Bruce J Small No 1 Pty Ltd v Chief Executive, Department of Lands
[1996] QLC 94
•9 July 1996
|
LANDCOURT BRISBANE
9 July 1996
Re: An appeal against a valuation
of the Chief Executive, Department of Lands
Gold Coast City Council - Division of Albert. (RV94-060)
Bruce J Small No 1 Pty Ltd v.
Chief Executive, Department of Lands
(heard in Coolangatta)
Introduction
Bruce J Small No 1 Pty Ltd (the "appellant") is the lessee of Special Lease 40846 over Lots 36 and 63 on Plan Number WD4474 in the Parish of Currigee, County of Ward. The subject land is located on Stradbroke Island and has a total area of 6,886m².
The respondent Chief Executive determined the unimproved value of the subject land to be $326,000 as at 31 March 1992, effective for the rental period commencing 1 July 1993. The appellant objected to that valuation. The objection was disallowed and the appellant appealed to the Land Court. The notice of appeal nominated a valuation of $100,000. At the hearing, the appellant contended for a valuation of $140,000, in line with the 1989 valuation.
The grounds of appeal, supplied in answer to a requisition from the Registrar of the Land Court, state:
"The land is leasehold. Use of the land is severely constrained by Council. In spite of an effort over 2 years to dispose of the land - I cannot get an offer. To say the land is worth more than that is ludicrous. I note 25 hectares of FREEHOLD LAND on Macleay Island sold recently for $225000! On that basis the two acre leasehold lot is worth substantially less than $100,000!"
The law
The legal principles to be applied in this case were usefully summarised in Grahn v The Valuer General (1992) 14 QLCR 327. In its reasons for judgment, the Land Appeal Court relied on the decision of the High Court of Australia in Brisbane City Council v The Valuer-General ((1978) 140 CLR 41, 5 QLCR 283) and the decisions of the Land Appeal Court in cases such as
Fischer v The Valuer-General ((1983) 9 QLCR 44) and Barnwell v The Valuer-General
((1989) 13 QLCR 13) as authority for the following propositions:
(a)The best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land (Fischer v The Valuer-General (1983) 9 QLCR 44, at p. 46; Barnwell v The Valuer-General (1989) 13 QLCR 13, at p. 17).
(b)Section 33 of the Valuation of Land Act 1944 (formerly section 13(7)) creates a presumption that the value in money terms shown by the Chief Executive (formerly the Valuer-General) in his notice of valuation is correct (Brisbane City Council v The Valuer-General (1978) 140 CLR 41, at p. 56).
(c)Once it is shown that:
(1)in making the valuation the Chief Executive acted upon a wrong principle, or made a serious error of fact; or
(2)the valuation was made by a method fundamentally erroneous.
the presumption created by section 33 is rebutted (Brisbane City Council v The Valuer-General (1978) 140 CLR 41, at pp. 56-7).
The appellant bears the onus of proving the grounds of appeal (section 45(4)) and, to succeed, must show that, in making the valuation, the respondent acted upon a wrong principle, or made a serious error of fact, or that the valuation was made by a method fundamentally erroneous.
Mr Bruce Small gave oral evidence and made a written submission on behalf of the appellant. Valuation evidence was given for the appellant by Mr LS Parsons, a registered valuer and director of Herron Todd White Valuers, and for the respondent by Mr D Treston, a registered valuer employed by the Department of Lands (now the Department of Natural Resources). Each valuer produced a written valuation report and gave oral evidence.
The subject land
Lot 36 is situated at Island Street, South Stradbroke Island. The street is a cleared sand track. Lot 36 is a rectangular waterfront allotment with approximately 60 metres frontage to Tipplers Passage and a depth of more than 110 metres on the northern and southern boundaries. It has an area of 6,880m². The allotment is well drained and generally level, apart from a slight rise toward the waterfront. At the date of valuation the land was virtually in its unimproved state. It was moderately timbered and had predominantly sand soil.
Lot 63 is a 6m² rectangular block located approximately 24 metres west of the western
boundary of Lot 36. It is totally submerged and is separated from Lot 36 by an esplanade, most
of which is submerged by water. Lot 63 is used for a jetty with a walkway to Lot 36. The depth of water is such that good boat moorage is available at the jetty.
A telephone service is available to the subject land, but reticulated water and sewerage systems are not available.
The allotments are situated approximately 120 metres north of the South Stradbroke Island Resort, previously called “Tipplers Resort”, which has accommodation units. “Tipplers’ is a popular destination for day tripping tourists and resident boating people.
There is no vehicular access from South Stradbroke Island to the mainland. The boat ramp at Paradise Point is situated approximately 12 kilometres by water in a southerly direction from the subject land. Travelling time by speed boat is approximately 20 minutes from Southport. Tipplers Passage is popular for water skiing. Cruise and charter boats visiting the area offer most water sports.
The Gold Coast City Council is committed to the protection of the environment and ecology of South Stradbroke Island. Landholders are required to return all waste material to the mainland for disposal.
South Stradbroke Island is a favoured retreat for holiday homes, being located near to the Gold Coast. Mr Treston stressed the attraction of the Island as a retreat for professional people, with long term potential and value being quite good especially since it has an unspoilt environment and no more residential development is being allowed there.
The lease over the subject land is a Business (Tourist Facilities) lease, SL06/40846. The lease commenced on 1 January 1977 and is for a term of 30 years. The appellant acquired the land in June 1986 for a purchase price of $150,000. At that time the annual rental for the first 10 years was $200 per year. According to Mr Parsons’ report, the lease includes conditions to the following effect:
within the first 3 years to effect tourist facility improvements of not less than $10,000;
during the whole term maintain a tourist facility use;
the land cannot be freeholded.
The land is zoned "Special Facilities - Tourist Facilities" under the Albert Shire Planning Scheme gazetted on 24 February 1995. Mr Treston said that it had the same zoning under the 1988 town planning scheme. Under that zoning the use of the land is restricted to "day tripper" tourist use.
There was no issue about the highest and best use of the land. According to correspondence, from Albert Shire Council in July 1994, the highest use of the land would be the provision of services associated with day tripper tourists. The services are likely to include toilets, covered seating and barbeques. Any proposed uses other than those considered appropriate for day tripper use would require a rezoning application to the Council. Depending on the nature and scale of ancillary facilities to support day tripper needs, a further application may be required to the Council. In his valuation report Mr Treston stated that the highest and best use of the subject land is for a tourist use or purpose that does not involve permanent accommodation units. He suggested that a possible use could be an island stop-over for boat cruises with a barbecue area, a caretaker's residence and a small shop or kiosk.
The appellant acquired the land to develop some form of cruise boat day tripping operation but subsequently acquired freehold land on South Stradbroke Island and the subject land became superfluous to the appellant’s needs.
A key issue in these proceedings is whether a residence could be built on the subject land. It is clear that such a building could not be built as of right. The question is whether it is likely that a residence could be constructed as part of a tourist enterprise on the land.
Council consent would be required to allow a caretaker's residence to be constructed and it should not be assumed that consent would be granted automatically on application. There is, in effect, a veto on further residential subdivision. In March 1981 the Albert Shire Council resolved to prohibit the construction of accommodation units on the subject land and other similar land (Portions 35, 36, 38, 45, 48, 49, 58, 60 and 66 and Reserve 1440). These leases were considered for day tripper tourist uses only in accordance with the 1974 Long Term Planning Report and because services were not available.
A letter dated 11 July 1994 from the Chief Executive Officer, Albert Shire Council (the “CEO”) to the Department of Lands stated: “Council is still committed to preserving the natural environment of South Stradbroke Island as reflected in the Draft Strategic Plan’s Tourism, Open Space and Shire Image objectives.” The same letter advised that the construction of “Residential uses” would be prohibited, but the construction of a “Dwelling House” (a single dwelling unit, but not a caretaker’s residence) would be permissible, subject to the rezoning of the land from Special Facilities to Rural C. Any structures would have to comply with relevant By-Laws, Regulations and the Building Act.
In a letter to Mr Small dated 30 September 1994, the CEO referred to the March 1981 resolution and stated:
“Council holds the view that South Stradbroke Island should be retained in a natural state where possible for Public Open Space purposes. ... The use is considered to be for day tripper purposes only and only structures for that purpose would be approved.”
Mr Small stressed that the use to which the subject land can be put is limited by the terms of the lease to tourist purposes. A residence (such as a caretaker's quarters) cannot be erected except in connection with acceptable tourist operations. In his opinion, the land would be more valuable if it were possible to erect a residence such as a weekender without it having to be linked to tourist operations. He also said that a tourist operation in the Tipplers area in 1992 or since was not an attractive form of business enterprise.
Mr Treston acknowledged that “the whole caretaker question is a problem”. He relied, however, on correspondence between the Department of Lands and the Gold Coast City Council (Exhibit 6) in which the Department, as lessor, indicated that it would not object to the lessee constructing a caretaker’s residence on the land for site maintenance purposes facilitating the development of the site for purposes ancillary to the Business (Tourist Facilities) designation of the land under the lease. In a reply dated 14 September, 1995 the CEO advised as follows:
“1. As the site is zoned “Special Facilities - Tourist Facilities”, the consent of Council would be required to allow a “Caretakers Residence”.
2.The consent would not be granted automatically and would subject to any objection or submissions received, plus a value judgment made in the light of information supplied in the application and a Planning Officers investigation. Any recommendations made would be subject to full Council approval and this of course could be the subject of an appeal.
3.If the application was approved it is thought that the conditions would not be to onerous and would pertain to, amenity, size, use, disposal of waste, landscaping etc.”
As Mr Treston observed, the letter from the Council “doesn’t really say you can but it doesn’t say you can’t.”
There are caretaker’s residences on Lot 60 and Lot 58 (on either side of the subject land) and on other lots. In Mr Treston’s opinion, “one could expect with all these caretakers’ residences practically surrounding the subject that with the right development a caretaker’s residence would be approved on the subject land.”
There was no suggestion that the lessee could build a house and then ignore the other
requirements. In other words, the owner could not enjoy a residential use of the site without
incorporating some commercial development. The related issue became how much additional expenditure on tourism development would be necessary to permit construction of a residence. Mr Parsons stated that someone would not outlay substantial amounts on a commercial venture to get a house on the site. Mr Treston agreed that there is a much more limited and specialised market for a special facility site than for a site zoned Residential A. The sort of business to be run on such sites is risky and there are few people who want to take those risks. That view is consistent with Mr Small’s statement about tourist operations in that area. In Mr Treston’s opinion, people would buy the land because of the potential for growth on South Stradbroke Island. The possibility of building a caretaker’s residence there would be “just an added bonus” for someone who could live on the site and run their business. It was difficult to predict with certainty what size operation would be sufficient, but he speculated that one could run a small business with the residence.
On the evidence just summarised I find that the highest and best use of the subject land at the date of valuation was for the provision of services associated with day tripper purposes and that such services could be provided without substantial expenditure, but that it could not be assumed that the Council would approve the construction of a caretaker’s residence as part of a tourist enterprise on the land.
The sales evidence
Much of Mr Small’s evidence concerned increases in the rent payable for the lease of the subject land and the effect which, in his opinion, rising rents have on the value of the land. When the appellant purchased the leasehold, Mr Small was aware that the first rental period of 10 years had almost finished. He considered the annual rental of $200 a “fairly good deal” (indeed, he agreed, it was cheap), but such a rental was normal for that sort of land at that time. He submitted that, although one could have anticipated CPI adjustments to lease rentals over the succeeding years, "one could never have anticipated or comprehended the lease rental would climb from $200 per annum to the current rental of $11,000 per annum - which is an increase of an incredible amount of 5500% over this period of time". He argued that the size of the annual rental was "the obvious drawback" to any sale of the lease because a potential purchaser would factor that into any purchase price calculation as if it were akin to interest on borrowed capital. In other words, he suggested, an annual rental of $11,000 would affect the market's estimate of the capital value of the land.
In these proceedings, however, it is the unimproved value of the fee simple title to the land (not the leasehold, or the land subject to a lease) which has to be determined. That assessment must be made having regard to logically probative evidence. The sales evidence provided by each party is summarised below. Because the primary sale on which the respondent relied was also important to the appellant’s case, I will consider the respondent’s sales evidence then the appellant’s sales evidence.
Respondent’s sales evidence: Mr Treston said that the valuation of the subject land had been based on evidence of sales of five blocks of land and had been assessed having regard to, and making proper allowance for, any restriction or limitation of use having regard to the purpose and conditions to which the lease is subject.
Sale 1 comprises a rectangular block with an area of about 7,340m² (Lot 45) and a small jetty block of submerged land (Lot 51). It has similar features to, and is located about 300 metres south of, the subject land. The property adjoins the South Stradbroke Island Resort on the resort's northern boundary. Lot 45 is a well drained waterfront site. It is generally level but has a slightly elevated frontal sand dune on the waterfront boundary. The land is virtually in its unimproved state and is timbered with selectively cleared, medium density coastal forest.
The lease was sold for $300,000 in January 1992.
Improvements included two demountable buildings and a jetty to which a value of
$31,000 was assigned, leaving an analysed value of $269,000 for the lease of the land. The purchaser was a successful tourist operator who had owned a backpacker’s accommodation business at Long Island in the Whitsunday Islands. He approached the vendor and made an offer on the property. The applied unimproved capital value of the land at 31 March 1992 was
$346,000.
The Business (Tourist Purposes) lease runs for 30 years from May 1984. For the first 10 years of the lease the annual rent was $200. From 1 July 1994 the rent increased to $12,110 per annum or 3.5% of the unimproved capital value.
The respondent placed most reliance on this sale. Mr Treston described the land as comparable to the subject land in most details except tenure. The subject land is being valued as freehold tenure.
The appellant also referred to this sale. According to Mr Parsons, the sale was out of alignment with the market and little comfort can be gained from it. The market was depressed at the time of the sale. Tourism and residential markets on the Gold Coast had peaked in 1988-
1989. Mr Parsons, who knows the vendor and the purchaser, said the vendor believes that he achieved “a very handsome price”. Mr Parsons considers that the purchaser was not well informed about the potential of the site. At that time, the purchaser planned tourist/backpacker style accommodation. Such an enterprise was a “false dream”, being contrary to the Council's policy. The purchaser stated subsequently that he paid well above market value. He had been unsuccessful in attempting to sell the property, even without a set reserve price. The respondent’s records indicate that, when interviewed by a valuer in August 1994 (more than 2 years after the purchase), the purchaser advised a valuer that the sale was a market value transaction. Later that year (possibly after the substantial rise in rent) he objected to the valuation of the land and adopted the opposite stance.
Although reluctant to use special lease sales to value freehold land, Mr Treston did so in the case of Sale 1 because of the lack of other sales evidence and the nearly identical nature of the land. He argued that an approximate freehold value could be determined by assuming that the freehold land produced 7% net return on the unimproved value. As rent is paid at 3%, the lessee could be said to have purchased the remaining 4%, or 60% of the equity. If $269,000 is the price of the lessee’s equity then the land is worth approximately $450,000. On those calculations, the unimproved value of $346,000 applied at the relevant date is conservative. The 7% figure was adopted as a rate which vacant mainland industrial land could bring in. There was no explanation of why the comparison was drawn between the subject land and vacant industrial land, and Mr Treston described the calculation as “a very rough method of looking at this”.
Mr Parsons was unwilling to estimate the market rental of the subject property as freehold but with the relevant restrictions on its use. Indeed he queried both the merit of the analysis (on the basis that it was very hypothetical) and its relevance (saying that, in his experience, people used to pay near freehold values for long term special leases at a time when the rental was offset by the exemption from land tax of such land).
Sale 2 is situated on Canaipa Point at the north-eastern end of Russell Island, about 4 kilometres east of the main transport jetty. Vehicular access on Russell Island is available from a bitumen strip roadway to within 150 metres of the property, and then by a formed earth track. Electricity and telephone services are connected to the property and, at the date of the valuation, town water was being connected.
The property has an area of 8,466m². It falls gently from its Canaipa Point Road frontage to the surrounding 300 metres long frontage to Canaipa Passage. The water frontage is suitable
for mooring boats due to its depth. The land has a 180 degree outlook to the north, east and south.
Improvements on the land comprise a low set, cement rendered brick and corrugated fibro dwelling, an inground concrete pool, a concrete block pump shed and a galvanised iron sheet clad garage, all of which are in fair condition. Although the land is zoned Restricted Open Space, it is developed with a single unit dwelling which is an "existing-non conforming use" under the zoning. Redlands Shire Council has consented to the dwelling being used as a caretaker's residence.
The land was sold to the Royal Queensland Yacht Squadron in August 1990 for
$520,000. Its analysed unimproved value (having made adjustments for the value of improvements) was $433,500. The purchase price was discussed by a well-attended meeting of the Squadron of some 90 people and the meeting endorsed the proposed purchase. The vendor’s asking price was $550,000.
Mr Treston described this sale as not a good comparative sale because of its distance from the subject land and because it has special features which were particularly attractive to the Royal Queensland Yacht Squadron. Although he had not inspected the site, he included the sale because it shows that there is value in waterfront property on these islands. The sale provides only background support, and Mr Treston argued that the best evidence is from South Stradbroke Island.
Sale 3 was the sale of the lease of the subject land to the appellant in June 1986, nearly 6 years before the relevant date of valuation. The purchase price was $150,000. When analysed to discount the value of improvements (the jetty in fair condition) the unimproved value of the land was $137,500. The sale was said to indicate the value of the lease in 1986 with approximately 20 years of the term to run. At the date of purchase the annual rent was $200. As at 1 January 1987, the reassessed annual rent was $4,200. On 1 July 1993, the annual rent was amended to
$9,780 (3% of the unimproved capital value).
Mr Parsons also relied on this sale. He said that the market was as low in 1986 as it was in 1992. There were no indications elsewhere in the market that prices would have doubled in that period. Indeed tourism-related properties had dropped in value.
Mr Parsons argued that people are unwise to pay close to freehold value for longer term leases. Mr Small paid $150,000 knowing that there would be a review of rent within 12 months, though not aware it would rise that much.
Sale 4 is a 809m² block situated at South Stradbroke Island Street, Currigee, approximately 12 kilometres south of the subject land and opposite the suburb of Hollywell on the mainland. Access on the Island is by way of cleared sand tracks. Access to the mainland is only available by aircraft or watercraft.
A telephone service is available, but a reticulated water and sewerage system is not available. All waste has to be disposed of on the mainland.
The site is separated from the "Broadwater" by a timbered esplanade. The site does not have waterfrontage or any improvements. Views of the "Broadwater" are restricted by the vegetation. The site is described as a level sandy allotment.
The land is zoned Residential A and was sold in April 1989 for $135,000. The analysed and applied values are $135,000.
In Mr Treston's opinion, the sale property is inferior to the subject land on a residential basis. The subject land is more than 8 times larger and has direct water frontage.
Sale 5 is a later sale of the same land as for Sale 4.
The property was sold in February 1992 for $160,000. Although there were no improvements of the site, its applied unimproved capital value at 31 March 1992 remained at
$135,000.
The land was purchased as a holiday home site. A dwelling was placed on site after sale.
Mr Treston said that the successive sales of the block suggest that between April 1989 and February 1992 the residential market on South Stradbroke Island at Currigee was rising.
Mr Parsons gave no specific evidence about these sites but said he was familiar with Currigee township and the general levels of sales there. In his opinion, however, the sales were not relevant because of their Residential A zoning.
Sales 4 and 5 were included in Mr Treston’s valuation report for two reasons. First, he thought that a prudent purchaser of the subject land would attempt to erect a caretaker’s residence on that land in connection with the development of a tourist business. Such a purchaser could compare the inferior sale block (which is much smaller than the subject land, has no services, no direct water frontage, no sea view), with the subject and would consider the relative benefit of living in a caretaker’s residence on the subject land while developing, maintaining and securing a tourist development on the land. On that basis, Mr Treston argued, the freehold value of the subject land must be greater than the $140,000 contended for by the appellant.
Second, although he conceded that the market for the land of Sales 4 and 5 was different from the market for the subject land, Mr Treston argued that even sales of residential land on South Stradbroke Island cannot be ignored, because of their location.
Appellant’s sales evidence: In his valuation report Mr Parsons stated that there had been no freehold sales of similarly zoned land in the location of the subject land. Consequently, he provided details of three leasehold sales in the Tipplers Passage area.
Sale 1 was the same as the respondent's sale 1, discussed above.
Sale 2 comprises Lots 38 and 64 in Island Street, South Stradbroke Island. They have a total area of 6,686m² and were sold in February 1993 (nearly one year after the relevant date of valuation) for $120,000. The property is substantially improved and is operated by Jetaway Tours. The sale price was an apportionment by the parties of leasehold land value. The transaction included acquisition of the total Jetaway Tour operations including plant, equipment and goodwill. Mr Parsons said: “I certainly wouldn’t be relying on that sale in any shape or form as far as a market value goes and the fact that it was just merely an apportionment of a larger sale price”. The sale was a fairly involved transaction and Mr Parsons had no way of assessing whether the amount apportioned had any relationship to the value of the leased land.
Sale 3 comprises Lots 53 and 58 in Island Street, South Stradbroke Island. They have a total area of 4,096m² and were sold in August 1994 (2½ years after the relevant date of valuation) for $900,000. The purchase price included the “McLarens Landing” operation as a going concern. The property was highly improved with a restaurant/residence of western red cedar construction, amenities/garage, bar, gazebo, extensive paving, fencing, landscaping and a deep water jetty. Also included in the purchase price was a 16.2 metre passenger catamaran (valued at $500,000), vehicles and generator. Mr Parsons conceded that this sale is difficult to analyse with accuracy. He argued, however, that a reasonable apportionment would suggest:
Passenger catamaran $500,000 Improvements, equipment and business goodwill $300,000 Land (leasehold) $100,000 TOTAL SALE PRICE
The valuation of the catamaran was provided to
$900,000
Mr Parsons by the parties, and he
considered the apportionment of other items to be “fairly conservative”. By deducting the total value of those items from the sale price he arrived at the figure to be apportioned as land value.
On the other hand, if (consistently with Sale 1) a value of $300,000 is ascribed to the land, then
the other improvements would be substantially under-valued. In Mr Parsons’ opinion, such a calculation throws further doubt on Sale 1.
Mr Parsons expressly placed little reliance on Sales 2 and 3 except to the extent that they indicated to him that the price of the Sale 1 land “is totally unrealistic”. Mr Treston placed no reliance on Sales 2 and 3 but noted that they supported the conclusion that “some tourist operators must have some faith in South Stradbroke Island”.
Sale 4: Although Mr Parsons did not have any idea of the values of blocks on Macleay Island, Moreton Bay, relative to blocks on South Stradbroke Island, he also placed some reliance on the sale of a freehold island site on Macleay Island, which has similar zoning to the subject land. The salient facts are as follows.
The land is a waterfront block of 270,161m² in Perulka Bay. Zoned "Tourist Business and Recreation", the site enjoys an eastern aspect over a sheltered bay and is in close proximity to Moreton Bay. The site had gained approval for a 37 unit resort including Marina, however, Mr Parsons understood that the approval had lapsed prior to auction and the property was purchased by a Brisbane investor to build a residence. The land was sold in February 1994 (almost 2 years after the relevant date of valuation) for $200,000. It is adjacent to other subdivided freehold blocks, and Mr Parsons did not envisage there being major difficulties in obtaining approval for a residence on it. In his opinion, the sale land is not directly comparable with the subject, but the subject land must be substantially inferior to it.
The freehold block is 40 times the area of the subject, was an after date sale in a stronger market, and was one where approval for a residence could have been obtained. In Mr Parsons opinion, however, the sale showed how depressed the market is for sites with no services and “it certainly does enlighten us as to where the value level should be for the subject site.”
Mr Treston described Macleay Island as inferior to South Stradbroke Island, with waterfront blocks selling for about $80,000 and blocks elsewhere on the island for around $5,000 to $10,000. From a residential point of view, and in terms of its tourism potential, South Stradbroke Island is far superior to Macleay Island. Although Sale 4 was at arm’s length, it was relevant to note that the approval had lapsed and a dredging permit with respect to mangroves on the frontage had not gone to the new owner. The property’s highest and best use was as a large rural homesite. Despite its zoning, any subdivision or tourist development is unlikely. Those features and the fact that it was a significantly after date sale mean that it can provide little, if any, guide to the unimproved value of the subject land.
Non-sales evidence: Mr Small gave evidence of his unsuccessful efforts to sell the lease of the subject lots for $150,000 in 1987-88, then in 1988-90, 1990 (at auction - no offers), 1993 (no offers), 1994-95 (no offers) and 1995 (at auction in May and August - no offers). Mr Small described himself as a “very very positive vendor”, though not “desperate”. Post auction reports from PRD Realty in May and August 1995 suggest a range of possible factors which detracted from the saleability of the property including the high valuation (which affects the amount of annual rental), the fact that cabins are not permitted, and the fact that the island does not need another day tripper liquor outlet.
Like Mr Small, Mr Parsons also placed some reliance on the failure of the subject land to sell at auction on 16 May 1995 when it had an advertised minimum bid price of $150,000. There were no bids then and the appellant re-advertised the land and scheduled another auction for 22 August 1995 when any reasonable offer would have been accepted. Mr Parsons noted, and Mr Small confirmed, that the marketing programme did not refer to the land as leasehold. Apparently, any enquiry soon dissipated when advised the current zoning and potential usage of the site.
Failure to sell a property, however, cannot be evidence of what it would have sold for at the relevant date of valuation.
Conclusion
This case has to be decided on the principles stated earlier in these reasons namely that:
(a)the best basis for assessing the unimproved value of the subject land is the use of sales of vacant or lightly improved parcels of land;
(b)the unimproved value assessed by the Chief Executive is presumed to be correct;
(c)once it is shown that:
(1) in making the valuation the Chief Executive acted upon a wrong principle, or made a serious error of fact; or
(2) the valuation was made by a method fundamentally erroneous, the presumption is rebutted;
(d)the appellant bears the onus of proving the grounds of appeal.
The major difficulty in this case was the lack of evidence with respect to the sale of comparable properties at or before the relevant date of valuation.
In summary, the appellant’s evidence was unsatisfactory. Sales 2 and 3 were significantly after date sales of leases (not freehold) and gave no clear indication of the land
value component of transactions involving businesses, land and other property. The sales were, in effect, disavowed for present purposes by Mr Parsons. Sale 4 was a significantly after date sale of a block 40 times the area of the subject, on an island some distance from South Stradbroke Island where real estate values generally are much lower.
The respondent’s sales evidence was not much more satisfactory. The respondent placed little reliance on Sale 2. Sale 3 was the sale of a lease 6 years before the relevant date of valuation and must be given little weight unless market conditions in March 1992 were substantially the same as in June 1986. Sales 4 and 5 must be given relatively little weight. Not only is the land significantly smaller than the subject, it is zoned Residential A and was sold to a market different from that for the subject land. The properties would only be comparable if there was a high likelihood that a residence could be built on the subject land. I have found that a purchaser could not assume that the Council would approve the construction of a caretaker’s residence as part of a tourist enterprise on the land.
In the end, the case must be decided by reference to the parties’ Sale 1.
Sale 1 is inherently problematic because it was a sale of a lease rather than a sale of freehold land. Mr Parsons suggested that Sale 1 was a “one off” purchase. It did not set a market trend. Indeed, with the benefit of hindsight, the sale was out of line with the market for properties of that type. He argued that, if Sale 1 had been disregarded and the market trend for tourist-related properties had been followed there would have been a decline from the March 1990 valuation. Rather, there was an increase in valuation of from $140,000 as at 31 March 1989 to $170,000 as at 31 March 1990 (+21.4%) to $326,000 as at 31 March 1992 (+91.8%). Accordingly, a valuation of $140,000 (in keeping with the 1989 valuation) is appropriate.
The appellant has raised sufficient questions about the Sale 1 to convince me that it should be treated with some caution, and the respondent’s evidence is not wholly compelling. Indeed it may be that the parties’ submissions are two sides of the one coin. The sale may well have been an arm’s length commercial transaction which would have raised few questions if the site had been available for development for tourist/backpacker style accommodation. At the date of purchase, the purchaser may well have considered the sale to have been a market value transaction. He may have revised that view later when he better understood the limitations on its use, and when the rent rose substantially.
Some suggestions that Sale 1 is not completely reliable for present purposes may also be gleaned from Mr Treston’s evidence when he said:
“... I prefer not to have anything to do with [sales of leasehold] if I can. However in this case, Mr Bull’s sale was just too good to be true.”
When asked what he does where there is one sale and the sale looks out of line with other sales, Mr Treston replied:
“If a sale looks suspect we investigate by ringing up the purchaser and vendor which we did and we rang these people up and as per the notes I’ve given previously valuer Ann Mihelac Mr Bull thought that that was fair enough what he paid.”
A little later, when asked whether other evidence would lead him to place the sale to one side in making the valuation Mr Treston replied:
“When this valuation was done, the date of valuation 31st of the third ‘92, the evidence doesn’t suggest that. Maybe looking at it now in hindsight with some later sales you could say that things aren’t that good with Mr Small’s activities trying to sell his lease etc., but at the date of valuation the evidence of Mr Bull’s sale and the evidence I’ve submitted in this report suggested this valuation applied was fair.”
Despite the reservations about Sale 1, the appellant has not shown that the sale should be disregarded. The appellant called no direct evidence about the circumstances of the sale and the purchaser’s state of knowledge about the uses to which the land could be put, nor was there evidence about whether any decisions on objections to valuation or appeals to the Land Court had upset the respondent’s original valuation of Sale 1 land.
I am satisfied, however, that the respondent made an error of fact in relying too heavily on the sale and in proceeding on the basis that it was probable that a residence could be constructed on the subject land. In not completely refuting the sale, the appellant has failed to show that the valuation of the subject land should be reduced to $140,000.
Bearing in mind the provision in s41(5)(a) of the Land Act 1962 (preserved by the Land Act 1994) that, in the exercise of its jurisdiction, the Court shall be governed in its decisions by equity, good conscience, and the substantial merits of the case, I am satisfied that a reduction in the order of 20% is appropriate.
Order
The appeal is upheld. The valuation of the Chief Executive is set aside and the unimproved value of the land is determined at $260,000.
GJ NEATE MEMBER
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