Austral-Pacific Fertilizers Ltd v The Valuer-General [1990] QLC 155

Re: Determination of Unimproved value - City of Brisbane. (AV89-142) Austral-Pacific Fertilizers Ltd Y.. The Valuer-General DECISION LAND COURT, BRISBANE. 10th August, 1990. This is an appeal against an annual valuation made by the respondent Valuer- General as at a relevant date of 31st March, 1988 of land which is part of the well known Gibson Island which is located in the Brisbane River at Murrarie and upon which there has been constructed by the appellant company, Austral-Pacific Fertilizers Ltd, a large chemical fertilizer complex pursuant to the Austral-Pacific Fertilizers Ltd Agreement Act of 1967. The land is described as Portions 468 and 472, Parish of Tingalpa and contains an area of 56.19 hectares. The appellant company contends within its Notice of Appeal for an unimproved value of $1,300,000 but led evidence through practicing Registered Valuer, Rodney Lewis Brett in support of an unimproved value of $1,210,000. The valuation under appeal is $2,600,000. This was made by [1990] QLC 155 -- 1 of 11 -- - Page 2 - Registered Valuer, Gerard Francis Glancy, who was at the relevant time in the employ of the Department of the Valuer-General (now the Department of Lands). It transpires that the determination of the unimproved value of this parcel of land fell fo~ the consideration of my learned colleague Mr White when it was last valued by the Valuer-General for valuation purposes (Appeal V87-1028). Now as a result of a request by the same parties before me, the record of proceedings in that case has been admitted as an exhibit here. Much of the material placed in evidence before me is identical with that contained in the record of the earlier case. Mr White reviewed most of it in his judgment and I see no useful purpose in repeating much of it here in my decision. Suffice it to comment that both decisions should be read together. Mr White's decision affirmed the determination by the Valuer-General of an unimproved value of $1,300,000 as at 30th June, 1985. The parcel was then described as two Special Leases (SL 31587 and SL 31588). These leases were issued pursuant to the provisions of the Land Act and to those of the aforementioned Austral-Pacific Fertilizers Ltd Agreement Act. The term of each lease was 30 years from 1st November, 1967. Now each Special Lease contains second schedule conditions providing that conversion to freehold is an option during the first 10 years of the lease at the rate of $3,000 per acre ($7,413 per hectare) and during the second 10 year~ of the lease at the rate of $5,000 per acre ($12,355 per hectare). The conversion option was taken up by the appellant company near the end of the second 10 year period on 1st June, 1987. It follows that at the relevant date for this annual valuation assessment (31st March, 1988), the subject land falls to be valued as fee simple land and not as Special Lease land as it was at the early relevant date of 30th June, 1985. The significance of this is that in this case it is the unrestricted fee which is to be valued, and not the fee taking into account any regard to and making proper allowance for any restriction or limitation to which the leases -- 2 of 11 -- I' - Page 3 - were subject (vide Section 11 (1) (v) of the Valuation of Land Act 1944 - 1987). I have perused the record of proceedings in re: Appeal V87-1028. Therein are copies of the then relevant Special Leases and the Austral-Pacific Fertilizers Agree:111ent Act of 1967. Put simply, the obligations of the company were to progressively reclaim and prepare for the construction of the fertilizer complex over the whole area of the subject land (then said to be 140 acres) by not later than 1st July, 1968, and to commence construction of the plant not later than 1st July, 1968, to spend a sum of $40,000,000 in the construction of the plant, and to commence commercial operation of the plant not later than 31st December, 1969. In addition, the lessee company was responsible for dredging of approach access in the Brisbane River to a berth site close to the plant to a depth of not less than 28 feet (8.5 metres) below water spring tide, and also to be responsible for dredging and maintenance of the berth site. Railway facilities were also to be provided by the lessee company. Now the principle work of development, in so far as it has direct bearing upon the determination of unimproved value, is filling. The decision of Mr White and that relevant record contains much, or most, of the events of a historical nature dealing with the filling of the land. I do not propose to restate all of this material here but to extract such of it, and such of the additional evidence placed before me, which leads to my determination of unimproved value. It is common ground that at the date of the commencement of the subject leases back in 1967 there was a relatively elevated sand ridge on the Brisbane River side of the site which occupied about one-third of its area. The balance of the land was relatively low lying and swampy. The elevated land resulted from the depositing of sand upon the site as part of a Crown reclamation project for the dredging of Moreton Bay shipping channels. The balance of the land has been filled by cut and fill from such -- 3 of 11 -- - Page 4 - part of the sand ridge on the site which exceeded RL 2.5 AHD (minimum building level) and by dredging material from the berth site and the approach channel. The dredged material was a mixture of sand and mud. The mud, together with some sand, was p~mped to Crown land across the Aquarium Passage from the subject site. Due to the relatively low quality of the dredged material, it is claimed that some over- dredging was necessary in the Brisbane River to obtain sufficient sand for the fill operation. Estimates are that 1,250,000 cubic yards {955,693 cubic metres) of both suitable and unsuitable material was dredged to obtain, as was calculated by engineer Sidney Herbert Williams who is a Director of the Engineering firm Cardno & Davies (Aust) Pty Ltd and who was called in the earlier case and also in this Court by the claimant company, a solid volume of 490,700 cubic metres. Mr Williams furnished his idea of the cost of the reclamation of the site as at the relevant date of 31st March, 1988. In so doing, he has used the same method of hypothetically filling the site using the dredge William Hiley, and has used the same volume as he did in the previous case. His cost estimate is $5,439,812. He comments that Mr White was prepared to accept the figure of about $7.00 to $7.50 per cubic metre based on a pontoon type dredging system taking fill to the Gibson Island site from nearby in the river as was in reality done. Mr Williams upgrades this cost per cubic metre using the cost price index, and from information in the sixth edition of a publication known as Rawlinsons - Australian Construction Handbook, to a figure of $9.00 per cubic metre for the 490,700 cubic metres solid fill in place. His actual calculation in his workings shows a cost of $10.73 per cubic metre as at November, 1988. This equates to a relevant date cost of $10.20 per cubic metre. Mr Williams leaves the Court in no doubt that his estimate at $10.20 per cubic metre is extremely conservative and his view is that, in all probability, particularly due to the inferior quality of the -- 4 of 11 -- - Page 5 - dredged material, it would cost much more. Much evidence was given by Mr Williams in support of his costing exercise but I do not feel the need to examine it in any detail here, as will later become apparent as my_ reasoning develops. Suffice it to say that had it have been necessary to decide with some accuracy the likely cost to reclaim the site, then Mr Williams' evidence was the only evidence on the point from a qualified engineer and of course, it is of considerable persuasion. Mr Brett derives his valuation from the following exercise: Improved value of site - 59.19 hectares@ $130,000 per ha $7,304,700 Less development works as per Mr Williams' report $5,439,812 Less - interest 1/2 development period of 9 months @ 14% $ 285,000 consolidation period of 3 months $ 200,000 on purchase price for 1 year @14% $ 170,000 Unimproved value adopted $1,210,000 $6,094,812 $1,209,888 Now the principle basis for Mr Brett's improved value is the sale of Reserve 436 and Portion 488, 489, 490 and 518 and allotments 1 to 11 of Section 15, parish of Tingalpa (hereinafter called the Quarantine Station site) containing an area of 23.84 hectares from the Commonwealth of Australia to the Minister for Industrial Development, Queensland on 30th June 1987 for $2,650,000 - or $111,160 per hectare. He says that although the Quarantine Station site has a less extensive Brisbane River frontage than the subject property, it is closer to the dredged shipping channel. It is also smaller and primarily comprises high solid land. -- 5 of 11 -- - Page 6 - Mr Bretts' allowances for loss of interest are made in VJ.ew of the considerable period of time involved in the site development. Advice as to the appropriate period was provided by Mr Williams. It is convenient if I turn here to Mr Glancy's valuation of the subject land. He has altered his approach to the valuation before me in view of the change in tenure from Special Lease to Freehold. He does not have regard to filling the whole site since he says that would have not been necessary to achieve the agreed highest and best use of the land - ie. for the construction of a "Noxious, Offensive and Hazardous" industry project in accordance with the zoning of the land. Mr Glancy's primary valuation reads:- 17 hectares @ $120,000 39.19 hectares @ $15,000 Adopted unimproved value $2,600,000. $2,040,000 $. 587,850 $2,627,850 ====== The 17 hectares valued by Mr Glancy at $120,000 per hectare is the sand filled area along the river bank at the commencement of the leases. He values this at its then state having regard also to the Quarantine Station site sale. He says, however, that the Quarantine Station site has a limited and shallow frontage to the Brisbane River. Since the preparation of his valuation report Mr Glancy has examined a report by the Engineering firm Gutteridge, Haskins & Davey concerning a general geotechnical investigation of the sale site. This leads Mr Glancy to the conclusion that the Quarantine Station site should be viewed less favourably as a development proposition than it was in his former opinion. He sees the 17 hectare portion on the Gibson Island site as having many advantages over the Quarantine Station site - it is closer to the Gateway Bridge, it has better access to shipping channels and has a large river frontage, -- 6 of 11 -- - Page 7 - it has services available including connection to the Roma to Brisbane natural gas supply pipeline, it has a good standard access road (Paringa Road), it has railway line access and has access to a large volume water main. He say that by comparison, the Quarantine Station site does not have any of these attractions for development for industrial purposes, save for a bitumen road of lesser quality to the southern boundary. The basis for Mr Glancy's valuation of the unfilled area at $15,000 per hectare is the sale of Subdivision 3 of Portion 448 and Subdivision 3 of Portion 449 and Resubdivision 1 of Subdivision 3 of Portion 450 and Resubdivisions 2 and 3 of Subdivision 1 of Portion 450, parish of Toombul, containing an area of 11.52 hectares from Bill Acceptance Corporation as Mortgagee to Peter G. Forrest on 26th February, 1985 for $150,000 - or $13,000 per hectare. This is a "Harbour Activities" zoned site located in Brownlee Street, Myrtletown. It is an isolated parcel and was purchased for the construction of a marina. This has not yet materialised. Mr Glancy says that massive earthworks would be required for the proposed development and it is in this sense he says the unfilled subject land and the sale land are not dissimilar. Mr Glancy has made a check valuation of the subject land. He says there was sufficient sand above RL 13 feet BCC Datum (100,000 cubic metres) to produce fill to raise an area of 9 hectares adjoining the 17 hectares of sand ridge to a required level of RL 12 feet. This could have been accomplished by pushing the uneven sand above RL 13 datum (thus levelling that section before optimum use) and spreading it over the 9 hectares to make it suitable for building. He says the cost to cut and fill and compact this available material would have been $5.60 per cubic metre. In the result then, his check calculation reads:- -- 7 of 11 -- •· - Page 8 - 17 hectares + 9 hectares filled - 26 hectares 26 hectares@ $140,000 per hectare 30.19 hectares @ $15,000 per hectare Less cost of site works $3,640,000 $ 452,850 82,000 cubic metres of fill@ $5.60 per cubic metre $ 459,200 Industrial carriageway on 366 metres length causeway $ 219,600 Stormwater drainage box culvert through causeway $ 20,800 $ 699,600 Plus interest at 13% for 1 month (½ construction period) Less holding cost of land for 6 months @ 13% $ 7,579 $4,092,850 $ 707.179 $3,385,671 $ 220.068 $3,165,603 After making an allowance for loss of rates during the construction period ($57,980) Mr Glancy's check valuation calculates the unimproved value to be $3,100,000. Mr Glancy points out that if the excess sand material on the 17 hectares of sand ridge on the subject land was used to develop 26 hectares of land for industrial development, then the area would approximate that which was ultimately used for the fertilizer complex. He says it is located on the subject Portion 468 which has an area of 28.3 hectares. The vacant but filled and levelled subject Portion 467 has about the same area. It is urged by the appellant company that I should follow the valuation principles adopted by Mr White in determining the unimproved value of the subject land in the earlier decision. This involved consideration of the value of the land as reclaimed and filled land, and then making adequate allowance for the added value given by the reclamation and filling. However, in view of the changed circumstances viz a viz -- 8 of 11 -- - Page 9 - leasehold tenure and freehold tenure, it cannot be said that the circumstances are the same. Should the subject land have been unimproved at the later relevant date of 31st March, 1988, the question then arises as to the prudence of reclaiming and filling the whole_ of the land. The reclamation and fill placed upon it by the appellant company must be seen as not to exist - vide Section 12 (1) (b) of the Valuation of Land Act. Certainly the impression I have of the evidence of Mr Williams is that his estimated cost of reclamation and filling is very conservative. He said in evidence that it could cost much more than $9.00 per cubic metre. If this is so, and if $9.00 per cubic metre is conservative to the extent of the difference between that cost and Mr William's calculated cost of $10.20 per cubic metre for the 490,700 cubic metres solid volume fill, then the cost of filling the site is increased by $588,840, and from his evidence I feel he even considers the figure of $10.20 per cubic metre to be conservative. Now it is clearly apparent that if in Mr Brett's valuation exercise the cost of fill is increased by $588,840, then his deduced unimproved value is reduce (without adjustment for interest calculations), to about $620,000. This is clearly not an acceptable unimproved value since it is well below the determination by Mr White as at 30th June, 1985 at ($1,300,000) and there is no evidence to suggest that values have fallen in the intervening period. A further consideration as to Mr Brett's valuation exercise is whether the filled land value as determined by Mr White at $120,000 per hectare should be increased to $130,000 per hectare. Both Mr Glancy and Mr Brett rely in this case upon the Quarantine Station site sale, which was also averted to in the earlier decision albeit that it took place about 2 years after the then relevant date. I should say now that the sale of the Quarantine Station site is the best evidence of value before this Court and I find that $120,000 per hectare is an appropriate filled value for the whole of the subject site -- 9 of 11 -- .. - Page 10 - as at 31st March, 1988, given all its advantages and disadvantages, and in consideration of its size. The valuation exercise produced by Mr Brett then results in such a low unimproved value on the adjusted rate of $120,000 per hectare filled as to render it of no assjstance. Further, if a cost figure of $10.20 per cubic metre solid volume for fill is used in Mr Brett's exercise, little or no unimproved value results. In all the circumstances, and bearing in mind the problems experienced by all in appreciating the widely differing volumes reclaimed and as to where, what quantity and what quality of surplus dredging material was actually dumped on site, I prefer to adopt, in principle, the valuation method of Mr Glancy, notwithstanding that the sale bases for his valuation of the unfilled land at $15,000 per hectare seems quite tenuous. This is not meant as criticism of Mr Glancy since it is understandable that he experienced considerable difficulty obtaining strictly comparable sales evidence for the valuation of the unfilled land. There is, however, a problem. The basis for Mr Glancy's valuation of the filled land at $120,000 per hectare is the Quarantine Station site sale which has road access, and there is no such road access to the 17 hectares of sand ridge within the subject site. Although Mr Glancy was at odds to say than in setting the value of the sand ridge at $120,000 per hectare, he took into consideration all of the advantages and disadvantages, including that of lack of internal access, I am not satisfied that an allowance against his valuation should not be made for the provision of internal access to the sand ridge within the site. Mr Glancy placed in evidence a map (Drawing DI-Z4-18000) upon which he indicated the location of the proposed industrial carriageway in his check valuation. It is to be noted that this indicated that the proposed carriageway proceeds past the area he then proposed for reclamation to the edge of the original sand fill. I propose to -- 10 of 11 -- - Page 11 - adjust the respondent Valuer-General's valuation of the land to provide for this carriageway in the same manner as suggested by Mr Glancy in his check valuation and to reduce the valuation under appeal by a sum of $243,000 (inclusive of interest). In the result _then, the appeal is allowed, the determination of the Valuer-General is set aside, and the unimproved value of Portions 469 and 472, parish of Tingalpa is determined in the rounded off sum of $2,360,000. (C.H. Carter) Member of the Land Court. -- 11 of 11 --