LAND COURT OF QUEENSLAND
CITATION: | Cidneo Pty Ltd v Department of Transport and Main Roads (No 3) [2017] QLC 45 |
PARTIES: | Cidneo Pty Ltd ACN 105 454 064 (applicant) |
| v |
| Chief Executive, Department of Transport and Main Roads (respondent) |
FILE NO/s: | AQL325-10 |
DIVISION: | General Division |
PROCEEDING: | Determination of compensation under the Acquisition of Land Act 1967 |
DELIVERED ON: | 24 August 2017 |
DELIVERED AT: | Brisbane |
HEARD ON: | 22, 23, 24 February 2016 Submissions closed 4 March 2017 |
HEARD AT: | Brisbane |
MEMBER: | WL Cochrane |
ORDER/S: | Compensation is payable by the respondent to the applicant for the taking on 22 February 2008 of an area of 8.385 hectares being Lot 1 on SP 218520 being part of the land contained in title reference 50553649, County of Stanley, Parish of Oxley in the sum of Six Million Three Hundred and Seventy-Seven Thousand Eight Hundred Dollars ($6,377,800). |
CATCHWORDS: | REAL PROPERTY – compulsory acquisition of land – compensation – proceedings for compensation – resumption of land – valuation methodology – contribution for traffic infrastructure – before and after method – remitted hearing. Acquisition of Land Act 1967, s 20 Boland v Yates Property Corporation Pty Ltd [1999] 74 ALJR 209 Brisbane City Council v Mio Art Pty Ltd & Anor [2011] QCA 234 Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd [2015] QCA 96 Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2011] QLC 18 Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2013] QLC 47 Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2014] QLAC 3 Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404 Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Ltd [1947] 74 CLR 358 Gregory v FCT [1971] 123 CLR 547 Heavey Lex No 64 Pty Ltd & S Paino v Chief Executive, Department of Transport [1999] QLC 133 Heavey Lex No 64 Pty Ltd & S Paino v Chief Executive, Department of Transport (2001) 22 QLCR 177 Leichhardt Council v Roads and Traffic Authority (NSW) (No 2) [2008] NSWLEC 1 |
APPEARANCES: | MD Hinson QC (instructed by Anderssen Lawyers) for the applicant DR Gore QC, with J Brien of Counsel (instructed by Clayton Utz Lawyers) for the respondent |
Assessment
Land Appeal Court proceedings
“The first ground of appeal was that the learned Member erred in determining, for the purpose of the cash flow analysis, that the appropriate figure to adopt for a contribution for road works (other than on Boundary Road) was $3,000,000. In relation to that ground it was submitted for Cidneo that the learned Member erred in law by disregarding relevant evidence...”[2]
“For DTMR it was submitted that the valuation which the learned Member adopted of the land retained by Cidneo was correct, because the road works contributions payable to DTMR were likely to be the same in the before and after cases. A number of its other submissions seem to have been directed to supporting this proposition. The point of the submission appears to have been that, on that basis, since neither party suggested a significant contribution for external road works in the before case, the learned Member was right to reach the conclusion he reached for the after case. That does not address the question whether the learned Member considered relevant evidence, and gave adequate explanations for his reasons, nor does it address the question whether he erred in the conclusion he reached about the value of the retained land. Cidneo’s submissions may cast doubt on the correctness of the assumptions about contributions, and on the value of the land, in the before resumption case; but these matters were not in issue in the appeal.”[3]
“Ground 2 of the Notice of Appeal alleged that the Land Court erred in not accepting and acting on evidence called in Cidneo’s case that, in assessing the value of its retained land after resumption, an additional period of six months should have been allowed for the time assumed to be taken to develop and sell lots resulting from the subdivision of the land. The written submissions for Cidneo supported this ground. The submissions identified the six month period as being an extra six months in part occasioned by the need for a further traffic analysis, but also by the need to redesign the estate in relation to the construction of Boundary Road, and the hydraulics associated with Bullockhead Creek. It was orally submitted that the evidence in support of this longer period was uncontradicted, but not referred to in the reasons of the learned Member. It was submitted that the reasons identified the issue, but did not resolve it. Alternatively, if the issue was taken to be implicitly resolved by the adoption of Mr Brett’s valuation, then the Land Court erred in failing to give reasons for doing so.”[4]
“There was a real issue between the parties on this question. It was raised by the differences in the cash flow analyses, and was the subject of submissions on behalf of Cidneo in the Land Court. The matters raised by Mr Viney and Mr Cumming in support of the longer period are not obviously without substance, so that a failure to discuss them might be explained on that basis. The reasons for judgment provide no basis for thinking that the learned Member considered this issue, and decided to accept the approach taken by Mr Brett on the basis of such a consideration. So far as is apparent from the reasons, the opposite is true.
The submission made on behalf of DTMR that the matter is covered by the assumption, apparently derived from Spencer, that the parties are aware of all relevant facts, is novel. No authority was cited in support of it. It is difficult to see how the assumption would account for the existence of a traffic study, no doubt to be presented in support of a development application. The submission should not be accepted.”[5]
“Ground 3 of the Notice of Appeal alleged that the Land Court erred in adopting Mr Brett’s period of 62 months for the development and sale of the land in the post-resumption case. Mr Hamilton’s cash flow analysis assumed a period of 76 months. The submissions for Cidneo made clear that, of the 14 months’ difference, six months was accounted for by the period the subject of Ground 2. In relation to the balance (8 months), it was submitted that the Land Court erred in particular in accepting Mr Brett’s evidence as to his rate of sale for lots produced in Stage 3, being two sales per month. It was submitted that the Land Court Member erred in failing to take into account evidence from Mr Whitelaw and Mr Hamilton criticising this rate of sale; as well as Mr Brett’s own acknowledgement that in February 2008 it could be expected that credit (and, if it be different, finance) was tightening. It was also submitted that Mr Brett in his cash flow analysis assumed an overlap in the construction of stages of the development (thus reducing the time required for the project); which he acknowledged might not be the approach of the prudent purchaser’ but the learned Member failed to deal with this evidence.”[6]
“Ground 4 of the Notice of Appeal alleged that the Land Court erred in accepting Mr Brett’s evidence that in February 2008 a low internal rate of return was acceptable for his cash flow analysis. The submissions for Cidneo in relation to this ground of appeal criticised Mr Brett’s approach of deriving an internal rate of return from a cash flow analysis, rather than adopting such a rate as an input for the analysis. It was submitted that his explanation that in February 2008 the market was speculative, was inconsistent with the agreed highest and best use of the land for development for industry and warehouse purposes; as this use did not include land banking. It was submitted that these matters were not dealt with in the reasons for judgment.”
“In DTMR’s cross appeal it contended that the Land Court erred in law in concluding that it could not take into account the transport infrastructure contribution actually required when assessing the just amount of compensation. DTMR contended that, using the known cost of $1,087,110 instead of the estimated cost of $3,000,000, compensation should have been less than the amount determined in the Land Court. Upon that footing, and assuming that an assessment using a combination of the before and after method and cash flow analyses was appropriate, DTMR contended that the amount of compensation should be reduced to $6,377,800 in accordance with Mr Brett’s Further Supplementary Report.
DTMR also contended in its cross appeal that the Land Court erred in failing to prefer a method of assessment which separately assessed each head of Cidneo’s loss under s 20 of ALA. DTMR argued that the before and after method would not produce a fair assessment of compensation and that (any) injurious affection or severance damage should have been separately assessed with reference to the actual amount of the transport infrastructure contribution. Under that ground of the cross appeal DTMR contended that the compensation should be reduced to $6,100,000 in accordance with the “check valuation” in Mr Brett’s “Further Supplementary Report” which separately valued the resumed land at $4,533,954 and “injurious affect” at $1,530,405.
In relation to that issue the Land Appeal Court held that if Cidneo’s appeal was allowed the submission that the use of the before and after method would result in an unfair assessment of compensation was somewhat speculative. Furthermore, because the contribution was relevant to the value of the land at the resumption date its amount was not to be determined by reference to knowledge of subsequent events except where they demonstrated the existence of facts known to the parties at the resumption date; it followed that the assessment of compensation would not unfair despite subsequent events turning out to be different from those known, or taken to be likely, at the date of the resumption.”[7]
“1. The Land Appeal Court erred in law in deciding:
Court of Appeal proceedings
“DTMR also argued that the Land Appeal Court should have allowed DTMR’s cross appeal and assessed compensation in accordance with Mr Brett’s Further Supplementary Report. The argument was based upon the circumstance that the compensation of $6,900,000 determined in the Land Court (taking into account the estimate of $3,000,000 for the transport infrastructure contribution) exceeded the assessment of $6,377,800 in Mr Brett’s Further Supplementary Report (which took into account the transport infrastructure contribution of $1,087,110 actually required). In response, Cidneo pointed to Mr Hamilton’s opinion that if the transport infrastructure contribution actually required should be taken into account, so too should DTMR’s demand in 2010 for a contribution of $13.7 million and the time and cost required to achieve the reduction in the transport infrastructure contribution be taken into account in the cash flows. As I have mentioned, upon that basis Mr Hamilton’s evidence implied an assessment of compensation of $27,350,000 (based on a pre-construction phase of 33 months) or $22,250,000 (based on a pre-construction phase of 25 months).
The exercise conducted by Mr Hamilton appears to involve contestable valuation judgments and assumptions, including an assumption that Cidneo’s holding costs (which apparently account for most of the amounts mentioned by Mr Hamilton) would not have been incurred but for the delay in reaching agreement upon the amount of the contribution. Neither the Land Court nor the Land Appeal Court has addressed those issues or made any determination with reference to the calculations in Mr Brett’s Further Supplementary Report. If it becomes necessary to do so, the Land Court, as the specialist tribunal established to resolve issues of that kind, should determine them. For that reason, I would hold that the Land Appeal Court was correct in not determining compensation in an amount claimed in the cross appeal. Instead, the matter should have been remitted to the Land Court for the determination of compensation.”
The current proceedings
“1.1 The respondent objects to the following aspects in both the body of the report and the after resumption scenario cash-flows on the ground that the changes are outside the scope of the remitter from the Land Appeal Court or the Court of Appeal:
1.2 The Respondent objects to Mr Hamilton’s challenge in Section 2 of the report to Mr Brett’s piecemeal approach as being unreliable and not even a worthwhile check method on the ground that Mr Hamilton did not express any disagreement with Mr Brett’s evidence about those matters in the original hearing in 2011 and 2012, and so this belated challenge is outside the scope of the remitter from the Land Appeal Court or the Court of Appeal.”[13]
“It follows that the reasons for judgment indicate that the learned Member recognised the need to determine which rate of sales should be preferred; he expressed a preference for that adopted by Mr Brett; and he gave brief reasons for doing so. It cannot be said that he failed to determine the issue. Although brief, his reasons provide some explanation for his conclusion on this question…”[14]
“The classic statement of what amounts to “special grounds” for reception of further evidence upon an appeal was approved recently by Lord Bridge in Langdale v Danby [1982] 3 All E.R. 129 at 137-138. Three conditions must be fulfilled. “First it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial: second, the evidence must be such that, if given, it would probably have an important influence on the result of the case, although it need not be decisive: third, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.””[18]
“The appeal rules relating to fresh evidence, whilst not determinative, provide a useful guide as to the manner in which the discretion should be exercised: Smith v New South Wales Bar Association [1992] 176 CLR 256 at 266-267, Carriage v Stockland Development Pty Ltd (No 5) [2004] NSWLEC 674. Those principles have been correctly identified by the council and noted in par [9](b) above.”
“Three conditions must be met before fresh evidence can be admitted on appeal: (i) it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; (ii) the evidence must be such that there must be a high degree of probability that there could be a different verdict; and (iii) the evidence must be credible: Atkins v National Australia Bank (1994) 34 NSWLR 155 at 160 per Clarke JA (Shelter JA agreeing).”[20]
“I just wanted to add, for your Honour’s assistance and my learned friends assistance … some more specificity in relation to paragraph 1.2 of exhibit R27. Having acknowledged it’s too wide, I would like to be more specific, and if your Honour would go to Mr Hamilton’s 2016 report … and if your Honour goes to page 9 ... he is responding to parts of Mr Brett’s 2015 report. And if your Honour just reads the first sentence of paragraph 2.2 … so in that first sentence he is clearly dealing with the figure of $4.3 million that Mr Brett has referred to in all of his 2011 and 2012 reports and now repeats in his 2015 reports and it’s that evidence of Mr Hamilton which is fresh evidence that offends the fresh evidence rules. And that’s a clear example, we respectfully submit, not for your Honour to rule on now, but for ruling on at the end of the case in light of your Honour’s information of what we intended to object to.”[22]
“And the respondent submits that the scope of the remitter includes the approaches taken by Mr Brett and Mr Hamilton of their supplementary reports. And both parties seek to expand upon the issues raised in those reports, and, on the face of it that should be permitted. Now, part of that exercise involves Mr Brett now saying, and this appears from paragraph 34 on the following page, subparagraph (a). This now involves Mr Brett saying I now prefer the piecemeal method rather than the before and after method. So that now is being put forward by Mr Brett as the primary evaluation approach, not the before and after method, at the original hearing where the piecemeal was described as a check.
And what the department is, in effect, saying is that now that Mr Brett wants to put forward the piecemeal mode of assessment as the primary assessment, not the check method, my side is not permitted to respond to that in the way that Mr Hamilton responds in his February 2016 report. In other words, while there is a change of Mr Brett’s preference in the appropriate method from before and after cash flow to piecemeal method my side is not to be permitted to challenge that, and is only permitted to challenge it on the basis that we did in the primary hearing where it wasn’t the preferred method, but was simply said to be a check method.
Now, your Honour might well understand a challenge to a check method evaluation in a primary hearing might not be as complete and comprehensive as a challenge to what was now said to be the preferred method of assessment. It was very much a side issue in the first hearing, because as there were – as your Honour will recall, there were joint reports saying the before and after cash flow analysis is the best way to bring out the differences. And Mr Brett simply put this up as a check method. And if your Honour has the transcript could I trouble your Honour to go back to the transcript to day six where at page 6-72 ---
…
This is Mr Brett’s examination-in-chief [indistinct] this isn’t meant to be something that’s precise. It’s meant to be something that assists the court in getting a feeling of a general level. So the first hearing – this was described by Mr Brett as a check method. Your Honour might recall I cross-examined Mr Brett about it, and he agreed that many of the figures that he used in the check method were themselves taken out of the cash flow. And I’ve put to him the proposition that if you use different outputs from the different cash flow, Mr Hamilton’s, for example, you’d get a different result. And he agreed. This was obviously correct.
So this was very much something which was not meant to be precise. Meant to be something that assists the court in getting a feeling of a general level, and was very much a check method as a check to the before and after. Now, the department’s case is quite different. This is the preferred method. This is the one that they urge upon you. And they want to argue the before and after shouldn’t be --- the preferred method.”[24]
The traffic engineering evidence
“The respondent’s position seemed, from my perspective, driven more by an apparent desire to obtain a large contribution from a party that it thought it might be able to collect from rather than by a sensible and principled traffic engineering basis.”[26]
“Cidneo contends that the Land Court ought to take into consideration the actual time taken by Metroplex between the lodging of its development application for the western component of its proposed development in November 2009 and the date of the agreement with DTMR about the TIC on 6 December 2011 in the after resumption cash flows.”[27]
“This report does identify some significant impacts of generated traffic on the State-controlled road network. However, directly contrary to the Traffic Impact Information Request, it provides no recommendations on works which might be considered necessary to ameliorate the impacts of the generated traffic. Instead, on page 7 it simply states “as the land is designated for industry uses and road safety is not compromised, the application should be approved.”
That is, in terms of the four basic steps expected to be included in a traffic impact assessment report (see paragraph 21), this report dealt with the first step, partially dealt with the second step, but made no attempt to provide information in respect of the third and fourth steps. Despite the very clear guidance provided by the DTMR letter of 31st March 2010, this traffic report submitted by the applicant was essentially still arguing that the impacts of their traffic generations were not their responsibility.
Information relating to the third and fourth steps (necessary road network upgrading) was not submitted until early December 2010, six months after this report of May 2010.
In my opinion, the identification of the impacts of the proposed development and the identification of works which would ameliorate those impacts was never particularly complex. All of the information required for a traffic impact assessment dealing with all relevant impacts was available from mid-2010. From that time, there were no traffic engineering issues which necessitated significant delays in the approval process.”[34]
“now, there is a good deal of criticism in the respondent’s submissions directed towards Metroflex saying “well, look, you sat on your hands. If you’re acting reasonably, you could have done this.” It takes two people to make an agreement and all I’m simply trying to identify is that on the Department’s side there was an attitude, to, which was not necessarily receptive to a meeting of the minds. Now a resolution did occur. It occurred on the eve of the commencement of the appeal for the western application.”[35]
The valuation evidence
“The before value was an input to the before cash flow to derive an IRR which was then used as an input to the after cash flow to derive the after value. Mr Brett’s before cash flow in Ex 61 produced an IRR after interest of 8.65% which was then input to his after cash flow.
Mr Brett revisits the before cash flow in his December 2015 report. That is outside the scope of either remitter order. Ground 3 of the appeal to the Land Appeal Court was solely concerned with the construction staging period in the after case not the before case. The appeal to the Court of Appeal related to the TIC in the after case, not the before case. The before case was and remains hypothetical. No development application was made for the before case highest and best use. The TIC was not agreed by reference to the facts of the before case. The Land Court has determined that the before TIC would be $3 million and there is no reason to change that figure.
There is no basis to revisit the before cash flow by substituting $1.087 million for $3 million as the TIC. As Mr Brett acknowledged in his March 2012 report, the before TIC would not be less than the after TIC and would likely be higher. That is the effect of Mr Beard’s evidence also.”[41]
“The basic issue remains – what is the impact of the decision of the Court of Appeal on the assessment of compensation of $6,900,000 by this Court. The specific sub-issues also remain as:
The Stage three issue
The Time and Cost issues
The Ground 2 issue
The Piecemeal issue
The Proper assessment of compensation.”[42]
“Cidneo’s primary case (Mr Hamilton’s Cash Flow 1) is that Mr Brett’s cash flow should be adjusted in four respects:
the TIC is reduced from $3,000,000 to $1.087 million;
the preconstruction phase is increased from 12 months to 24 months;
the cost of negotiating the TIC agreement is substituted for the cost of a traffic network analysis;
construction of stage 3 commences at month 41 instead of eight months earlier.”[43]
“To the rate of sales, and as I said, that’s now disappeared because in the cash flows that Mr Hamilton has done, he said, look, let’s not have that argument, I’ll just adopt Mr Brett’s rate of sales. I’ll try and keep them simple. So that’s fallen by the wayside.”[46]
“These conclusions provide a sufficient basis on which to uphold the appeal on Ground 3. It should, however, be said that there must be a real doubt about the validity of Mr Brett’s approach to the rate of sales. As has been mentioned, he proceeded on the basis that the speculative market of 2007 would continue, notwithstanding the increases in interest rates up to February 2008, and the increased difficulty in obtaining finance. Particularly against that background, there is a very real question whether the hypothetical prudent vendor and purchaser would assume the continuation of a speculative market for a further period approaching four years. If Mr Brett’s rate of sales were not adopted, this could well have implications for the assumed construction program. With slower sales, a developer might be more inclined to delay construction for Stage 3 to reduce its risks and its interest of liabilities.”[47]
“can I just mention, in that regard, to-Ground 2 of the Appeal to the Land Appeal Court – your Honour may have seen, from the written submissions, concerned this extra six months in the after case for traffic analysis. That’s now disappeared and been subsumed in the issue canvassed in Mr Hamilton’s supplementary March 2012 report about whether one needs to take into account if one can have regard to a subsequent event, that being the agreement about the amount of transport infrastructure contribution in the after case – whether one can also have regard to the time and cost taken in achieving that outcome in making the assessment of compensation, and as I indicated earlier, paragraph 32 of the respondent’s submissions on the remitted hearing, exhibit R26, appears to accept that the scope of the remitter includes the approaches taken by Mr Brett and Mr Hamilton in their supplementary reports.”[48]
“Providing the before and after returns are consistent it is appropriate to determine the compensable loss (apart from disturbance matters) by the piecemeal addition of the per hectare value of the resumed land plus the per hectare impacts on the retained land of the components identified in paragraphs 2.6.1, 2.6.2 and 2.6.3 above. This is the basis of my assessment on pages 25 and 26 of my valuation report dated 17 November 2011.
From the Court of Appeal decision it is clear that post-resumption events impacting on the value of the retained land may be brought to account. On this occasion post resumption changes have occurred, at least in respect of identification of the TIC cost. In these circumstances the summation of the value of the resumed land and of the value of injurious affects on the retained land is my preferred method.”[50]
“I don’t mind the cash flow. It’s a reverse of what I’ve spoken of in the past. The cash flow’s there certainly to quantify those holding charges. The cash flow’s there to see what comes of the cash flow and if it differs from the piecemeal, you need to reconcile the two and see which you prefer to go with. But on this occasion, what triggers it really is the Court of Appeal’s decision as a – something of a reminder to be somewhat more flexible in these matters, not being wedded to the before and after approach for the last 40 years and then treat something else as some kind of check method. I revisit this one and there’s a good deal of clarity that can be obtained from the piecemeal method in respect of the quantification of the value of the resumed land and the quantification of the injurious effects or, if there was, enhancement on the retained land.”[52]
“The use of the subsequent information made me realise that you can’t close your mind to the piecemeal method. Here’s an occasion where, if events have happened after the acquisition, you need to then revisit the exercise to substitute those costs to bring those to account and that got me thinking in respect of the means by which you could reasonably quantify the components of the piecemeal method. Sot it was a reminder rather than some dramatic event.”
All of which matters were subject of agreement between him and Mr Hamilton.[54]
“And on the approach that you and Mr Hamilton took in this case you said that a before and after cash flow analysis was the appropriate way to go because – and the appropriate way to deal with that was to put yourself in the position of the hypothetical prudent purchase as at the date of resumption, February 2008 --- Correct.
All right. And on that basis you and Mr Hamilton received different advice from traffic engineers about what an input into the cashflow, a transport infrastructure contribution, would be? --- Yes, yes.
Yes? --- Sorry.
And now each of you are putting in a different figure, 1.087 million ---? --- Yes.
--- at least in the after case. That’s common to both of you? --- Correct.
And Mr Hamilton doesn’t revisit the before case and I’ll come to that shortly? --- Yes.
But you use the same figure in the before case? --- I do.”[58]
“Well, it’s what I touched on before, the reminder from the Court of Appeal’s decision that there are the occasions where it’s appropriate to look at the piecemeal because a subsequent event might affect the value, but that was only a trigger to – as a reminder that you do not need to look at both the piecemeal and the cash flow, so I look at the piecemeal and the cash flow, and then re-looking at the piecemeal approach it seems to me there is considerable transparency and considerable ability to quantify each of the relevant components and leave somewhat unclear and unexplained what drives all of the issues in the uncertainty of the cash flow.”
“A decision needs to be made as to the matters raised by Mr Hamilton in his March 2012 report. Quite apart from that, the matters decided by the Land Appeal Court as to appeal ground 2 and appeal ground 3 are not resolved by an agreement as to the amount of TIC. They need to be determined by the Land Court. As well, it seems to me that the valuers will need to revisit their evidence, and that the parties will need to spend some time ensuring that the evidence which is presented to the Land Court is coherent and in a framework consistent with s 20 of the Act.”[61]
“My approach and valuation are unchanged from the Alternative (b) check valuation on page 5 of my March 2012 Further Supplementary Report. These proceed on the basis of a 12 month approval period and a $100,000 traffic network study both before and after the resumption. It excludes Mr Hamilton’s 8 month delay in the release of stage 3. The approach separately quantifies the value of the resumed land and that of the various injurious affects calculated as:
Injurious affect $1,530,405
Value of resumed land $4,533,954
Total $6,064.359
Rounded to $6,100,000”.[64]
“2.5 Before and after cash flow exercises are necessary on this occasion because the direct comparison approach is not sufficiently sensitive to quantify the resumptions impacts on the retained land. The size and nature of this property, with its potential for industrial subdivision, means comparison with prices paid elsewhere cannot account for all variables relevant to each site’s development characteristics and costs. Adverse impacts on the retained land are best brought to account by accommodating each within the post resumption cash flow.
2.6 For this property the resumption’s affects on the retained land, best expressed as a rate per hectare of developable land, are:
2.6.1 lower net realisations from allotment sales
2.6.2 high development costs, including holding costs (council rates and government land tax), over the life of the project, and
2.6.3 lower interest costs over the life of the project.”[65]
A table summarising these values follows. The cash flows are contained in Attachments One to Four of this report.
BRETT MARCH 2012 REPORT (Based on 12 month approval period and $100,000 traffic network analysis)
Land Value IRR Before Resumption $60,877,800 9.12% After Resumption $54,500,000 9.03% Difference $6,377,800 Piecemeal assessment $6,064,359
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CASHFLOW 1 (Based on the $60,000,000 pre-resumption value, 24 month approval period and $100,000 traffic network analysis)
Land Value IRR Before Resumption $60,000,000 5.97% After Resumption $53,000,000 5.98% Difference $7,000,000 Piecemeal assessment $5,071,766
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CASH FLOW 2 (Based on the $60,000,000 pre-resumption value, 24 month approval period and $241,236 litigation cost)
Land Value IRR Before Resumption $60,000,000 5.92% After Resumption $53,000,000 5.93% Difference $7,000,000 Piecemeal assessment $5,074,345
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CASH FLOW 3 (Based on a pre-resumption return of about 9.04%, 24 month approval period and $100,000 traffic network analysis)
Land Value IRR Before Resumption $52,350,000 9.06% After Resumption $46,500,000 9.05% Difference $5,850,000
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CASH FLOW 4 (Based on a pre-resumption return of about 9.04%, 24 month approval period and $241,236 litigation cost)
Land Value IRR Before Resumption $52,275,000 9.04% After Resumption $46,425,000 9.04% Difference $5,850,000
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The traffic engineering evidence
“and it’s really, at bottom, your Honour’s acceptance of the Department’s case that in terms of traffic impacts there was no material difference between the before and after case. There was significant impacts in the before case there was significant impacts in the after case, and your Honour accepted that in the result, the amount of time taken in the before-case to obtain the relevant preconstruction approvals would be the same as in the after case, and that, in effect, in both cases there would be a need for a traffic study, which was the thrust of Mr Beard’s evidence.”[75]
“… I have been instructed to prepare post resumption cash flows adopting adjustments to Mr Brett’s after resumption cash flow contained in his supplementary report dated 23 November 2011. The purpose of this report is to:
“The hypothetical exercise necessitated by the resumption does not assume that the hypothetical prudent purchaser is an overseas resident. Rather, it assumes that the hypothetical prudent purchaser is a “johnny-on-the-spot” – who would not factor into his costs in the cash analysis some costs referable to a consultant engaged by an overseas purchaser. All of Mr McGregor’s claimed amount of $80,000 fails on this ground alone.”[80]
“Because the cost is up at the beginning of the cash flow, it will have an impact, but because the project takes over many many years it’s not the case where you deduct $100,000 or $200,000 from the actual land value. So if you reduce that TIC contribution from $214,000 to $100,000, all other matters remain the same, the value would increase, but not to the same extent as the $100,000.”[87]
“I consider that Mr Brett’s cash flow four – after resumption most closely reflects the actual after resumption scenario. His after resumption valuation is $46,425,000.
Mr Brett’s after resumption valuation of $46,425,000 is relatively similar to my after resumption valuation of $45,750,000 based on a delay of 24 months. The difference in value would reflect what I consider an error in Mr Brett’s valuation in that he commenced construction of Stage 3 well before it would have been prudent to do so.”[89]
“In my 4 November 2015 Addendum report I adopted Mr Brett’s post-resumption cash flow with a number of amendments. These amendments were included in the cash flow in order to take into consideration comments within the judgement of the Court of Appeal. These included:
In order for my post-resumption cash flow, which was based on Mr Brett’s post resumption cash flow to reflect the same level of return that Mr Brett had selected, it was necessary for my cash flow to deliver an IRR of approximately 8.68%.”[91]
“what is required in my opinion to fairly assess compensation in this case is to assess the value of the property before resumption and the value of the land after resumption. The difference between the two figures reflects not only the land taken but severance, injurious affection and enhancement. The exercise undertaken by Mr Brett does not satisfy this approach.”
“… the matters decided by the Land Appeal Court as to appeal ground 2 and appeal ground 3 are not resolved by an agreement as to the amount of TIC. They need to be determined by the Land Court. As well, it seems to me that the valuers will need to revisit their evidence, and that the parties will need to spend some time ensuring that the evidence which is presented to the Land Court is coherent and in a framework consistent with s 20 of the Act.”[93]
“Mr Brett and Mr Hamilton differ in their ‘before’ and ‘after’ construction timeframes by a total of 21 months.
Mr Brett opines the construction timeframe in the ‘after’ will be completed 10 months earlier than the ‘before’ development (47 months in the ‘before’ including gaps between stages and 37 in the ‘after’). Mr Hamilton opines the construction timeframe in the ‘after’ will be completed 5 months later than the ‘before’ development (43 months in the ‘before’ including gaps between stages and 48 months in the ‘after’).
Mr Hamilton also takes the view that the commencement of construction will be delayed by 6 months as a result of the severance and injurious affection in the after case.
Apart from the six month delay, the main differences between Mr Brett and Mr Hamilton are –
Mr Brett starts Stage 4 one month later than Mr Hamilton in the ‘before’ | 1 month |
Mr Brett starts Stage 1 three months later than Mr Hamilton in the ‘before’ | 3 months |
Mr Brett starts Stage 3 five months earlier than Mr Hamilton in the ‘after’ | 5 months |
Mr Brett starts Stage 4 six months earlier than Mr Hamilton in the ‘after’ | 6 months |
At Mr Hamilton’s request, I have prepared Gant charts illustrating the staging of each valuer which are located at pages 1 and 2 of the bundle.
A prudent developer who relies on bank funding to undertake development would, in my experience, usually only commence the next stage of a construction once they had achieved sufficient pre-sales of the prior stage and settlements of most lots in the stage prior to that.
Page 5 of the bundle is entitled ‘Lots Sold and Settled before commencement of next stage’ and shows that in the cash flow models prepared by Mr Brett and Mr Hamilton there is one significant item which does not meet these principles (highlighted) blue, namely Mr Brett’s model whereby he suggests Stage 3 in the ‘after’ would commence so early that there would probably be no pre-sales and certainly no settlements of Stage 1. In my opinion that is ‘unbankable’, uncommercial and not the action of a prudent developer.
By the term ‘unbankable’ I mean that such a position would not be acceptable, in my opinion, to a financier lending to fund the construction of any given stage on generally accepted practices.
Based in my experience in property finance, I would concur with Mr Hamilton’s view that construction of stage 3 in the ‘after’ case would commence 5 months later than Mr Brett’s timing.
With any four stage land development, I would normally expect there to be three peaks in stock on hand as construction of new stock is undertaken. On occasions, I have seen developments with four peaks – this arises when the second stage is not commenced prior to any settlements from the first stage. In this case, both valuers have proceeded on the basis (in both the ‘before’ and ‘after’ case) that commencement of the second stage will proceed prior to any settlements in the first stage.”[94]
“The decision of this Court in Mio Art recognised that s 20 of the Act deals with two separate elements of compensation: the value of the land taken, and damage caused by severance, injurious affection and disturbance. The decision recognised that the Act requires that the value of the land taken be assessed as at the date of the acquisition. Further, that damage caused by the other three matters will often be quantified by reference to post-acquisition events – [51], [75].
Where the entirety of a land-owner’s lot is resumed, the only relevant enquiry for the Court is the value of the land taken. However if part of a land-owner’s lot is resumed, the Court may in addition need to enquire as to: damage caused by severance, injurious affection, disturbance and enhancement. In cases of the latter type, a short-hand method of assessing compensation known as the ‘before and after method’ has been used regularly. It is described by Spigelman CJ in Mir Bros Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales:
“… That method involves subtracting the market value of the residue land (i.e. the part of the property that was not acquired and remains the property of the Appellant) from the market value of the entire property prior to acquisition.””[97]
“I consider that Mr Brett’s cash flow 4 – after resumption most closely reflects the actual resumption scenario. His after resumption valuation is $46,425,000.
Mr Brett’s after resumption valuation of $46,425,000 is relatively similar to my after resumption valuation of $45,750,000 based on a delay of 24 months. The difference in value would reflect what I consider an error in Mr Brett’s valuation in that he commenced construction of Stage 3 well before it would have been prudent to do so.
Based on the agreed pre-resumption valuation of $60,000,000 and Mr Brett’s Cash Flow 4 after-resumption valuation of $46,425,000 the compensation payable would be $13,575,000.”[100]
“Mr Hamilton’s 4 November 2015 Addendum Report contains a post-resumption cash flow which adopts my post-resumption cash flow including a return of 9.04% as per Attachment 2 of my Further Supplementary Report dated 14 March 2012 but changed by the following:
1.4.1 Stage 3 construction is delayed for 8 months after the completion of stage 2 whereas I do not include a delay.
1.4.2 Development approval period is extended by 12 months to 24 months.
1.4.3 Provision of a $241,236 cost of litigation to reduce DTMR contribution.
1.4.4 Exclusion of a traffic network analysis cost of $100,000.”[101]
“The first mistake relates to the adjustment described as “pre-construction phase increased from 12 months to 24 months.” It was common ground between the 2 valuers in the original hearing that it was possible to start construction in the last month of the pre-construction phase; for both valuers that was month 12 in the before case; in the after case, it remained month 12 for Mr Brett, but Mr Hamilton used month 18, to allow for the extra 6 months to allow for the obtaining of a traffic report; applying the same logic to the new period of 24 months, construction should commence in month 24, not month 25.”[116]
“while it is true that the LIC did refer to a difference of eight months between the two valuers in this discussion of Ground 3, Mr Hamilton has taken that reference out of context in his decision to delay the start of construction of Stage 3 for eight months after the time assumed by Mr Brett.”
“it was never identified as a period that separated the start of construction of Stage 3 in the valuers different cash flows. Mr Whitelaw had identified that as a period of five months and reference to the relevant cash flows confirms that that was the correct period.”
“Mr Brett’s preconstruction phase is 12 months, but with the true civil works commencing in month 12. We’ve established that? --- Mmm.
Right? So if it is valid to adjust that 12 months by adding on an extra 12 months, that takes you to month 24. We discussed that before lunch, correct? --- Yes, I’m following you.
And if you add on the five months’ difference, which was – we can see was between you and Mr Brett for the commencement of stage 3, whatever you use as the indicator of commencement, you get a total of 17 months to add on to Mr Brett’s 12 months, so if he started phase – stage 3 in 2011 – let’s go back to ---? --- At month 20, yes.
At 20, to use the trigger that you’ve used here. Then the adjustment would be to month 37. Just let me think about that? --- Yes.
You’ve got to add on 17, so it’ll be to month 37. Yes. Correct? --- Yes.
Whereas you have added on four months. You’ve taken it to month 41? --- Yes.
And that is a mistake? --- I’d have to think through why I adjusted it. It’s inconsistent.
I’ll give you – I concede that.”
Conclusion
Orders:
Compensation is payable by the respondent to the applicant for the taking on 22 February 2008 of an area of 8.385 hectares being Lot 1 on SP 218520 being part of the land contained in title reference 50553649, County of Stanley, Parish of Oxley in the sum of Six Million Three Hundred and Seventy-Seven Thousand Eight Hundred Dollars ($6,377,800).
WL COCHRANE
MEMBER OF THE LAND COURT
[1] Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2013] QLC 47.
[2] Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2014] QLAC 3 at [25].
[3] Ibid at [66].
[4] Ibid at [29].
[5] Ibid at [74] to [75].
[6] Ibid at [30].
[7] Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2015] QCA 96 at [18], [20] and [21].
[8] Ibid at [25].
[9] Ibid at [29].
[10] Ex R5.
[11] Ex R6.
[12] Ex R10.
[13] Ex R27.
[14] Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2014] QLAC 3 at [82].
[15] T 1-7, line 35.
[16] Ex R9.
[17] Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404.
[18] Ibid at [408].
[19] Leichhardt Council v Roads and Traffic Authority (NSW) (No 2) [2008] NSWLEC 1.
[20] Ibid at [9].
[21] T 1-13, line 8.
[22] T 1-15, line 20 to T 1-16, line 23.
[23] T 1-16, lines 10 to 22.
[24] T 1-17, line 11 to T 1-18, line 21.
[25] Ex R11, page 2, para 5.
[26] Ex R11, para 8.
[27] Ex R39, para 20.
[28] Ex R39, paras 27(a) and (b).
[29] Ex R12, pages 23 to 25.
[30] Ibid.
[31] Ex R14, page 469.
[32] Ex R17, pages 309 to 311.
[33] Ex R14, para 171.
[34] Ex R12, page 6, paras 30 to 33.
[35] T 4-37, line 19.
[36] Ex R5.
[37] Ex R6.
[38] Ex R10.
[39] Ex 29, page 55; Ex 30, pages 16, 18 and 23; Ex 71, page 5 and T 3-46, lines 32 to 33.
[40] Ex 38, paras 10 to 12.
[41] See T 3-13 line 25; T 3-25 line 41 to T 3-26 line 15 and Ex R12, para 37. See also Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2013] QLC 47 at [215].
[42] Ex 39, para 3.
[43] Ex R24, page 3, para 14.
[44] Ex R6.
[45] Ex R24, page 4, para 26.
[46] T 1-20 lines 22 to 26.
[47] Cidneo Pty Ltd v Chief Executive, Department of Transport and Main Roads [2014] QLAC 3 at [88].
[48] T 1-20, lines 25 to 37.
[49] Ex R10, page 5, paras 2.12 to 2.13.
[50] Ex R10, page 5, para 2.12.
[51] Ex R7.
[52] T 3-41, lines 23 to 34.
[53] T 3-44, line 37.
[54] T 3-42, lines 20 to 38.
[55] T 3-43, lines 15-16.
[56] Ex R6.
[57] T 3-43 line 21.
[58] T 3-45, lines 26 to 44.
[59] T 3-45, line 46 to T 3-46 line 3.
[60] T 3-48, line 21.
[61] Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd [2015] QCA 96 at [87].
[62] Ex R38, page 2, paras 8-12.
[63] Ex R10.
[64] Ibid, page 8, para 5.1.
[65] Ibid, page 4, paras 2.5. to 2.6.3.
[66] Ex R7, page 19.
[67] Ex R8.
[68] Ibid, page 2.
[69] Ex R9.
[70] Ibid, page 5.
[71] Ibid, page 3.
[72] Ibid, page 5.
[73] Ex R10.
[74] Ibid, page 7.
[75] T 4-9, lines 1 to 10.
[76] Ex R6.
[77] Ex R6, pages 4 to 7.
[78] Ex R16.
[79] T 1-90, lines 22 to 36.
[80] Ex R39, page 22, para 77.
[81] Ex R39, page 2,2 para 78. See Heavey Lex No 64 Pty Ltd v Chief Executive, Department of Transport [1999] QLC 133 at [451] to [453]; Heavey Lex No 64 Pty Ltd v Chief Executive, Department of Transport (2001) 22 QLCR 177 at [184].
[82] T 1-44 to T 1-64.
[83] Ex R38.
[84] T 1-68, lines 36 to 40.
[85] T 1-81, lines 12 to 18.
[86] T 2-45, lines 1 to 10.
[87] T 2-45, lines 4 to 9.
[88] T 2-45.
[89] Ex R6, page 13.
[90] Ex R10, attachment 4, page 43.
[91] Ex R6, page 8, paras 1.4 to 1.5.
[92] Ex R6, page 9, para 2.3.
[93] Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd [2015] QCA 96 at [87].
[94] Ex R36.
[95] Ex R36, page 5, para 25.
[96] Brisbane City Council v Mio Art Pty Ltd [2011] QCA 234.
[97] Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd [2015] QCA 96 at [56] and [57].
[98] Initial Land Court hearing transcript, T 7-64, lines 20 to 45.
[99] Initial Land Court hearing transcript, T 7-66, line 20.
[100] Ex R4, page 13.
[101] Ex R10, page 3, para 1.4.
[102] Ex R35.
[103] Ex R10, page 7.
[104] Ex R14, paras 83, 84, and 91(b).
[105] Ex R12, para 24 and Ex R14, para 112.
[106] Ex R14, paras 166 to 171.
[107] Ex R14, para 171.
[108] Ex R17, para 9.
[109] Ex R9.
[110] Ex R6, page 9.
[111] Ex R8.
[112] Ex R6, page 4.
[113] Ex R6, page 5.
[114] Ex R6, page 4.
[115] Ex R39, paras 6 and 7.
[116] Ex R39, page 5, para 9.
[117] T 2-56 to T 2-57.
[118] T 2-56, lines 25 to 27.
[119] Ex R36, para 18.
[120] T 2-65, lines 19 to 40.
[121] T 2-68, lines 1 to 5.
[122] Ex R10.
[123] Ex R9.
[124] Ibid, page 5.
[125] Initial Land Court hearing transcript, T 5-5.
[126] Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Ltd [1947] 74 CLR 358 at [373]-[374]; Gregory v FCT [1971] 123 CLR 547; and Boland v Yates Property Corporation Pty Ltd [1999] 74 ALJR 209 at [279].
