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

Public Works Act 1902 (WA)

Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410

Balquhidder Pty Ltd v Minister for Planning (1986) 58 LGRA 339

Bergman v Holroyd Municipal Council (1988) 66 LGRA 68

Blocksidge v State of Queensland [1991] 2 Qd R 1

Brewarrana Pty Ltd v Commissioner of Highways (No 1) (1973) 32 LGRA 170

Britton v Minister for Education (1985) 29 The Valuer 224

Carson v Minister for Environment and Planning (1990) 70 LGRA 215

Celtic Agencies Pty Ltd & Campbelltown Estates Pty Ltd v South Australian Land Commission (1978) 20 SASR 176

Cienda Pty Ltd v SA Urban Land Trust (1988) 65 LGRA 419

Cieslinski v Minister of Works (1978) 20 SASR 55

Commissioner of Succession Duties v Executor Trustee and Agency Co of South Australia (1947) 74 CLR 538

Crisp & Gunn Co­op Ltd v Hobart City Corporation [1963] HCA 55; (1963) 110 CLR 538

Crompton v Commissioner of Highways (1973) 5 SASR 301

D'Amico v Shire of Swan­Guildford [1969] WAR 183

Daandine v Commissioner of Land Tax (1943) 7 The Valuer 200

Doherty v Commissioner of Highways (1974) SASR 57

English Exporters (London) Ltd v Eldenhall Ltd (1973) 1 Ch 415

Gregory v Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547

Gugusheff v SA Urban Land Trust (1990) 55 SASR 268

Hieronymus v Minister for Education [1989] unreported; Land & Environment Court of NSW; No30344 of 1988

Housing Commission (NSW) v Falconer (1981) 1 NSWLR 547

Hurdis v Minister (1957) 2 LGRA 132

John Bridge (in liq) v The Commonwealth of Australia (1951) 11 The Valuer 375

Latimer v North Coast National Agricultural & Industrial Society (1938) 17 LVR (NSW) 67

Lewis v Christchurch Drainage Board [1972] NZLR 229

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305

March v City of Frankston [1969] VicRp 44; [1969] VR 350

McGlynn & Co Pty Ltd v Municipality of Parkes (1938) 5 The Valuer 308

Minister for Home and Territories v Lazarus [1919] HCA 12; (1919) 26 CLR 159

Minister of State v Rostron [1914] HCA 66; (1914) 18 CLR 634

Pastoral Finance Association Ltd v The Minister [1914] UKPC 77; [1914] AC 1083

Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370

R K Morgan Holdings Pty Ltd v Melbourne & Metropolitan Board of Works (1992) 77 LGRA 102

R v Dowding [2000] VSC 222

Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] 2 All ER 317

Reading v Valuer­General (1923) 6 LGR 132

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Robinson & Co Ltd v Collector of Land Revenue (Singapore) [1980] 1 WLR 1614

Smith v Walsh (1995) 90 LGERA 122

State of Louisiana, Department of Transportation and Development v Hammons 550 So. 2d 767; 1989 La App LEXIS 1519

Tatmar Pastoral Co Pty Ltd v Housing Commission of New South Wales (1984) 54 ALR 155

The Commonwealth v Reeve [1949] HCA 22; (1949) 78 CLR 410

The Crown v Murphy [1990] HCA 42; (1990) 64 ALJR 593

The Federal Commissioner of Taxation v Williamson [1943] HCA 24; (1943) 67 CLR 561

Tooheys Limited v The Valuer­General [1925] AC 439

Turner v Minister of Public Instruction [1956] HCA 7; (1956) 95 CLR 245

Waalt Homes Pty Ltd v Road Construction Authority (1987) 64 LGRA 346

Wong v Minister of Water Resources (1985) 55 LGRA 431

Woollams v Minister (1958) 75 WN (NSW) 103

Wright v Municipal Council of Sydney (1916) SR (NSW) 348

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.

119 At times a conclusion as to value may be little more than an estimate or guess. However, much depends on the experience, skill and credibility of the individual valuer. A difficulty in articulation of the reasoning process which led to the opinion does not necessarily diminish the validity of the opinion on value.

120 There is another dimension. The Duffy land was ripe for development. The buildings were at the end of their life. While there may have been some period during which some rental income would be available, such income would be short term pending development of the land. Any allowance for rent is likely to be notional as a long term lease period would be inappropriate and it is unlikely that a tenant could be found to lease all the Duffy land or for the full term between notional purchase and commencement of development.

121 Any development would involve demolition of the buildings. This would be at some cost. After taking into account the possibility of rental income and the cost of demolition, I conclude that it is appropriate to value the Duffy land as vacant land. This was the approach favoured by all valuers.

122 In an urban area like Northbridge, comparable blocks of vacant land are likely to be scarce. Therefore, it is necessary for a valuer to form an assessment of improvements on otherwise comparable land and deduct the value of the improvements from the sale price of the comparable land to arrive at a value for vacant land.

123 One area of difference between the valuers is the determination highest and best use of the Duffy land. Although Mr McMahon considers that the highest and best use is primarily a function of the town planning zone in which it is situated, I do not agree. Certainly the zoning is an important factor but only one of a number of factors which together allow a valuer or a court to form a conclusion as to the highest and best use of the land. Market demand is capable of being a factor of equal or greater weight than the factor of the zoning. Mr Spencer's example is pertinent:

"... the major determinant of market value is what the market is doing, the state of the market, market demand. You can have a centre of city zoned property in Mukinbudin with all these zoning attributes of general commercial CC at Northbridge. There would be no market demand for it. ..."

124 Mr Spencer further illustrated the point from his own experience when market demand fell in St George's Terrace in the early 1990s, even though zoning, setbacks and council regulations remained the same.

125 I now turn to deal with the evidence of each valuer.

The plaintiff's valuers: Mr Stephen Barry McMahon

126 The plaintiff's principal witness was Mr Stephen Barry McMahon. Mr McMahon was engaged by Mr Duffy to negotiate with MRWA. When negotiations proved unsuccessful, he formally valued the properties.

127 He purported to use the "comparable sales" method of valuation. His method of valuation, although outwardly conventional, is in fact quite unusual. He principally valued the Duffy land by reference to the sale of the Aberdeen Hotel and checked or confirmed his valuation by reference to a large number of sales within the Northbridge area.

128 Mr McMahon's 1999 valuation is relied upon to support the value of the Duffy land claimed in the statement of claim. In the valuation, Mr McMahon relies principally on the sale of the Aberdeen Hotel to MRWA in November 1995. There are superficial attractions to this course.

129 The pockets of land are, broadly speaking, similar. The lands abut each other, the Duffy land facing Newcastle Street and the Aberdeen Hotel facing Aberdeen Street. Each lot has been affected to the same degree by the blight. However, the fundamental difficulty is in the manner used to value the Aberdeen Hotel for the sale and thereby relating that value to the Duffy land.

130 In September 1975 Pervan Investments Pty Ltd purchased the Aberdeen Hotel, then known as the Red Lion Hotel. It was in a very run-down condition.

131 In October 1979 Pervan Investments Pty Ltd transferred the hotel to Mauna Nominees Pty Ltd, a Pervan family company.

132 In about 1982 Glassford Holdings Pty Ltd acquired the leasehold of the hotel and remained in possession of it until 1988. Glassford Holdings carried out extensive renovations and alterations to the hotel.

133 In September 1988 Mauna Nominees Pty Ltd sold the land and buildings only to Burundi Holdings Pty Ltd for the sum of $1.35 Million. In November 1988 Glassford Holdings sold the leasehold to Burundi Holdings Pty Ltd.

134 The Aberdeen Hotel was sold as a going concern on a walk-in walk-out basis to MRWA for $7.7 million in November 1995.

135 Mr Stephen Warne, a quantity surveyor with the firm of Currie & Brown, gave evidence of a replacement cost estimate for the Aberdeen Hotel in the sum of $2,876,000. He had undertaken this estimate for Mr McMahon's use in valuing the Aberdeen Hotel land.

136 Mr Warne impressed me with the depth of his knowledge and experience in quantity surveying. However, this evidence is only useful if Mr McMahon's method of valuation is accepted.

137 It is clear from the valuations at the time that the hotel was valued as a going concern and as a very successful hotel with brisk trade. The valuation therefore is a mixed valuation of land, business and goodwill, which was not compartmentalised into a value for land, or land and buildings only, and a value for the business. This is clear from the valuation of Mr Kennedy, who valued the hotel for the owners, Burundi Holdings Pty Ltd, and from Mr Wilkinson of Knight Frank and Mr Elliott who valued the Aberdeen Hotel for MRWA.

138 Only Mr McMahon makes use of the Aberdeen Hotel in his calculation of the value of the Duffy land. Mr Dix does not. Mr Spencer and Mr Elliott both reject its use.

139 The Aberdeen Hotel was sold on a walk-in walk-out basis as a fully operational hotel. The approach of Mr McMahon was trenchantly criticised by Mr Elliott whose evidence I accept:

"The valuations of hotels and related businesses on a 'going concern' basis are completed usually on the basis of a capitalisation of net profit, or by the capitalisation of net rental, then adding to that latter sum the items of licence, goodwill and furniture, fittings and equipment. We are not aware from our experience that either accepted valuation methodology or Court precedent has ever suggested that the valuation of a property of the nature of the Aberdeen Hotel, which includes by its very nature a business component, could or should be valued on the basis of summation.

The assessment of the net profit of the property, for capitalisation purposes, is based on the ability of the property to generate income, then deducting the costs associated with earning that income, adjusting for the nature and proven sustainability of the business and determining the resultant net profit which is then derived from that business."

140 Mr McMahon's valuation method was also criticised by Mr Wilkinson. He is a very experienced valuer of licensed premises. Mr Wilkinson was a valuer who provided a valuation for MRWA prior to its purchase of the Aberdeen Hotel. I accept his evidence as to his method and the valuation. Mr Wilkinson said:

"...

The sale of the Aberdeen Hotel was based on a walk-in-walk- out figure and assessed accordingly. Walk-in- walk-out includes both the freehold and leasehold (business) interest and therefore extracting the value for different components becomes a theoretical exercise. In fact, it would not be considered normal practice to use sales of licensed premises - especially a sale which incorporates a business component - for other valuation exercises. The value is based on the profitability of the operation and a goodwill factor is therefore inherent in the total property and impacts on the value of the land and buildings.

As further evidence of the inherent business component in the assessment of land and buildings, it should be noted that when valuing the land and buildings a fair market rental must be firstly assessed. This rental is assessed using a profitability factor and then capitalised at an appropriate yield to arrive at the freehold value. Normal practice when adopting a fair market rental is to compare with other hotel rental evidence which is generally based on a percentage of the net operating profit or turnover.

The land and building component is therefore reliant on the operation being carried out and has no relevance to surrounding properties in terms of land values or depreciation rates for the improvement. To further support these comments is the fact that a summation method is never used to assess the market value of licensed premises. This is fundamental and is well documented in all text relating to valuation methodology of this category of real estate.

For example in the text named Principles and Practice of Valuation by J F N Murray under the chapter that deals with hotels and licensed premises it is stated the land and buildings in the case of hotels are only part of the total value and derive their importance because of their suitability to the trade carried on.

The land buildings and plant should not be valued separately.... Land buildings and plant are integral with the enterprise which must be valued as a whole.

Any attempt to value a hotel by the summation method will give misleading results.

..."

141 The purchase of the hotel was on a walk-in walk-out basis. The value is a function of the profit and has nothing to do with surrounding properties. The summation method of assessing land values was not used and should not be used. A walk-in walk-out basis of valuation cannot of course be used with a development lot. It is notable that the other valuers concerned in the valuation of the Aberdeen Hotel, Mr Kennedy from Richard Ellis on behalf of the vendor, and Mr Elliott from Colliers Jardine, both used the same method of valuation as that of Mr Wilkinson.

142 Mr McMahon's use of the valuation of the business and land of the Aberdeen Hotel and his attempted extrapolation from that of a notional land value is invalid.

143 Even to a non-valuer, it is obvious that there is no comparison between a block of land ripe for development on which is standing obsolete buildings, and land on which is situated a thriving prosperous hotel business. The principal basis upon which Mr McMahon valued the Duffy land was by use of the Aberdeen Hotel. He sought to confirm the value he arrived at for the Duffy land from analysis of the Aberdeen Hotel by reference to other sales in Northbridge. His valuation insofar as it relies on the Aberdeen Hotel must be rejected.

144 Mr McMahon sought to confirm the value he assigned to the Duffy land after analysis. Mr McMahon's first approach was to examine the sales maps of the Valuer General's Department over the relevant area. He then selected a series of properties which were, in his view, comparable. There were 11 such properties although he assiduously examined all sales in the area. All sales were put in evidence.

145 Of course, no two properties are ever entirely comparable and so a measure of judgment must always be used to apply a common yardstick.

146 Valuation is not a precise science. The method Mr McMahon adopted was to assign to various matters a percentage difference in respect of the subject property (the Duffy land) and the compared property. I will refer to this as the "arithmetic approach". Such an approach is likely to mask error. It is an approach rejected emphatically by Mr Spencer, Mr Zucal and Mr Elliott and, in my judgment, correctly so.

147 An example of the error which can occur can be seen in Mr McMahon's first assessment sheet. This compared the subject land with a block of land on the corner of Roe and Milligan Streets, known as Admin office Metropolis Night Club and found on sales sheet 049-099 as number 1 (Mr McMahon's marking). Under "locality" the subject land (the Duffy land) is east of Northbridge while the contemporary sale is west of Northbridge. It was assessed by Mr McMahon as comparable, but the adjustment for the contemporary sale was 50 per cent. This was explained by Mr McMahon on the basis that the land in eastern Northbridge was more sought after and valuable than land in western Northbridge.

148 There are a number of problems with this proposition. The first is that it is broadly contradicted by the evidence of Mr Adams. By 1995 there was significant new development in western Northbridge, centred around Russell Square, including a large tract of land which had formerly been the City of Perth Depot and was being developed for residential purposes.

149 The second significant problem is the arbitrary assignment of a figure of 50 per cent. No compelling evidence was produced by Mr McMahon to justify a finding that the value of land in eastern Northbridge was 50 per cent higher than land in western Northbridge in 1995. Although expressed as an opinion, there is no evidence to support it. It is not therefore an opinion, only speculation. Experts may give evidence of opinion. Evidence of speculation or guess is inadmissible or alternatively to be attributed no weight.

150 The next item on Mr McMahon's assessment sheet is "exposure". Mr McMahon assigns a high exposure to the subject land and a medium exposure to land at the corner of Roe and Milligan Streets, adjusting the figure by 15 per cent in favour of the Duffy land.

151 Again, no evidence is supplied to justify this figure. Evidence was given of the volume of daily traffic in Newcastle Street, but no evidence was given of the volume of traffic in Roe Street. While it may be accepted that there can be a significant difference in value for commercial premises between those which are on busy roads and those which are on side streets, Roe Street is hardly a side street.

152 The arithmetical approach in assigning a percentage by way of adjustment, attempts to clothe an imprecise estimation with apparent mathematical certainty.

153 Mr McMahon has assumed a maximum plot ratio, taking into account the 20 per cent bonus plot ratio. It is not clear by any examples given by Mr McMahon that the bonus plot ratio automatically applies.

154 The arithmetical approach is used throughout Mr McMahon's assessments of properties in the Northbridge area and therefore the error of approach infects all of his "comparable" sales. As a result, I find it unnecessary to deal in detail with every sale identified by Mr McMahon as "comparable" because of this fundamental flaw.

155 There is another problem. The approach used by Mr McMahon "adjusts" the sale price of the "comparable" property. Mr Zucal criticises this approach and I accept his criticism. The sales price is fact. A valuer might use that price and other matters, including date of sale, size of land, and improvements to the land. A valuer will generally use a sale with other sales in the "basket of sales" evidence.

156 The valuer then applies experience and judgment to reach a conclusion on the value of the land. The technique of adjusting the sale price of the comparable property builds into the process an assumption masquerading as a fact.

157 My conclusion about Mr McMahon's method of comparable sales is that he has adopted a method which is calculated to maximise the value of the Duffy land, inflating the value beyond its fair market value. His attempt at arithmetical precision is designed to obscure the uncertainty inherent in many of his assumptions.

158 I am confirmed in my conclusion by remarks of Gobbo J in a case where there had been "a most intensely analytical methodology which involved an attempt to deduce common rates of value from a wide range of sales of greatly varying degrees of comparability. In R K Morgan Holdings v Melbourne & Metropolitan Board of Works (1992) 77 LGRA 102, Gobbo J said at 108 - 109:

"It will be seen that there are a large number of adjustments made in each case. Each adjustment is a matter of judgment with a potential for error. The figure arrived at is designed to relate the sale parcel to the subject land so as to make the eventual rate reflect the various differences between the sale land and the subject land. The rate arrived at after such a process therefore has an illusory appearance of certainty and accuracy about it. It also appears to proceed on the basis of endeavouring to elicit a rate for the prime land portion of the sale property. Here again there are possible pitfalls because of the critical effect of allowing for too high or to (sic) low a proportion of prime land. ...

The dangers in a resort to such a table is that it may in effect mean that sales are treated as comparable by reason of adjustment when it might have been safer to discard most of the sales as not being comparable. There is also the danger that detailed evaluation of many sales may distract a valuer from facing the implications of sales that may, by reason of time and location, be the most comparable sales of all.

...

There are no doubt benefits from some system of adjustment as a check method in relation to some sales but the traditional approach is in my view more likely to address the critical issues and to avoid side questions about the various levels of adjustment adopted."

159 Mr McMahon arbitrarily ruled out of consideration all sales occurring to the north of Newcastle Street on the basis that they occurred within the Town of Vincent and under different zoning, namely "commercial suburban" zoning. It is to be remembered that the Duffy land is zoned CC. The City of Perth has a history of applying a wide discretion to its applications for development.

160 The difference in zoning is significant and is certainly a factor to be taken into account. It makes reliance on comparable sales within the Town of Vincent an exercise demanding caution. However, I do not agree that the difference in zoning necessarily renders all sales within that area incomparable.

161 There are commercial and residential developments within the Town of Vincent which are suitable for comparison. I found some comparisons to be of considerable use especially those on similar roads, such as William Street and Beaufort Street. These were used by Mr Spencer and, to a degree, by Mr Elliott.

162 Mr McMahon used a series of developed property premises to confirm his valuation based on the Aberdeen Hotel. Significantly, he used the Australian Taxation Office building, a large multi-storey office block erected in the early 1990s by John Holland Constructions in Francis Street, and Economic House, a substantial multi-storey commercial premises in the heart of James Street. In my opinion, the use of these properties in the circumstances of this case is flawed. They do not provide a proper basis of comparison with the Duffy land.

163 Mr Elliott was asked whether the sale of the ATO site by Galvans in 1990 could be used for comparison.

164 He pointed out that what was assigned by Galvans to Amethyst:

"... is not just the vacant land, its the land on which a tender had been let to Galvans for the construction of an office building for the Australian Taxation Office on the land to its building requirements at a fixed price contract which had been undertaken then by John Holland and at a pre-committed lease rate. ..."

"... its a very difficult sale to use even in trying to analyse it because a significant and very large proportion of the end value attained and achieved in that sale price is related to the capitalised value which the improvements add to the land as a result of the lease on those improvements."

167 Mr Elliott did not use Economic House as a comparable sale. His company, Collier Jardine, was the Manager of the building which at material times was substantially vacant. Only about 40-50 per cent was let. Significantly, Mr Dix rejected Economic House because the improvements to the site made it non-comparable. In my opinion its use by Mr McMahon was wrong.

(iii) Milligan - Roe Street corner property

168 Mr Whittleston gave evidence that he is the Senior Properties Officer for Western Power and undertakes transactions for property affecting Western Power. He was personally involved in the negotiations which led to the purchase of the north-western corner of Milligan and Roe Street in August 2001 for the sum of $1.48 million. The corner property adjoins the existing Western Power switching station. He commissioned various valuations and obtained authority to negotiate purchase of the property above the advised market valuations because the site was preferred over other sites for Western Power's future terminal sub-station.

169 I construe this to mean that the particular property had special value for Western Power by reason of its proximity to the other Western Power property and therefore they were prepared to pay a premium for it. Mr McMahon's reliance on this property is flawed.

170 In the course of evidence, both in-chief and under cross-examination, Mr McMahon had great difficulty in answering directly the question being asked of him. In the main I consider this to be his general mode of speech. As such I am cautious in drawing an adverse inference in respect of his credit for this reason alone. On occasions, however, I thought he was dissembling and deliberately not answering a question in order to disguise the fact that the question exposed a weakness in his valuation approach.

171 As previously indicated, Mr McMahon has purported to value the Duffy land as at resumption date 27 October 1995 on a number of occasions.

173 This may be contrasted with his valuation report dated 28 March 1995 which was $2,640,000 including special value to the adjoining owner of $240,000.

174 Mr McMahon explains this colossal difference in the two figures as follows:

"My previous report and valuation dated 28 March 1995 was prepared for the purpose of negotiations then contemplated for the acquisition of the subject land by Main Roads WA prior to resumption.

The valuation was based upon the best information available at the time. Since completing that valuation further information has become available which forms the basis of this report."

175 I do not think that the difference in valuations has been satisfactorily explained notwithstanding his attempts to do so in cross-examination. While the sale of the Aberdeen Hotel may not have been a factor in his earlier valuation, other sales which he considered were comparable sales were available. His use of comparable sales in his later valuation was to confirm the value arrived from analysis of the Aberdeen Hotel. If his approach had been correct, the subsequent analysis should have revealed a value more in keeping with the value of his first valuation. The disparity reflects badly on both valuations.

176 The difference between the valuations remains troubling and is another matter which adversely affects my assessment of Mr McMahon's credibility.

177 Mr McMahon made a number of assumptions about the Duffy land on the basis that there had been no CNBR. He assumes (correctly in my view) that the likely zoning of the land would have been CC. He further assumes that the land would have achieved a plot ratio of 3.6. I do not consider that such an assumption is justified although I accept that a plot ratio of at least 3 was likely and there was the possibility of bonuses.

178 Mr McMahon assumes "value" means the value of the land to the owner, means the price he would pay for it rather than lose it or the value of the land itself, plus any special value to the owner. This is not precisely the Spencer test.

179 Mr McMahon was engaged by Mr Duffy as negotiator and valuer. He combined the two functions, as well as providing a complete service through to settlement. He is a licensed settlement agent. The amount of his fee and its calculation is questionable. Mr McMahon said the fee was originally to be 1 per cent of the negotiated sale. However, that was later altered by him. His accounts to Mr Duffy indicate a significant amount of his accounts have been deferred, that is, Mr Duffy has not yet been required to pay them. Mr McMahon does not know what actual figure he will be rendering as an account to Mr Duffy in due course or whether he will be rendering an account at all. Taking note of his demeanour at the time of this period of his cross-examination and having regard to his answers, I consider him to be evasive about his fee arrangement, an arrangement which, incidentally, is not in writing. My impression, formed through this issue, and through my observations of him during a lengthy and detailed cross-examination, is that his independence as a valuer has been compromised. This compromise of independence is also reflected in the letters he wrote on occasions, letters which went well beyond those which might be expected of a valuer defending his opinion. The letters at times adopted positive advocacy of his client's case. I find him to be generally a partial witness.

180 In contrast, for example, I do not find Mr Spencer to be partial. While Mr Spencer was prepared to vigorously defend his opinion, I consider he brought a degree of objectivity to the valuation which was lacking in the evidence of Mr McMahon. Of course partiality is not of itself a reason to reject the opinion of a witness any more than objectivity is a definitive reason to accept the opinion of a witness. They are factors to be taken into account and an overall assessment as to the extent to which a witness's evidence or portion of it is to be accepted. I have taken it into account in this way in reaching my conclusion to reject Mr McMahon's valuations as flawed, inconsistent and lacking credibility.

181 Mr Dix was engaged to provide a commentary on Mr McMahon's valuation and subsequently to provide a valuation of his own.

"Value of land taken including improvements $3,570,000

Consequential losses 173,145

Solatium $374,315

To make a total rounded to $4,118,000"

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

"Unless the value disclosed by sales in both zones are the same, the evidence of comparable sales must be restricted to the same zone, ie the central area of the City of Perth."

184 In this Mr Dix was supporting Mr McMahon. However, I find that although zoning is an important aspect in determining value, it is not definitive.

185 Significantly, Mr Dix rejected several important sales of properties relied upon by Mr McMahon. These related particularly to developed properties, Economic House, the Marco Polo Restaurant and the ATO.

186 In relation to the Aberdeen Hotel, a matter upon which Mr McMahon puts the most store, Mr Dix said:

"It is not in our view possible to complete a retrospective valuation of the property based on valuations prepared by others."

187 For reasons already expressed, I agree with this observation.

188 The upshot is that the expert evidence led on behalf of the plaintiff as to valuation is in significant conflict.

189 This internal conflict within the plaintiff's case affects the attempt to establish on the balance of probabilities the true value of the Duffy land at the time of resumption.

190 Mr Dix analysed a number of sales, rejecting some as not comparable. The Aberdeen Hotel fell into that category again, confirming Mr Dix's earlier comments on Mr McMahon's valuation.

"As a consequence of the lack of reliable evidence in the central core area we have looked at the purchase price of land in the lower density precinct west of Lake Street. We have looked particularly at the evidence provided by sale number 1 (James Street west of Lake Street) and sale number 2 (International food hall) and we consider they represent the best evidence of value of that lower density land. As most sales are of land with different development potential and normally different size and shape, there are always advantages and disadvantages with each site and the subject land is no exception."

192 In relation to his nominated sale No 1, Portion of Perth Town Lot Y 104 James Street west of Lake Street, Mr Dix concluded that the land had the benefit of proximity to core Northbridge and a frontage facing Russell Square. He said the sale needed adjustment for the lower density and for time and the adjustment to $1500 a square metre is supported by other information in the market place.

193 There is a degree of circularity in the approach adopted by Mr Dix in concluding that the adjusted price of $1500 was fair and reasonable.

194 In cross-examination Mr Dix was of opinion that there was a value in the western sector of approximately $1500 per square metre and he used that opinion to adjust his sale No 1 in September of 1994 at $1312 up to $1500 in October 1995. However, that value also comes from including sale No 1. Mr Dix was equivocal as to whether the fact that sale No 2 was a sale to an adjoining owner was of significance. However, it was a sale to an adjoining owner, effectively to companies controlled by Mr Hardy.

195 Such sales should be viewed with caution because it may be that an adjoining owner is prepared to pay a premium in order to acquire the land. Nevertheless, this was one of two sales which Mr Dix nominated as most useful.

196 The second sale upon which Mr Dix placed greatest reliance, is the sale he nominates as sale No 2, Portion Perth Lot Y 130 and Y 131 (Lot 40), the International food hall. This was a sale in June 1997, significantly after resumption of the Duffy land.

197 Sale No 2 (the International food hall), Mr Dix said, lacked the direct exposure to core Northbridge, however it is in close proximity to it and has the benefit of a wide frontage facing Russell Square. It also has secondary road frontage that provides easy access to the site:

"We consider the value of $1,500 per square metre we have adopted for this site reflects our assessment of its comparison with sale 1 at the date of valuation after adjusting for time. It is noted that this property sold after the date of valuation at a substantially increased price.

198 The note is well made and is significant. The sale took place between two parties resident in Singapore, rather than on the open market. There were substantial improvements on the land and the sale included an amount for chattels. It is land situated in what was in the late 90s the developing area of Northbridge, west of the core area.

199 Mr Dix was unable to satisfactorily explain the difference he ascribed to the land on 8 May 2000 in his comments on Mr McMahon and his subsequent valuation in August 2001.

"Our assessment of the value as at the date of the subject valuation is a land component of $2,245,000 or $1371 per square metre in October 1995."

"We have estimated that by October 1995 this property would have had a value of approximately $2,457,000 ($1500 per square metre)."

This is a significant variation which is unexplained.

202 Again, Mr Dix tended to use the method adopted by Mr McMahon of adjusting sales although not to the same arithmetical degree. The actual sale price is a fact. Matters which affect the comparability of the sale price of land sold for comparison and the land with the Duffy land include the time between the sale and the valuation of the Duffy land. Attempts to adjust the sale price, while having the superficial appearance of transparency, in fact mask error.

203 Mr Dix also ignored a number of sales closer to the Duffy land and closer in time to the date of resumption. Mr Dix was inconsistent in selection of comparable and non-comparable sales.

204 For example, in his review of Mr McMahon's report, Mr Dix selected, as the most comparable sale, a sale of vacant land in Francis Street, sold in June 1994 for $725,000. He wrote:

"It is our opinion that this sale without adjustment at $1450 per square metre must reflect the minimum value for comparable land. It is acknowledged that the sale is of a relatively small lot, however in commercial and industrial sales size is not always a factor and in some cases large lots achieve a premium."

205 Yet in his valuation in August 2001, in respect to the same piece of land he wrote:

"We consider this sale to be below market value based on other evidence in the area. ... Based on other evidence we consider this lot would have had a value exceeding $2000 per square metre in October 1995. The site is of comparable size to each of the subject lots however in our opinion it is unsound evidence of value."

206 Mr Dix was never able to point to a particular sale supporting his view of $1500 per square metre, relying on "a combination of all the sales." The figure of $1500 is not able to be supported, especially where it relies on inclusion of some properties with questionable comparability and exclusion of other properties apparently comparable.

207 I have outlined in comparatively brief form why I am unable to accept Mr Dix's valuations as reliable.

The defendant's valuers: Mr Jeffrey Allen Spencer

208 In May 1995 Mr Spencer was a valuer with Knight Frank Hooker which was one of two firms engaged by the defendant to provide valuation advice in respect of this portion of the proposed Northbridge tunnel.

209 Mr Spencer was an impressive witness who was not shaken in cross-examination. I regard him as having considerable expertise and as having approached this valuation impartially.

211 His first valuation dated 19 May 1995 valued the Duffy land at $1 Million as follows:

"233 Newcastle Street $450,000

235 Newcastle Street $550,000"

212 He regarded the sites as having a value of $590 per square metre and $560 per square metre respectively.

213 Mr Spencer had regard to a range of sales outside the immediate Northbridge area and indeed in the Town of Vincent. Care has to be taken in assessing these latter properties, but I am satisfied that they are capable of providing reasonable comparisons in certain circumstances.

214 Mr Spencer revalued the Duffy land on 8 January 1996, a valuation as at 27 October 1995. His opinion on the revaluation, the fair market values of the properties was $1,265,000 as follows:

"233 Newcastle Street $565,000 ($740 per square metre)

235 Newcastle Street $700,000 ($710 per square metre)"

215 On 10 March 1997, Mr Spencer revised his valuation again, noting that:

"I decided that the valuation expressed any doubts too severely in favour of the resuming authority - particularly in relation to the discount for size, and the discount between Aberdeen Street and Newcastle Street values."

216 He reassessed the property's value as being in the range of $750-$800 per square metre with no variation in the rate per square metre for the individual lots, adopting the mean value of $775 per square metre as follows:

"1747.4 square metre site @ $775 per square metre $1,354,235. Adopt $1,354,000."

217 He also noted the question of site contamination.

218 Mr Spencer did a hypothetical development analysis on Mr Ednie-Brown's option that Mr Spencer regarded as most appropriate for development of the Duffy land, arriving at a figure of just over $1 Million. That analysis equated to $584 per square metre for the Duffy land, somewhat less than valuation by way of comparable sales. Mr Spencer's principal approach was by comparable sales. The hypothetical development was used as a test to the valuation arrived at by reason of comparable sales. I accept Mr Spencer's valuation of $775 per quare metre as best reflecting the value of the Duffy land.

219 Counsel for Mr Duffy criticised both Mr Spencer's approach and his partiality. However, I am of opinion that his approach was conventional and that in the main his basket of evidence of comparable sales was reasonable. Senior counsel for the defendant, while not directly criticising Mr Spencer, suggested that the evidence of Mr Elliott and Mr Zucal should be preferred. I do not prefer their evidence over that of Mr Spencer, although I do prefer their evidence in contrast with that of Mr McMahon and Mr Dix. There are two reasons why I accept the valuation of Mr Spencer. The first is that I am inclined to think Mr Elliott and Mr Zucal paid too little regard to the blighting effect of the CNBR over many years. The blight had a definite impact on development in the area. While Mr Elliott and Mr Zucal both acknowledged the effect of the blight, I do not consider that they sufficiently allowed for its detrimental affect on the valuation of the Duffy land. I find Mr Spencer's opinion correctly acknowledged the depression in market value brought about by the blight and adjusted his opinion of the value of the Duffy land accordingly.

220 There is a second and alternative reason why I adopt the evidence of Mr Spencer. The defendant put forward both Mr Spencer and Mr Elliott as competent valuers on whose opinion the Court should rely. Mr Zucal, as explained, supports the valuation of Mr Elliott. Each of the three valuers performed the task in a competent manner, arriving at an opinion which I find to be honestly and reasonably held by each of them. Valuation is not a precise art and necessarily involves an element of judgment. When valuations, such as those of Mr Elliott and Mr Spencer are similar, it may not be possible to assign error to one or other.

221 Where land is acquired by resumption and the Judge is unable to accept the plaintiff's evidence, faced with two valuations on behalf of a defendant, each of which is competent and reasonable, the Judge should, in prudence, accept the higher valuation. This course is followed in fairness to the plaintiff whose land has been compulsorily resumed and who has therefore been necessarily deprived of the opportunity to obtain an actual sale price for the land.

The defendant's valuers: Mr Geoffrey Robert Elliott

222 Mr Elliott was employed at Colliers Jardine as Manager, Valuation and Consultancy. Because of unexpected pressure of work he, with approval from Mr Alexander, engaged Mr Zucal to assist in the valuations. He was cross-examined, as was Mr Zucal, as to whether Mr Zucal was engaged as a sub-contractor but in my opinion nothing turns on the issue.

223 What is clear is that the valuations expressed were arrived at by joint discussion but that both Mr Zucal and Mr Elliott each made their own independent judgment that the figures arrived at were appropriate.

224 As with all the valuers, I was able to observe them giving their evidence both in examination and cross-examination. It did not appear to me that Mr Elliott's credibility was being challenged by counsel in cross-examination although the accuracy and reliability of his valuation certainly was.

225 Mr Elliott's answers were careful and thoughtful. I was impressed with the general context of his answers. He was extensively cross-examined about the same matters as Mr Zucal, although Mr Elliott has personal knowledge about the Aberdeen Hotel and Economic House which Mr Zucal does not. In general, the comments I make about Mr Zucal's valuation apply also to that of Mr Elliott.

226 For essentially the same reasons that I will express in relation to Mr Zucal, I consider that Mr Elliott's valuation, though honestly and reasonably made, nevertheless does not express completely the actual value of the Duffy land at the time of resumption. Except to that extent, I accept Mr Elliott's opinions as to valuation and his comments and criticisms of Mr McMahon's and Mr Dix's valuations.

The defendant's valuers: Brian Ernest Zucal

227 The defendant called Mr Brian Zucal, principal of Brian Zucal & Associates. Mr Zucal was subcontracted by Colliers Jardine to assist in the valuation of the Duffy land and others.

228 He was the joint author, with Mr Elliott, of the Collier Jardine's valuation and revaluation.

229 He was also partly the author of a critique of Mr McMahon's valuations, although he played no part in any comments in relation to the Aberdeen Hotel or Economic House.

230 Mr Zucal was principally called by the defendant to establish a link in the chain of evidence. He had conducted an internal examination of the subject properties and prepared measurements. He had also talked to some planning officers in local authorities and had consulted the Water Corporation in relation to the sewer lines which affect both the Duffy land and other land in the nearby vicinity.

231 Mr Zucal was however cross-examined extensively by counsel for the plaintiff as to his valuation. The valuation was a joint valuation reached after discussion between Mr Elliott and he. The valuation of the land was as follows:

"231 and 233 Newcastle Street, Northbridge $438,000

235 and 237 Newcastle Street, Northbridge $542,000

Total value $980,000"

232 In the revaluation, Mr Zucal and Mr Elliott took into account further properties, including properties closer to what Mr Zucal described as "the heart of Northbridge." However, their overall assessment of value did not change.

233 Mr Zucal has had many years experience as a valuer, being a licensed valuer for 41 years. He is Licensed Valuer No 100. He has obvious knowledge of the Northbridge area, both as a valuer and in general.

234 I was impressed with his approach to valuation. The assumptions he made in the main seem to be sound assumptions. His initial assumption as to what the zoning of the Duffy land might have been had the CNBR not existed, may have been somewhat conservative. However, as he described it, I do not consider that in the formulation of his opinion, the difference between CC and C3 was material.

235 Although he was cross-examined as to the accounts he had rendered and the conversations he may have had with Mr Alexander, on the whole of the evidence I do not consider he was subjected to any influence from Mr Alexander as to the formulation of his valuation opinion. As is clear from other evidence, there was substantial disagreement between Mr McMahon on behalf of Mr Duffy and the valuers engaged by MRWA. During the period following May 1995, Mr Alexander was doing his best to try and see if an agreement could be reached between the competing, or more accurately, opposing opinions of the valuers.

236 Mr Zucal valued the land by reference to comparable sales. At a later point he tested that valuation by reference to the hypothetical development as proposed by Mr Ednie-Brown. This test did not cause him to alter his opinion as to the value of the Duffy land.

237 In his opinion, there is no blight on the northern side of Newcastle Street. In this, I think, he has taken an overly conservative view which has affected, to some degree, his judgment when comparing the Duffy land with some in his basket of sales, including sales on the north side of Newcastle Street.

238 He was critical of Mr McMahon's method of adjusting the sales. In his view, adjusting sales goes against the grain of valuation convention; if a sale is adulterated, it is no longer sales evidence. I accept his criticism of Mr McMahon's method.

239 This raises again the issue of substance between Mr McMahon and all the other valuers. For reasons I have previously expressed, I reject Mr McMahon's method. Valuation is the formation of an opinion or judgment which is incapable of mathematical precision. As it is no more than an opinion, it follows that reasonable and experienced valuers may honestly form different opinions as to the value of a particular parcel of land. The difference may often be explained by the weighting, almost intuitively, that they may give to various factors.

240 Mr Zucal's valuation was also coloured by his view of the most appropriate development which the market would accept. In his opinion, a one or two storey office building with warehouse, with adequate car parking, suitable for retail showroom, would be the best use of the property. He regarded an office development as "bad news". He said the costs of the development would be likely to be significantly more than the yield, having regard to the rent that may be obtained. In his opinion, comparison of the Duffy land and the ATO was like cheese and chalk.

241 He did not regard the core area of Northbridge as comparable with Newcastle Street although in his first report he did have regard to some sales in that area for the revaluation.

242 Mr Zucal was forthcoming about the factors which led him in some part to change his mind about property south of Newcastle Street in his second valuation and that some of his assumptions were not perhaps entirely relevant. I found his candour refreshing and increased my respect for his overall opinion.

243 Mr Zucal was cross-examined about a valuation of 74 Aberdeen Street in respect of property owned by Mrs Salici.

244 That valuation was at $1100 per square metre, which is nearly double the value per square metre attributed to the Duffy land.

245 Mr Zucal explained the difference. He drew a distinction between land in Newcastle Street and Aberdeen Street. The uses he described for the Salici property would not in his opinion be appropriate in Newcastle Street. He noted that the size of one parcel of the Duffy land was similar to the Salici land.

246 Although Mr Zucal was not called to give evidence about his valuation opinion after cross-examination opened up the topic, I consider that Mr Zucal's opinion was honestly formed and was a reasonable opinion based on conventional valuation practice.

247 As I have previously remarked, I am inclined to think that Mr Zucal's valuation, and necessarily that of Mr Elliott, erred to a degree on the conservative side. I think this is partly because he failed to take complete account of the effect of the blight which I consider did affect the northern side of Newcastle Street for some distance, in addition to the south side, depressing values to an extent. This affected the weight he may have attributed to the sale of the Pisconeri complex on the corner of Newcastle Street and Lake Street which was the first sale relied upon by Mr Zucal. I do not pay much regard to the difference in square metre price between the Salici property and the Duffy property. They were valued by Mr Zucal within months of each other and he must clearly have had in mind the various factors to which he has referred and which caused him to value the Salici property at a higher rate. Those factors persuade me that the Salici property in Aberdeen Street would have been regarded more favourably by the market and achieved a higher price than the Duffy land in Newcastle Street.

248 In the end, I think the view of the blight, to which I have already made reference, and the opinion about zoning of the CNBR land, has contributed to a more conservative valuation of the land than I think is warranted. For the reasons already expressed, I prefer the valuation opinion of Mr Spencer for the purposes of resolution of this case.

249 The defendant led evidence from Ms Jillian McNamara and Mr Ian Bruce as to contamination on the Duffy land.

250 It appears that Ms McNamara, an Associate Hydrologist, conducted a preliminary survey on behalf of her employer URS Australia, formerly AGC Woodward-Clyde.

251 Her conclusions were, in essence, that some contaminants were found but in order to determine their effect further work would have to be undertaken.

252 It appears that further work was undertaken by a different firm, Sinclair Knight Merz, in particular by Mr Ian Bruce. His report suggested a number of options and broad indicative costs.

253 There is obviously potential for any developer of the land to have to dispose of some degree of contamination. A prudent purchaser in October 1995 would take account of this fact. I have not been provided with any firm figure of possible costs. It is therefore not possible to make a specific deduction of a notional purchase price. It is a factor to be taken into account and weighed together with the mix of all the other factors. I do not make any particular discount to the value of the Duffy land due to possible contamination.

254 Perhaps unusually for a case involving the resumption of land, I have not found it necessary to analyse each sale relied on by the various valuers in any great detail, selecting those which I regard as comparable and rejecting those which I do not. The reason I have not done so is because I regard Mr McMahon's valuations as so fundamentally flawed that they cannot be relied upon for any purpose. In seeking to extract a value for the Aberdeen Hotel, he has adopted an approach which has been rejected by every other valuer called in the case. The Aberdeen Hotel formed the principal basis for his second valuation which he then sought to support by reference to comparable sales.

255 For the reasons I have set out, I regard Mr McMahon's method of adjustment of comparable sales as flawed and several of the sales relied on for comparison are simply not comparable. For these reasons, and reasons relating to his general credibility, I reject the opinion expressed in his earlier valuation as well. I reject the evidence of Mr Dix in part because of the disparity between his approach when commenting on Mr McMahon's report as to what is comparable land and his subsequent rejection without significant explanation, of such land in his subsequent valuation. He was unable to justify his assumed value of $1500 per square metre for relevant portions of the Northbridge area despite extensive cross-examination on the point. The two sales upon which he principally relied are not really appropriately comparable sales. So in the end, I am unable to be affirmatively persuaded to assign any value for the Duffy land based on the plaintiff's valuation evidence. In other words, evidence called on behalf of the plaintiff, does not persuade me on the balance of probabilities that the value of the Duffy land is the amount claimed in the statement of claim. I am unable to distil from the plaintiff's case any acceptable evidence which would lead me to assign an alternative value for the Duffy land. In short, I entirely reject the evidence on behalf of the plaintiff as to the value of the Duffy land.

256 However, it is undoubted that the land does have a value and I consider Mr Spencer's valuation best reflects that value. I therefore find that the value of the Duffy land as at 27 October 1995 was $1,354,000.

257 This was a compulsory resumption and in the circumstances it is appropriate that there be a financial recognition as a solace to Mr Duffy. The Public Works Act 1902, s 63(c)(ii) gives the Court discretion to award an amount not exceeding 10 per cent for compulsory taking.

258 Senior counsel for the defendant argued that no amount or a nominal amount only should be awarded.

259 In March v City of Frankston [1969] VicRp 44; [1969] VR 350, Barber J described the power to award solatium in these terms at 356:

"It is a discretionary power in the court and the solatium should be assessed in respect of imponderable factors arising from the compulsory nature of the acquisition.

... [solatium] is an expression apt to describe an award of some amount to cover inconvenience and in a proper case distress caused by compulsory taking."

260 These remarks are obiter dicta but were followed in James v Swan Hill Sewerage Authority [1978] VicRp 49; [1978] VR 519. I agree with them.

261 There has undoubtedly been inconvenience to Mr Duffy and disruption to his business as a result of the acquisition. Although disruption to business may be the subject of a separate claim, it may still have a relevance as to whether to award solatium. It is part of the general inconvenience and imponderables caused by the compulsory acquisition. I exercise my discretion to fix the amount for solatium as 10 per cent of the value of the land: Public Works Act, s 63. While the amount I fix for solatium is the maximum amount possible, I regard the figure of 10 per cent as fair and reasonable amount as a solace.

262 The plaintiff claims stamp duty of $295,875, conveyancing fees of $14,040 and Land Titles Office fees of $1600. However, there is no evidence that such fees were incurred as a result of the resumption. In fact, the evidence of Mr Duffy is to the contrary.

263 No evidence has been led to justify a figure of $5000 for rates and taxes. I gave leave to the plaintiff to make submissions or produce evidence on the rates and taxes and said to counsel for the plaintiff:

"If by the time I am ready to deliver [judgment] I have received nothing then on the present state [of the evidence] I can give you nothing."

No evidence or submissions have been received, so I make no award for rates and taxes.

264 There is in the statement of claim, a claim for valuation fees and negotiator's fees totalling $44,500. There is no entitlement to either basis of fee under the Public Works Act. A valuer's fee may be a disbursement properly allowable in a costs order in appropriate circumstances. However, if those circumstances exist, the claim for valuer's fee nevertheless cannot arise under a general claim for compensation pursuant to the Public Works Act. The Court is restricted to such items of compensation enumerated in that Act. Further, I note that some valuer's fees have been paid by MRWA anyway as part of the negotiating protocol whereby owners of affected land were enabled to have the land valued by a valuer of their choosing at MRWA expense. Mr Duffy chose Mr McMahon.

265 The parties accept that interest at the rate of 8 per cent should be paid on any amount awarded.

266 The plaintiff's claim to judgment is found by me as follows:

Less amount already paid as part payment: $1,400,000

267 The plaintiff is therefore entitled to judgment in the sum of $89,400 together with interest at the rate of 8 per cent per annum until paid.