Brown v Council of the Town of Goondiwindi [1996] QLC 156 (1996-1997) 16 QLCR 672

LAND COURT BRISBANE 5 DECEMBER 1996 Re: A96-34 - Determination of compensation - Resumption of land in Goondiwindi for water storage and filtration purposes - Acquisition of land Act 1967 BETWEEN: Desmond Charles Brown and Lorraine Susan Brown Claimants AND Council of the Town of Goondiwindi Respondent (Constructing Authority) (Hearing at Goondiwindi) JUDGMENT Land described as Lot 63 on Registered Plan G 4726, Parish of Goondiwindi, County of Marsh, containing an area of 1.226 ha, being the whole of the land in Certificate of Title Volume 1012, Folio 4, was taken by the respondent Council from 18 August 1995 by proclamation published in the Government Gazette. The land is situated in George Street, Goondiwindi, about 1.4 km by road (although radially about 500 metres) north-easterly of the Post Office and business centre. George Street in the immediate locality is not constructed from the west (off McLean Street) but has a narrow gravel/earth track to provide vehicular access off the bitumen Frideswide Street to the east. The land was unserviced at the relevant date, although electricity and reticulated water could have been connected with the cost dependant on the necessary extension involved. The subject section of George Street is surveyed with four large lots (one of which is the subject land) ranging in size from 9,601 m² to 1.232 ha, off its southern frontage, backing on to a crescent-shaped section of Serpentine Creek. A modern brick church/hall is constructed on the land adjoining the subject to the east. On the northern frontage is a relatively large area of vacant land being the balance area of a recently developed residential subdivision off Jabiru Drive. To the south, south-east and south-west of the Serpentine Creek crescent is older established residential development in close proximity to the eastern fringe of the business centre. The subject land is of level to low-lying topography, influenced by [1996] QLC 156 -- 1 of 11 -- 2 its adjacency to Serpentine Creek. Prior to flood mitigation works in the town the land had been subject to some local flooding, but was physically capable of use as a large homesite. Although within easy walking distance of the central amenities of Goondiwindi, including State and private schools, the site was zoned “Rural”. It is clear from an affidavit of Mr P.W. Cleary, Town Clerk of the Council of the Town of Goondiwindi, that the scheme of works, being the purpose for which the land was taken, includes the three vacant lots on the southern frontage of George Street, westerly of the church/hall, including the subject land. The owners of the three lots had been notified in September 1992 that it was “essential that their properties ... be acquired for the site of a future water storage and filtration plant”. The affidavit provided details of subsequent negotiations with the owners of each lot. It is also clear from the valuation evidence that the other two lots had been eventually purchased by private treaty, each for the price of $50,000. The subject matter was referred to the Court by the respondent Council and the claimants were ordered to enter an appearance by filing a claim for compensation. A claim dated 23 August 1996 was filed, subsequently amended by a claim served on the constructing authority and set out as follows: “ Land $75.000.00 Valuation Costs $2,660.00 Legal Costs $2,205.09 Stamp Duty and legal fees on purchase of land $2,382.50 Total $82,247.59 In addition the claimant claims:-  Goondiwindi Town Council indemnify the claimant in relation to the amount of any Capital Gains Tax payable by the claimants on the amount payable pursuant to this claim and further any Capital Gains Tax payable by the claimants which may be assessed pursuant to their obtaining this indemnity;  the payment of interest at rates set by the Land Court for Compensation Awards and;  Goondiwindi Town Council rates applicable to the Land taken from the date of resumption.” When the matter came on for hearing the claimants’ case was conducted by Mr Brown, while Mr W.L. Cochrane, Barrister, appeared on behalf of the respondent. Mr Brown gave evidence himself and called valuation evidence through Mr W.E. Johnson, a registered valuer. Mr Johnson had valued the land in the amount of $75,000. He saw its position as “unique having a frontage to Serpentine Creek and being much larger in area than the land located in the near vicinity, already -- 2 of 11 -- 3 subdivided”. Mr Johnson described the site as being fairly level with a slight depression and in his opinion capable of providing “an excellent homesite and if necessary a raised building pad could be constructed on the site” - a not uncommon practice in Goondiwindi on his observations. Mr Johnson had noted that Lot 61, one lot removed to the west, generally similar to the subject land although physically inferior being lower lying land, had been purchased by the Council for $50,000 on 18 March 1993. Then the adjoining land to the west, Lot 62, also lower lying land and inferior, in his opinion, to the subject land, had been purchased by the Council on 17 December 1993 also for $50,000. Mr Johnson had seen a letter written to Mr Brown by the vendor of Lot 62 (and tendered as an exhibit by Mr Brown) which Mr Johnson interpreted as indicating dissatisfaction with the price which had been paid, but which had been accepted rather than to cause conflict with the Council, a business client of the vendor. From Mr Johnson’s inquiries there had been no other sales of land comparable in size and proximity to the business centre at around the relevant date of resumption. Mr Johnson saw it as obvious that land values had increased in the period since the sales had taken place to the Council. Although he did not advise the amount of the actual valuations Mr Johnson “noted that the rateable land values used by the Goondiwindi Town Council on the subject land and the two sale properties ... rose by about 43% during the 12-month period prior to the date of resumption”. Mr Johnson had investigated and provided details of nine sales of land which he found of some assistance in his valuation. Most were of sites much smaller in area (in the range of 3,466 m² to 4,585 m²) in excess of 2.5 km and as far as 5 km, from the Post Office. A 3,466 m² site in Cairns Street had first sold in January 1994 for $74,000 then resold in April 1996 for $75,000. Mr Johnson found that site to be “reasonably comparable”. It had a narrow frontage to a cul-de-sac and backed onto the Macintyre River with any flood susceptibility removed by a levee bank construction. Under cross-examination Mr Johnson agreed that although more distant from the town centre, this riverfront site was fully serviced and located in a good quality residential area. The balance of the sales of smaller lots were in the price range generally from $40,000 to $45,000 although the largest (4585 m²) had sold for $57,200. Most enjoyed all residential services. Mr Johnson’s comparison was that each was “overall inferior” to the subject land. Then there were two somewhat prestigious larger riverfront lots of 2.233 ha and 2.016 ha which had sold in December 1993 for $125,000 and $130,000 respectively, both of which represented, in Mr Johnson’s opinion, “the top -- 3 of 11 -- 4 end of the rural homesite market”, both lots being superior to the subject land. Valuation evidence for the respondent was provided by Mr M.B. Brennan, registered valuer. He had first valued the land for the Council prior to the resumption, as at 5 January 1994 in the amount of $50,000. His valuation as at the date of resumption remained unaltered. Mr Brennan described the immediate locality as a fairly low-lying area adjacent to Serpentine Creek, with the subject land being a near level to gently undulating block with a low-lying ridge towards the road frontage. The land was stock fenced and cleared, except for shade trees. Mr Brennan’s earlier report and valuation was tendered for the purpose of being read with the valuation as at the date of resumption, which Mr Brennan had understood to have been 1 November 1995. Nothing turned on the slightly later date which had been adopted by him. In both reports Mr Brennan included in the schedule of “comparable sales” the $50,000 1993 sales, to the Council, of the two lots to the west, referred to by Mr Johnson. Mr Brennan described Lot 61 as a fairly low parcel with a homesite area adjacent to the north-east corner, which area was 400 millimetres-600 millimetres lower than the homesite area of the subject. His remarks relevant to Lot 62 were, “Similar parcel to subject and is a near level to moderately undulating creek front parcel with black clay soils mostly and a similar area of high Box ridge on the northern side. Very similar to subject, however does not join a church hall. This is considered to be the best evidence of value.” Of the remaining sales in his earliest report, two were vacant or lightly improved. A 1.75 ha lot in a “rural homesite area north of the railway line” with all-weather gravel road access had sold for $42,000 in February 1992. Mr Brennan was of the opinion that level of value would have increased to $50,000 in January 1994, which he believed had supported his valuation at that date. In both reports, details were given of a sale of a 7,388 m² riverfront site in Kildonan Road, on the south- eastern outskirts of town, for $100,000 in May 1993, then its resale in November 1993 for $85,000. Mr Brennan felt the earlier sale was high and in fact Mr Johnson gave evidence to the effect that the sale resulted from an exchange of property. That site was improved with a fairly substantial shed which Mr Brennan valued at $15,000 in analysing the later sale to show a land value of $70,000 for a site which was, in his opinion, clearly superior to the subject. Mr Johnson had not been aware of that later sale at the time of conducting his valuation, and while he agreed the riverfront location enhanced the value of that land he drew attention to the amenity proximity advantages of the subject site. He disputed Mr Brennan’s “added -- 4 of 11 -- 5 value” analysis of the shed, because, in his opinion, the nature of the structure and position on the site, detracted from the residential amenity. Mr Brennan also took some comfort from another sale in Kildonan Road, of a 3,415 m² site of triangular shape, an apex of which touched the river, but in a noisy area close to highway traffic. That property which included a small cottage in poor condition had sold in March 1994 for $47,000 then $57,000 in August 1995. The later sale was analysed to show a land value of $47,000 which result, in Mr Brennan’s opinion, supported his valuation of the subject land. He felt that the earlier sale had been a “low” sale and the later sale at a higher price was not, in his opinion, indicative of any rising trend in values. Of most comfort to Mr Brennan, subsequent to his earlier valuation, was the sale of an 8.0039 ha site fronting Lamberth Road some distance to the north-east of the subject land, also backing on to Serpentine Creek but adjacent to a wide lagoon area which, in comparison with the subject land, provided a pleasant water orientated amenity. This much larger site had sold for $90,000 in June 1994. Mr Brennan’s remarks relative to that sale were: “Mostly cleared rural homesite on the southern side of Serpentine Lagoon. Has northerly aspect. Access is across bridge via Old Cunningham Highway. Gravel road frontage. Long frontage to lagoon. Relatively close to town. Supports $50,000 on subject parcel. Better than subject.” Valuation Considerations I gained the impression that while Mr Johnson considered the subject land as unique in terms of its size and location relative to amenities, he also saw it as exclusive, being, at the relevant date, the one privately owned vacant site in that immediate locality. Of course, before the Council’s acquisition activity there had been three available sites. I see the “scheme” which resulted in the subject resumption as involving the land comprising the three sites. It is well-established principle that a dispossessed owner is not entitled to any enhanced value resulting from the scheme itself and it would be wrong in principle, in my opinion, to find some premium in value, as Mr Johnson appeared to do, because the subject land was at the date of resumption the one vacant lot remaining. I am also of the opinion that Mr Johnson gave insufficient consideration in his comparison process, to the services available to the various sale lands and the lack of services, except at the cost of extension, available to the subject land. On the other hand, it is also clear that Mr Brennan relied, particularly in the first instance, on the price paid by the respondent for the other two -- 5 of 11 -- 6 lots going to make up the land required for the scheme. Although the sales took place some time prior to the date of resumption, I am persuaded by Mr Brennan’s evidence, and not by Mr Johnson’s opinion to the contrary, that the market for large homesites was relatively static during the intervening period. Such a conclusion seems to be confirmed by the sale and resale referred to by Mr Johnson of the 3,466 m² site in Cairns Street. There is however a question raised as to the weight which should be given to the sales to the Council. It is clear that the Council’s initial offers were unacceptable to each of the owners including the other two vendors. Then, there was an inference that considerations other than market value may have influenced the vendor of the adjoining Lot 62, particularly in that the same price was accepted by him for that lot, as was paid for the physically inferior Lot 61. Mr Brennan saw the sale of Lot 62 as “the best evidence of value” in his valuation considerations. There can be no doubt that it would be difficult to find a better physical comparison than Lot 62 and then but to a lesser degree, Lot 61. There did not seem to be any real dispute by the claimants that the price paid for Lot 61 was other than fair. It is clear that comparison of the subject land with the remaining sales evidence from both sides is largely a matter of opinion. Although comparisons are possible, none of the sale sites could be reasonably regarded as directly comparable. In Woollams v. The Minister (1957) 2 LGRA 338, Hardy J, whilst satisfied there was no principle of law requiring the complete rejection of sales to a constructing authority, commented as follows, at p.347: “However, they should be used with considerable caution, bearing in mind that the Board had a statutory power of resumption and that it is reasonable to infer that all the vendors knew of that power, and that they would also know that the Board would exercise it and resume their properties if a negotiated sale was not made. The negotiated selling prices may be said to reflect the views of the vendors and the purchaser as to what the vendors would be likely to recover in an action for compensation following a resumption, discounted perhaps to some extent by the knowledge that some legal and other expenses incurred in such an action would have to be borne by the dispossessed owners and that there would be some delay in having compensation assessed and paid, rather than to reflect a market selling price agreed upon between a willing vendor and a willing purchaser .... In view of the foregoing I have used those sales for the limited purpose of putting a check on certain of the opinions expressed by the defendant’s valuer ...” There is further considerable authority to support the view that sales to a constructing authority should be treated as His Honour said in Woollams supra with “considerable caution”. Nevertheless, prices paid by a constructing authority do not need to be ignored, particularly in -- 6 of 11 -- 7 circumstances such as is the case here, where the alternative evidence is not seen to be directly comparable. While I accept that Lot 62 may have been the best physical comparison with the subject land, I am unable to accept that the sale of Lot 62 was necessarily “the best evidence of value”. It was evidence which could not be ignored, just as the evidence of the sale of the physical inferior Lot 61 could not have been ignored. Mr Johnson did not agree with the suggestion put to him, and as was inferred in Mr Brennan’s comparison with Lot 62, that the church/hall development adjoining the subject land would have had a deleterious effect on its market value. While the adjoining use could well limit the field of potential purchasers, as Mr Johnson saw it, there were positive aspects to having such an adjoining development connected to services, and with only intermittent use requirements. There should be no doubt that the cost of servicing a vacant site in Goondiwindi, to allow residential use, would be a factor a prudent purchaser would need to establish. That was not done positively in this matter with various estimates being suggested for connection of electricity. Mr Brennan took the broad view that Lots 61 and 62 also lacked services, enabling a like-with-like comparison, while the 8 ha site in Lamberth Road, also needed to have electricity extended but at a cost unknown to him. As I understood the evidence, if a choice was to be made between the subject land and Lots 61 or 62, the subject land would have, through its location, enjoyed priority in extension of services and at the least cost, with the serviced church/hall development adjoining. After giving consideration to the overall sales evidence, I have come to the conclusion that Mr Johnson’s valuation is significantly too high. In particular, I am unable to accept that his comparison in finding the subject land “reasonably comparable” to the riverfront site in Cairns Street is a reasonable reflection of matters which would affect the market. I should say at this juncture that I was invited by the parties to inspect the subject land and the various sales evidence. That was done and was found to be helpful in understanding the evidence and the various comparisons which were made. While I accept that the sales to the Council are useful as a check and appear to be within the general range of value which would be expected, I am not persuaded that Lot 61 was, before further filling development, of equal value to Lot 62 or the subject land. If the price paid for Lot 61 was fair, as it appears to have been, then some credence is given to the suggestion that the price eventually offered and accepted for Lot 62 was somewhat harsh in comparison. It seems to me that while Mr Brennan did not take a -- 7 of 11 -- 8 demonstrably niggardly approach, his assessment represented the minimum value which might have been argued on the overall evidence. I have come to the conclusion that a determination in the amount of $55,000 would resolve any doubts in favour of the claimants, as to the market value of the land. Value to Owners Much of Mr Brown’s evidence was directed to what could be interpreted as a submission that the land had special value to the owners. The location of the land within practical walking distance of amenities and particularly schools, then the rural-residential range of uses permitted by the relatively large area of the site in such a location are features which were of particular significance to the claimants. It is however those positive features which influence its market value, just as do the negative features which include the standard of access, topography and importantly lack of connection to residential services. If it was not for its location, it seems safe to say that the land would have limited market appeal, regardless of its size. It is clear that the owners have been frustrated by having had their land taken from them and their hopes for the future development of that land disappointed. Important to them is the not uncommon criterion that the land was not for sale except at their price. The real test of special value is however to establish what amount a prudent purchaser in the position of the claimants would be prepared to pay for the land rather than fail to obtain it, or to regain it. I am unable to accept that the claimants would be regarded as prudent had they been prepared to pay more than open market value, as has been determined. Another aspect of the special value to them which the owners believed the land possessed, was related to a Capital Gains Tax issue. Mr Brown said that the subject land had been acquired for the purpose of building the family’s first new home. From his point of view, while he recognised the availability of rural-residential type homesites on the outskirts of the town, it was not possible to replace such a site as the subject within walking distance of schools and the central town area. This was important to the family while the children were still young. Their existing residence was similarly handily located, within walking distance of all amenities. Mr Brown confirmed the affidavit evidence of the Town Clerk in that the first approach by the Council was through a real estate agent after which an offer of $40,000 had been made. The claimants had refused the initial and subsequently increased offers and had consistently advised unwillingness to sell although indicating an asking price of $85,000. The reduced formal -- 8 of 11 -- 9 claim had been based on the professional valuation advice which had been sought. The claimants are concerned that they may be liable for significant Capital Gains Tax based on the amount of compensation determined, for the loss of the land. Such an imposition would effectively erode the funds available for acquisition of a replacement site leaving them in an inferior asset position to that which was enjoyed prior to resumption. It is for that reason that indemnity is sought relative to any taxation implications. It may well be that the claimants through forced realisation of this asset, will, because of the date of their purchase of the land, and at a price which has allowed capital gain, become liable for taxation on any gain as assessed. There was no precise evidence as to their personal taxation position. Had the resumption not occurred the claimants say it was intended to build a residence on the land and occupy the property as their new principal place of residence, as they understood it, not becoming caught up in Capital Gains Tax liability. That which was taken from the claimants was vacant land and it is the task of this Court to ensure that the claimants receive the full worth of that vacant land to them at the date of resumption. There is not, as I see it, any element of special value attaching to the land in the hands of the claimants as a result of personal taxation implications. In Theo and Ors v. Brisbane City Council (1990-91) 13 QLCR 160 the Land Appeal Court considered and rejected a claim relating to Capital Gains Tax giving the following reasons at 165, 166: “It is his claim that they are entitled to compensation for any Capital Gains Tax which might be payable upon the realisation of any replacement capital investment property if the claimants elect to acquire one. There is no sound basis for such a claim and there is no authority for the proposition that an award of compensation payable upon a resumption should be adjusted or altered so as to take into account the liability of the claimants to income tax. As was stated by Else-Mitchell J in Chong v. Fairfield Municipal Council (1968) 88 W.N. (NSW) 346 at p.350 - ‘I am unable to agree that the liability or otherwise to income tax of a developer has any relevance to the assessment of compensation. Income tax is not a charge on land or on the income or assets of a taxpayer: it is an exaction imposed by government and quantified by factors and criteria which in many respects are personal to the taxpayer and are capable of arrangement or re-arrangement so as to vary the total tax burden.’ We are in agreement that income tax is not a charge on land and that the Court below correctly found that it was not compensable in a claim following resumption of land under the Acquisition of Land Act.” Another item of claim which might be considered in terms of disturbance -- 9 of 11 -- 10 or special value to the owners was the estimated stamp duty and legal fees payable on the purchase of replacement land. The evidence is that the claimants have not acquired land to replace that which was taken. While it may be that the claimants believe they are unable to obtain another site with the characteristics which were attractive to them, they are, of course, not bound to reinvest the proceeds of the resumption in real estate. Acquisition of replacement vacant land is not in the circumstances seen as “a natural and reasonable consequence of the dispossession of the owner” (see Harvey v. Crawley Development Corporation [1957] 1 AllER 504 at 507). In the formal claim reference was made to an issue relative to Council rates. Mr Brown explained that Council rates had not been paid for a period subsequent to advice that the land would be resumed, but prior to the actual proclamation. It is the claimants’ responsibility to pay the rating charges applicable to the land up to the date on which it was taken. Disturbance During the course of the hearing agreement was reached between the parties as to the following amounts for professional fees expended in compilation of the claim for compensation: Legal Fees $1,500 Valuation Fees $1,410 Total $2,910 That amount is awarded accordingly. Summary of Determination Compensation is determined as follows: Land $55,000 Disturbance - as agreed $2,910 Total Compensation $57,910 Interest The Court was informed that an advance payment effectively in the amount of $50,000 was made on 6 September 1996. That amount included $1,419.55 withheld by the respondent Council for the outstanding rates as at the date of resumption. Various professional fees, including the amounts awarded under the heading of disturbance were also deducted from the advance payment, and redirected on the claimants’ authorisation. It is ordered that interest at the rate of 8.75% per annum be paid on the amount of $53,580.45 being the amount of compensation determined for the land less the outstanding rates at the date of resumption, from 18 August 1995 up to and including 6 September 1996 then on the amount of $7,910 from -- 10 of 11 -- 11 6 September 1996 up to and including the day on which the balance amount is paid. RE WENCK MEMBER OF THE LAND COURT -- 11 of 11 --