Caltex Oil (Australia) Pty Ltd v Chief Executive, Department of Lands [1994] QLC 304

[1994] QLC 304 Re: Appeal against a valuation. Valuation of Land Act 1944. AV93-561. Caltex Oil (Australia) Pty Ltd v. Chief Executive, Department of Lands DECISION LAND COURT, BRISBANE 30 September, 1994 This is an appeal against the determination of the Chief Executive, Department of Lands (the respondent), to value Lot 1 on RP 99186 and Lots 2 and 4 on RP 91704, parish Yeerongpilly, in the sum of $187,000 for the purposes of the annual valuation of the Area as at 31 March 1992. The valuation was made under the Valuation of Land Act 1944 (the Act). The subject land is in the fee simple ownership of Caltex Oil (Australia) Pty Ltd (Caltex). The land has an aggregate area of 1793m 2 and is developed for service station purposes. The site is situated on the corner of Orange Grove Road and Henson Road, Salisbury, about 13 kilometres south of the Brisbane GPO. It is a corner site occupying the north-west corner and with frontage of about 40 metres to both roads . The corner is truncated. Opposite (but not directly opposite) Henson Road which runs east-west is Malvern Street. The intersection is signalised. Streets are of full width bitumen construction with concrete footpath and concrete kerbing and channellin~. All relevant services are available to the site. The land is zoned Residential "A" under the City of Brisbane Town Plan. Under that zoning a service station is a consent use. In the notice of appeal Caltex, through its agents Raine and Horne, stated an unimproved value of $120,000. In the hearing of the matter evidence was led through Mr AJ Crawford, registered valuer and a director of Raine and Horne to an unimproved value of $47,000. This valuation was made on the premise that the highest and best use of the land is for residential purposes. The respondent led evidence to a value of $152,500. This valuation was written by Mr RB Cranstoun, -- 1 of 17 -- 2 registered valuer in the employ of the Department of Lands. His valuation is based on the premise that the existing use of the land for service station purposes is the higher and better use. Thus the issue of highest and best use arises for consideration apart from what was thought to be the principal issue, namely whether the listing of the site as a probable contaminated site under the Contaminated Land Act 1991 (the Contaminated Land Act) has an effect on value. Some aspects of both the Act and the Contaminated Land Act may be covered at the outset. Under the Act, the Chief Executive is to decide the unimproved value of land to be valued - s.13. Unimproved value in relation to improved land means - " ... the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist. 11 - s.3.1 In Toohey's Ltd v. The Valuer-General [1925] AC 439 PC, Lord Dunedin at p.433 in discussing unimproved value said - " ... What the Act requires is really quite simple. Here is a plot of land; assume that there is nothing on it in the way of improvements, what would it fetch in the market? It will be observed that the value is not what has been sometimes designated by the expression 'prairie value'. The land must be taken as it exists at the date of valuation. 11 In Clough v. The Valuer-General (1981-82) 8 QLCR 70, the Land Appeal Court after considering Toohey's case and Tetzner v. The Colonial Sugar Refining Co Ltd [1958] AC 50, said at p.75 - "We think it beyond doubt that what has to be valued is the subject parcel of land viewed as if the improvements thereon, visible or invisible, never existed but that otherwise the parcel was situated in the community (and environment) with the amenities and facilities that had grown up around it as at date of valuation. 11 On p.76 of the same case in rejecting a submission that the Chief Executive when valuing land that is improved land should ascertain an unimproved value by deducting the value of improvements from an improved value, the Court said - " It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value. The reason is j -- 2 of 17 -- 3 obvious. In applying such sales there is no room for error in analyzing the value of improvements. Because there is less room for difference of opinion as to value of the various items of improvement and comparison is thus simpler, it has been held that highly improved sales should be avoided in preference to sales comprising a lesser degree of improvement. In Toohey's case and Jowett's case the method of ascertaining the improved value of the subject property and deducting the value of the improvements therefrom was adversely criticized. Whilst in some cases it may be appropriate to adopt the method, it seems to us that in the majority of cases it introduces additional items to value each of which can be the subject of a difference of opinion and thus increase not only the work load of the valuer and the Courts but also the difficulties and uncertainties of arriving at a reasonably correct unimproved value. 11 (Jowett v. The Federal Commissioner of Taxation (1926) 38 CLR 325). It is a fundamental principle of valuation and inherent in the definition of unimproved value that land shall be valued for its highest and best use. It is also well established that in considering highest and best use the impact of any statutory scheme affecting use is a relevant consideration. In the subject case there is evidence that were the subject land valued under the test stated in Toohey's case and given expression in s.3(1) of the Act consent for service station purposes would not be forthcoming from local government. This however does not preclude the Chief Executive from valuing the land for the purpose for which it is in fact used. Section 3.4 of the Act provides - "(4) Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed that - (a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates; and (b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used; but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that any improvements referred to in subsection (1) had not been made. 11 -- 3 of 17 -- 4 This provision had its origin in overcoming the · inequity in valuing land for rating purposes which were it in an unimproved state would be restricted by town planning laws to a use of lesser value than the use actually made of the land - existing lawful non-conforming uses - see Sonnerdale v. Valuer-General (1953) 19 LGR (NSW) 211; Wunderlich Limited v. Valuer-General (1959) 5 LGRA 50 and Ritchie v. Valuer-General (1961) 21 LGRA 296. In Pye and another v. Valuer- General (1972-74) 29 LGRA, Else-Mitchell J, in considering unimproved value which should apply to land with two residential flats thereon but otherwise included in an area reserved for country road, held that the appropriate assumption was neither that the land was vacant nor that it could be utilized for the unlimited erection of a residential flat building. "This does not mean, however, that unlimited or unrestricted use of the land for the erection of a residential flat building of any larger or different size must also be assumed ... " - p.163. See also Wickham Properties Pty Ltd v. The Valuer-General (1990-91) 13 QLCR 4. These cases were concerned with the import of town planning schemes on unimproved value when unimproved value ascertained in accordance with the provisions of s.3-1 of the Act would reflect a lower value than an unimproved value ascertained on the assumption that the land could continue to be used for the purpose for which it is used. The sub-section however does not displace the rule of highest and best use. It merely enables a valuation to be based on actual lawful use (and as a consequence highest and best use) when that use would otherwise be unavailable or restricted by some statutory scheme. The dominance of the rule of highest and best use is evident when the converse is applied. In Bilungra Pty Ltd v. The Valuer-General (1988-89) 12 QLCR 294, a parcel of land zoned "Residential B" with an area of 794m 2 and with two flats erected thereon fell to be valued under the Act. The parcel was below the minimum area upon which units may be permitted as of right. Within that zone a single dwelling house use was a permitted use. The Valuer-General valued the land for its highest and best use as a single unit residential site. At p.294 Mr Smith, President of the Court said: " However the section also authorises a valuation being made on the basis that if there is a higher legal use (in this case single dwelling) to which the land may be put than the use to which it is actually being put (Res.B multi unit) then the land may be valued in accordance with that higher use. " -- 4 of 17 -- 5 In the subject case a related question arises as to the effects of the Contaminated Land Act, the impact of which may vary (so it will appear) depending upon the finding of highest and best use. The usage of the subject land for service station purposes dates from the early 1960s. The site is improved with a service building comprising office, shop, store and workshop, and with two bowser islands facing Orange Grove Road and one facing Henson Road. A large LPG storage tank is at the rear adjacent to the adjacent property facing Henson Road. About 80% of the site is concreted or covered by service buildings . Underground tanks comprise- 9900 litres ulp 14800 litres ulp 9100 litres distillate 42000 super An underground tank of 33,500 litres was abandoned and sand filled in 1991 . This tank was abandoned following evidence of leakage (water into the tank). The site is classified as a "probable" site on the Contaminated Sites Register established under the Contaminated Land Act. This Act was enacted to facilitate the management of contaminated land and for other purposes. The objects of the Act include - II (c) to identify all contaminated land in Queensland; (d) to establish a register of contaminated land; (e) II to have information on contaminated land available to the public. (s.3) "Contaminated land" means - "land, a building or structure on land, or matter in or on land, that, in the opinion of the chief executive is affected by a hazardous substance so that it is, or causes other land, water or air to be, a hazard to human health or the environment;" The Act is administered by the Department of Environment and Heritage (DEH) . Section 17 requires that notification be given the Chief Executive DEH of land that is or is likely to be contaminated. An onus rests on a local authority -- 5 of 17 -- 6 Government department or other statutory authority to notify the Chief Executive of land within its jurisdiction that is, or is likely to be contaminated (sub-section (4)). Sub-section (5) of the Section provides that - " For the purposes of sub-section (4), land that is being, or has been, used for a prescribed purpose is taken to be land that is or is likely to be, contaminated." Regulations provide that the use of land for "service station" is use for a prescribed purpose. Section 23 provides that the Chief Executive may at any time classify land as- ( a) a possible site; or (b) a .probable site; or (c) a confirmed site; or (d) a restricted site; or (e) a former site; or (f) a released site. After classifying land, the Chief Executive must cause the prescribed particulars in relation to the land to be recorded in the Contaminated Sites Register and cause written notice of the classification to be given to the relevant local authority. Sub-section (5) of the section provides that land may be classified as a "probable site" if "a current ... use of ... . the land is a prescribed use ... ". The subject land is in fact on the Register as a "probable site". Whilst the land remains used for the purpose for which it is used (whether in the ownership of Caltex or another) the site will remain listed as a probable site. Were that use to discontinue and the land intended to be put to another use (for example, a residential use), the classification of the land would require to be upgraded to either a "released" or "former" site. In these respects sub-sections 8 and 9 of s.23 provide - (8) Land may be classified as a former site if - (a) it was previously classified as a probable site, confirmed site or restricted site; and (b) following action taken to remediate the land, on investigation by the chief executive, the chief executive is satisfied that the land is no longer, contaminated land. -- 6 of 17 -- 7 (9) Land may be classified as a released site if - (a) the land has been classified as a possible site or a probable site; and (b) on investigation by the chief executive, the chief executive is satisfied that the land is not contaminated land. Section 27 provides that a person disposing of land that is a "probable site" must give written notice to the other person setting out - " (a) the classification of the land; and (b) particulars of any current, or unsatisfied, notices given under this Act in relation to the land." It may be seen that under s.23 notice of the listing of land in the Contaminated Sites Register is to be given to the relevant local government. Section 8.3A of the Local Government (Planning and Environment) Act 1990 details the requirements for preparation of a site contamination report. Service stations are designated uses for the purposes of these requirements. The effect of these statutory provisions is that approval for any redevelopment of a service station site in ·this case for residential purposes would require an upgrading of the classification of the land to former or released site. The position was not addressed nor is it necessary that it be addressed were a probable site to be put to another use carrying with it possibilities or probabilities of contamination from that use - assuming that the proposed use was compatible with zoning laws applying to the land. Evidence touching on these matters was given on behalf of the appellant by Mr CR Higginson, town planning consultant; Mr WM Marley, consulting engineer specialising in environmental engineering; and by Mr MD Ryan, manager, property development, for Caltex. In the subject case the issues lie between the effects of the listing of the site in the Register on the value of the land a) for the purpose for which it is used and b) for redevelopment for residential purposes. There is no dispute that an upgrading of the site to a "released" or "former" site is necessary before a building permit would issue. Mr Marley who has had extensive experience in making site contamination ass~ssments for the petroleum industry in Queensland in the context -- 7 of 17 -- 8 of service stations, classifies the probability of contamination from petrol hydrocarbons (which contain a number of constituents that are regarded as hazardous to human health) into nil or minor contamination and significant contamination. Minor contamination is defined as contamination which would take about one month to remediate involving mainly removing the tanks etc from the site and some contaminated soil if it were identified. Significant contamination is that which would take a significantly longer period (greater than three months) and greater expense to remediate. This could include the removal of more soil or the treatment of contaminated soil by bio-remediation measures. Contamination can occur from spillage when tankers are filling or when motorists are using the bowsers. In his experience he has found that the probability of contamination increases with the age of the service station. In the subject case some degree of movement and cracking of concrete was observed. On the assumption that the site was intended to be de-commissioned and disposed of by Caltex the processes involved would include the following in the range of costs estimated by Mr Marley - 1. Preliminary Site Investigation (Service Station to Remain) 2. Site Investigation and Decommissioning CMPS&F Fees Contaminated Level Nil or Minor Significant 6,000 6,000 6,000 - 7,000 Contractor and Charges 10,000-20,000 Remediation 6,000 - 7,000 20,000 - 100,000 3. Total CMPS&F Fees Site Validation 4,000 - 8,000 20,000 -35,000 3,000 - 5,000 4,000 - 8,000 33,000 - 120,000 His experience told him that as with other sites of similar age to the subject site he could anticipate the probability of nil or minor contamination to be 70%. Accepting the presence of an abandoned tank (due to leakage) and broken concrete -- 8 of 17 -- 9 the probability of significant contamination is put at 30%. He said that in practice site investigation takes place in conjunction with the removal of tanks so that actual contamination of the underground can be determined. Thus an upgrading of the site could involve either of the full range of costs as estimated by Mr Marley. Were the site to be sold to another operator, he was firmly of the view that the purchaser would require a site investigation report. Among the functions performed by Mr Ryan is the divestment process involving overseeing demolition, site remediation and documentation through to sale of the site. In his experience a site is almost impossible to sell without remediation. From here I turn to the evidence relevant to the highest and best use of the site. The evidence of Mr Ryan dealing with the subject site as a service station site includes his description of the site as typical of the inner or middle ring service stations, the likes of which he says are being divested by all major oil companies around Australia. For new development the ideal criteria would include a site possessing an area of 3000m2 , preferably 4,000m2, with an 80 metre frontage, preferably 100 metres, situated on a major arterial road with a traffic density around 20,000 - 25,000 vehicles per day and with good visibility - sight lines to the site. The site would need to be compatible with the surrounding development and suitable for 24-hour trading possessing a throughput in the vicinity of 400,000/500,000 litres per month. Mr Ryan said that the acquisition of new sites generally comes from entrepreneurs and could cost up to $2 million improved for which the company would be looking for a return on investment of 20% or 5 year purchase. In terms of this criteria the subject site is seen as obsolete. Traffic density in Orange Grove Road is of the order of 7,000 vehicles per day. The site in his opinion primarily relies upon local community support assisted in recent years by the divestment of local competing sites by other companies. Mr Ryan sees throughput of the subject site (around 170,000 litres per month) as "some tolerable throughput" for present purposes. This throughput he says has been maintained for the last four to five years. In his opinion the demographic profile of the area is not conducive to growth in the mainstream product. Under the leasing/franchise agreement existing with the operator and expiring in 1998, a rental of $38,000 per annum is payable. There is sufficient evidence before the Court to conclude that the -- 9 of 17 -- 10 operator is struggling to survive. There is nothing that can be done to improve the business. Any refurbishment in the opinion of Mr Ryan would not return the costs outlayed . The site is one which in the eyes of management is awaiting the opportunity of divestment. For reasons which need not be stated this opportunity may not occur until the year 1998. As the major companies have adopted comparable criteria, Mr Ryan said that he could not foresee any possibility of the site being purchased by another major oil company. Mr Higginson formed the opinion that were the site in an unimproved state consent for development of the area for service station purposes would not be given for reasons including a) that use of the site for this purpose would intrude upon the local residential amenity and residential streetscape - visual and noise intrusion, light overspill, traffic impacts (noise, lights, etc.) odours and/or fumes. Whilst a site with adequate design elements may satisfy or ameliorate intruding impacts, he is of the opinion that the subject site could not adequately satisfy this town planning criteria. Further, with an area of 1793m 2 and roughly 40m x 40m the site could not adequately accommodate current standards covering landscaping requirements, access to and on the site (including tankers and waste collection vehicles) and on site carparking requirements. Mr Crawford formed the opinion that the highest and best use of the site in an un improved state would be for residential purposes. The site comprises three lots capable of sale independently. Accepting values applied by the respondent to three comparable Residential "A" lots taking up the opposite corner of Orange Grove Road and Henson Road, he performed an exercise assuming the purchase of the three lots for resale. Lots were priced at $51 ,000, $46 ,000 and $45,500 which, after allowing for risk and profit, costs of marketing and holding costs, etc., he obtained a land value of $108, 166. He sought support for this valuation in the sale of land (among others) situated on the corner of Lillian Avenue and Ainsworth Street to the west of the subject land containing an area of 1601 m 2 . The site was purchased from Shell Company of Australia (litreage 120,000 per month) in a remediated state for $65,000 and onsold to the Queensland Housing Commission for $150,000. Seven town house-type units have been put on the site. The first sale reflects a value of about $40 per m 2 . Mr Crawford was of the opinion that the subject site was -- 10 of 17 -- 11 "slightly higher" in value to the sale land. He would value the subject site at $60 per m 2 or $107,000 which is comparable with the sum obtained in the former exercise. Mr Higginson expressed the opinion that the subject site could obtain permission for a similar type town house development accommodating six units. Mr Cranstoun agrees that if the site is considered for residential use the sale land in Lillian Avenue is very comparable. He also led evidence of a sale of an ex-service station site situated at 124 Orange Grove Road, Coopers Plains. This land of 1609m 2 was purchased from Shell for $180,000 and redeveloped for commercial purposes (2 shops) . However, this sale is of little use as he agrees with the evidence given by Mr Higginson that the subject site has no demonstrable potential for commercial purposes. The only evidence he produced in testing the residential value of the land came from a valuation of the three lots separately from which he allowed a discount for bulk holding of 7.5% to derive a value of $126,000. I prefer the evidence demonstrated by the sale in Lillian Avenue. Accepting that a hypothetical prudent purchaser would not overlook any relevant business consideration, the subject land in my opinion would be priced and sold as a potential unit site. A direct comparison with the sale of land in Lillian Avenue which can accommodate seven units would yield in my opinion a value of the subject site of $135,000 in a vacant remediated state. From that sum Mr Crawford would allow for remediation costs. The allowance comprised firstly the sum of $6,000 (being an estimate of the cost of obtaining a site investigation report from a firm such as that of which Mr Marley is a member) and secondly the sum of $54,000 as an estimate of decontamination costs, etc., derived from the probabilities and estimates of costs advanced by Mr Marley. Thus, in his workings he arrived at a valuation of $47,000. Or if $135,000 were adopted as the correct value, a net sum of $75,000 would be obtained. Mr Cranstoun in his workings (analyses of sales) would make no such deduction. In fact were the site unremediated and sold for redevelopment he would add on the costs of remediation. Mr Cranstoun said that he valued the land under s.3(4) of the Act. He compared the land with sales (2) of land purchased for redevelopment as service station sites and he compared the applied value with values applied to existing service station sites. It seems to have been assumed (due to lack of any cogent evidence as to the value of the subject site for any other -- 11 of 17 -- 12 potential use) that a value for this purpose would exceed the value for any other potential use (in this case residential use), whereas Mr Crawford sought to ascertain a .value of the land for both service station and residential purposes. He would value the site for service station purposes at $45,000. One method included consideration of a number of sales which he describes as secondary service stations. In this exercise he derived an improved value of $435,000 calculated at $2.50 per litre on 174,000 litres per month. The cost of replacing existing improvements is estimated to be about $615,000. He gives the improvements a depreciated value of $420,000. This particular exercise would yield a land value of $15,000 which quite frankly does not make sense. The basic value (price per litre) was gathered from the sales in the ratio of litres per month to sale prices. Litres per month range between 70,000 to 141,000. Sale prices range between $270,000 for 1305m2 situated at Banyo to $440,000 for a 1277m2 site in Logan Road, Holland Park. In the former case the land is zoned "Business" and has shops adjacent and opposite. In the latter case it is said that the land has better zoning. Other zonings of the sale lands include "Future Industry", "Res B R3" and "General Industry". The evidence in this case, particularly that of Mr Ryan, is that a litreage of 174,000 per month is not viable and that no oil company on current criteria would contemplate setting up a service station with such a limited throughput. If this evidence is applied in considering the sales, none is viable. I would therefore suggest that the prudent purchaser would not analyse or form his opinion of purchase price in the manner in which Mr Crawford has applied the sales. More than likely he would in my opinion work up from a residual value for land (that is, for "Future Industry" or "Commercial" or as the case may be) and would add to that base value an additional sum reflecting the utility value in the improvements until such time as economics demand redevelopment. I find this exercise of little assistance other than to support the inference that the subject site if put to auction as improved for service station purposes would more than likely find a buyer who worked along the lines which I have just discussed. The only relevant body of evidence remaining covers purchases of land for service station purposes and the onsale of such sites for such purposes. Mr Crawford put details of 12 sales before the Court. Two of those sales (one of which -- 12 of 17 -- 13 was used for purposes of direct comparison by Mr Cranstoun) were examined in evidence in detail. At 113 Granard Road, Rocklea, five residential lots were purchased comprising an aggregate area of 2432m 2 for a consideration of $526,000. The package was onsold for $2,545,000. This development occurred in 1990. Litreage is of the order of 623,000 per month. Traffic in the primary direction is estimated at 20,700 vehicles per day. At 1240 Beaudesert Road, Acacia Ridge, three parcels having an aggregate area of 4312m 2 were purchased in 1992 for $500,000 and onsold for $1.9million. Litreage for the first year was 202,000 with growth estimated at 350,000 litres per month for year two and 380,000 litres per month for year three. Traffic is estimated at 13,000 vehicles per day in the primary direction. The latter sale reflects a land value of about $115 per m 2 • The site is operated by Caltex. It is agreed that in terms of present criteria these service stations are at the top of the range and are superior to the subject site in every relevant respect. In comparison with the sale in Beaudesert Road the subject site is valued by Mr Cranstoun at $152,500 or $85 per m 2 • He agrees with Mr Ryan that no oil company would purchase the subject land unimproved for service station purposes. The sales of secondary service station sites produced by Mr Crawford although not considered directly by Mr Cranstoun would appear to do nothing to assist his case. Nor do I find any assistance in the comparisons made with these last sales of unimproved lands for service station purposes. Mr Cranstoun attempted to justify the higher value applied to the subject land by comparing the site with values applied to existing service stations. Three sites were identified, one of which is in Kessels Road, McGregor, of 1604m2 valued at $112 per m2 . It is admitted that the site has superior location, exposure, etc., and higher traffic flow. Again, as is evident in the applied values, any comparison becomes arbitrary. The only remaining evidence which may assist in weighing up the question whether actual use is the higher and better use is that dealing with the economics of the current business to the owner. Rental is at the rate of $38,000 per annum. Were the site valued in its depreciated state at $420,000 (Mr Crawford), a yield of roughly 9% arises. The evidence of Mr Ryan is to the effect that the business has a limited life. On general principles, an investor putting money into a dying business would seek a higher yield which, ipso facto, asks the question whether the land as -- 13 of 17 -- 14 improved is worth the sum applied by Mr Crawford. No comparison was made by either side as to how the economics would compare if the site was developed new for a) service station purposes and b) for residential purposes - say six town houses. I accordingly find that for the purposes of this valuation the highest and best use of the land is for residential purposes and for that purpose I find that the land is worth in a vacant state $135,000. The Contaminated Land Act is an act to facilitate the management of contaminated land. It is of general application. The scheme of the legislation falls into the same category as other statutory based schemes controlling or affecting land use. In Stubberfield v. The Valuer-General (1988-89) 12 QLCR 328, Carter J at p.331 said - " The institution of town planning schemes and by-laws for the purpose of controlling land use and the evolution of related disciplines has been a feature of commercial and professional life in the last 30-40 years. The relationship between statutory based schemes which control land use and the impact of those schemes on land value can no longer be seriously questioned. The real estate market will inevitably and necessarily examine the impact of a town planning scheme including a development control plan or a town planning proposal upon a particular price of real estate before deciding what it is worth in the market place. What effect if any a particular scheme will have upon the value of a particular parcel of land is however a pure question of fact. " The observations of His Honour are apt in the circumstances of this case. The evidence before the Court is that it is the policy of Caltex and other major operators to remediate a site prior to sale. This work is generally undertaken in conjunction with demolition of structures, removal of underground tanks and so forth. Were a site purchased in a developed state for say a residential use, the vendor could not hope to obtain from the purchaser a price based on the value of the land in a vacant state. In either sense, were the approach taken by Mr Crawford as correct, costs of remediation would run with the land in perpetuity as an allowance in the same sense as other allowances are made for any works effected by man which enhance value such as clearing or levelling (see Morrison v. Federal Commissioner of Land Tax (1914) 17 CLR 498) . In that case the Court was concerned with works effected by man after the land ceased to be Crown land - that is, in the developme_nt of the land from its virgin state. The circumstances of the -- 14 of 17 -- 15 subject case are in the reverse. The work sought to be allowed for in the exercise is a clean up of land for a use which has superseded a previous use lasting in this case for many years and no doubt during the period constituting the highest and best use of the land. A person has only to walk the streets in an area where use is changing from single unit residential to multi-unit residential to observe the activity in demolition and cleaning up of a site in preparation for redevelopment. This sort of activity has been considered by the High Court in discussing unimproved value. In The Valuer-General v. Fenton Nominees Pty Ltd (1981-82) 150 CLR 160, the Court at p.166 said - " The importance of these sales is that they tended to establish the price which a developer would be prepared to pay for vacant land suitable for the appropriate development. Although the developers acquired parcels of improved land in assembling their sites they were acquiring improved land in order to convert it into unimproved land as part of a consolidated site which they could then develop. The improvements existing on the land which they acquired had no value to them. Consequently no part of the purchase price reflected a value placed by them on those improvements. In these circumstances the price which the respondent paid was one element, indeed the largest element, in the cost of acquiring a site consisting of vacant land suitable for development. The other elements were the costs of demolition and of earthworks. It is only by adding these costs that one can establish the price that the developers were prepared to pay for a suitable site with no improvements upon it. It follows that the approach adopted by Mr Quintrell was correct and that the primary judge was right in accepting his approach. The principle enunciated in Toohey's Ltd v. The Valuer-General ( 10) does not speak to this situation. It tells us that it is the subject land in its unimproved state that is to be valued. It does not deny that sales of improved property in the vicinity may be relevant material for the purpose of valuing the subject land in its unimproved state when the improved property has been acquired so that its higher potential as vacant land may be realised, the costs of demolition of improvements being an additional element in what the purchaser is prepared to pay in order to acquire vacant land. It matters not that, viewed from the standpoint of the vendors of the separate parcels of land, the price which they obtained reflected the value to them of the existing improvements and their reluctance to move to other premises. This is no way derogates from the value which the evidence has in establishing the price which commercial developers were prepared to pay for suitable vacant land similar in kind to the respondent's land in its unimproved state. " -- 15 of 17 -- 16 In this context and in the context of this case I can see no difference between ridding a site of structures or other useless material and ridding it of contamination notwithstanding that the latter may be a requirement of the law. Cardinal principles of valuation say that the best evidence of value is derived from sales of land comparable with the land to be valued. The principles are of greater import when the land to be valued possesses features which in a general sense may give rise to some concern in the minds of intending purchasers. There is evidence before the Court of at least two sales of land situated in the general locality of the subject land both of which were formerly service station sites. One w~s put to a residential use; the other to a commercial use. One sold in November 1991; the other in November 1992. It is reasonable to assume that any stigma, fear or apprehension arising from the former use of the sites for service station purposes is reflected in the selling prices. There is also before the Court sales of land purchased for development for service station purposes and onsold for such purposes. Such sites will have found their way on to the Contaminated Sites Register. Were they turned over again to another major company (and remain on the register as probable sites) the evidence is that a site investigation report would be required. The cost of such a report is estimated at $6,000. The influence this may have upon the mind of the intending purchaser may be gauged by the relationship of the cost of obtaining the report to the selling prices. In similar vein, I would imagine that with lands situated within an industrial estate where the use of contaminants in manufacture or processing is common the impact of the scheme of the legislation will be relative to use and value of the lands for industrial purposes. See Logform Industries Pty Ltd v. Chief Executive, Department of Lands AV93- 375 (to be reported). It seems to follow that the real significance of contamination will only come to the fore when a site (possible or probable) reaches the stage where the actual site is on the verge of moving from a use which necessarily carries with it possibilities or probabilities of contamination to a use which conflicts with the former use - more than likely this will be limited to a residential use. In the circumstances the appeal will be allowed and the unimproved value of the subject site determined in the sum of $135,000. -- 16 of 17 -- 17 Accordingly, the appeal is allowed, the determination of the Chief Executive is set aside and the unimproved value of the subject land is determined in the sum of One hundred and thirty-five thousand dollars ($135,000). (D.M. White) President of the Land Court -- 17 of 17 --