Brampton Island Pty Ltd v The Valuer-General [1991] QLC 257

l LAND COURT, BRISBANE 17th May, 1991 Re: Determination of rent for third rental period of lease and Re: Appeals against determinations of Valuer- General - Brampton Island - PCL 30/2323 NCL and Appeals V90-671/672. Brampton Island Pty Ltd V. Th e Crown AND Brampton Island Pty Ltd V. The Valuer-General DECISION Before the Court are appeals (2) against determinations of the Valuer- General of the unimproved value of land situated on Brampton Island which is leased from the Crown by Brampton Island Pty Ltd and a reference by the Minister which requires a determination by the Court of the rent payable under a lease held by the same company over part of the land, the subject of the appeals. The matters were dealt with together, with evidence of value being given on behalf of the lessee company by Mr T. Jones, registered valuer in private practice, and on behalf of the respondents, by Mr J.N. Smith, registered valuer in the employ of the Department of Lands, Division of Valuations. The relevant lands which will be described shortly cover an area of 11.25 hectares, are adjoining parcels and are used for Tourist Resort purposes, - being known as Brampton Island. The island is situated about 35 kilometres north- east of Mackay, from which it may be accessed by sea (daily by Roylen Cruises) or [1991] QLC 257 -- 1 of 21 -- 2 by air (Australian Airlines - Twin Otter service) and about 75 kilometres from Shute Harbour (the mainland access to the Whitsunday Islands). Exhibit 34 which comprises an aerial photograph (coloured) of the island produced by the Department of Mapping and Surveying in co-operation with the lessee, states, among other things, that the island has an area of approximately 7. 7 square kilometres and rises to 219 metres. The island is principally a National Park. It is in the shape of a hand with the five fingers spread in a direction from south-east to south-west of the north-east or northern point where sits the resort at Sandy Point. An airstrip adjoins the resort, running from Sandy Point to Turtle Bay. A shallow water jetty is near the resort in the north-west and further afield in the same direction there is· a deep water jetty with access by tram line to the resort complex. Exhibit 34 depicts blue water and sandy beaches between the fingers, whilst, as the names would imply, there is a sandy beach fronting the resort complex. The body of the island (the palm of the hand) is densely forested National Park with a lookout at Brampton Peak in the centre and there are walking tracks or access tracks around the perimeter. Water for the resort is obtained from catchment dams within the National Park, from bores and from a dam (tank) within the leased areas. The resort generates its own power and has provided its own sewerage treatment plant. The land is zoned "Comprehensive Development" and it is agreed that the highest and best use of the area is for Tourist Resort purposes. The resort complex includes about 108 units and it is accepted that the potential of the area is not significantly greater, lest the is.land atmosphere be destroyed. With that Mr Jones is of the opinion that the water supply would limit potential. The resort proper is contained within the Perpetual Lease, being described as Lot 5 on Plan Ci4322, containing an area of 10.4489 hectares. This area adjoins the airstrip in the south- -- 2 of 21 -- 3 east. From the tip of the airstrip and running the boundary of the Perpetual Lease around Sandy Point to the shallow water jetty is a strip of esplanade held by the company under Special Lease. This area is described as Lot 28 on Plan Ci4322 (SL 30/49263) containing 7974 square metres. The Special Lease was issued for "Business (Tourist Facilities)" purposes and cannot be transferred unless in conjunction with a transfer of the Perpetual Lease. The combined area of the two leases is 11.25 hectares. The rent of the Perpetual Lease is required to be determined for a rental period of 5 years commencing on 1st October, 1988. The determination is subject to the provisions of the Land Act which state that the determination of the Court II shall be of a sum equal to 3 percentum of the unimproved capital value of the land comprised in the lease as determined by it as if the land were held in fee simple at the date of commencement of the rental period in question" (s.212). For this purpose, the respective unimproved values are as follows: Area 10.4489ha Date 1.10.88 Smith $3.?M Jones $1.35M The combined area of the two parcels is the area the subject of the appeals against the determinations of the Valuer-General. These determinations were made under the provisions of the Valuation of Land Act, s.12(1)(b) of which is applicable in the circumstances and provides that unimproved value means - II In relation to improved land, 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 -- 3 of 21 -- ( 4 The relevant parcels are adjoining parcels. The smaller is held under Special Lease but this lease was issued for "Business (Tourist Facilities)" purposes with no restrictions or limitations which may require special consideration under s.11 (1)(v) of the Act in determining unimproved value. The primary charter (s.12(1 )(b)) has therefore application in the circumstances. This charter is in substance identical with the test laid down in s.212 of the Land Act - "unimproved capital value" having the same meaning as purchasing price in fee simple (see - Re: Jimbour Selections (1926/27) 11 C.L.L.R. 99). In both cases the words used are synonymous with market value - In Spencer v. The Commonwealth (1907) 5 C.L.R. the High Court propounded the proper test for the assessment of land value. It is the price which a willing purchaser would at the date in question have had to pay to a vendor not unwilling, but not anxious to sell. It seems to me that that test finds statutory expression in the Valuation of Lands Act. In defining 'unimproved value' for the purposes of the Act, it recites that that value is 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. In simple terms it is synonymous with the market value of the land. • - J.B. and D.M. Stubberfield v. The Valuer-General (1988/89) 12 Q.L.C.R. 328 F.C. per Carter J. In the Spencer case, Isaacs J. put the test as follows: II In the first place the ultimate question is, what was the value of the land on 1sdanuary 1905? All circumstances subsequently arising are to be ignored. Whether the land becomes more valuable or less valuable afterwards is immaterial. Its value is fixed by Statute as on that day. Prosperity unexpected, or depression which no man would ever have anticipated, if happening after the date named, must be alike disregarded. The facts existing on 1st January 1905 are the only relevant facts, and the all important fact on that day Is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted. The plaintiff is to be compensated; therefore he is to receive the money equivalent to the loss he has sustained by deprivation of his land, and that loss, apart from special damage not here claimed, 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 -- 4 of 21 -- 5 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. • In each subject case the market value is required to be ascertained on a given date. It follows, in applying the Spencer test, that foreseeability is limited to that which may be foreseen at the relevant date and the capital sum fixed as at that date notwithstanding the period of time for which it will remain fixed for rating and taxing purposes or for that the rent derived therefrom will apply for a period of 5 years. The relevant matters are, however, valuations for revenue rating and taxing purposes and for that purpose the Court's attitude to the ascertainment of the capital sum embodies a degree of caution which as a principle of general application is expressed by Dixon, J., as he then was, in Commissioner of Succession Duties (SA) v. Executor Trustee and Agency Co . of SA. Ltd (1946/47) 74 C.L.R. 358 as follows: .... I should like, however, to add for myself that there is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a court's attitude in the application of the test. In a case of compensation doubts ';lre resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate. • (pp 373/374) (See also Determination of unimproved values for freeholding purposes - GHPLs 10/ 3109-10, Charleville, Land Court. 28th March, 1991). For the purposes of the valuation of Land Act, the respective unimproved values are as follows: -- 5 of 21 -- Area 11.25 ha 11.25 ha Date Smith 31.3.1988 $2.8M 31.3.1989 $4.2M 6 Jones $1.62M $1.62M The ascertainment of the value for rental purposes sits between these dates on 1st October, 1988. The rent for this period was actoally determined by the Minister at a sum based on an unimproved capital value of $3.3M. In the hearing, evidence was led by the Crown to an unimproved value of $3. 7M which at 3 percent would reflect a rent of $111,000 per annum. The respective valuations have been framed on the basis that the subject land is unimproved, is zoned for the purpose which, it is agreed, is its highest and best use and with all surrounding facilities and services as they exist at the relevant dates. The subject land in its unimproved state can reasonably be described as consisting of sandy coastal forest on the frontage, rising up to steep slopes on the south and south-west. The development has included levelling, filling, walling and landscaping. A depression in the south-eastern section has been developed into a water storage, augmenting other storages. This work of development has been costed by Mr Jones at $30,000 and it has been allowed for in his valuation at that sum. He says that the frontage area is vulnerable to tidal surges and that with works it is now fairly safe, although as recently as December 1990 the resort had to "sand bag" an area from the tramway line/foreshore conjunction along the north beach and around the corner. The principal water supply for the resort comes from storages within the National Park. The tenure over the relevant water storage areas was held under Special Lease. The lease expired on 30th September, 1988. It appears that, in future, tenure over these areas will be held under a form of Permit __to_, Occupy authorising the continued operation of the existing facilities. Some apprehension was expressed in the evidence as to the security of this form of -- 6 of 21 -- 7 tenure and evidence was given that should access to these facilities be denied, cost to barge water from the mainland would be at least of the order of $500,000 per annum. The present supplies are sufficient to serve the existing density of development. It may limit (in the opinion of Mr Jones) any further development but this is not seen by Mr Smith as a liability - in his opinion a development of the existing kind spread over the area of the resort of 11.25 hectares enables a separation of resort facilities from staff facilities, etc., thus giving the development an island atmosphere. For comparison purposes it seems to me that the site may be viewed as one having a supply of water from external sources sufficient to provide a development of at least that of the existing density and as secure as the lease over the resort, for I cannot imagine any prudent lessor (more so the Crown) granting a lease over the resort area for that purpose (assuming it were unimproved land) and denying it access to water from external facilities in existence at the time of the grant. I come now to the valuation evidence. In the opinion of Mr Jones the best evidence of value is found in the sale of North Keppel Island (15. 7 ha) - Special Lease) which sold for $1.55M on 4th May, 1985, and Wild Duck Island (126.5 ha) which sold for $1.2M on 27th July, 1988. These properties were selected for reasons which include their location which is "relatively remote from the main tourist" areas. North Keppel is proximate to Great Keppel off Yeppoon. The island has no airstrip and no jetty. Launch services are available from Rosslyn Harbour. He sees comparability between that land and the subject land in size and quality. He said that North Keppel has water problems, a good beach and comprised on sale an old small resort "but will no doubt be redeveloped as a middle area" resort of the Brampton type. His analysis of the sale reflected an -- 7 of 21 -- 8 unimproved value of $1.3M (Mr Smith - $1.2M). The analysis reflected a value per hectare of $82,278. His valuation of the subject combined area is $1,650,000 or $146,719 per ha. · The sale is included in the schedule of sales tendered through Mr Smith but is not relied upon for the purposes of direct comparison, for reasons principally that the sale is removed in time, that North Keppel is significantly removed in location from Brampton, and that the tenure is subject to significant restrictions. Mr Smith said that the water supply is poor on North Keppel and that a ceiling on development has been set at 60 units - a limitation which, in his opinion, although governed by the availability of water may be prudent in view of the presence of North Keppel. He saw this last matter as a factor favouring Brampton in that it is not subject to pressure from the influence of nearby developments. Before leaving the sale, I should add some matters concerning tenure. North Keppel is National Park. The tenure sold is a Special Lease over part of the National Park. The lease contains some 25 numbered conditions including a condition (No 14) that the Director of National Parks has the right to use up to one- third of the total lease area for the development of facilities for visitors to the National Park. A condition (No 21) states that conversion of the lease to a perpetual lease or a freehold tenure will not be approved and there is another which states that the lessee shall continue to provide cabin type accommodation to a standard satisfactory to the Minister and the Director of National Parks. Wild Duck is situated to the south-east of Carmila. The sale covered an area of 126.5 hectares, of which 18.95 hectares is held under Perpetual Lease and 107.55 hectares is held under Special Lease. The sale was effected by a mortgagee in possession in July 1988 for a consideration of $1.2M. In Mr Jones' -an~alysis of the sale, an unimproved value of $1,008,000 is obtained which he -- 8 of 21 -- 9 apportioned between the Perpetual Lease and Special Lease in the ratio of $750,000 ($39,578 per ha) and $258,000 ($2,399 per ha) respectively. The sale is also found in the evidence of Mr Smith. The Valuer-General obtained an unimproved value of this island on analysis of $880,000. The island has an airstrip but has no jetty. It possesses a natural lake, has good sandy beaches and there is a turtle rookery on the island which limits the placement of developments to areas which will not throw light upon the rookery. Briefly, Mr Jones sees Brampton as being superior in situation but inferior in quality, size and water resources. He views the sale as being very relevant in time as it falls between the relevant dates of valuation. The sale was made by the National Australia Bank Limited as mortgagee after auction. Improvements are listed in the contract as including, "14 brick villas in various stages of completion (all unfurnished)". The contract makes mention that the vendor "takes no responsibility for the six (6) registered subleases" on the island. The island in the opinion of Mr Jones has an excellent beach on the north and a useful beach on the south. He sees the freshwater lake as an advantage and said that the balance of the island was National Park. The factor rendering Brampton superior in his opinion was its location to Mackay. Mr Smith sees the airstrip on Wild Duck as an important asset as there are no regular launch services from Carmila. He emphasised that development would be required to be placed so as not to interfere with the turtle rookery and he was aware that the purchaser had in mind a multi-million dollar proposal for an integrated resort consisting of an extremely large number of villas, resort hotels, golf courses and further redevelopment of the airstrip. He said that the subleases posed some obstacles to further development of the island. He agrees that Brampton has a superior location and better services. He did not regard the sale as a suitable basis for valuation -- 9 of 21 -- 10 purposes. The relationship in which Mr Jones has the islands at about $40,000 per hectare (perpetual lease area - Wild Duck) to $146,719 per hectare on the subject area is enough to suggest that comparability between the two sites is difficult. Other sales considered useful by Mr Jones included Happy Bay, Palm Bay and Dent Island. The first two are situated on Long Island whilst Dent Island is immediately to the west of Hamilton Island. All are situated within the Whitsundays. The sale of Happy Bay took place in April 1986. Palm Bay sold in August 1987 and Dent in June 1988. The sale of Dent was of a Pastoral Holding over the northern two-thirds of the island. The southern area of 115 hectares is held by the Commonwealth of Australia. The purchaser of the Pastoral Holding was the operator of Hamilton Island. The area purchased is 194.2 hectares. The price paid for the lease was $1.2M. The purchaser purchased with the intention of developing the island as an adjunct to Hamilton Island by providing a golf course and a resort hotel. Subsequent to the purchase, he obtained a lease from the Commonwealth of the southern area at a rental of $50,000 per annum. A possible land use plan prepared by Ullman and Nolan for Hamilton Island Enterprises (the purchaser) depicts areas for resort, golf course, open space, water storages and a substantial area in the north-western part of the island for refuse disposal. The evidence is that the purchaser was confident that he would obtain the necessary tenure to enable development. This sale is viewed by Mr Jones as useful supporting evidence and > he also had some regard to the rent payable under the lease from the Commonwealth. Mr Smith said that he interviewed the purchaser to learn that the sale represented an additional water supply for Hamilton and that the development of a golf course was seen by the purchaser as an attribute which would add to the - attraction of Hamilton Island and the Whitsundays. He agreed that the sale could -- 10 of 21 -- 11 be taken as an adjoining owner sale. He said that he had difficulty in making any comparison between the sale land and the subject land as there was no defined resort usage in respect of Dent. On Long Island there are three resorts - which from north to south are Happy Bay, Palm Bay and Paradise Bay. Happy Bay which comprises an area of 7.695 hectares of Perpetual Lease and 127.47 hectares of Special Lease (National Park) sold in April, 1986, by share transfer for $2.5M. The sale was analysed by Mr Jones and reflected an unimproved value of $1,050,000 of which $1 M was attributed to the resort area, reflecting a rate per hectare of about $130,000. The Valuer-General on analysis of the sale obtained an unimproved value of $1,080,000. The rent for this lease (PCL 05/1775) NCL was determined by the Court on 25th November, 1987, for the third rental period of the lease which commenced in October, 1986. For that purpose the unimproved value of the area was determined at $1M. As at 31st March, 1987, this land was valued by the Valuer-General at $1.2M, at 31st March, 1988, at $1.9M and at 31st March, 1989 at $4M. The value of the Happy Bay resort area as at October, 1986, can be taken as established. There is some evidence of comparison between this area and Brampton. It possesses, however, characteristics in common with Palm Bay which has been compared in detail with Brampton and for that reason I see no purpose in duplicating the evidence, except to add that in the opinion of both Mr , Jones and Mr Smith, this area is superior to Palm Bay which has been valued by the Valuer-General at $800,000 in _respect of a relevant date of 31st March, 1987; $1.2M in respect of a relevant date of 1st March, 1988; and $2.2M in respect of a relevant date of 31st March, 1989. The sale and the sale of Palm Bay have been - used by Mr Jones as evidence of an increase in value between the sale dates. -- 11 of 21 -- 12 Palm Bay, which sold in August 1987 for $1.7M, is of a relatively small area comprising a resort area of 2.343 hectares held under Perpetual Lease and 4.047 hectares held under Special Lease (National Park). Mr Jones' analysis of the sale reflected an unimproved value of $1,105,000. The analysis made on behalf of the Valuer-General reflected an unimproved value of $1,285,000. The difference between the two analyses lies in an allowance made by Mr Jones of $200,000 for the dredging of a channel and swing basin, external to the leased area. A study the authorities put before the Court by Mr Paterson, counsel for the respondents, supports his submission that the works are analogous to a road and are not an improvement "on" or "appurtenant to" the site - (See Appeals against determinations of the Valuer-General - Ci ty of Radcliffe (1984/85) 10 Q.L.C.R. 50) - and should not therefore, be included in the analysis. The sale may thus be taken as reflecting the figure obtained by the Valuer-General. This is the value that was applied to the land as at 31st March, 1988. Mr Jones concedes that values increased from 1980 to 1988 but says that there is no evidence to substantiate a rise after that date. In comparing these two sales, he inferred an increase of about 23 percent per annum subject to modifications for the difference in size between the two sites. This aspect may be left for the time being. The sale is particularly relevant to the assessment of the value of the subject land as at 31st March, 1988. It is the primary sale used by Mr Smith for this purpose. Mr Jones' apportionment of the sale is as follows: 2.343 ha (Perpetual Lease)@ $426,803 ha 4.047 ha (Special Lease)@ $25,945 ha = = $1M $105,000 If the bulk of the allowance for dredging is included in the value of the resort land, the rate per hectare would be of the order of $500,000. The capital value that Mr -- 12 of 21 -- 13 Jones applied to the subject area of 11.245 ha is equivalent to a value per hectare of about $147,000. The capital value applied by Mr Smith to the area is equivalent to a rate per hectare of $250,000. Palm Bay is 8 kilometres from Shute Harbour. It is agreed that it has a superior location to Brampton, being within the Whitsundays, with proximity to other resorts in that area and with the ability to share the transport infrastructure servicing area. It is agreed that the beaches are comparable and that Palm Bay has reasonable anchorage (no jetty). Mr Jones prefers the aspect of Palm Bay which is towards the mainland, this being on his researches the preferred aspect. His view of the two properties may be summed up in this part of the transcript when questioned about the relationship between Palm Bay at about $1.3M and Brampton: " Of Palm Bay is about $1.3 million, a little under $1.3 million? -- Yes. As at 22 August 1987, right. Now the relevant date is 1 October 1988 for the rental determination? -- Yes, O.K. And for that purpose the P.C.L. area on Brampton is given a value of $3, 700,000? -- I believe that's unreasonably high. Why do you say that? -- Well I think that Palm Bay would be demonstrating the highest unit rate probably of any, I'm sure, of all the sales that I considered to be useful and I say that because I exclude Tropical Island Paradise, but the disadvantage in this instance of Brampton is that it's in another place, it's in a different world, it's in a world that starts from Mackay. Palm Bay is in a world that starts and begins and finishes in the Whitsundays, in the presence of half a dozen other major resorts. I think that is, you know, a wholly critical factor. In other words I believe the relationship between Palm Bay and Brampton is not expressed accurately by considering relativities of the order of $t million for the P.C.L. in 1987 as a sale and $3. 7 million for three times the area as a valuation. Do you consider the subject or Palm Bay to be the better property? In other words how did you assess the one against the other? -- Acre for acre it's all - Palm Bay is all good and if we're looking at unimproved values it's all good, it's a good pocket handkerchief place. I think it's a lovely place. Brampton is 11 hectares as against 3, it's still a beautiful place and very attractive and a popular resort but because of its location, I mean I don't know how much it cost to put the airstrip on it, but if that airstrip wasn't on Brampton then it would not be in the same street as Palm Bay in overall -- 13 of 21 -- ( 14 value. But given the fact the airstrip is there? -- Given the fact that the airstrip is there I say that it helps to bridge the gap but it doesn't bring Brampton Island into the same category as any of the Whitsunday properties. " Palm Bay has a small bore and a · slight depression within the lease which the owners hope to use for water. Otherwise, water is brought by barge from the mainland. Mr Jones described the area as relatively small in the context of today's requirements, whilst Mr Smith sees that also as a disadvantage over Brampton in that Brampton with its size can spread the improvements and thus retain an island atmosphere. Mr Jones' comparisons are made primarily on a per hectare basis. The sale of Palm Bay without the adjustment for the dredging of the channel reflected on his apportionment a value of $426,803 per hectare. The value applied to the subject area overall is a rate of about $150,000 per hectare in round figures. There is no dispute that smaHer properties can be expected to realise higher unit valuers in the marketplace. However, when the comparison was put to Mr Jones in cross-examination at these rates per hectare, he expressed concern and could not satisfactorily resolve the substantial difference apparent in the figures. If the overall value he obtained in the sale - $172,926 - is put beside the rate he applied to Brampton of $150,000 per hectare, the comparison seems to make better sense, assuming that the whole area of the sale land could be developed for resort purposes. This comparison actually appears in his working papers. Clearly a comparison in this form cannot stand. It follows also that his workings on gauging the rise in values between Happy Bay and Palm Bay suffers the same defect for in that exercise the comparison was made in the same form. For the comparison to have any real weight it should have been made between the apportionments for the respective Perpetual Lease areas; that is of about $130,000 -- 14 of 21 -- 15 in respect of Happy Bay and $426,000 in respect of Palm Bay. This sale alone would on the evidence support the value applied by Mr Smith to Brampton of $2.8M at 31st March, 1988. I am also of the opinion that North Keppel would offer no resistance to an application of a value of that order but there the comparison cannot be made with confidence on the evidence before this Court, particularly when regard is had to the limitations on the nature and kind of development which might be permitted on North Keppel. The relevant date for the rental matter is 1st October, 1988, followed by an assessment of value as at 31st March, 1989. If a rise in value can be established or reasonably inferred from market evidence for the purpose of the valuation as at 31st March, 1989, it is only a matter of degree in applying a value as at 1st October, 1988. I turn therefore to the evidence dealing with the values applied to the subject land as at 31st March, 1989. For this purpose Mr Jones has principally relied upon the sale of Wild Duck. Mr Smith principally relies upon the sales of Paradise Bay and Keswick Island. Keswick has an area of about 770 hectares and is situated to the south-east of Brampton and about 30 kilometres north-east of Mackay. The island was held under Pastoral Holding Lease. The purchase was made in June, 1988. The purchaser was Mr C. Dorrough. The consideration paid was $2M. After allowing for structural improvements, plant and machinery, Mr Smith obtained an unimproved value of about $1.SM for the leased ' area. It is the opinion of Mr Jones that the sale could not be taken as a basis for valuing Brampton. He includes these reasons which were not sought to be contested: II The property was purchased with a view to development of a large resort over a period of 20 to 25 years, envisaging an outlay of some 400 to 500 million dollars. -- 15 of 21 -- ( 16 Development proposals included an international airport, a marina, a resort hotel and a full-size golf course. The purchasers made approaches to the Lands Department for developmental approval and were granted a Special Lease at a rent of $250,000 per year based on a Capital Value of $25,000,000. It also outlined a highly detailed and comprehensive research and development program in the terms of the Lease.- " The sale obviously can have no relevance for the purpose of direct comparison with Brampton and appears to me to fall into much the same category as Dent. Their existence, either singularly or together, appears to be useful only in demonstrating an expression of market confidence in the future of the area which .I might add can place some buying pressure and increased prices on smaller resort areas although not comparable in scale or kind. Paradise Bay sits at the southern end of Long Island. The area of the lease (Special Lease) is 3.237 hectares. The lease was sold in January, 1989, for $2M. Mr Smith analysed the sale. He obtained an unimproved value of $1,650,000. The value applied to the sale land for rating purposes as at 31st March, 1989, is $1.SM. The value applied to the site as at 31st March, 1988, for the same purpose was $650,000. Mr Jones described the site as very small, having 1. 72 hectares of steep slopes, about 1 hectare with fair beach frontage and .5 hectare with poor beach. He described the area as being relatively remote and said that it was an unattractive site. He said that the site is exposed to the south and south-easterly breezes which makes landing difficult or awkward most of the time, that the topography is hilly to steep, that the establishment of a jetty on the site would be very difficult and that the cost which would be uneconomic in terms of the size of a resort which could be built there. He said that the water supply is __liro_ited and that in terms of the Whitsundays it is remote therefrom. He regarded the purchase as an imprudent purchase. The site had been on the market for $4M, -- 16 of 21 -- 17 was reduced to $3M and subsequently acquired for $2M by Eastpac Property Ltd. by contract entered into in January, 1989, and settled in June of that year. The person principally responsible for deciding to purchase the land was Mr AW. Johnson, a director of the purchasing company. He gave evidence. He said that at the time the company was cashed up and was looking to invest in the Whitsundays (it being one of three areas considered to be the major tourist destinations in Queensland, the others being Cairns and the Gold Coast) and that at the time there was a lot of development activity in the area, including the construction of high-rise on Hamilton Island, the Quintex development at Airlie Beach, the development at Woodwark Bay, the Aqua del Ray resort at Midge Point, the upgrading of Proserpine Airport to international standards and the introduction of international charter flights to Hamilton Island. What the company initially had in mind was the construction of a luxury resort on the area, including a 345 room hotel and it realised that there were problems with exposure of the site to the prevailing south and south-easterly winds, which could be overcome by the construction of a breakwater and problems with the provision of services such as water, electricity and sewerage. He said that quite a lot of preliminary work was done whilst the contract remained conditional on board approval and that investigations were made in greater detail in the six month period before settlement. The investigations which carried on after settlement of the purchase showed that ' the company had significantly underestimated the cost of providing services and he said that having taken a closer look at developments in the area, the company believed that an oversupply was looming for the type of development it initially had in mind. In the result the highest and best use considered for the site is "as a - backpackers hotel type of resort". In short, Mr Johnson now considers "that the -- 17 of 21 -- 18 land has far more limited development potential than I originally believed and that the company didn't do its homework well enough before purchasing the land". In cross-examination he said that the company thought the area (Whitsundays) had a lot of growth potential particularly over the medium to long term and that "at that time we thought we bought well". In his comments upon the sale Mr Smith said that although Paradise Bay is within the Whitsundays region it has a very small beach, no protected anchorage with fringing reef providing a major obstacle to boat access and is regarded as the least desirable site within the Whitsundays region. On the strength of this sale and Keswick together with the general activity occurring at the time, he would value Brampton up by 50% between March 1988 and March 1989. In the evidence of Mr Jones (Exhibit 17) in discounting this sale, he compares the selling price of this site for redevelopment at $617,000 per hectare with his analysis of Palm Bay at $173,000 per hectare and highlighted the factor of one being 3.5 times the other. This comparison should perhaps have been made with Palm Bay as apportioned by himself at $426,803 per hectare, which prima facie backs up the line of action taken by Mr Smith. What then should be done with this sale. Counsel for the respondents relies heavily on the Spencer test and the words of Isaacs J. which have been repeated herein and stresses that in the test the value judgment must be made at the relevant date (in this case the date of sale) as things "then" appear including foreseeability as "then" appearing. In applying this test to the evidence of Mr Johnson, the submission is that the sale may be given full force and effect. I agree with his submission to the extent that a purchaser subsequent to the purchase on finding that market fluctuations are contrary to his · expectations or that subsequent events which were not foreseeable at the date of -- 18 of 21 -- ,, t, ( 19 sale have affected values, cannot be heard to say that he was imprudent at the date of purchase. What concerns me, however, with the application of the test in this instance is that it must be read in the light of the words previous to that part of the judgement so often quoted and they are that the price which is to be considered is that which would be paid for the land "for the most advantageous purpose for which it is adapted". The evidence of Mr Johnson and Mr Jones is that the sale land is not suited for the purpose for which it was purchased. The words of Mr Smith are by no means glowing. The evidence suggests that at best the area is suited for a low-key type of resort and far from the concept of a luxury resort as contemplated by the purchasers when they purchased. If this be the case, and it seems on the balance of probabilities that it is the case, the sale can be of little assistance. The sale cannot be used as a basis for valuing land with a potential for low-key resort purposes because that was not the purpose for which the land was purchased, though it may be the highest and best use of the area. Conversely, the sale cannot be used to value land suitable for luxury resort purposes with mammoth development costs because they were thought not to be mammoth when the consideration was paid. In these circumstances, the safest course to adopt is to ignore the sale. I find that the sale of Keswick is of limited assistance in that it lacks comparability with the subject land and smaller sized resorts. Wild Duck is a sale by a mortgagee, the tenure is encumbered by subleases and again it ' was a sale where the purchaser had in mind development far and away above that which would appear to be obtainable on Brampton given present water supplies and evidence as to the highest and best use of the area in terms of density. Keswick and Dent may be useful in establishing a value of those properties or in -valuing areas with a comparable potential to that envisaged by the purchasers. The -- 19 of 21 -- ( 20 sales however along with the activity covered in the evidence of Mr Johnson and Mr Smith whilst not being directly comparable with Brampton or for that matter with smaller density resorts obviously produced a climate which would put buyer pressure on any resort and to that extent would be sufficient to convince any prudent vendor that he could obtain something in excess of 1987 values in 1988 and 1989. For these reasons I would allow the value applied to Brampton of $2.8M as at 31st March, 1988, to stand (being of the opinion also that the allowance of $30,000 made by Mr Jones for the depression which has been turned into a water storage area would not affect the selling price) but will apply but a moderate increase thereafter in exercising further caution and moderation in view of the obliqueness of the market evidence. As at March 1989 I would apply a value of $3M. From this sum may be taken the value of the Special Lease area in order to ascertain a value of the Perpetual Lease area as at October 1988. The only breakup I have on this point is that of Mr Jones who valued the area of the Special Lease which is the esplanade area at a sum about 20 percent of the value of the whole. On this ratio the value of the Perpetual Lease area may be fixed at $2.4M for rental purposes. Accordingly I make the following determinations: Re: Appeal V90-671 - 31st March, 1988 - The appeal is dismissed and the determination of the Valuer-General is affirmed. Re: Determination of rent - The rent to be charged for Perpetual Country Lease No 30 /2323 (NCL) during the third rental period of the lease is determined at $72,000 per annum being 3 percentum of an unimproved capital value of $2.4M. -- 20 of 21 -- ( 21 Re: Appeal V90-672 - 31st March, 1989 - The appeal is allowed, the determination of the Valuer-General is set aside and the unimproved value ol the subject land for the purposes of the Valuation of Land Act is determined in the sum of Three million dollars ($3,000,000). D. M. White Member of the Land.Court -- 21 of 21 --