Cox v Water Resources Commission [1995] QLC 55 (1997) 16 QLCR 123

LAND COURT BRISBANE 17 July 1995 Re: Claim for Compensation - Resumption for Burdekin River Irrigation Project - Acquisition of Land Act 1967 - Water Resources Act 1989. (A91- 50, A91-51, A91-52, A92-49) Vivian Henry Cox v. Water Resources Commission Hearing at Townsville J U D G M E N T The claimant's land comprising four parcels with a combined area of 3705.274 hectares was resumed for the purpose of the Burdekin River Irrigation Project (the Burdekin Project). Each of the parcels of land was resumed on the following dates: Lot 46 on Plan GS6, Parish of Jarvisfield, area 1092.854 ha, resumed 5 May 1990 Lot 47 on Plan GS36, Parish of Jarvisfield, area 2327.221ha, resumed 5 May 1990 Lot 4 on Plan GL12472, Parish of Northcote, area 78.91 ha, resumed 22 September 1990 Lot 87 on Plan GL12483, Parish of Jarvisfield,area 206.289ha, resumed 27 April 1991 3705.274ha The proposal to construct a dam at the Burdekin Falls was presented to Parliament in March 1980, for the purpose of obtaining the approval of the Legislative Assembly to the proposal and to constitute the extended Burdekin River Irrigation Area. From the publication of an Order in Council on 12 April 1980, the claimant's land has been within an area constituted under the provisions of the Irrigation Act 1922 as the Burdekin River Irrigation Area (BRIA). At the dates of resumption, the land was being used for the grazing of cattle, but approximately 72ha on Lot 47 had previously been used for growing fodder crops. In addition, an area of Lot 47 was being used as an effluent disposal area for a feedlot which was established on the adjoining land owned by the claimant's son, Geoffrey Alexander Cox. It would appear that both parties agree that 5 May 1990 should be the effective date as at which compensation should be determined. Their respective valuers did not contend that there should be any difference in value because of the different resumption [1995] QLC 55 -- 1 of 102 -- 2 Land $ 9,930,000 Improvements $ 87,000 Disturbance $ 369,000 Legal Fees $ 2,000 Valuation Fees $ 10,000 dates. The original claims for compensation for Lot 46, Lot 47 and Lot 4, dated 23 October 1991, and for Lot 87, dated 17 November 1992, totalled $6,303,950. The amended claim for compensation in respect of all of the above described land was lodged on 16 February 1994, as follows: Total Claim $10,398,000 From the time of its inclusion in the BRIA, the claimant knew that the land was to be resumed as part of the Burdekin Project for the creation of new irrigation farms. The claimant contended that this scheme, the Burdekin Project, prevented the development of the subject land as irrigated cane land, in conjunction with other land to the south, as part of a private irrigation undertaking called the Davco Irrigation Project. The difference between the amount of compensation claimed by the claimant ($10.4 million) and the amount assessed by the constructing authority ($1.9 million), is the result of the different approaches taken by their respective valuers. It is well established that for the purpose of determining compensation, any effect which the Burdekin Project has had on the value of the land must be ignored, (the Pointe Gourde principle). That this principle operates in respect of both enhancing values and depreciating values was established by the Privy Council in Melwood Units Pty Ltd v. Commissioner of Main Roads [1979] A.C. 426, where their Lordships said at pp. 434-435: " Under the Pointe Gourde principle (see Pointe Gourde Quarrying and Transport Co. Ltd. v. Sub-Intendent of Crown Lands [1947] A.C. 565) the landowner cannot claim compensation to the extent to which the value of his land is enhanced by the very scheme of which the resumption forms an integral part: that principle in their Lordships' opinion operates also in reverse. A resuming authority cannot by its project of resumption destroy the potential of the whole thirty-seven acres for development as a drive-in shopping centre, and then resume and sever on the basis that that destroyed potential had never existed. ... the principle remains applicable in a case such as the present, notwithstanding that planning permission had not been given for the whole thirty- seven acres and would not have been given, when the lack of such permission was manifestly due to the expressway project, and it is established that, without the expressway project, such planning permission would have been given for the whole thirty-seven acres. To hold otherwise in this case would enable the acquiring authority to inflict by its project the same injustice at one remove. -- 2 of 102 -- 3 ... In their Lordships' 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. " The claimant contended that the value of the resumed land has been depressed by the scheme, while the respondent argued that the implementation of the scheme has enhanced its value. Both agreed, however, that compensation must be assessed on the basis that the Burdekin Project had not been implemented. Central to the claimant's case is the assumption that, in the absence of the Burdekin Project, at the date of resumption, the Davco Project would have been providing a reliable water supply sufficient to irrigate all the potentially arable land on the resumed area in quantities sufficient to grow cane. The respondent, on the other hand, argued that it was only because of the channel water from the Burdekin Project that the resumed land had potential as cane land and that, in the absence of the scheme, its highest and best use was dry land farming and grazing, with a small area of irrigable/arable land supplied from limited groundwater resources. The pivotal question, therefore, is whether or not the Davco Project would have been technically and economically feasible if there had been no Burdekin Project. The majority of the 32-day hearing was concerned with the evidence of experts directed to this hypothetical question. The case was largely conducted as if the Davco Project was still possible. Distinguished experts were called by both parties to give evidence about whether or not various aspects of the Davco Project were feasible. To this extent the case was conducted in an atmosphere of unreality as many of the witnesses dealt not so much with the hypothetical question of whether or not this project could have been undertaken, but whether it could be undertaken. It is therefore necessary to explain the Davco Project and to consider in some detail the evidence as to its feasibility. The Davco Irrigation Project The Davco Irrigation Project was devised by David Cox, son of the claimant Vivian Henry Cox and brother of Geoffrey Alexander Cox. The purpose of the scheme was to provide water sufficient to grow sugar cane on the Cox family lands and on lands of neighbouring farmers, by means of conjunctive use of river water, ground water, natural drainage and tail water collection. The Cox family has held land in the Burdekin Valley since 1887. A family redistribution of land in the mid-1970s, resulted in VH Cox holding the resumed land, which was the northern area of the family aggregation, Geoffrey Cox holding the land to the south of that land, while David Cox held the land on the south of the aggregation. -- 3 of 102 -- 4 VH Cox also held Portion 690 with an area of 63.131 hectares, situated in the south- east corner of the aggregation, close to a bend in the Burdekin River. Figure 1 shows the family aggregation, part of which had been subdivided and sold to finance development. At the time of the redistribution of the family property, it was used for cattle grazing, but the Coxes agree it was only second or third class grazing land. However, they recognised that the land had potential for growing sugar cane and subsequent events have proved this to be correct, as the Cox lands are now largely prime sugar- growing land. Its suitability stemmed from the fact that it was very level ground, well drained and with suitable soils. The level ground minimised the start-up costs of furrow irrigation, which is most effective in the Burdekin heavy clay soils. The land was also ideally situated between the Invicta and Pioneer Sugar Mills. Irrigation is essential for the growing of cane in the Burdekin Valley and the Cox lands had no access to sufficient water for such purpose. However, David Cox believed that adequate water was available, as underground water was being used on the adjoining Mona Park properties and there was the option to draw water from surplus flows in the Burdekin River. David Cox had no interest in grazing, he wanted to be a cane farmer. His vision was the development of the family land for sugar cane farming. He decided to establish his own irrigation scheme and with the support and financial assistance of his family, he conceived and developed a plan for a scheme which he called the Davco Irrigation Project. David Cox described the project thus: " The Davco Irrigation Project was at its inception (and to some extent remains) a carefully planned privately funded self sufficient integrated system of water harvesting, storage and distribution with infrastructure to legally harness, store and reticulate water from the Burdekin River, the underground aquifer, natural rainfall and topographical runoff for use on lands owned by the Cox family and others. The project comprises a system or conduits, channels, drains, pipes, culverts, pumps and storage cells to distribute the water to and over the lands. The project was designed by me with sufficient capacity to supply peak irrigation requirements to the whole of the land for the growing of sugar cane on that land. " (Exhibit 18, pages 4 - 5). David Cox was confident that the sugar industry would continue to expand. His project started in 1977 when he devised a farm development plan and applied for a river licence with an allocation of 2,200 megalitres. He discussed with representatives of the Pioneer Mill the availability of his land for growing sugar cane and negotiated an -- 4 of 102 -- 5 easement for a tramline across his land and land held by other family members. Central to the scheme was the harvesting of water from the Burdekin River. This would be achieved by a series of pumps at a pump-site on the river bank, pumping under the Ayr-Dalbeg Road to the commencement of a channel system. The Davco main channel would traverse the southern boundary of Portion 690 and continue along the southern boundary of David Cox's land. Three other channels would distribute the water over the remainder of his land and eventually onto the land of other family members. The scheme also involved a series of drains which exploited the natural drainage of the land in such a way as to utilise runoff water and the tail water from irrigation as part of the conjunctive water use process. The scheme was modified and altered over the years as circumstances changed. David Cox realised that the storage of surface water would have been necessary and preliminary plans included provision for two above-ground storage cells with 5-metre high walls and 1km long sides. A later plan included the pumping of river water directly into one storage cell, situated towards the south-east corner of the aggregation, adjacent to the foothills of Kelly Mountain. David Cox reasoned that a second storage cell of roughly the same capacity may have been necessary in the future, if the Davco scheme was to be extended to the lands to the north of the subject land, owned by his uncle, Mr Cecil Cox, and the Hoeys. David Cox was confident that in time sufficient water would have been available to water the lands outside the family aggregation and possibly through to the highway to the north. David Cox had carefully considered the funding of this project. He realised that it would be beyond his capacity and that of the family. Therefore, he proposed to develop, subdivide and sell areas of farmable size while retaining the balance lands. The purchasers of these farms were seen as potential participants in the Davco Irrigation Project and the subdivision was designed accordingly. From various sources David Cox acquired sufficient capital to continue with his development project. Development of channels through lands held by other people was assisted by those landowners bearing the cost of channel construction in return for the spoil from the channels which was used in the levelling of their lands. This process was used to advantage by David Cox in the construction of the Davco main channel and where channel A and channel B were constructed through lands which had been sold in Stages 1 and 2 of his subdivision plan. The right to underground water was a crucial part of the Davco Project. However, the Cox lands had very little right to underground water. Brown Road at the southern boundary of the family aggregation separated David Cox's land from the Mona Park area. The farms to the south of the road had the right to irrigate from one pump -- 5 of 102 -- 6 for every 65 acres (26 hectares) to a maximum of 204 megalitres. The Cox land to the north of the road had the right to only one bore and 204 megalitres of water for each 2,000 acres (800 hectares) held, sufficient to grow 65 acres (26 hectares) of sugar cane. David Cox used most of the water entitlement from his own holdings and from other land which he acquired as part of the project (the Parker land) to provide a water allocation for five of the nine subdivided lots. The Parker lands were to form part of the Davco Irrigation Project, but David Cox's interest in those lands was subsequently acquired by the Water Resources Commission by agreement as a trade-off to allow David Cox to hold more of his original landholding. So that ground water could be used as part of the conjunctive use process, David and Geoffrey Cox evolved a scheme of recharging the underground aquifer, so that the water would be stored in the aquifer and available to be extracted for use in the Davco Project. The recharge process involved the construction of nine recharge trenches by means of which water was to be pumped into the aquifer through a sand filter. These trenches were not constructed, but a recharge trial had been conducted and during the course of the hearing another recharge trial was undertaken. Extensive evidence was given about the recharge process and will be discussed later in this judgment. During 1978 and 1979, David Cox continued with his development program, including the preliminary work for the pump stations on the Burdekin River bank and the pipe system. Consents were obtained from the relevant authorities to pump from the river through a process of collection chambers and pipelines to the beginning of the channel system and across Portion 690. Work on the Davco main channel proceeded and in January 1979, David Cox was granted a licence to pump 1200 megalitres per annum from the river. He realised that this was not sufficient to supply the whole of the project, but he envisaged that each of the participants in the project would apply to the Water Resources Commission for a water allocation. Then, subject to the payment of Davco headworks charges, they would have the right to use the Davco channels once they had approval from the Water Resources Commission to draw river water. The Burdekin Dam Scheme was announced in April 1980 and David Cox was faced with the prospect of resumption, not only of his land but that of the potential users of the Davco irrigation system. However, he was not convinced that the Burdekin Project would proceed and he continued with the development of the Davco Irrigation Project. He spent a considerable amount of time meeting with politicians and officials, discussing the impact that the Burdekin Scheme would have upon the Davco Irrigation Project. He realised that as well as affecting the supply of water to potential users of his project, the Burdekin Dam would affect the flow of the river itself, which was crucial to the Davco project. -- 6 of 102 -- 7 By early 1981 construction of the Davco main channel was proceeding and David Cox intensified his efforts to obtain the right to grow sugar cane. In June 1981 he applied for a free flow licence. Development continued from 1984 to 1986, with David Cox doing all that he could to limit the impact of the Burdekin Scheme on his farm and his project. In February 1987 he applied for an increase in his Waterworks Licence, but at the date of hearing this remained unresolved. In June 1987, David Cox devised a scheme of leasing assignment from landlocked farmers who were then able to use their "roaming" entitlement to grow cane on the Davco farm. Although at significant cost, he used this to great advantage, achieving economies of scale utilising broadacre farming techniques and cost efficiencies. In 1994, the Davco farm grew over 100,000 tonnes of cane with the same machinery as a farm that grows 10,000 - 12,000 tonnes of cane. In 1993 the Davco partnership was the largest private producer of sugar, producing over 103,000 tonnes from 2,566 hectares. David Cox stated that it was envisaged that the Davco Irrigation Project would not have been just a private profit-making venture, although he conceded that the fact that it was going to serve his land, as well as others, was a prime motivation. When the scheme was in place, a water board, similar to those already operating in the Burdekin, would have been established to operate it. The Davco Irrigation Project concept plan was continually modified from the time it was first envisaged, in accordance with prevailing circumstances. Because of the Burdekin Dam Project, it had to be modified substantially and was not able to provide water to the subject land as was the original intention. With the announcement of the project, all the family land was threatened with resumption as were all large landholdings, including prospective participants in the Davco project. Mr Geoffrey Cox also gave evidence about the Davco Project. He affirmed the family's support for and contributions to its development. He explained the strategy of constructing Pelican Road and subdividing and selling some farms to finance the development of their lands. He said that David's idea was to use the excess free flow out of the river, while his idea was to establish a recharge scheme similar to those in the North Burdekin Water Board area, where he had previously owned a cane farm. The scheme became a combination of these aspects. The Davco Project was to be worked up by David and himself, Geoffrey Cox said, while Kalamia Plains Pastoral Co. was used to clear and prepare the family lands, including the subject land. He said that his father (the claimant), David and himself agreed that the project was to be a joint effort and that they would split the costs on a proportional land basis. He explained that one of the major benefits in undertaking the development -- 7 of 102 -- 8 themselves was the use of gravel from a quarry on his own land for roadbuilding in the project area. Geoffrey Cox and his father conducted all the business on their lands under the business name Kalamia Plains Pastoral Co., with interests one-third and two-thirds respectively. This included the feedlot, the grazing and the farming on Geoffrey's land. Contributions were made by the claimant and Geoffrey Cox from time to time through Kalamia Plains Pastoral Co. to the Davco Project. Geoffrey Cox said that David went ahead with development on their behalf and they reimbursed him, whenever they were able. Geoffrey Cox had prepared a schedule of payments made up to the date of resumption, both direct payments and work done by the bulldozers offset as work for the Davco Project. Direct payments between 1986 and 1988 amounted to $204,631.34, work done by the Kalamia Plains bulldozer in 1980 and 1982 amounted to $33,105, and work done by Geoffrey Cox's bulldozer between 1982 and 1991 amounted to $58,985. He explained that there were also many previous payments made to David that could not be identified. Therefore, identifiable contributions to the Davco Project by the claimant (excluding the last item of contribution made by Geoffrey Cox) is two-thirds of $237,736.34 or $158,490.89. [This differs from Mr Eales' figure in his hypothetical exercises.] Geoffrey Cox said that he applied in the early 1980s for a licence to pump water from the Burdekin River for the development of his land as part of the Davco Project, but no reply was ever received from the Water Resources Commission. He continued to develop his land through the 1980s, planting an area of 40 hectares to mangoes and in 1990 commenced planting cane until he had, at the date of hearing, some 500 hectares under sugar cane. If it had not been for the Burdekin Project, Geoffrey Cox thought that by the date of resumption the subject land would have been developed for cane growing. By 1979/1980, the development of the family lands was well underway using machinery owned by the various family members. The Davco Irrigation Project, as finally envisaged that it would be in 1989-1990, is shown on the plan which is Exhibit 21, reproduced here as Figure 2. This plan shows the lands owned by David, Geoffrey and Vivian Henry Cox, plus the lands sold in subdivision, divided into a series of farm management areas, with these blocks generally comprising areas of 100 to 150 hectares, with approximately 30 kms of channels, approximately 15 kms of drains and 9 recharge trenches. A large storage cell is shown situated towards the south-eastern boundary of the Davco land, with the possibility of a second storage cell to be constructed later to service lands further to the -- 8 of 102 -- 9 north, if the project was to be so extended and such extra water storage was needed. The Claimant's Argument The claimant contended that if the Davco project had proceeded as originally intended, in the absence of the Burdekin Project, Davco water would have been available to the subject land by 1990. While the Coxes were confident of the ultimate success of their project, a great deal of evidence was given by experts in various fields for the purpose of demonstrating that, in the absence of the Burdekin Project, the Davco Irrigation Project would have been technically feasible and economically viable. The Evidence of Professor Raymond Edward Volker At the time he gave evidence, Professor Volker was Professor of Civil Engineering and Head, Department of Civil and Systems Engineering at James Cook University. During the hearing he took up an appointment as Professor of Civil Engineering and Head, Department of Civil Engineering, at the University of Queensland. Professor Volker's main areas of research were in the field of water resources engineering, including flow through porous media and groundwater modelling, and numerical modelling of an aquifer under the Burdekin Delta with intermittent recharge. Professor Volker's Overview of the Davco Irrigation Project Professor Volker described the project as an integrated system of water storage and distribution designed to irrigate approximately 7,200 to 8,000 hectares of sugar cane without using water from the Burdekin Dam. He explained that an irrigation project required sources of water, a means of withdrawal and its application as irrigation. It may rely on groundwater, surface water or a combination of both. Groundwater based projects rely on natural recharge of the aquifer, in some cases augmented by artificial recharge, as in the Davco Irrigation Project. Artificial recharge means providing water, other than by natural recharge, to the aquifer which then acts as a reservoir from which water can be drawn. Introducing water by artificial means improves the rate of natural recharge and increases the quantities of water available. Professor Volker described the Davco Irrigation Project as a conjunctive use project, relying on water pumped from the Burdekin River to supplement natural recharge. It incorporated surface water storage, plus pumps and channels to deliver the captured part of the high river flow to the crop, to the groundwater storage and to surface storage. There are several aspects which Professor Volker described as advantageous to the viability of the project. The Burdekin River, adjacent to the project land, often had large surplus flows when there was insufficient rain for crops on the Davco land. Thus, he reasoned, a significant proportion of the irrigation requirement could be drawn from the river in most years, without depriving other potential users of access to reasonable -- 9 of 102 -- 10 quantities. He said that a good quality aquifer underlies the project area at depths shallow enough to make artificial recharge feasible. The underground storage of water eliminates evaporation and does not require construction. The slow movement of water in the aquifer makes it possible to retrieve recharge water. It provides a distribution system as it is continuous under the project area. Bores and pumps may be located where required for crop irrigation. Professor Volker went on to describe the major components of the proposed Davco Irrigation Project, as the concept plan finally evolved, as comprising: . the aquifer to provide and store water; . pumps to divert water from the Burdekin River; . pipes and channels to transport it; . a surface storage to supplement the aquifer and assist removal of sediment; . artificial recharge pits. In the Professor's opinion, such a system would allow the irrigation of sugar cane to supplement rainfall and optimise crop growth. In order to show that the Davco Irrigation Project would have been viable, Professor Volker explained that a conceptual design and feasibility study had been undertaken. However, he said that detailed design would have been required immediately prior to full implementation. This conceptual design and feasibility study accepted that the aquifer described by hydrogeologist, Mr Woolley, was capable of storing artificial recharge in quantities required to supplement natural recharge. Professor Volker went on to say that the aquifer had sufficiently high transmissivities and storativities to ensure the efficient withdrawal of the amounts of water required for irrigation. He stated that the similarity of the aquifer to that of the adjacent Burdekin Delta made it unnecessary to compare it with systems elsewhere. A preliminary design of a pump station for capturing river flow was performed by McIntyre and Associates Pty Ltd. Open channels to transport river water to the farm had been size-costed and preliminary design of a dam to store water was undertaken by Beckhaus Civil Pty Ltd. Artificial recharge was investigated by calculation using the results of a recharge trial and, in Professor Volker's opinion, shown to be viable. As part of the preliminary process, a computer model to represent the functioning of the Davco Irrigation Project was developed to assist in assessing the ability of the project to provide the necessary quantities of water daily. This model did not attempt to simulate in detail all the processes affecting water movement at different locations in the aquifer or channels at all possible times. Rather, it relied on reasonable estimates of water movement and available storage on a daily basis and simulated overall response of the system for a given set of recorded climatic conditions. This modelling was undertaken by Mr Crees. -- 10 of 102 -- 11 Professor Volker said that the Davco Irrigation Project as it was designed had an inherent robustness, reinforced through the opportunity to control many of the key components such as: . the total length of the recharge pits and size of the pits; . the frequency and method of pit cleaning; . the size of pumps; . the size of surface store; . the incorporation of surface storage in the supply line to the recharge pits; and . the opportunities for the use of tail water. Professor Volker stated that the management options were also enhanced because of the large number of interrelated components and the opportunity to control their operation. Consequently, he thought that the project offered a great deal of flexibility to optimise its performance through both design and operational aspects. For example, he said that the pits would not be constructed to the full length in the first place, but would be extended if needed. The frequency of cleaning schedules would be established by experience. Also, the type and size of pumps and the size of the surface store would be left until the detailed design stage. Detailed design would have been undertaken prior to implementation, Professor Volker said, when the appropriate combination of infrastructure installations to optimise the operation of the project would have been investigated. The object of the present exercise was, he said, to show that the Davco Irrigation Project would have been a feasible method of irrigating the Davco lands. Professor Volker concluded that based on 21 years of recorded hydrologic data and on the analysis of the project operation and its various components which were reported upon by the various experts, the project had been shown to represent a feasible means of irrigating the subject land to grow sugar cane. The Aquifer Crucial to the success of the proposed Davco Irrigation Project would have been the capacity of the aquifer under the Davco lands to receive, store and transmit water. If the aquifer did not have these properties, an essential component of the project would have been removed. The Volume of the Aquifer Evidence in this regard was given by two hydrogeologists, Mr Donald Russell Woolley, a consultant hydrogeologist with extensive experience, called by the claimant, and Mr John Robert Hillier, Manager, Groundwater Assessment, Department of Primary Industries Water Resources, called by the respondent. Both witnesses prepared their reports on the basis that the Burdekin Dam was not in existence. They used essentially -- 11 of 102 -- 12 the same sources of information, consisting mainly of published material and investigations carried out by others in the area of the Davco lands. Both hydrogeologists generally agreed that the aquifer consists of sand and gravel deposits underlaid by bedrock and overlaid by a substantial clay layer of varying thickness, ranging from less than 6 metres to about 20 metres. They seemed to agree that water enters the alluvial material in the aquifer by natural recharge through infiltration of rainwater, irrigation water, river, creek and runoff water from periodic major floods, and from leakage from the underlying bedrock. Infiltration from rainwater is as low as 2.5% of annual rainfall, for approximately 25mm for an average year. This natural recharge rate became the basis for the Water Resources Commission's allocation policy of allowing .25 megalitres per hectare for irrigation bores in the area. The evidence indicates that, after reaching the water table, water moves through the aquifer system at a rate controlled by the hydraulic gradient and by the aquifer permeability. In the Burdekin Valley (in which the Davco lands are situated) under natural conditions, groundwater will flow from south to north towards the sea. Before development of the area there was an equilibrium with recharge of aquifers equal to discharge. As the water table rose, discharge to the sea increased and vice-versa, with the salt water/fresh water interface virtually stable. Development has upset that equilibrium, with clearing and irrigation increasing recharge and causing water levels to rise. Use of groundwater can lower water levels, but if they are lowered too far they could result in movement of salt water into the aquifer. It is important that the gradient to the north be maintained so a significant flow continues in that direction, or movement of salt water would occur. Mr Woolley and Mr Hillier agreed that the Davco Irrigation Project would not have caused that to occur if the water levels were kept above the 1971 minimum. Both hydrogeologists agreed that the capacity of the aquifer to receive artificial recharge depended upon the volume of unsaturated aquifer material between the lowest water level recorded in 1971 and the base of the variable clay layer. The depth of this unsaturated material was also variable and depended to a large extent on the depth of the clay layer. The Water Resources Commission had drilled approximately 60 bores in the vicinity of the Davco lands for groundwater investigation purposes. Mr Woolley and Mr Hillier used the bore log data from these bores to calculate the size of the aquifer above the 1971 water level as the area available to store artificial recharge water for the Davco Irrigation Project. In addition to water leaving the aquifer to the north, both hydrogeologists assumed that there was an inflow of water from the south (the Mona Park area) of 18 megalitres per day entering the aquifer beneath the Davco lands. This also had to be -- 12 of 102 -- 13 taken into account in estimating the volume of the aquifer available for recharge water. From the available bore log data, Mr Woolley prepared a representation showing the water beds penetrated by the test bores and extrapolated these to indicate a possible distribution of the main aquifers. He noted the increasing thickness and depth of the aquifer towards the north, as the maximum potential for groundwater pumpage occurs where the aquifer is thickest and deepest. In calculating the volume of water that could be stored within the aquifer between the base of the surface clay layer and the lowest recorded water level in 1971, Mr Woolley estimated that the average width of the valley is 8 kilometres, the length 7 kilometres and has adopted an average thickness of 6 metres for the available aquifer. To that he applied a storativity value of 0.16, which had been previously adopted by Australia Groundwater Consultants in their 1983 report, which Mr Woolley considered to be reasonable. Storativity is the proportion of the volume of the aquifer occupied by water. From these data, Mr Woolley calculated the volume of water that could be stored at 54,000 megalitres. Mr Woolley admitted that the average thickness of the available aquifer is an arbitrary figure as he did not have sufficient data to be more accurate. He said that the volume of 54,000 megalitres is small compared with the total volume of the groundwater stores in the aquifer within the Davco area, which he estimated at 216,000 megalitres. He concluded that the aquifer is therefore amenable to conjunctive use with river water by providing short-term storage for artificially recharged water. He stated that the available evidence on the aquifer seemed to indicate that it would be well adapted to underground water storage. On the other hand, Mr Hillier's conclusions varied greatly from those of Mr Woolley. From investigation drilling, Mr Hillier drew the following conclusions:- . at the northern boundary of the subject land the depth of clay overlying the aquifer is 3.6 to 14.6 metres below the ground, with unsaturated aquifer material above the 1971 water level varying from 0 to 5.9 metres, the average being 1.5 metres. . at the southern boundary of the subject land (slightly to the north of the centre of the Davco lands) the depth of clay varies from 2.7 to 9.75 metres, saturated aquifer material above the 1971 level varying from 1.25 metres to 8.3 metres, the average being 3.0 metres. . at the southern boundary of the Davco lands (Brown Road) the clay varies from 4.2 metres to 13.6 metres, with saturated aquifer material above the 1971 level varying from 0 to 6.8 metres, the average being 4.9 metres. From these data, Mr Hillier arrived at an average thickness for the unsaturated zone above the 1971 water level of 3.13 metres. Using an area of 8 kilometres x 7 -- 13 of 102 -- 14 kilometres, he calculated the volume of this layer at 175,280,000 cubic metres. Mr Hillier went on to say that the maximum value of storativity for clean aquifer material is 0.16. If this storativity value is used, the volume of water that could be stored is 28,000 megalitres. However, the presence of clay and silt in the Davco aquifer would reduce this value significantly. Therefore, Mr Hillier concluded that the storativity value of 0.16 is too high for this aquifer and that a value of 0.1 would be more reasonable. Under cross examination, Mr Hillier was taken through the bore log data for the various bores on his cross-sections and as a result of amended dimensions of the Davco area, Mr Hillier agreed that the calculation of the volume of available aquifer material could be close to 351 million cubic metres. If Mr Woolley's estimate of the storativity of 0.16 was applied, the result is 56,000 megalitres of stored water, which approximates closely Mr Woolley's estimate of 54,000 megalitres. However, Mr Hillier adhered to his opinion that the storativity is 0.1 so that the volume of water equals 35,000 megalitres. He also commented that only 80% of the artificially recharged water could be recovered. There is substantial difference between these two experts as to the volume of aquifer material available for artificial recharge. Whichever method is adopted, the result is hypothetical, as only very extensive test drilling could indicate the amount of aquifer available. However, the calculations put to Mr Hillier in cross-examination do indicate that on the most optimistic estimates a value of 351 million cubic metres is available. There is considerable disagreement about the storativity of the aquifer material. Because of the amount of clay and silt in the sand and gravel, Mr Hillier thought that the storativity was only 0.1. However, he seems to be alone in this estimate. Among the published material presented in evidence, Australia Groundwater Consultants, with whom the Water Resources Commission seemed to agree for other purposes, estimated storativity at 0.16. This same value was adopted by a Mr O'Shea of Water Resources Commission in his report which was tendered in evidence, as well as by Mr Woolley. A report by Coffey and Hollingsworth indicates that their estimate of storativity of the aquifer under Portion 31 (to the north-west of the subject land) might be as high as 0.2, while a report by a Mr Cox of the Water Resources Commission, using a soil moisture meter, indicates that storativity might be 0.21. The state of the evidence is such that it is difficult to make a finding with any confidence of the size of the available aquifer. However, the weight of the evidence would, in my opinion, tend to favour the larger rather than the smaller estimate. Therefore, the volume of the aquifer available for artificial recharge may be in the vicinity of 50,000 megalitres. The Ability of the Aquifer to receive, store and transmit water. Natural recharge. -- 14 of 102 -- 15 There was general agreement on the sources of natural recharge of the aquifer, although Mr Woolley commented upon the apparent uncertainty of the relative importance of the various recharge processes and the lack of precision in estimation of volumes attributable to them, in the numerous studies of the aquifer system in the Burdekin Valley. The movement of water through the aquifer system is controlled by the hydraulic gradient, that is the difference in water elevation, and by the aquifer permeability. Water table contours show water entering the alluvial system and confirm the northerly movement of ground water towards the controlling sea level to the north. Permeability of an aquifer is commonly expressed as its "transmissivity". From data obtained during continuous pumping of a bore over one month in 1991, Mr Woolley concluded that the transmissivity is 5000 square metres per day. For the whole of the aquifer he estimated an average transmissivity of approximately 3000 square metres per day. On the other hand, Mr Hillier regarded the permeability of the aquifer as a limiting factor and, although he has used a transmissivity of 3000 square metres per day (from models developed by Seccombe and Arunakumaren), he thinks 2400 square metres per day is more realistic. Using an equation involving the length of the southern boundary of the Davco lands, the hydraulic gradient and the transmissivity, Mr Woolley estimated that there was a down valley groundwater flow of 18 megalitres at a velocity of one-tenth of a metre per day. As the aquifer system is continuous to the north from the Mona Park area and the thickness of the alluvial deposits improves in that direction, from data obtained from the Mona Park irrigation area, Mr Woolley concluded that groundwater withdrawal at a rate of 4 megalitres per hectare was reasonable. He expressed the opinion that the Water Resources Commission could have no reasonable grounds for refusing a licence for bores to pump at a rate of 2.5 megalitres per hectare. However, the officers of the Water Resources Commission see the matter very differently. Mr Leon Malcolm Leach, Senior Hydrologist, Northern Region, gave evidence that the Davco land was in an area that had been proclaimed as a sub- artesian bore district because of the lack of available groundwater due to poor reliable natural recharge and the need to manage groundwater use. He said that saltwater could invade the fresh groundwater rendering it useless for irrigation. The lack of natural groundwater led to the creation of the Burdekin Project. The Water Resources Commission's allocation policy for the area including the Davco lands, was one bore for each 800 hectares (or part thereof) and an allocation of 0.25 megalitres per hectare. Mr Leach admitted that it was based generally on the amount of infiltration of rainfall, the long-term average of which is 0.25 megalitres per year. The Commission had used this as the basis for its policy of safe yield at 0.25 megalitres per hectare per year, since the late 1970s. This policy was reassessed by -- 15 of 102 -- 16 Australia Groundwater Consultants in 1982 and 1983, and in 1990 by Seccombe and Arunakumaren. These reports generally agreed that the Commission policy was proper and, while an extraction rate of 2 megalitres per hectare per year was unlikely to cause saltwater intrusion, it would have a detrimental effect on irrigation by decreasing water levels in present irrigation areas. The evidence was to the effect that the safe yield in Mona Park was established at 1667 megalitres when it was opened up as an irrigation area in 1963/64. As a result of later investigations, by 1978 the safe yield was set at 6690 megalitres. However, there was no change in the safe yield assessed by the Commission for the area to the north, which included the Cox lands, because of its concern about the possible deterioration of water quality. Artificial recharge. The various groundwater experts have considered the possibility of introducing water to the aquifer by means of artificial recharge for short-term subsurface storage. Artificial recharge has been used by the North Burdekin Water Board and by the South Burdekin Water Board in the Burdekin Delta for over 20 years. Continued canefarming in the area is now heavily dependant on these recharge schemes. Some 200,000 megalitres annually is recharged by pumping from the river into a complex system of natural and artificial channels, trenches and seepage areas from which it percolates to the aquifer. It was generally agreed that the main requirements for artificial recharge are: . sufficient flat land for the construction of recharge pits; . a ready supply of clean algae-free water to prevent the sand filter and the aquifer from clogging; . an aquifer shallow enough to be reached by conventional excavating equipment; . an unconfined aquifer with properties of transmissivity and storativity sufficiently high to enable water to be introduced at required rates. While estimates of the depth of the aquifer below the surface clay layer varied, it was agreed that there were areas where depths were less than 10 metres, which would allow the trenches to be excavated using conventional machinery. The Burdekin River itself would provide the appropriate sand for backfilling. The Artificial Recharge Trial No.1 To demonstrate the feasibility of recharging water artificially, a recharge pit similar to those used in the South Burdekin Water Board area was established on the Davco land. A trench into the aquifer sand, 9.6 metres long x 1 metre wide x 5.5 metres deep was excavated from the base of a pit 11.6 metres long x 4 metres wide x 1.5 -- 16 of 102 -- 17 metres deep (tapering sides made the floor of the trench 9.6 metres x 3 metres). The trench was backfilled with unscreened river sand and the base and sides of the pit were also covered with sand to ensure that clay from the sides would not contaminate the sand filter. Professor Volker reported on the results of the recharge trial, observing that the test pit was substantially smaller than the proposed operational trenches and that in practice screened sand would be used with the probability of increased recharge rates. For approximately the first 20 days of the trial, bore water was used. Professor Volker explained that the object was to demonstrate that it was feasible to get water into the aquifer at sufficient rates, not to simulate a pit in operation. The results show that where there is a source of clean water available, water could be introduced into the aquifer at rates of 30 to 40 litres per second (0.30 to 0.35 megalitres per day per metre of trench). After that initial period, channel water was introduced to ascertain whether there would be any appreciable effect from sediment or algae in that water. Recharge continued for a further 14 days, a total duration of approximately 33-34 days, with the infiltration rate gradually reducing to about 10 litres per second (0.09 megalitres per day per metre of trench). Professor Volker said that the test showed that large quantities of clean water can be recharged, but if there is sediment or algae in the water and it is not properly controlled, the recharge rate will decline. Suspended material is trapped on the sand surface and reduces the infiltration rate. However, he noted that the Davco Irrigation Project provided for river water to be passed through a storage cell before it entered the recharge pits. This would act as a large sedimentation basin to remove a high proportion of the suspended material. Professor Volker went on to state that the storage cell would not have been vital for the volume of water necessary for irrigation, but would have been required to control the quality of the water for recharge purposes. Although all particles larger than 2 micrometres should have been removed, the Professor said it would have been necessary to clean the pit surface periodically to remove fine particles which clog it, thereby reducing the recharge rate. He contended that high infiltration rates could be maintained longer when grain size larger than 2 micrometres was removed and would ensure that regular pit cleaning could be undertaken at a frequency low enough to ensure a viable recharge operation. He explained that the South Burdekin Water Board pits operate for periods of 4-5 weeks without the need for cleaning and then often drying out and raking the surface is all that is necessary to restore the infiltration rate. At longer intervals, skimming the top 25-75 millimetres of sand could be necessary. Professor Volker went on to say that in order to minimise the need for pit surface cleaning, it would be advantageous if recharge operations were restricted to times when river water had low total suspended solids. The South Burdekin Water Board restricts -- 17 of 102 -- 18 pumping from the river to times when water turbidity is less than 150 units. Professor Volker described that as a somewhat arbitrary policy, not appropriate for the Davco Irrigation Project, as it would unduly restrict times when water could have been pumped or recharged. He was also critical of turbidity as a measure of the quality of water. He said a more precise measure is the total of suspended solids, that is, the mass of suspended solids per volume of water. Professor Volker went on to explain that during the recharge trial, the response of the aquifer was monitored by water levels in observation bores, which responded fairly rapidly to the introduction of water through the trial pit. He said this indicated a very good hydraulic connection between the pit and the aquifer sands, suggesting that artificial recharge should be successful. The Professor concluded that on the basis of the results of the trial and the experience of recharge operations by the two Water Boards in the Delta, it would be feasible to control the sediment load in recharge water and clean the pits sufficiently to maintain an effective recharge operation. According to Professor Volker, the artificial recharge trial had demonstrated that flow rates in the range of 40 litres per second to 10 litres per second, depending largely upon the quality of the water, could be sustained through a trench 10 metres long. This was equivalent to 0.35 to 0.09 megalitres per day per metre of the trench, with an average of approximately 0.25 megalitres per day per metre. The Professor concluded that it would "almost certainly" be feasible to recharge water at rates necessary for the operation of the Davco Irrigation Project. However, Professor Volker emphasised that while the scheme was technically feasible, he had not made any investigation of costs. He said it would be appropriate to proceed to a design stage, where there would be further detailed investigations, calculations and analyses, which would weigh the costs and benefits to determine if the scheme was economically feasible. The respondent was critical of Professor Volker's report, describing it as nothing more than a basic preliminary assessment to identify that the artificial recharge system may be theoretically possible and worthy of further investigation. The results of the recharge trial showed that its efficiency dropped dramatically. It was suggested that they were of no probative weight, because the test was conducted for too short a period and clean bore water was used for most of the time. In reality, highly turbid river water would be used. The respondent submitted that Professor Volker's analysis of the recharge trial provided no evidence upon which a prudent purchaser could make a firm decision as to the viability of the Davco Project. Mr Hillier's recharge model. To test the dispersion of water from an artificial recharge scheme, Mr Hillier -- 18 of 102 -- 19 constructed a small groundwater flow model, using what he considered to be a high transmissivity of 3000 square metres per day and a high storativity of 0.16. The results of this simulation showed that after six months of continuous recharge at 270 megalitres per day over the nine proposed recharge sites, the water tables would have risen up to 6.5 metres above the starting level. After six months with no input, the water mounds created by the recharge would have evened out. However, his flow equation showed that 48 megalitres per day were lost due to flow over the northern boundary. However, when Mr Hillier used what he considered to be the more appropriate parameters of storativity of 0.059 and a transmissivity of 2400 square metres per day, the simulation showed water levels rose over 11 metres at the pits, with the head building up into the clay layer. With an average rise of 8 metres, the outflow over the northern boundary would be 56 megalitres per day, so that a significant proportion of the recharge would be lost from the property and would not have been available for irrigation. Turbidity. Mr Hillier saw major difficulties in getting water into the aquifer. He said that the experience of the Water Boards and of the Commission in other areas showed that highly turbid water reduced infiltration rates. From this he concluded that artificial recharge is possible only when clean water is used. Mr Hillier prepared an analysis of flows in the Burdekin River greater than 1500 megalitres per day, between 1972 and 1986. This showed that flood harvesting would have been feasible for about 57% of the days, but up to seven months could occur without opportunities to pump. However, turbidity of the water, which increases with high flows, remained a limiting factor. An analysis of turbidity readings for the same period when the flow exceeded 1500 megalitres showed that generally when water was available for flood harvesting, turbidity levels were very high. Although an average of 204 days per year had sufficient flows for flood harvesting, only 139 days per year had turbidity readings of less than 2000 units, while only 34 days had turbidity readings of less than the preferred value of 100 units. Mr Hillier contended that turbidity would have to be reduced to a suitable level before water could be used for recharge. He agreed that this could be achieved by settling out suspended matter by holding the water in ponds. However, he was of the opinion that fine suspended particles would not readily settle out and regular cleaning of the filter would be required, while the smaller particles would penetrate to a greater depth where cleaning could not be undertaken so easily. Professor Volker agreed with this analysis, but stated that the periodic cleaning regime should take care of the problem. On the other hand, Mr Hillier conceded that turbidity readings could not give an accurate reading of total suspended solids and that -- 19 of 102 -- 20 the extent of such solids could not be computed from turbidity readings. Recharge trials conducted in the South Burdekin Water Board area on Shands and Iyah trenches led Mr Hillier to the conclusion that only 0.032 megalitres per day per metre could have been input into the aquifer of the Davco lands. He contended that to achieve the required input of 270 megalitres per day, more than 8.44 kilometres of trenches would be required, which would involve excavation of about 300,000 cubic metres of clay and require about 200,000 cubic metres of clean sand for backfilling the filter. He estimated that cleaning would be required every two to three weeks and many bores would be needed to extract the water stored in the aquifer. Mr Hillier concluded that constructions of this magnitude would not appear to be justified for the small quantity of groundwater that could have been recovered. Therefore, in his opinion, artificial recharge would not have been a plausible option. The evidence clearly shows that both Shands trench and Iyah trench are so different to those proposed for the Davco Irrigation Project, that the average results of those trials are not relevant. In any case, a report by Jones and Henry tendered in evidence, stated that the data was not sufficiently detailed or comprehensive to enable conclusions to be reached about artificial recharge. Computer modelling of the operation of the Davco Irrigation Project. The Crees Model Mr Mark Randell Crees, a research engineer particularly experienced in experimental and computer modelling investigation of groundwater recharge, gave evidence for the claimant. Mr Crees had developed a computer model to simulate the water storage and distribution system of the Davco Irrigation Project, designed to irrigate about 8,000 hectares of sugarcane. The model was developed and run to simulate the performance of the system over a 21 year period from 1967, prior to the completion of the Burdekin Falls Dam, using the recorded daily rainfalls, river discharges and pan evaporations for that period. In Mr Crees' computer model, water entered the system by means of rainfall, as groundwater flow, or was pumped from the river, under constraints of a required minimum remaining river flow and the capacity of the pumps. The model was designed so that water pumped from the river would first go to satisfy any crop requirements, then to recharge the groundwater store, then to the surface storage. When crop requirements could not be met using water from the river, water was extracted first from the surface store, then from the groundwater store. If the crop requirement could not be met, a shortfall was recorded. The parameters of the model were derived from published sources or from the work of others. These parameters included: . minimum river flow that must go downstream after Davco pumping to -- 20 of 102 -- 21 allow for downstream users, 1350 megalitres per day; . capacity of river pumps, 530 megalitres per day (from McIntyre and Associates' report); . net area covered by crops, 7,800 hectares; . storage capacity of surface store, 5,976 megalitres (from Mr Beckhaus' report); . groundwater storage capacity, 53,760 megalitres (from Mr Woolley's report); . length of artificial recharge pits, 2,700 metres (9 pits each 300 metres); . rate per metre of recharge trench at which water can be introduced, 0.1 megalitres (from Professor Volker's report); . amount of groundwater flow available for use, 6 megalitres per day (from Mr Woolley's report). The model was set so that water could not be extracted from the groundwater storage below the 1971 lowest recorded water level. It was assumed that one-third of the 18 megalitres per day of natural groundwater flow that was estimated by Mr Woolley would be available, with an outflow of 12 megalitres per day across the northern boundary of the Davco land. The results of the simulations showed that the system supplied 100% of optimum water requirements in all but three years, and greater than 99% of optimum in two of those. In 1969 the system was able to supply 55%. The average irrigation water supplied over the 21 years was 9.3 megalitres per hectare per year, with up to 13.6 megalitres per hectare per year supplied when required. The simulation also showed that if only 8 megalitres per hectare was available, there would be a number of years when less than 100% of optimum crop requirement was supplied. The model required 1.39 megalitres per hectare per year from the aquifer, compared with Mr Woolley's estimate of sustainable yield of 2.5 megalitres per hectare per year. In Professor Volker's opinion, the results of the model showed that the Davco Irrigation Project would have been a feasible project, capable of supplying irrigation quantities to meet crop requirements in all but one of the 21 years of the simulation period. A sensitivity analysis showed that the project remained viable for a large number of combinations of parameters and capacities. Dr Harding's comparative model. -- 21 of 102 -- 22 Dr Paul Elias Harding, a hydrologist with Chaseling McGiffin Pty Ltd, gave evidence for the respondent and presented a comparison between the Crees computer model and a water harvesting model developed by the Department of Primary Industries. The DPI model also simulated the diversion of water from the river into a combined surface and groundwater store. It ignored, among other things, the effect of rainfall, deep drainage from irrigation, groundwater through-flow and assumed no evaporation. Dr Harding said that the DPI model was set with the same starting flows and pump capacities as the Crees model. It had a constant annual demand from the combined storage set at 74,847 megalitres per annum (about 9.6 megalitres per hectare), which was the mean irrigation demand calculated by Mr Crees. In addition, the DPI model started with on-farm storage as empty, while the Crees model assumed that the initial groundwater store contained about 20,000 megalitres. The DPI model was used to simulate the same period as the Crees model (1967 to 1987) using equivalent parameters, the capacity of the combined storage, 59,735 megalitres, being equivalent to groundwater store of 53,760 megalitres and surface store of 5975 megalitres. The starting flow at the Clare gauge was set at 1350 megalitres per day and the pumping rate at 530 megalitres per day. Allowing for the differences between the two models, the results were reasonably consistent. Both models predicted a major deficit in the water required by the crop in 1969, although they disagreed as to the amount of it. The DPI model also predicted a deficit in 1967 of 6,397 megalitres, but because it did not take account of the inflow to groundwater store from through flow or the infiltration of irrigation water, an adjustment of 11,000 megalitres must be made before there was a deficit on the Crees model. Dr Harding contended that a longer period should have been used in the simulation before he could be confident of the prediction of one severe deficit in 21 years. To test this, the DPI model was used to simulate the period 1951 to 1993, using daily stream flows from the Clare gauge, making allowance for the effect of the Burdekin Falls Dam for the years 1987 to 1993. The results showed that when the adjustment of 11,000 megalitres per annum was made to the DPI model, severe deficits were predicted in 1951, 1952, 1969 and 1993. In other words, Dr Harding said, by extending the period, the probability of a severe deficit doubled from 1 in 21 to 4 in 42. He suspected that if the Crees model was run for that extended period, it would show similar results. Of critical importance in these simulations is the size of the groundwater store. To test the sensitivity of the results, Dr Harding ran the DPI model with the groundwater store capacity reduced to 35,000 megalitres (a combined capacity for water storage of 40,957 megalitres). The results showed an increased probability of failure to supply the -- 22 of 102 -- 23 optimum amount of water required to 8 years out of 42. A further run with the groundwater store reduced even further to 20,000 megalitres, increased the occurrence of the deficit. Similarly, when the groundwater store was reduced and the starting flow increased from 1350 megalitres per day to 1650 megalitres per day, the deficits were more severe. Despite these results, Dr Harding conceded that the Crees model was much more sophisticated than the DPI model and would be more likely to give a better approximation of what would happen, even though it may not give the correct results. The results are, after all, just the best estimates and depend upon the accuracy of the parameters. Also of crucial importance is the period used in the simulation. Mr Crees said that he used the period 1967 to 1987 because he was confident of the accuracy of the data over that period. It was a period which included a very dry time and a very wet time, so he thought that it was representative of all types of weather. The periods 1951/52 and 1992/93 were extraordinarily dry years. If they were excluded and the period 1953 to 1991 was used with the Crees model parameters, the DPI model showed only one year of severe deficit in 38 years. Reworked runs on the Crees model for the period 1951 to 1992 showed severe deficits in 1952 and 1969. Although there were deficits in other years, the model showed 99% of crop requirements were supplied. Another run of the Crees model over the longer period, with groundwater capacity at 35,000 megalitres and starting flow of 1650 megalitres per day, showed similar results. As a result of the modelling, Dr Harding was prepared to concede that if the parameters in the Crees model could be proved, the Davco Irrigation Project could have been made to work. He also agreed that the project as modelled would not cause the long-term average water level of the aquifer to be any lower than it would be without the project. However, Dr Harding was concerned that the model was optimistic in respect of the size of the groundwater store, which he considered to be the key to the project. He was also concerned about the efficiency of getting the water into and out of the aquifer and water loss from the aquifer. The respondent's main criticism of the Crees model was the period for which it was run and it was submitted that the results obtained by Dr Harding from the DPI model over the longer period should be preferred. The respondent also made the valid point that a computer model is only as good as the assumptions made about its parameters. As outlined above, the parameters adopted by Mr Crees depended upon the accuracy of work undertaken by others. If they were not correct, then the model must be reworked, producing different results. -- 23 of 102 -- 24 The Availability of Pumping Licences Burdekin River Hydrological Studies Report Doctor Harding prepared this report before he knew the full extent of the Davco Irrigation Project. Therefore, although the report did not directly relate to the project as it has finally evolved, it still had relevance. Doctor Harding's report offered comment on the availability of water supplies from the Burdekin River prior to the construction of the Burdekin Falls Dam, when there were two categories of pumping licences available. The first was in respect of a regulated supply from existing storages and the second in respect of water harvesting, allowing the diversion of water once the river flow at the Clare gauge had reached a predetermined level. Regulated supply Prior to the Burdekin Falls Dam, water supply on the Burdekin system consisted of a major dam, the Eungella Dam, and a series of weirs. Doctor Harding stated that there would have been no water available for the Davco Irrigation Project from this source as it was fully allocated. Water harvesting While the stream flow in the Burdekin River was very high during periods of high flow, Doctor Harding said that the flow was variable, with approximately 80% of the stream flow in January to March. Periods of very low flow have been recorded, and in 1966 there were three consecutive months of no flow. Therefore, he concluded that a successful irrigation scheme based on water harvesting would need to store water on- farm to ensure the survival of a crop during the periods of low flow. Doctor Harding reported on the results of a computer program which simulated the daily operation of a water harvesting scheme which was used to determine the reliability of what he then thought to be the extent of the Davco Irrigation Project. Realising that the actual scheme was to be much larger, Doctor Harding extrapolated the results. He thought that the results could be used to demonstrate its reliability, which was, he said, determined by three critical parameters, the pumping rate, the storage capacity and the predetermined level at which pumping can occur. The period of analysis was from 1951 to 1986 using recorded stream flow data at Clare. Doctor Harding said that the starting flow for pumping would be set by the Department at a level high enough to ensure that water harvesting would not adversely affect down stream users. A typical starting flow would be 1500 megalitres per day downstream of the Clare Weir. The simulations of the water harvesting system showed that an on-farm storage of 15,000 megalitres with a pumping capacity of 173 megalitres per day would be required to supply crop demands for 68% of the land in more than 78% of years, if the starting flow was 1500 megalitres per day. -- 24 of 102 -- 25 Doctor Harding said that the storage capacity or pumping rate would have to be substantially increased to maintain this reliability for a higher demand or starting flow. If the starting flow was set at 1800 megalitres per day, the annual reliability would decrease to 56%. He said that two options were available to improve the annual reliability, either increase the size of the on-farm storage to 20,000 megalitres, or increase the pumping rate to 260 megalitres per day. At that starting flow both measures would be required to increase the annual reliability to more than 90%. Determination of a licence application for a large water harvesting proposal after 1981 without the Burdekin Falls Dam Doctor Harding also prepared a report dealing with the matters which the Department would take into account in considering an application to divert water from the Burdekin River. Essentially, this report stated that the Department must ensure that the granting of such an application would not adversely affect the sufficiency of water to supply existing licensees and permittees. Due allowance must also be made for other users in setting the starting flows. Doctor Harding calculated the authorised water requirements of downstream users as at 30 December 1981 at 1550 megalitres per day. As the Davco Irrigation Project was based on six waterharvesting pumps with a combined capacity of 540 megalitres per day (90 megalitres per day per pump), Doctor Harding said that a decision on a water harvesting application in late 1981 may have set starting flows for one pump at 1640 megalitres per day (1550 + 90) to 2090 (1550 + 540) megalitres per day for six pumps. By late 1989 or early 1990, Doctor Harding said, there was the potential increase in downstream demand of 300 megalitres per day. He thought that any application similar to the Davco Irrigation Project requirements may have set starting flows at 300 megalitres per day above those being considered in 1981. However, during cross- examination it became clear that there was uncertainty about some of the figures used in Doctor Harding's calculations. Mr Crees' model worked on the basis that there would be 1350 megalitres per day for downstream users after the Davco pumping. The comparison therefore is between Doctor Harding's starting flow, now somewhat suspect, of 1550 megalitres per day and Mr Crees' starting flow of 1350 megalitres per day. Groundwater pumping licences Mr Leach also gave evidence of the requirements of the Chief Executive in considering applications for groundwater licences. Under the Water Resources Act there were three aspects that must be enquired into: (i) the availability and sufficiency of groundwater to satisfy existing licensees and the applicant; (ii) the effect granting a licence would have on others; and -- 25 of 102 -- 26 (iii) any other matter the Chief Executive thinks fit. He said the Department's principal responsibility was to preserve the rights of existing licensees. The Department was also concerned to establish a balance between recharge and pumping demand. Without recharge to the groundwater storage, water levels would fall and pumping rates become uneconomic or even fail. Mr Leach said that most of the recharge comes from rainfall during prolonged events and little over 2.5% of average rainfall may reach the aquifer. This may take 8 to 12 months to percolate through the extensive clay blanket. Overall, he said, the amount of long-term average annual recharge under natural conditions is a little over 25mm per year, equivalent to an extraction rate of approximately 0.25 megalitres per hectare per year. Mr Leach said that in the years 1966-70 and 1981-88, groundwater levels declined, with little recharge. Licensees in the Mona Park area experienced declining supplies in bores and had difficulty irrigating. In some parts in the North Burdekin Water Board area, water levels fell to below mean sea level. One of the Department's main concerns, Mr Leach explained, was the maintenance of present water quality. In the Mona Park irrigation area there had been a steady increase in conductivity and any additional groundwater use would lower the water levels further and increase salinity. Despite recent favourable weather conditions and the recovery of water levels, Mr Leach said that water quality had not improved and was of major concern to the Department. Mr Leach concluded that the present allocation policy in respect of the subject land is appropriate and proper to control the effect on other licensees. He thought that the claimant would probably have been issued with a licence for an allocation within that policy, as it would have had little effect on existing licensees. Mr Woolley had expressed the opinion that the withdrawal of groundwater at the rate of 2.5 megalitres per hectare is sustainable. Mr Leach did not agree. In his opinion about 1 megalitre per hectare would be available when the properties were irrigated and, without irrigation, only 0.25 megalitres per hectare. Mr Leach was aware of the artificial recharge trial on the subject land. He agreed that it seemed technically possible to put water into the aquifer. However, the trial lasted only about 30 days and he thought that the results suggested that if the test had continued, there may have been a lower infiltration rate. He felt that it was yet to be proven, as the test had not run long enough. Mr Leach was also critical of a number of aspects of Mr Crees' computer model: he thought the period of simulation of only 21 years was relatively short; there would have been a significant difference if the model had started with the groundwater store empty instead of half full; the model was taking as much or more water out of the aquifer as it was putting in; there were always losses in such situations, and it was not -- 26 of 102 -- 27 possible to extract 100%. In reality, he said, the more water that was put in, the more that escapes from the subject land to neighbouring lands and cannot be recovered. Mr Leach had little confidence in the results of the simulations and thought that a lot more modelling was required. He said that another major concern was the saltwater wedge to the north of the subject land. Any pumping above that allowed by the present policy would tend to draw in the saltwater wedge which the Department was trying to keep in its present position. Bore Water Licences - The Claimant's Argument The claimant submitted that the proposed usage of the aquifer by Davco was reasonable, having regard to the interests of others, as required by the Water Resources Act. Therefore, it was contended that there would have been no reason for refusing the appropriate bore water licences. The claimant argued that the Davco Project would have caused no long-term reduction in average water table levels and that the aquifer would sustain withdrawal of 2.5 megalitres per annum without problems, because of recharge. The policy of the respondent of allowing withdrawal at the rate of only .25 megalitres per hectare per annum was attacked as being of little weight. The inconsistency of the respondent's policy when compared with the allocation granted to the Hoey land of 6 megalitres per hectare per annum, was emphasised. Hoey's land is closer to the coast in an area with known salinity problems. The attitude of the then Commissioner Mr Thomas David Fenwick, Director-General of the Department of Primary Industries and former Commissioner of Water Resources, gave evidence of his Department's involvement with the Burdekin River Irrigation Project and with the Cox family. Mr Fenwick had been closely associated with the project since its inception, having been chairman of the committee which produced the 1980 report on the establishment of the Burdekin River Project and later was Chairman of the Burdekin River Project Advisory Committee from 1982 to 1991. Mr Fenwick outlined the Commission's dealings with the Cox family, commencing with David Cox's application for a licence to pump 2200 megalitres from the Burdekin River. David Cox was granted a licence for 1200 megalitres in January 1979, which Mr Fenwick considered to be the only secure water available to him prior to 1980. He regarded any project relying on unregulated supply from the very infrequent waterharvesting opportunities as unrealistic, because prior to the construction of the dam, there were lengthy periods of no flow in the river. Mr Fenwick said that following the decision of Parliament to establish the Burdekin River Irrigation Project, all lands in the proclaimed area were to be resumed and private development of larger areas was not permitted. He explained that the policy was to maintain the integrity of the irrigation area as a cohesive whole. -- 27 of 102 -- 28 Subdivisions may have been allowed if they complied with the arrangements for the irrigation area. It was Government policy that lots under 100 hectares not be resumed and that they be provided with an allocation of water free of charge. Mr Fenwick said that David Cox wanted his project to be treated as a special case and to some extent it was. He was allowed to retain about 1500 hectares, but the balance of his land was resumed in May 1990. However, that resumption had not proceeded because of an injunction which was at that time still in force. As an example of the special treatment given to David Cox, Mr Fenwick mentioned the early purchase of his interest in Portions 15 and 16, Parish of Northcote (the Parker lands). According to Mr Fenwick, a Cabinet decision of 22 November 1982 authorised that David Cox be granted a further 6,640 megalitres of allocation when supply became available from the river, but he would be required to pay the appropriate capital charge. However, subdivision of the retained land remained subject to prior approval of the Commissioner of Water Resources. Mr Fenwick admitted that the Water Resources Commission was aware as early as 1980-81 of David Cox's intention to establish an irrigation project. However, it was his understanding that until the date of resumption there had been no mention of recharge using flood harvesting. It is clear from the evidence that it was always the intention of the Coxes to establish water storages. An application by GA Cox dated 30 March 1981 for a waterharvesting licence mentioned a small storage. An application by David Cox dated 27 June 1982 proposed a pumping station and mentioned two earth storage tanks, each 4500 megalitres in capacity. However, Mr Fenwick said that he could not recall any discussion about artificial recharge. At first he said he had not heard of the Davco Irrigation Scheme, but later said that he considered that it would not have been economically viable because of the long periods of no flow in the river, the thickness of the clay overlaying the aquifer which made recharge very slow and the cost of creating any recharge system. Mr Fenwick thought there would have been no expansion of the sugar industry without the Burdekin Falls Dam. He said that the 1977 committee report found that without an alternative source of major water supply for the Lower Burdekin, economic development would stagnate. Mr Fenwick stated that the commercial decision by CSR in the late 1980s/early 1990s to commit $100 million on upgrading the Invicta Mill was based on the throughput resulting from the Burdekin Project. In the absence of that scheme, he said, there was no prospect of expanded production. Waterharvesting in his opinion would not have been a realistic alternative and would have been too unreliable for sustainable long-term stability of sugar production in the area. However, Mr Fenwick said, with the construction of the Burdekin -- 28 of 102 -- 29 Dam, one million megalitres of water became available to the Lower Burdekin and expansion followed rapidly. Mr Fenwick was at some pains to refute any suggestion that there was any hostility to Mr Cox by employees of the Water Resources Commission. He referred to the unusually large number of meetings held with his officers, himself and the various Ministers of the time. At no stage, he said, did David Cox present any concept or details of groundwater recharge. However, he admitted that he is now aware that Mr Cox applied for a free flow licence, but he was not aware of that until he was preparing his statement of evidence. Mr Fenwick felt that in many ways Mr Cox had been dealt with more fairly than many other landowners. Of the Water Resources Commission policy of .25 megalitres per hectare, Mr Fenwick said this was based on the Commission's own research on the performance of aquifers and the reports by three independent consultants, each of which confirmed the wisdom of the policy. He said that during the relevant period there was no likelihood of a person obtaining a licence to pump ground water at the rate of 2.5 megalitres per hectare. He went on to say that because of the deterioration in groundwater quality, by 1990 most landowners in the Mona Park area were reducing their reliance on groundwater. However, it is clear that they were able to do so because the area was being serviced by BRIA channel water. The Likelihood of Water Harvesting The success of the Davco Project depended upon extensive water harvesting from the Burdekin River. Therefore, the question arises as to whether, in the absence of the Burdekin Dam, the necessary licences would have issued under the Water Resources Act for water harvesting to take place. Based on the evidence of his experts, the claimant contended that there would have been adequate water in the river to supply the Davco Irrigation Project through water harvesting, as the interests of other users could be adequately protected. The respondent's experts were certain that water harvesting was not feasible. In the circumstances, it is not possible to find that there would have been sufficient reliable flow in the river to allow water harvesting on the scale required for the Davco Irrigation Project. The best that can be said is that there may have been. However, it is clear that the claimant would have had a difficult task to persuade the Commission to grant the necessary licences and may have had to resort to litigation to settle the issue. The Cost of the Davco Irrigation Project The pumping station Mr Brian Peter Wright, a civil engineer specialising in water engineering, -- 29 of 102 -- 30 employed by McIntyre and Associates, Consulting Engineers, gave evidence for the claimant and presented a concept report headed "Davco Farming, Burdekin River Pumping Station, 6000-6500 litres per second capacity". A previous concept report for a pumping station on the banks of the Burdekin River had been prepared by his company in September 1992, for the purpose of advising Mr David Cox of the type of pump installation required to irrigate his property as it then was. The 1992 report examined several pump station options to determine the most appropriate configuration to suit the site and the required application. The purpose of the present report was to advise on the pumping installation that would be required to pump water for the Davco Irrigation Project to serve some 7200 hectares of irrigated crops, at a capacity of 6000 - 6500 litres per second, or 530 megalitres per day. Site description Mr Wright's report stated that the site is on the outside of the river bend, in a low flow channel which was approximately 50 metres wide and 1.8 metres deep at the time of his inspection. The river bank was approximately 8 metres above the river water level, steeply sloping at a grade of approximately 1.5 to 1. The lower bank consisted of river silts, potentially subject to erosion, and was densely vegetated. The upper river terrace rose gradually to its highest point which was elevated a further 8.3 metres above the lower bank. Mr Wright assumed that the river bank was relatively stable, notwithstanding that a substantial collapse of the lower river bank had occurred within 50 metres downstream of the pump site and that other major bank failures were reported downstream. Investigations as to the stability of the river bank could, he said, be left until the design stage, when more detailed consideration would be given to the piping arrangements, site layout, access and water hammer analysis. Mr Wright went on to say that the existing pumps withstood the 1991 flood and this seemed to confirm his opinion of the bank's stability. System hydraulics This part of Mr Wright's report dealt with the pumping capacity and pipe-work system which was to convey the pumped water through to the discharge point. He said that water had to be lifted up the bank of the river to the level of the Ayr-Dalbeg Road, where discharge would be through pipes under the road and into a channel on the far side. Mr Wright recommended five Flygt (290KW) pump/motor sets to meet the requirement of 6000 - 6500 litres per second versus 18 metres head. He said that following investigations he concluded that such pumps were appropriate for the cost. They are basically flood-lifter pumps designed for lifting dirty, silty water from flood flows -- 30 of 102 -- 31 over low heads. He anticipated that they would have a life of 15 to 25 years. He also carried out a computer network analysis of pipe and pump configuration. Conceptual layout Mr Wright's report showed how these pumps would be installed and operated. The scheme consisted of five pumps each able to be operated independently. The principal components of the pumping station included an intake structure, five inclined pipe columns for housing the pumps and conveying discharge water, lateral discharge pipes connecting the inclined columns to the header pipe and duplicate air chambers and rising mains from the header pipe to the outlet. The report stated that the 1200 diameter inclined pump columns would be generally along the natural bank profile, supported at the top by piles driven deep into the natural bank to at least riverbed level, to minimise disturbance of the bank and prevent slippage of the whole bank and structure into the river. Mr Wright's report goes on to say that rock mattress protection to stabilise the bank and prevent underscouring would need to be provided to the bank upstream and downstream of the inclined pipes and between the pipes. Mr Wright said that he had allowed for protective works for a relatively unstable bank, because it would be inevitable that there would be some disturbance of the bank. He had allowed for the driving of piles to stabilise the structure independent of the bank itself. However, he agreed that if the bank was eroded away, the integrity of the entire pumping station would be jeopardised. Mr Wright's report went on to state that the switchboard and controls would be installed in a small building, the floor of which would be set above flood level. This would be located on the lower bank close to the pumps and would therefore need to be some 8 metres high and constructed to withstand high velocity floods. Scheme costs Mr Wright provided preliminary estimates of costs for the pumping station and pipe work at the conceptual stage, as well as an estimate of the annual operating and maintenance costs. He incorporated a contingency allowance of 15% (or nearly 1/4 million dollars) into the preliminary costing to allow for unestimated minor items, such as the water hammer analysis and uncertainties during construction. Mr Wright's preliminary estimate of the scheme capital costs amounted to $2,030,000. However, it emerged in evidence that this estimate should be reduced by $83,400, as the structure at the end of the rising main had been costed elsewhere. The annual operation and maintenance costs assuming 120 days continuous pumping, amounted to $347,000. In cross-examination, Mr Wright was queried about the cost of various components, such as reinforced concrete, support piles, head stock, pumps, the control building, cabling and the switchboard. He responded by saying that they were preliminary estimates and that detailed costings would be considered at the detailed design stage. He was closely questioned about the stability of the river bank, but did -- 31 of 102 -- 32 not agree that he could have under-estimated the cost by up to $500,000. He felt that because of the nature of the installation, and the location and stability of the bank, massive protection was not required. The respondent was particularly critical of Mr Wright's conceptual analysis and "ballpark" costings, submitting that he had grossly underestimated the likely costs. He had relied on the advice of Mr David Cox about the stability of the bank rather than making his own investigations. It was suggested that his estimate of $10,000 for the cost of the structure to contain the switchboard and controls was ridiculous and his costings of reinforced concrete, support piles, cabling, conduit and the various protective measures were all undercosted. The costs provided by the respondent's engineer, Mr Devlin, at $2,533,300 were advanced as being more appropriate. The Storage Cell, Channels and Recharge Pits Mr Dennis Frederick Beckhaus, a civil engineering contractor, gave evidence for the claimant and submitted a quotation which included an outline of construction procedures, for the construction of a complete irrigation, storage and supply system for the Davco Irrigation Project. Mr Beckhaus had constructed and project-managed similar projects in the Namoi/ Gwydir cotton irrigation areas of New South Wales and had carried out contract work for the Water Resources Commission in the Burdekin area. Mr Beckhaus' quotation was for the Davco Irrigation Project as shown on a layout plan closely resembling Figure 2, except that no drains and only one storage cell were included. Mr Beckhaus said that the drains were not included in his quotation as his design would not disturb the natural drainage system. He assumed that drains would be constructed as the farms were developed. Mr Beckhaus' quotation is for a total of $3,120,098 made up as follows: Storage construction $ 343,095 Channel construction $ 1,092,103 Recharge $ 572,250 Overflows $ 210,250 Structures $ 802,400 Provisional sums $ 100,000 Total $ 3,120,098 Mr Beckhaus said that if roadworks were to be undertaken in association with a subdivision of the subject land, road construction to Council standard would be at the rate of $140 per lineal metre. However, if gravel could be obtained from a quarry on Mr Geoffrey Cox's land, this would save approximately 10%. Storage cell Although he quoted for only one storage cell, Mr Beckhaus said the original request was for four storage cells, all to be located on the eastern side. Cell No 1, as -- 32 of 102 -- 33 quoted for, was for an area of 233 hectares containing 5975 megalitres. Cell No 2 would have been 310 hectares, containing 10,180 megalitres. Although there was no quotation for the construction of the second cell, Mr Beckhaus said it would have the same type of embankment, but would have more rock and concrete on the overflows, which would be three to four times dearer than those in Cell No 1. As they would have one bank in common, the quantity of earthworks would be reduced, but the cost of Cell No 2 would be well over $500,000. If additional cells were to be built, Cell No 3 would be some 368 hectares, while Cell No 4 would be 438 hectares. Mr Beckhaus quoted a rate of $1.05 per cubic metre to excavate the material from within the water area or adjacent drains for the embankment construction and foundation. However, he noted that some permeable material would need to be removed and replaced with borrowed clay and had made provisional allowance for that. The maximum height of the embankment wall was to be 5 metres. Mr Beckhaus was of the opinion there would be no need to provide for erosion protection. The embankments would be predominantly of clay fill obtained from the area where the storage cell was to be constructed. He thought that the cost of maintaining the storage area would be between $12,000 and $20,000 annually, depending on the extent of erosion. Maintenance would be required because of wave action, but only when the storage cell was full. Channels Mr Beckhaus quoted for approximately 40 kms of channels of two types, one with a flat channel bed and the other a V-shape. He said that a percentage of the material excavated would be placed on adjoining roads, while the remainder would be used for levelling cane fields. The channels were to be below ground level and would act as drains to the system. Mr Beckhaus added that controlled water could be recycled by pumping, while flood flows had not been diverted from existing waterways. Mr Beckhaus explained that his system was designed so that the individual fields would drain into a tail water return system through the channels, with one tail drain for each cane farm (by which I took him to mean each management area). Mr Beckhaus did not allow for lining the channels with clay, as he said that the Davco Irrigation Project encouraged seepage into the aquifer. He thought the operation and maintenance of the channels would be approximately $1,000 per kilometre, or $1.00 per metre, each two years. He did not think that the channels would need de- silting each year. Recharge Pits -- 33 of 102 -- 34 According to Mr Beckhaus' report, the material excavated from the recharge pits would be distributed 50% to the fields and 50% to adjacent banks. Mr Beckhaus provided for 38,500 cubic metres of screened sand for back filling at a rate of $11.50 per cubic metre. As for the maintenance of the recharge pits, Mr Beckhaus thought the cost of extracting sand from the recharge trench would be about $1 per lineal metre. He explained that approximately 6-8 inches of sand would be taken off, the cost being mainly machine time. Replacement sand was costed at the rate of $11.50 per cubic metre. Structures The structures quoted for by Mr Beckhaus include the recharge pits, culvert, small diversion weir, crossings and gates and drop structures. All structures, except the crossing under the Ayr-Dalbeg Road, which would be constructed in accordance with Queensland Transport specifications, were quoted for as using good quality used steel materials. Where possible, fibrecrete was to be used instead of structural concrete, while drop structures were to be of reinforced concrete. Conditions Mr Beckhaus made the quotation subject to certain conditions: • The work would be completed in one establishment and if inclement weather forced further establishments, they would be at additional cost. • The construction of the storage cell would be carried out when conditions were suitable, when it was dry enough for plant haulage, but with sufficient in situ moisture. • The price was based on all fuel being rebated fully. Mr Beckhaus said the project would take probably 40 - 50 weeks if uninterrupted. If the moisture was at the correct level the storage cell could be constructed in about a month and a half. If it was not, construction of it would wait until the next wet season or moisture would be added, which would increase the cost. Mr Beckhaus was questioned about the appropriateness of the costs for various components of the project. He said that he was confident of the costs that he quoted because of work that he had undertaken in New South Wales and for the Water Resources Commission in the Burdekin area. He disagreed with the suggestion that the costs were not appropriate for the sort of erodable sodic soils that would be encountered in this project. The only allowance that he made for compaction of any material was by machine-rolling, but he denied that this would result in a relative density of only 80% - 85%, saying that depending on the moisture level it would be upwards of 95%. -- 34 of 102 -- 35 The respondent submitted that the costing undertaken by Mr Beckhaus was for a very basic irrigation scheme, more appropriate for one farm than for a scheme to be operated by a water board with a number of users. Evidence was called through Mr Schultz to demonstrate that the rates used by Mr Beckhaus did not coincide with the rates that he quoted for works of the respondent. (Mr Schultz's evidence will be referred to later.) Mr Beckhaus' costings of the maintenance of the recharge pit and of the storage cell were challenged. The use of second hand steel was questioned. His estimates, based on the compaction by loaded machinery traffic, were attacked as being not appropriate for a high security irrigation scheme such as the Davco Project. The respondent also contended, based on the evidence of Mr Devlin, its engineer, and Mr McConnell, its manager of dam safety, that the storage cell would be a "referable dam" and as such it would be required to be constructed to a higher standard than provided for by Mr Beckhaus. The Evidence of the Respondent to the Contrary Mr Kevin James Devlin, Manager, Irrigation Area Design, DPI Water Resources, gave evidence for the respondent. Mr Devlin is a civil engineer with over 20 years experience in rural-related civil engineering, particularly irrigation and drainage infrastructure and flood mitigation. He has been associated with the Burdekin Project since the 1975 joint Commonwealth/State appraisal of the resources and potential of the Burdekin River basin. He was involved in the design work and from 1989 managed all design for the Burdekin Project. Mr Devlin had detailed knowledge of the subject land from 1980, when he was involved in gathering data, organising ground survey and planning for flood monitoring. His involvement extended to detailed land assessment, a ground survey followed by a soils survey in the area, which preceded the detailed design of farm layouts. He was responsible for the BRIA farm design of the subject land. Mr Devlin stated that as part of the Burdekin Scheme, the resumed lands have been developed with other land, totalling 6,112.2 hectares. This resulted in a relatively low utilisation of 4,158.9 hectares, or 68% of the gross land available. He explained that about 600 hectares of Lot 47 was bisected by a major waterway, Pelican Creek, and was below acceptable flood immunity. This was left for drainage, along with about 280 hectares of Lot 44, which was also bi-sected by a waterway. A further area of about 175 hectares was set aside as a wildlife corridor and to conserve representative areas of major vegetation communities of the flood plain, forming part of a wildlife corridor between one and five kilometres wide between undeveloped areas to the south and the north. -- 35 of 102 -- 36 Approximately 59% of the subject land has been developed as farms, Mr Devlin said, and at the time of hearing, most had been auctioned. He provided details of the extent of supply channels, drains and roads constructed and their cost per hectare. Farms have been subdivided generally into 100 hectare units, the recognised basic management unit, and shaped for ease of operation to keep initial development costs for each farmer at a practical level. Mr Devlin said farm design was influenced by such things as soil types, topography, flooding, ground water, etc. A farm had to be viable as a development unit and sustainable in the long term. He said farm design became a compromise, as farms could rarely be designed with one soil type. Different soil types require different management, with sodic soils being exposed when the topsoil was scraped off. Mr Devlin stated that some 37% or 10.4 kms of the BRIA supply channels have been clay lined, where leakage through in situ material would have resulted in undesirable losses to ground water, or where materials of unacceptable erodability were encountered. Mr Devlin thought that channels which were unlined, as costed in Mr Beckhaus' estimates, would be unsatisfactory because of their erodability. In the BRIA, the drainage to each lot is designed to remove, in Mr Devlin's words, "a peak 48 hour storm occurring on average in half the years in that period with inundation on individual farms limited to 0.5 metres over less than 50% of the farm". He said that velocity was not a concern, as there is no problem if inundation is of short duration only. Losses from waterlogging occur if the cane is inundated for 48 hours or more. He agreed, however, that the Davco Project as designed would remove a flood event runoff after the flood abated. Mr Devlin's Criticisms of the Davco Proposal Mr Devlin's comments on the Davco Irrigation Project were confined to the subject lands or the infrastructure directly serving them. The Layout Mr Devlin stated that the layout in Figure 2 proposed maximum use of the available area and, while it might yield the optimum return in the short-term financial sense, it would result in the following adverse consequences; . It developed land which was extremely flood prone, such as blocks 6A, 7A and 5E, which would be completely inundated in a 1 in 2 year event, which he considered to be an unacceptable flood risk. However, he later conceded that as long as not all the farm was inundated, the low-lying areas could be quite productive. While it would be risky, he agreed that the farm could be managed -- 36 of 102 -- 37 to take account of the risk and not worked when it was likely to flood. . The proposed development would include an area of over 10 kms of stock route, the closure of which the Burdekin Shire Council would be unlikely to agree. While the responsibility is vested in the Department of Lands, such a matter would be referred to the local authority. However, Mr Devlin conceded that in the BRIA development, the Council allowed the Water Resources Commission to alter the stock route. . The development would encroach on the banks and immediate flood plain of the Barratta Creek (blocks 5E, 5 and 7A) and the Green Swamp drainage lines (blocks 1A to 1E), which are important conservation areas due to their fragility under flood flows and the important connectivity which they provide between the few remaining areas of remnant vegetation. Mr Devlin conceded that when the BRIA project commenced, conservation and environment considerations did not figure largely and have been adopted with the benefit of some hindsight. On the other hand, there is evidence that even blocks which were by no means ideal were sought after. Auction 13 of the BRIA lands included Lots 62, 63, 64 and 65, which were previously part of the resumed land. Despite their problems, Lot 62 sold for a record price, while Lots 63, 64 and 65 all sold for high prices. All these blocks required some levelling and had problems with the direction of watering, soil types and shape of paddocks. Mr Devlin agreed that they serve to demonstrate that it was not possible to get the ideal layout in this area and that there had to be a compromise. Compatibility with Soils Mr Devlin thought that the Davco layout had been developed without any significant reference to available soils mapping. He said that ideally individual furrows for a particular farm should be located in a single soil type, or the lighter textured soil of lesser water holding capacity should be at the top of the furrow. Blocks 4A to 4E and 5B to 5E and 3A on the Davco layout did not meet these criteria, he said, with the consequence of less than optimum production as, under normal irrigation practice, some parts would be under-watered and other parts over-watered. He said that in the Davco layout it was not possible to have all parts of the block irrigated in a uniform direction. Mr Devlin was of the opinion that several Davco blocks would require extensive top soil stripping, which he thought should be avoided, as too much stripping and levelling is not economic. He emphasised the need to avoid what he called "gross manipulation of topography". Compatibility with Topography Mr Devlin stated that each farm must be designed having regard to slope and -- 37 of 102 -- 38 drainage. He thought that practically all farms in the Davco layout would drain onto each other. In his opinion: . Blocks 5B to 5E, 4A to 4E and 2E would be farms with significant intermediate high points hindering both supply and drainage and would require large cuts of about ½ metre deep. . Blocks 2A and 2B would be supplied to their lower sides and would require costly mains to supply them, with drainage implications. . Several blocks have substantial areas of reverse gradients involving shallow surfaced sodic duplex soils which would necessitate removal and stockpiling of the top soil and levelling of the subsoil, or the sodic subsoils would be exposed and render the area unproductive. . One block has a substantial drainage depression some 2 metres deep, which is a major flood distributary channel and even if filled would require substantial stabilisation. Standard of Work Mr Devlin was critical of the standard of civil works proposed by Mr Beckhaus, particularly the fact that no drainage infrastructure was provided for or costed. However, Mr Beckhaus had not costed the drains, which were generally in natural depressions and water courses, because he reasoned that the farmers would themselves undertake their construction, taking the spoil to level their farms. Mr Devlin did not accept that the majority of spoil from drains could have been used for the levelling of adjacent fields, as the drains would run through sodic soil. However, he agreed that if it was undertaken in the manner described, it would have been cost neutral to the Davco Irrigation Project. The purpose of the drains was to collect tail water and also to remove rainwater runoff. Whilst Mr Devlin agreed the Davco Project plan would address the former, he did not agree that the channels' drainage, as designed, would have been adequate to drain stormwater runoff. Individual Components of the Davco Proposal Mr Devlin also commented on the standards proposed for individual components of the Davco Irrigation Project and presented his cost estimates for those works. Costings for most of the work were obtained from a Departmental document entitled "Asset Register Management Systems - Asset Valuation - June 1991", which was used for the valuation of government assets. Other costs were obtained from Departmental staff. -- 38 of 102 -- 39 Pump Station Mr Devlin considered that the proposal prepared by Mr Wright had some serious deficiencies: . The station would have been inadequately protected against undermining. It was planned to be on the outside of a significant bend in the river adjacent to recent slip failures. He admitted, however, that there would be no problem if it was pinned to bedrock. . A significant terminal structure for protection would be necessary at the outlet of the rising main. . If the control building was located near the upper bank, the cost of motor cabling would be significant. If it was sited on or near the lower terrace but 8 metres high, the cost of such a structure to withstand flood debris would exceed the savings in cable cost. . The proposed butterfly control valves located on the lower terrace below flood level would need to be hydraulically actuated. . The pump station would have had to pump during flood flows to fulfil its water harvesting function, with the potential for excessive pump wear or overload. Mr Devlin presented a revised estimate for the cost of the pump station of $2,533,300. Storage Cell The storage cell in the Davco proposal was to act as both surface storage and as a settling tank. Mr Devlin stated that the experience of the Water Resources Commission was that such storages would require baffle walls at a substantial additional cost. He also thought that the Davco structure would have been a "referable dam". He said that the topography was such that to achieve the capacity of 5,975 megalitres, a bank height of 5.8 metres would be required, not 5 metres as calculated by Mr Beckhaus. The structure would therefore be a "referable dam" under section 3 of the Water Resources Act and would, according to Mr Devlin, require design and supervision by a professional engineer, a freeboard of 1.5 metres, soil conditioning, compaction to at least 95% and a batter protection by graded rock. Mr Devlin was also concerned about the sodic soil material that would have been involved in the construction of such a dam. He was of the opinion that such material would be unsuitable for use in a water-containing structure and even the material that passed the test would require compaction. He said it is best left alone. He said that the -- 39 of 102 -- 40 earth dams in western New South Wales, referred to by Mr Beckhaus in his evidence, were in self-mulching black clays. The soils of the Burdekin flood plain are prone to dispersion and slaking, with undercutting and piping failures, beaching and rill erosion. In the erodable areas in the BRIA, he said, all works have been compacted to 98% density ratio and compacted wet of optimum moisture content. However, during Mr Devlin's evidence there was some confusion as to just how much of the construction required 98% compaction. It appears that not all works have been compacted to a 98% density ratio. Mr Beckhaus had proposed to compact the cell walls with machinery traffic, particularly with loaded scrapers. Mr Devlin did not consider that to be an acceptable method and said that proper compaction could be achieved only with sheeps' foot rollers. Mr Devlin provided an amended cost estimate for the storage cell to the minimum engineering standards required at $2,058,689. Channel System Mr Devlin stated that the distribution system proposed by the Davco Project consisted of excavated ditches constructed in a manner identical to Water Resources Commission drains. He was concerned about the proposal that spoil from the channels would have been suitable for levelling adjacent fields, because of the sodicity of the soil. While he agreed that sodic soil could have been placed at a depth and the topsoil replaced, it would have been costly. Among other criticisms, Mr Devlin was of the opinion that the channels should be lined where they pass through Unit 6 soils. However, there was evidence that the Davco Main Channel (now part of the Barratta Main Channel) passes through Unit 6 soils and has not caused localised waterlogging and salination. Mr Devlin provided calculations and costs of the earthworks involved. He noted that while there were significant variations for individual reaches, the total earthworks involved was in close agreement with the Beckhaus total. However, he pointed out that there were some important differences, particularly in relation to the drop and access structures. His costing of the proposed Davco channel system was $1,521,470 (950,919m3 x $1.60). Drainage System Mr Devlin costed a drainage system to the standard which would remove a 48 hour event at the locations specified in the Davco layout at $990,800. He said this would avoid nuisance flooding within a timeframe sufficient to prevent waterlogging damage. Road Network -- 40 of 102 -- 41 Mr Devlin commented that if the farm management units were developed for use by Davco, the roads need be of a standard sufficient only for cane haulage traffic. However, if they were to be sold in subdivision, the standard must be that acceptable to the Burdekin Shire Council. His costing was $80 per metre for gravel roads and $180 per metre for bitumen roads, with floodways $260 per metre. Development Costs of Works Located on the Subject Land Mr Devlin stated that the Davco proposal for the resumed land yields 27 lots for a total area of 3,104 hectares. He brought Mr Beckhaus' proposals to what he considered to be sound engineering standards, which significantly increased the costs. His costings of the infrastructure located on the subject lands were as follows: 1. Channels: earthworks @ $1.60/m3 $ 437,500 Structures $ 303,500 2. Drains: earthworks @ $1.60/m3 $ 240,330 Structures $ 195,000 3. Roads: earthworks 19.4kms @ $140/m $2,716,000 Structures $ 114,000 Mr Devlin emphasised that his cost estimates were conservative as there were many unestimated items: Summary and Conclusions Mr Devlin concluded that the subject land was suited to irrigation development, but to avoid flood prone land or areas of conservation values, only 2,100 hectares were available to be developed into farms. The Davco proposal developed some 3,100 hectares of the subject land and made no allowance for flood margins, stock routes, areas of conservation value or the needs and interests of neighbours and the wider community. The subdivisional layout, while producing geometrically simple shapes, did not meet any of the criteria used by the Farm Inspection Committee to assess farm layouts for the Burdekin Project. The two major surface water components of the Davco supply scheme were the pump station and the surface storage. The pump station, in Mr Devlin's opinion, would be inadequately protected against erosion and was under-costed. By his calculations, the storage cell would be deemed to be a referable dam and as such would have to conform to a much higher standard of construction than that proposed. He thought that the topography and potential water-logging damage would dictate that some form of drainage infrastructure would be required. The earthworks costs used by Mr Devlin were based on past works in the immediate vicinity and indicate rates substantially above the unit rates in the Beckhaus statement. -- 41 of 102 -- 42 Excavation Costs For his adopted excavation rate of $1.60 per cubic metre, Mr Devlin relied on the evidence of Mr Steven Michael Schultz, Executive Engineer Construction, DPI Water Resources, whose duties included supervising major contracts being let in the BRIA. Mr Schultz gave evidence that he had compared Mr Beckhaus' rates in five contracts for work on the Burdekin Project, with the rates derived from two contracts where Water Resources had hired plant from private persons on an hourly rate, and which included costings for supervision by Water Resources personnel and other overheads. Mr Schultz's tabled results in summary showed rates which varied from $1.48 per cubic metre for Contract No. 1, to haul and place within 560 metres (adjusted to $1.61/m3 following a claim for variation and a lump sum payout of $40,000) to $2.28 for Contract No. 7 to excavate, haul and place within 750 metres. Mr Schultz concluded that work under similar conditions, but restricted to an average haul distance of approximately 250 metres, would cost at least $1.60 per cubic metre. However, much of that contract work was for the construction of above ground channels, which is different to the work that would have been involved in the Davco Project. Mr Schultz's evidence was not particularly helpful in determining the cost of excavating material for the construction of a large dam, which is different from the building of channels, particularly above ground channels, as different machinery is used. It emerged in evidence that the bigger the job, the larger the machines that can be used, with resulting economies of scale. It also emerged that the conditions in the Water Resources contracts were not the same as those in private contracts. Indeed, Mr Beckhaus had suggested to Mr Schultz that work could be performed in a much more economic manner than was required by Water Resources. The contract rates tabulated by Mr Schultz would therefore seem to provide no real indication of the rate that should be applied to the construction of the storage cell. It seems reasonable to conclude that if Mr Beckhaus was undertaking the construction of the storage cell for the Davco Project, he would do so at a rate much less than $1.60 per cubic metre. It is noteworthy that although Mr Devlin was prepared to accept Mr Schultz's advice of $1.60 per cubic metre for the storage cell, he adopted the rate of $1.00 per cubic metre for the excavation of the feedlot effluent pond. Referable Dam Mr Devlin based his conclusion that the proposed Davco storage cell would constitute a referable dam on the advice of Mr Russell John McConnell, Manager Dam Safety, DPI Water Resources. Mr McConnell was the principal technical adviser to the -- 42 of 102 -- 43 Chief Executive on dam safety issues and as such he evaluated each proposal for the construction of a dam and made recommendations. Mr McConnell explained that the relevant legislation is contained in s.3.11 of the Water Resources Act, which requires the Chief Executive, for the purposes of protecting life and property, to control "referable dams". Such dams are defined as works that include a barrier that impounds, diverts or controls water and which is either 10 metres or more in height and creates a reservoir storage capacity of more than 20,000 cubic metres, or is more than 5 metres in height and creates a reservoir storage capacity of 50,000 cubic metres or more. Mr McConnell went on to say that such works are declared "referable dams" by reason of the danger to life and property that would result from their collapse or failure. If the storage cell was gazetted as a referable dam, appropriate standards would have been required in its construction. Mr McConnell said that dam safety is controlled by ensuring that adequate standards of design and construction are used and these are determined by the degree of hazard potential. That is, the amount of damage to life and property that would probably occur if the dam were to collapse or fail. Hazard potential is assessed by undertaking a dam break analysis, which considers the volume, velocity, depth, location of houses, roads, etc. While technical standards are not prescribed in the legislation they are determined by best prevailing practice as determined by the Chief Executive. Mr Devlin had supplied Mr McConnell with the details of the proposed Davco storage cell and asked for his comments. The relevant details provided were: storage capacity 5,975ML embankment height 5 metres free board 1 metre compaction nil soil conditioning nil soil erodability high fetch length 1.6km Mr McConnell ascertained from the locality map that failure of the storage cell would result in a cross-country flow north towards the Red Lily area. From the information he had available, Mr McConnell said that he would not regard the storage cell as a small farm dam. He concluded that it would be considered to be referable in at least the low hazard category, but more likely in the significant hazard category, because of the volume stored and the potential impact of an uncontrolled release on the surrounding land. He said that on the basis of the information supplied, the correct height of the embankment should be 5.5 metres and the dam would therefore be referable because of the height of the embankment. -- 43 of 102 -- 44 Mr McConnell said that the dam would require between 1.2 to 1.5 metres of freeboard. He explained that the purpose of freeboard is to allow for wave action, so that waves will not slop over the top and cause rill erosion on the downstream bank. It also allows the water level to rise after storm rains and discharge over the spillway without overtopping. Mr McConnell relied heavily upon the information provided by Mr Devlin. He readily admitted that if Mr Devlin's information was incorrect, then he would have to revise his opinion. It is clear that some of the information given to Mr McConnell was not correct. Mr Devlin told him there was no compaction, but Mr Beckhaus gave evidence that compaction would be undertaken by using loaded scrapers. Mr McConnell admitted that the Department recommends compaction by the use of loaded scrapers for small dams. He conceded that compaction to 95% would be adequate, but he seemed to be of the opinion that compaction by loaded scrapers alone would not achieve that result. Mr McConnell's conclusion that the Red Lily area was populated and represented a significant hazard, appeared to be based on information provided by Mr Devlin. He did not determine whether water would pass through any property between the storage cell and the Red Lily Lagoon. Mr McConnell stated that his comments were of a general nature because of the absence of a formal proposal and engineering plans and specifications which would be required before a licence could be issued. The Claimant's Arguments concerning Mr Devlin's Evidence Counsel for the claimant submitted that Mr Devlin's criticisms of the Davco layout reflect a different ideal and a different philosophy of design, focusing on the containment of initial costs to safeguard new farmers on small blocks. This, it was contended, was in marked distinction to the concept underlying the Davco Project which was never intended to be the subdivision and sale of the various farm management areas, but the large scale broadacre farming of irrigated sugar cane. While the flood prone nature of some blocks could be of concern, it was submitted that as a large scale farming venture, such flooding is quite manageable. Besides, flooding had not discouraged purchasers of this land. Mr Devlin's criticism concerning the stock route was without foundation, the claimant submitted. It had not been used in living memory and, just as the stock route was altered to fit in with the BRIA farm layout, it would have been accommodated within the Davco Project. One of Mr Devlin's main concerns was that the Davco layout was not compatible with soils or topography. However, he had conceded that the ideal layout could not be -- 44 of 102 -- 45 achieved in this area and the BRIA layout was itself a compromise. His evidence indicated that the respondent had experienced problems and its designs resulted in some instances in such undesirable features as variable slopes, furrows running through different water-holding soil types, variable drill lengths, sharp angles and exposing sodic soil by cutting into shallow topsoil. The claimant argued that the criticisms of Mr Beckhaus' quotation for costs of the Davco Project were misplaced. Mr Devlin had included $361,175 for compaction, $709,487 for dumped rock and armouring on the inside of the storage cell wall. He had also adopted $1.60 per cubic metre for excavation ($1.05 per cubic metre quoted by Mr Beckhaus), $30 per cubic metre for spillway rock ($9.50 per cubic metre, Mr Beckhaus) and claimed that Mr Beckhaus had provided for insufficient freeboard. These opinions were based on his belief that the storage cell would be declared a "referable dam". The claimant contended that the water level in the storage cell could be lowered without affecting the performance of the project, so there was no necessity to increase the height of the wall to more than 5 metres. Accordingly, the freeboard was sufficient. It is difficult to accept Mr McConnell's conclusions as he based his opinion on information given to him by Mr Devlin, some of which was wrong. He admitted that he was really not in a position to form an opinion in the absence of seeing a specific proposal and undertaking a preliminary hazard assessment. If all the claimant's criticisms of Mr Devlin's costings for excavation, compaction, spillway work and batter protection are valid and the cost of a road on top of the dam wall is excluded, Mr Devlin's cost of construction of the storage cell is less than the $553,345 proposed by Mr Beckhaus. Further Evidence on the Recharge of the Aquifer The Experience of the Water Board Mr Graham John Laidlow, Manager of the North Burdekin Water Board, gave evidence for the respondent. He said the North Burdekin Water Board and the South Burdekin Water Board were established in the mid-1960s and are funded by levies on growers and mills on the basis of two-thirds and one-third respectively. He explained that the purpose of the North Burdekin Water Board is to manage the water resources in the Board's area, to provide sufficient water for irrigation and to maintain the aquifer so as to prevent salt water intrusion. Prior to the construction of the Burdekin Dam, the North Burdekin Water Board pumped water from the river into a system comprising principally Sheep-station and Plantation Creeks. The Board had linked these and other watercourses by means of artificial channels in order to replenish -- 45 of 102 -- 46 the extensive lagoon system, where recharge of the aquifer could take place. Mr Laidlow said that prior to the Burdekin Dam, there were restrictions on the water available to the Board at periods of low flow. At certain levels pumping had to stop. The Board also had to restrict its pumping when the river was running at too high a level. Before the construction of the Burdekin Dam, Mr Laidlow said, the Board was an opportunity pumper, getting what water it could and this sometimes meant pumping dirtier water than it would have liked. However, in operating its recharge pits, the Board tried to avoid introducing water of higher turbidity than 200 parts per million, but often had to do so. However, he explained that this resulted in shorter operating periods, reduced intake levels and higher costs of pit maintenance. Cleaning frequencies at the lower turbidity levels were up to three to four weeks, but low turbidity promoted algae growth, which also sealed off the pits. When turbidity was in the range of 1,000 parts per million, the Board had to clean the pits about once a week, as the decline in the intake rate was very rapid and maintenance was expensive relative to the volumes of water introduced. Mr Laidlow said that the system of waterways which the Board operated was originally part of the Burdekin delta and had a good connection with the aquifer. Water table levels were generally very close to the bottom of the pits. According to Mr Laidlow, the Water Boards were entitled to pump from the river while there was a certain level of flow. Although these levels were well below what would be considered flood levels, the Boards had sometimes been in a critical situation for water. He explained that the water table had declined right through the 1980s and, despite the water that the Board had introduced, it reached a critically low level which resulted in salt intrusion. Mr Laidlow was of the opinion that provided there was no diminution of water available to the North Burdekin Water Board, he could see no problem in the establishment of another water board. However, he agreed that in the absence of the Burdekin Dam any new water board set up to service the Davco Irrigation Project would have competed with the two existing water boards for available water at times of low flows. Therefore, it was probable that the Board would have objected to any application to take water up-stream of its pumps. However, since the construction of the dam, there is virtually an assured supply. Mr Laidlow said that the Board is now able to pick and choose when it services the aquifer, but recharge is given less priority in favour of open water supply, which is considered to be the most cost-effective means of managing the aquifer. However, he thought that the recharge pits were still valuable in a local sense, to fill in the pumping -- 46 of 102 -- 47 depressions which develop in the aquifer. Mr Laidlow said that the Davco trial recharge pit was similar to the standard method adopted by the water boards for construction of pits. He said the North Burdekin Water Board had some pits in that configuration, but at a depth of perhaps three metres rather than six. In cleaning the trenches, Mr Laidlow explained that two to three inches of sand was removed and the pits were resanded periodically. He said that the Davco recharge pits would probably have used a more streamlined sand cleaning and removal process than that adopted by the North Burdekin Water Board. Artificial Recharge Trial No. 2 During the hearing, a second recharge trial had been undertaken in the vicinity of the subject land. This trial commenced on 8 February 1994 and the parties agreed to cooperate and present evidence of the results of the trial towards the end of the hearing. On 29 June 1994, Mr Crees presented a report which was based on the data recorded for the first 139 days. Mr Leach gave evidence in rebuttal for the respondent. The recharge slot for this trial was 10 metres long by 1 metre wide, excavated to a depth of 8 metres and filled with sand. The trench above the slot was 19 metres long by 9 metres wide and 2 metres deep, with a nominal 1 metre thickness of sand pre- filter. The area of the pit floor, or pre-filter, was therefore considerably larger than that of the first recharge trial. Water for this trial was pumped from a BRIA water supply channel. Mr Leach explained that this water had travelled about 10 kilometres in the main channel, then into the Mulgrave balancing storage, then along about 45 kilometres of channels before being pumped into the pit. A series of observation bores had been sunk to monitor the results. Mr Crees reported on the inflow rate and water levels recorded in three observation bores. Water was not available for two days in mid-February and there was a pump failure on day 45. After day 129 the water flow was stopped, the trench was dried out and the top layer of sand was removed by an excavator. Approximately 300 cubic metres of sand was removed above the recharge slot, 200mm from the floor of the pit and 70 mm from the sides of the pit. Generally, the results of the trial showed a steadily declining flow up to the time of cleaning the trench. After cleaning, the inflow rate fell initially then increased for the remainder of the 7 days recorded period. Mr Crees reported that by day 129, just over 130 megalitres of water had been introduced at an average rate of 0.1 megalitres per metre of recharge slot per day. Mr Leach had graphed the test pit results and he reported that at the start of the -- 47 of 102 -- 48 trial the intake rate was about 3.1 megalitres per day. After 30 days it was down to about 1.29 megalitres per day. After 75 days it had fallen to 0.72 megalitres per day and on day 125 it was 0.29 megalitres per day. He extrapolated this curve to show that after about 180 to 200 days, the intake level would be negligible. Mr Crees agreed with Mr Leach's contention that it was logical that the reducing pit intake rate was the result of the reduction in permeability due to suspended matter in the filters. He also agreed that coarser suspended particles would be trapped on the surface of the pre-filter and a mud fill develop, while finer particles would penetrate further into the sand. Eventually the entire pre-filter would become clogged and have to be replaced. Mr Leach contended that the renovation of the pit after 129 days failed to restore the high infiltration rates initially recorded and that more of the pre-filter would have to be removed and replaced at each renovation. However, Mr Crees thought that the test had not been of sufficient duration to conclude that the intake rate falls rapidly and is not restored each time the filter is renovated. Mr Leach was of the opinion that the recharge trials demonstrated that the required recharge rate of 0.1 megalitres per day per metre of trench could not be sustained over the required period. However, while agreeing that the long-term sustainability of recharge rates was not proven, Mr Crees was optimistic about the indications from the trials. In my view, the two recharge trials provide no conclusive evidence as to whether artificial recharge at the rate required for the Davco Project could be achieved. The first trial was too brief and clean bore water was used for most of it. The second trial was longer, but it seems that the water used for at least part of the trial was, for various reasons, significantly muddier than would usually be the case. With the evidence in such an unsatisfactory state, the best that can be said about the recharge trials is that artificial recharge, at least to some extent, has not been proven to be impossible. The Availability of Cane Assignment Mr Paul Richard Todhunter, the former secretary and later director of the Central Sugar Cane Prices Board from 1982 to 1991, was called as a witness by the respondent. He gave evidence of the process of gradual deregulation of the sugar industry since the early 1980s. Mr Todhunter said that he had been requested to prepare a statement, as the respondent was seeking firm evidence that assignment would not be granted without water. Mr Todhunter said that he had a different view point. Since expansion -- 48 of 102 -- 49 assignment was not generally available to new applicants until 1990, he thought that would be more the controlling factor. Mr Todhunter explained that until recently the sugar industry was controlled by the Regulation of Sugar Cane Prices Act 1915. That Act provided for the regulation of production by way of assignments, which were increased from time to time pursuant to the world market outlook and other considerations. The Central Board had sole jurisdiction to grant, administer and cancel assignment. The Act was replaced in 1991 by the Sugar Industry Act and the Queensland Sugar Corporation assumed jurisdiction for assignments. Following approval by the Minister of an expansion, Mr Todhunter said that the Board administered the process of granting assignments. In doing so it enlisted the aid of local assignment inspection committees to assess applications. These committees took into account the suitability of land and any restrictions on its use. Mr Todhunter said the availability of water was an important consideration, as was the distance to an established delivery point. Mr Todhunter said that of all primary industries, sugar had been the most tightly regulated. Prior to 1986, Mr Todhunter said, part of an assignment could be moved only by substitution in a strictly regulated process, to a measured suitable area on the grower's property. He said that this was a clumsy process. Then under the 1986 Act, a grower was able to nominate 115% of land as the area on which he could grow 100% of assignment. Where a grower utilised unassigned land to plant the additional 15%, the practice became known as "roaming". Mr Todhunter went on to say that the report of the Savage Committee recommending elimination of assignments, produced a good deal of debate in the industry and partially contributed to the 1986 Amendment Act. This Act embodied some of its recommendations on deregulation and removed some of the restrictions. Mr Todhunter said that change was on the way and it was obvious that it was going in the direction of deregulation. However, it took until 1991 before most of the Savage recommendations were adopted. He added that total deregulation had not been achieved and, while there was still a system of assignments, he understood that anyone who wanted an assignment could get one. Until the 1989 amendments, expansion assignment was generally confined to existing growers. Previously all cane farm sales had to be approved by the Central Board. The 1989 Act allowed assignment and peak to be disposed of separately from the land and attached to other land in the same mill area. As a consequence, some growers and new entrants took the opportunity to buy or lease assignment, with or without peak, and relocate that assignment to their own land. This leased assignment -- 49 of 102 -- 50 provided a basis for participation in future expansions. The 1989 Act further deregulated assignment controls, enabling growers to plant up to 115% of their assignment entitlement and to "roam" on unassigned land. It also allowed growers in land-locked mill areas to seek expansion assignment in other mill areas, that is, to roam in those other areas. The effect of roaming enabled every grower with additional land to grow more cane. Those who did not have such land, could either buy some, or come to an arrangement with someone else. The 1989 Act assisted new entrants and those existing growers wanting to expand, by allowing them to lease assignment from land- locked growers who were otherwise unable to participate in roaming or in future expansions. Mr Todhunter said that in hindsight roaming produced more problems than it solved and the scheme was not carried into the 1991 Sugar Industry Act. However, he said this was not necessary, because the same or better results could be achieved under that Act. The Sugar Industry Act 1991 This Act abolished the Central Cane Prices Board and the Sugar Board and created the Queensland Sugar Corporation, which had responsibility for assignments and production controls. The Act provided for annual increases in assigned lands of 2½%, unless the Minister decided otherwise, in the years 1991 to 1995 inclusive. It also stated that the Corporation was not to grant assignment on new land unless • it was capable of producing commercial crops of sugar cane; • it was situated in a location from which cane could be efficiently delivered to a mill; • it could be prepared and utilised for the growing of sugar cane without undue damage to the environment; and • the whole of the land had adequate title. Cane Expansions 1980 to 1993 Mr Todhunter gave details of the expansions from 1980 to 1993. In summary, in 1980 the expansion was 5%, in 1981 the expansion was 3%, in 1989 the expansion was 5%, (these three expansions were confined to existing growers). The 1990 expansion was 8%, the 1991 expansion was 2.5%, the 1992 expansion was 5.5%, and the 1993 expansion was 5%, all of which included new growers. New growers did not gain access to expansion assignment on a general basis until 1990, when shortfalls were made available to them. By the end of 1992, some 381 -- 50 of 102 -- 51 new cane growers had benefited from expansion assignment, receiving on average about 31 hectares each. Mr Todhunter said that the most successful new entrants in the period 1986 to 1992 were DRV Cox and DG Robbie (the Davco farming partners). They entered the industry by leasing assignment. Later, with the consent of the lessors, they obtained expansion assignment in their own right, 56.5 hectares in 1989, 27.2 hectares in 1990, 13 hectares in 1991, 236 hectares in 1992 and 692 hectares in 1993. Mr Todhunter said that the availability of water influenced recommendations of the local assignment committees in the granting of expansion assignments, particularly in the Burdekin. These committees had instructions to liaise closely with the Water Resources Commission and the DPI and preference was given to land that had water available, Mr Todhunter said. The Situation at the Date of Resumption On behalf of the respondent, it was submitted that prior to the introduction of roaming, the subject land could not have grown assignment cane. The 1990 expansion occurred after the date of resumption and the assignments granted to new growers were small. The expansions in 1991 and 1992 yielded only small incremental increases. Therefore, it was submitted, on the basis of Mr Todhunter's evidence, a prudent purchaser would not have any reason to believe that a cane assignment could be obtained. Such a purchaser would not have paid any more for that possibility in the future. However, Mr Todhunter said that as at May 1990, the resumption date, things were very confused. He said that it was hard to say that there would be unlimited expansion on the evidence at that time, although it was clear that strict regulation would be relaxed. He said that the situation was not resolved until the introduction of the Sugar Industry Act in June 1991, which provided for small and progressive expansions. It is clear from Mr Todhunter's evidence that at the date of resumption the deregulation process was well advanced and would, in all probability, continue. In my view a prudent purchaser would be well aware that there was every likelihood that the strict regulation of the assignment process would be relaxed or could be circumvented. The experience of the Davco partners showed what could have been achieved. The Valuation Evidence The Claimant's Valuers. Evidence for the claimants was given by Mr Geoffrey William Eales, a registered valuer in practice in Townsville. Mr Eales submitted a report and valuation in which he -- 51 of 102 -- 52 cleared and levelled to cultivation, for various classes of soils. following rates per hectare: Mr Eales adopted the Class 2 soils $ 7,000 Class 3 soils $ 6,000 Class 4 soils $ 3,500 Class 5 soils $ 1,000 valued the resumed land at - Land and improvements $10,017,000 Disturbance $ 369,000 Total $10,386,000 Mr Eales stated that at the date of resumption the land was used for the raising of beef cattle, with part of it used as the effluent area of a feedlot located on adjoining land owned by Mr Geoffrey Cox. However, he pointed out that the property had the potential to be used for the growing of sugar cane and other agricultural crops, as subsequent events have demonstrated. His report stated that water and fencing improvements were appropriate for grazing cattle, while the only structural improvement was a shed of 384 square metres situated opposite the feedlot. Mr Eales stated that the land had many attributes which enhanced its potential for cane growing. If the Burdekin River Irrigation Scheme had not proceeded, Mr Eales thought that by 1990 the Davco Irrigation Project would have been developed at a provisional cost of $1,000 per hectare, bringing water to the subject lands and providing on-site farm pumping infrastructure. Mr Eales obtained the information about the Davco Irrigation Project from Mr David Cox and from the consultants who gave evidence on behalf of the claimant. He relied upon their reports as confirming that the resumed land would have been irrigable/arable land as at the date of resumption. He was advised that the cost of pumping water to service the Cox aggregation from the Davco Project would be approximately $18 per megalitre, much cheaper than the Water Resources' charge of $35 per megalitre for channel water. Basis of Valuation As the basis for his valuation, Mr Eales relied on the sales of 18 parcels of irrigable/arable agricultural land and cane farms which sold between January 1988 and November 1991, with areas between 20.432 hectares and 296.836 hectares. These sales analysed to show values between $3,480 and $10,166 per hectare watered, Ten of the 18 sales had cane assignments. However, what Mr Eales considered -- 52 of 102 -- 53 to be his best sale, Sale 10/10A, did not. It had been developed for the growing of beans, but was purchased by a cane farmer for the growing of cane. All sales had access to BRIA channel water and to tramlines. Mr Eales said that based on the sales evidence he did not believe there was any difference in the market for a property which had an assignment and for one which did not. He thought that purchasers were aware of the roaming provisions and that the industry was being deregulated and had not paid more for assigned land. The sales used by Mr Eales were of lands, which had been established for farming and irrigation for some time, except for Sale No. 3, which was not cleared or farmed and which, in Mr Eales' opinion, set the lower limit for Class 5 soils. Mr Eales said that he did not use the Water Resources Commission's BRIA auction sales as a basis. He did not regard them as comparable as they were too far away from the subject area, although they had similar Barratta clay soils. He thought that the auction sales were at very depressed prices because of the over-supply of irrigable/arable land which came onto the market as a result of the Burdekin Project. In Mr Eales' opinion, the Burdekin Project had devalued the irrigable/arable lands in the area at the date of resumption. He said that potential purchasers knew that 500 to 600 lots would be put on the market in the ensuing years. This, he thought, induced them to delay buying farms and to wait for land which suited them. Mr Eales went on to say that since 1986/87 there had been a trend for cane farming families to aggregate farms. The big increase in sale prices for land at Auction 12 in November 1993, compared with those paid at Auction 11 in September 1993, was caused by adjoining owners purchasing to aggregate their holdings. He thought that farmers had waited until blocks from the subject land had come up for auction, as they were closer to the existing cane farms in the North Burdekin Water Board Area than were the blocks in previous auctions. Some of the sales used by Mr Eales were of lands in the old Clare irrigation area and had been in production for some years, but he did not believe that this added any value. In applying the rates per hectare to the subject land, Mr Eales used a DPI soil survey map and had employed surveyors, Brazier and Motti Pty Ltd, to calculate the areas of the various classes of land, except for the areas in the south-west corner and on Lot 4 on Plan GL 12472, where he classified the land himself. In his opinion, Class 3 soils were as good as Class 2 soils for cane growing, but he admitted that Class 2 soils were better for alternative uses. In some circumstances he thought that Class 3 soils had advantages over Class 2 soils and were sought after by cane farmers. To illustrate his conclusions concerning Class 3 and inundated land, Mr Eales -- 53 of 102 -- 54 explained that the area marked 7F on the Davco Plan grew the greatest number of tonnes of sugar cane in the Burdekin last season and was subject to the same inundation as the unclassified area in Davco blocks 6A and 7A on the subject land. He said that flowing water does not affect cane in an advanced stage of growth. Although he applied the figures derived from the sales for each class of soils directly to the subject land, Mr Eales felt that they were conservative. He thought that if there had been no Burdekin Project, the lands watered by the Davco Project would have been at a premium. It was his opinion that values could have been 50% higher than he applied. District comparisons Mr Eales contended that prior to the implementation of the Burdekin Project, the price paid for irrigable/arable land and for cane farms in the Burdekin District was consistently higher than those paid for such land in the Ingham District. However, he said that sales in 1990/91 indicated that while cane farms in the Burdekin had continued to maintain higher values than those in Ingham, the Burdekin irrigable/arable lands showed lower values than comparable lands in Ingham. Mr Eales concluded that was the result of the supply of Water Resources Commission developed irrigable/arable land outstripping the demand, especially as large areas of better situated land was then still to come onto the market. He supported his reasoning by comparing sale prices in the Burdekin in 1980/81 and in 1990/91, with sale prices at Ingham during those periods. Mr Eales used the Water Resources Commission sales up to Auction 9 in June 1992, to demonstrate his opinion that the Burdekin Project had devalued the irrigable/arable lands. He referred particularly to the number of blocks not sold or passed in because of the over-supply of such land and the fact that good Class 3 land, better located, was still to come onto the market. He went on to say that Ingham sugar cane land historically had lower production per hectare than that in the Burdekin and relied mainly upon rainfall rather than irrigation. However, the land-locked nature of the Ingham cane land created an artificial market for cane farms in that district, which forced the prices up. Mr Eales' reasoning Mr Eales reasoned that under the reverse Pointe Gourde principle, compensation in this case had to be assessed without regard to the effect that the Burdekin Dam Project had on the value of the subject land. He stated that if the scheme had not been implemented, by the date of resumption the dispossessed owner would have been in the following position: . The Davco Irrigation Project would have been supplying water to the Cox -- 54 of 102 -- 55 family land at a headworks cost of approximately $1,000 per hectare. . The subject land would have been the only significant area to which the cane industry could expand, unless other private projects were developed. . It would have been the only major parcel of land capable of being subdivided and sold as irrigable/arable land within the Burdekin area. . Therefore it would have commanded a premium price, as the price control of the sugar industry was being deregulated and prices equivalent to the rate per hectare for developed cane land would have been paid. . The dispossessed owner could have either held the land or sold part of it to finance the project. . Potential purchasers of that land, including his sons, would have considered purchasing it, selling off 30% and developing the balance area into a large efficient cane farm. Mr Eales approached the valuation by assuming that virtually all the land was capable of being irrigated and growing sugarcane and that an adequate supply of water was available, at least to a nominal level of 8 megalitres per hectare. He reasoned that although the Burdekin Project had allowed for large scale expansion of the cane industry, there have been previous expansions in the Burdekin and the Davco Irrigation Project would have allowed for expansion, although on a smaller scale. In valuing the land as if it had irrigation water and the potential to grow cane, Mr Eales realised that in 1990 the only way that it could have grown cane was if it had an assignment or if some other arrangements in respect of roaming or transferring assignments were made. However, he thought that this presented no difficulty. Basis of Valuation Mr Eales arrived at the valuation of the subject land by undertaking two hypothetical development exercises. What he called "Basis 1" was not a true hypothetical subdivision, but was described as a "hybrid sort of hypothetical subdivision", as it proceeded on the assumption that 8 lots (blocks 4A to 4D and blocks 5A to 5D) were sold and the balance area retained. Mr Eales said it "recognises the Cox family's special circumstances". In that exercise Mr Eales valued the 8 lots by calculating the areas of each of the classes of soil and applying the appropriate rate per hectare. He did the same with the retained land, with a 10% discount for size, even though he said he could find no evidence for such discount. He reasoned that because of the tendency since 1987 for cane growers to aggregate larger areas, the evidence showed that they paid the same rate per hectare for larger parcels as they did for smaller parcels. In this "hybrid" hypothetical subdivision, Mr Eales allowed a profit and risk factor for the 8 lots of 5%, as he reasoned that the land would be well sought after and there would be virtually no risk. He did not agree with the suggestion that profit and risk should have been 35-40%. He said the land would sell quickly and that the developer's -- 55 of 102 -- 56 VALUATION - BASIS 1 - HYPOTHETICAL DEVELOPMENT (EIGHT) (8) LOTS SOLD BALANCE RETAINED) GROSS REALIZATION Lots 4A to 4D Lots 5A to 5D $ 5,599,000 (As set out in Schedule on Page 22 of Exhibit 84) Value of Retained Land (Discounted for size) $12,170,700 $17,769,700 capital would be tied up for only a short period. Mr Eales' Basis 1 proceeds as follows: Less, Selling Costs Legals $ 12,000 Commission $ 143,575 Advertising $ 8,000 $ 163,575 $17,606,125 Less, Profit & Risk Realization on $5,435,425 @ 5% $ 258,830 $17,347,295 Less, Development Costs Davco Irrigation Project $3,200,000 (Preliminary Estimates) Less Contribution Already Made $ 182,083 Timber Treatment: 1381.474 Ha of clearing and levelling to cultivation @ $1,000/Ha $1,381,474 1361.7 Ha of stick ripping and $3,017,917 levelling @ $700/Ha 460.5 Ha of ripping and $ 953,190 levelling @ $300/Ha $ 138,150 $2,472,814 DEVELOPMENT COSTS Roads (4.2km) $ 644,000 Engineering Costs 12.5% $ 80,500 -- 56 of 102 -- 57 Survey Costs & Council Fees - Allow $ 20,000 $ 744,500 Contingencies 2.5% on Development Costs of $6,235,231 $ 155,881 Add Interest on Development Costs $6,391,112 for ½ of Development & Selling Period of 12 months @ 12.5% $ 399,444 $ 6,790,556 VALUE OF LAND INCLUDING INTEREST AND HOLDING COSTS $10,556,739 Less, Interest & Holding Costs $ 625,059 TOTAL LAND VALUE $ 9,931,680 ADOPT $ 9,930,000 Improvements Structural Value of Shed (Lot 47) $ 87,000 TOTAL VALUE LAND AND IMPROVEMENTS $10,017,000 Mr Eales' Basis 2 assumed the land was subdivided into 5 large lots and sold. He said that this was a secondary method to Basis 1 and was what a prudent outside purchaser would have done, recognising the potential for broadacre cane land subdivision. In this exercise, Mr Eales applied a profit and risk factor of 10%, because he felt there would have been slightly more risk for five larger blocks. However, he had no doubt that such larger blocks would have been readily saleable, because of the trend to amalgamate cane farms into larger areas. He felt that the subject land would have been particularly sought after by cane farmers from the North Burdekin Water Board area because of its proximity. He said that several of them had been waiting for this land to come onto the market, as demonstrated by their purchases at recent auctions. Mr Eales' Basis No. 2 proceeds as follows: BASIS II - HYPOTHETICAL DEVELOPMENT FIVE (5) LARGE LOTS SOLD) GROSS REALIZATION (As set out in Schedule on Page 23 of Exhibit 84) Less, Selling Costs $19,100,000 Legals $ 10,000 Commission $ 479,750 Advertising $ 19,000 $ 508,750 $18,591,250 Less, Profit & Risk on Realisation 10% $ 1,690,114 $16,901,136 Less, Development Costs Davco Irrigation Project -- 57 of 102 -- 58 (Preliminary Estimates) $3,200,000 Less, Contribution Already Made $ 182,083 Timber Treatment: 1381.474 Ha of clearing and levelling to cultivation @ $1,000/Ha $1,381,474 1361.7 Ha of stick picking, ripping and levelling @ $700/Ha $ 953,190 $3,382,083 460.5 Ha of ripping @ $300/Ha $ 138,150 $2,472,814 Development Costs: Roads (4.9 km) $ 686,000 Engineering Costs 12.5% Survey Costs & $ 85,750 Council Fees - Allow $ 18,000 $ 789,750 Contingencies 2.5% on Development Costs of $6,644,645 $ 166,116 $ 6,810,763 Allow Interest on Development Costs for ½ of Development & Selling Period @ 12.5% $ 425,669 TOTAL DEVELOPMENT COSTS $ 7,236,432 Value of Land including Interest & Holding Costs $ 9,664,704 Less, Interest & Holding Costs $ 572,589 VALUE OF LAND $ 9,092,115 ADOPT Improvements Structural $ 9,092,000 Value of Shed (Lot 47) $ 87,000 TOTAL VALUE LAND AND IMPROVEMENTS $ 9,179,000 Mr Eales made no apology for using developed cane farm sales to value the lands in these exercises. He said that he valued the different soil types per hectare from the sales on the basis that each lot was developed as a cane farm and that there was already all the infrastructure to provide irrigation water to the subject lands. He -- 58 of 102 -- 59 said that he had used the costs of development provided by the experts who gave evidence for the claimant in this case. For 3,200 hectares of irrigable/arable land, he had calculated the cost to get water at $1,000 per hectare, or $3,200,000, less the contribution already made by the claimant to the Davco development. He allowed for the cost of the further timber and land treatment to bring the arable area to cultivation stage, the relevant areas being measured by surveyors Brazier and Motti Pty Ltd from an aerial photograph. In Basis 1, Mr Eales allowed for 4.2 kms of bitumen roads at $140/metre, as he reasoned that farm roads on the balance area would be developed with farming activities. In both exercises he valued the shed at $87,000, arriving at that figure on the basis of information which was provided by Mr Geoffrey Cox, as the shed had been removed before Mr Eales could inspect it. As the basis for the valuation of the individual blocks, Mr Eales relied heavily on Sale 10/10A, which he considered to be his most appropriate sale. It was larger than the other sales, had no cane assignment as it had been a bean farm, consisted of Class 2 soils running off to Class 3, and was purchased for the purpose of growing cane. This property, with an area of 335.826ha, sold in July 1990 for $3,100,000. Mr Eales analysed the sale to show $7,605 per ha, watered, cleared and levelled to cultivation. The state of the subject land at the date of resumption. It was suggested to Mr Eales that he should have valued the subject land as it was at the date of resumption. At that time Lot 47 had a licensed bore with an allocation of 204 megalitres per annum, Lot 46 had no bore, Lot 87 had a licensed bore with an allocation of 52 megalitres per annum and Lot 4 had a licensed bore of 20 megalitres per annum. Therefore the total water allocation was 276 megalitres per annum. However, under the then existing Water Resources Commission policy, Lot 47 had the potential for up to 582 megalitres per annum, Lot 46 had potential for up to 273 megalitres per annum, but Lot 87 and Lot 4 had no further potential for water. Therefore the total potential water allocation was 927 megalitres per annum. If the only water available was 927 megalitres per annum, this would, at 8 megalitres per hectare, irrigate approximately 116 hectares, the majority of the balance being dry arable land and grazing land. Mr Eales expressed the opinion that all but 520 hectares could be dry farmed. Mr Eales agreed that if he was wrong in his assumptions and the land was required to be valued as it was at resumption date, a prudent purchaser would have to evaluate the potential of the land to receive irrigation water from the Davco Project and then discount the price he would pay for the risk involved in getting that water to the subject land. However, he reasoned that if there had been no Burdekin Project, there would have been strong support for the implementation of the Davco Irrigation Project. The expansion in the sugar industry would have continued, in his opinion, and the whole industry and probably the Government would have supported any project with a real prospect of providing irrigation water. He had no doubt about the Cox family's -- 59 of 102 -- 60 ability to perfect such an irrigation scheme. Mr Eales felt that a potential purchaser would have regard to these matters and consider there was no risk. This was proved, he said, by the evidence of Professor Volker and the other experts. Under those circumstances, Mr Eales said that he had no doubt that a prudent purchaser would be prepared to pay the same for the subject land as he would for land that was serviced by Water Resources Commission channels. Therefore, Mr Eales reasoned that it was correct to compare the subject land, with its potential of only 927 megalitres per annum and with no cane assignment, with sales of land with channel water and with cane assignments. He contended that the values of agricultural land and cane land had merged. Mr Wake's evidence Valuation evidence for the claimant was also given by Mr JR Wake, a registered valuer in practice at Yungaburra. Mr Wake had not made an independent valuation. He stated that his instructions were to review the valuations prepared by Mr Eales and the valuer for the respondent. However, since the valuation reports were not exchanged by the parties, Mr Wake could not review the latter. He therefore carried out an exercise which he described as an "audit" of Mr Eales' valuation. He inspected the subject land in October 1992 and six or seven times thereafter. Mr Wake was of the opinion that if it had not been for the Burdekin Dam Project, David Cox and Geoffrey Cox would have started planting cane on the subject land in 1988 and by 1990 there would have been substantial areas under cane. For this reason, Mr Wake saw the highest and best use of the land as broadacre irrigated agricultural land. According to Mr Wake, deregulation of the sugar industry commenced with the 1986 amendments to the Regulation of Sugar Cane Prices Act and it was evident at the date of resumption that deregulation of the industry was imminent. Mr Wake said that this distinguished the subject land from some of the earlier resumptions. Mr Wake reasoned that, although the potential value of the subject land as irrigable land could be realised only with the co-operation of adjoining owners, this did not preclude that potential from being taken into account since it was worked as part of a family aggregation. In Mr Wake's opinion, the value of the subject land was not increased by the Burdekin Project but was adversely affected because: . the threat of resumption froze all land sales in the threatened area; . following the 1980 proclamation of that scheme, subdivision in the area could be undertaken only with the consent of the Water Resources Commission, whose -- 60 of 102 -- 61 policy was not to approve any subdivision; . as a result of the scheme, sale prices in the area lost their normal relativity with those of arable land in other cane growing areas, for the reasons set out in Mr Eales' report; and . the Davco Irrigation Project would have provided irrigation water to the whole of the subject land at an operational and development cost far cheaper than the Burdekin Project. Mr Wake said that he had to assume that the Burdekin Project had not proceeded and had placed a large number of blocks on the market. The Cox lands would then have been, in his words, "almost the only land available for cane expansion purposes", and the subject land would have had water available to it by the date of resumption. Therefore, the proper valuation approach was to value the resumed land as irrigated land. According to Mr Wake, the subject land lacked only irrigation water to enable it to grow sugar cane because: . it had appropriate soils, . it had good contours for furrow irrigation, . drills 1km in length could have been designed for efficient mechanised and irrigation management, . large area farms could have been made available, . the infrastructure was available to facilitate sugar cane growing, . it was located between established cane-growing areas in the premier sugar- growing district. Mr Wake said that he endorsed Mr Eales' approach, that the subject land was to be regarded as capable of being irrigated at the date of resumption and would be used for cane-growing purposes within a short time thereafter. However, he conceded that if those assumptions were not correct, Mr Eales' valuation would be wrong. He also agreed that if the Davco Irrigation Project was possible but not implemented at the date of resumption, a prospective purchaser would assess the risk of getting irrigation water to the subject land and that would affect the price that such a purchaser would be prepared to pay. However, he did not agree that the basis of the valuation depended upon cane assignments being readily available. He said many farmers had brought assignments from other areas to unassigned land they had purchased and he referred to examples in the sales used by the other valuers. He provided details of the multiple holdings of cane farming families in the Burdekin area as evidence of the trend to large-scale production. Mr Wake endorsed Mr Eales' valuation approach, which was based on sales of -- 61 of 102 -- 62 irrigable/arable land in the Parishes of Northcote and Mulgrave. He said that he looked at Mr Eales' sales and also sales in the Parishes of Jarvisfield and Inkerman. Although Mr Wake did not analyse them, he concluded that they supported the results that Mr Eales drew from the Northcote and Mulgrave sales. Mr Wake saw Mr Eales' two valuation exercises as being based on hypothetical development by way of subdivision of the aggregation into irrigated and developed farms. However, he conceded that he did not know of any hypothetical development valuation exercise that had been carried out in respect of rural lands. Mr Wake was aware that, at the date of resumption, the actual potential water allocation of the subject land was 927 megalitres per annum. He acknowledged that if the assumptions that he and Mr Eales had made about the Davco Project turned out to be wrong, then it would be appropriate to determine compensation on the basis of the area that could be irrigated with that potential allocation, and then to classify the balance into dry arable and grazing areas. However, he thought that there may be subdivisional potential as dry land. Of Mr Eales' Basis 1, Mr Wake said it assumed that eight farms were excised to provide the funding for capital works to develop a retained area of 2,776 hectares which, he said, "is in accordance with the development strategies undertaken by the two sons of Vivian Cox". Of Mr Eales' Basis 2, Mr Wake said it is based on the premise that the highest and best use of the land would be achieved by its sale as five large developed farms, in conformity with the trend of cane farmers to purchase multiple farms for the greater efficiencies that can be achieved. Mr Wake felt that this approach would better suit the market demands than the BRIA subdivisions which, he thought "created excessive development costs to establish small farms which are in many cases being aggregated". Sale of the Parker land to the State Government Mr Wake referred to the sale of Mr David Cox's interest of approximately 1,650 hectares of Portions 15 and 16, parish of Northcote (the Parker land) to the Water Resources Commission for $2,448,228 in October 1982, following protracted negotiations. This land was originally to be part of the Davco Irrigation Project, but was required for the Burdekin Project. Mr Cox had successfully negotiated a price of about $1,480 per hectare in 1982, whereas the price offered by the respondent for the subject land was $422 per hectare. Mr Wake thought that Mr Eales' valuation of $2680 per hectare was consistent with the price paid for the Parker land, as prices in the Burdekin generally had increased substantially. In Mr Wake's opinion, the subject land was better located than the Parker land, as it was adjacent to the North Burdekin Water Board area and had slightly better -- 62 of 102 -- 63 soils. Mr Wake said that he would normally not rely on a transaction in 1982 to support a valuation in 1990, but where the market had been frozen in an area and that was the only transaction, then it was important. Value to the dispossessed owner Although it was not a separate item of assessment by Mr Eales, Mr Wake thought that the subject land had elements of special value to the dispossessed owner. He reasoned that at the date of resumption the claimant and his family would have continued their feedlot operations and expanded their cane growing activities. The land therefore had value for large-scale major cane farming. He felt that the development costs were warranted in view of the expected returns, as illustrated by the experience of Davco Farming and had there been no Burdekin Dam Project, the Cox family would have controlled a large proportion of the land available for cane expansion. Mr Wake was confident there would have been expansion of the cane industry even if the Burdekin Dam Project had not eventuated. The Coxes would have been able to sell their excised lots on an irrigable/arable basis on a market not depressed by the release of some 660 farms over a 15 year period. He said that newspaper articles in early 1990 had stated that the Burdekin Project would make available 3000 hectares of new farms in the next year. Mr Wake endorsed Mr Eales' valuation of the machinery shed removed by the Water Resources Commission, at $87,000, as he said it would be similar to the type of good quality modern steel-framed machinery shed found on many cane farms and would not overcapitalise a block subdivided from the subject land. Mr Wake concluded that the value of the subject land should be calculated in accordance with Mr Eales' Basis 1 at $9,930,000, or $2,680 per hectare. To this should be added the value of the shed at $87,000 and two-thirds the value of the feedlot at $357,000, making a total of $10,374,000, which Mr Wake considered to be a fair assessment of compensation. He said that he was satisfied that Mr Eales had approached the valuation on a proper basis and, after due investigations, he had no reason to disagree with any of Mr Eales' figures. While he thought that the profit and risk adopted by Mr Eales was minimal, he felt it was fair. The Respondent's Valuer Valuation evidence for the respondent was given by Mr Robert Joseph Moloney, a registered valuer employed by the DPI Water Resources as a property officer. Mr Moloney had worked in the Burdekin area for many years and was responsible for assessing the compensation payable for lands acquired by the Water Resources -- 63 of 102 -- 64 Commission in connection with the Burdekin Project. He did not consider that the scheme had caused any detriment to the value of the subject land which should be taken into account in assessing compensation. Mr Moloney thought that without the Burdekin Project, expansion of the sugar industry would have been limited and he doubted that the Davco Irrigation Project would have been feasible. His valuation was therefore made on the basis of some expansion in the Burdekin, but limited by the amount of water that would have been available. He rejected completely the possibility that the Davco Irrigation Project would have been servicing the resumed land at or about the date of resumption. Mr Moloney valued each portion of the subject land separately, but did not make any difference in value for the different dates of resumption. His method of valuation was to classify each portion of the resumed land into areas categorised as irrigable/arable, potential irrigable, dry arable and grazing. In calculating the area of the various categories of land, Mr Moloney relied upon a map compiled by DPI soil scientist, Mr J McClurg, who also assisted with further advice as to the suitability of soils. To each of these categories Mr Moloney applied values derived principally from the Land Court determinations in previous Burdekin Project resumptions, in the cases of Fabrellas v. The Commissioner of Water Resources (A91-21) 11 December 1991 and Turner v. The Commissioner of Water Resources (A90-43 and 44) 25 February 1992, neither of which were reported. He considered that each of the resumed properties in these cases had similar use and potential to the subject land. To support the valuations applied to each category of land, Mr Moloney used sales of irrigable/arable lands, dry arable lands and grazing lands. Mr Moloney's valuation is, however, based principally on the two Court decisions. The Fabrellas land of 375.3ha was resumed on 2 September 1989. It was situated on the Barratta Road, about 42 kms south-west of Ayr and 28kms south of Giru, and some 10 kms south-west of the subject land. The Land Court determined compensation payable at $355,590, which Mr Moloney apportioned on a treated, fenced and watered basis as: Irrigable/arable 13ha @ $3,650/ha $ 47,450 Dry arable 123ha former cultivation @ $1,241/ha $ 152,643 89ha with regrowth @ $650/ha $ 57,850 -- 64 of 102 -- 65 67ha uncleared @ $550/ha $ 36,850 Grazing only 44ha former cultivation @ $1,030/ha $ 45,320 26ha with regrowth @ $430/ha $ 11,180 13ha uncleared @ $330/ha $ 4,290 $ 355,583 The Fabrellas determination was used by Mr Moloney as a basis for irrigable/arable, dry arable and grazing soils. However, he had to apportion the values as best he could, as the Land Court made no apportionment on a treated, fenced and watered basis. In comparing the Fabrellas land with the subject land, Mr Moloney commented: " Three classifications of soils on the resumed land are similar to the Land Court determination, however the varying areas of the lots ... and the better situation of the resumed lands have been taken into consideration and adjustments made to the values. " The Turner lands, comprising 3,187.304ha, were resumed on 22 March 1986 (255.28ha) and on 26 June 1987 (2,932.024ha). They are situated between Barratta Creek and the Haughton River, about 20kms south of Giru and some 10 kms south- west of the subject lands. The Land Court determined compensation at $230 per hectare on a fenced and watered basis, or $733,074, stating that it could be apportioned as follows: 1,313 rain fed arable @ $300/ha 1,874 grazing @ $180/ha In his comparison with the subject land Mr Moloney stated: " The dry arable and grazing components of the subject land are superior to the Land Court determination mainly due to better situation and development. Also the varying areas of the resumed lots have been taken into consideration and adjustments made to the values when compared with the Land Court determination. " Support for his irrigable/arable values was drawn from sales, nine of which had been auctioned by the Water Resources Commission between 18 November 1988 and 15 May 1990. Two further sales were of blocks subdivided and sold by Geoffrey Cox in May 1990, from his property immediately to the south of the subject land. The 11 sales varied in area from 36.79ha to 120.1ha. The sale prices showed values from $2,943 to $4,724 per hectare, generally mostly cleared and some levelled but with virtually no -- 65 of 102 -- 66 other improvements. Each of these sales was supplied by Water Resources Commission channel water at the rate of 8 megalitres per hectare, but at the date of sale, none of them had cane assignments. Mr Moloney compared each of the sales with the irrigable/arable areas on the subject land, reaching the conclusion that this category of land should be valued at $4,000 per hectare, developed as irrigated cultivation. As support for his grazing/dry arable levels of value, Mr Moloney went through a similar exercise in respect of three sales of grazing lands. The first of these sales is a property of 3,836 hectares, known as "Dingo Park", in April 1985 for $756,000. The second sale is of the same property in March 1993, after a further 95.44 hectares of freehold land and 1,241.124 hectares of leasehold land had been added to it and extensive development work carried out. The sale price was $1 million. This property is situated about 60 kms south of Townsville and about 25 kms south-west of Giru. Mr Moloney's third grazing/dry arable sale is situated about 30kms south of Home Hill, has an area of 955.2 hectares and sold in March 1993 for $460,000. Mr Moloney analysed each of these sales and compared them with the subject land, applying what he considered to be appropriate rates per hectare to the grazing and dry arable areas and making allowances for the state of development of each area. He added the value of the shed (then on Lot 47) and the value of Jardine yards on Lot 46. A summary of Mr Moloney's valuation for a total of $1,908,834 as it appears in his report, is reproduced here: -- 66 of 102 -- 67 Summary of Values Lots 46, 47, 87 Jarvisfield and Lot 4 Northcote. LAND: A. Irrigable Arable Lot 47: 26ha @ $4000ha including development to irrigable cultivation $104 000 Potential Irrigable Arable: 46ha @ $2750 including infrastructure & development to cultivation (requires licence and further bore) $126 500 Lot 46: 34ha @ $1830ha (includes clearing) $ 62 220 Lot 87: 7ha @ $1820ha (includes clearing) $ 12 740 Lot 4: 2.5ha @ $1750ha $ 4 375 Total Irrigable and Potential Irrigable Arable Soils 115.5ha $309 835 B. Lot 47: Dry Arable 469ha@ $575ha (raked & burnt with small regrowth) $269 675 104ha @ $500ha (raked and burnt, mod.regrowth plus odd log) $ 52 000 722ha @ $430ha (pulled with regrowth) $310 460 Lot 46: 16ha @ $625ha (raked and burnt, small regrowth) $ 10 000 642ha @ $480ha (pulled with regrowth) $308 160 51ha @ $400ha (with no timber treatment) $ 20 400 Lot 87: 98ha @ $670ha (pulled with regrowth) $ 65 660 14ha @ $650ha (tordoned) $ 9 100 5ha @ $600ha (with no timber treatment) $ 3 000 Total Dry Arable 2121ha $1048 455 C. Lot 47: Grazing Lands 143ha @ $425ha (raked & burnt - small regrowth) $ 60 775 275ha @ $280ha (pulled with mod. regrowth) $ 77 000 542ha @ $200ha (with no timber treatment) $108 400 Lot 46: 37ha @ $475ha (raked & burnt) $ 17 575 237ha @ $330ha (pulled with regrowth) $ 78 210 75ha @ $250ha (no timber treatment) $ 18 750 Lot 87: 28ha @ $430ha (pulled with regrowth)_ $ 12 040 34ha @ $410ha (tordoned) $ 13 940 20ha @ $360ha $ 7 200 Lot 4V: 38ha @ $460ha (cleared and burnt) 15.7ha @ $410ha (cleared & burnt subject to easement) $ 17 480 $ 6 437 22.71ha @ $330ha (with no clearing) $ 7 494 Total Grazing Soils: 1467.41ha TOTAL LAND: $425 301 $1 783 591 STRUCTURES: 90 900 YARDS: 34 343 $1 908 834 In the absence of comparable in globo sales, Mr Moloney considered this to be a more appropriate method of valuation than Mr Eales' hypothetical subdivisions. He valued each category as it was developed at the date of resumption. He said that he had valued in that manner because comparison was easier with sales and with the Land Court determinations. -- 67 of 102 -- 68 The difference of $1,250 per hectare between the value for irrigable/arable land and potential irrigable/arable land was, Mr Moloney said, simply his opinion based on the cost of bores and the element of risk involved in getting licences, as an applicant would have to prove that there were adequate supplies. Mr Moloney did not agree with Mr Eales' assessment of timber treatment. He said that he saw no sign of discing on the subject land, apart from the 72 hectares of cultivation, although some areas had been raked and burnt, with regrowth at varying stages. The timber treated areas were calculated from his ground inspection assisted by aerial photographs, but he did not discuss timber treatment with Mr Geoffrey Cox. Mr Moloney explained that in making his valuation he ignored the Davco Irrigation Project. He was of the opinion that it was not financially viable because of the high infrastructure costs. In addition, he made the following points: • there was lack of reliability of the Burdekin River for additional quantities of water; • there was the risk of obtaining an irrigation licence of sufficient volume because of the competing demands on the river; • world prices for raw sugar were falling at the date of resumption; • the remoteness of the subject land from the river, which was to be the source of irrigation supply; • the granting of assignments to new growers could not have been foreseen at the date of resumption; • cane tram sidings were some distance from the resumed lands; and • the potential licensed irrigable area of the subject land was not being utilised for cropping, nor was the licenced volume being used for cane production. For these reasons, Mr Moloney was of the opinion that a prudent purchaser would have regarded the highest and best use of the resumed land to be predominantly grazing/dry arable, with limited irrigable/arable potential. Mr Moloney reasoned that a prudent purchaser of the subject land would regard the area of the subject land that could be irrigated from the potential groundwater allocation of 927 megalitres, as the only potentially irrigable area, with the balance lands being dry arable or grazing, depending on soil classification. The resumed land comprised mainly Class 3 soils, with lesser areas of Class 2, small areas of Class 4, and only a few hectares of Class 5. However, according to Mr Moloney, sales in the BRIA area had not revealed a distinction between blocks with -- 68 of 102 -- 69 different proportions of Class 2 and Class 3 soils. Therefore, he was of the opinion that application of a higher value to Class 2 soils was not warranted. He rejected Mr Eales' application of $7,000 and $6,000 per hectare to Class 2 and Class 3 soils respectively, stating that such values were not supported by sales. He thought values of $3,000 to $3,500 were more appropriate. Mr Moloney commented that most of Mr Eales' sales were of blocks with levee soils and not comparable with the subject land, because they have a wider range of crop suitability. For example, he thought that beans could not be grown successfully on the subject land. Mr Eales had said that in normal years there would not be much difference between Barratta clays and levee soils. Mr Moloney disagreed, as he thought that in normal years levee soils were marginally better, while in wetter years they were much better. In Mr Moloney's opinion, land that had been cultivated for many years was better than new land. However, he thought that did not apply so much to levee soils as to backland clays where there is a mixture of sodic and non-sodic soils and where soils have to be treated with gypsum. He said that farming over the years will even out the crops. Basic sales Mr Moloney rejected as being not directly comparable, the 18 basic sales used by Mr Eales as (except one) they were better located, fully developed, fully irrigated properties, which have been farmed for many years, with mainly river levee soils. The sales which Mr Moloney used to support his primary method of valuation were, he contended, similarly situated and more comparable to the subject land. Mr Moloney disagreed with Mr Eales' contention that the Water Resources Commission auctions had flooded the market and depressed land prices. He thought that the prices achieved at auction were realistic for undeveloped and untried land and he did not believe that they were the result of an artificial market. According to Mr Moloney, the subject land was not unique as there were large tracts of similar quality land in closer proximity to the river. There is no doubt that in the absence of the Burdekin Dam, there were large tracts of land that could be used for growing cane, all they needed was water. Whether the subject land was in a better position to get water than the other lands is a question of fact to be decided here. The claimant's case is that the uniqueness of the subject land lies in the fact that it would have received water from the Davco Irrigation Project if there had been no Burdekin Dam. The hypothetical subdivision method of valuation In Mr Moloney's opinion, the hypothetical subdivision method of valuation should not be used as a primary method of valuation, even in the absence of comparable in -- 69 of 102 -- 70 globo sales. He said that it was usually adopted for urban rather than rural land. He considered it to be essentially a support method for more reliable approaches based on sales evidence, because of the difficulty of accurately assessing development costs, time of development, demand for lots and selling period. Despite his reservations about the method of valuation, Mr Moloney tested Mr Eales' hypothetical exercises by undertaking two hypothetical subdivisions of the subject land, adopting what he considered to be a more realistic approach in each case to development costs, gross realisation and profit and risk. For the purpose of these exercises, Mr Moloney based his gross realisation values on the assumption that, at the date of resumption, the Davco Irrigation Project would have been capable of delivering water to the subject land in the reasonably foreseeable future. Therefore, he valued each block as irrigable/arable land, using as a basis the sales that he had used as support for the valuation of the irrigable/arable land in his primary method of valuation. However, he did not discount the land values for the risks and uncertainties which, even upon that assumption, would have been felt about the likely success of the Davco Project. He took those matters into account in the profit and risk factors. He reasoned that a prudent purchaser would have considerable doubt about the availability of Davco water, so he adopted a higher rate of profit and risk in each case than was adopted by Mr Eales. Indeed, Mr Moloney strongly disagreed with Mr Eales' assessment of profit and risk factors, as he felt that Mr Eales relied too heavily on the successful operation of a theoretical groundwater recharge and extraction scheme. In his opinion, even if the Davco Project was successful, the cost of irrigation water would be comparatively high because of the necessity of dual pumping, once from the river and then from the aquifer. He felt that Mr Eales had not sufficiently considered that without the Burdekin Dam, there would have been competition for water from the river, with consequent risk of obtaining a pumping licence and of the continuity of supply. There was also the uncertainty of obtaining a cane assignment. Furthermore, Mr Moloney felt that the uncertainty of the extent and the cost of construction of works on land not owned by the claimants, together with all the doubts raised by the various experts as to the practicality of the whole Davco Project, would increase the risk factor in the mind of a prudent purchaser. Mr Moloney said that he had arrived at his profit and risk factors not from sales, but from his knowledge and experience, taking into account all the uncertainties. Mr Moloney's hypothetical subdivisions Instead of Mr Eales' Basis 1, Mr Moloney's approach was first to consider a 27 lot subdivision based on the Davco layout for the subject land. He thought that both hypothetical subdivisions would meet Council requirements, except perhaps for some -- 70 of 102 -- 71 drainage easements. He regarded the Davco layout as an acceptable hypothetical subdivision plan. He rejected Mr Eales' "hypothetical development" approach, as he felt that a prudent purchaser would not undertake the exercise on the basis of retaining an area of 2,776 hectares for his own use. There was no evidence, he said, to support the value of such a large area of irrigable land as a single lot. Mr Moloney allowed for the costs involved in the development of the resumed land and calculated its contribution to the total Davco headworks cost in proportion to its area compared with the total area of the Davco Project. Mr Moloney said that the development costs that he used for roads, channels, recharge pits and drainage came straight from Mr Devlin's report. However, he adopted the claimant's figures for bores and pumps of $18,000 each. Engineering fees were purely a mechanical calculation while survey fees came from the Department's chief surveyor. Using what he termed a realistic profit and risk factor of at least 25% - 30% and realistic irrigation development costs and contributions to Davco headworks, Mr Moloney's hypothetical subdivision exercise for 27 lots resulted in a negative in globo value. Mr Moloney's First Hypothetical Subdivision Gross Realisation Lot 1A Value $ 358 000 Lot 2A Value $ 374 000 Lot 3A Value $ 571 000 Lot 4A Value $ 380 000 1B $ 431 000 2B $ 375 000 3B $ 457 000 4B $ 392 000 1C $ 375 000 2C $ 365 000 3C $ 445 000 4C $ 397 000 1D $ 275 000 2D $ 378 000 3D $ 443 000 4D $ 381 000 1E $ 331 000 2E $ 346 000 3E $ 435 000 4E $ 346 000 5A $ 237 000 6A $ 158 000 5B $ 375 000 7A $ 226 000 5C $ 333 000 Lot 4/Northcote 5D $ 376 000 $ 176 000 5E $ 352 000 $1 673 000 $ 560 000 Total $10 088 000 LESS: Selling costs Legals on sale (28 lots) $ 56 000 Commission @ 2.5% $ 252 200 Advertising @ $500 per lot $ 14 000 $ 322 200 LESS: Profit and risk @ 30% 30 $ 9 765 900 130 x $9 677075 $2 253 646 $ 7 512 154 -- 71 of 102 -- 72 Legals on sale 6 x $3600 $ 21 600 Commission @ 2.5% $ 145 650 Advertising 6 x $500 $ 3 000 $ 170 250 Balance: $5 655 750 LESS: Development costs Bores 55 @ $18000 $ 990 000 Farms pumps: 27 @ $4000 $ 108 000 Roads $2 830 000 Channels $ 741 000 Drainage $ 434 100 Recharge pits $ 408 700 Engineering fees (12.5%of roads, channels & drains) $ 500 637 Survey fees $ 62 000 Contingencies (5%) $ 282 386 Subdivision fees $ 1 350 $6 358 173 ADD: Interest on ½ development period @ 12.5% for 12 months $ 397 385 $6 755 558 PLUS: contribution to Davco headworks 3104/ha 7800/ha x $6124000 $2 437 037 $9 192 595 Gross Land Value Negative $1 680 441 Additional negatives Interest on Gross Land Value for 6 months Legals on Purchase Stamp duty A similar approach was adopted by Mr Moloney in respect of Mr Eales' Basis 2, for five large parcels. Mr Moloney's Second Hypothetical Subdivision as per Mr Eales' Basis 2 design In undertaking this exercise, Mr Moloney assumed that: . the land was in its present state of development . the roads and channel outlets will be supplied to the southern boundary only . there were no drainage works . there were no bores or pumps supplied That is, that the land was sold as it was, but in 5 subdivisional lots with at least some access to the channel and road abutting the southern boundary of the subject land. Gross Realisation Lot 1 approx 559ha $ 939 000 Lot 2 approx 609ha $1 056 000 Lot 3 approx 637ha $1 438 000 Lot 4 approx 560ha $1 102 000 Lot 5 approx 833ha $1 115 000 Lot 4 Northcote 79ha $ 176 000 3277ha $5 826 000 LESS: Selling costs LESS: Profit & risk @ 25% 25 -- 72 of 102 -- 73 125 x $5 586 525 $1 131 150 $4 524 600 LESS: Development Costs Roads 4.9km @ $140m $ 686 000 Channels 4800m (volume 120290cm) $ 192 464 Channel structure: 2 x (check drop & access) @ $25500 $ 51 000 2 x (normal drops) @ $20000 $ 40 000 Access Crossing: 3 x (over channel) @ $14500 $ 43 500 3 Soakage Pits $ 408 700 Engineering fees @ 12.5% of $1421664 $ 177 708 Survey costs $ 25 000 Subdivisional fees $ 250 Contingencies 5% $ 21 685 $1 646 307 ADD: interest on development period of 6 months @ 12½% $ 51 447 $1 697 754 PLUS: contribution to Davco headworks 3104 7800 x $6124000 $2 437 037 $4 134 791 Balance: Gross Land Value $389 809 LESS: interest on Gross Land Value for ½ selling period of 12 months @ 12.5% $ 24 363 Net Land Value LESS: Legals on purchase $ 3 261 $ 365 446 Stamp duty $11 267 $ 14 528 Englobo Value $ 350 918 Mr Moloney had no sales as a basis for the valuation of the 500 and 600 hectare blocks. He relied upon his opinion. However, Mr Moloney's second exercise produced a value for the subject land of only $350,918, which was substantially less than the value of $1,783,591 from his primary method of valuation. Therefore, he was of the opinion that his exercises showed that the hypothetical subdivision method of valuation was not appropriate in this case. The Legal Arguments The Pointe Gourde Principle Senior Counsel for both the claimant and for the respondent agreed that the compensation in this case must be assessed ignoring the effect of the Burdekin Project upon the value of the resumed lands. However, while the respondent considered that the Burdekin Project had enhanced the value of the land, the claimant contended that the scheme had adversely affected it in two ways: first, it had destroyed the potential of that land for development as sugar cane land as part of the proposed Davco Irrigation Project; and second, it had depressed the value of potential cane land generally by placing on the market at the date of resumption large numbers of irrigated cane farms. In other words, the respondent argued that the principle established in Pointe Gourde Quarrying and Transport Co. Ltd v. Sub-Intendent of Crown Lands [1947] A.C. 565, applied in the circumstances of this case. On the other hand, the claimant argued that the reverse of that principle applied, as explained by the Privy Council in Melwood -- 73 of 102 -- 74 Units Pty Ltd v. Commissioner of Main Roads [1979] A.C. 426 at 434-35. Their only agreement is that compensation is to be assessed on the basis that the Burdekin Dam Project had never been implemented. The claimant further argued that it was necessary to distinguish between matters which, in the absence of the Burdekin Dam Project, would merely have been future potentialities as at the date of resumption, and those which would actually have come into existence at that date. In the former, the value of the potential had to be assessed, in the latter it was submitted that the law required that the value be assessed as if that state of affairs was actually in existence. Stated simply, the claimant's case was that at the date of resumption the subject land would have had irrigation (as distinct from potential for irrigation). Therefore, it was argued, compensation must be assessed on the basis that irrigation in fact existed and was not merely potential. The respondent's argument was that it was the Burdekin Dam Project that transformed the subject land from second class grazing land, with irrigation potential limited by the Commission's groundwater policy, into irrigated cane land. It was submitted that the advent of the Burdekin Dam Project before the Davco Irrigation Project got underway may have disappointed the Cox family's hope of achieving the grand vision, but disappointed hopes are not a basis for compensation. The case for the respondent was that the land should be valued as it was at the date of resumption, by classification of the various areas as irrigable/arable, potential irrigable/arable, dry farming and grazing, adding, if applicable, an amount for what a prudent purchaser would pay for its future potential. It was wrong, the respondent contended, to value potential as reality. The Claimant's Argument Mr Fryberg Q.C., Senior Counsel for the claimant contended that the announcement of the Burdekin Dam Project in 1980 and the inclusion of the subject land and other Cox family lands in an area where it was necessary to obtain the approval of the Commissioner of Water Resources prior to subdivision, had effectively prevented the development of the Davco Irrigation Project. The argument continued that by the date of resumption, the actions of the respondent in releasing large numbers of irrigated cane farms onto the market, with many more to follow, had depressed the market value of the subject land as irrigated cane land. This reasoning flows from the argument outlined above, that this Court must find that at the date of resumption the subject land would have had irrigation water provided by the Davco Irrigation Project. The claimant relied for this proposition principally on the decision of Hardie J. of the New South Wales Land and Valuation Court in Woollams v. The Minister (1957) 2 L.G.R.A. 338. The case concerned the compensation payable following the resumption of land for the construction of the Warragamba Dam. In the circumstances of that case, there was a delay of some 12 years between the commencement of the project and the resumption. It became generally known that the valley would be flooded when the dam -- 74 of 102 -- 75 was completed and that the whole of the properties there would be acquired. As Hardie J. said at p.342: " The resumption by the Board of a large number of properties, the departure from the Valley of some of the residents, and the contemplated departure of other residents had a serious effect upon the amenities available in the Valley. Before the date of resumption most of the boarding houses had closed down following upon resumption or purchase by the Board and the bus services that formerly operated in the holiday seasons between Camden and the Valley were discontinued. The daily bus service between Bimlow and Camden ceased to operate at some unspecified date prior to the resumption of the subject property. All prospects of electricity being connected to the Valley disappeared. The main road into and through the Valley was allowed to deteriorate and the area retrogressed in many respects and directions. " In Woollam's case, the matter was subject to s.124 of the New South Wales Public Works Act 1912, the provisions of which required that in assessing compensation the value of the land taken was to be determined at the date of resumption "without reference to any alteration in such value arising from the establishment of railway or other public works upon or for which such land was resumed". However, Hardie J. held that s.124 had the same practical effect as established principles of compensation law. In the present case, Mr Fryberg for the claimant particularly drew attention to the words of Hardie J., where at p.344 His Honour said, "... the depreciating effect on value of the public work may not be to reduce value in terms of money but to retard the inflationary process and thus diminish the increase in value that would otherwise take place. ..." Mr Fryberg submitted that the law recognised that a detriment to the land is effected by preventing a benefit and that it was just as much a detriment to the land to prevent a benefit as it was to directly impact upon and harm the land. He also placed particular emphasis on the findings of Hardie J., where His Honour said at p.346: " I am of opinion that the value is to be determined on the assumption that the amenities and other economic and social conditions in the subject area did not deteriorate following upon and by reason of the decision of the Board to proceed with the Warragamba Dam project, and the acquisition by the Board of a number of properties in the Valley before the relevant date, and other events and circumstances associated with or consequential upon such acquisitions, and on the assumption that those amenities and conditions would have improved during the period under consideration, as they did in other primary producing and tourist areas during the post-war years, by reason of the increase in population, the improved prices being paid for primary products and the general economic development that occurred throughout the State. " It was submitted that if even the most general improvement to the subject land was prevented, be it through inflation or the general economic development of the State, then that detriment is to be ignored. The findings of Hardie J. were approved and followed by Wells J. in Crompton v. -- 75 of 102 -- 76 Commissioner of Highways (1973) 5 S.A.S.R. 301 at p.309, which was in turn approved by the Full Court of the Supreme Court of South Australia in Emerald Quarry Industries Pty Ltd v. Commissioner of Highways (1976) 14 S.A.S.R. 486. The findings in Woollams case were applied by this Court in Bell v. Brisbane City Council (1972) 39 C.L.L.R. 227. That case involved the resumption of land for the North Pine Dam some 11 years after the scheme had been formally approved. Mr Smith, then Member and later President of the Land Court, held that the principle that the amount of compensation is not to be affected by any appreciation or depreciation in value resulting from the purpose or scheme of resumption is a principle so basically fundamental to a fair and equitable approach to the assessment of compensation that it is not arguable. Mr Fryberg urged the Court to follow the sentiments expressed by Mr Smith at p.232: " Compulsory acquisition is a necessary power of modern government to be exercised in the public interest and for the public welfare. Inevitably dispossessed owners suffer anxiety, personal and financial inconvenience, obliterations of plans, of hopes and aspirations and often a severing of sentimental and deeper attachment to the land of which they are dispossessed. It is only fair and just and in the public interest that resumption processes should follow quickly upon the announcement of any public scheme and dispossessed owners should receive expeditious consideration of their claims according to law thus affording them the opportunity of establishing themselves elsewhere as soon as possible. The feelings and factors previously referred to are aggravated and multiplied if a long period precedes, as in the present case, the resumption of the required land. Such lapse of time leads to allegations that land values have been frozen or depressed as a result of being earmarked for future resumption or because of uncertainty as to whether or not land will be ultimately required. No dispossessed owner should be required to suffer monetary loss as a result of any adverse effect of the scheme upon the value of his land irrespective of whether such adverse effect arises from the nature of the scheme or from any delay occasioned by non-implementation of resumption processes. " Counsel relied particularly on the last sentence, submitting that if there is a doubt caused by the delay, that doubt must be resolved in favour of the claimant. It was also submitted that as the subject land was part of a family aggregation, if the Court was satisfied that it would have been developed by the family working together in an amicable manner, its value is enhanced and it is worth more than if it was valued separately: Copley v. Bureau of Industry (1942) 19 C.L.L.R. 4, where the President of the Land Court, Mr Payne, said at p.10: " The value of each portion, as part of a family aggregation, worked for a number of years in an amicable manner, is worth more than if valued separately .... By working together properties which possess different characteristics, the parties are enabled to utilise every acre of the aggregation to its best advantage... The actual use to which the -- 76 of 102 -- 77 resumed land was being put must necessarily be one of the factors to be considered in assessing just compensation." The Respondent's Argument Mr Cooke Q.C., Senior Counsel for the respondent, argued that the Burdekin Project enhanced the value of the subject land rather than depressed it by oversupply. It was submitted that the key to unlocking its potential as cane land was water and the scheme provided a supply of irrigation water that enhanced rather than destroyed their potential for development. Without the scheme, it was submitted, there was virtually no potential for development at all. The argument continued that any enhancement in value because of a potential would be reflected in the price negotiated by willing but not overanxious parties: Spencer v. The Commonwealth (1907) 5 C.L.R. 418. The starting point for the valuation must be to assess the land as it was at the resumption date, evaluate its highest and best use and determine what a prudent purchaser would have paid for land with that potential. Mr Cooke urged the approach adopted in this case by Mr Moloney rather than that adopted by Mr Eales, which he submitted had no factual foundation but was based on a fictitious state of affairs created by his unsupportable assumption: Stanfield v. Brisbane City Council (1990-1991) 13 Q.L.C.R. 32. There was no probative objective evidence to support the view that the Davco Project was other than fanciful and the respondent was not required to pay a value assessed on some sentimental or irrational basis: Duncan v. Minister for Education (1968-69) 17 L.G.R.A. 323 at 328. Mr Cooke submitted that Mr Eales' hypothetical subdivision approach to the valuation was not appropriate as it was artificial and not a reliable method to obtain the market value of land at the resumption date. The need to check by other methods of valuation was stressed in Bonofran Pty Ltd v. Commissioner of Railways, a decision of the Land Court, 14 October 1988 (not reported), and in Rost and Collins, Land Valuation and Compensation 3rd Edition; 1984, p.163. It was argued that the method is particularly inappropriate in the case of broadacre rural lands. The earlier Burdekin cases, including Fabrellas and Turner, were determined by the Land Court using the classification method. In any case, Mr Cooke contended, Mr Eales' gross realisation figure based on $7,000 per hectare for irrigable/arable land was far too high, while his profit and risk factors of 5% in one exercise and 10% in the other, were unrealistically low. A more realistic figure would be at least 30%: Bonofran Pty Ltd v. Commissioner of Railways. The appropriate method of valuation, Counsel submitted, was to value the land as it was at the date of resumption by the classification method. That is, each area of -- 77 of 102 -- 78 land should be valued according to its highest and best use, including its future potential, at values which a hypothetical prudent purchaser would pay based on such purchaser's assessment of that potential. The Issues This case raises a number of difficult issues and I have set out the evidence in greater detail than would normally be necessary in order that the differences of opinion between the various experts can be readily appreciated. However, it is not possible, nor is it necessary in my opinion, to resolve all the uncertainties that have been raised. I have reached the conclusion that despite the voluminous evidence and numerous witnesses in this case, the issues can be reduced to a few propositions which, although difficult to resolve, can be stated simply. (1) Does the Pointe Gourde Principle apply? At the time of hearing this matter, the development of the BRIA was well advanced. The resumed land had been developed and at least part had been auctioned. Record prices had recently been realised for blocks that were originally part of the subject land. Its potential as irrigated cane land had been realised. However, at the date of resumption, the BRIA development was still some distance away. The prices being realised for developed blocks were somewhat disappointing. Despite this, there was little doubt that the land's potential as irrigated cane land would be achieved with the arrival of BRIA channel water as a result of the Burdekin Dam Project. The respondent argued that the key to unlocking that potential was water which could only be provided by the Burdekin Project and this must be ignored. It was contended that the relatively poor prices being achieved at auction were the result of factors other than an oversupply of developed irrigated cane land on the market. The respondent rejected Mr Eales' irrigable/arable value of $7000 per hectare, urging acceptance of Mr Moloney's value of $4000 per hectare. Mr Eales' value was, it was submitted, derived from sales which were not comparable, as they were in established farming areas and (all but one) had been worked for many years. In addition, many had better levee soils, most had cane assignments and all were serviced by Water Resources Commission channels. The respondent also drew attention to the fact that Mr Eales had adopted a value of $3500 per hectare for irrigable/arable land in the Fabrellas case, where the resumption date was September 1989. On the other hand, the claimant argued that the market for that type of land was depressed because of an oversupply. The sales used by Mr Eales indicated the values which the subject land could have achieved at the date of resumption, if the Davco Project had proceeded and there had been no Burdekin Project. I have come to the conclusion that there is merit in the claimant's argument so -- 78 of 102 -- 79 far as the value of irrigable/arable land is concerned. There is no doubt that the proclamation of the subject land as part of the BRIA in 1980 prevented the Cox family from proceeding with the development of their lands by financing that development by the subdivision and sale of part of it. If there had been no Burdekin Project, there is little doubt that there would have been some expansion of the cane industry in the area, but certainly not to the extent that occurred after the construction of the Burdekin Dam. In such circumstances, the land which was suitable for cane growing and which had access to water in sufficient quantities for irrigation would have commanded a premium and, on the probabilities, been selling for prices higher than were being achieved at the BRIA auction sales at the date of resumption. The auction sales by the Commission were not made by a normal developer, but by a public authority. It was in the public interest to release land onto the market, but not necessarily at the highest possible prices. A large number of irrigated farms came onto the market and it was well known that there would be many more to come. Potential purchasers knew there was no urgency. It was therefore not the normal market situation where the vendor was trying to achieve the best price. (2) What is the Value of the Irrigable/Arable Land at the Date of Resumption? Mr Eales adopted values for this category of $7000 per hectare for Class 2 soils and $6000 per hectare for Class 3 soils. He reasoned that while there was little between them for cane growing, the Class 2 soils had some advantage for growing alternative crops. Mr Geoffrey Cox explained that cane growers had realised the value of Barratta clay soils relatively recently. The delta soils were easier to work with small tractors and were regarded as the best soils. However, with the advent of bigger machinery and large scale farming, the merits of Barratta soils were realised. It is clear that a trend has developed in the Burdekin for cane farmers to aggregate their holdings because of the benefits of large scale broadacre cane farming. Both Mr Eales and Mr Wake were convinced that they were prepared to pay a premium to do so and that this process commenced before 1990. Even Mr Moloney conceded this. Mr Moloney relied on previous Land Court determinations to arrive at the level of values that he applied to each category of land. The Fabrellas land was resumed in September 1989. In that case, Mr Moloney was the valuer for the respondent and he relied upon earlier Land Court determinations in Steven v. The Commissioner of Water Resources (1990-91) 13 Q.L.C.R. 75, where the date of resumption was mid-1987. In -- 79 of 102 -- 80 addition, the date of resumption in the Turner case was also 1986/87. Mr Moloney therefore relied on the determination of a level of values for land in 1986/87 as his principal basis for land resumed in 1990/91. In addition, the evidece indicates that the subject land is more valuable than the Fabrellas land and significantly more valuable than the Turner land. In the circumstances I think it is preferable to turn to recent sales evidence as the basis of valuation. The Roncato sale (Mr Eales' Sale 10/10A), with an area of 335.826 hectares, was the largest of his sales and was purchased for cane farming purposes. Mr Moloney thought that it was not comparable with the subject land, as it had a larger area of irrigable land, was better situated, with river frontage land and with levee soils. However, in my view, this sale cannot be lightly dismissed, particularly in view of the trend by canefarmers to aggregate larger areas. This sale does provide evidence of the price that a cane farmer was prepared to pay for a larger parcel of land. Mr Eales analysed this sale to show $7605 per hectare watered, cleared and levelled to cultivation, but without a cane assignment. Having regard to this sale together with the other sales evidence, I have come to the conclusion that $6000 per hectare should be applied to the irrigable/arable area of the subject land. However, the question remains as to how much of the subject land should be regarded as irrigable/arable land at the date of resumption. (3) Is the Claimant's Assumption Correct? I cannot agree with the claimant's proposition that it must be assumed as a matter of law that, in the absence of the Burdekin Project, the Davco Project would have been providing irrigation water to the subject land at the date of resumption. Certainly, Woollam's case and the cases which followed, provide authority for the proposition that the valuation for purposes of compensation must be assessed on the assumption that the amenities and other social and economic conditions in the area did not deteriorate and, indeed, would have improved. It can therefore be assumed that there would have been an expansion in the sugar industry, the tramway being negotiated through the subject land would have been constructed and that the values of irrigated cane land, and land with that potential, would have increased in value. However, in my view this is not authority for the proposition contended for by the claimant. I cannot see how Woollam's and the other cases can be extended to include as a matter of law that the successful completion of a private irrigation scheme must be assumed. Besides, there is simply too much doubt about its technical feasibility and financial viability. While the enhancement in value resulting from the improvement in -- 80 of 102 -- 81 the amenities and social and economic conditions must be assumed, in my opinion it is extending the principle in Woollam's case too far for it to include the assumption as a matter of law of the successful completion of the Davco Project. In those circumstances that pertained in Woollam's case and in Bell's case, because of the delays between the commencement of the schemes and the respective resumptions, and the public knowledge that the lands in those areas were to be taken, the amenities and social and economic conditions had deteriorated and no new ones were implemented. The areas, therefore, stagnated and regressed. The reasoning in those cases was that compensation must be assessed on the assumption that those amenities and social and economic conditions had not deteriorated but had improved. However, I can find nothing in the reasoning in those cases for the proposition that I must find that, but for the Burdekin Project, the Davco Project would have been providing irrigation water to the subject land by the date of resumption. I accept that it is probable that without the Burdekin Project the value of irrigable/arable land would have increased and that the subject land would be served by a cane tramline giving access to two and possibly three mills. However, I am not convinced that the majority of the subject land should be valued as irrigated cane land. I consider that this was the fundamental error in Mr Eales' approach to the valuation. He has accepted potential as reality. This method of approach was strongly criticised by the Land Appeal Court in Stanfield v. Brisbane City Council (1990) 13 Q.L.C.R. 32, where the Court stated at p.52: " The flaw in both exercises apart from ignoring the realities of the actual zoning is that, whilst the effects of the resumption (which began in 1985) should be disregarded in determining compensation, it is wrong to assume that the subject land at the relevant date would have been in the position of the Village Roadshow, and to assume that the subject land should be valued as if it was in that position. If the land possessed a potential for a higher and better use the potential forms part of the value of the land but it is the present value alone of that potential which has to be valued at the date of resumption. 'You must not notionally bring what is only potential into being and value it as if it existed' - (per Dixon C.J. in Turner v. Minister for Public Instruction (1956-1957) 95 C.L.R. 245, 268. " Therefore, apart from the value of the land which can be irrigated in accordance with the then existing water allocation policy of the Commission, the remaining area of suitable land would have merely had a potential for cane growing at the date of resumption. It is the present value of that potential that has to be determined: Cedar Rapids Manufacturing and Power Company v. Lacoste [1914] A.C. 569 at 576. The High Court of Australia in Spencer v. The Commonwealth (1907) 5 C.L.R. 418 established what is meant by "value", especially in the judgments of Griffith C.J. and Isaacs J. The test proposed by Griffith C.J. appears at p.432: " In my judgment the test of value of land is to be determined, not by -- 81 of 102 -- 82 inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?' It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together." Isaacs J. said in his judgment at 441: " To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property. " The question in the present case, therefore, becomes: In the absence of the Burdekin Project, what would a prudent purchaser, as envisaged by the test in Spencer's case, have been prepared to pay for the potential that the land might have been provided with irrigation water from the Davco Project? In my opinion such a prudent purchaser would make this assessment, taking into account such things as: • whether the Davco Project was technically and financially feasible; • the risk of its long term reliability; • whether the river had sustainable flows to enable water harvesting; • the difficulty of changing the policies of the Water Resources Commission and obtaining river and groundwater pumping licences; • the problem of obtaining cane assignments. Apart from the area which could be irrigated in accordance with the Commission's then existing policy, Mr Moloney considered that there was no potential in the balance area above that of dry farming and grazing. The respondent contended that there was no element of special value to the owner and, except for the area used as effluent disposal for the feedlot, the claimant agreed. I will discuss the feedlot separately. However, I am of the opinion that a prudent purchaser would take a more optimistic view of the land's potential than did Mr Moloney. He made little difference between the value of dry farming land and grazing land. I think that the evidence establishes that there should be a higher value for dry farming land for two reasons. -- 82 of 102 -- 83 First, it is clear from the evidence of Mr Geoffrey Cox that part of the development process was to crop the land for forage sorghum or other fodder crops for some years in order to offset the cost of land treatment. However, he made it clear that such cropping was for fodder or silage purposes rather than for grain. I gain support for this opinion from the approach adopted by Mr Rosser to the valuation of the Parker land in 1982. At that time he valued the dry farming land there, which on the evidence is similar to the subject, at either $1,600 per hectare unimproved, based on the Cox sales, or at $1,050 per hectare unimproved, based on other sales. Second, while the evidence does not establish that the Davco Project would have been successful, neither does it conclusively prove that it would not. The best that can be said is that it may have been. Therefore, I am not prepared to reject the proposition that a prudent purchaser would have paid something extra for the dry arable area because of the possibility that the Davco Project would have provided irrigation water to the subject land at some time in the future. It is quite possible that the vision of Mr David Cox may have required modification and compromise, the costs may well have been higher and the delays longer. However, I think that the possibility of some ultimate success of the scheme, at least in part, would have induced a hypothetical prudent purchaser to pay something more than dry farming value. (4) What is the Value of the Dry Farming Land? Two sales by Mr Geoffrey Cox of land on Pelican Road in 1990 were used by Mr Moloney as part of his basis of valuation. Mr Cox explained that he sold these lands in haste at what he could get for them. He had been issued with a notice of intention to resume Lot 8 and was concerned that his entire aggregation could be resumed. As the lands on Pelican Road had no water allocation, he thought the Commission would offer only $150 per acre as compensation. He did not know whether the purchasers were able to negotiate access to channel water before or after purchase, but both subsequently did obtain BRIA channel water. However, Mr Cox was certain that the contracts with the purchasers were not conditional on satisfactory arrangements being made to obtain water. At the time the construction of the BRIA channel was well under way, but as far as Mr Cox was concerned, they were dry blocks with no water allocation. He sold them at the same price that he had obtained for similar land in 1980 and he said "... they got snapped up in a flash". He said that he had put this price on them for two reasons; first, because he felt the situation was still the same in 1990 and second, because he could give no water allocation. Also in 1990, Lots 4 and 5 on RP 36389 were sold by Mr Geoffrey Cox to a Mr Mio at approximately the same price per hectare. That purchase of this larger area of land was not included in Mr Moloney's basis of valuation. Mr Cox said that he considered that dry land farming was a good way of developing the land for its ultimate use as cane land. Dry land crops, such as sorghum, -- 83 of 102 -- 84 would help pay for the costs of development and he said that even if the crop was not a harvestable one, it would provide a grazing crop for cattle and in part compensate for the cost of development work. The lands sold by Mr Geoffrey Cox in 1980 were sold with no water allocation and apparently with no guarantee of BRIA supply at the time of sale. The Burdekin Dam Project had only just been announced and no construction had commenced. Therefore, in 1980 these lands could have had no more than the potential for irrigation at the time they were sold. Mr Rosser's sales schedule shows that the lands sold by Mr Geoffrey Cox at that time analysed to show unimproved values ranging from $2,150 to $2,500 per hectare. Mr Moloney's sales schedule set out the details of two sales by Mr Geoffrey Cox in May 1990. According to that schedule, 53.577 hectares sold for $185,000 and 56.55 hectares sold for $196,000. These sales show values of $3453 per hectare and $3466 per hectare respectively. Mr Moloney described the state of development of both as pushed, stacked, burnt and cutterbarred at date of sale, with no structures. There is no evidence to the contrary. However, Mr Moloney stated that these blocks each had a water allocation of 8 megalitres per hectare. As Mr Cox said that he sold them with no water allocation, the water allocation mentioned by Mr Moloney must have been arranged with the respondent subsequent to the sale. Be this as it may, there is little doubt that the potential for irrigation was much closer at the date of these sales than it was in 1980. In my opinion, these sales give at least some indication of what purchasers were prepared to pay for small areas of dry arable land with potential for irrigation water. While it is by no means ideal evidence and the sales are not directly comparable to the circumstances of the subject land, they do provide some evidence of value of dry arable land with irrigation potential in 1980 and in 1990. There is little evidence of the value of dry arable land, leaving aside for the moment its value including potential. Mr Eales did not express a view, while Mr Moloney adopted a maximum rate of $670 per hectare, raked and burnt with small regrowth. However, this is only $200 more than the maximum rate per hectare that he applied to grazing lands, raked and burnt. I note also that in his apportionment of the Land Court determination in the Fabrellas case, he attributed $1241 per hectare to dry arable cultivation. On the other hand, the sales by Mr Geoffrey Cox in 1990 show approximately $3500 per hectare, cleared virtually to cultivation. However, allowance must be made for the possibility that these lands were purchased with the likelihood of obtaining water from the Burdekin Project. Also, they are small areas. While the potential for the dry arable area of the subject land to obtain irrigation water from the Davco Project would be, in my opinion, something that a prudent -- 84 of 102 -- 85 purchaser would not ignore, I do not think that such a purchaser would be prepared to pay a great deal more than the dry arable value for something that might not happen for some time, might not be reliable and might be costly. After weighing what evidence there is, I have come to the conclusion that a prudent purchaser would pay $2000 per hectare for the dry arable area of the subject land, cleared to cultivation. (5) What is the Appropriate Method of Valuation? I cannot accept the hypothetical subdivision method of valuation as the primary method of valuation in this case. Mr Eales' Basis 1 was not a true hypothetical subdivision as it assumed that three quarters of the land was retained and not sold. This cannot be correct as the test of value set out in the judgments in the Spencer case envisages the sale of the whole of the land. It was likened by Mr Wake to a hypothetical development. However, in the present case that is an even less acceptable method of valuation and has been the subject of critical comment in numerous cases: see Thirty-Fourth Philgram Pty Ltd v. The Crown (1992-93) 14 Q.L.C.R. 13 and the cases cited therein. The respondent contended that the hypothetical subdivision method of valuation is best used as support for a more conventional method of valuation. It was suggested that it was a method of last resort in the absence of broadacre sales and not standard valuation practice for rural lands. The respondent attacked Mr Eales' hypothetical exercises as being flawed, principally because his gross realisation figures were too high, while his profit and risk factors were unrealistically low. He had adopted no other valuation method as a check. It is well recognised that the hypothetical subdivision method is seldom appropriate for the valuation of rural land: Rost and Collins, p.163. The problems associated with that method of valuation are contained in the judgement of the President of the Land Court, Mr Smith, in Bonofran Pty Ltd v. Commissioner of Railways, delivered 14 October 1988 (not reported). At pp.7-8, the learned President said: " As a method of valuation, distinct from its application in particular cases, the hypothetical subdivision method has been adversely criticised. Perhaps the most well known and authoritative are the comments of Dixon, C.J. in Turner v. Minister for Public Instruction (1956-1957) 95 C.L.R. 245 at p.267/8:- ' There is still another consideration. One would suppose that a case will not often occur where there is no other evidence of value than the result of the method of computation invoked in the present case (i.e. a hypothetical subdivision valuation). More usually it will be possible, so it may be assumed, to find some light or basis of inference in actual sales made of comparable pieces of land that might be sub-divided. Some guidance must often be obtainable from the prices which building land has realised even though it is not in the neighbourhood, if the circumstances and situation possess a sufficient similarity. The -- 85 of 102 -- 86 formula, the use of which apparently has become so familiar in valuing land suitable for sub-division, contains a number of factors all of which seem to depend on little or nothing more than opinion and it may be supposed that widely different results may be produced by variations in detail, though no given variation may itself seem considerable. It would appear natural therefore for a judicial valuer to seek to check his result by reference to as many sources of information and inference as may be found, even if he might consider that they would not provide him, had they stood alone, with a satisfactory independent basis for an ultimate conclusion. ' I cite,in addition, my own remarks in Merewether v. Brisbane City Council (1974) 1 Q.L.C.R. 126 at p.132. Also Para Vale Estates Pty. Ltd. v. Minister for Works (1966) 12 L.G.R.A. 19 at p.23 (Sup. Ct S.A.); The Minister for Lands v. Franklin - Valuer July, 1986, 229 at pp.235/6 (Land and Environmental Ct N.S.W.); and Myer Realty v. The Commissioner for Railways (1980/81) 7 Q.L.C.R. 87 at p.92 (Ld Ct) to mention a few. A small variation in any one of the many component steps (estimate of gross realization, selling period, risk/profit factor, development costs etc.) can make a significant difference to the answer - the value of the unsubdivided land. Courts have, therefore, frequently stressed the prudence, indeed the desirability, of checking a valuation emanating from the application of this method against sales of comparable land in an unsubdivided state. " I respectfully agree with the comments of the learned President. In the present case, the profit and risk factors in Mr Eales' hypothetical exercises were adopted on the assumption that at the date of resumption the subject land would have had Davco irrigation water available. Even on that basis, I think that his factors were unrealistically low. In view of my finding that the law does not require such an assumption to be made and because of the unresolved doubts about the feasibility and viability of the Davco Project, Mr Eales' hypothetical development exercises are of no assistance. Mr Moloney undertook hypothetical subdivision exercises only after Mr Eales had given his evidence and, for those purposes only, he accepted that at the date of resumption the Davco Project would be supplying irrigation water to the subject land. Mr Moloney did this for the sole purpose of demonstrating that even when more realistic values, development costs and profit and risk factors were applied, the method was still inappropriate. It is quite clear that Mr Moloney had no faith in the hypothetical subdivision method but felt that he should demonstrate how flawed Mr Eales' approach was in case the Court accepted that the assumption should be made. I am of the view that it would be pointless to undertake a hypothetical subdivision valuation. If the gross realisation was assessed on the assumption of the success of the Davco Project at the date of resumption, the profit and risk factor must be such that it takes account of all the unresolved risks and uncertainties. In such circumstances the -- 86 of 102 -- 87 profit and risk would be of such magnitude that one could have no confidence in the result. It is better to determine the valuation by other means. The claimant contended that the hypothetical subdivision method is appropriate as a primary method in the absence of comparable in-globo sales, as in this case. It was pointed out that the method was used by Mr Rosser in 1982 to value the Parker lands. However, I note that Mr Rosser adopted profit and risk factors of up to 40%, without having to consider the risks involved in the Davco Project. In any case, Mr Rosser's valuations were not tested in Court, while in the earlier Burdekin cases of Zandonadi, Fabrellas, Stevens and Turner, the Land Court determined compensation by the classification method. I intend to adopt a similar approach. Valuation by Classification Irrigable/Arable Land Under the groundwater allocation policy of the Water Resources Commission, the parties seem to agree that the subject land had entitlement to 927 megalitres per annum. At the rate of 8 megalitres per hectare, this entitlement would irrigate approximately 116 hectares. As a result of my finding in respect of irrigable/arable land, I intend to adopt $6,000 per hectare, treated and watered, for that area of land. Dry Arable Land with Potential Mr Eales made no assessment on the basis of dry arable land. He considered all but approximately 500 hectares to be irrigable/arable land, but he allowed for 445.5 hectares of Class 4 soils, while approximately 442.1 hectares were not included in the area which he valued. This latter area appears to have been the total area included in roads, stock route, water courses, etc., on the Davco design. Mr Moloney valued 115.5 hectares as irrigable and potential irrigable/arable land, 2121 hectares as dry arable land and 1467.41 hectares as grazing land. The areas of the various classes of soil calculated by surveyors, Brazier and Motti Pty Ltd, from the DPI soil map, as annexed to Mr Eales' report, show 2189 hectares of Class 3 soils and 889 hectares of Class 2 soils, a total of 3078 hectares of land suitable for the growing of sugar cane. Excluding the 116 hectares of irrigable/arable land, this would leave 2962 hectares of potentially suitable land. However, the evidence would seem to indicate that not all of this area would be suitable for dry farming. Weighing this evidence I have come to the conclusion that it would be reasonable to adopt an area of 2200 hectares as dry arable with potential for irrigation in the future and 1389.274 hectares as grazing. The Grazing Lands The balance area of approximately 1390 hectares falls to be valued as grazing -- 87 of 102 -- 88 460.5 ha ripping at $300 per ha $138,150 1361.7 ha stick picking, ripping and levelling @ $700 per ha $953,190 land. Mr Moloney applied values to grazing land ranging from $200 per hectare with no timber treatment up to $475 per hectare, raked and burnt. Mr Eales did not attribute a value to grazing lands as such, but he adopted a value of $1000 per hectare for Class 5 soils, those soils unsuitable for agriculture. After reviewing the evidence contained in the bases of valuation of both valuers, I have come to the conclusion that the rate of $400 per hectare, cleared to grazing standard, should be adopted for the grazing land. Perhaps, in the future, if the Davco Project had proved to be successful, then some of this land could have been developed as irrigated cane land as envisaged by Mr Eales. However, at the date of resumption I think that such a possibility was too remote for a prudent purchaser to pay more than grazing value. Valuation Fully Economically Developed From these findings, I have adopted the following classifications and values: 116 ha irrigable/arable @ $6000 per hectare $ 696,000 2200 ha dry arable with potential @ $2000 per hectare $4,400,000 1389 ha grazing @ $400 per hectare $ 555,600 Total $5,651,600 The costs to develop the land to that stage need to be deducted. Timber Treatment Mr Eales inspected the land accompanied by Mr Geoffrey Cox and using an aerial photograph mosaic, he noted the state of land development with Mr Cox's assistance. He then had surveyors Brazier and Motti Pty Ltd measure the cleared and treated areas as indicated on the mosaic. His evidence was largely confirmed by Mr Cox and I accept Mr Eales' assessmennt of the various areas rather than Mr Moloney's. Mr Eales estimated that approximately 501.6 hectares had been cleared, stick raked and disced to cultivation, approximately 460.5 hectares had been cleared, raked and burnt and approximately 1361.7 hectares had been cleared. The balance area of approximately 1381.5 hectares, he described as lightly timbered forest country. In estimating the timber treatment required to bring all the subject land to levelled cultivation standard, he reasoned that no further work was required on the existing cultivation of 501.6 hectares, but the following work was required on the balance areas: 1381.5 ha clearing and levelling to cultivation @ $1000 per ha $1,381,474 Therefore, a total expenditure of $2,472,814 was required to bring the whole of the land to the stage where it would be levelled cultivation for the growing of irrigated sugar cane. -- 88 of 102 -- 89 However, in the approach that I have chosen to adopt, there is no necessity to bring the whole area to that standard of development. Apart from the area of 116 hectares, there is no necessity for development to irrigation standard. That area is already accommodated within the 501.6 hectares of existing cultivation, leaving the remaining 385.6 hectares of cultivation available for dry farming. Although on the state of the evidence it is not possible to be precise about the location of the dry arable and grazing areas, it seems to me that the development necessary is sufficiently accounted for by the treatment of the 460.5 hectares and 1361.7 hectares described by Mr Eales at a cost of $1,091,340. As the balance land is described as lightly timbered forest, as grazing land it would require little or no timber treatment. Further Irrigation Bore I accept Mr Moloney's evidence that a further irrigation bore would be required to irrigate the area that could be irrigated in accordance with the Commission's groundwater allocation policy. The evidence indicates this would cost $18,000. Therefore, I consider it is necessary to deduct an amount of $1,109,000 which I feel would be sufficient to cover reasonable development costs to the standards envisaged by the values applied. The value of the resumed land is therefore assessed at $4,542,600. The Value of the Structures As mentioned previously, Mr Eales valued the shed which at the date of resumption was situated on Lot 47 at $87,000. However, it was removed before he was able to inspect it. On the other hand, Mr Moloney had the advantage of inspecting the shed before its removal and he valued it at $90,900. In the circumstances, I adopt Mr Moloney's valuation of the shed. Mr Moloney valued a set of cattle yards known as Jardine Yards at $34,343. Mr Eales did not value them, probably because he valued the subject land as irrigable/arable land, rendering the cattle yards obsolete and of no value. However, on the reasoning that I have adopted, the yards would still have value. Therefore, I adopt Mr Moloney's value of $34,343. I now turn to the issue of disturbance. Disturbance (i) The Feedlot The Background - Mr Geoffrey Cox's Evidence Mr Geoffrey Cox gave evidence that in 1983 when cane prices were depressed, the Cox family decided that feedlotting was an alternative venture which would fit into -- 89 of 102 -- 90 their operations. The design and construction of the feedlot was commenced in 1986 as a project of Kalamia Plains Pastoral Company, the farming partnership of the claimant and Geoffrey Cox, in which their interests were two-thirds and one-third respectively. The feedlot structures were sited on Lot 1 on Registered Plan 36390 (owned by Geoffrey Cox) and the effluent runoff area on Lot 47 on Plan GS36, because of their respective contours. Lot 1 was a raised area which fell away to the north and the effluent flowed down the slope over the then unmade Corica Road onto Lot 47 and was allowed to spread out over a considerable area. The Kalamia Plains partnership constructed Pelican Road to access the feedlot, Mr Cox explained. At the time there were no Government licensing requirements for feedlotting. Council consent was required in conjunction with the Water Quality Control Council. Mr Cox said that the latter would not approve a pumped runoff system, only one where effluent runoff followed the natural fall of the land. According to Mr Cox, a pumped effluent system was considered too risky by the authorities because of the chances of mechanical failure or power outages in storms, when there would be a lot of runoff. Ancillary automatic start-up diesel systems would have been required. The first Burdekin Shire Council consent in 1987 was for a capacity of 4,000 head and the feedlot commenced operation in early 1988. The Cox's initial intention was to operate it themselves, but Super Stock, a subsidiary of Defiance Milling, became interested during the construction and the feedlot was leased to Super Stock until the latter part of 1989. In May 1989, an application was made to the Burdekin Shire Council for an extension of the feedlot capacity from 4,000 to 8,000 head, with plans showing an effluent sediment pond to be constructed on Lot 47, and for the effluent then to be reticulated out over an area of crops on Lot 47. Mr Cox explained that at that time there were no definite guidelines for feedlots, but it was known that they were soon to be published. Therefore, the sediment pond and reticulation system were not constructed, awaiting those guidelines. In the meantime the effluent free-flowed naturally onto Lot 47 and dispersed. The Burdekin Shire Council approved the application to extend the size of the feedlot to 8000 head in June 1989. The conditions of that approval included the requirement for the down-slope runoff of effluent to a drainage area which was to be greater than four times the feed lot area. They also required that "Liquid effluent is to be disposed of in accordance with guidelines set by the Water Quality Control Council of Queensland", with whom Mr Cox had been liaising. Condition 7 dealt with any future relocation or upgrading in the event of construction of Corica Road. Mr Cox said that had it not been for the pending resumptions, the effluent pond and disposal system would have been constructed in accordance with the feedlot guidelines. -- 90 of 102 -- 91 On 12 December 1988, an application was made for an extension of the feedlot to cater for an additional 12,000 head. Mr Cox explained that it was his intention to seek an equity partner to establish a meatworks. However, a capacity greater than 10,000 head was required. While the Coxes were comfortable with their own operation at 8,000 head, the extension to 20,000 would have widened their options. Soon after that application, on 28 February 1989, the Water Resources Commission issued a notice of intention to resume, among other lands, Lot 47 and Lot 8 on Registered Plan 36390, owned by Geoffrey Cox, which adjoined Lot 1 to the east. Lot 8 was subsequently taken by proclamation dated 2 June 1990 but, after a long period of negotiation, the proclamation in respect of Lot 8 was revoked. On 21 April 1989, the Burdekin Shire Council advised that it approved the extension of the capacity of the feedlot to 20,000 head, with similar conditions to the previous approval, except for Condition 15 which stated: "If at any time Portion 47V (Lot 47) becomes unavailable for the disposal and containment of liquid effluent in terms of the application, the use of feedlot shall cease." Mr Cox said that the Water Resources Commission initially was not concerned about the feedlot. However, by the end of 1988 when 7,500 head of cattle were in the feedlot, he thought that the Commission feared that it would not be able to sell its yet to be developed nearby blocks and decided that the feedlot had to go. The Commission lodged an objection to the application to increase the feedlot to 20,000 head and served notice of intention to resume Lot 47 and Lot 8. Mr Cox said that he thought these actions demonstrated its intention to stop the feedlot. Subsequently, a successful appeal was lodged to the Local Government Court by the Water Resources Commission against the Council's approval. Mr Cox explained that the grounds of appeal were to the effect that the approval would be contrary to the rights and interests of surrounding landholders and an unacceptable detriment to the amenity of those landholders; would be inconsistent and/or incompatible with the proposed further development of the surrounding lands to irrigated farming lands; and would be contrary to good town planning principles. The appeal also stated that approval should not have been given because of the notice of intention to resume Lot 47. Mr Cox said that Commission officers had made it clear that they wanted to get rid of the feedlot. He conceded that under the new regulations of December 1989, the method of disposal of effluent did not comply with the new guidelines, which required total containment of all runoff in a containment pond. If such a containment pond was to be constructed on Lot 1 or Lot 8, total excavation would have been required. However, on Lot 47, as there was a considerable fall, a containment pond could be constructed above ground, like a turkey's nest. The difference in cost between the two methods, he estimated to be $400,000, the difference between $1 million in the cost of excavation, compared with the cost of about $600,000 on Lot 47. -- 91 of 102 -- 92 Mr Cox said that while they were prepared to comply with the guidelines by constructing the effluent disposal on Lot 47, the Commission was determined not to let the feedlot continue. He said that he "limped it along" for 18 months, but it ceased operations towards the end of 1991. The reason that the feedlot ceased was, in his opinion, because of the stated intention of the Commission's officers to get rid of it at all costs and hence the resumption of the subject and his own Lot 8. An application for a feedlot licence under the new regulations was made by the feedlot manager in January 1990, followed by a letter dated 6 March 1990 from the manager of the Feedlot Services Group of DPI requesting further details. Mr Cox explained that no further plans were submitted as requested, because of negotiations then going on. He felt there might have been some confusion if the licence application had been pursued at that sensitive stage. It was Mr Cox's understanding that, having applied for a licence, until such time as it was accepted or rejected by the Department, they were lawfully able to continue running the feedlot. Mr Cox said that grain for the feedlot would have been obtained from local contract growers. Grain from the Central Highlands would have been a backstop, but with added transport costs. Before the Burdekin Project, land was being cleared and working up as dry land in anticipation of eventual cane expansion, growing grain in the meantime. Although grain growing was not a long term proposition in the Burdekin under rainfed conditions, he felt that it was a very useful pioneer crop to get some return on the cost of land development and was a well accepted practice in the Burdekin before the dam. The Coxes themselves intended to grow forage sorghum and forage corn on their surrounding lands for silage, either on dry land or, if possible, on irrigated land. When they were able to grow cane on their lands, they would source their raw materials elsewhere, growing what crops they could and contracting the rest. Mr Cox saw the partnership schemes as complementary. Their cattle grazing operation was on raw country. They improved that land in anticipation of cane expansion. In the meantime, they could work their land up by grain and fodder growing. He said that they could have been flexible, depending on which activity produced the bigger returns, but they had no doubt that the land was going to be cane land. Mr Cox said that they realised that when the new guidelines were implemented they would have to upgrade the effluent disposal. They had budgeted to do so on Lot 47, but delayed any action until the precise guidelines were available. The guidelines proved to be much as they had expected and they were achievable on Lot 47. However, when that land was resumed, he felt that the added cost of establishing the pond on his own land was prohibitively expensive. The Official View - Mr Evans' Evidence Evidence in relation to the feedlot was given by Mr Peter Alexander Evans, a -- 92 of 102 -- 93 hydrologist holding the position of Groundwater Geologist, Department of Primary Industries, Water Resources. Mr Evans' report stated that prior to November 1989, the regulation of cattle feedlots was undertaken by local authorities, with the Department of Environment and Heritage administering the water pollution aspects under the Clean Waters Act. Since then, legislation has given the DPI the responsibility for the licensing and on-going management of feedlots, although local authorities still had responsibility for town planning approval. In relation to the subject feedlot, Mr Evans explained that the Burdekin Shire Council approved an extension of the then 4000 head capacity to an 8000 head capacity on 6 June 1988. He stated that subsequent applications to increase the capacity to 20,000 head were unsuccessful because of appeals by the respondent and others. A feedlot licence application was submitted on 20 January 1990, under the new regulations. However, Mr Evans said that the DPI Feedlot Services Group did not receive the appropriate information to fully consider the feedlot licence application. Accordingly, the feedlot had never received a licence to operate. However, Mr Evans agreed that if there had been no resumption, there was no technical reason why the feedlot operation could not have been licensed to continue with the upgraded effluent disposal on Lot 47. Mr Evans went on to state that from the formula contained in the Queensland Government Feedlot Guidelines, the effluent pond design volume for the subject feedlot would require that 143 megalitres of good quality irrigation water was available to allow sustainable land application onto crops. He said that no such groundwater allocation was attached to Lot 1 and, although a registered bore on Lot 47 had an annual allocation of 204 megalitres, a condition of its licence required that water from that bore be used only within the boundaries of Lot 47. However, Mr Evans did not consider whether a water allocation from other land held by the claimant could have been transferred to Geoffrey Cox's land. Mr Evans said that if an effluent retention storage with 143 megalitre capacity was installed, it would have been possible to dispose of the liquid wastes onto Lot 8 on RP 36390 (the adjoining land owned by Geoffrey Cox) by pumping. He said that the guidelines' formulae specified that the required area for irrigation of runoff effluent would be 155 hectares and the required area for disposal of manure 162 hectares, a total of 317 hectares for the waste disposal area. Mr Evans stated that a comparison of the waste disposal suitability of the land on Lot 8 and that on Lot 47 showed that the land on Lot 8 was quite comparable with the land designated for feedlot waste disposal on Lot 47. He also expressed the opinion that an effluent retention storage could be constructed on Lot 1 to accommodate the required volume of effluent but it may require a synthetic liner to prevent seepage losses. -- 93 of 102 -- 94 Had the feedlot obtained a cattle feedlot licence and a legitimate source of water supply, Mr Evans concluded that it could have operated successfully by retaining runoff effluent in a storage and applying it to lands on Lot 8 by pumping. Therefore, it was his opinion that the resumption of Lot 47 would not preclude the operation of the feedlot. However, in expressing this opinion, Mr Evans did not consider the additional cost of relocating the effluent disposal area, constructing the pond and using irrigation to dispose of the liquid out of the pond after the settling time. Nor did he take into account the fact that Lot 8 was subject to a notice of intention to resume at that time and was actually resumed on 2 June 1990, although that was later rescinded. The Difference in Cost of Establishing the Effluent Disposal Mr Devlin also gave evidence about the feedlot. He said that he had designed an effluent pond disposal system which fulfilled the requirements of the new guidelines, to service 8000 head of cattle. He did this on the basis of information provided by Mr Evans who told him the volume of the required pond was 143 megalitres and provided a plan. Mr Devlin had been asked to compare the cost of constructing the pond on Lot 47 and on Lot 1. He said that according to his calculations for construction on Lot 47, the runoff from the feedlot required a broad ditch, with a bed width of 2 metres and a flow depth of 3/4 metre. The total earthworks would be 90,000m3 of cut and 7500m3 of fill. A significant pipe would be required to cross Corica Road. The proposal for construction on Lot 1 would require excavation of 170,000m3, a net difference of 80,000m3, but no fill or road crossing would have been required. Mr Devlin concluded that the cost of establishing the pond on Lot 47 would have been $167,000, while the cost of establishing it on Lot 1 would have been $275,000, a difference of $108,000. However, it emerged that there was doubt about the information provided by Mr Evans and that the volume of the required pond may calculate to either 249 megalitres or 253 megalitres. Mr Devlin was unsure whether Mr Evans had allowed for the runoff and rainfall on the storage itself. Without a map of the bunded area, Mr Devlin admitted that he could not determine the correct figures. It seems, therefore, that the cost difference between establishing the effluent disposal system on Lot 47 and on Lot 1, could be much greater than calculated by Mr Devlin. The Valuation Evidence In his valuation, Mr Eales included an amount of $357,000 under the heading of "Disturbance" for the feedlot. In Mr Eales' opinion, the resumption of Lot 47 of the subject land caused the closure of the feedlot because of the loss of the effluent area. His report continued: " The cost of re-establishing the effluent area on Lot 1 on -- 94 of 102 -- 95 Shed/Office $ 6,000 Harvestores $ 133,500 Feedlot Yards $ 283,350 Water Supply $ 13,000 Loss of Business Income $ 100,000 $ 535,850 Loss of 2/3rd interest $ 357,000 Registered Plan 36390 is firstly uneconomical due to the cost of providing the effluent area and secondly, the resuming authority and the subsequent new landholders in the area would be potential successful objectors to an application to re-establish the effluent area. The loss incurred was to the extent of the value of the Structural Improvements, Feedlot Yards, Water Improvements and Harvestores less their residual or salvage value. The value of machinery used in the feedlot operation has been sold at discounted prices, however, no claim is made for the loss incurred for these items due to the difficulty of establishing the difference between normal depreciation and the discounted prices of the machinery sold. " Mr Eales explained how he valued of the improvements on Lot 1 which, although it was not resumed, were rendered less valuable by the resumption of Lot 47. He assessed the loss in value of the shed/office on the basis of its alternative use as a farm shed. He thought that the loss in value of the harvestores was offset by their salvage value. He regarded the feedlot yards and water supply as being totally lost. In summary, his assessment of the compensation for the feedlot was: Mr Eales rationalised his assessment for loss of business income on the basis of the loss which would be incurred until the feedlot could be relocated. Attached to his report was a "Trading, Profit and Loss Statement" for the year ended 30 June 1990, showing a profit of $52,343.95, and a similarly headed statement for the year ended 31 January 1991, showing a profit of $114,799.69. Mr Eales adopted a loss of profit for one year of $100,000. The overlap between the two financial statements contained in Mr Eales' report was explained by Mr Geoffrey Cox. He said that the statement to the year ended 31 January 1991 was the best representation of the financial capacity of the feedlot. Prior to late 1989 it had been leased to Super Stock. The year ended 30 June 1990 included bad debts of $60,000, when Queensland Stations, then with cattle in the feedlot, went into receivership. The year to the end of 1991 was distorted, he said, as it included no fodder costs, it was all income. However, he said that even in the selected period, the feedlot was not operating anywhere near its full capacity, which he felt would produce an annual profit in the vicinity of $1 million. -- 95 of 102 -- 96 Mr Eales said that he had valued all the resumed land as irrigable/arable land, including that used as the feedlot effluent area. He reasoned that the effluent area would have no less value than the cane land and may have had a higher value. The claim for the feedlot was, he said, based upon its special value to the resumed owner, who had his interest in the feedlot totally disrupted by the resumption. Mr Wake's Opinion Mr Wake outlined his understanding of the reasons for the closure of the feedlot and the claim for its total loss: . The feedlot could not continue to operate in accordance with Town Planning consent following the taking of the area used for effluent disposal. . There was, in his words, "extreme doubt" if an effluent disposal which complied with the upgraded requirements introduced in 1989 could be re-established on Geoffrey Cox's land. It could, he thought, be physically relocated, but only at the exorbitant expense of some $250,000 to $300,000, being the difference between the cost of upgrading the existing effluent disposal on the subject land and the cost of constructing an upgraded effluent disposal for 8,000 head capacity on Geoffrey Cox's land. . The Water Resources Commission and an adjoining landowner had objected to the expansion of the feedlot, and the development of further farms by the Commission raised doubts about the prospect of approvals. . An effluent containment on the resumed land could have been gravity-fed, whereas relocation onto Geoffrey Cox's land would require massive excavation and/or expensive pumping. . The cost was considered by the owners to render the project of doubtful viability and would appear not to be acceptable to the authorities. Mr Wake said that it was his understanding that the 1989 Amendment Act introduced a licensing system for feedlots under which they had to meet the standards prescribed, but existing feedlots were given time to comply. He said that if the Coxes intended to use the feedlot for greater than 500 head, they would be required to substantially upgrade the effluent disposal system. Mr Wake endorsed Mr Eales' assessment of the compensation for the feedlot at $344,000 (which differs from Mr Eales' figure). He had looked at the profit and loss statement up until the time the feedlot stopped operating on 30 June 1991. Is Compensation Payable for Disturbance? The Arguments The claimant submitted that there was little evidence to contradict Mr Eales' valuation of $357,000 as the value of the feedlot, as Mr Moloney gave no evidence about it. As for the argument that it could not have continued lawfully after the date of resumption, it was submitted that the relevant provisions of the Stock Act 1915 were -- 96 of 102 -- 97 proclaimed to commence on 16 November 1989, but provided that no prosecution was to be brought if an application was made within three months of that date. An application was made on 20 January 1990, but was never dealt with and no construction work was carried out. The claimant contended that construction of the effluent disposal system to the necessary standard was feasible on Lot 47, but the additional cost of carrying out this work on Lot 1 made it uneconomical. Furthermore, the requirements for effluent disposal involved 155 hectares for irrigation from the effluent pond. Lot 1 contained approximately 60 hectares, of which approximately 12 hectares were used for the feedlot facilities. Lot 8 owned by Geoffrey Cox was being resumed and was not available. Mr Devlin's calculations for the additional cost of constructing the appropriate disposal system were based on a required storage capacity of 143 megalitres provided to him by Mr Evans. This was proved to be incorrect. In addition, the claimant submitted, relocation of the effluent disposal from Lot 47 would have required fresh consent from the Burdekin Shire Council. This was unlikely to be given. The Council had indicated its attitude by providing a condition in the 1989 extension approval that the feedlot cease to operate if the use of Lot 47 became unavailable. The Council was unlikely to grant a fresh approval in the face of the opposition to the feedlot by the respondent and other likely objectors. In opposing the claim in respect of the feedlot, Counsel for the respondent submitted that the partnership's accounts showed that, apart for the year 1988/89 when it was operated by Super Stock under lease, the feedlot did not make a profit. He submitted that the trading figures relied on by Mr Eales were of doubtful validity and did not reconcile with the official accounts of Kalamia Plains Pastoral Company. It was further submitted that the feedlot was established as a stop-gap measure until the land could be brought into cane production and that the Coxes knew before they commenced construction that resumptions were a real possibility. In addition, Counsel argued, at the date of resumption the feedlot did not have a licence to operate and before one could be obtained, considerable upgrading of the effluent disposal system would be required. Therefore, it was submitted that any assessment of compensation for disturbance should be limited to the difference between the cost of constructing the upgraded disposal system on the resumed land and the cost of constructing it on Lot 1. Mr Devlin had estimated this to be $108,000, the claimant's two-thirds interest being $72,000. I turn now to consider the attitude of this Court in such matters. In Murray v. Queensland Electricity Generating Board (1984) 10 Q.L.C.R. 69, the Land Appeal Court considered the matter of disturbance. At page 78, the Court said: " Disturbance, although it is often separately assessed by Courts, is not a separate subject of compensation. Its relevance to the assessment of the amount which will compensate the former owner for the loss of -- 97 of 102 -- 98 his land lies in the fact that compensation must include not only the amount which any prudent purchaser would find it worth his while to give for the land, but also any additional amount which a prudent purchaser in the position of the owner,that is to say for the business such as the owner has already established on the land, would find it worth his while to pay sooner than fail to obtain the land. It follows that if in the first instance, the land is valued on the basis of its suitability for some more profitable form of use, there can be no justification for making an addition to the value so ascertained because of disturbance. " The Court then referred to decisions of the High Court in The Commonwealth v. Milledge (1953-1954) 90 C.L.R. 157 at p.164 and Crisp and Gunn Co-Operative Ltd v. Hobart Corporation (1963) 110 C.L.R. 538 at p.546. The Acquisition of Land Act 1967 makes no provision for a head of claim for disturbance. However, as the Land Appeal Court recognised in Murray's case, it is part of the special value to the owner and often separately assessed. This Court has recognised that in appropriate cases disturbance can be awarded in accordance with the test in Harvey v. Crawley Development Corporation (1957) 1 All E.R. 504 at p.507. That is, that any loss sustained by the dispossessed owner which flows from a compulsory acquisition may properly be regarded as the subject of compensation for disturbance, provided that it is not too remote and that it is the natural and reasonable consequence of the dispossession of the owner. However, the claimant must prove that his claim comes within these criteria. It is well established that where compensation is assessed on the basis of a more profitable use, there can be no award of disturbance on the basis of its actual use. In the present case, I am not convinced that the assessment of compensation for the effluent area of the subject land on the basis of its value as irrigable/arable land is a higher and better use than its present use. Mr Eales thought that it was at least as valuable. However, it is clear that its use for effluent purposes was essential to the operation of the feedlot and it might well be much more valuable. In my opinion, it has been established that at the date of resumption it was not possible to relocate the effluent disposal area from Lot 47. The alternative locations were, apart from the additional cost, just not available. Lot 1 on RP 36390 was too small and Lot 8 on RP 36390 was being resumed. Therefore, with the resumption of Lot 47, the feedlot could no longer operate. Furthermore, even if it had been possible to relocate the effluent area, it is most unlikely that the feedlot would have obtained the necessary approvals because of the respondent's proposed development of the resumed area for cane farms. It would have been quite incompatible to have a feedlot with an 8000 head capacity in such a closely settled area. I am satisfied that the losses sustained by the claimant are not too remote and are the natural and reasonable consequences of the resumption of the effluent discharge area of the feedlot. Therefore, they fulfil the test propounded in Harvey v. -- 98 of 102 -- 99 Crawley and the claimant has a valid claim for disturbance. Since it was not possible to relocate the effluent disposal area either to Lot 1 or Lot 8, the respondent's contention that compensation for disturbance be limited to the difference in cost of relocation, must fail. In the circumstances, the approach adopted by Mr Eales is the only evidence I have of the assessment of disturbance and I propose to adopt it, with one qualification. I am not convinced of the validity of the claim for loss of business income until the feedlot was relocated. For various reasons explained by Mr Geoffrey Cox, the feedlot had not achieved its profit-making potential. There was no evidence that the Kalamia Plains partners ever considered relocating the feedlot elsewhere, where they would have been required to comply with the feedlot licensing requirements introduced in 1989. Indeed the evidence is that the application to increase the capacity to 20,000 head was made, not to continue the feedlot operation, but as a preliminary to seeking equity funding for the establishment of an abattoir. It would seem from the evidence that the claimant was not deprived of his interest in a feedlot that was producing a profit of $100,000 per annum. The partnership accounts show that apart from 1988/89, the feedlot did not achieve a profit approaching that figure. In my opinion, he has been deprived of the opportunity to operate the feedlot in a more profitable manner. Therefore, I am of the opinion that disturbance to the feedlot because of the resumption of Lot 47 should be confined to the loss of the improvements as assessed by Mr Eales. His figures in this regard were not challenged. Therefore, disturbance to the feedlot is assessed at $435,850. The claimant's two-thirds interest is $290,500. (ii) Valuation and Legal Fees During the course of the hearing the parties agreed to the claim for legal fees for $2000. However, the claim for valuation fees of $10,000 remains unresolved. Mr Eales said that he was instructed on 4 October 1991 to prepare a valuation and had commenced his research. However, the claim was required to be lodged quickly and when it was lodged on 23 October 1991, Mr Eales had not finalised his valuation. The amount claimed for valuation fees of $10,000 was for the work he had undertaken up to that time at the normal charge out rate over three weeks. He had not, at the time of giving his evidence, submitted an account to the claimant. Mr Eales explained that he could not complete a valuation prior to the lodgment of the claim as various experts' reports were required and he wanted to be certain that the elements of the Davco Irrigation Project were possible. He did not advise that the claim should be $6.3 million. In my opinion, the claim for $10,000 in respect of the valuation work undertaken by Mr Eales up to the date of preparation of the claim must fail. It is well established that the only professional fees recoverable as disturbance are those which were -- 99 of 102 -- 100 incurred in the preparation of the claim for compensation itself and not for the work done to the time of lodgment of the claim. Mr Eales' evidence was that he was able to provide little assistance to Mr Geoffrey Cox in the preparation of the claim. He said that at the time he "... would not have a clue". He could provide him only with a very wide range of values and details of some sales. Mr Cox drafted the claim virtually without valuation assistance. In these circumstances, no amount should be awarded for Mr Eales' contribution to the preparation of the claim. As the parties have agreed to the amount of $2000 for the legal fees incurred in connection with the preparation of the claim, that amount will be awarded. Interest At the request of Counsel for the claimant and with the agreement of Counsel for the respondent, I will leave the matter of any interest to be awarded under s.28 of the Acquisition of Land Act 1967, for further argument after the delivery of this judgment. Determination I determine compensation payable by the respondent to the claimant under all heads of claim at Four million, nine hundred and sixty thousand, four hundred dollars ($4,960,400), being made up as follows: Value of the land taken $ 4,542,600 Structures: Shed $ 90,900 Yards $ 34,400 $ 125,300 Disturbance: Feedlot $ 290,500 Legal Fees $ 2,000 $ 292,500 $4,960,400 (JJ Trickett) Member of the Land Court -- 100 of 102 -- -- 101 of 102 -- -- 102 of 102 --