LAND COURT OF QUEENSLAND

CITATION: McPherson v Caloundra City Council [2005] QLC 43

PARTIES: Graham E and Judith H McPherson (applicants) v. Caloundra City Council (respondent)

FILE NO.: A2004/0129

DIVISION: Land Court of Queensland

PROCEEDING: Determination of compensation payable consequent upon the resumption by the Caloundra City Council under the provisions of the Acquisition of Land Act 1967 for sewerage farm, disposal works and depots, recreation grounds and parks purposes of Lot 10 on SP 107372, County of Canning, Parish of Bribie containing 73.59 hectares

DELIVERED ON: 26 August 2005

DELIVERED AT: Brisbane

HEARD AT: Brisbane

MEMBER Mrs CAC MacDonald

ORDERS: 1. The compensation payable by the respondent to the claimants is determined at $2,699,000. 2. The respondent is ordered to pay interest to the claimants at the rate of 5.5% per annum on the amount of $2,699,000 for the period commencing 12 December 2003 up to and including 5 April 2004, then on the amount of $1,849,000 for the period commencing 6 April 2004 up to and including the day immediately preceding the date that amount is paid by the respondent to the claimant.

CATCHWORDS: Valuation – method of valuation – piecemeal or overall approach – clear distinction between flooded and flood- free land – piecemeal approach adopted. Valuation – use of sales – acceptable sales – property not advertised at time of purchase – purchased for exchange with another vendor – purchaser an experienced land developer – willing purchaser and vendor – sale adopted. Valuation – use of sales – unacceptable sales – differences in location, topography, views, country types – adjustments necessary – no substantive evidence as to how adjustments made – sales not adopted. Valuation – particular factors in valuation – potential for sand extraction – no separate allowance for such – potential included in overall sale price.

APPEARANCES: Mr DR Gore, QC for the applicants Mr M Gynther for the respondent

SOLICITORS: Griffiths Parry for the applicants Garland Waddington for the respondent

[1] This matter has been referred to the Land Court under the provisions of the Acquisition of Land Act 1967 (the Act) for hearing and determination of a claim for compensation in respect of the resumption of land owned jointly by Graham Eric and Judith Helen McPherson (the claimants). The land was resumed on 12 December 2003 by the Caloundra City Council (the respondent) for sewerage farm, disposal works and depots, recreation grounds and parks purposes. The land is described as Lot 10 on Survey Plan 107372 in the County of Canning, Parish of Bribie and has an area of 73.59 hectares. It is located at Sunset Drive, Meridan Plains, Caloundra. [2] The claimants have claimed an amount of $3,050,000 and interest as compensation for loss of the land. Although Senior Counsel for the claimants indicated that a claim for disturbance might also be pursued, no evidence as to any disturbance losses was lead. [3] The respondent contended that the value of the land as at the date of resumption was $2,030,000. [4] An advance of $850,000 was paid to the claimants on 6 April 2004. [5] The claimants were represented at the hearing by Mr DR Gore QC. Mr M Gynther appeared on behalf of the respondent. [6] Evidence was given on behalf of the claimants by – Mr JA Jameson - a registered valuer and the Acquisitions Manager of AV Jennings Mr CF Stewart - company director Mr TW Morrow - accountant and company director Mr GE McPherson - accountant and one of the claimants Mr RR Henderson - registered valuer of Bob Henderson Valuers Pty Ltd

2 [7] Evidence was given on behalf of the respondent by Mr AF Carrick, a registered valuer of AF Carrick and Associates. The Land [8] The land taken was the whole of Lot 10 on SP 107372, an area of 73.59 hectares. Lot 10 was burdened by an easement in gross for drainage purposes in favour of the Caloundra City Council. The land is situated on the southern side of Sunset Drive, approximately 7 kms north-west of the Caloundra Post Office and CBD. Sunset Drive is a gravel formed road along the frontage of the subject land and is part bitumen sealed and gravel formation for approximately 2.5 kms to the east of the subject where it becomes fully sealed. [9] There are no services connected to the subject land. Power and telephone are available to the land and town water is available approximately 400 m to the east. [10] Mr Henderson described the subject land as a quality, well located parcel of coastal grazing country with a good house site, and situated within minutes of Caloundra services and beaches. Residential development is located close to the rear boundary, and a proposed roadway will be constructed at the rear of the property which will provide a buffer to existing development. [11] Lot 10 is an irregular shaped parcel lying in the Mooloolah River flood plain. The land is level to gently undulating. Mr Henderson said that the area at the north-east of the land is selectively cleared with a good assortment of hardwood timbers and an area of scrub adjoining to the east. It has a view of the Glasshouse Mountains to the south. There is a waterhole near the north-western corner of the land and a substantial drainage channel runs from south to north through the land. The property is fenced with four barbed wires on timber posts. [12] Mr Henderson said that the land is constituted as follows: Pasture improved (mostly Narok Setaria) - 50 ha approx Grassed - 10 ha approx Standing scrub - 8 ha approx Land above Q100 flood level in north-east - 6 ha approx section, suitable for a house site

Comparable vegetation areas of Dominant (of concern) Regional Ecosystems are noted on the subject, as well as on Mr Henderson's Sales 1, 2 and 3. [13] Mr Carrick classified the land as follows: 8 ha – wet melaleuca and wallum understorey vegetation 7 ha – thinned and grassed open forest/woodland

3 58 ha – cleared to pasture He said that 7.1 hectares of the land lies above the Q100 flood level, and 25 hectares is below the Q2 flood level. The drainage easement discharges into that area. [14] The land lies within the Meridan Plains Extractive Resource area and contains an exploitable reserve of sand of unknown quantity. The significance of this resource is considered later in this decision. [15] As at the date of resumption, the subject land was in the Rural zone of the Caloundra City Planning Scheme (gazetted on 2 August 1996). It was in the Open Space area of the Strategic Plan and the Resource Elements were Extractive Industry – Resource Areas (Generalised). A new Draft Caloundra City Plan was published in July 2003 and came into force on 29 September 2004, some 9 months after the date of acquisition. Under that Plan, the subject is located within the Rural precinct of the Mooloolah Valley Planning Area and is subject to the following overlays – Extractive Resource Area, Extractive Resource Areas (Heritage Routes), Flood Management, Acid Sulfate Soils, Biting Insect, Aviation Affected and Habitat and Diversity. There is no potential to subdivide the land. [16] The parties' valuers agree that, as at the date of resumption, the highest and best use of the land was –  Dwelling house (immediate)

 Sundry grazing (immediate and continuing until ripe for extractive industry)

 Extractive industry (estimated 5 to 10 years time frame from the date of acquisition).

They also agree that a dwelling house and the extractive industry use could co-exist on the subject land with adequate separation buffering. Valuation Methodology [17] Section 20 of the Act provides – "Assessment of compensation

(1) In assessing the compensation to be paid, regard shall in every case be had not only to the value of land taken but also to the damage (if any) caused by either or both of the following, namely –

(a) the severing of the land taken from other land of the claimant;

(b) the exercise of any statutory powers by the constructing authority otherwise injuriously affecting such other land.

(2) Compensation shall be assessed according to the value of the estate or interest of the claimant in the land taken on the date when it was taken.

(3) In assessing the compensation to be paid, there shall be taken into consideration, by way of set-off or abatement, any enhancement of the value of the interest of the claimant

4 in any land adjoining the land taken or severed therefrom by the carrying out of the works or purpose for which the land is taken.

(4) But in no case shall subsection (3) operate so as to require any payment to be made by the claimant in consideration of such enhancement of value."

There is no claim in respect of severance or injurious affection in this matter, nor any set- off for enhancement. The central issue for determination is, therefore, the value of the estate or interest of the claimant in the land taken as at the date of resumption. [18] The parties' valuers valued the subject land by comparison with sales of comparable properties. The major areas of disagreement between them were the identification of suitable sales and whether a piecemeal valuation or an overall approach valuation should be adopted. [19] The claimants' valuer, Mr Henderson, carried out two valuations of the subject land. The first, which was dated 20 October 2004, valued the subject property as at the date of resumption at $2,640,000. The second valuation was dated 18 February 2005 and valued the subject as at the date of resumption at $3,050,000. This was the valuation the claimants relied on to support their final claim. [20] The differences in the two valuations resulted from the adoption of different methodologies by Mr Henderson. He also relied on two additional sales in the second valuation and added components to allow for the pasture and substantial sand deposit on the subject land. [21] Mr Henderson adopted a piecemeal approach in the earlier valuation, calculating the value of the land as follows: Approximately 6 ha of flood-free selectively cleared $900,000 land assessed at $150,000 per ha

Approximately 59.59 ha of cleared, grassed and drained $1,638,725 country assessed at $27,500 per ha

Approximately 8 ha of standing scrub assessed at $100,000 $12,500 per ha $2,638,725

Mr Henderson adopted $2,640,000 as the market valuation. [22] The second valuation, using the overall approach, was calculated as follows – 73.59 ha assessed at $41,500 per ha overall $3,053,985 Mr Henderson adopted $3,050,000 as the market value of the subject. [23] No allowance for GST was made in either valuation and no sum representing GST has been claimed.

5 [24] The respondent's valuer, Mr Carrick, valued the subject on a piecemeal basis by comparison with rural/rural residential and extractive industry sales. He also used two sales for a direct comparison with the subject on a site to site basis. [25] Using the piecemeal approach, Mr Carrick adopted a value of $2,030,000 or $27,585 per hectare for the subject land, calculated as follows: Value of notional 12 ha house site $800,000

Value of 61.59 ha balance area $1,231,800 $2,031,800

[26] The site to site comparison lead to Mr Carrick adopting a value of $2,000,000 which equates to $27,177 per hectare. However Mr Carrick added a caveat to the use of a rate per hectare in valuing rural residential properties because, in his opinion, such properties provide a lifestyle for the owners such that value is based only loosely on land area. Thus the value of rural/rural residential property does not necessarily increase proportionately with an increase in size of the property. By way of contrast, he considered that viable productive rural properties are properly valued using a rate per hectare calculation. Claimants' sales evidence Sales 1 and 2 [27] These two sales were the primary basis for both Mr Henderson's valuations. [28] The two properties are adjacent to one another and were sold in one line to Liekefett Holdings Pty Ltd. They are located opposite the subject land. Both Sales 1 and 2 have the same designation as the subject under the Caloundra City Planning Scheme and the Caloundra City Plan. [29] Sale 1, (the 'Brett Leacy' sale) comprised 86.66 hectare which sold on 3 March 2004 for $2,440,000. Mr Henderson described the property as a long parcel of flood prone grazing land with a northern frontage to the Mooloolah River. At the time of the sale, the property was improved with a good quality brick dwelling on a raised platform, a shed and yards. Mr Henderson assessed the value of the improvements at $240,000 and, therefore, he analysed the value of the land to $2,200,000 or $25,387 per hectare. He said that the value of the improvements was made up of $200,000/$210,000 for the house and the balance for the other improvements which were a 1.5 metre mound (where the house is located), a steel shed, some yards and a small drive.

6 [30] Mr Carrick analysed this sale as follows: Sale Price $2,440,000 Residence $300,000

Shed $33,000

General ground improvements $15,000 $348,000

Sale price less improvements $2,092,000

Less flood free house site and curtilage (2 ha) $100,000

84.661 ha flood affected grazing land and uncleared $1,992,000 = $23,529/ha forest areas

[31] Sale 2, (the 'Ken Leacy' sale) was owned by Edna Joyce and Kenneth George Leacy, the parents of Brett Leacy. The property was sold on 2 March 2004 for $4,880,000. It comprised 127.902 hectares in two adjoining parcels (Lots 4 and 5) of grazing country with frontages to the Mooloolah River. Approximately 10 hectares of Lot 5 was above flood level. There were some sheds and a basic lowset dwelling on the property. Mr Henderson analysed this sale as follows: Sale price $4,880,000

Improvements $125,000

Sale price less improvements $4,755,000

Less 117.902 ha of flood prone grazing land at $27,500/ha $3,242,305

10 ha of flood free land $1,512,695 = $151,270/ha

He said that he had not treated the uncleared land separately in his analysis of the Leacy properties, whereas he had in his first valuation of the subject land. [32] Mr Carrick analysed the sale as follows:- Sale Price $4,880,000

Improvements (Mr Henderson's figure adopted) $125,000

Sale Price less improvements $4,755,000

Less 114.422 ha of flood affected grazing land and uncleared forest areas at $23,529/ha (using Brett Leacy sale analysis) $2,692,235

Land above Q100 (13.48 ha) $2,062,765 = $153,024/ha

7 [33] Mr Henderson's opinion was that the sale price of the two properties was a reasonable reflection of the differences between them. Sale 1 was 86 hectares of flood prone river flat land whereas Sale 2 was 127.9 hectares which included on Lot 5 an elevated area of 10 hectares which was flood free, and which, in percentage terms, was comparable to the flood free area on the subject land. Although Mr Henderson said initially that the area of flood free land on Sale 2 was 10 hectares he agreed under cross-examination that it could be 13 hectares. The house site on Sale 1 had been built up above flood level but access to the house remained low and inaccessible in floods. In comparing the sales properties with the subject, Mr Henderson made no allowance for the possibility that a house site could be built up above the flood level on Lot 4 of the Ken Leacy sales, because, he said, that was only a limited possibility. Similarly he did not mention that the subject land does not have a frontage to the Mooloolah River, unlike the sales, although he considered that was not necessarily an advantage because, in a flood, the Leacy land always flooded earlier than the claimants' land. Respondent's challenge to claimants' Sales 1 and 2 [34] Both Leacy properties were sold as a result of negotiations carried out by a Mr JA Jameson, the acquisitions manager of AV Jennings Ltd. Mr Jameson, who is a registered valuer, gave evidence that at the time of the negotiations, AV Jennings, which is a publicly listed housing development company, wished to acquire land in the Caloundra region suitable for housing development. AV Jennings held no such land in the area, although it had contracted to buy a 40 hectare parcel from a Mr Doug Drinnan and previously had contracted to buy the Ivadale Lakes residential estate. Both of those contracts failed to settle. Mr Jameson said that he had a good grasp of the market in the area for land with the potential for residential subdivision, and he said that that type of land was selling for about $700,000 to $800,000 per hectare. [35] Liekefett Holdings Pty Ltd owned 12.5 hectare of land in the vicinity of the subject, which was zoned Future Urban and which was suitable for residential development. Mr Jameson approached Mr Ray Liekefett and told him that AV Jennings wanted to purchase the 12.5 hectares. Mr Liekefett said initially that he was not prepared to sell and in any event he had nothing to replace his land with. Mr Jameson believed that if he could provide Mr Liekefett with an alternative property nearby he would be interested in selling his property. Mr Jameson was aware that the Leacy properties were for sale, the owners having tried to sell previously, without success. That land was not suitable for residential development. Nevertheless, Mr Jameson approached Mr Brett Leacy and Mrs Edna Leacy regarding a possible acquisition by AV Jennings of their properties which would

8 then allow a land swap – the Leacy properties could be sold to Mr Liekefett in return for the sale of the Liekefett land to AV Jennings. [36] The Leacys granted options to purchase their properties to AV Jennings or nominee. The purchase price was $2,440,000 for the Brett Leacy property and $4,880,000 for the Ken Leacy property. [37] The prices were lower than the Leacys' asking prices of $2.5 million and $5 million respectively. The reductions were made by deducting the value of the agent's commission from the sale price of each property. Mr Jameson said that Mr Brett Leacy was influenced to accept less because he was dealing with a publicly listed company with a significant amount of money behind it. The Leacys subsequently paid agent's commission to their agent in a separate arrangement. [38] Mr Jameson then reapproached Mr Liekefett who agreed to swap his 12.5 hectare property for the Leacy properties. [39] The final result was, said Mr Jameson, that Mr Liekefett was paid $7.32 million by AV Jennings in return for the sale of the 12.5 hectares to AV Jennings. There was no commission payable by Mr Liekefett on the sale of that property and AV Jennings paid the stamp duty. It appears from other evidence, namely a copy of the transfer of the Liekefett land to AV Jennings Ltd (Exhibit 16), that although the consideration for the sale was stated in the transfer to be $7,320,000, stamp duty was paid on an amount of $7,842,035.42. The discrepancy between these two amounts was not explained. [40] Mr Liekefett was nominated as the purchaser of the Leacy properties and paid a total of $7,320,000 for both. AV Jennings paid the stamp duty on those transactions. [41] Mr Carrick, for the respondent, said that he had not relied on the Leacy sales to value the subject land because he did not consider that the sales were arm's length transactions within the meaning of the test in Spencer's case. He considered that the price the Leacys had set for the sale of their properties was influenced by the fact that they were of the opinion that the 13 hectares of high ground in the south-east corner of Lot 5 had potential for residential development because it adjoined the expanding Kawana Forest estate to the east. In that sense they were ahead of the market, Mr Carrick said. Moreover, because the Leacy sales were part of an equivalent exchange of property, the end result of either sale did not indicate market value. His opinion was that Mr Liekefett was persuaded into the purchase of the Leacy properties by the offer of inducements. The deal was very attractive to Mr Liekefett. He paid no commission, stamp duty or legal fees. Another purchaser who did not have those inducements would have negotiated more strongly. Mr Liekefett was induced to sell his property, which he had not wanted to sell, and Mr

9 Carrick considered that had an impact on the price paid for the Leacy properties. Mr Liekefett was cashed up, as a result of his sale of the Ivadale Lakes and he was actively looking for somewhere else to graze cattle. [42] Counsel for the respondent submitted that the sales of the Leacy properties to Liekefett Holdings should not be used for valuing the subject land. They were not arm's length transactions and did not satisfy the test in Spencer's case because  to acquire the land suitable for residential development AV Jennings had to acquire a parcel that Mr Liekefett would be prepared to take a transfer of; and

 the consideration AV Jennings paid for the Leacy properties ($7,320,000) was not the whole picture. The full picture would require (i) analysis of the price paid by AV Jennings for the Liekefett land. AV Jennings were, in effect, 'funding' Mr Liekefett into the purchase of the Leacy land. As a matter of logic Mr Liekefett would have been prepared to pay whatever the Leacy sales dictated provided that the consideration paid to him by AV Jennings resulted in a suitable net gain from the overall transaction;

(ii) there was either no evidence or inadequate evidence of the stamp duty paid by AV Jennings on either or both transactions and the effect on the total consideration paid.

[43] Counsel also submitted that Mr Jameson had little relevant experience in that he only had valuation experience for a little over two years at the time he brokered the transactions, and he had no recognisable valuation experience involving grazing or flood-prone grazing country. Mr Jameson was assisting AV Jennings to get into the market. Mr Liekefett did not want to sell and there were no hard negotiations with the Leacys over the sale – the Leacys set the price which Jennings agreed to pay, less the value of agent's commission. The properties had dissimilar uses. Mr Jameson was unable to explain why the consideration shown in the stamp duty imprint on the transfer of Liekefett Holdings' land to AV Jennings was higher than the sale price of that land. Mr Liekefett did not pay stamp duty on his sale to AV Jennings or on the acquisition of the Leacy land. Conclusions re challenge to the use of the claimants' Sales 1 and 2 [44] To determine the compensation payable to the claimants it is necessary to determine the market value of the land taken. That is established by determining the amount that a prudent buyer would pay to a prudent seller. In Spencer v The Commonwealth of Australia (1907) 5 CLR 418 at 441, Isaacs J described the prudent vendor and purchaser as persons who are willing to trade, but "… neither of them so anxious to do so that he or she would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, 10 of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property."

[45] Although counsel for the respondent was concerned primarily with attacking the reliability of the Leacy sales, the nexus between those sales and the sale of the Liekefett land was such that the reliability of that transaction must necessarily be considered. [46] Mr Jameson's evidence indicated that AV Jennings Ltd wished to purchase en globo land suitable for residential development in the Caloundra area and that at the time of these transactions the company owned no such land in the area. The ultimate goal of the transactions under consideration here was to enable AV Jennings to acquire such land. There are aspects of AV Jennings' purchase of the Liekefett land which indicate that the purchase should be treated with some caution. The Liekefett land was not on the market and the evidence was that Mr Liekefett was, initially, an unwilling vendor. Additionally there was, by inference at least, some suggestion that AV Jennings was an over willing purchaser. [47] In my opinion, however, the evidence goes no further than establishing that AV Jennings was a willing purchaser in an open market. AV Jennings is a long established housing development company. Mr Jameson said that he was familiar with the market for residential development land in the area. The purchase of the Liekefett land was the type of transaction in which AV Jennings had considerable experience. In the absence of any evidence demonstrating that the price paid by AV Jennings for the Liekefett land was above market value, I am not prepared to infer that an experienced property development company such as AV Jennings paid above market value for that land because of its desire to enter the market. It appears that the supply of en globo residential development land in the area was diminishing with the result that the market price was rising in the face of continuing demand. There was also evidence that there was an increasing demand for land of all types in the area. The transactions demonstrate that this was a market where such deals could be negotiated. [48] I am prepared to accept, therefore, that the Liekefett land was sold at market value. Given that stamp duty in this transaction was paid on an amount of $7,842,055.42, it appears that the sale price of $7,320,000 was not the total consideration received by Mr Liekefett. The difference may be explained by the fact that AV Jennings paid the stamp duty on the purchase by Mr Liekefett of the Leacy properties and also, perhaps, Mr Liekefett's legal fees. In any event, the amount of consideration paid in this transaction does not directly impact on the valuation of the subject land, and nor therefore does the lack of precise information as to the makeup of the total consideration. I turn now to consider the Leacy sales. 11 [49] While the price struck for the Leacy sales was the same as that nominally paid by AV Jennings for the Liekefett land, that, in itself does not mean that the Leacy sales cannot be relied on. [50] I do not consider that Mr Jameson's lack of experience in the valuation/sale of rural/rural residential property of itself leads to the conclusion that the price he negotiated for the sale of the Leacy properties was imprudent. Certainly the evidence indicated that the Leacys were determined to obtain their price for their properties. Although they wished to sell because Mr Ken Leacy was seriously ill and Mr Brett Leacy had purchased elsewhere, the properties had been on the market and failed to sell. Mr Jameson said that this was because they had not been marketed effectively. In the end, the Leacys dropped their prices by an amount equal to the commission payable on the sales. Most importantly, there is no evidence to suggest that Mr Liekefett was an imprudent purchaser of the Leacys' land. Mr Liekefett was a longstanding resident of the area whose father had, at one time, owned at least part of the Leacy land. Mr Liekefett also appears to have been familiar with the property market in the area as he had sold two substantial properties in the previous few years. I therefore consider that it is unlikely that he would pay an inflated price for the Leacy properties. [51] Counsel for the respondent submitted that, as a matter of logic, Mr Liekefett would have been prepared to pay whatever the Leacy sales dictated provided that he obtained a suitable net gain from the transaction. I do not accept that analysis. Counsel's submission that Mr Liekefett may have been prepared to pay an excess amount for the Leacy land provided he obtained a suitable net gain from the transactions is only a possibility if Mr Liekefett had received more than market value for his land. I have said that there is no evidence to support that proposition. On the basis that the Liekefett land was sold at market value, I consider that it is unlikely that Mr Liekefett would pay an inflated price for the Leacy properties and thereby decrease his net gain from the transactions. [52] As with the sale of the Liekefett land, I do not consider, therefore, that there is any substantial evidence establishing that the Leacy land was sold at above market value. Nor is there any evidence that the sale of the three Leacy lots in one line produced a higher price than would have been achieved if they had sold separately. Similarly, the fact that the properties had not been advertised for sale at the time of these transactions does not point to the price paid being higher than market value. [53] My conclusion is that the Leacy sales can and indeed should be used in the valuation of the subject land. The sale prices totalled $7,320,000. I do not consider that the evidence

12 that Mr Liekefett apparently received more than $7,320,000 for the sale of his land points to any need to adjust the sale price of the Leacy properties in any way. Value of pasture and sand on subject [54] As stated earlier, Mr Henderson carried out two valuations of the subject land. He adopted a piecemeal approach in his first valuation (dated 20 October 2004) calculating the value of the land as follows: Approximately 6 ha of flood-free selectively cleared land assessed at $150,000 per ha $900,000

Approximately 59.59 ha of cleared, grassed and drained country assessed at $27,500 per ha $1,638,725

Approximately 8 ha of standing scrub assessed at $12,500 per ha $100,000 $2,638,725 Adopted $2,640,000

[55] The second valuation (dated 18 February 2005) adopted $3,050,000 as the market value of the land. Mr Henderson used the overall approach in that valuation assessing the value of the land at $41,500 per hectare. He said that he had adopted the overall approach because of its simplicity and because it was appropriate in the light of Sales 1 and 2, the Leacy sales. If he were to revisit his piecemeal valuation on the basis of this reassessment, he would revalue the 59.59 hectares of cleared, grassed and drained country at $35,000 per hectare which would bring the value of that land to $2,085,650 and the total value to $3,085,650. [56] Mr Henderson reached the figure of $41,500 per hectare by calculating that his first valuation (of $2,640,000) equated to an overall figure of $35,874 per hectare. Mr Henderson said that when he reconsidered his original valuation he thought that, compared with Sale 1, which showed $25,000 per hectare for native vegetation land all of which was subject to flooding, the subject land was worth $10,000 more per hectare, because of its improved pasture. He then added an additional 5% which results in $37,668 per hectare. He added the 5% for two reasons – because his Sale 8 (the Prudent Ventures sale) had subsequently emerged showing a rate of $41,273 per hectare for low lying sugar cane country, and also because he considered that his figure was 'light on' compared with Sale 2. [57] Mr Henderson then added a further 10% to the rate of $37,668 per hectare to reflect the extractive resource potential of the subject land. He was aware of one site where the owners were getting $17/$18 per metre for sand. The added 10% resulted in a rate of $41,434 per hectare which he rounded up to $41,500 per hectare. 13 [58] Approximately 50 hectares of the subject land is improved to pasture, mainly Narok Setaria, and about 10 hectares is grassed. Mr Henderson estimated the cost of the pasture improvement at about $10,000 per hectare. He considered that needed to be taken into account in a comparison with the Leacy properties which were basically native pastures with a small amount of pangola on some of the elevated land in Sale 2. Setaria is an exceptionally good cattle feed whereas pangola is a good summer grass, which dies out in winter. His costing of $10,000 per hectare allowed for light clearing, stick-picking, burning off or mulching, disc ploughing, hoeing, seeding and fertilising, rolling and a follow up application of fertiliser. He considered that 15 kilograms of seed per hectare would be required at about $16 a kilo. He attributed about half of the $10,000 cost to the clearing, stick-picking and burning off. [59] Mr Carrick said that he had made some enquiries, during the course of the hearing, as to the cost of Setaria pasture. He had spoken to Landmark, which is a large produce store at Yandina, and to an independent contractor who does part time clearing and seeding. He had been advised that the cost would be approximately $1,000 per hectare which included liming, disking, seeding and fertilising, rolling and a subsequent application of fertiliser. He was advised that 4 kilos of seed per hectare would be necessary at $15.70 a kilo. [60] The clearest evidence of the value of the flood prone grazing land on the subject comes from an analysis of Mr Henderson's Sale 1 which, on his analysis, showed $25,387 per hectare. That land was cleared, it appears, but subject only to native vegetation. Approximately 50 hectares of the subject land is improved with Narok Setaria and another 10 hectares is grassed. The evidence indicated that some additional value should be attributed to the subject land because of the pasture improvement. Mr Henderson's added value of $10,000 per hectare was based on his estimate of the costs of the pasture improvement, $10,000, and included an amount of $5,000 for clearing, stick-picking and burning off. Similar work had also been carried out on Sale 1 so I consider that no allowance should be made for that work on the subject, as compared with Sale 1. Consequently Mr Henderson's evidence points to a cost of $5,000 per hectare whereas Mr Carrick's costs remain at $1,000 per hectare. Mr Henderson provided no factual evidence to support his professional opinion as a valuer with rural experience that the costs of the pasture improvement were $10,000 per hectare. He had not mentioned that additional value in either of his written reports. I note that Mr McPherson, who carried out the pasture improvement, gave no evidence as to the cost at the time he did the work. In those circumstances, I do not consider that the claimants have discharged the onus of proof in respect of even $5,000 per hectare. Mr Carrick had taken advice from experts in

14 the area and I have accepted his evidence. In the absence of any evidence as to the relationship between the cost of and any increased value attributable to the pasture improvement, I will allow $1,000 per hectare for the increased value of the improved pasture area of 50 hectares, that is a total of $50,000. [61] There is an additional area of approximately 10 hectares of grassed land on the subject. There was no specific evidence as to how that area should be valued. There was evidence that an unspecified area of Sale 2 was improved with pangola. In those circumstances it appears that a valuation of the subject land by comparison with Sales 1 and 2 will adequately allow for the value of the grassed area on the subject. [62] In his second valuation, Mr Henderson added an extra 5% to the sale per hectare because of the information that had emerged from his Sale 8 and because he considered that his figure was 'light on' compared with Sale 2. For reasons which will become apparent later in the decision, I do not accept this approach. [63] Mr Henderson also added an extra 10% in his second valuation, for the added value of the sand reserve on the subject land. [64] In a report entitled 'The Meridan Plains Sand Resource', prepared for the Department of Natural Resources by Wilson Cooper (Exhibit 29), a resource deposit of sand suitable for construction purposes was identified and evaluated in the Mooloolah River flood plain downstream of the Bruce Highway (see p.1 of the Report). The depth of the sand ranges between 8 and 18 metres, with an average of 10 metres. Approximately 50 hectares of the subject land lies within the resource area. The report estimated (at p.15) that the sand resource was worth $10 per tonne wholesale (in 2004 money), after extraction and processing, ready to go out the gate. The costs of extraction and processing would be about $6 per tonne, leaving a value of $4 per tonne profit. The report went on to say (at pp.15 and 16) that without an accepted development application for a planned extraction and with no extraction permit from the Caloundra City Council or operating licence issued by the Environmental Protection Agency, the value of the sand in the ground would arguably be very little. [65] As at the date of resumption, there were no permits in place allowing the extraction of the resource from the subject land and both valuers agreed that the resource could only be exploited in a five to ten year time frame. Mr Henderson considered that a 10% increase in value should be allowed for this potential. The quantum of that percentage increase was not supported by evidence other than that he pointed to the price obtained in his Sale 9 to show the increased value paid for that land as compared with river flat flood prone land.

15 [66] Mr Henderson's base figure per hectare for the grazing land on the subject was obtained primarily by comparison with the prices obtained in the Leacy sales. Those properties also lie within the Meridan Plains Extractive Resource Area. Mr Henderson suggested that the purchaser, Mr Liekefett, had bought the properties for grazing purposes and that the prices he paid contained no allowance for the sand resource. I do not accept the latter part of that proposition. I have already said that the evidence points to Mr Liekefett being a prudent purchaser who was very familiar with the area and the property market in the area. Although the Wilson Cooper report was not published at the date of Sales 1 and 2, and the extent of the sand resource as a whole was not precisely known, it can be assumed that Mr Liekefett would have had the knowledge of a prudent purchaser as to the possible future potential of the sale properties for sand extraction including any potential difficulties in obtaining the necessary permissions and approvals. It follows that the prices he paid would reflect an amount for that future potential. He may even perhaps, have had some precise knowledge of the extent of the sand on the sales, as there was some evidence that Wilson Cooper may have reported back to the individual landholders as to the resource on their properties prior to the issue of the final report. Since the resumption of the subject land also occurred before the publication of the Wilson Cooper report, the same level of knowledge should be attributed to the prudent purchaser of that land. I am not prepared, therefore, to add any extra amount for the sand resource on the subject land, as compared with Mr Henderson's Sales 1 and 2. Sale 3 (Respondent's Sale 2) [67] This property is located at Sunset Drive, Meridan Plains adjacent to the north-eastern corner of the subject land. It comprises 12 hectares of partly elevated and partly low lying open coastal forest/woodland and melaleuca forest country. It is almost square shaped. It is improved with a very basic, small, highset, western red cedar house, and a small shed/stable building and dam. Approximately 7.3 hectares lies above the Q100 flood level intersected by a tapering finger of country below the Q100 line. [68] The property was purchased by a Church body with the intention of establishing a church there which was a consent use under the Caloundra City Planning Scheme. The property was zoned Rural, Open Space under that Plan, and is within the Mooloolah Valley Planning Area Rural Precinct under the Draft Caloundra City Plan. It is not in the Extractive Resource Area but is partly within the Extractive Resource Separation Area. [69] The property was sold on 7 January 2004, for $950,000. Both Mr Henderson and Mr Carrick analysed the sale to a land value of $900,000.

16 [70] Mr Henderson considered that there would be some small difference between the sale property and the subject in terms of susceptibility to flooding, and the availability of town water. In both his valuations he analysed the sale to $75,000 per hectare on a site basis, without drawing a distinction between the value of the land above and below the Q100 flood line. He noted that both the sale and the subject property had very similar areas which were subject to the Vegetation Management Act, which also applied to his Sale 2, the Ken Leacy land. He said that he used the sale to show the desirability of the land in terms of its proximity to facilities, beaches and the commercial area of Caloundra. He considered that the sale demonstrated that the purchaser had paid good money for the property which reflected its location and the lack of available land in the area. He did not consider that it showed a great deal on a per hectare basis. [71] Mr Carrick used this sale as the primary basis for valuing the notional 12 hectare house site in his piecemeal valuation. He said that the area in the north-eastern corner of the subject had characteristics that were similar to this sale. In comparing that area of the subject with the sale he said that both properties have similar flood free areas, although that area on the sale is more elevated. They have similar type country and similar use potential. There is a larger area cleared on the subject. Town water is connected to the sale property. Mr Carrick considered that it was significant that the sale has a separate title whereas the notional 12 hectare area on the subject is part of a larger 73.59 hectares. He considered that it was necessary to deduct an amount to allow for the costs of subdivision. Based on this sale and his Sale 1 (which is described below at [99]), Mr Carrick applied a value of $800,000 to the subject's notional 12 hectare house site. Sales 4, 5, 6 and 7 [72] These contiguous properties were purchased in the first part of 2003 by Investa Pty Ltd. They are located on the Bruce Highway at Palmwoods. With the exception of 20.57 hectares of Sale 5 which was zoned Master Planned Community, all of the land was zoned Rural and used for growing sugar cane. Brief details of the sales are - Sale No. Date/Sale Area Price 4 17 April 2003 313.6 ha $24,000,000 ($76,631/ha) 5 14 April 2003 69.32 ha $5,000,000 ($72,129/ha) 6 30 January 2003 20 ha $1,000,000 ($50,000/ha) 7 30 January 2003 20 ha $1,000,000 ($50,000/ha) Although the properties were largely zoned Rural, the Council had earmarked the land for further investigation. Mr Henderson agreed that a purchaser of the type of Investa Pty Ltd (which is the trustee for a major listed trust) would not aggregate holdings of this type

17 unless it was fairly certain that it could develop the land at some time. The prices therefore reflected a potential for urban and residential use. The subject land does not have that potential. Mr Henderson said that he had not used the sales as a primary basis for his valuation but to demonstrate that all of the land east of the highway was in high demand. He did not contend that the rates per hectare obtained in the Investa sales could be applied to the subject land. [73] Mr Carrick considered that these sales could not be applied in a valuation of the subject, either in aggregate or separately because the bulk of the land was identified in the Caloundra City Council Statement of Proposals for Caloundra City Plan, released during 2001, as an area where "Further investigation before commitment to long term urban development can be made". He estimated that there was potential to develop 3,000 residential lots on the properties. Sale 8 [74] This property is located at Westaway Road, Meridan Plains. It is a low lying parcel of 66.63 hectares, with small frontages to Westaway and Sattler Roads. The land was planted with sugar cane at the time of the sale. About 15 hectares near the southern boundary of the land, near Caloundra Road, lies above the Q100 level. At the time of the sale, the land was zoned Rural and designated as Rural and Open Space land in the Strategic Plan under the Caloundra City Planning Scheme. In the Caloundra City Plan it is located within the Rural precinct of the Mooloolah Valley Planning Area. Part of the property is in the Mooloolah Valley Equestrian Area. The land is also subject to a number of overlays including Extractive Resource Areas (resource and separation areas), Flood Management, and Extractive Resource Areas (haulage route and buffer measured as a width of 50 metres on each side of haulage route). [75] Mr Henderson said, in his second report, that this sale added some weight to the evidence given in relation to his Sales 1 and 2. He said that the sale was an example of the fact that throughout 2003 developers were sourcing land east of the Bruce Highway, with the result that there was virtually no land left for development or grazing. The sale property had the potential to be developed, at the southern end, for keeping horses, but its viability was debatable because of access difficulties. It did not have a proper road frontage and substantial roadworks would be necessary to take advantage of the zoning for equestrian purposes. The land was cultivation land and subject to flooding but a little more elevated than the subject land. [76] On 5 August 2003, Cathstar Pty Ltd was granted an option to purchase this property for $2,750,000. The option was to be exercised within two successive 3 month periods, non

18 refundable fees of $10,000 being payable in respect of each period, such fees to become part of the deposit if the option were exercised. The second option period was extended until 14 April 2004 by the payment of a further $5,000 on the same terms. The option was exercised and a contract of sale was entered into on 15 April 2004. Subsequently the vendor agreed to extend the time for settlement to 3 December 2004. Although there was oral evidence by Mr Morrow that the purchaser agreed to pay an additional $50,000 for the extension of time to 3 December, an affidavit by Mr AC Parry (the solicitor for the claimants), who acted for the purchaser in this transaction, established that the purchaser agreed to pay the additional $50,000 to the vendor for a vendor finance facility which is described in the next paragraph. The original contract was rescinded and a new contract of sale was executed and settled on 3 December 2004, with Prudent Ventures Pty Ltd nominated as purchaser. The contract price (including the additional $50,000) was $2,800,000 or $42,023 per hectare. An additional $80,000 was paid for the sugar cane crop, and $25,000 for fertilizer. [77] Although the written contract of sale dated 3 December 2004 did not indicate this, the parties also agreed, a week before settlement, that the balance purchase price would be paid by instalments. A deposit of $100,000 (including the option fees) had been paid under the April contract. A further $500,000 was paid on the day of settlement, and $250,000 on 28 February 2005. $50,000 was due on 30 April 2005 and the balance on 30 June 2005. The amount of $2,305,000 was secured by a mortgage back to the vendor. No interest was payable provided that the payments were made on the dates specified. Respondent's challenge to Sale 8 [78] Mr Carrick did not rely on this sale in his valuation, his primary reason being that he considered that the price paid could not be supported by reference to the uses permitted by the town planning schemes and the Draft South East Queensland Regional Plan. He said that because of the proposed upgrade of Caloundra Road to four lanes and the construction of the Multi Modal Transport Corridor (MMTC), the purchasers were of the opinion that there was an urban use for the property because it is strategically placed in relation to the new road network. He also said that the purchasers were firmly of the opinion that once the new road systems were operative, the town plan would be amended to allow urban use for the land. Both Mr Stewart and Mr Morrow, whose evidence is considered below, denied that they made any such statement.

19 [79] Mr Carrick said that a number of other factors also contributed to his discarding the sale. Those factors included  the fact that the vendor granted a mortgage, on interest-free terms, to secure the payment of the balance purchase price by instalments; [Mr Parry's evidence has established that the finance facility was paid for.]

 the property was, as a result of the purchaser's options, out of the market from August 2003 to December 2004. The sale was not tested in the market during that time;

 while Mr Carrick agreed that in theory a purchaser needed to pay only one dollar more than a competitor in order to secure a purchase, he considered that a purchaser might also spend a deal more to make sure of the purchase;

 the secrecy surrounding the proposed use of the property. Mr Carrick considered that the price indicated that there was something extraordinary planned for the property so that the purchaser was prepared to pay a premium to secure it;

 under the draft SEQ regional plan, which had been issued prior to the execution of the final contract, the right to use the property for equestrian purposes was removed.

Mr Carrick concluded that the purchasers were anxious to obtain the property and were prepared to take a punt. [80] However, Mr Carrick said that even if the Court were to decide that the purchase was prudent, he did not consider that the sale could be applied because the property was not comparable with the subject. Unlike the subject, the sale was at the focal point of what was happening on Caloundra Road. In respect of matters such as suitability for a house site, the subject was superior to the sale, but not vastly superior. [81] Evidence in relation to this sale was given on behalf of the claimants by Mr CF Stewart and Mr TW Morrow. Mr Stewart is a director of Cathstar Pty Ltd which is a unit holder of the Prudent Ventures No. 1 Trust. Mr Stewart, as director of Cathstar, executed the original option agreement to purchase the sale land and Cathstar subsequently nominated Prudent Ventures Pty Ltd as purchaser. Mr Stewart has considerable experience as an investor in commercial transactions on the Sunshine Coast although most of that experience did not, at the time of this transaction, extend to the purchase of land suitable for rural purposes. He said that he considered that the price paid for the purchase of the sale land was reasonable and not in excess of local market expectations. He also said that the purchase was an arm's length transaction. [82] Mr Stewart was not prepared to disclose the nature of the proposed use for the property because of its commercially sensitive nature. He said that that use was not one which would be permitted by the current Caloundra planning scheme. Although the Draft SEQ 20 Regional Plan had not been issued at the time he executed the option agreement, he was aware of its contents by 3 December 2004, the date when the second contract to purchase was executed and settled. He therefore knew that the proposed use was not supported by that Plan which might also have been a 'hiccup' to his plans. Nevertheless, although he might not have been able to carry out the proposed development within five years he considered that the property would be worth an enormous amount of money within 15 or 20 years. He was therefore prepared to enter into the contract because of its long term potential. He agreed, in response to a question from Counsel for the respondent, that he had in mind that the land would, on a long term basis, provide either a well-suited service or commercial facility in respect of a proposed industrial estate south of Caloundra Road and the racetrack, if approval could be obtained for such a use. He also had a fall back position – a development that might still be possible under the Caloundra City Plan – which would still have a profitable outcome. [83] Mr Stewart said that he had not sought town planning advice in relation to the purchase but had purchased a copy of the Town Plan and endeavoured to decipher it for himself. He had also spoken to a Council officer who had told him that the Council would not countenance any use for the land other than the equestrian use permitted by the Town Plan. However, if nothing else worked, he considered that he would be able to do a development that would comply with the new Caloundra City Plan. [84] Mr Stewart said that he was not aware of the proposed upgrade of Caloundra Road prior to entering into the option agreement but by the time the option was exercised, he did know of the proposal and that it involved a flyover across Caloundra Road and access to the proposed industrial estate south of the race track. He did not realise until some time later that the upgrade included construction of a service road at the front of the sale property. He insisted that he had not been interested in buying the property because of the proposed Caloundra Road upgrade. He was aware, prior to the exercise of the option, of a proposal for the construction of a Multi Modal Transport Corridor to the east of the sale property which would provide good transport facilities to the land. [85] By the time of the exercise of the option, Mr Stewart was also aware that the sale land was outside the urban footprint in the Draft SEQ Regional Plan. He and Mr Morrow had, since the exercise of the option, made a submission to the Office of Urban Management, seeking to extend the urban footprint. As at the date of the hearing he did not know the result of that submission. [86] Mr TW Morrow is an accountant and a director of Prudent Ventures Pty Ltd, the purchaser of the sale property. Prudent Ventures Pty Ltd holds the land in trust for a unit

21 trust, the units in which are held as to 50% each by interests of Mr Morrow and Mr Stewart. [87] Mr Stewart had approached Mr Morrow to join in the purchase of the sale land. Mr Morrow said that Mr Stewart had told him about the possible uses of the land under the Caloundra City Plan. He had subsequently joined with Mr Stewart in making a submission to the Office of Urban Management. He knew of the proposed Multi Modal Transport Corridor and was aware generally of the proposal to establish the industrial estate to the south of Caloundra Road before the exercise of the option but only became aware of the proposed upgrade to Caloundra Road and the proposed construction of the flyover over that road on the day before settlement. He was not aware, at the time of the exercise of the option, that the sale land was strategically placed to provide commercial or service facilities for the industrial estate nor was he aware, or concerned, that there would be better access to the land if Caloundra Road were upgraded as proposed. [88] Mr Morrow said that he had been telephoned by Mr Carrick prior to the hearing and had said to him it would make sense that all traffic to and from the industrial estate would travel via the proposed flyover. However, he denied that he had said to Mr Carrick that he had a commercial use for the property in mind. Conclusion re challenge to the use of the claimants' Sale 8 [89] There is an air of mystery surrounding the purchaser's intentions as to the proposed use of this land. No town planning advice had been sought. Mr Stewart said that he had in mind that the land had long term potential for development for commercial or service facilities. Mr Morrow said that he was not aware of those uses at the time of exercise of the option. Since Mr Stewart's proposed use was not permitted by the Caloundra town plans, it appears that it would be necessary that the land be rezoned and possibly included in the urban footprint in the SEQ Regional Plan for such use to be possible. The proposal has not been tested. In the absence of any further information about the long term proposal, and in the light of the fact that it required rezoning of the land and possible amendment to the Draft SEQ Regional Plan, the proposed use appears to be speculative and as such the purchase cannot be described as one which would have been made by a prudent purchaser. While it is correct that, in theory, a prudent purchaser need only pay one dollar more than a competitor to secure a property, the evidence is such, in this case, that it is not possible to conclude that this purchaser was prudent and had therefore paid only market value for the land. Moreover there is no evidence as to whether the value of the long term potential may have affected the purchase price paid.

22 [90] Although both Mr Stewart and Mr Morrow said that they had in place alternative plans for a development which would be permitted under the Caloundra City Plan, the nature of that development was, similarly, not disclosed. Both said that such a development would be profitable and provide an exit strategy. However, again in the absence of any detail and, therefore, any testing of that proposal, I consider that it would be unwise to rely on the sale. [91] The circumstances surrounding the sale also point to the fact that it was seen by the vendor as advantageous. Those circumstances include the fact that the property was held under option/contract for some 15 months before the sale was completed, the vendor choosing not to forfeit the deposit when the purchaser apparently was unable to settle on the original settlement date. [92] There is an even more fundamental matter which prevents use of this sale in the valuation of the subject land. Since there is no evidence as to the proposed use of the sale property, nor any details as to what rezoning changes would be necessary, it is not possible to say that it is a use to which the subject land could be put. It is therefore not possible to say whether the sale is comparable with the subject in that respect. [93] In summary, the sale exhibits features which indicate that the purchasers could not be regarded as prudent, within the meaning of that term as described above in Spencer's case. There is not sufficient evidence to conclude that the proposed uses of the sale property are comparable with the uses permitted on the subject. My conclusion is, therefore that the sale should be relied on as evidence of the value of the subject land. Sale 9 [94] This property of 37.19 hectares was sold for $2,720,000 in January 2002 with settlement in August 2003. It is situated at Glenview Road, Glenview, west of the Bruce Highway. The property was zoned Rural in the 1996 Caloundra City Planning Scheme. Resource Elements were identified as Extractive Industry Resource Areas (Generalised). The land was purchased by an adjoining owner, CSR, which had an extractive industry operation on the adjoining land. Mr Henderson said that the sale showed a rate of $73,130 per hectare. He said, in his second report, that he had relied on Sale 9 to a certain extent, in that the price obtained was higher than river flat flood prone land. [95] Mr Carrick said that the contract price was based on an assessed in situ sand reserve of 2,500,000 m³. He did not consider a rate per hectare analysis to be appropriate for valuation of an extractive industry site, and analysed the sale to a rate per cubic metre in situ of $1.09/m³. Mr Carrick said that the sale price was influenced by the facts that the contract was conditional on obtaining a material change of use to expand the existing

23 extractive industry activity, and that it was a sale to an adjoining owner of an existing extractive industry operation. By contrast, the prospects of sale to an independent operator on a stand alone basis were limited because of the need to provide alternative haulage routes. Respondent's Valuation [96] Mr Carrick valued the subject land on a site basis by comparison with his Sales 3 and 4. On that basis his valuation was – Land – Site value 73.59 ha Rural/Rural Residential Site with Future Extractive Industry Potential $2,000,000

That value reflects $27,177 per hectare [97] Mr Carrick also valued the subject land on a piecemeal basis using comparative sales. He notionally divided the subject into two areas, a 12 hectare house site and the balance area of 61.59 hectares. He valued the notional 12 hectare house site by comparison with his Sales 1 and 2, Sale 2 being the primary basis because it was most comparable with the subject's notional house site. Based on those sales he applied $800,000 to the notional 12 hectare house site on the subject. Mr Carrick valued the balance 61.59 hectares by comparison with Sales 3 and 4. Using those sales he applied $20,000 per hectare to the balance, which amounts to $1,231,800. [98] The total value on this approach was $2,031,800. Mr Carrick adopted a value of $2,030,000, based on the piecemeal approach. Respondent's Sales Evidence Sale 1 [99] This property comprises an area of 20.433 hectares which was sold on 17 December 2003 for $860,000. Mr Carrick described the land, which is situated at Glenview Road, Glenview, as a vacant parcel of low coastal forest ridge country and river flats. There is an excellent house site on a low ridge. It is subject to a water pipe line easement. There is an "esplanade" between the southern boundary of the land and the Mooloolah River. The property lies within the Rural precinct of the Mooloolah Valley Planning Area under the Draft Caloundra City Plan, and is subject to overlays including Extractive Resource Area and Flood Management. Mr Carrick considered that the sale reflected a site value of $860,000. The purchaser had advised that he purchased the property for rural residential purposes although he was aware that it lay within an extractive industry area. [100] Mr Henderson did not rely on this sale because it is west of the Bruce Highway and has an area of only 20.433 hectares. Although the land lies in an extractive resource area Mr

24 Henderson considered that only about 10 hectares could be exploited because of the site's proximity to roads and housing and the pipeline running west to east across the land. Sale 2 [101] Mr Carrick's Sale 2 is Mr Henderson's Sale 3 which is discussed at [67] to [71] above. Sale 3 [102] This property is 53.1 hectares in two lots (Lot 562 and Lot 2) situated on the Landsborough-Maleny Road west of the Bruce Highway. The property sold on 18 August 2003 for $995,000. An elevated strip of variable width softwood scrub runs along the land frontage of Lot 2. Both parcels fall steeply to moderately away from these road frontages to an undulating plateau area. The land is improved to pasture and was formerly used for dairying and grazing. There are numerous shallow water courses throughout both parcels. There is a number of possible house sites on the property with excellent local coastal and range views, including Mt Tibrogargan. Access to both lots was difficult and dangerous but at the time of the sale the road was being widened and provision made for two new safe points of access. The land was zoned Rural and designated Rural in the Strategic Plan in the Caloundra City Planning Scheme. It is located within the Stanley River-Peachester Planning Area of the Draft Caloundra City Plan, in the Rural Open Space – Conservation and Waterway Precincts. It is subject to overlays including Steep Slope/Stability. There is potential to subdivide a rural use lot from Lot 2. [103] At the time of sale, the property was improved with a small, lowset, weatherboard cottage, an old milking shed and bails. Mr Carrick said that the cottage was habitable but he considered that the buildings added no value to the property. He therefore concluded that the sale reflected a site value (2 titles) of $995,000 or $18,738 per hectare. Sale 4 [104] This property has an area of 64.75 hectares and is located at 165 Mountain View Road, Maleny. It sold on 18 August 2004 (that is, some eight months after the resumption of the subject land) for $2,500,000. [105] The land is almost rectangular in shape with an extensive frontage to Mountain View Road. It is bordered on the west by an unnamed, unformed road. The land falls generally across the whole parcel to the south. A narrow strip of level country runs parallel with the road frontage then falls steeply to a wide plateau area before falling moderately to steeply to the southern alignment. Spectacular views of the hinterland, coastal plain and Glass House Mountains are available from the property.

25 [106] The sale property consists of cleared forest, rainforest and softwood scrub. Approximately 36 hectares have been cleared to pasture which is in good condition. The balance area is largely in its natural state. Water, which is considered permanent, is stored in a number of earth and spring fed gully dams. [107] The property was zoned Rural and designated Rural in the Strategic Plan under the Caloundra City Planning Scheme. It is also designated in the Draft Caloundra City Plan (Maleny and Environs) as Agricultural Area and Ecological Area, and is in the Maleny Plateau Planning Area where it is subject to a number of overlays including Habitat and Biodiversity and Steep Slopes/Stability. There is potential to subdivide a rural use lot. [108] The property was improved with an old, weatherboard, highset farm house, old dairy, milking shed, yards and boundary fencing which Mr Carrick valued at $75,000. The purchaser intended to use the property for rural/rural residential purposes and build a new house on retirement. In the meantime the existing improvements provided a modest holiday income or weekend retreat. The property was agisted by an adjoining owner at the date of sale and that arrangement continued after the sale. [109] Mr Carrick analysed the sale to a site value of $2,425,000 or $37,452 per hectare. [110] Mr Carrick said that he had turned to Sales 3 and 4 because, as discussed above, he had not used the Leacy or the Prudent Venture sales, and despite an extensive search by computer he had been unable to find any comparable sales, east of the highway, at the relevant time. Respondent's Sales 3 and 4 - Conclusions [111] I do not consider that the respondent's Sales 3 and 4 are sufficiently comparable with the subject land to provide a useful basis for valuing the subject. Mr Carrick identified the differences as follows: Sale 3

 Combined area of titles is smaller than the subject by 20 hectares;

 Sale has 2 titles;

 Country types are different. Sale is superior;

 Locations are different (beachside v countryside);

 Different views. Sale superior;

 Selection of house sites;

 Access issues at the date of sale;

 The analysis of this sale to a $rate/hectare includes a house site;

 Subject has long term potential for extractive industry, sale does not.

26 Sale 4

 Subject is larger by 9 hectares;

 Country types are different. Sale is superior;

 Locations are different (beachside v countryside);

 Different views. Sale is vastly superior;

 Selection of house sites;

 The analysis of the sale to a $rate/ha includes a house site;

 Subject has long term potential for extractive industry, sale does not. [112] To these differences can be added those identified by Mr Henderson. The sales are geographically distant from the subject and are elevated sites with generally good views over the Glasshouse Mountains. They are a completely different type of country. Both parcels are primarily fairly steep, scrub country. Sale 3 has both southern and western slopes, Sale 4 has mainly southern slopes with plateaus. [113] My conclusion is that the difference between the sales and the subject with respect to location, topography, availability of views and types of country are such that no meaningful comparison can be drawn between them. The number of adjustments that would be necessary and the lack of any substantial evidence as to how such adjustments could be made would make any attempted comparison unsafe. Sale 5 [114] Mr Carrick's Sale 5 is Mr Henderson's Sale 9 and is discussed at [94], [95] above. Conclusions [115] I have indicated earlier in this decision that I consider that the claimants' Sales 1 and 2 should be used for the purpose of valuing the subject land as at the relevant date. Of all the sales evidence, I consider that those properties are the most comparable with the subject. Sale 3 is also relevant, at least in terms of its location. The claimants did not seek to rely on their Sales 4 – 7 other than to demonstrate that there was a high demand for land east of the Bruce Highway in the year leading up to the resumption. I have decided previously that Sale 8 is not reliable. Sale 9 may have been useful for the purpose of valuing the sand component on the subject land as a separate item, but I have decided, as discussed above, that Sales 1 and 2 include an amount for the sand resource. [116] The respondent's valuer relied principally on his Sales 1 and 2 (the claimants' Sale 3) and his Sales 3 and 4 in his piecemeal valuation, and on his Sales 3 and 4 in his overall site valuation. I have said that I do not consider that the respondent's Sales 3 and 4 should be used in valuing the subject land.

27 [117] Mr Carrick's opinion was that the subject land and a number of the sales properties were more appropriately valued as rural residential properties than on a rate per hectare basis, the latter being more suitable for viable productive properties. [118] Both the subject land and the claimants' Sales 1 and 2, which I consider are the principal sales to be applied for valuing the subject, were used for cattle grazing at the relevant time. I can see no reason why they should not be valued on a rate per hectare basis, and I propose therefore to adopt that approach. [119] Two methods of valuation were adopted by the valuers in this matter. I consider that the piecemeal method is more appropriate because the evidence indicates that there is a significant difference in value between the flood prone land and the flood free land on the subject. That is established by the price per hectare obtained by the vendors in Sales 1 and 2. In Mr Henderson's valuation, his Sale 1 achieved $25,387 per hectare for land which was flood prone whereas Sale 2 achieved $151,270 for the flood free land. Mr Carrick's analysis, using a similar methodology, showed $23,529 per hectare for Sale 1 and $153,024 per hectare for the flood free land on Sale 2. In the light of such a marked difference in value between the two types of land, I do not consider that an overall approach can lead to an appropriate valuation of the subject land. [120] The difference between Mr Henderson's and Mr Carrick's analysed value per hectare of Sale 1 (the Brett Leacy sale) resulted from Mr Carrick adopting a different value for the improvements on Sale 1 and treating an area of 2 hectares separately, as a flood free house site and curtilage. [121] Mr Henderson said that, although he did not have the plans, he had been inside the house. He had valued the improvements towards the end of 2003 for the then owner, Brett Leacy for capital gains tax purposes. The living area was 252 square metres, which he valued at just over $200,000 and he had valued the other improvements at just over $33,000, making a total, rounded up, of $240,000. [122] Mr Carrick valued the house at $300,000 and the shed and general ground improvements at $48,000. Mr Carrick said that he had obtained a copy of the floor plans of the house, inspected the property, checked with the Council as to the value placed on the house at the time of construction in 1999 ($140,000) and spoken to the builder who built the house, who said that it would cost $330,000 to replace the house today. The builder also said that the $140,000 did not include the costs of floor coverings or kitchen fit out. Mr Carrick adopted $300,000 as the value of the house, $33,000 as the value of the shed, based on a price per square metre, and $15,000 for other improvements such as the general ground improvements to the curtilage of the house, the dam and the basic tennis

28 court. The flood free site was created by construction of a mound using approximately 5,550 cubic metres of fill. [123] I have accepted Mr Carrick's valuation of these improvements as he had made appropriate and thorough enquiries as to the construction of the house and was able to supply detailed reasons in support of his valuation. [124] Mr Carrick also allowed $100,000 for a two hectare house curtilage to include the flood free house/shed site of approximately 3,700 square metres, general ground improvements and dam. He adopted a two hectare curtilage by analogy with the allowance for a principal place of residence in stamp duty valuations. His value of $100,000 was adopted by reference to a nearby residential estate where a fully serviced 800 square metre allotment sells for $225,000 to $250,000. By comparison, the sale curtilage is inaccessible in floods so he considered that it was reasonable to halve the selling price of the residential allotments. [125] Again, I consider that Mr Carrick's reasons for allowing a value of $100,000 for the house curtilage were persuasive, and I have accepted that analysis also. [126] It follows that I accept Mr Carrick's analysis that the flood free land in the Brett Leacy sale reflected a price of $23,529 per hectare. [127] I have also accepted Mr Carrick's analysis of the Ken Leacy sale in preference to that of Mr Henderson. I can see no reason to draw a distinction between the value of the flood prone land on the subject property as compared with that on the Ken Leacy land. Both appear, from the flood maps (Exhibit 21), to be subject to a similar degree of flooding. Mr Henderson suggested that the Sale 2 flood land was more valuable than that on Sale 1 because Sale 2 had the benefit of a flood free area on Lot 5. I consider that difference is adequately allowed for by valuing the flood free land separately. The only other point of difference between the valuers was the area of flood free land on Sale 2, and Mr Henderson agreed under cross-examination that that area was approximately 13 hectares. Mr Carrick's analysis applied the $23,529/ha from the Brett Leacy sale to the flood prone land on Sale 2 and calculated the value of the flood free land on that property to be $153,024/ha. [128] Mr Henderson's Sale 3 is Mr Carrick's Sale 2. The sale was analysed by both valuers to $900,000 for 12 hectares which equates to $75,000 per hectare. Although the claimants' Sale 3 is immediately adjacent to the subject it is difficult to apply the sale to the subject land in any useful way. The sale is only a sixth of the size of the subject and was purchased for church purposes, a use which does not appear to be permissible on the subject.

29 [129] Mr Carrick used this sale and his Sale 1 for valuing the subject's notional 12 hectare house site at $800,000 in his piecemeal valuation of the subject. That approach does not draw a distinction between the flood free and floor prone land either in the sale or in the notional 12 hectare site on the subject. While it may not be appropriate to draw such a distinction in relation to the sale property, which is a much smaller property with a different use from the subject, I consider that the distinction should be drawn in relation to the subject, given its size and highest and best use. In other words I consider that the subject should be valued by valuing the flood free land and the flood prone land separately, not by dividing the subject into a notional 12 hectare residential site (which would consist of flood free and flood prone land), and a balance of flood prone land. [130] Mr Henderson's reports say that the area of flood free land on the subject was approximately 6 hectares. Mr Carrick said the area was 7.1 hectares. Mr Henderson agreed with that in his oral evidence. I will adopt that area as the flood free area. [131] Mr Henderson's original valuation, valued 8 hectares of standing scrub at $12,500 per hectare. No evidence was given to support the adoption of that figure. There was evidence that his Sale 2 included a similar area of scrub land. While it would be possible to analyse that sale by making an allowance for that type of land, I have decided not to do so because of the absence of evidence to support the $12,500 figure. I have, therefore, notionally divided the subject land into flood free land and flood prone land only and made the allowance, discussed at [60] above, for the value of the improved pasture. [132] For the above reasons, and relying primarily on the Leacy sales, the subject's value is

 7.1 hectares flood free land at $153,000/ha $1,086,300

 66.49 hectares flood prone land at $23,500/ha $1,562,515 which includes

 50 hectares pasture improved grazing land at $1,000 extra/hectare $50,000 $2,698,815

Adopt $2,699,000

30 ORDERS 1. The compensation payable by the respondent to the claimants is determined at $2,699,000. 2. The respondent is ordered to pay interest to the claimants at the rate of 5.5% per annum on the amount of $2,699,000 for the period commencing 12 December 2003 up to and including 5 April 2004, then on the amount of $1,849,000 for the period commencing 6 April 2004 up to and including the day immediately preceding the date that amount is paid by the respondent to the claimant.

CAC MacDONALD MEMBER OF THE LAND COURT

31