Fabrellas v The Commissioner of Water Resources [1991] QLC 45

LAND COURT, BRISBANE. 11th December, 1991. Re: Determination of Compensation - Resumption for a purpose of the Irrigation Act 1922 - 1986 (viz Burdekin River Irrigation Project) - (A91-21) LJ and GB Fabrellas v. The Commissioner of Water Resources J U D G M E N T Consequent upon the resumption by the Commissioner of Water Resources on 2nd September, 1989 of land described as Lot 2 on RP 741994, County of Gladstone, Parish of Northcote containing an area of 375.3 hectares, the dispossessed owners Laurence Joseph Fabrellas and Gloria Bernice Fabrellas filed a Claim for Compensation with the respondent Commissioner in the sum of $1,466,000. The matter was referred to the Court by the Crown Solicitor on 6th February, 1991 for the purpose of the determination of compensation pursuant to the resumption. The resumed land is situated in Barratta Road about 42 kms south-west from the Township of Ayr and 28 kms south of Giru. It was zoned "Rural A" under the provisions of the Burdekin Shire Council's Town Planning Scheme which was gazetted on 2nd July, 1977. The land was at resumption date being used for agriculture which was a permitted use under the provisions of the Town Plan. Evidence was called from one of the claimants (Laurence Joseph Fabrellas) who told us that he together with one Sebastiano Casterina purchased the property in the early 1970's. Mr Fabrellas has been a cane farmer in the Lower Burdekin District for about 44 [1991] QLC 45 -- 1 of 13 -- - Page 2 - years. At time of purchase the property was used for grazing purposes. The purchasers' intention at the time of sale was to partition the land so as each party could farm their respective parts on their own account. Then the property was described as Portion 13v Parish of Northcote and it contained an area of 789 hectares. Shortly after purchase, the owners commenced to grow rice in partnership. About 40 hectares of rice was grown. However Mr Fabrellas says that the country was not ideally suited to rice growing and the water allocation the property had was from a bore and was not sufficient to grow any large area of rice. Mr Fabrellas told us that it was his intention eventually to bring the land into sugar cane production as and when expansion took place in that industry. He was aware of a restriction imposed by the then Commission of Irrigation and water supply on the use of under ground water, but was satisfied that there was an unlimited supply of ground water available for tapping some time in the future. Mr Fabrellas said that he was aware that in nearby Mona Park, large areas had been opened up in 1963 for cane expansion and that irrigation licenses have been granted to irrigate virtually the whole of that area from under ground supplies. However, consistent efforts by him to obtain an increased allocation for under ground supplies were refused. Mr Fabrellas regarded his land as being suited to long term development for cane production since it was located adjacent to the Invicta Mill Tramline, the soil quality was ideal for agriculture and he believed that there was this large underground water supply available. Power was connected to the property. Mr Fabrellas informed the Court that his co-owner Mr Casterina did undertake small cropping on part of his lands which are similar in quality to the resumed land and was quite successful in growing produce but the venture was not entirely financially successful due to market conditions. Mr Fabrellas put two bores down shortly after the purchase of the property. Licenses were sought for each bore but the Water Resources Commissioner would only grant a license for one bore and guaranteed only sufficient water allocation to irrigate approximately 24 hectares. Both bores however were equipped to irrigate a rice crop which had been planted -- 2 of 13 -- - Page 3 - but the Water Resources Commission insisted he pull up one of the facilities. Towards the end of the 1970's Mr Casterina and the claimants decided to partition the property, but the Water Resources Commissioner refused to approve of it. Sometime after this, Mr Casterina negotiated a sale of one half interest in the property to one G. De Zolt. At a later date, a further approach was made to the Water Resources Commission with a proposal for subdivision of the property which was then approved. A condition of the approval was that the existing water allocation be split so that the claimants had a right to irrigate approximately 12 hectares and De Zolt the same area. Mr Fabrellas says he has not actively farmed the land since that time because of the inadequate water allocation. Mr Fabrellas believes that he has been discriminated against by the Water Resources Commission since the time he has had an interest in the land. As a result, the land has an appearance of being less than it really is because it has not been able to demonstrate that an adequate water supply was legally available. He says his land is just as suitable for growing sugar cane as land owned by the Burdekin Agricultural College nearby and for which a number of bores were approved. Mr Fabrellas sees the only reason he was refused licenses to irrigate his property was so that the Water Resources Commission could resume it for the Durdekin scheme and acquire it at the lowest possible price. He believes he should be compensated on the basis that it was irrigable arable land, or at least that it was arable land with a potential for irrigation. Mr Fabrellas told us that when the property was subdivided, NORQEB required that he and De Zolt enter into minimum guarantee agreements for the supply of power. After the land was resumed, the Commission did not enter into a new agreement with NORQEB for the supply of electricity until May, 1991. NORQEB continued to levy the minimum guarantee payments and Mr Fabrellas had to pay a total of $1700 under the guarantee agreement for non-use of electricity for the period from the resumption until May 1991. Valuation evidence was called on behalf of the claimants from Geoffrey William Eales who is a practicing registered valuer at Townsville. Mr Eales assesses -- 3 of 13 -- - Page 4 - compensation as follows:- LAND AND IMPROVEMENTS (including water and fencing) 25 ha irrigable/arable licensed land @ $3,500/ha $ 87,500 155 ha fully cleared potential irrigable/ arable land @ $3,000/ha $465,000 125 ha partly cleared potential irrigable/ arable land @ $2,000/ha $250,000 70 ha timbered country potential irrigable/ arable land @ $1,250/ha $ 87 500 $890,000 ===== DISTURBANCE Professional fees in lodging claim for compensation - valuation and legal fees $7,350 NORQEB guarantee $ 1,700 Total Claim $899,050 ===== Mr Eales describes the resumed land as forest country timbered with poplar gum, moreton bay ash, ironbark and bloodwood. It is generally level to gently undulating dark brown clay loams to loams of clays. Part of the land has been cleared for cultivation and levelled for rice production. Some sucker regrowth was in evidence. Mr Eales classifies the property as:- 180 ha fully cleared and levelled to cultivation 125 ha cleared to cultivation with some sucker regrowth 70 ha uncleared country Mr Eales says the property has one sub-artesian Licensed Bore no. 37563 with an allocation of 101.5 megalitres per annum. It is equipped with a Gaskin Turbine pump powered by a 30 horsepower electric motor and time switch. Mr Eales considers this allocation is capable of irrigating 25 hectares but he sees the property as having a potential to -- 4 of 13 -- - Page 5 - be fully irrigable/arable agricultural land suitable for the growing of sugar cane, rice or small crops. Mr Eales was not able to specify from which source the irrigation water would be made available, but says there would be little doubt that if unresumed, the land would eventually become irrigable land. There are obviously only three possible sources - from underground supplies, from channels from the irrigation scheme, or from some form of private scheme from the Burdekin River. Mr Eales sees the subject land as being located in an area of the Burdekin which is a logical one for the continued expansion of an agricultural area primarily used for growing sugar cane. He says it has good quality soils, a good underground water supply, it is located adjacent to an existing Mill tramline. It has three phase power and is in close proximity to Ayr and Townsville. Mr Eales informed the Court that the Water Resources Commission granted a new license in the subject area by allowing a license in the name of LA and IC Savorghan to be transferred from Giru to land described as Lot 2 on RP 36875 Parish of Northcote. The allocation was for a 242 megalitres. Mr Eales says this approval established a precedent and that underground licenses may have been available for other landholders in the area including the claimants. There is however, evidence that Mr Savorghan had to abandon his entitlement for ground water supplies at Giru. Mr Eales relies upon a number of sales for his valuation of the subject land. He says the potential for irrigable/arable land has to be considered and recent sales in the area show levels of value which are consistently high, varying between $2,200 per hectare to $3,477 per hectare overall for irrigable/arable agricultural country with or without irrigation licenses. It seems one of the principal sales relied upon by Mr Eales is the sale of the half share of Portion 13v from Casterina to De Zolt on 25th May, 1979 for $400,000. This sale of course incorporates the subject property. Mr Eales analyses this sale to show a value of $761,628 for the land watered, fenced and cleared - or $965.30 per hectare. He apportions the unimproved value to show $500 per hectare for timbered agricultural land and $1,318 per hectare for cleared agricultural land. At that time, the irrigation license allowed for the -- 5 of 13 -- - Page 6 - pumping of 203 megalitres per annum to irrigate approximately 50 hectares. My immediate observation is that Mr Eales has applied very significantly higher levels of value in his valuation of the resumed land - no doubt as a result of the sale being about ten years prior to resumption. Other sales relied upon by Mr Eales are incorporated within his valuation report. They are available for reference. There are six sales from Cox to various parties in 1980 which show values ranging from $1,980 per hectare to $2,585 per hectare. Some had irrigation licenses, some did not. Mr Eales tabulated a series of sales from the Crown in 1989 which show values ranging from $2,200 per hectare to $3,477 per hectare for irrigable arable land (previously referred to in this judgment) with water allocations from channels. Other sales in 1990 show values ranging from $2,370 per hectare to $3,466 per hectare and Mr Eales says these properties had no irrigation licenses at date of sale. Mr Eales has valued to land taking into account that it is reasonable for the acquiring authority to pay more for it than normal market value. The respondent Commissioner called in evidence James Ian McClurg who is a land resource officer in the employment of the Department of Primary Industries stationed at Ayr. Mr McClurg has been involved with detailed surveys and land suitability assessments for over 5 years within the Burdekin River Irrigation area. He regards the subject land to have two possible agricultural uses. Firstly, with an allocation of high quality irrigation water, the land is suitable for growing a range of crops. This assessment assumes area works for channel irrigation has been fully installed. Secondly, where no irrigation water is available the land has been assessed on its potential for rainfed cropping. Mr McClurg says the soils on the subject land were mapped in detail during the survey of the Northcote section of the scheme in 1986-1988 for which he was personally responsible. He says there are four main groups of soils on the resumed property. They include cracking clays (243 ha or 65%), sodic duplex soils (54 ha or 14%), non sodic duplex soils (56 ha or 15%) and uniform sands (21 ha or 6%). Mr McClurg is of the opinion that most of the resumed land is suitable for sugar cane production with irrigation works installed. An -- 6 of 13 -- - Page 7 - area of 271 hectares (or 72%) is suitable for rainfed cropping (dry arable) but he does not consider rainfed cropping to be a proposition in the Burdekin due to the light rainfall in the area. He says rainfed cropping is a very risky proposition in the environment of the Burdekin. Leon Malcolm Leach, who is a hydrologist in the employ of the Water Resources Commission, Department of Primary Industries, at Ayr, told us that the resumed land lies within the Northcote District which is an area declared on 29th October, 1964 as a sub-artesian bore district which was proclaimed as such because of the lack of available ground water due to poor reliable natural recharge and the need to manage ground water so that its use is in balance with long term natural recharge. Any person who wishes to use a sub-artesian bore within the Northcote District for the purpose of irrigation is required to do so under an authority of a license. On 2nd December, 1971 an application was made by the former owners of Portion 13v (LJ Fabrellas and S Casterina) for a license to allow test drilling and the construction of one production bore. License No. 37564 was authorised on 20th March, 1972 for the construction of a bore with conditions limiting it to the use of ground water to 203 megalitres per annum over 26 hectares. Six test bores were drilled and two production bores were established. One was unauthorised and later destroyed. A further production bore was drilled prior to 29th May, 1974. This was later authorised by licensed no. 39991. When Portion 13v was partitioned, since the parts were about the same size the ground water allocation was equally apportioned between the two lots, 101.5 megalitres per annum and 13 hectares on each lot. So that at date of resumption the licensee of the subject land was authorised to irrigate from one production bore on an area of 13 hectares with an amount of water not exceeding 101.5 megalitres per annum. Mr Leach told us that there has been substantial Commission drilling in the general vicinity of the subject land, and he is familiar with the ground water availability from the sediments underlying and surrounding the lands near the subject land. He says that on going studies have shown that while ground water exists beneath the resumed land, it is of limited quality and without adequate replenishment the ground water resource would be mined with dire consequence to existing licensees. There has been an allocation rule based on -- 7 of 13 -- - Page 8 - attempting to balance extraction with long term recharge for over 20 years, and Mr Leach says a full entitlement to the available ground water beneath the subject land was already allocated by 1973. Mr Leach commented in evidence that the licenses authorising the construction of some 11 bores on the Burdekin College land conformed with existing Commission Policy rules. Robert Joseph Moloney, who is a registered valuer in the employ of the Department of Primary Industries (Water Resources Commission) values the resumed land as $330,590. His valuation is made up as follows:- LAND (a) Irrigable arable - land only (excluding development, but fenced and watered) - 13 ha irrigable arable clay loam soils @ $2,700/ha $35,100 (b) Dry arable lands - land only (excluding development, but fenced and watered) - 279 ha clay and clay loam soils with some form of arability in rainfed conditions @ $550/ha $152,450 (c) Grazing lands - land only (excluding development, but fenced and watered) 83 ha clay and clay loam soils suited to grazing only in rainfed conditions @ $330/ha $27,390 (d) Development - 19 ha laser levelled and formerly cultivated @ $950/ha $18,050 111 ha old cleared to cultivation stage including stumping @ $700/ha $77,700 24 ha formerly cleared to cultivation stage now carrying light regrowth @ $200/ha $4,800 141 ha formerly cleared but carrying substantial regrowth @ $100/ha $14,100 $114,650 (e) Structures nil -- 8 of 13 -- - Page 9 - Total land and development $330,590 ===== Mr Moloney describes the subject land in its virgin state as comprising level to gently undulating light to moderately timbered forest country. It contains primarily cracking clay soils with a band of clay loams in the north. The development at the time of resumption is described by him as being about 19 hectares cleared to the cultivation stage including laser levelling, 111 hectares cleared to cultivation stage but not laser levelled, 165 hectares formerly cleared but now carrying regrowth. At resumption date the land was used for grazing but Mr Moloney considers its highest and best use to have been for limited irrigation cropping and grazing. The irrigation bore was not in use at that time, and he says that power was disconnected from the facility several years ago. Mr Moloney bases his assessment of compensation mainly upon the judgment of the Land Appeal Court in Re: JR Steven v. The Commissioner of Water Resources (handed down on 21st August, 1990 and not yet reported). The Land Appeal Court determined compensation in that matter for the taking of Lot 388 on Plan SB209, Parish of Leichardt Downs containing an area of 479.606 hectares in the sum of $433,722. The resumption date was 15th August, 1987, and the land was resumed for the same purpose as for the subject land. As Mr Moloney points out, compensation determined by the Land Appeal Court was made up as follows:- Land (inclusive of water & fencing) 24 ha developed irrigable arable land @ $1,850/ha $ 44,400 84 ha developed irrigable arable land @ $1,600/ha $134,400 92 ha undeveloped dry arable land @ $416/ha $ 38,272 280 ha grazing land @ 250/ha $ 70,000 $287,072 Development 92 ha clearing & cultivation @ $500/ha $ 46,000 66 ha clearing of grazing land @ $350/ha $ 23,100 7 ha clearing & cultivation @ $350/ha $ 2,450 $ 71,550 Land - inclusive of timber treatment, -- 9 of 13 -- - Page 10 - water and fencing $358,622 Structures Dwelling $58,000 Shed $13,350 Tanks $ 3,750 $ 75,100 $433,722 ===== It is to be observed that Mr Moloney has valued the subject irrigable arable lands exclusive of development $2,700 per ha, and including development at $3,650 per hectare. Mr Moloney considers that his applied value rates for the subject land are in line with the determination by the Land Appeal Court taking account of the soil types, country, situation, access and method of irrigation delivery which was, in the Steven case, by utilising a pump situated on the Burdekin River some 5 kms to the south-west of the Steven land and delivery of water by open channel. It is also to be observed that Mr Moloney has valued the subject at much higher rates per hectare than those determined in the Steven judgment, for the reason that he sees the resumed land as being superior overall to the Steven land mainly due to its situation. Mr Moloney has also relied upon sales evidence to support his valuation of the irrigable arable soils on the subject land. These sales show irrigable values per hectare (exclusive of development) ranging from $2,705 per hectare to $3,974 per hectare. All sale properties have superior irrigation capability being served from the Water Resources Commission channels. He has also used sales in support of his valuation of the dry arable and grazing soils on the subject property. Details of these sales and the type of country involved are fully set out in his valuation report and accordingly are readily available for reference. Mr Moloney does not rely on the sale of the half share of Portion 13v from Casterina to De Zolt. He says it is too remote in time, being about 10 years prior to the date of resumption. I agree that the time remoteness is such as to make that sale unreliable as a valuation basis. The same can be said of many of Mr Eales' sales particularly, those in 1980 -- 10 of 13 -- - Page 11 - when the evidence discloses the sugar cane industry was in a buoyant condition and in a state of expansion. Mr Moloney also criticised the use of many later arable sales relied upon by Mr Eales, mainly on the basis that the purchasers of the blocks which did not have irrigation licenses had the knowledge that irrigation water was to be made available in the future from the Water Resources Commission channel. Upon my appreciation of the evidence, it is clear that I must prefer the approach of the respondent Commissioner in the assessment of compensation. The case for the claimants clearly embraces the addition of value to the resumed land for its potential for irrigation, and it is equally clear that, but for the scheme of resumption, that potential could not have been economically realised. There was just no prospect of obtaining underground irrigation supplies on the subject land apart from the existing license to irrigate 13 hectares. In this respect I adopt the evidence of Mr Leach who is an expert in the field of hydrology. To determine compensation on the basis used by Mr Eales would simply mean borrowing from the scheme of resumption and this is not sustainable in law (vide Melwood Units v. Commission of Main Roads (1978) 5 QLCR 145 p 153). In other words I cannot hold that the assumed hypothetical fully informed prudent purchaser negotiating to buy the resumed land in the open market place as at the date of resumption, would be prepared to pay the level of values applied by Mr Eales, since if the scheme is to be disregarded, there was no prospect of his obtaining sufficient underground irrigation water supply to irrigate the whole property. This has been the case since even before original Portion 13v was purchased by Mr Fabrellas and Mr Casterina since the land falls within the Northcote area within which the respondent Commissioner has had the power to control the groundwater supply since its proclamation on 29th October, 1964. Having said this, it remains for me to examine the respondent's case. All the evidence is clear and precise - Mr Leach has satisfied me that there was no prospect of obtaining further irrigation supplies. Mr Moloney has adopted an area classified as dry arable which is not at great divergence with the area suggested by Mr McClurg as containing soils suitable for rainfed cropping, and as far as I can determine, Mr Moloney has valued the -- 11 of 13 -- - Page 12 - resumed in line with the determination of the Land Appeal Court, after making certain adjustments in favour of the subject land. There is a time difference between the dates of resumption of the Steven land and of the subject land, but I do not think there is any substantial change in the market circumstances prevailing as between the different dates. It is clear that there is no room for compromise between the parties in this case, and I simply cannot agree with Mr Fabrellas, and for that matter Mr Eales, that compensation should be assessed on the basis that the resumed land should have been, at resumption date, irrigable arable land or potentially irrigable arable land. However on closer examination of Mr Moloney's valuation, compared with that of Mr Eales, it seems apparent that there is a discrepancy in the area considered by each valuer to have been cleared for cultivation. While it is difficult to reconcile their respective estimates since some of the cleared land is carrying regrowth, I am led by the evidence on Mr Eales that an extra area of 50 hectares could reasonably have been regarded by Mr Moloney to be in a more completely cleared state than his valuation suggests. He has applied a rate of $700 per hectare for clearing to the cultivation stage including stumping, and $200 per hectare for clearing to the cultivation stage with light regrowth. Since I should weigh any doubts I have in favour of the dispossessed owners, I propose to adjust Mr Maloney's valuation of the resumed land by adding to it a component of $25,000 for the value of the extra clearing. This is the only adjustment I make to his valuation. Accordingly I find that fair and reasonable compensation for the resumption flows from my acceptance of the adjusted assessment of compensation for the loss of the land in the sum of $355,590. Legal fees involved in the preparation of the claim for compensation are agreed in the sum of $1,350. Counsel for the respondent submits that a claim for valuation fees in the sum of $6,000 is not allowable since they were incurred well after the date of the filing of the claim for compensation. No reasonable argument could be, nor was it mounted against the submission, that the valuation fees were not incurred for the purpose of the preparation of the claim for compensation. Accordingly no compensation is awarded for valuation fees. The claim for $1,700 for the payment by the claimant of the NORQEB guarantee is -- 12 of 13 -- - Page 13 - compensable. Accordingly compensation under the head of disturbance is determined in the sum of $3,050. Compensation is accordingly determined under all heads of claim in the sum of $358,640. Section 28 of the Acquisition of Land Act 1967 - 1988 provides that the Court may order that interest be paid upon the amount of compensation determined by it. I am advised that an advance of $70,000 against compensation was paid by the respondent Commissioner on 8th October, 1990. I order that, in addition to compensation payable, interest be paid by the respondent Commissioner to the claimants at the rate of 12.5% per annum on the following sums and for the following periods:- On the sum of $358,640 for the period commencing 2nd September, 1989 and ending on 8th October, 1990 and; On the sum of $288,640 for the period commencing 9th October, 1990 and ending on the day immediately preceding the date upon which final compensation is paid. (C.H. Carter) Member of the Land Court. -- 13 of 13 --