Felixstowe Pty Ltd v Council of the City of Gladstone [1993] QPEC 3

IN THE PLANNING AND ENVIRONMENT COURT HELD AT GLADSTONE QUEENSLAND P. & E. Appeal No. 1 of 1992 BETWEEN: FELIXSTOWE PTY. LTD. Appellant COUNCIL OF THE CITY OF GLADSTONE Respondent REASONS FOR JUDGMENT O'SULLIVAN D.C.J. DELIVERED THE J.:7 JI._ The Appellant appeals against the refusal of the Council of the City of Gladstone of a claim for compensation for injurious affection relating to land described as Lot 2 on v Registered Plan No. 15152, County of Clinton, Parish of ~ Gladstone ("the land"). The land was re-zoned from Residential "A" (High Density) to Residential "A" (Low Density) under the Town Planning Scheme of the Respondent gazetted on 15 June 1991 ( "the prescribed date"). On 12th March 1977 the land had been re-zoned to Residential "A" ( High Density). This re-zoning had been the subject of a Deed dated 12 March 1981 between the Appellant and the Respondent which provided for 162 units in accordance with a plan of development ( "the Deed"). Deed is as follows: Clause 9 of that -- 1 of 17 -- 2 "Notwithstanding anything herein contained arid without prejudice to the Council's rights hereunder if the Developer shall fail in its obligations hereunder with respect to the development of any part or parts of the said lands in accordance with the plans attached hereto and such failure to develop shall continue for a period of one year then the Council shall have the right without any further reference to the Developer to apply for the re-zoning of the said part or parts so undeveloped to the original zoning of Residential "C", as herein set out or such similar zoning as may be applicable under the Council's Town Planning Scheme from time to time for Residential Development and in the case of such re-zoning being granted the Developer shall not be entitled to any compensation in respect to such re- zoning whether on account of injurious affection or otherwise howsoever." The Respondent gave the Appellant various extensions of time for the commencement of the proposed development. Building approval for the construction of 1 2 units was granted by the Respondent to the Appellant on or about 25 July 1990. A new Town Planning Scheme was gazetted for the whole of the City of Gladstone on 15 June 1991 ("the new Scheme"). Pursuant to the new Scheme the land was zoned Residential "A" ( Low Density) . Pursuant to the Table of Zones a dwelling house is a permitted use in that Zone and as far as is relevant in this appeal, cluster housing development is a consent use. The Statement of Intent for the Residential "A" Zone in the new Scheme is as follows: "The intent of this zone is primarily to accommodate detached dwelling houses at low densities to the general exclusion of other land uses, but may include specific uses associated and compatible with these residential areas." The Appellant made a claim for compensation pursuant to s.3.5 of the Local Government (Planning and Environment) Act 1990-92 {"the Act") which was received by the Respondent on 28 -- 2 of 17 -- 3 October 1991. By letter dated 23 December 1991, the Respondent rejected the claim, relying on clause 9 of the Deed. The appellant appeals against that decision. Pursuant to s.3.5(8)(a) of the Act, compensation is assessed as follows: "The amount of compensation is (subject to paragraphs (b), (c) and (d)) to be an amount equal to the difference between the market value of the interest immediately after the time of the coming into operation of the provision of the planning scheme by virtue of the operation whereof the claim for compensation arose and what would have been the market value of that interest if the provision had not come into operation." The value of the land if the new Scheme had not come into operation was agreed by the parties at $569,250. In contrast the market value of the land immediately after the time of the coming into operation of the new Scheme was in issue. The values contended by the Respondent's witnesses were $7,000 (Roffey) and $6, 634 (Jorgensen), representing the value of 2 units (161 multi-units prior to the new Scheme and a 159 cluster housing development under the new Scheme.) The value contended by the Appellant was $167,000, representing the ~ value of the land developed as a 46 lot residential / subdivision. The market value of land at the prescribed date is arrived at by applying the tests enumerated in a long line of authorities, including the well-accepted approach in Spencer v The Commonwealth of Australia (1907) 5 C.L.R. 418 at 441 per Isaacs J:- "The market value cannot exceed what such a prudent purchaser would be prepared to give him. 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 the -- 3 of 17 -- 4 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, or 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." Other authorities are of assistance to the particular issues raised in this appeal. In Gallagher v. Brisbane City Council (1975) 2 Q.L.C.R. 368 (at p.381), the Court said: "But if the highest and best use on the said date is a permitted use by consent, the view we hold is that only in exceptional circumstances, if at all, would its present value not exceed, to some extent, its permitted use a 'as of right' value. The amount by which it does exceed this last mentioned value will depend, among other things, on the time lapse between resumption date and the consent date." In N.L. Horner & Horner Investments Pty. Ltd. v. Brisbane City Council (1983) 9 Q.L.C.R. 3 (at p.10), the Court adopted Gallagher and said: "However, the task imposed upon me by the Act, is to seek to place a value on the claimant's land on the basis of the highest amount they would reasonably be expected to receive from a hypothetical prudent purchaser. In doing so I must weigh all the potential which the land possesses in the claimant's hands, and although I must have due regard to the current zoning I must not use such zoning to deny the claimants a higher value if a prudent purchaser would be prepared to offer on the basis of the probabilities or possibilities of a higher zoning." In Gill v. Queensland Ambulance Services Board (1988-89) 12 Q.L.C.R. 186, the Court said (at p.198): "In testing a matter of this kind a hypothetical sale must be envisaged in accordance with Spencer's case and the possibilities and probabilities of obtaining an amendment of the plan given due consideration." -- 4 of 17 -- 5 Town planning evidence was given by Mr Schomburgk for the Appellant and Messrs Warren and Bell for the Respondent. Mr Bell was the Respondent's Town Planner prior to Mr Warren and later a Consultant Town Planner for the Respondent. The substantive difference in the town planning evidence was the highest and best use of the land immediately after the new Scheme came into operation: specifically, whether it was a residential subdivision (Mr Schomburgk) or cluster housing t (Mr Warren) . Mr Schomburgk adopted a minimum lot size of 600 m2 in the Residential "A" Zone. He considered that Section 7. 9. 4 of the Scheme, and the Table to which it refers, gave no guidance as to density in the Residential "A" Zone, other than it being within the phrase "all the other zones as determined by Council." Mr Warren considered a minimum density of 300 m2 for ' group title cluster housing in the Residential "A" Zone was appropriate. He based this on two duplex dwellings being two dwelling units on one 600 m2 allotment, each dwelling unit being on an allotment of 300 m2 . He also referred to the June 1992 amendments to Clause 10. 13. 1 of the new Scheme which changed the minimum area for Residential "A" from 600 m2 to 300 m2 . The Respondent sought to give some weight to three factors, namely, that in 1981 the land was earmarked for cluster housing development; that cluster housing is also supported by the Strategic Plan; that the 1981 zoning was in the face of objections. -- 5 of 17 -- 6 Mr warren considered the Respondent would have given consent immediately after the prescribed date for a cluster housing development. He referred to a grant under the Residential Regulation Review Program which the Department of Housing and Local Government approved for the Respondent in a letter to it of 16 January 1991. This grant was to enable the Respondent to consider innovative developments. This, together with his figure for likely density for Residential "A", and section 1 . 3. 1 . 1 of the new Scheme led him to believe that consent would have been given. Mr Warren said that if cluster housing development had been proposed in June 1991 he, as Town Planner for the Respondent, "would have felt comfortable in supporting such an application to the Council". Mr Warren gave evidence that if a purchaser had asked him after the prescribed date: "what can I do with this site?" he would have answered along the lines of: if you can make an application for cluster housing development which you can demonstrate to me will work, I will probably recommend it to Council. He would have also have added the comment: I can't guarantee that the Council will accept my recommendation al though my recommendations as a generalisation tend to be followed. Mr Warren said that he did not believe he would have been in a position to convey to a purchaser that the down-zoning was in the face of the Council's consultant's recommendation; that matter would have been dealt with in a special meeting. -- 6 of 17 -- 7 Mr Warren gave evidence that since his time with the Council (approximately December 1989) there had been no cluster housing developments of the scale of the proposed unit development on the land. Mr Schomburgk referred to the consent uses in the . Residential "A" Zone. He considered that the minimum area for Residential "A" of 600 m2, in conjunction with the Statement of Intent for the Residential "A" Zone, meant that it was likely that Council would not allow a cluster housing development which provided a density in excess of that which might be provided by a conventional residential subdivision. Mr Bell was asked by the Respondent to consider the Appellant's Objection to the re-zoning of the land as Residential "A" (Low Density) under the new Scheme. It was his recommendation that the land be rezoned to Residential "B" (Medium Density) under the new Scheme. His recommendation was contained in a report to the Council as follows: "The-zoning of Lot 2 on R.P. 15152 (multi unit site) be upheld in part with land being rezoned to Residential B which better reflects the proposed scale of development than unit density proposed in the original application." This recommendation was not adopted by the Respondent, as shown in Item 12 in the Minutes of the Special Meeting of the Respondent held on 7 December 1990, which is as follows: "That the objection be upheld in part as per the Consultant's recommendation except for land described as Lot 2 on R.P. 15152 and that such land remain as advertised viz. Residential A." Mr Warren disagreed with Mr Bell's recommendation because he considered that the unit development which could be achieved under the Residential "B" Zone was in excess of what -- 7 of 17 -- 8 was approved under the Deed. He said that the densities for units in the Residential "B" zone were one unit per 250 m2 . This would enable a development far in excess of 145 units on the land. Ms Finster, an Architect/Town Planner, was engaged by the Respondent to provide drawings for cluster housing. These were tendered to the Court and showed 159 units. She had been provided with design parameters by Mr Warren. Her cluster housing development was based on an assumed minimum density of 300 m2 per allotment. It is likely that a prudent purchaser would, on making enquiries of the Respondent be made aware of the building permit for 12 units issued to the Appellant on 13 November 1989. Mr Warren said he considered he had to treat this building application as as-of-right in the Residential "A" Zone. Mr MacKenzie-Forbes, a Director of the Appellant, said that the Appellant did not proceed to use the building permit because the back-zoning meant that the land could not be used as security. It is likely that a prudent purchaser would, on reading the relevant Town Planning Scheme, find little guidance especially from section 7. 9. 4 and the Table accompanying it. It was suggested that he would therefore make enquiries of the Respondent. He might become aware of the Council Resolution of 7 December 1990 (which I have quoted above). Mr Warren did not say that he would explain the background of this Resolution to him. Senior Counsel for the Respondent submitted that the Resolution ought not be construed as -- 8 of 17 -- 9 preventing a consent for cluster housing. I consider that such an inference would not be made by a prudent purchaser and he would take the Resolution at face value. · I consider that he would focus on the most recent event, namely, the backzoning. I consider that if a prudent purchaser came to know of the Respondent's decision to back-zone the land he or she would place a high risk on gaining the Respondent's consent ' for a cluster housing development, and consider it more probable than not that the use of the land would be for a conventional subdivision. Mr Schomburgk considered the possibility of Greenstreet housing or Australian Municipal Code of Residential Development ( "Amcord") for the land. He considered that the whole concept of Amcord was to incorporate a mix of housing styles in a development and, to be practicable, such a ) development should have a range of houses on various sizes of allotments. He considered that a development along Arncord guidelines would not be viable using 300 m2 allotments (unless \J they were house and land packages) and prepared a plan showing 450 m2 minimum lot size and 59 lots. Mr Warren gave evidence that he would support an application for an Arncord-style subdivision, with conditions. imposed. Mr Warren said his personal preference for the land, however, was for cluster housing style development to maximise infrastructure in the heart of the city. I find on the evidence that it is more probable than not that the land would not be used for an Amcord-type -- 9 of 17 -- 10 development; and a prudent purchaser would not pay a premium for an Amcord-type development for the land. The Valuers who gave evidence were Mr Brett on behalf of the Appellant and Messrs Roffey and Jorgensen on behalf of the Respondent. Both Mr Roffey and Mr Jorgensen assumed that the highest and best use of the land was for a cluster development of 159 units. They both assumed the highest and best use under the old Scheme was a 1 61 unit development. Mr Roffey considered that the risk of obtaining consent for a cluster housing development was cancelled out by the risk occasioned by reliance on Clause 9 of the Deed. Mr Roffey's valuation of the land used comparable sales for similar developments to arrive at a value of $3,500.00 per unit for the land. His estimated compensation was therefore $7,000.00. Mr Jorgensen found that "sales evidence would suggest that a unit development site of the size of the subject property has a market price of approximately $3,000 per unit site." He added $634 being additional application costs to arrive at a compensation figure of 2 units x $3,000 per unit, plus $634 arriving at a figure of $6,634.00. Mr Jorgensen gave weight to the 1981 approval and the extensions of time granted thereafter as indicating a generous approach on the part of the Respondent. I consider that while these matters are relevant, they must be considered in the light of the down-zoning especially as it was against the Appellant's Objection and the Respondent Consultant's recommendation. Mr Brett used comparable sales which had been achieved generally in a number of estates in the vicinity. He also had -- 10 of 17 -- 1 1 regard to statistical information from the Valuer-General on average sales prices, to arrive at a gross realization of $30,000 per lot for the 46 lots in a residential subdivision of the land. From that assessment he subtracted, as a development exercise, the relevant costs associated with a subdivision development, including a headworks contribution of $2,100 a lot (a total of $76,600), and thus valued the land at $167,000. Mr Roffey also undertook the exercise of valuing the land on the basis of the highest and best use being a Residential "A" subdivision. He considered that only one sale, Watford Street, for $190,000 was _comparable. Mr Brett valued that land at $167,000. Mr Roffey applied the development costs ·from Watford Street to the land, thus arriving at a valuation of $190,000.00 if a headworks contribution were imposed and $276,000.00 if no headworks contributions were imposed. In , cross-examination, Mr Roffey accepted that he did not take, into account engineering and surveying fees of $15,000 which may already have been expended on Watford Street, and possible holding charges of $5,000 to $6,000 which would make a difference. There was no clear evidence of these fees and charges. Mr Roffey was asked about various factors which made the Watford Street sale not comparable. These included the fact that subdivisional approval had been obtained prior to sale, the Watford Street land was elevated with very good views, Watford Street was in a generally newer suburb and was approximately 4 hectares. -- 11 of 17 -- 12 I prefer Mr Brett's methodology where he used comparable sales and cross-checked with statistical sales information from the Valuer-General, arriving at a figure of $167,000. A further difference in valuations arose depending on whether a headworks contribution should be taken into account. Messrs Jorgensen and Roffey were advised by officers of the Respondent that no headworks contribution would be imposed on a residential subdivision on the land. The Respondent has a "Policy for the Determination of Water Supply and Sewerage Contributions on Development Application". Mr Warren gave evidence that he would have recommended to the Respondent that, pursuant to this Policy, no headworks contribution be payable as there would be no increased demand on the water supply and/or sewerage services if the land were developed for a residential subdivision. Mr Brett's valuation of $270,000 was based on his opinion that the prudent purchaser would only be prepared to proceed on a basis that no headworks contribution was applicable if he had an:- " irrevocable undertaking from the local authority that it is the fact that those headworks charges won't be made, and beyond that an indication that other works required for the consent won't in some way be perhaps inflated or sought to offset those headworks charges, and I say that not on any reflection on this Council, but just in relation to Councils and the cautious and perhaps suspicious nature of developers. A great concern of developers is the possibility that a local authority will seek contributions beyond those which would normally be sought." The test to be applied is that of a prudent purchaser taking into account the possibilities and probabilities of such a charge being imposed. I consider a prudent purchaser -- 12 of 17 -- 13 would make further inquiries to ascertain if a headworks contribution would be imposed. If they had done so, they would have been advised by the Town Planning Department that they would recommend these charges not be imposed on the land but this is not to say that the Council would necessarily adopt those recommendations. The Deputy Shire Engineer of the Respondent gave evidence that he would tell an enquirer that the engineering department ' would recommend headworks be charged on a per lot basis. The enquirer could obtain a copy of the Respondent's Policy but I find that he would not find this document easy to follow and it would not provide him with a clear answer. Witnesses gave evidence that they were not aware of any residential subdivisions where the Respondent resolved that headworks not be levied. I consider that a prudent purchaser would consider it , more probable than not that the Respondent would impose a condition requiring a headworks contribution. I find that a headworks contribution should be taken into account in the valuation of the land. I assess the value of the land after the prescribed date at $167,000.00. The before value has been agreed by the parties to be $569,250.00. If compensation be payable, I accordingly assess it at $402,250.00. Counsel for the Respondent submitted that compensation is not payable because the Respondent is entitled to rely on Clause 9 of the Deed. Counsel for the Appellant -- 13 of 17 -- 14 submitted that the Respondent is not entitled to rely on Clause 9, for a number of reasons. The history of the dealings between the Appellant and the Respondent is relevant. In a report to the Town Planning Committee on 5th March 1986, Mr Bell recommended that:- "(a) The Council is not willing to accept the charge over the subject land; (b) The Performance Bond is to remain at $30,000; ( c) The period for compliance with the terms of the agreement is extended until 18th June, 1989; (d) It is FURTHER RECOMMENDED that the applicant should also be advised that the Council is prepared to release the bond if the subject land is re-zoned to Residential "C"." Mr Bell said that he had Clause 9 in mind when he made this recommendation. On the 18th March 1986, the Town Clerk of the Respondent forwarded a letter to the Appellant advising that the Council would waive the $30,000 bond and return it to the owners on the rationale that the bond was designed to guarantee the construction of roadworks in Bowles Street and that "The owners be advised that Council is presently reviewing its Town Plan and consideration will be given to the desirability of the existing zoning at that time". Mr MacKenzie-Forbes gave evidence that following this letter the Appellant received no further advices from the Respondent until he attended a meeting with officers of the Respondent on 15 March 1989. This meeting was attended by Mr Gordon, the Acting Town Planner for the Respondent, and Mr Woodman, the Assistant Town Engineer for the Respondent. Mr MacKenzie-Forbes stated that there was never any suggestion -- 14 of 17 -- 15 during the meeting, by any Council officer, that the land was liable to be back-zoned. It was around the date of this meeting that the Appellant engaged various persons to prepare a townhouse design and layout. An extension of time was given to the Appellant to 18 June 1987. There is a diary note dated 15 March 1989 which includes the following: "They could see no problems in regard to ~ densities or zonings at this stage". The Appellant lodged an application for building approval for the first twelve units of the project. Building approval was granted on 13 November 1989. The documentation tendered in the Appeal indicates that at the time of this approval, the Respondent did not mention to the Appellant any intention to back-zone, either orally or in writing. By letter dated 11 January 1990, the Respondent advised , the Appellant that the proposed development of part of the subject land for the erection of twelve houses required the further consideration of the Appellant. The second paragraph of that letter stated that: "Reference is also made to an agreement between Felixstowe Pty. Ltd. (The 'Developer') dated 12/5/81 and varied by deed of variation executed by the Council on 15/12/85." On 10 July 1990, Mr MacKenzie-Forbes and Mr Comiskey, a Director of the Appellant, had a meeting with Mr Warren. It was agreed that at that meeting Mr MacKenzie-Forbes was advised that a building approval would be issued once the Appellant had given a letter in relation to external works -- 15 of 17 -- 16 associated with the first twelve units. At that meeting there was no mention that the land was to be re-zoned back to the Low Density Residential Zone. There was no indication that the concept plans tendered needed to be submitted to the Council before the scheme could proceed. Mr MacKenzie-Forbes said that as he and Mr Comiskey left the meeting they noticed the new Town Plan on display and discovered that the land was about to be re-zoned. When they advised Mr Warren that they had seen that the land was to be re-zoned, he replied that the Appellant should lodge an Objection. Mr Warren could not recall whether there were discussions about whether development in accordance with the new concept plan could proceed. He said the re-zoning was on display prior to the meeting and he noticed the gentlemen looking at it. After the meeting, there was some comment passed about the re-zoning and he told them they could lodge an Objection. I have perused all the documentation tendered in the Appeal for the period from the execution of the Deed on 1 2 March 1981 until the prescribed date, 15 June 1991. I find that it does not support the contention that the Respondent considered the Appellant was in default of clause 9 of the Deed, and it therefore had a right to back-zone the land. It is not clear from the evidence that the Respondent's 1991 application for re-zoning of the land was the result of the Appellant's default under the Deed or whether it was the result of a general planning review, independently of the Deed. Senior Counsel for the Respondent submitted that the Respondent's decision not to accept the recommendation of its -- 16 of 17 -- 17 Consultant Town Planner "gives rise to the inescapable inference that it decided to exercise the back-zoning right, in accordance with its terms". I find that this inference ought not be drawn. I find that the rezoning was not the result of the Appellant's default under the Deed. There was no evidence that the Respondent advised the Appellant that it intended to exercise its right to back-zone; indeed, the evidence which I accept is to the contrary, namely, that Messrs MacKenzie-Forbes and Comiskey found out about it when they saw it on public display at the offices of the Respondent. I accept that, pursuant to clause 9 of the Deed, the Respondent was not required to advise the Appellant that it intended to re-zone; indeed the clause states that "the Council shall have the right without any further reference to the Developer". However, this does not mean that the Appellant had lost its rights to compensation if there was a re-zoning independently of default under clause 9 of the Deed. The exercise by the Respondent of its right to back-zone without compensation pursuant to clause 9 needs to be clear and unequivocal. I find that clause 9 of the Deed does not deny the Appellant the right to be compensated. I assess compensation at $402,250.00. -- 17 of 17 --