Half Moon Bay Hearing Announced

The government has released the details of the settlement reached in the acquisition of Half Moon Bay property, the value of which has been in dispute for some time now.
Below are the particulars of the final settlement.

THE BOARD: Chairman – Justice David C Harris; Governor General’s Appointee – Mr. Victor Michael; Half Moon Bay Holdings Appointee – Mrs. Joyce Kentish.

1. THE CHAIRMAN; Harris J: The Claimant is a company incorporated under the laws of Antigua and Barbuda which at all material times was the registered proprietor of certain lands in the parish of St. Phillip on Antigua comprising of three parcels, 55, 56 and 57 Block 32 3282A St. Phillip’s South Registration Section which totaled 108.17 acres, known as the Half Moon Bay Resort. On this Resort, at a location commonly known as Half Moon Bay which included beach frontage of 1,800 feet, the Claimant operated a Luxury Hotel and Golf Course prior to 1995.1

2. The Defendants are named in their respective capacities as representative of the Government of Antigua and Barbuda and the Authorized Officer appointed under the Land Acquisition Act Cap 233.

3. In September, 1995, Hurricane Luis severely damaged the resort forcing the Claimant to cease its operations.

Half Moon Bay hote
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4. Eventually, in 2002, the Government of Antigua and Barbuda determined to acquire the Resort under the provision of the Land Acquisition Act Cap 233. In February of 2002, the Government passed resolutions in the House of Representatives and Senate for the acquisition. In March 2002, the Government published the required declaration that the land be acquired for a public purpose in the Gazette.

5. The Claimant challenged the acquisition and in the course of the proceedings before the High Court, the Government gave a voluntary undertaking2 that they would refrain from “entering into possession of and/or disposing of the Applicant’s lands in purported pursuit of the provisions of the Land Acquisition Act until the hearing and final determination of these proceedings”.

6. The Government successfully applied to strike out these proceedings as not disclosing any reasonable cause of action.

7. Further negotiations between the parties after the delivery of the judgment of the Court of Appeal were unsuccessful and the claimant appealed the decision of the Court of Appeal. The matter was heard and determined by the Privy Council which gave its ruling on 5th June, 2007 upholding the decision of the Court of Appeal in favour of the Government, to strike out the Claimant’s Claim. The acquisition progressed.

8. The ‘Authorized Officer’ appointed under the Act received two valuations for the property; one from Property Consultancy Services (“PCS”) for the sum of US$23,056,550.00 and one from Deloitte and Property Consultants (“Deloitte”) for the sum of US$22,715,000.00. The Authorized Officer recommended that the average of both be used as the fair market value of the property3. The Claimant, Half Moon Bay Holdings Ltd, claimed US$60,000,000.00 based on their valuation obtained from CB Richard Ellis (“CBRE”). However, the Authorized Officer did not treat with the Claimant or make any offer of compensation. The Claimant filed an application for judicial review to compel the appointment of the Board of Assessment (“the Board”) in April 2008. The Government consented to the Order for Mandamus to compel the appointment of the board on 14th May, 2008. The Board was appointed in June 2008. Valuation reports, preliminary submissions, pleadings and witness statements were exchanged on directions of the Board during the course of 2008 – 2009 and the hearing of the evidence with respect to compensation took place on 7 – 9th July, 2009.

Evidence

9. The Board was provided with the following documentary evidence in the Trial Bundle (“the TB”) with respect to the value of the property:

1. Valuation report from CB Richard Ellis (”CBRE”) dated 7th September, 2007 on behalf of the Claimant4.
2. Valuation report dated 2nd January, 2001 from Oliver Davis SCV.
3. Valuation report from Property Consultancy Services dated May, 2008 on behalf of the Government.
4. Valuation report dated 12th May, 2008 from Deloitte on behalf of the Government.

10. The Board also heard evidence from the following persons5:-

1. Natalia Querard, Managing Director of the Claimant

2. Kent Kerr of CB Richard Ellis, Valuer
3. Lesroy Samuels, the Chief Valuation Officer of the Government
4. David Matthias, the Authorized Officer
5. Simon Watson, formerly of Deloitte, Valuer
6. Carlisle Thompson, former Chief Valuations Officer of Barbados and Consultant to Government of Antigua and Barbuda, Valuer. 6

11. The parties made both oral and written submissions on the several issues arising in this matter. The Governor General’s Appointee to the Board of Assessment, Mr. Victor Michael and the HMB Holdings Appointee to the Board of Assessment, Mrs. Joyce Kentish, delivered their respective Assessments before the close of the week ending the 18th December 20097. Several questions were raised shortly thereafter by the Chairman for consideration by the said Board members, but ultimately there was no change in the positions of the said Board members. I now deliver my assessment and annex those of the other two aforementioned members of the board of Assessment.

12. In so far as is relevant to the disposal of the issues before the Assessment Board, the following matters do not appear to be in dispute between the parties:-

1. The Claimant is the sole registered proprietor of the lands prior to the acquisition by the Government.
2. That the Government’s right to enter the property arose in March 2002 when, in accordance with the finding of the Privy Council, the second publication of the declaration was made in the Gazette.
3. The Government became registered proprietor of the parcels 55, 56 and 57 on 8th March, 2005.
4. That the Government actually entered into occupation of the lands on 23rd July, 2007.
5. That Oliver Davis provided the valuation report which gave a value of the property in 2001.
6. That the statutory rate of interest of 4%8 is unenforceable as it contravenes the provisions of the Constitution of Antigua and Barbuda.
7. That the appropriate rate of interest under the land acquisition Act, section 21, is the market rate.
8. That the reference to the determination of the value of the property as at a date 12 months prior to the acquisition9 is unenforceable as it contravenes the provisions of the constitution of Antigua and Barbuda.
9. The Authorized Officer never made an offer of compensation or entered into negotiations with the Claimant with respect to compensation.

THE ISSUES

13. The following issues were identified by the claimant and have been accepted by the Board of Assessment as arising from the valuation reports and evidence submitted to and oral evidence led before the Board by the parties:-

1. What is the appropriate date by reference to which compensation should be assessed;
2. What is the appropriate method by which the value of the lands should be determined;
3. What is the amount of compensation to which the Claimant is entitled;
4. What is the appropriate rate of interest payable on such compensation;
5. From which date should interest accrue;
6. Is there any basis on which the Claimant should be denied its reasonable costs of preparation and submission of its claim;
7. What is the quantum of costs to which the Claimant is entitled.

PROVISIONS GOVERNING ASSESSMENT OF COMPENSATION

14. In assessing the value of the acquired property, the Board is constrained to consider and apply the rules in section 19 of the Land Acquisition Act Cap 233 of the Laws of Antigua and Barbuda as set out below:

“19. Subject to the provisions of this Act, the following rules shall apply to the assessment and award of compensation by a Board for the compulsory acquisition of land –

Half Moon Bay
1. the value of the land shall, subject as hereinafter provided, be taken to be the amount which the land, is sold in the open market by a willing seller, might have been expected to have realized at a date twelve months prior to the date of the second publication in the Gazette to the declaration under section 3:

Provided that this rule shall not affect the assessment of compensation for any damages sustained by the person interested by reason of severance, or by reason of the acquisition injuriously affecting his other property or his earnings, or for disturbance, or any other matter not directly based on the value of the land;

2. the special suitability or adaptability of the land for any purpose shall not be taken into account if that if that purpose is a purpose to which the land could be applied only in pursuance of statutory powers, or for which there is no market apart from the special needs of a particular purchaser or the requirements of any Government department;
3. where the value of the land is increased by reason of the use thereof or of any premises thereon in a manner which could be restrained by any court, on the contrary to law, or is detrimental to the health of the inmates of the premises or to public health, the amount of that increase shall not be taken into account;
4. where land is, and but for the compulsory acquisition would continue to be, devoted to a purpose of such a nature that there is no general demand or market for land for the purpose, the compensation may, if the Board is satisfied that reinstatement in some other place is bona fide intended, be assessed on the basis of the reasonable cost of equivalent reinstatement;
5. no allowance shall be made on account of –

1. the acquisition being compulsory or the degree of urgency or necessity which has led to the acquisition;

2. any disinclination of the person interested to part with the land acquired;
3. any damage sustained by the person interested which, if caused by a private person, would not render such person liable to an action;
4. any damage, not being in the nature of deprivation of or interference with an easement, servitude or legal right, which, after the time of awarding compensation, is likely to be caused by or in consequence of the use to which the land acquired will be put:

Provided that the nothing herein shall prejudice any claim under this Act for damage subsequently sustained in consequence of the use to which the land acquired is put.

5. any increase to the value of the land acquired likely to accrue from the use to which the land acquired will be put;(Emphasis mine)
6. any outlay or improvement of such land which has been made, commenced or effected within twelve months before the publication of the declaration under section 3, with the intention of enhancing the compensation to be awarded therefor in the event of such land being acquired for public purposes.”

THE TEST

15. In assessing the value of the land, the board is guided by the Land Acquisition Act and more specifically section 19 thereto. This section of the act provides at 19 (a) that the value of the land shall, subject shall hereafter provided, be taken to be the amount hereafter which the land if sold in the open market by a willing seller, might have been expected to have realized …”

THE APPRAISER’S INSTRUCTIONS

CBRE – Kent Kerr

16. The instructions to the appraiser CBRE by H.M.B. is at appendix ‘A’ and ‘B’ of Kent Kerr’s witness statement at page 41 of the witness statement bundle (“the Trial Bundle” or “TB”), volume II. These instructions, in my view, direct the expert, independent valuer (See CPR 2000 requirements; see also paragraph 17 of Kent Kerr’s’ witness statement at page 29 of the witness bundle volume II) as to certain “facts” and to what considerations he must enter into. It directs him to use at least two specified methods of valuation – and identifies the costs and the income approach – to arrive at a “substantiable figure”. These instructions and compliance with them, are not entirely consistent with the objectives of 19 (a) of the Act or with the duty of the expert witness under the aforementioned rules of the CPR 2000. HMB misconstrued the role of the valuer and the interpretation of section 19 of the land Acquisition Act.

17. Further and consistent with the tenor of these instructions, Mr. Kent Kerr received the letter from HMB Holdings ltd., dated January 28, 2009, requesting that he provide HMB with a professional basis for argument against the conclusions reached by the Government appointed appraisers. Mr. Kerr’s duty to the Court would require him giving evidence and in the conduct of his affairs in this matter to determine, first, whether the Government appraisal conclusions are fair and correct before he argues against those conclusions. This letter has the effect of seeking to have Mr. Kerr deviate from his primary duty to the Court as an expert witness. In paragraph 6 of the witness statement of Mr. Kerr and indeed as reflected in his report, he did use the methodologies of (i) Residual Land Value10; (ii) Cost approach11 along with the Sales Comparison Approach.

18. The instruction’s overriding request is for an appraisal “for a substantible figure”. In neither instruction at appendix “A” or “B” of Kerr’s statement, is fair market value or the words of the section 19(a) of the Act referred to expressly, impliedly or just in substance, used. In paragraph 7, he says that in order to arrive at his final value of US$ 60,000,000.00 he considered the highest and best use to which the subject property could be put. Again, this procedure appears to be consistent with his instructions to employ the valuation methodology to “arrive at a substantible figure”. I note further, that at pp 8 of the CBRE report located at pp 46 of the Trial Bundle volume III, Cl. 1.8, “Purpose of the Valuation”, it provides as the ‘purpose’; to ‘estimate the “Fair Market” value of the subject property based on a Residual Land Value Approach (Gross Sell Out Method). It appears to me however, that his duty is to determine the fair market value, and to utilize the appraisal method best able to achieve this end. To have suggested that he narrow his ‘purpose’ to that of estimating a fair market value specifically by using the ‘Residual Land Value Approach’ is in my view incorrect. Further, at cl. 1.9 of the said CBRE Report – “Intended Use of the Valuation” – it says that his valuation was for the exclusive use of the Client, HMB Holdings Ltd. The conjoined effect of these two clauses in my view, suggests a prescribed valuation approach consistent with CBRE’s instructions by the claimant, that would arrive at a ‘substantiable figure’ for the use of the client, HMB Holding. CBRE in my view would have had for the most part, to disregard it’s instructions from HMB Holdings Ltd in order to comply with the CPR rules 2000, the Land Acquisition Act and to produce a fair market value. Perhaps Mr. Kerr did so.12

19. Mr. Kerr does, at paragraph 17 of his witness statement at pp 29 of the bundle, assert that he understands his duty to the Board as set out in rules 32.3 and 32.4 of the CPR 2000 and that he has complied with that duty ( which essentially provides for his impartiality, independence and overriding duty to the Court over his client, HMB Holding Ltd). He, at paragraph 6, says that his reconciled conclusion is that the fair market value of the property is US$ 60,000,000.00.

The Deloitte Appraisal – The Oliver Davis Appraisal

20. Here, at part 2.1 of the Executive Summary at pp. 46 of the Deloitte report and pp 53 of the last Tab of the TB Documents Bundle vol. III, Deloitte say that the Antigua and Barbuda Investment Authority requested of them to carry out an appraisal of the market value of the Half Moon Bay Hotel site located at St. Phillips, Antigua. The purpose of the appraisal, say Deloitte, was to “…establish fair, reasonable and consistent market rates for compensation of private interests in Antigua and Barbuda.” Deloitte continues; that they had been asked in their instructions to prepare the valuation on the basis of Market value. They then defined ‘Market Value’ in accordance with the Royal Institute of Chartered Surveyors (RICS) and the International Standards Committee (IVSC) as “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.” It had been asked to determine the value of the land as at the date of the valuation, May 2008 and as of the 11th march 2001 and 11th march 2002.

21.It would have been more helpful and productive of transparency, had we had sight of the actual instructions. In any event, Deloitte has stated that its instructions are to arrive at a “ market value”. There is no evidence to contradict this.

Half Moon Bay

22. The Davis valuation is similar to that of the Deloitte valuation in so far as the instructions to Mr. Davis are not provided to the Board. Perusing the report and the letter from Mr. Davis to Mrs. Querard of HMB, dated Jan. 2, 2001, one does not glean much in the way of the instructions that were given to Mr. Davis that is of much help to me in determining the purpose of the valuation and what was requested of Mr. Davis.

23. In relation to the valuation instructions13 and the question as to whether they are consistent with the objectives of the CPR 2000 and very importantly, productive of the considerations set out in S. 19 of the Land Acquisition Act, one has to look at the substance of the instructions to see whether in effect they accord with and direct the valuer to, the relevant rules of the CPR 2000, section 19 of the Act, the report itself and any other requirement. The reference to “Fair Market Value” and “Market Value” in both the Claimant’s and the Defendant’s appraisal reports are broadly consistent with the rules set out in section 19(a) and section 19 generally (of the Land Acquisition Act), for application to the assessment and award.14 Further, for my part, I am concerned not with whether the reports state compliance with the CPR 2000, but whether in fact there is compliance.

24. In my view, the instructions to CBRE fall woefully below that which, if followed, would produce compliance with the CPR 2000, the Land Acquisition Act, more particularly section 19 (a) of the Land Acquisition Act and ultimately the realization of a market value as defined in S. 19(a) of the Act: “ (a) the value of the land shall, subject as hereinafter provided, be taken to be the amount which the land, if sold in the open market by a willing seller, might have been expected to have realized at a date …”

25. The methodology actually used by CBRE not only was recommended by HMB Holdings Ltd. in its instructions to CBRE, but in the end, this methodology brought about, as recommended in its instructions – a “substantiable figure” of US$60,000,000.00.

THE ISSUES

What is the appropriate date by reference to which compensation should be assessed?

26. The Board was unanimous on the date being July 2007; the month immediately following the decision of the Privy Council as when the Government took possession15. On the face of it, section. 19 (a) of the Land Acquisition Act read in the context of the decision in the Bernice Lake case16, points to compensation based on the value assessed, being the date of the “… second publication in the Gazette of the declaration under S. 3.” However, this rule is subject to the provisions of the Land Acquisition Act. The provisions of the Act suggest a distinction between “vesting” and “possession” and require possession to complete the acquisition.17

27. The Government in this case, undertook in earlier legal action to refrain from taking possession of the property, thereby delaying possession and as a consequence, the date of the completion of the acquisition. Specifically the Government undertook to “…refrain from entering , taking possession of and/or in any way entering and/or disposing of the Applicant’s lands in purported pursuit of the provisions of the Land Acquisition Act (Cap 233 of the Revised Laws of Antigua and Barbuda 1992) until the hearing and final determination of these proceedings.”

28. The claimant relied on this undertaking. The 2005 registration of the Government of Antigua and Barbuda does not in my view affect the date of possession and acquisition for purposes of determining the date for the assessment of value. Looking also at section 28 (a) of the Registered Land Act, in the circumstances there set out, the rights of a person in actual occupation of land overrides a registered interest.

29. Now there appears to be some conflicting position between the parties as to whether the Claimant remained in occupation after the 2nd publication in the gazette and the Court Order. For my part, I cannot see what other effect the Government’s undertaking to refrain from entering upon and taking possession of the subject lands could have, but to have in effect kept the Claimant in possession and indeed, as the evidence establishes, also in physical occupation of the subject lands,. This is my finding on the evidence.

30. The Government of Antigua and Barbuda gave the undertaking, which was reduced to an order of the Court, and is taken to have done so with full knowledge of the Constitution, the Registered land Act, the claimant’s reliance on the undertaking and the effect of the delay in completing its rights of entering into possession conferred on the Government by the 2nd publication in the gazette. In effect, the Government deferred the effect of the second publication. It cannot now resile from the effect of that undertaking.

WHAT IS THE APPROPRIATE METHOD BY WHICH THE VALUE OF THE LANDS SHOULD BE DETERMINED?

31. I have considered the contents of all the expert reports that form part of the ‘agreed documents’ in Trial Bundle III, the witness statements of the expert valuers including their commentary on the appropriateness of the respective methods of valuation, the oral testimony in the matter and the submission of counsel for the parties.18 In the face of the higher detail and justifications provided in the CBRE and Deloitte appraisals, as opposed to the PCS and Oliver Davis reports, these have generally been given more consideration and in fact the opinions expressed in the CBRE and Deloitte reports, in the end, for the most part formed the basis for my findings and conclusions.19 I preferred the evidence of Mr. Watson generally, as being more realistic, inherently consistent and pertinent to Antigua and Barbuda. He and his evidence appeared to be more rooted in the rules, industry standards and their application to Antigua and Barbuda, of which he exhibited, in my view, a superior working knowledge of.

Half Moon Bay
32. In my view the most appropriate method of valuation of the subject property in all the circumstances, is the Sales Comparison approach. This approach in the circumstances of this appraisal treats the acquired site as a “greenfeild” site in 2007 and 2008. I accept this as the most apt description of the property.20 I observe, that residual Value approach (Gross Sell-out) used by Mr. Kerr of CBRE has several component, one of which employs the Sales Comparison approach. Presumably, CBRE having used the Sales Comparable approach as one of the pillars of its appraisal does not question the general integrity of that system of appraisal used or the fact that it is one which is commonly utilized in the Land appraisal business.21 Further, having regard to the provisions in section 19 of the Act, I am not entirely sure of the applicability of parts of the Residual method, to the valuation under the Act.

33. Mr. Kerr of CBRE, in paragraph 6 of his witness statement said he used the methodologies of the Sales Comparison approach and the Residual Land Value approach in order to determine the fair market value. In order to arrive at his “fair market value” figure that he stated as US$ 60,000,000.00., he had to consider the highest and best use to which the property could be put, namely as a high end resort – residential and exclusive development.22 He said that he did not consider the subject lands as a “greenfeild” site.

34. The definition of the Residual Land value approach he describe as one that estimates the value of a property based on a net present value of the development opportunity discounted at the appropriate rate. I observed however, Lord Carswell, in the Privy Council Appeal, No 29 of 2004, Blakes estate ltd v The Government of Montserrat, referred to the end value of the Residual Appraisal method, in a not to complimentary a manner, as a ;”…prospective development value sometimes referred to as ‘hope value’” 23(emphasis mine).

35. Mr. Kerr continues that; “It is used typically to analyse the value of properties planned for development or re-development such as the property and examines the revenue from sales and the costs of the development to arrive at the net income which is then discounted at the applicable market rate to reflect the residual value of the land parcel”24. Mr. Kerr goes on to state that; “he used a combination of the Sales Comparison approach and Cost approach as described at page 66 of the report , to estimate the value of the property in relation to comparable properties in Antigua and the greater Caribbean area”. Mr. Kerr said that having done this, he made adjustments for market conditions and any difference in physical and other characteristics or condition of the comparable properties.25

36. A very important pillar of CBRE valuation is considering the “highest and best use” of the property. This approach in identifying the most profitable use to which the land can be put is not in my view necessarily consistent with arriving at a fair market value, but rather with the highest possible market value in a theoretically constructed future world.

37. The Residual method can from all appearance be a sophisticated and highly refined method requiring equally sophisticated and refined sources of information and inputs and the existence of appropriate comparables and circumstances.

38. So, for instance, were Half Moon Bay zoned for a particular development with the architectural drawings complete, planning approvals complete, quantity survey complete and ready, so all the developer has to do is purchase and then sell lots and/or commence construction of pre-sold condo or villa units for instance, as the case might be, this perhaps would represent a clearer case for application of the residual approach. Clearer still, would be a turn-key, completed development, ready for sale of the individual lots or in a mixed development, ready for sale of the condominiums, the Hotel, Restaurant etc. As one moves away from a complete development that is ready to sell at the date of acquisition, the assessment Board has to consider and balance all the circumstances to ascertain the value of the land for what it in fact was on the specified date, July 2007 26 or 2002.27

39. Further, in relation to the status of the subject lands being a “greenfeild site”, the new development plans (with no planning or other official approval) used by CBRE and the layout and road ways there depicted, do not appear to bear resemblance to that which is depicted in the CBRE report and in the bundle as an arial view of the existing site. Superimposing one over the other makes the point. I agree with the view that the existing infrastructure will not be of any discernable value to a new developer who, like HMB and subject to planning and other approvals, would bring its own vision and plan for the financially viable development of Half Moon Bay. The subject lands in my view, undoubtedly is a “greenfeild site” to be sold as a whole for an entirely new development than the one that existed on the ground prior to the hurricane in 1995 and which remained on the ground at the time of all the appraisal reports relied on in this matter.

40. The claimant has relied substantially on the cases of; Blakes Estate Ltd v The Government of Montserrat, Privy Council Appeal No. 29 of 2004 and the New Zealand case of the Maori Trustee v Ministry of Works [1959] AC 1 in support of the proposition that the Residual method of appraisal is applicable even where there is no approved development plan.28 This is in fact so in the appropriate circumstances. However, it appears to me that the Privy Council, in the Maori case were at pains to distinguish between the subject property’s unrealized possibilities and realized possibilities at the time of the acquisition and the error in law, in compensating a party as if unrealized possibilities were in fact, realized possibilities. In the Maori case, land was acquired with the potential and the intention for subdivision. The Maori Land Court purported to assign a value to the land on the basis that it could at the relevant date be sold as such. There was no approved subdivision plan nor was there the requisite Ministers approval of that plan. The Privy Council in the Maori case noted that there are, however, as has frequently been observed, cases where land has a potentiality which may be realizable in the foreseeable future and, if so will give the land an added value over and above its value for the uses made of it at the time of the taking.29 The judgment continues and refers to the case of Vyricheria Narayana Gajapatiraju v Revenue Divisional Officer, Visagapatam [1939] A.C. 302, which case the Board pointed out, “shows the task of valuing land with such a potentiality may not always be an easy one”30. In the Maori case, the Privy Council identified three (3) material factors for the compensation tribunal to consider in that case. First, the consent of the relevant Minister had to be obtained; second, what effectively amounted to planning approval had to be obtained, and thirdly, none of the subdivisions and roads and other facilities were actually on the ground.

41. His Lordship, Keith of Avonholm stated the task of that compensation court, as the Privy Council saw it; “…is to estimate how far the land was ripe at the date of the taking for sub-divisional development and how soon, looking to the need of obtaining any necessary consents, the land would in fact, but for the taking, have been fully developed, and to value it accordingly”. I note also that the judgment in the Maori case does not disclose if the compensation tribunal was constrained by legislative provisions akin to the whole of our section 19 of the land Acquisition Act, other than 19(a) – “…sold in the open market by a willing seller…”31.

42. Further, at pp17 of the said Maori Judgment, their Lordships found that it would have been an erroneous application of the law to have awarded compensation on the assumption that the subdivisions (and in our case, the villas, Hotel and other facilities set out in the “master plan”) could have been sold to purchasers on the date of the acquisition. They found that it was erroneous “…for the reason that there were in fact no subdivisions, and that to give the claimant compensation on the basis that there were , would be to give him compensation for unrealized possibilities as if they were realized possibilities”.32 In the Turner case, Dixon C.J. is quoted by his Lordship as stating, on the facts of that case: “…the only sale that could be considered is a sale of the land as it was at the date of the resumption, that is “unsubdivided” [sic], but having the clear potentiality that it was fit for subdivision”. There is no dispute in the HMB matter that the subject lands have the clear potentiality for resort development and subdivision and that at the date of the acquisition the subject property was not ready for sale in accordance with the ‘Master plan’. The subject lands have possibilities; unrealized possibilities and/or prospects, at the time of acquisition.

43. In the instant valuation, one also has to consider several factors to include; (i) That the development plan was not approved, nor was any evidence led as to its general (if not specific) compliance with planning rules, regulations and practice in Antigua and Barbuda; (ii) None of the Buildings, lots , roads, infra structure were constructed (iii) the potentialities did not appear to be realizable within a short time; (iv) The probability that the development plan, by the time it had passed through all the Government departments including the Ministry of Tourism and the planning division and the usual environmental impact assessment determined, consideration given to the building and population density, appropriate sewage disposal systems and indeed a different highest and best use as perceived by the Government authorities and/or an actual future investor/purchaser, and all the other considerations entered into by all the relevant authorities and indeed the investor also ; the scheme of land development as contained in the unapproved plan may very materially be modified in critical matters such as and including; the roads , drainage , accesses, establishment of green areas, number of hotel rooms, number of condo’s, individual homes, lots and the sizes of these buildings or lots and other items.

44. Further, there is the question as to whether a 9 hole or 18 hole golf course is constructed, if constructed at all. The Government ‘s 2007 press release spoke of a development with a Golf course; The Ministry of Tourism, Planning Division, the Investment Authority or other relevant authority may, for instance, determine that a Golf course of a certain size be a part of that development so that side of the Island be service with a Golf course or, having given another developer the authority to build a golf course, may determine that it does not want another huge consumer of water in that end of the island or at all. Antigua depends on desalinated potable water. And, if not constructed what shall take its place. Further, there are the considerations and approvals in relation the proportions in which the various type of properties are constructed in relation to each other and the resort population density which are at this time entirely unclear. I say unclear, because the effect of the “Planning” process on all the considerations in this paragraph and the paragraph above, may well be such as to substantially modify, have scrapped and written anew, the whole plan or parts thereof, bringing with it a discernable if not significant influence on the estimated revenues, development costs, profits and ultimately the calculation of the residual value of the land. Apart from the general resort theme desired by the Government, it appears to me that every single other development consideration (and some, quite detailed I would imagine) has to be determined, worked through, sanctioned and approved by the various Government bodies. The final product, in my view, is wholly unpredictable for the useful application of the Residual Method of appraisal and the useful application of the Residual Method over that of the Sales Comparable method which was used by the independent appraisers retained by the Government of Antigua and Barbuda.

45. The development scheme in the Maori case involved the distribution of lands to the indigenous peoples of New Zealand, where the lot sizes were restricted by statute to no less than 10 acres. The nature of the distribution was not likely to pose a problem and indeed, before the acquisition the purpose and extent of the scheme were for the most part settled; there were intended to be plain lots without as many of the complexities and considerations of urban development. In that case it was in all the circumstances of that acquisition, determined that the Residual approach was an appropriate method of appraisal; and it probably was. There was no suggestion in the Maori case that there were comparable sales in recent times upon which one could use as a bench mark against which one makes the requisite adjustment to compensate for the material differences between the properties and so on. In fact that case was not a case where the efficacy of the Residual method was pitted against that of the Sales Comparable method; but it was a case dealing with the proper application of the Residual Method of appraisal and issues arising thereto.

46. I accept the purpose for which the Government acquired the lands to be that as set out in the Government press Release on August 20, 200733. However, that general purpose allows for tremendous variations in projects that fit that general purpose many of which might just not succeed in passing unaffected through the Planning gauntlet and other land development obstacles.34

47. Now, in the case of HMB and the reliance on the residual method for the valuation of it’s lands, I recognize, on the evidence, that several inputs are required to arrive at the present value of the land. In Antigua, there is no stock, fund or financial market generally against which to gauge the rise and fall of property-based companies or funds, no time sensitive cost of living index, no construction cost index, no settled statistics with respect to any aspect of the construction industry including such statistics from and Architectural, Quantity Survey or Engineering associations or bodies. There does not exist, the ‘market’ data base which exists in more sophisticated property and development markets that would allow a reasonably accurate prediction of the factors that the CBRE report purports to deal with. Mr. Kerr himself said at pp. 74, clause 4.4 of the CBRE report, that he could not readily obtain construction cost information and had to talk informally to various individuals.35 Further, land development purchases and more importantly, its actual development, does not take place here with the frequency that will generate reliable statistics on which one would found the Residual approach. Indeed, there is no sufficient evidence of the source and integrity of the information used to calculate the input factors in the Residual approach. The more theoretical the project – as this one is – the greater the amount of reliable data required to come up with the projections required in the Residual approach.

48. I find that the uncertainty of this multilayered appraisal – Residual approach – not suitable for our purposes here.36 In any event, CBRE did not seek to stress the details of the components of it appraisal system such as for instance, what went into making up and the sourcing of the construction costs which it used to subtract from the projected sales of the development units. Further, the speculative element in projected sales is surely no less than that which attends the allowances made in the Sales Comparative measure, for instance, for the differences in the geographical and physical features between HMB lands and the comparable. I add to that, the several allowances made for each component of the Residual approach, such as the allowances made when the sales comparative approach component is determined (such as the varying geographical locations , size of parcels, quality standards etc.) , those factors used to make allowances for construction costs, and for projected sales, all with a dimension of speculation.

49. I accept the evidence of Mr. Simon Watson of Deloitte that the multidimensional nature of the Residual approach serves to create more avenues for default, and that a 10% movement in the value of any one of the input components of the residual System e.g. sale price of a condominium, or parcel of land, can result in as high as a 90% movement in the Residual value.37 On my understanding of the evidence, I see that the variation need not even be anywhere as high as this in order for it to produce grave inaccuracies.

50. A critical component of the CBRE assessment is ascertaining the highest and best use of the subject land. It does not appear to me that it is disputed that the Government’s hope for the development of those lands are for a high end resort as described in their press release. (see para. 41 above). Whether that is the highest and best use may well be debatable. However, Mr. Kerr assumed that plans produced to him by his client, the claimant, were approved plans for the highest and best use of the subject lands. The evidence as it turns out, is that they were not approved plans. In cross examination he admitted that to calculate the developmental costs as part of the Residual approach, he would need the specifics of the project. He would need a development plan.

51. He testified, in effect, that if there are no entitlements and no subdivisions available, one would have to use the Sales Comparable approach as the valuation method. There is no dispute that the development plan on which CBRE rested its appraisal, was not an approved plan. The ‘proposal for valuation services’ by CBRE, states that the “Market Value for Subject Property” is on a “As Is” basis with existing infrastructure and entitlements approved” and “Other conditions as directed by client or client advisors”. We do not know all the ‘other conditions’ that the claimant directed CBRE on, but presumably it includes those set out in the instructions at appendix “A” and “B” referred to earlier.

52. In this case, there is no approved subdivision or entitlements. It is true that the cases of the Maori Trustees and Blakes Estates suggests that an approved plan need not necessarily be in place to justify the use of the Residual method. However, in this case, having regard to what I have said above and further or alternatively, in the view of what appears to be the view of the claimant’s valuer, Mr. Kerr, that the absence of an approved sub division and known ‘entitlements’ in this case, would justify as the preferred valuation method; the Sales Comparison approach. I note that the regional examples of mixed use resorts used by Mr. Kerr in his report at pp 70 (Trial Bundle Vol. 3), all have a ‘development status’ as ‘Approved’ or ‘site work on-going’ with one example as in “planning stages”. The Antiguan comparables identified by CBRE from pp 73-75 of the report at Bundle III, do not appear to represent ‘greenfeild’ land or even developed lot prices, but prices which include existing buildings with complimentary facilities. Further still, the regional comparables identified from pp. 88 of the said report to pp102, mostly list per sq.ft prices and suggest price per sq.ft of floor space of building as opposed to land alone ( the largest lot identified is approx 64,000 sq. ft – approx 1.5 acres). But further, whether the Residual approach can be used in a case where the plan