance on the north side of the easement area, two of which are hatchet shaped. Gross realisation in the after design is $1,646,500 with average lot prices of $39,200. I accept these figures. Mr Caleo said that a range of 20% to 35% is sought by developers in the relevant area as a profit and risk allowance, however, no specific source of this information was mentioned, nor the method of its calculation. He adopted a figure of 25% profit and risk on the basis of the size of the subject development. The selection of a 25% rate was not directly challenged. Putting aside my consideration of the risks associated with downstream drainage that I commented on earlier, I would therefore accept Mr Caleo's 25% profit and risk rate. I also accept Mr Caleo's development and selling period of 2.2 years for his before resumption exercise. Mr Stack has suggested two years. I have also adopted Mr Caleo's period of 1.75 years for his after resumption exercise. Attention was given to Mr Caleo's method of calculation of interest in his hypothetical exercise. He said that he had employed the method used by my learned colleague, Mr Wenck, in McLachlan v. The Crown, (unreported, 24 August 1995) as it took into account the subdivision of land by stages. One difficulty with this approach in the present case is, however, that there was no evidence that Mr Johnstone had provided his estimated costings having regard to a staged development. Indeed, evidence from Mr Bailey was to the effect that the costings as presented were not completed on this basis and that if they were to be, extra cost would be involved mainly because of the need for preliminary costs to be duplicated at least in part. Mr Johnstone was not recalled to rebut this evidence and I accept that this extra allowance would be required. I also accept that it would have been appropriate to stage a subdivision of the land and that development in stages of about 25 lots was a practice which was common in the area at the time. Mr Bailey did not provide me with an estimate of the extra costs that would be involved in a staged subdivision, however, as I understand his evidence, the figure would approximate $8,000. I will include that figure in my hypothetical subdivision exercises. The interest calculation method employed in McLachlan's case calculates interest on development costs on the basis of expenditure occurring in stages and assuming income is received from sales taking place in those stages. The formula may be presented thus: ( Development Costs x Interest per annum ) x Development and Selling Period (years) ( Number of Stages 1 ) 2 -- 23 of 31 -- 24 In the context of the hypothetical subdivision method where the development is assumed to take place in stages, the utilisation of the method described in McLachlan's case is entirely appropriate in my view. As rebuttal, Mr Stack provided an interest figure based on the employment of a discounted cash flow approach, however, all I have is the bald figure with no evidence concerning the assumptions made. In the circumstances, I would prefer to carry out a calculation using the formula that I have set out above. I also consider it appropriate to not blend different valuation methodologies without good reason. The only other comment concerning Mr Caleo's hypothetical subdivision exercises related to the fact that costings for clearing and grubbing, as provided by Mr Johnstone, were higher in the after resumption exercise than in the before approach and whilst I have no evidence to explain this apparent anomaly, I will, on my own initiative, assume a transposition error and will include the higher figure of $22,000 in the before resumption hypothetical exercise and the $20,000 figure in the after exercise. Mr Caleo included a figure of $25,420 for surveyors fees in his after resumption exercise. There is a mathematical error in the adoption of this figure and I will adjust it to $26,040 (42 lots at $620 per lot). Mr Stack suggested that some money would need to be spent on the house on the land to improve its presentation and to therefore enhance the perception of the standard of any proposed subdivision. However, as this suggestion was not put to Mr Caleo for his consideration, I will make no allowance for it. Taking into account the various adjustments that I have made above including downstream drainage costs of $51,500 in total, but otherwise relying on the figures contained in the hypothetical exercises in Mr Caleo's valuation, I will now present revised hypothetical subdivision exercises. Before Resumption Gross realisation $2,057,500 Less cost of sales $101,813 $1,955,687 Less profit and risk at 25% $391,137 Less downstream drainage risk $39,000 $430,137 Net realisation $1,525,550 Less development costs $1,185,064 Less Interest calculated in accord with McLachlan's case @ 9.25% per annum $60,290 $1,245,354 -- 24 of 31 -- 25 Land including acquisition and holding costs $280,196 Less rates and taxes, say, $3,990 Land including interest $276,206 Less interest on land @at 9.25% for half development and selling period $25,508 $250,698 Less acquisition costs, say $12,000 Land Value $238,698 Rounded to $239,000 After Resumption Gross realisation $1,646,400 Less cost of sales $81,060 $1,565,340 Less profit and risk @ 25% $313,068 Less downstream drainage risk $39,000 352,068 Net realisation $1,213,272 Less development costs $1,081,967 Less interest calculated in accord with McLachlan's case @ 9.25% per annum $43,785 $1,125,752 Land including acquisition and holding costs $87,512 Less rates and taxes, say $3000 Land including interest $84,512 Less interest on land @ 9.25% for half development and selling period $6,328 Land including acquisition costs $78,183 Less acquisition costs, say $5,000 Land Value $73,183 Rounded to $73,000 -- 25 of 31 -- 26 The residual land value figure of $73,000 produced in the after resumption exercise presented above is substantially below the $120,000 figure relied upon by Mr Caleo. He supported his figure by reference to sales of large rural residential sites, it will be recalled. Now, for such a land use a purchaser would be unconcerned about the need to make arrangements for the downstream drainage of the land following subdivision, for no subdivision is contemplated. I would reason, therefore, that, having regard to this and to the fact that a vendor would not accept $73,000 for sale of the land for subdivision if he could get $120,000 for it as a site, Mr Caleo would not adjust his after resumption site value were he asked to consider this question. I will return to this question of the after value following my consideration of Mr Stack's valuation. Before I leave this after value, however, I should make the point that Mr Johnstone's costings proceeded on the basis that the after resumption subdivision would have lower drainage costs because the subdivider would benefit from the easement resumed through the land. This is contrary to the Pointe Gourde principle, as such a benefit should be disregarded, though the inclusion of any costs for such drainage would have no impact on my final after resumption value, discussed below. I mention this as I had no basis for estimating such a cost for inclusion in my above exercise. Mr Stack's Valuation There was a subtle difference of opinion between Mr Caleo and Mr Stack concerning the highest and best use of the claimants' land. Whereas Mr Caleo proceeded on the basis of immediate subdivision and sale, Mr Stack said in his valuation "Redevelopment of the parcel to single Residential A allotments, with areas less than 750 m, is considered to be a higher and better use for this parcel during stronger market conditions. Any subdivision of the site would presently require a significantly extended marketing period, affecting the viability of this subdivision." He said in oral evidence that he thought that the house located on the land provided a particular advantage in that a purchaser would be able to use the land for residential purposes, thus obtaining a beneficial valuation under s.17 of the Valuation of Land Act 1944 with a consequent reduced level of local authority rates. As I wrote earlier, Mr Stack suggested selling prices of lots at $36,000 each on average and a selling period of 24 months: figures not dissimilar from those already discussed when I dealt with Mr Caleo's hypothetical subdivision exercises. It seems to be the case then that whilst each of the valuers described their view of the highest and best us of the claimants' land in different terms, they had in mind a similar outcome for the land. I should add that whilst the bulk of the discussion centred on -- 26 of 31 -- 27 subdivision, Mr Stack also said that the claimants' land may be suited to use as a nursing home, or similar. In his before resumption valuation Mr Stack valued the claimants' land at a rate of $50,000 per ha after considering a range of eight in globo sales, three of which he saw to be of particular use. I will come to those sales shortly. His before valuation was $246,000. Interestingly, this figure includes the value of the house on the land, according to evidence Mr Stack gave during cross-examination, however, there was nothing in his written valuation to suggest that this was the case. It would be usual, in my view, where an in globo value is placed on land on the basis of a value per ha that the value of structures such as a house would be expressed separately having regard to any addition such structures added to the bare in globo value of the land. Nevertheless, Mr Stack was not challenged as to his methodology in this regard. He agreed during cross-examination that the house had a value of about $70,000. If I consider my comment concerning methodology, this would indicate that the land component of Mr Stack's $246,000 would be just under $36,000 per ha. If nothing else, the production of this figure assists in my comparison between Mr Stack's valuation and that provided by Mr Caleo. Mr Stack's after resumption valuation of $172,200 also included the value of the house which remained at $70,000. In his written valuation Mr Stack expressed the after value as being at $35,000 per ha, however, on the approach that I have discussed above, the land component of his after value would be just under $21,000 per ha or $102,200 overall. In common with Mr Caleo's valuation, Mr Stack also expressed the view that the after value of the land corresponded with the value of the parcel as a large residential homesite, though his assessment of price is about $18,000 lower than that suggested by Mr Caleo. He did not refer to sales in support of his opinion of the after resumption value as a site. Mr Stack wrote in his valuation that the reduced value of the claimants' land after resumption was attributed to: the reduced flexibility of any development potential, the loss of usable area, and the formation of two sections of the one parcel. Having regard to these factors, he exercised his professional judgment to arrive at the lower after resumption figure. The difference between his before resumption value of $246,000 and his after value of $172,000 gave rise to his assessment of compensation at $74,000. Mr Hill, for the claimant, suggested in address that Mr Stack's after resumption valuation of $172,200 should be a lower figure as Mr Stack agreed during cross-examination that the area of land subject to the resumed easement would be of no value to the claimants. The argument therefore suggests that the rate of $35,000 applied to the after value by Mr Stack ought to apply to 4.92 ha less the 4,848 m encumbered -- 27 of 31 -- 28 by the easement. This was not put directly to Mr Stack during cross-examination, however, had it been I am confident that Mr Stack would have pointed out that on page 4 of his valuation he had noted "the loss of use of 4,848 m of land" following the resumption and this proposition was repeated in different language on page 15 of his valuation where he expressed his view regarding the after resumption value. There is, therefore, no error patent on the face of Mr Stack's valuation as his $35,000 per ha includes the presence of the easement over part of the claimants' land, as it should do. I come now to the sales evidence relied upon by Mr Stack. Sale Property Sale Date Sale Price Area (ha) Zoning Best Use Analysed Rate/ha A Kingsmead Est Burnda St Kirwan 13-Aug-92 $680,000 17.27 Res A Single Res. Subdivision $39,374.64 B Innes Estate Deeragun 13-Aug-92 $400,000 83.23 Res A & Com. Single Res. Subdivision $4,805.96 C Herveys Range Rd Bohle Plains Dce-92 $225,000 15.12 Rural B Single homesite $14,880.95 Sale Property Sale Date Sale Price Area (ha) Zoning Best Use Analysed Rate/ha D Ninth Street, Railway Est Feb-93 $360,000 2.98 Special Purposes Intensive res. Development $120,805.37 E Cnr Smiths Rd & Bowhunters Rd, Condon Jul-93 $375,000 14.97 Rural B Intensive Res. (e.g.) nursing home $25,050.10 F Lot 1 Dalrymple Rd Kirwan Jul-93 $500,000 16.8 Res B Single Res. Subdivision $29,761.90 G Willows Est Kirwan May-94 $5,600,000 105.0 Res A Single Res. Subdivision $53,333.00 H 21 Veales Rd Cordelia Aug-94 $450,000 85.3 Rural Res Rural Res. Sub $5,275.50 I have already referred to Mr Stack's Sale A which is the same property included as Sale 3 in Mr Caleo's valuation. This sale is of particular importance to my mind as it is the only sale which each valuer agrees is a suitable basis for valuing the claimants' land. Mr Stack said that the most useful sales in valuing the claimants' land were Sales A, E and F on his schedule and that the other sales were included for completeness and to provide a cross-section of the market. Without descending to the detail of the discussion concerning Mr Stack's Sales B, C, D, G and H, I restate that his primary sales were selected on the basis of their location in Thuringowa City, their potential and their size. -- 28 of 31 -- 29 Sale E was purchased by a local real estate agent, was improved at the date of sale with a low-set timber home and shed and the purchaser commenced residing on the property following purchase. Mr Stack is aware, however, that the purchaser has a clear intention to develop the property at some stage in the future and on this basis he sees the sale land as being similar to the potential that he ascribes to the claimants' land. Mr Caleo said that part of the Sale E land is located below the local authority's development line, though I was not informed as to how much of the sale block is thus affected. Mr Caleo excluded this sale from his valuation on the basis of the effect of the development control line, the fact that the property was improved and was purchased for owner occupation, though with development intended at some state in the future, and because the land was zoned "Rural". Mr Stack's Sale F took place whilst the vendor was under some pressure by its bank to dispose of the property, though Mr Stack said that the property was well exposed to the general market and is a sale suitable for consideration. Mr Caleo said that he understood the price was an apportionment of the overall sale price similar to the situation prevailing in his Sale 2. Before and After Values It has frequently been said by this Court and by other Courts exercising similar jurisdiction that hypothetical development methods of valuation are inherently unreliable and are best employed as a check against the direct comparison method where comparable sales are available. (See, for example, Merivale Motel Investments Pty Ltd v. The Brisbane Exposition and South Bank Redevelopment Authority (1985) 10 QLCR 268). The difficulty that I have in the instant case is that in comparison between the before resumption property and the sales evidence the valuers did not approach that comparison on the understanding that the arrangement of downstream drainage posed the type and extent of risk that I have identified. Mr Caleo proceeded on the basis, as I understand the evidence, that there was an easement downstream which would have accommodated downstream drainage and that the only cost to the would-be developer of the Despot land would have been a figure of $40,000 for the construction of a temporary drain. Mr Stack did not expressly refer to downstream drainage as an issue in his valuation Viewed correctly, in my view, there are costs and risks associated with this downstream drainage which, when taken into consideration, would produce a different in globo value when comparison with the sales evidence is considered. Unfortunately, I am in a position whether neither Mr Stack nor Mr Caleo expressed an opinion as to how the marketplace might take into account the perspective on downstream drainage that I have described in these reasons, thus I am left very largely to my own devices. Nevertheless, I do -- 29 of 31 -- 30 have the adjustments that I have made to the hypothetical subdivision exercise and in the peculiar circumstances I find myself in, I will place somewhat greater reliance on the hypothetical subdivision exercise than I would normally be inclined to do. I will, however, take into account that in some of the sales referred to by Mr Caleo (and I refer in particular to Sales 1, 3 and 4), purchasers undertook a risk that external charges would be greater than might have been known at that time of purchase or fell within a wide range, meaning that the extent of the liability concerned with such costs was not capable of precise ascertainment. Bearing this in mind, I conclude that the apparently precise way in which I have attempted to adjust Mr Caleo's hypothetical subdivision exercise to take into account the downstream drainage issue, runs the risk of producing a residual value which would not be identified as consistent with market expectations. I think it useful in a case such as this to acknowledge that one ought to take whatever benefit a consideration of the available sales, overall, provides. I would not therefore put any of the sales referred to by the valuers out of my mind in settling on a value of the claimants' land as it stood before resumption. Having said this, I must say that size of land is a particularly important consideration in considering in globo value, given the additional risks and holding costs associated with larger blocks of land. Somewhat greater reliance should therefore be placed on Mr Stack's Sales A (Mr Caleo's Sale 3), E and F as he suggested, and Mr Caleo's Sales 3, 5 and 6. I recognise the criticisms levelled at the suitability of even these transactions, however, valuers must take the market as they find it and cannot manufacture basic sales evidence. If I concentrate on the common sale, that is the Kingsmead Estate property (Stack Sale A, Caleo Sale 3), I note that, disregarding the downstream drain issue, Mr Caleo placed $60,000 per ha on the claimants' land in comparison with the analysed sale price of $39,375 per ha or $62,536 based on a worst case scenario with respect to external costs. Mr Stack's valuation on a bare basis was $36,000 per ha. I must say that Mr Stack's figure is clearly too low when one considers that his criticisms of Mr Caleo's hypothetical subdivision exercise were peripheral, yet that exercise supported Mr Caleo's use of his in globo sales. I think that Mr Caleo's in globo value of the claimants' land before resumption is much closer to the mark than Mr Stack's is and must be accorded due consideration. If I now introduce into consideration the factor of the costs and risks associated with the downstream drainage from a subdivision of the claimants' land, it is clear that Mr Caleo's figure of $60,000 per ha is too high. After paying regard to the before resumption hypothetical -- 30 of 31 -- 31 subdivision exercise I have completed, to the in globo sales and the comments the valuers have made on them, and to the need for the downstream drainage issue to be taken into account, I will settle on a before value of $245,000. This brings me to the peculiar position of finding an after resumption value in circumstances where Mr Caleo's figure is $120,000 yet Mr Stack's figure, when I deduct the value of the house, is about $102,000. If I were to adopt Mr Stack's figure, compensation would be enlarged. My task is, however, to strike a figure for the after value based on the evidence. Mr Stack did not produce homesite sales. Mr Caleo did. Also, I am drawn to the view that Mr Stack has adopted values at a lower level than those suggested by Mr Caleo and as settled on by me. To select Mr Stack's after value as being the more suitable would be a little like picking the slow clock to arrive at work and the fast clock to go home. The evidence of sales of large rural homesites included in Mr Caleo's valuation supports his after site valuation of $120,000 and I adopt that figure. Accordingly I determine compensation for the loss of land at $125,000 ($245,000 before value less $120,000 after value). Interest I order that interest on the compensation figure of $125,000 be paid by the respondent to the claimant at the rate of 7.75 per centum per annum from the date of resumption up to and including the day immediately preceding the date of payment of compensation. RP SCOTT MEMBER OF THE LAND COURT -- 31 of 31 --