Bow v Chief Executive, Department of Natural Resources

[1999] QLC 125

[1999] QLC 125

 

LAND COURT

BRISBANE

1 DECEMBER 1999

Re:     V99-63

An appeal against an unimproved valuation -

Valuation of Land Act 1944 -

Local Authority:        Townsville

Maria C Bow

v.

Chief Executive, Department of Natural Resources

(Hearing at Townsville)

D E C I S I O N

The appellant owns a vacant block of residential land located at 86 Yarrawonga Drive, Castle Hill, in the City of Townsville, in an area commonly referred to locally as Yarrawonga (the "subject land").  The Chief Executive placed a valuation of $125,000 on the land pursuant to the provisions of the Valuation of Land Act 1944 as at a relevant date of 1 October 1996. The appellant contends for a figure of $100,000 on the basis of the following grounds of appeal:

"1.       Valuation does not reflect disabilities of the site.

2.Valuation does not reflect the market.

3.Incorrect relativity is applied."

It became clear during the hearing that the reference to "relativity" was intended by the appellant to suggest that the comparisons made by the Chief Executive between the subject land and sales evidence was incorrect. 

Valuation evidence in support of the appellant's figure was given by John Robert Wake, a registered valuer, whilst Robert Arthur Noakes, registered valuer, gave valuation evidence in support of the Chief Executive's figure.  Following the conclusion of evidence and submissions, I inspected the subject land and all of the sales referred to by the two valuers.  These inspections were carried out in the company of the two valuers, as well as Mr Denis Schy, agent for the Chief Executive. The inspections assisted me in my appreciation of the evidence.

The subject land has an area of 803 m², is zoned "Residential" under the provisions of the Townsville City Council Town Planning Scheme gazetted on 16 September 1994 and is situated on the lower slopes of Castle Hill, being within a recently completed stage of a prestigious residential development.  The parent land comprises a Development Lease held from the Crown under which the State receives an agreed return based on the gross sale price of allotments.  A sloping concrete road provides access to the land, which Mr Wake describes as "fair".  All normal public utility services are provided, including underground electricity reticulation.

The subject land is rectangular in shape having a 30-metre frontage, whose width Mr Wake described as a "bonus", and depth of 26.77 metres.  It has a moderately steep crossfall of about 4.5 metres measured along the road frontage alignment and a crossfall of about 6 metres along the rear boundary.  There is a reasonable building contour for a depth of about 12 metres into the land, beyond which it rises into a steep broken rock face for a height in excess of 5 metres.  On Mr Wake's measurement there is approximately 11 metres differential in contour between the highest and lowest point on the land.  Both valuers agreed that construction on the subject land would be expensive, either requiring cyclone bolts into rock, if a pole-house construction technique were employed; or expensive cutting with a prospect of encountering rock, if levelling of the site were to be attempted.  Such construction difficulties, however, also confront other blocks in the area to varying degrees.

Mr Wake said that the land had a very good shape, a good size and good elevation and its southerly aspect was desirable in Townsville given that it allowed the enjoyment of breezes.  The aspect of the land is towards Castle Hill which provides a much too immediate view to be considered attractive, whilst the rear view from the higher part of the land is over the city and the harbour towards the sea with Cape Cleveland in the background.  Views in a northerly direction are inhibited by the immediate rise in topography towards and extending beyond the rear of the subject land.  The land is an inside block and is overlooked by an adjoining lot to the west further up the hill and has another block to the east on the downhill side.  Depending upon the type of house constructed on this lower block, views from the subject land may be inhibited.  The subject land receives water runoff from the adjoining uphill lands. 

There was some inconclusive debate between the two valuers as to which views in Townsville are to be preferred.  Mr Wake suggested that views to the North Passage, Palm Island/Magnetic Island region were the most desirable, with Magnetic Island/Cape Cleveland coming next and Cape Cleveland and the harbour coming in third.  Mr Noakes thought that the views including part of the city and harbour were considered attractive in Townsville given that these views afforded an aspect at night including lights.  However, both valuers agreed that the extent of views was probably the critical matter.  It transpires that my conclusions on the valuation evidence do not turn on my having to select a preference for one opinion or the other concerning the comparative attractions of views.

In his valuation Mr Wake employed four sales for comparison purposes and also made reference to a sale of the subject land.  The appellant purchased the land for $118,000 on 3 June 1998 at a discount of $2,000 from the asking price and Mr Wake explained that the sale was the last in the Stage 7 development.  He said that both the discount and the fact that the land had not sold earlier could be explained by the difficult contour on the subject land and the prospect of views being built out or at least limited by adjoining development.  I will return to consider the subject sale in due course, however, will first of all discuss Mr Wake's four comparable sales. 

Sale 1 is at 98 Yarrawonga Drive, has an area of 1,254 m² and sold for $120,000 on 7 June 1996.  This sale is located downhill from the subject land on the same side of Yarrawonga Drive and is found on the corner of that street and Landsborough Street.  It is slightly fan shaped.  Mr Wake's second sale at 105 Yarrawonga Drive sold for $120,000 on 14 June 1996.  It has an area of 804 m².  This sale and the following two sales are located on the southern side of Yarrawonga Drive, whereas the subject land is on the northern side.  Sale 2 is downhill from the subject land, diagonally opposite Sale 1.  Sale 3 in Mr Wake's valuation has an area of 822 m² and is located at 109 Yarrawonga Drive.  It sold for $115,000 on 7 June 1996.  It is separated from the Sale 2 property by another allotment.  Sale 3 adjoins Sale 4 which is further down the hill again.  The Sale 4 property has an area of 994 m² and sold on 7 June 1996 for $105,000.

Mr Wake offered a general comparison between his sale properties and the subject land.  He said that each of the sale properties had a better view than was available from the subject land and with no risk of being built out; construction would be cheaper and more flexible given the gravelly clay foundation on the southern side of Yarrawonga Drive; and the impact of drainage runoff over the subject land was not a disability shared by any of the sale properties.  I would expect, however, that runoff would be experienced by the Sale 1 property referred to by Mr Wake, and to some extent by his Sales 3 and 4. 

Those points of comparison are, however, not the issues concerning these sales which separate the parties. Whilst Mr Wake's valuation records that the vendor in the case of each of his sales was Yarrawonga Pty Ltd, evidence from the Chief Executive revealed that Yarrawonga Pty Ltd had defaulted under a mortgage over the Development Lease which included the subject land, all of the other allotments referred to by Mr Wake and other lands. A Notice of Exercise of Power of Sale issued under the provisions of s.84 of the Property Law Act 1974 and dated 12 March 1996 evidenced that the mortgagee intended to exercise its power of sale following the default by the mortgagor. A letter of 16 April 1996 from the mortgagee to the Department of Lands, under whose control the development lease was managed for the Crown, advised that a sale of the land was proposed following advertising. Mr Noakes said that an auction had been conducted by the mortgagee, but that no sales had taken place, with sales being negotiated independently after the auction. This evidence indicates that each of Mr Wake's sales were sales by the mortgagee.

Mr Noakes said that he found mortgagee sales to be generally unreliable and that such sales frequently attracted people who were expecting bargains in the form of lower prices.

Whilst any forced sale needs to be treated with caution and appropriate investigations carried out, it is not universally the case that a sale by a mortgagee, or for that matter, a company in liquidation needs to be rejected as a basis for valuation.  In Re Murray (1934) 13 LVR 25 the Land and Valuation Court of New South Wales was considering a mortgagee sale and said at 27:

"… there is nothing in the evidence to show that anything was done by the vendors to preserve the interests of the mortgagor, or that there was any reserve in respect of that sale."

In such circumstances, the sale would not be considered reliable.  A different conclusion was drawn in Waterhouse v. The Valuer-General (1927) 8 LGR 137.  In that case, the land the subject of the mortgagee sale, had been in the hands of real estate agents for some period, had been inspected by a number of purchasers and was the object of interest by other real estate agents.  In these circumstances, the Court said (at 139)

"No doubt Mr Cohen was entitled, and rightly, to comment on the fact that this was a mortgagee's sale, but that does not entirely dismiss this sale from consideration."

In Henderson v. Liverpool Plains Shire Council (1932) 2 The Valuer 179 the Court relied upon a mortgagee sale in circumstances where the  sale property had been offered at auction after being well advertised, but had not sold until after the auction.  Now whilst the facts of this last-mentioned case are similar in some respects to the facts presented before me, each case needs to be considered on its own facts and having regard to the overall circumstances surrounding the sale.

Mr Wake said in support of the prices paid for the mortgagee sales in his valuation that his Sale 3, which had in June 1996 transacted at $115,000, had resold "recently" at $120,000.  Given that there was a view by both valuers that the market did improve in 1998, and I return to that issue shortly, Mr Wake's suggestion is that this resale supports the 1996 price for that land.  Mr Wake described the resale as a "forced sale", a term he used to describe the fact situation where the vendors had purchased elsewhere and, wanting to sell their Yarrawonga Drive land quickly, arranged for it to be auctioned.  There were no other facts suggesting that this "recent" sale was other than at market level. 

Mr Wake also referred to Sale 1 in Mr Noakes' valuation which he said supported the prices paid for the sale lands included in his valuation.  Mr Noakes' Sale 1 has an area of 895 m² and sold on 12 June 1997 for $120,000.  That sale date is some eight months after the relevant date for valuation, however, there was no disagreement between the valuers as to the application of that sale in the present case.  Mr Noakes said that this sale is superior to each of his four sales, in that it is a corner site and its topography, and that adjoining, indicates that views from the land would not readily be built out.

Mr Noakes said that his Sale 2 could be used to indicate that Mr Wake's sales were at too low a level.  Sale 2 in Mr Noakes' valuation took place in July 1996.  The land has an area of 1,082 m² and sold for $105,000.  The sale land is located at 9 Grange Court, Belgian Gardens, a suburb on the other side of the hill from the subject land, but in an otherwise attractive area, though containing less prestigious homes than are found in Yarrawonga.  The Sale 2 land has a rear view only, but quite an attractive view I should say, providing an outlook which includes the ocean.  Mr Noakes said that Sale 4 in Mr Wake's valuation at $105,000 was clearly superior to Mr Noakes' Sale 2, indicating that Mr Wake's sale was a bargain.

Mr Noakes said that views from the southern side of Yarrawonga Drive are better than the views from the north side, a point agreed to by Mr Wake.  Whilst that would appear to favour the appellant in any comparison between the subject land and sales on the southern side of Yarrawonga Drive, it is a point raised to challenge the appropriateness of the level of Mr Wake's sales.  There was some argument about whether a view from the front or the rear of a house constructed on Yarrawonga Drive were to be preferred by the type of purchaser purchasing there, with Mr Wake saying that rear patios are important to the type of purchaser who buys in that area.  Mr Noakes, on the other hand, said that views from the front of a property is the more important consideration, though stressing that he was more concerned with looking at the residential usage of the land.  My observation is that houses can and are built on the south side of Yarrawonga Drive in such a way as to afford both an aspect towards the ocean and city views from the front of the land, and a higher-up and similarly attractive view from a large part of the rear of the land.  The capacity to provide a structure which affords the enjoyment of views from both the front and the back, results from the views being available from the north to north-easterly quadrant from the land; from the advantage southerly lots have in overlooking Yarrawonga Drive itself; and from the fact that the blocks there slope steeply up from the road. 

I note that three of Mr Wake's sales took place on 7 June 1996 and the fourth one week later, suggesting either an anxious vendor or a most fortunate confluence of events.  Given that the earlier auction did not attract purchasers, I would doubt that the common date of three of the sales would indicate that purchasers were clamoring to purchase the product and would tend to lead towards the conclusion that product pricing was a factor of major influence.  In all of the circumstances, I am reticent to rely on the sales referred to in Mr Wake's valuation, given that I have a remaining doubt as to whether they adequately reflect the market.  In so concluding I have in mind that Mr Wake said that even if I were to reject his sales, that he was comfortable in relying upon a comparison between Mr Noakes' Sale 1 and the subject land.  Given his view on this and my independent view that it is preferable to rely on sales without a suggestion of taint, my conclusion to reject Mr Wake's comparable sales is confirmed.

Mr Wake also referred, as I mentioned earlier, to the subject sale.  The vendor had apparently been asking for a price of $120,000 and accepted a figure of $118,000 from the appellant.  The sale took place on 3 June 1998, this block being the last for sale in Stage 7 of the development.  The suggestion is that it is the comparative disadvantages of the subject land that relegated it to the last position of sale.  I was not given evidence as to what other lots sold out of Stage 7, so cannot draw my own conclusions concerning the attractiveness of the subject land comparatively in the marketplace at that time.

Mr Wake said that the subject sale took place in a higher level market than had prevailed in 1996, the market having increased during the 1996 to 1998 period.  Mr Noakes said that the market had increased in 1998.  There was no evidence to show the trend in the market between 1996 and 1998; whether there was a point of increase during 1998 when Mr Noakes suggested the market had changed; or whether the increase had been gradual during 1998.  There was the evidence of the resale of Mr Wake's Sale 3 to a Mr Price "recently, showing an increase in price of $5,000", however, without a sale date and the fact that the original sale was a mortgagee sale, that later transaction provides me with no guidance.  Mr Noakes mentioned that Lot 21, which adjoins the subject land on the uphill side, sold in "mid-1998" for $120,000, then "resold within a few months" for $135,000.  That would tend to suggest that the increase in the market was later in 1998, however, without details of these transactions I think it unwise for me to draw a conclusion concerning the market trends.

In the circumstances, all I have is the subject sale at $118,000 in June 1998.  Now I should make it clear that Mr Wake does not suggest that that sale ought to be used as the basis for valuing the subject land as at 1 October 1996.  He simply says that that sale points to the Chief Executive's $125,000 as being too high, even if the market had not increased.  I understand the force of Mr Wake's argument, however, it suffers in that the sale is some 20 months after the relevant date and the level of price is not supported by reference to contemporary 1998 sales.  The state of the evidence concerning the subject sale is quite unsatisfactory.

There are two other sales in Mr Noakes' valuation to which I will refer.  His Sale 3 at 380 Stanley Street took place in August 1996.  The sale price of $110,000, which Mr Noakes applied at $100,000 only, was paid for an area of 1,202 m².  Stanley Street is, in effect, the older part of Yarrawonga Drive as the same road continues through and simply has a name change.  Sale 4 in Mr Noakes' valuation is at 94-96 Yarrawonga Drive.  That property comprises an area of 1,612 m² or the equivalent of two lots merged into one by the developer for the benefit of the purchaser.  There is a drainage easement through the joint block.  Sale 4 took place in November 1996 at a price of $154,000 which was applied at $150,000 by the Chief Executive.  Mr Wake said that, effectively, Sale 4 comprises two blocks at $77,000 each.  I think, however, the better view would be that the Sale 4 land is a very large residential lot with an easement disability and a consequent reduction in area.  The purchaser has built on the uphill part of the allotment providing a greater security for the views available from the land.  I think that the price level and the size of the Sale 4 land render it suitable as a "ceiling" comparison property only, which is of limited use in the fine tuning of the value of the subject land.  In a similar vein, I conclude that Sale 3 at 380 Stanley Street provides a "floor" value.  The Sale 3 land, whilst on the high southern side of the street and above street level, is intersected by a gully and has partly restricted views, as well as a  limited elevation.  Sale 2 I think is best referred to as supporting evidence only, given that it is located in a different area from the subject land.  This brings me to Mr Noakes' Sale 1.

Sale 1 is the best evidence of value for the subject land.  The sale property has the advantage of being located on a corner, but one which leads into a cul-de-sac not into any elongated street: a location which affords a choice of access and a flexibility of building design.  The shape of the allotment provides the prospect of rear access from the cul-de-sac.  The Sale 1 land has a greater prospect than does the subject land that views from the land would be retained, if I assume that a house on the subject land were constructed partly on the rock shelf to the rear – an advantageous location in so far as views are concerned, but involving an expensive construction cost.  The Sale 1 land has a more even topography than does the subject and would generally be less expensive to build on.  The sale land also has a slight advantage in size being 895 m² compared with the subject 803 m².  These advantages that the Sale 1 land has over the subject land are offset by the subject land's superior elevation and shape.  On Mr Wake's evidence, however, the subject land has a disadvantage in that water runoff over it needs to be managed.  

I think overall that a figure of $100,000 as contended for by the appellant is clearly unsustainable, particularly if I refer to Mr Noakes' Sales 2 and 3, but I cannot agree that Mr Noakes has adequately taken into account the disabilities of the subject land in drawing his valuation conclusion.  Perhaps he was influenced too greatly by the higher elevation of the land being valued.  In the result, I think that the value of the subject land ought to be struck at the same level as that shown by Sale 1.

Accordingly, the appeal is allowed, the valuation of the Chief Executive is set aside and the value of the subject land is determined at One Hundred and Twenty Thousand Dollars ($120,000).

RP SCOTT

MEMBER OF THE LAND COURT