Supreme Court of WA|2002-08-13|Before: Kechnie J

Duffy v The Minister for Planning [2002] WASC 201 (13 August 2002)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : DUFFY -v- THE MINISTER FOR PLANNING [2002] WASC 201

HEARD : 10-12, 15-19, 2226, 2930 OCTOBER 2001, 1115 & 2122 FEBRUARY 2002

Resumption of land - Pointe Gourde principle - Effect of blight - Valuers - Use of mathematical assessment of comparable property - Use of hotel valuation - Comparable sales - Effect of zoning - No new principles

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1 This is a straightforward claim for compensation arising out of the compulsory acquisition of the plaintiff's land for the purposes of building the Graham Farmer Freeway through Northbridge. The claim is made under statute. The statute had a name change at some point. It was originally named the Public Works Act 1902. From 9 December 1995 the Act was called the Land Acquisition and Public Works Act 1902. From 30 March 1998 the title of the Act reverted to the Public Works Act 1902. Some actions relevant to these proceedings were taken during the period when the Act was called the Land Acquisition and Public Works Act. Some documents tendered in evidence bear that title. However, none of the operative sections which govern this claim refer were amended during the period so for convenience, I shall refer to the Act as the Public Works Act throughout this judgment. The provisions which now govern the compulsory taking of land are to be found in the Land Administration Act 1997.

2 The land in question comprises two lots, Lot Y77 and Lot Y78, better known as 231-237 Newcastle Street, Perth. The title particulars are:

"Portion of Perth Town Lot Y77 the subject of diagram 1856 and being the whole of the land comprised in certificate of title volume 1432 folio 464.

Portion of Perth Town Lot Y78 and being lot 1 on Diagram 3957 and being the whole of the land comprised in certificate of title volume 1092 folio 235."

3 On 27 October 1995 the Duffy land was compulsorily taken for public works under the Public Works Act 1902, s 17. The effect of this taking was to convert the Duffy land into a claim for compensation: s 18.

4 There are a number of other parties who have claims outstanding in the Court arising from the compulsory acquisition of their land which is adjacent or near to the Duffy land. They are S & R Investments Pty Ltd (CIV 1710/97); Chriss Lucas Kounis (CIV 1712/97); Serafino Galipo, Maria Flora Galipo, Manuela Chicca and Sabina Chicca (CIV 1713/97). As many of the valuation principles are common to their claims and to Mr Duffy's claim, the parties have agreed to proceed with Mr Duffy's case first. The other actions therefore stand adjourned.

5 From 1963 the Duffy land was, in common with other properties in Newcastle Street and adjacent areas, subject to a reservation under the City Northern Bypass Reservation ("the CNBR"). The Duffy land was acquired as part of the tunnel for the Graham Farmer Freeway which has now been built.

6 Towards the middle of the last century, the plaintiff's uncle, Michael Duffy commenced business as a plumber in Aberdeen Street. In 1946 he purchased Lot 78 and established a plumbing hardware business on the site. In 1950 he purchased Lot 77.

7 In 1965 Patrick James Duffy, the plaintiff, left school and commenced apprenticeship, with Michael, as a plumber.

8 In 1976 Patrick entered into partnership with Michael in the plumbing and hardware business. As part of the partnership, Michael transferred the two lots so that Patrick became a joint tenant of the Duffy land with Michael.

9 In 1988 Michael died and Patrick succeeded to ownership of the Duffy land by survivorship.

10 In that same year Patrick brought his two brothers into the partnership and they traded as Duffy Brothers Plumbers.

11 The brothers carried on business until around the time of the resumption when it appears the partnership was dissolved. During 1995 negotiations ensued between Mr Duffy and Main Roads - WA ("MRWA") but agreement could not be reached on the value of the land. Although the Minister for Planning is nominally the defendant in this action, in fact the real defendant is MRWA. The action has been fought by both sides on that basis. After the date of resumption, on 24 November 1995, Mr Duffy made a claim for compensation in the amount of $2,580,000. By way of response the defendant offered $1,148,372 on 6 March 1996. This offer was rejected although that amount was subsequently paid (with interest) to Mr Duffy by way of part settlement: Public Works Act 1902 (as amended), s 49A. A further payment was made to Mr Duffy on 15 May 1998 in the sum of $251,628 together with interest from the date of resumption. Mr Duffy has therefore been paid $1.4 million by way of compensation without prejudice to his rights to have this Court determine appropriate compensation. The plaintiff's claim for compensation has grown considerably and, as now pleaded, is for $8,116,916 made up as follows:

Land and buildings $7,020,000

Stamp duty 293,875

Conveyancing fees 14,040

LTO fees 1,600

Valuation fees 12,500

Negotiator's fees 32,000

Rates and taxes 5,000

SUBTOTAL $7,379,015

Solatium 737,901

TOTAL $8,116,916

12 The claim is stoutly resisted by MRWA which contends that Mr Duffy has been paid due compensation for his land and is entitled to no further payment by way of compensation and nothing by way of solatium.

History of the City Northern Bypass Reservation

13 Some form of northern bypass seems to have been in concept since the days of the Stephenson Plan in the 1950s. The land comprising the CNBR was formally reserved in 1963.

14 In 1989 plans of a possible link between the Mitchell Freeway and a proposed bridge over the Swan River to the north of the city became public. The link included a road which, broadly speaking, was contiguous with the CNBR.

15 In 1994 the Metropolitan Region Scheme was amended to better reflect the possibility of a link between the Mitchell Freeway and the Eastern suburbs bypassing the central business district.

16 At about this time MRWA commenced detailed planning for the project. As part of the planning a strategy was evolved for the acquisition of properties which had been subject to the CNBR and would be needed for the bypass. Although a number of differing forms for a bypass were considered, the concept finally settled upon was that of a tunnel extending from the west to a point near the Mitchell Freeway and proceeding more or less due east, emerging around Lord Street. In order to dig the tunnel, a significant portion of the Duffy land, along with that of others, had to be resumed. The bypass has now been completed and is known as the Graham Farmer Freeway.

17 The valuation of the Duffy land is made more complex by the lengthy reservation of the land under the CNBR.

18 It is appropriate to value land without regard to the proposed public work. This means that in valuing the land, the CNBR should be disregarded. While that is an easy statement to make, the reservation since 1963 has had a distinct effect on the market value of land within the CNBR and adjacent thereto. The reservation has also prevented development, further contributing to a lowering of values. This is known as "blight".

19 Newcastle Street and the blight are described in the "Northbridge Study Final Report 1991" in terms which were applicable as at the time of resumption.

"Newcastle Street

Although Newcastle Street forms the northern boundary of the study area it has strong vehicular and pedestrian links with the area to the north. These links form major threshold points for entering into Northbridge. The City Northern Bypass Road Reservation, combined with industrial zoning to the north, has resulted in serious blighting of Newcastle Street. The footpaths are inadequate, the built form uncohesive, there are no street trees and powerlines occupy both sides of the road. It carries through traffic bypassing the city centre and it is this traffic (in even greater volumes) that the City Northern Bypass is intended to absorb if it is built. Traffic volumes in Newcastle Street may decrease substantially if the bypass is constructed. The uncertainty surrounding the bypass severely limits planning for Newcastle Street, which has potential to be rebuilt to become an integral part of the study area with a high degree of pedestrian and driver amenity."

From these general matters I turn to the evidence led by both parties.

20 The plaintiff gave evidence in support of his claim.

21 I found Mr Duffy to be an open and honest individual, who has acted at all times in this matter on the advice of others, and particularly Mr McMahon. This is a reasonable position to adopt. As he put it: "I am a plumber." He regards the land as his superannuation.

22 Mr Duffy had a substantial connection with the land and in latter years carried on the Duffy Brothers Plumbing partnership from the Duffy land.

23 Although I generally accept his evidence, there was one area of Mr Duffy's evidence which was unconvincing. That related to his financial arrangements in respect to Mr McMahon's fees.

24 It is unnecessary to set out the substance of Mr Duffy's evidence which, except for his evidence about Mr McMahon's fee, I accept. The main effect of his evidence is to persuade me to make an allowance for solatium.

The budget of MRWA: did it affect the defendant's valuers?

25 One important plank in the case presented on behalf of Mr Duffy is that the valuers engaged by MRWA, Mr Elliott and Mr Spencer, were not independent of their client in forming opinions as to value. They saw themselves, it is alleged, not as independent valuers but as members of a negotiating team with Mr Alexander as the team leader. In support of this plank, it was submitted that MRWA had established a budget for the program and that this budget became known to Mr Alexander, the appointed negotiator.

26 To support the argument that the valuers were not independent or objective, the plaintiff submitted that the valuers had been influenced by Mr Elphick and Mr Alexander. The valuers were to be persuaded to assign a low value to the Duffy land, and presumably other land, so that the MRWA budget for the whole bypass project would not be exceeded. Counsel for the plaintiff called Mr Gerard John Elphick of MRWA and Mr Donald Rosy Alexander of Chesterton International to give evidence. Mr Elphick was the Acquisitions Manager, Major Projects, MRWA. His function was to coordinate the land activities for the bypass project. He is a valuer by profession and is currently a member of the Australian Property Institute. Mr Alexander's firm, Chesterton International, was appointed to act as negotiator for the acquisition of properties between Newcastle Street and Stirling Street, including the Duffy land. Mr Alexander did the actual work as the negotiator.

27 There was a meeting of the CNBR Special Steering Committee on 28 June 1995. At that meeting the budget was discussed. Mr Alexander was present for part of the meeting.

28 Mr Elphick said that Mr Alexander and Mr Wilkinson, a licensed valuer employed by Knight Frank, attended the meeting on 28 June 1995 to discuss the matter of the purchase of the Aberdeen Hotel and for no other purpose.

29 This evidence is confirmed by Mr Alexander who said he attended for a short period of time to discuss specifically the Aberdeen Hotel.

30 Mr Elphick obtained updated estimates from all the property negotiators involved in the CNBR project prior to the meeting. He explained that his purpose was to update the meeting. As to the allegation of influence on the valuers he was asked in cross-examination:

"Did you ever inform the valuers who were retained by Main Roads to value the properties in the various sectors of any budget constraints?---No, at no stage.

Did you ever inform them what the budget was?---No."

"Were you ever told by Mr Elphick or anybody else at Main Roads that you were to negotiate to meet a budget?---Never.

Were you told what budget or budgets were relevant?---It was of no interest to me because I was only doing a quarter of the project.

Did you ever instruct either Mr Elliott or Mr Spencer to arrive at any particular valuation?---No, that would be improper and virtually impossible.

Did you ever instruct them as to some limit they were to value to?---Never."

32 Each of the valuers called by the defendant, Mr Spencer, Mr Zucal and Mr Elliott, denied that they were ever told to value to a price or ever told what the acquisition budget might be.

33 Mr Elphick produced minutes of the City Northern Bypass Special Steering Committee.

34 Mr Elphick gave evidence that he never informed negotiators at any stage of the budget estimate for the project or the actual budget for the project.

35 Although Mr Elphick's evidence was of a potential cash-flow problem in 1995, in fact that problem did not eventuate because the project slipped behind at the beginning and so the potential cash flow problem did not in fact develop.

36 This aspect of the plaintiff's case fails entirely. Contrary to submissions by counsel for the plaintiff, the only evidence is that the negotiator, Mr Alexander, was not working to a budget. Mr Alexander did not know the budget. He therefore did not tell the valuers what the budget figure was or instruct them to adjust their valuations to achieve the budget.

37 Counsel for the plaintiff attempted to draw support for his argument by reference to invoices rendered and accounts paid from time to time. He also referred to the contracts between the valuers, the negotiator, and MRWA. In fact, the written agreements between the MRWA and the negotiator, and MRWA and the valuers, show nothing untoward. The brief to valuers is unexceptional and is what is to be expected. The role of the negotiator is also clearly stated. I expressly reject the allegation made by counsel for the plaintiff in opening that Mr Spencer and Mr Elliott, when valuing the Duffy land for the purposes of compensation, were subject to pressure. I find that their valuations were objectively made according to opinions honestly held by them.

The City of Perth: likely planning approvals

38 Land contained within the CNBR was not subject to the City of Perth Town Planning Scheme. It is land adjacent to the Town of Vincent providing a border between the two municipalities. Because the land was not within any town planning scheme, before the Duffy land can be valued, it is necessary to make some predictions as to what the likely zoning and use of the Duffy land would have been if there was no CNBR. These determinations are relevant in determining the highest and best use of the land. The evidence in relation to the relevant period comes principally from Mr Kenneth Atwell Adams, Mr Clayton Morris Higham and from a document entitled "The Northbridge Study".

39 If the CNBR reservation had not been present, I consider it most probable that the Duffy land would have been zoned CC under the City of Perth City Planning Scheme. CC means "General Commercial (Central Area)".

40 The CC zoning gives rise to a wider number of permitted uses than the possible alternative C3 zoning. C3 means "General Commercial C3 (Suburban Area). The plot ratio allowable under General Commercial zone in the CC area was 3. In the C3 area, the plot ratio was 2.

41 It is of significance that in 1991 the City of Perth's City Planning Scheme was amended by deletion of cl 48(4). By this deletion, Council was allowed a wide discretion in respect of residential density. Prior to that amendment, the residential development density limit was R160. Subsequently, Council approved a number of residential developments, especially in the vicinity of Russell Square, exceeding R160 in permitted density.

42 To advance this aspect of the case, the plaintiff called Mr Kenneth Atwell Adams, a very experienced town planner and Chair of City Vision.

43 Mr Adams has been in a planning and architectural practice since 1974, prior to which he was employed as a senior town planner with the then Town Planning Department of Western Australia. He has carried out a wide range of planning work for State Government agencies, local government authorities and individual and corporate clients.

44 He described his conclusions about what conditions would have been relevant to the development of the Duffy land by 1995 had there been no Metropolitan Region Scheme reservation for the City Northern Bypass as "careful professionally informed speculation."

45 To form his opinion he consulted a number of documents including the "Stephenson Proposals for the Central Area of Perth (1955)", the "Metropolitan Region Scheme 1963-1995", the operative "City Planning Scheme No 1" (gazetted 1985), "Perth Central Area Policies Review (1993)", the municipal boundary decision of 1993, the "Northbridge Study (1991)", the "City Living Report (1992)", the "Draft City Planning Scheme No 2 (1994) including the draft "Precinct Statements and Policies (1994)", the "Northbridge Tunnel decision 1993-1995", relevant development trends; and developments approved by the Council in Northbridge since 1990.

46 A part of his opinion relates to the likely use of Newcastle Street as part of the road network. I will deal with this aspect separately under the heading "The road network".

47 He correctly notes the plot ratio limits west of Lake Street as 2.0:1 and east of Lake Street (including the subject land if it were CC) as 3.0:1.

48 He noted that by cl 138 of the scheme, there is a provision for a bonus plot ratio of up to 20 per cent:

"If, in the opinion of the Council the proposed development includes a community or other facility or amenity and that facility or amenity and the design standard and nature of the proposed development as a whole constitute a significant improvement to the amenities or environment of the Central Area."

49 Within the Central Area, cl 142(2) exempts land and any zone, other than the residential zone, from an obligation to provide carparking spaces on site. Where they are provided, cl 142(3) provides for a maximum of carparking spaces. He also notes that within the central area C1 and CC zones there are no specific requirements for setbacks, open space or landscaping. In the Suburban Area Zone C3 and Il there is a minimum 4.5 metre setback to the street, landscaping requirements and parking requirements.

"Development along Newcastle Street, southside, between Lake and Williams Streets would have continued the diversity of Northbridge east of Lake Street, but capitalising on its key exposure and outlook with taller development and higher densities of residential (including hotels) and offices. In most cases these would be above more lively ground uses, including some retail, entertainment and restaurant type uses."

"The subject land occupies what would have been and no doubt will become - a strategic site, with excellent commercial exposure on the northern edge of the Central Area of Perth. It would have had a prime position on an upgraded Newcastle Street, with excellent road connections, both north - south - east - west and contiguous with the active core of Northbridge.

...

In architectural terms this would, in my opinion have translated into a building of up to six stories, with basement carparking. It would have almost certainly utilised a plot ratio of 3.0 or perhaps higher."

52 In 1995 MRWA's valuers, particularly Mr Elliott, wished to test their valuation by a hypothetical development. Mr Elliott had valued the Duffy land by using comparable sales and wished to test the opinions as to value thus derived by using an alternative valuation procedure, known as hypothetical development. By this procedure, a development of the land is envisaged. The development generally represents the highest and best use to which the land may be put. To that end, Mr Antony Colin (Tony) Ednie-Brown, a very experienced architect, then of the Buchan Group, was engaged to produce a number of concepts for development of the Duffy land.

53 In carrying out his instructions, Mr Ednie-Brown spoke with Mr Higham, a senior planner with the City of Perth. In about 1995, Mr Higham was the Manager of Approval Services.

54 Mr Ednie-Brown produced a series of concepts or options which were costed by Mr Christopher Kelly of Ralph Beattie Bosworth Pty Ltd, a firm of quantity surveyors.

55 The various options prepared by Mr Ednie-Brown all provided for some on-site parking. They contained a mix of commercial development at ground level and residential development. He also prepared options for general office development, although these were not sketched. Option 3B was for a combination of retail and residential units including 70 two bedroom units, parking for 78 cars and a common swimming pool. Mr Ednie-Brown's concepts as to a hypothetical development of the Duffy land were somewhat more extensive than the more nebulous concepts which Mr Adams considered would represent the best development of the Duffy land. I find Mr Ednie-Brown's concepts generally appropriate for the purpose for which they were produced.

56 While Mr Adams' opinion is useful, a hypothetical purchaser in October 1995 would have done as Mr Ednie-Brown did and speak with the relevant planning officers of the City of Perth, in particular Mr Higham.

57 Mr Higham is presently the Director of Planning and Development, City of Joondalup. Prior to December 1998 he was employed by the City of Perth in various planning positions commencing in January 1982. In his evidence, he agreed that it would be reasonable for the central area boundary to extend to Newcastle Street as suggested by Mr Adams. However, he adds:

"It is arguable whether identical development policies and standards would have applied along Newcastle Street as would apply to the central area. In my view the policies and standards for this area would have been likely to take account of the need to achieve a degree of compatibility with the standards to be set for the northern side of Newcastle Street. There may have been a recognition that this area was a transitional zone between the suburban standards to the north and the city standards to the south of Newcastle Street which would translate into streetscape standards, building heights, setbacks, bulk of buildings which take cognisance of that relationship."

58 He explained that he was not using the word "zone" in his witness statement in a formal, technical sense. Mr Higham explained that in the 1990s, particularly in 1995, the City of Perth was developing policies for various inner city uses, including residential, and the Northbridge Policy was one policy in place. These policies would guide Council as appropriate and supplement the Town Planning Scheme. Council did not often override the City's planners. As Mr Higham explained:

"There was a popular misconception that many of the officer's decisions were overturned by the Council. I think that misconception came about because the major developments in the city where, that was occasionally the case were the ones which were reported in the press but in the context of all the approvals and refusals that were given for development applications, I think that the proportion was actually quite small."

"We were dealing with many, many development applications and, as I said, in the context of the huge volume of applications we dealt with, the number of times that the Council didn't go along with the officers was minimal and a difference in fact often it was only a part-disagreement anyway. It might be one of the conditions that was changed. ... and a difference was more likely with major developments rather than whether its located within central or suburban areas."

60 Mr Higham was asked whether the City of Perth would have been likely to recommend approval for residential developments in Newcastle Street and he said:

"Yes, the city planning scheme, as I recall, didn't have any requirement for commercial or parking related to commercial development within the central area but there was a requirement for parking for residential and it was at about that time that the councillors, the elected body at that stage, had started to express some concern about the lack of parking for residential in the central area and the advice that I was giving at that stage was that there was a need to ensure that we were achieving the parking requirements for residential within the central area."

"Of course there are some that did achieve those maximums, but generally most developments didn't achieve a maximum. ..."

62 Mr Higham instanced as examples a large part of the central area of the city, the shopping precinct in the central business district ("CBD") that has a plot ratio of 5 and has probably been developed to a plot ratio of .5 at the most.

"... the preference was to commercial at the street level and then if it was possible to achieve residential above that then that was seen as a bonus."

64 Mr Higham explained that his attitude was to look at each case on its merits as the Council had fairly wide sweeping powers within its scheme to exercise discretion. Certainly the more the discretion to increase density was being sought, the more closely he would look at the merits of the proposal:

"I was always more interested in the way a development appeared in terms of streetscape, ... and whether it was an appropriate use in terms of the locality. Those sorts of matters to me were far more important perhaps then in the end a number which might be a plot ratio figure or a density figure."

66 Mr Higham would have thought that six or more storeys was starting to stretch beyond the limits, but he would look at the merits of such a proposal if presented.

67 In cross-examination Mr Higham was asked about the relevance of the attitude of the Town of Vincent on the other side of Newcastle Street:

"I think I'd certainly have a look at them and see what kind of development they were trying to achieve on that side and might even have a discussion with them about that. At the end of the day, though, of course it's the council decision on their own."

68 Mr Higham acknowledged that he was the team leader of the study team for the Northbridge Study.

69 Mr Higham was challenged about his evidence as to six storeys stretching the limits by reference to Russell Square. He said:

"I would put to you that land around Russell Square is a very different proposition despite what this policy says in terms of building relationship to street and open space. I think you can do quite different things around Russell Square than you could do, say, on Newcastle Street."

70 In 1995 a prudent purchaser would have contacted Mr Higham and as a result may well have been cautious about a development on the Duffy land to its maximum in terms of plot ratio. The odds of Council overruling a recommendation from its planners do not appear to be great.

71 Although I have no hesitation in accepting Mr Adams as a man of honesty and experience, to the extent where his opinion differs from the views expressed by Mr Higham, I do not accept his evidence, preferring the views of the person who was the Manager of Approval Services with the City of Perth at the relevant time.

72 As previously indicated, an important question is to predict what sort of thoroughfare Newcastle Street would have become by 1995 had the CNBR not existed.

73 Three witnesses gave evidence directly in relation to this issue. Mr Adams gave evidence for the plaintiff. Mr Paul Trichilo, a planner with MRWA, and Ms Carol Anne Barbara Jelley, a Transportation Engineer, gave evidence for the defendant.

74 While I do find that Mr Adams is qualified as a town planner to give an opinion in relation to the transport system, I consider that both Mr Trichilo and Ms Jelley have better qualifications and greater relevant experience. Whereas Mr Adams' experience and expertise is general, Mr Trichilo and Ms Jelley have specialised in roads and, in the case of Ms Jelley, transport economics. Their evidence carried great weight in my mind and I accept their evidence over that of Mr Adams. Furthermore, Mr Adams expressed two contrary views on the likely development of Newcastle Street had the CNBR not been present. Each opinion had been researched and was carefully held by him. While he honestly conceded that his first opinion was wrong, the fact of the concession causes me to look with caution on his later opinion.

75 Mr Trichilo is a civil engineer who has worked with MRWA for about 32 years.

76 For the past 12 years Mr Trichilo has been employed in the strategic planning area and he is currently Manager, Road Network Performance. During the period 1995 he held the position of Manager, Metropolitan Planning. Planning for major roads involves assessment of current travel and transport demands and also an estimation of future demands as the city grows, then an assessment of the current network and its adequacy to meet those demands and if it is determined there is a need to plan for future improvements, to look at options in terms of their adequacy in achieving the objectives and the likely impacts they will have on the urban environment.

77 Mr Trichilo was involved in the planning of the Graham Farmer Freeway. In his opinion the use of existing roads through Northbridge, such as Newcastle Street, Aberdeen Street, and one-way Pier Street, as suggested by Mr Adams, would have resulted in a large increase in traffic volumes on these roads and other roads in the Northbridge area.

78 I found Mr Trichilo's refutation of Mr Adams' opinion generally persuasive.

79 As Mr Trichilo pointed out, Newcastle Street was likely to have become a very busy street. In dealing with the question of a bridge crossing over the Swan River, Mr Trichilo said:

"If you have a bridge crossing it's quite clear that you will have to accommodate that sort of demand, that level of demand, and a road like Newcastle Street or some road along that general corridor is where you would need to provide for that. If you take the proposition that you don't have the bridge and indeed you don't have a crossing, again the problem doesn't disappear. The demand doesn't go away. It might be a different level of demand, but nevertheless you have an issue to deal with and Newcastle Street is very much part of that issue."

80 Ms Jelley is a transportation engineer with high qualifications and considerable experience. She noted that traffic volumes were forecast for the City Northern Bypass in the middle section Lord Street to Fitzgerald Street as:

• Tunnel option 75,000 vehicles per day with the expected peak hour volume of :

"• The City Northern Bypass was planned to be a regional road on the basis of its functional significance and its traffic profile being a majority of 'through' or regional trips

• The City Northern Bypass would have required to be designed to a level of service D in accordance with standards prevailing at that time

• The forecast volumes for a surface road were 50,000 - 60,000 vehicles per day (two way) and 5,000 - 6,000 vehicles per day (two-way)

• A surface urban arterial operating as a one way pair, even at its maximum capacity of 3 through eastbound lanes and 3 through westbound lanes, full clearway, major intersections flared and limited frontage access, would not have adequate capacity to accommodate the forecast volumes, using the prevailing standards at that time."

82 The effect of this evidence is that the development of the city would have required a northern bypass at some point. Whether the northern bypass would have affected the Duffy land is, for this purpose, immaterial. The growth of traffic in an east-west access was such that had Newcastle Street been a part of the bypass, traffic would have increased significantly. In fact, it is unlikely that Newcastle Street would have been chosen as part of the bypass because it would have been unable to accommodate the traffic volume at peak hour. However, I accept that it would have been a likely link road carrying a substantial volume of traffic. The traffic volume would have affected the uses to which the Duffy land could have been put. While it may have benefited from increased exposure, its use for residential units or an hotel may have been inhibited. These are both factors which a prudent purchaser would have considered.

83 Witnesses on behalf of the plaintiff advanced the possibility that the Duffy land might be developed as an hotel and that this possibility may constitute the highest and best use of the land. MRWA disputed the proposition that a hotel development was realistic. Mr Alan Boys who is the Managing Director, Hotel and Leisure Advisory Pty Ltd, is very experienced in the hotel industry. He is a tourism and hospitality analyst.

84 He was engaged by MRWA to undertake a market study of conditions existing in October 1995 and provide an assessment of the potential for the development of the Duffy land as an hotel or serviced apartments as if undertaking such a task as at 27 October 1995 (the date of resumption).

"From our review, we do not consider that there is a compelling case for the development of either a hotel or serviced apartments on any of the sites. We consider that the sites are not suitable for hotel development, being located on the outer boundary of a secondary hotel development zone.

Notwithstanding the rapid improvement and conditions with the Perth hotel market it is likely that there will be a significant increase in competitive supply over the next three years, including hotels in Northbridge, that are in locations which are more suitable for hotel development than the subject site.

Whilst market conditions may currently be more conducive for the development of serviced apartments, we are concerned that the competitive market will become oversupplied by 1997 and remain so through to the end of the decade and beyond. Given the poor locational aspects of the subject sites, we consider any serviced apartment development at the subject sites would most certainly fail both operationally and as a development project.

Accordingly, based on our analysis and experience in the hospitality industry, we cannot support the development of either an accommodation hotel or serviced apartments at any of the subject sites. We consider that they are highly unlikely to be economically viable and will present a major financial risk if undertaken."

86 This conclusion is supported by an analysis which I found to be persuasive. He regarded the location of the Duffy land as a secondary location.

"... it's an unproven area. There was at that point no major hotel development occurring. It was not an established area. Its difficulty was that it was almost on the out - - it is on the outer boundary of what I would call a secondary hotel zone. ..."

In his opinion the major area for hotels in Perth is within the CBD.

88 In cross-examination Mr Boys stated that he was not a valuer. His interest, consistent with his role as an analyst, is in the "bottom line", as he described it.

89 Mr Boys did not conduct an analysis as to what the cost of a building or its operating costs or room rates might be because:

"... if I was asked to provide a report at that time, I would have gone as far as this and that is it, because I think it would have been a waste of the client's money to pursue it any further."

90 Mr Boys was asked about the hotel developments around Russell Square. He considered that although they were not more accessible, they were probably a little bit better in terms of being within a residential community.

91 Mr Boys' "brutal assessment" of the present situation:

"... is no hotel would work in Northbridge because the market in Perth is in such a state of turmoil that it's very difficult to see that any property is going to work at the moment."

92 Four valuers were called to give evidence. The plaintiff called Mr Steven Barry McMahon and Mr Terrence Dix. Each is in practice on his own account. Each has considerable experience as a valuer and, it would seem, in compensation valuation. It was asserted by Mr McMahon and Mr Dix that this was a specialised field, but I am not sure that is so. However, it does not matter.

93 Two companies, Knight Frank and Colliers Jardine, were engaged by MRWA in 1995 to provide assistance to the negotiator, Mr Alexander, by way of valuations.

94 Mr Jeffrey Allen Spencer, who was with the firm Knight Frank at the time of his valuations is now in practice on his own account. Mr Spencer was responsible for valuing the Duffy land as part of his duties to MRWA. Mr Elliott of Colliers Jardine and Mr Brian Zucal were joint authors of the valuation provided to Mr Alexander and MRWA by Colliers Jardine. Mr Zucal was not nominated by the defendant in pre-trial matters as an expert witness on valuations. He was called on behalf of the defendant to give largely formal evidence about measurements he had made and observations he had noted. He was nevertheless extensively cross-examined and taken exhaustively through the reports prepared by he and Mr Elliott. In the result I am able to act upon his evidence as an expert valuer.

95 The valuers all agreed that the appropriate method of valuation was the comparable sales method. Several valuers tested their primary method by using a hypothetical development procedure as mentioned. Although all valuers used comparable sales to arrive at their conclusions, there are, however, huge variations in the valuations provided by the four valuers. This is why this case has come about.

97 The valuers called by the defendant have taken account of a degree of contamination of the Duffy land. Some assessment of the possible costs of clearing the contamination have been made. The valuation reports do not appear to have made specific allowance in the valuation of the Duffy land to the stigma attached to the land by the presence of contamination.

98 Although the valuers agree with the comparable sales method, there is substantial disagreement between Mr McMahon and the other valuers about what constitutes "comparable sales".

99 Substantial points of difference relate to the Aberdeen Hotel and to the use of improved and developed property.

100 Having read the valuations, and other written material submitted into evidence, having listened carefully to each of the valuers under examination and, in particular, cross-examination, I have formed a favourable view of the expertise of the defendant's witnesses, Mr Elliott, Mr Zucal and Mr Spencer. I also accept them as credible witnesses.

101 Although I regard Mr Dix as having similar experience, I consider his valuation is flawed because, in the end, it chiefly relies on one property. His sales analysis of that sale is flawed. There are other issues with his evidence as well which makes his opinion on value of the Duffy land unreliable.

102 Mr McMahon adopted a different approach and, for reasons I shall explain, I do not accept his approach, with the consequence that his evidence does not persuade me to adopt his estimates of value for the Duffy land.

103 I do not understand that the parties are in dispute as to the general principles applicable to the determination of the value of the Duffy land and so it is only necessary for me to make brief reference to the authorities.

104 The leading authority in Australia is of course Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418 per Griffith CJ at 432:

"The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together."

105 The test was refined and restated in The Commonwealth of Australia v Arklay [1952] HCA 76; (1951-52) 87 CLR 159 per the Court at 169:

"It is established that 'value' in such a context means the value of land to the owner. Where the amount for which a vendor may sell and a purchaser buy is not controlled the Court poses a hypothetical problem, the answer to which supplies this value. It is a familiar rule which in Australia was authoritatively formulated in Spencer's Case. Shortly stated what is required is 'an estimate of the price which would have been agreed upon in a voluntary bargain between a vendor and purchaser each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business considerations': Commissioner of Succession Duties (SA) v Executor Trustee & Agency Co of South Australia Ltd [1947] HCA 10; (1947) 74 CLR 358 at 367. It is simply an analysis of what in all the relevant circumstances would be the price that a willing purchaser would have to pay a vendor willing but not anxious to sell in order to obtain the land."

106 In conducting the analysis referred to The Commonwealth of Australia v Arkley, assumptions have to be made evaluating the size of land and the location of land. In a built-up area, such as Northbridge, many parcels of land are partly or fully developed. There is little undeveloped land. The Duffy land has buildings and improvements which have reached the end of their useful life and the land is ripe for development. The possibility of development adds a further dimension in applying a yardstick to comparable sales.

108 The Public Works Act 1902, s 63 provides:

"63. In determining the amount of compensation (of any) to be offered, paid, or awarded for land taken or resumed, regard shall be had solely to the following matters: -

(a) The value of the land with any improvements thereon, or the estate or interest of the claimant therein, as on the date of the gazetting of the notice of the taking or resumption without regard to any increased value occasioned by the proposed public work; ..." (My emphasis)

109 The statute reflects what is known as the "Pointe Gourde principle": Pointe Gourde Quarrying and Transport Co v Sub-Intendent of Crown Lands Trinidad [1947] AC 565. It is logical and easy to ignore the enhancement of value which the proposed public work will achieve. That is not the issue in this case. Here, all valuers agree that the blight has adversely affected the Duffy land. The issue is the extent to which the public work proposed, or more specifically the CNBR, has decreased the value of the land.

110 This issue was decided in Melwood Units Pty Ltd v Commissioner of Main Road [1979] AC 426 where at 434 Lord Russell of Killowen, speaking on behalf of the Privy Council said:

"Under the principle in Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565 the land owner cannot claim compensation to the extent to which the value of his land is enhanced by the very scheme of which the resumption forms an integral part: that principle in their Lordships' opinion operates also in reverse. A resuming authority cannot by its project of resumption destroy the potential of the whole 37 acres for development as a drive-in shopping centre, and then resume and sever on the basis that that destroyed potential had never existed."

111 In the present case there is little or no evidence that the proposed public work - the Graham Farmer Freeway and Tunnel - had any effect on the value of the Duffy land, either by way of enhancement or by way of deterioration. What has caused a diminution in value is not the public work, but the blight of the CNBR over a long period. In Housing Commission of NSW v San Sebastian Pty Ltd [1978] HCA 28; (1978) 140 CLR 196, Jacobs J, with whom the other members of the Court agreed, said at 205 - 206:

"A difficulty which arises in the application of this [the Pointe Gourde] principle is that valuation is in the ordinary case based on market value and, if the proposed public purpose and the possibility or likelihood of resumption therefore has become known prior to the date of resumption, the market value at the time of resumption will probably reflect by way of increase or decrease the possibility or likelihood of resumption for that public purpose. Therefore that value cannot be accepted. Yet it is inevitably in most cases the starting point of the process of valuation. With the actual market value at the time of resumption as the starting point it is then necessary to determine whether that value has been depressed or elevated by the markets for knowledge of the possible or likely public purpose and consequent resumption. It is therefore inevitable in such circumstances that the public purpose has to be taken into account in the process of valuation but it can be taken into account only for that purpose. ... Restrictions on land use ... explicitly or practically, use is restricted to a use for a public purpose for which the land might be resumed, are commonly imposed as a result of consultation with or direction by the public authority concerned with the carrying out of the particular public purpose. In such a case where there is a direct relationship between the restriction on land use and the proposed establishment of the public works the effect on value of the zoning or restriction ought to be ignored."

112 Jacobs J went on to deal with the question of the relationship between restrictions and proposed public works, indicating, in effect, that each case must be looked at in its own terms.

113 In cases of valuation, a court is very much guided by the opinions of others. Usually evidence is given by experienced valuers. That evidence necessarily is an admix of ascertainable fact and professional judgment. The task is complicated in resumption cases because there are a number of assumptions which must be made. Assumptions are necessary because there has been no sale on an open market. There has been no willing, but over-anxious vendor, or willing, but not over-anxious, seller. As Griffith CJ acknowledges in Spencer, the task is hypothetical.

114 Few blocks of land are exactly alike so that judgments must necessarily be made to apply so far as possible a common yardstick.

115 In the present case the blight increases the need and speculation by valuers and town planners looking back to 1963 and then hypothesising as to future development which may have occurred without the CNBR. Thirty-two years have passed affecting the land within the CNBR. There was clearly a blighted effect caused by the reservation. The best that can be done is to hypothesise as to the probable development of Newcastle Street over a third of a century. Necessarily, this gives rise to possible differences of opinion, each opinion being reasonably held. Each opinion is a forecast of the future in hindcast.

116 What is a Judge to do? I perceive the task to be to listen to the experts' opinions, select those which seem, for one reason or another, to be the most persuasive and credible, and determine from those opinions, and other evidence, the probable development of a blighted area had a reservation over land not existed. A Judge usually decides which sales of land are most comparable to the subject land. From this the Judge is to reach a conclusion as to the fair market value for the land at the time of the resumption. In this exercise, the Judge is not an investigator. These are adversarial proceedings and the plaintiff carries the onus of establishing the fair market value on the balance of probabilities. Nor is the Judge a valuer. The Judge must decide on the factual evidence having regard to such expert opinion evidence or part thereof which the Judge accepts.

117 There are difficulties in what I may describe as a conventional approach to assessing comparable sales. This method was used by Mr Dix, Mr Spencer, Mr Zucal and Mr Elliott. This approach requires the valuer to gather as many facts about sales of land as possible and evaluate those facts before forming a conclusion as to the compatibility of the sale and land with the subject land. Then the valuer must extrapolate from the comparisons a value for the subject land.

118 Because all the facts are weighed in the mind of the valuer it may be difficult for the valuer subsequently to explain to the court the thought processes which led to the conclusion which was reached on the value of the land.

Duffy v The Minister for Planning [2002] WASC 201

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (372 paragraphs)

Duffy v The Minister for Planning [2002] WASC 201 (13 August 2002)

(iii) Milligan - Roe Street corner property

(a) Mr Dix's comments on Mr McMahon's valuation

Parties

Legislation Cited (2)

Cases Cited (21)