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Irvine v Bundaberg Regional Council QLC 29
LAND COURT OF QUEENSLAND
Irvine v Bundaberg Regional Council  QLC 29
Neil Samuel Irvine
Bundaberg Regional Council
Determination of compensation under the Acquisition of Land Act 1967
21 June 2019
11, 12 & 13 February 2019
Submissions closed 16 May 2019
PG Stilgoe OAM
REAL PROPERTY – COMPULSORY ACQUISITION OF LAND – PROCEEDINGS FOR COMPENSATION – QUEENSLAND – where the constructing authority took a leasehold interest with an option to renew from the applicant – where the applicant ran a skating rink business which relied on volunteer labour and had irregular hours – where the lease terms restricted the permitted use and had relatively onerous terms – where the taken land had a caretaker’s residence – where the accounting experts agreed that the existing business on the taken land had no value – where the valuer experts used a profit rent methodology in their valuations – whether the option term had value – whether the applicant was entitled to compensation for disturbance and/or loss of profits
EVIDENCE – ADMISSIBILITY – OPINION EVIDENCE – EXPERT OPINION – where the valuer experts participated in court managed expert evidence during the preparation of their joint expert report – where the joint expert report did not address all material issues – where subsequent reports to the joint expert report were required to be prepared
Acquisition of Land Act 1967 s 12, s 20, s 28
Commonwealth v Milledge (1953) 90 CLR 157;  HCA 6, considered
Horn v Sunderland Corporation  2 KB 26, considered
The Minister v The New South Wales Aerated Water and Confectionary Co Limited (1916) 22 CLR 56;  HCA 48, cited
KW Wylie (instructed by Finemore Walters & Story) for the applicant
DD Purcell (instructed by Baker O'Brien Toll Solicitors) for the respondent
- Lee-Anne Naumann loves the sport of roller skating. In 2002 Lee-Anne’s husband, Neil Irvine, acquired an interest in the roller skating rink in Bundaberg, located within the precincts of what was then the Bundaberg Showgrounds. Together with Mr Irvine’s son Blair, also a roller skating enthusiast, and some volunteers, Lee-Anne operated the skating rink as a family business on weekends from 2010 until its closure in 2016.
- Mr Irvine acquired his interest in the skating rink by the transfer of a lease. The original lessee constructed the skating rink and caretaker’s residence in or about 1979. The skating rink is a steel beam and concrete block commercial structure; the caretakers residence is a cavity brick three bedroom dwelling attached to the rink. Mr Irvine undertook a full renovation of the property on acquisition.
- The lease provided for an initial term of 40 years at an annual rent of one dollar per year payable on demand. The initial term was due to expire on 30 June 2019. Mr Irvine had an option for a further term of 30 years at an annual rent of $100 per week, adjusted for the present value by a formula provided for in the lease. The experts agree that the current weekly rental, if the option had been taken up, would be $488 per week.
- In 2016, the Bundaberg Regional Council resumed the land on which the skating rink was located. The Council concedes that Mr Irvine held an interest in land for the purposes of s 12(5) of the Acquisition of Land Act 1967 (ALA), so he is entitled to compensation.
- The assessment of compensation is governed by s 20 of the ALA. In addition to the value of the land taken, I must also consider any costs attributable to disturbance. The relevant date for determining compensation is 4 November 2016.
- The parties cannot agree on the compensation payable to Mr Irvine. His original claim, as set out in his Statement of Facts, Matters and Contentions filed on 24 May 2018, was made up as follows:
Residual value of lease
Residual value of option to lease
Loss of profits ($33,000 p.a. for 33 months)
- The Council initially submitted that Mr Irvine isn’t entitled to any compensation because the skating business had no value and, therefore, no prudent purchaser would pay to acquire the lease. In written submissions filed after the hearing, the Council has conceded that Mr Irvine is entitled to $100,000 for the value of the existing leasehold interest and $27,500 for the legal and professional fees attributable to disturbance.
- The issues I have to decide, then, are:
- What is the residual value of the lease and option to lease?
- Is Mr Irvine entitled to additional compensation for disturbance and, if so, on what basis?
- Is Mr Irvine entitled to compensation for loss of profits and, if so, on what basis?
The assessment methodology
- Because the accounting experts, Mr Bernard Whebell CA and Mr Paul Vincent, agreed that the business had no market value, the only thing that could be valued was the balance of the lease plus the option. The valuers, Mr Grae Shelton and Mr Tom Walton, had a unique task before them.
- The valuers approached this task by using the profit rent methodology. That methodology is explained by Isaacs J in The Minister v The New South Wales Aerated Water and Confectionary Co Limited:
“the compensation payable to the tenant, in respect of the mere value of the tenancy itself, is regulated by the considerations stated in Cripps on Compensation, p. 101. The learned author (now Lord Parmoor) says:—It “depends on the difference between the actual rental paid by him and the improved annual rental that the property is worth. This difference must be multiplied by the number of years’ purchase at which the tenant’s interest should be valued. This will be determined by the character of the property and by the length of the term or tenancy.” The capitalized value of the tenant’s interest is the value to him…
…As to what is the best rent the property is worth, consistently with the terms of the lease, that must be tested by what Lord Dunedin in the Cedars Rapids Cods Case termed “the imaginary market which would have ruled had the land ” (here the term) “ been exposed for sale ” at the moment of notification.
The supposed competition in this market will determine the best rent procurable.”
- Mr Shelton assessed the profit rent as $225,000 for the balance of the term and $400,000 for the option period, giving a total of $625,000. Initially, Mr Walton assessed the profit rent as zero for both the balance term and the option period but, in evidence, conceded that the profit rent might be between $50,000 and $100,000 for the entire leasehold.
- It is not surprising that the valuers’ opinions about the appropriate figure for profit rent differed, but the absence of any detailed analysis of the competing views is disappointing, given that the experts participated in the Land Court’s Court Managed Expert Evidence process (CMEE). The CMEE is designed to identify and eliminate these sorts of problems before the production of the joint expert report. Rather than rejecting each other’s methodology out of hand, a diligent joint expert reporting process should have given me an assessment by each expert based on both their own and their opponent’s methodology.
- Mr Walton produced an individual report after the production of the joint expert report because he did not have an opportunity to inspect the properties Mr Shelton nominated as comparable. The purpose of the joint expert report, particularly coming from a CMEE, is to cover all aspects of the experts’ evidence without the need for individual reports thereafter. The appropriate approach in this case would have been for the valuers to reconvene after Mr Walton had time to consider Mr Shelton’s comparative properties.
- The experts produced a further joint expert report after a day in the witness box. This document provided me with a comparative analysis of the sales evidence, something that should have resulted from the CMEE.
- This was a CMEE that did not meet its objectives.
The comparable lease evidence
- Mr Shelton’s initial calculation of $55/m2 was midway between the two lowest rentals in a set of seven comparable leases. The valuers now agree that only three of the leases are relevant.
Bundaberg Indoor Sports Centre
- Mr Shelton initially assessed the rent per square metre for the Centre at $52.98/m2, but the experts subsequently agreed that the actual rent is somewhere between $47/m2 and $49/m2. Mr Shelton believes that the building is comparable to the subject site, whereas Mr Walton considered it to be superior in that it offered larger and better female and male amenities, a separately enclosed ground floor air-conditioned bar, and a mezzanine floor.
- Comparing the photographs of the Centre with those of the subject property, I prefer Mr Walton’s view. I acknowledge that the photographs of the subject site were taken some years after Mr Irvine vacated, and there had been no maintenance in the meantime, but the facilities provided in the subject building are inferior to those provided in the Centre.
- Mr Shelton considers that the subject property is in a better location than the Bundaberg Indoor Sports Centre, as it is very close to the Bundaberg High School and TAFE College. Mr Irvine nominated the subject property’s location – close to the CBD, suburban residences and the school – as a significant advantage for the subject site.
- Mr Walton considers that the limited offer of indoor, family based sporting activities in Bundaberg results in a patron base that is willing to use the facility on a destination basis. He also considers that Bundaberg’s size limits any significant travel time.
- I am not persuaded that location is an important consideration in assessing value. I accept Mr Walton’s view that a skate rink is a destination facility and interested patrons would be prepared to travel a little further to reach that destination.
- The valuers agree that the Centre offers superior car parking and vehicular access.
- The Centre’s lease is a five year lease with no options. Mr Shelton believes that this leaves the operator vulnerable at the expiration of the lease term. Mr Walton considers that the lack of an option is a matter of limited risk because the premises has been used for indoor sports for several decades. He considers that, given it paid $320,000 for the business in June 2017, the current lessee shares his view that there is limited risk.
- I agree with Mr Walton that the Bundaberg Indoor Sports Centre represents a superior property with superior leasing potential. It is a newer building with better facilities.
FlipOut Indoor Trampoline Sports
- FlipOut is located in a light industrial complex on the fringe of Bundaberg city. The current rent equates to $56.31/m2.
- Both valuers consider the FlipOut building to be superior to the subject property. Mr Walton identified that FlipOut has disabled toilet facilities, roller door access, mercury vapour lighting, an internal two level office and ducted air-conditioning. He considers the premises presents to a very high standard.
- Mr Shelton believes that the rental potential for this property is depressed due to local market perceptions that the area is subject to flooding. Mr Walton acknowledges that the complex has some flooding issues, but considers that these issues would have been factored into the rent negotiation, which took place in 2016, after the flooding occurred, and after the Council undertook flood mitigation work.
- Mr Walton identified that the lessor provided a rent-free incentive equivalent to $6250 or 6.9% of the rent payable over the term. Mr Walton considers that, when comparing rentals, a deduction of 6.9% should be applied to the base rate. As both Counsel conceded, that reduces the rent per square metre to approximately $52/m2.
- The valuers agree that the car parking at FlipOut is superior to the subject property.
- Mr Shelton initially calculated the rent for Gymfinity as at the date of acquisition at $78.43/m2, but later revised his assessment to $71/m2.Mr Walton considers that the true rental for this property (including the mezzanine) is $53/m2 because the initial rent for the property was struck on the basis that the lessor would provide the entire fit out, all air-conditioning and upgraded bathroom finishes. The rent was adjusted down in 2017 because the escalation clauses resulted in an unsustainable rent. Further, Gymfinity is only liable for 50% of Council rates.
- Both valuers agree that Gymfinity is superior to the subject property. In particular, Mr Walton notes that this property is near new, and does not suffer the maintenance issues of the subject property.
Other skating rink rental evidence
- Mr Shelton provided, but did not rely on, details of skating rink venues in other locations to demonstrate skating rinks can and do pay rents in excess of his rental assessment. Mr Walton was critical of the use of other skating rinks to assess the commercial rent.
- I am not persuaded that the rent payable by other skating rinks in other locations assists me in determining the commercial rent. Mr Shelton frankly conceded that these rinks are all fully air conditioned and operate seven days per week. He did not otherwise address different market conditions in the other locations or the particular terms of the leases. To the extent that Mr Shelton used information from skate rinks in other cities and towns to support his primary view, it is unhelpful.
The caretaker’s residence
- Mr Shelton added $240 per week for the three-bedroom caretaker’s residence attached to the skating rink to his calculation of commercial rent. He compared the residence with other residential properties throughout Bundaberg and considered that the rent being charged was well below market rate.
- The comparable properties Mr Shelton provided in his analysis are very different from the caretaker’s residence. They are new, well-maintained, and in residential areas. They are not co-located with a commercial property. They do not provide any basis for a comparison.
- As Counsel for the Council, Mr Purcell points out, the use of the caretaker’s residence is proscribed by the city planning scheme. It can only be used in connection with any other use conducted on the same parcel of land. Therefore, it cannot be rented as a standalone premises.
- Given the restrictions on the occupation of the caretaker’s residence, I am not inclined to add the potential rent of the caretaker’s residence into an assessment of the commercial rent.
- Mr Purcell has criticised Mr Shelton’s approach, submitting that he has calculated the commercial rent for an alternative premises, not the commercial rent for the subject premises. For reasons that follow, I consider there is some validity to this submission.
- It is apparent from the evidence that Mr Shelton was valuing a commercial property with the tenancy that was used for fitness or recreation purposes. He was not valuing a property the only use for which was for a skating rink or recreational purposes and which was built specifically for that purpose. The comparative premises he analysed had significant differences from the subject property.
- The comparators could be subject to other uses compatible with the local government zoning. They could be used, for example, for warehousing or by wholesalers, or as a workshop for service industries. They could even be used for a bead shop. However, the subject lease provided that the lessor covenanted and agreed:
“Not to use or permit to be used the demised land and the promises erected thereon or any part thereof for any purpose other than that of a skating rink and or any other suitable sporting activity without the consent of the lessor first had or obtained provided always such consent shall not be arbitrarily withheld in the case of any sporting or social activity which can be reasonably conducted on the premises…”
- As I have mentioned, the subject site was built specifically to be used as a roller skating rink. To convert it to any other use would have required considerable expenditure. By contrast, the properties Mr Shelton valued were not purpose built and could be readily modified to accommodate other uses.
- While there is always an obligation on a tenant to maintain the premises, it is unusual for that obligation to extend to the building fabric. Mr Irvine was required to keep the building in good and tenantable repair, keep the tenancy in good and tenantable repair, and he was responsible for structural defects in the building.
- The cost of keeping this building in good and tenantable would be far more than the cost of making good a commercial tenancy in a new, or near new light industrial building. Although the property inspection report describes the building as being in reasonable quality given its age, both Mr Shelton and Mr Irvine conceded that the building needed a new roof, resurfacing of the skating rink floor and painting internally and externally. Mr Irvine acknowledged that this work was required sooner rather than later. The cost of that work was roughly estimated to be $60,000. Mr Shelton did not take into account the additional obligations of a lessee of the subject premises when considering the comparators.
- The subject site might be close to the local high school and TAFE but it is not co-located with other tenancies. The comparators that Mr Shelton selected were all within an area of similar tenancies.
- Mr Shelton’s approach was consistent with that of a real estate agent attempting to procure the best price for a vendor, rather than as an independent valuer. I note in that regard Mr Shelton’s colourful comments in the first joint report.
- I am therefore unable to accept Mr Shelton’s view that an appropriate base rent for the subject property is $50/m2. To do so would ignore the significant differences between the subject property and the comparable leases, and the fact that the subject premises was in all ways inferior to the closest comparable property, Bundaberg Indoor Sports Centre. Mr Shelton’s refusal to adjust his base figure of $50/m2, despite invitations to do so,raises some questions as to his methodology.
- Although Mr Walton maintained the view that he could not reliably calculate a profit rent, he did undertake that exercise, arriving at a figure of $30/m2. Mr Walton’sreason for the discount was the physical condition of the subject property and a calculation of a “net effective basis (i.e. post allowance for incentives)” for the residual of the term certain.
- Mr Shelton criticised figure of $30/m2 because he was unaware of any commercial properties in Bundaberg available at that rate. With respect to Mr Shelton, I think that observation misses the point. The exercise the valuers, and the Court, have to undertake is not to observe the state of the rental market in Bundaberg but to put a value on this lease as it exists over this property. Mr Shelton’s observation in this regard confirms my view that he was valuing the market rather than the subject property.
- Mr Walton already factored in the incentives when considering the comparable properties. I cannot see why those incentives should be factored in again. I do accept, however, that there should be some discount for the difference in the physical condition of the buildings and the effect that will have on the obligations under the “make good” clause. The make good figure of $60,000 is analogous to, and probably more than, the fit out cost for Gymfinity. Although Mr Walton did not provide a precise methodology to justify reducing the net rental to $30/m2, I consider that this figure represents a better assessment of the commercial rent than Mr Shelton’s assessment, which ignores what are obviously relevant influences.
The value of the balance term
- Adopting a rate of $30/m2, Mr Walton calculated the profit rent for the balance of the initial term at $117,000. It appears, however, that his calculation is incorrect. Applying a discount rate of 7.5%, the net present value of the Year 3 rent produces a figure just under $40,368, not $26,912. Therefore, the total profit rent on Mr Walton’s calculations is closer to $130,000.
- For different reasons, though, I arrive at Mr Walton’s final figure of $117,000 as the appropriate figure to apply for the value of the balance of the current term. By excluding the residential rent as I have previously determined, the calculation becomes:
Skating & Associated Rent Rate per annum (Net)
Caretaker’s Rent per week (Net)
Present Value/Profit Rent Calculations
Annual Present Value
- Mr Walton considers that the amount should be further discounted for the peculiar terms of the lease. I disagree, because Mr Walton has acknowledged that the discount to $30/m2 already takes these matters into account. Therefore, I find that Mr Irvine is entitled to $117,000 compensation for loss of the balance of the initial term.
The residual value of the option
- The valuers agree that weekly rent for the option period is $488 per week.
- Mr Shelton maintains that the profit rent for the option period should be calculated on $50/m2, minus the actual rent payable, plus a factor for inflation and then minus a factor for risk, giving a figure of $400,000.
- He prepared a spreadsheet of projected future cash flows based on a starting profit rent of $50/m2. Mr Shelton included an annual market growth of 2% compounding for the first 10 years, 3% compounding for the next 10 years, and 4% compounding for the last 10 years of the option, from which he then deducted the actual rent payable. Then, he calculated the net present value using a 20% discount rate, justifying the adoption of a higher rate so as to account for “risk”.
- There are some problems with Mr Shelton’s spreadsheet. The first is that he calculated the return based on $50/m2 whereas I have determined that the appropriate rate is $30/m2.
- The second problem is that Mr Shelton relied upon standard rental increase clauses in commercial leases which link to CPI to justify the annual growth rates of 2%, 3% and 4%.
- Mr Walton pointed out that these clauses give both the lessor and the lessee certainty over a short lease term and are not designed to be a substitute for the calculation of the actual annual growth. Indeed, many commercial leases provide for a review to market at regular intervals (usually on the exercise of an option after three or five years), something which is missing from Mr Shelton’s assessment. The difficulty with Mr Shelton’s approach which Mr Walton identified is confirmed by the fact that the tenant in FlipOut, while initially accepting a linear 3% increase in rent for 5 years, negotiated the rent back to market at the first available opportunity.
- Mr Shelton’s projected market growth over the full term of the option goes from a profit rent of $82,230 in 2019 to $195,495.82 in 2048, representing a 138% increase over the term of the option. That would be an extraordinary return, particularly as Mr Shelton acknowledged that growth in commercial property is not linear but subject to losses and gains over a long period and that the commercial leasing market in Bundaberg has been stagnant since 2013.
- The third problem is that Mr Shelton used a discount rate of 20% “given the nature of the asset and the risk factors involved in achieving the Profit Rentals projected” but, as he conceded, he did not factor in any capital expenditure for the maintenance of the building over the course of that period. It may be that Mr Shelton’s discount of 20% is sufficient to account for that, but I was not favoured with any evidence about it. Once again, Mr Walton did not offer an alternative view.
- My initial inclination was to ask the valuers to prepare an updated cash flow spreadsheet, adopting the base rental of $30/m2, a more realistic annual growth rate that reflects history, and, if not included in the discount rate of 20%, factoring in the capital expenditure required over a 30 year period to maintain the property. Mr Walton attempted to undertake that task on the second day of the hearing. For a number of reasons I did not admit his efforts into evidence, not least of which being that Mr Shelton did not have an opportunity to consider the assumptions Mr Walton made.
- On reflection, however, I do not consider that exercise will assist me. It will produce a figure well supported by a formula but not, in the end, supported by reality.
- Mr Irvine bought this lease in 2002 for $60,000. At that time, there was 16 years left on the balance term plus the option. That is, 16 years at an annual rent of $1. I also have a copy of a transfer of lease from Mr Irvine to a third party executed in October 2002, stamped in early 2003, showing the consideration for the transfer as $97,000. Obviously, the transfer did not take place but the document was tendered to show the price that a willing purchaser might be prepared to pay for the leasehold interest. At that time, there was 15 years left on the balance term at an annual rent of $1. By November 2016, a prospective purchaser had only 2 years and 9 months to take advantage of an annual rent of $1. Because there was less time to exploit the profit rent potential, all other things equal, it must be that the value of the lease had decreased substantially over that time.
- It was submitted that I cannot use these transfers in 2002 to assess the value of the leasehold in 2016 because of inflationary and market factors that have occurred in the intervening 14 years. That is true in part but it defies logic that a wasting asset – a leasehold the term of which is necessarily decreasing as time passes – would increase in value 6 or 10 times over that period. The only material difference in circumstances is the Council’s decision to acquire the leasehold. That cannot be a good reason to inflate the value of the lease to such an extent.
- Counsel for Mr Irvine, Mr Wylie, criticised Mr Walton’s approach to the profit rent calculation, submitting that he has conflated the commercial rent for the subject premises with the rent which a business could afford to pay for occupation of the property while still making a profit. Both Mr Walton and Mr Shelton explored the “business” potential of the subject premises. Mr Walton used the business potential to test the economic feasibility of any market rent assessment. In my view, that was a prudent application of a reality check; did the profit rent calculation actually reflect the market, given the financial performance of the permitted use?
- Taking Mr Walton’s comments into account, a figure of $117,000 for the whole of the lease represents a realistic figure for the whole lease period for the chance of an improved return on investment. If I assume a willing purchaser knows the potential income for the balance period is $82,500, a potential purchaser is paying an extra $34,500 for the chance of capital gain or the ability to improve the income plus the opportunity to take up the option. Given the constraints of the subject lease, the premium seems more than generous, particularly as the actual income was generated with no labour expenses at all, Mr Irvine told the Court that the only way to increase revenue was to operate 7 days per week, and a skating business is much more marginal once it is paying more than a peppercorn rent. As Mr Walton commented, it is likely that the incoming purchaser would be an opportunistic one, much as Mr Irvine was in 2002.
- If Mr Irvine was not prepared to pay $400,000 for the option to lease in 2002, it cannot be worth that now. I assess the value of the option at nil.
Costs attributable to disturbance
- The matters that fall within “costs attributable to disturbance” are set out in s 20(5) of the ALA. They include costs reasonably incurred or might reasonably incurred relating to the use of the land taken, an amount reasonably attributed to the loss of profits and other economic losses and costs reasonably incurred that are a direct and natural consequence of the taking of the land.
Loss of Profits
- Although the accountants agreed that the business had no value, their report contained a profit and loss analysis for the 10 years from 2008 to 2016. The skating rink was consistently in profit from 2012. There is nothing in the evidence to suggest that Mr Irvine would not have maintained a profit for the balance of the initial term. Mr Shelton calculated the loss of profits at $30,000 per annum for two years and nine months being $82,500.
- The profit rent approach assumes that Mr Irvine has a lease interest of some value to a prospective purchaser. Once the purchaser acquires the lease, then Mr Irvine is not operating the business and his income stream from the business ceases. If I were to give Mr Irvine compensation for loss of profits for the balance term, I would be giving him double compensation. Mr Irvine is not entitled to claim loss of profits for the balance of the term.
- Mr Irvine also claims relocation costs. Mr Purcell submits that, because the business had no value, there is no justification for compensating Mr Irvine for the cost of relocating the business. He refers me to Horn v Sunderland Corporation and Commonwealth v Milledge as authorities for the proposition that compensating Mr Irvine for both profit rent and disturbance costs would result in double compensation.
- Both cases referred to involved situations where the landowner was not using the subject property for its highest and best use. In Horn v Sunderland Corporation, the Court stated that the landowner was “asking to be compensated, not for any work real pecuniary damage, but for the loss of the opportunity to indulge in it is idiosyncrasy.” Mr Purcell submits that Mr Irvine too is indulging in an idiosyncrasy.
- The analogy is not helpful. In Horn v Sunderland Corporation, the landowner was claiming the cost of purchasing alternative land. Mr Irvine does not want the cost of purchasing alternative land, nor does he want the cost of constructing an alternative building. What he claims is the cost of the fit out of alternative premises. Further, in Horn v Sunderland Corporation, the landowner wanted to buy “building land” and farm on it. That was the idiosyncrasy to which the Court referred; the landowners desire to use the alternative land for a “lesser” purpose. Again, that is not Mr Irvine’s intention.
- Whether or not anyone else thinks it is a sound business proposition to continue with a skating rink in Bundaberg, Mr Irvine was entitled to relocate the business and, because relocation was only necessary because of the resumption, he was entitled to be compensated for the relocation costs.
- Excluding the cost of preparing the rink floor, Mr Irvine claims a relatively modest $59,800. Mr Purcell correctly points out that none of these figures is supported by quotes or any other objective evidence. Instead, Mr Shelton used his ‘life skills’ to compile this part of the claim. However, because of the relatively modest claim, I am prepared to accept the following:
Advertising to advise of relocation
External signage at new premises
Safety compliance signage
Additional lighting for sake areas
Lighting protection covers
Communications (phone, internet, etc)
Power upgrades to cater for requirements
External security lighting
Security systems (cameras, etc)
- I accept that Mr Irvine will have to construct facilities within the new premises, but there must be an element of enhancement in Mr Irvine’s claim, as he will have new premises with new internal structures instead of a facility some 38 years old. Therefore, and because I have no evidence at all on these items, I propose to discount the construction costs by an arbitrary factor of 30%. The construction costs total $33,000. Mr Irvine is therefore entitled to an additional $23,100 in respect of construction costs:
Construct DJ console
Construct First-Aid room
Construct skate hire/sales, repair, admin, etc
Construct and fit-out canteen area
Construct games/party room
Total construction expenses
- I am not persuaded by Mr Irvine’s claim of $108,000 for refinishing the floor. As Mr Irvine frankly conceded that the existing floor needed refinishing, this is a cost that he would have incurred in any event.
- Because floor marking is a necessary incident of refinishing the floor, I do not allow Mr Irvine’s claim for that amount.
- The unique circumstances of this case required a unique solution. The resolution of this case was not assisted by ambit claims unsupported by evidence but justified by enthusiastic expert assessments. Mr Irvine is entitled to a payment of $193,600, calculated as follows:
Head of compensation
Residual value of lease
Residual value of option
Costs of the claim
Loss of profit
- I also find that Mr Irvine is entitled to interest from 4 November 2016 and up to the day immediately preceding the date on which payment of compensation is made, pursuant to s 28(1) of the ALA. That interest must be calculated at a rate of four percent per annum, that rate being the default Reserve Bank of Australia pre-judgment rate.
- The parties may file and serve any written submissions as to costs within 14 days of this order.
- Compensation is determined in the amount of One Hundred and Ninety-Three Thousand, Six Hundred Dollars ($193,600.00).
- The respondent must pay interest on the compensation to the applicant at a rate of four percent (4%) per annum, on and from 4 November 2016 and ending on and including the day immediately preceding the date on which payment of the compensation is made.
- Either party seeking costs may file and serve their written submissions as to costs within fourteen (14) days.
PG STILGOE OAM
MEMBER OF THE LAND COURT
 Ex 1, page 5, para 25.3.
 Ex 1, page 4, paras 20 to 21.
 Ex 14.
 Ex 1, Exhibit NSI-1, page 8.
 Ex 3, paras 220.127.116.11 and 8.6.
 ALA s 20(1)(b).
 Calculated later in Ex 3, page 21.
 Respondent’s written submissions filed 5 April 2019, page 31; T 1-3, lines 14 to 18.
 Ex 2, page 6, para 5.1.
 (1914) AC 576.
 (1916) 22 CLR 56, 81-82.
 T 2-74, lines 20 to 31.
 T 2-39, lines 22 to 23.
 Ex 5.
 Ex 9.
 Ex 3, pages 37 to 38.
 Ex 13; T 2-3 lines 46 to 47, T 2-4 lines 1 to 9.
 Ex 9.
 Ex 9, page 2.
 Ex 11, pages 1 to 5.
 Ex 10.
 Ex 1, page 4, para 23.
 Ex 5, page 9, para 4.2.13.
 T 2-27, lines 1 to 20.
 Respondent’s written submissions filed 5 April 2019, page 11.
 As demonstrated by the uses of adjacent buildings shown in Ex 15.
 T 1-55, lines 37 to 38.
 Ex 1, Exhibit NSI-1, page 4, clause 1(k).
 Ibid page 3, clause 1(b).
 Ibid clause 1(d).
 Ibid pages 3 to 4, clause 1(e).
 Ibid page 4, clause 1(g).
 Ex 14.
 T 2-29, lines 1 to 7.
 T 1-21, lines 1 to 6.
 T 1 – 22, lines 35 to37, 43 to 44.
 T 1-22, lines 24 to 26; Ex 1, page 4, para 44.
 Ex 3. See, for example, page 15, para10.10.
 T 3-4 to T 3-6.
 Ex 5, page 14, para 5.2.
 T 2-47, lines 25 to 30.
 T 1-22 to 1-23.
 Ex 5, page 14, para 5.3.
 T 2-42, lines 30 to 34.
 Ex 13.
 T 3-11, lines 25 to 38.
 T 2-23, lines 4 to 13.
 T3-9, line 46 to T3-10, line 5; T 3 –12, lines 29 to 31.
 T 3-8, line 43 to T3-9, line 2.
 Ex 1, page 19.
 T 3-16, lines 1 to 18.
 T 2- 29, line 41 to T2-35.
 Ex 1, page 17.
 Ex 7.
 T 1-50, lines 16 to 31.
 Applicant’s written submissions filed 9 May 2019, page 10.
 T 1-63, line 43 to T 1-64, line 5.
 T 2-29, lines 4 to 7.
 T 2-28, lines 38 to 44.
 Ex 3, page 21.
 T 1-19, lines 23 to 31.
 T 1-31, lines 1 to 3.
 T 2-41, lines 1 – 7.
 Ex 1, page 6, para 26.4.
 ALA s 20(f).
 Ex 2.
 Ex 3, page 21, para 11.5.
  2 KB 26.
 (1953) 90 CLR 157.
  2 KB 26, 39.
 Ex 3, page 20, para 11.3.
 T 2-92, lines 18 to 25.
 Ex 1, page 13, para 44.
- Published Case Name:
Irvine v Bundaberg Regional Council
- Shortened Case Name:
Irvine v Bundaberg Regional Council
 QLC 29
Member PG Stilgoe OAM
21 Jun 2019