Byers v Chief Executive, Department of Natural Resources and Mines

[2002] QLC 37

LAND COURT

BRISBANE

21 MAY 2002

Re:     Appeals against Annual Valuations

Valuation of Land Act 1944
  Shire of Calliope
  (AV2001/0217 and V2001/0603)

Stanley K and Lenore Byers (AV2001/0217)

Lenore Byers (V2001/0603)

v.

Chief Executive, Department of Natural Resources and Mines

(Hearing at Gladstone)

D E C I S I O N

These are two appeals by landowners in the Shire of Calliope against the unimproved values applied to their properties by the Chief Executive, Department of Natural Resources and Mines (the respondent) under the provisions of the Valuation of Land Act 1944.

Background
           Mr Stanley K Byers and Mrs Lenore Byers are the owners of a parcel of land described as Lot 5 on Plan SP133048, Parish of South Trees, containing an area of 1.601 ha.  As at 1 October 1999, the respondent applied an unimproved value of $41,000 to that property.  The owners objected against that valuation and following advice that their objection had been disallowed, they appealed to the Land Court advising that their estimate of the unimproved value was $20,000.
           Mrs Lenore Byers is the owner of land described as Lot 3 on Plan SP120829, Parish of South Trees, containing an area of 1.063 ha.  As at 1 October 1999, the respondent applied an unimproved value to that land of $40,000.  Following advice that her objection had been disallowed, she appealed to the Land Court advising that her estimate of the unimproved value was $20,000.
           The grounds of the owners' appeals are similar, relating to the large percentage increase in the two valuations and the severe Council restrictions regarding any improvements that are placed on these lots, which are regarded by the Council as being flood prone.
History
           The history of the appellants' ownership of these lands was outlined by Mrs Lenore Byers, who appeared and gave evidence on behalf of the appellants.  Mrs Byers explained that the appellants purchased a property with an area of about 12 acres in 1992.  At the time the only improvements were a shed and a few mango trees.  They planted more mango trees and constructed two houses, one on the northern part of the property and the other on the southern part.  The northern house was built for their parents, while Mr and Mrs Byers reside in the house on the southern part of the property.  According to Mrs Byers, they had some difficulty in gaining Council approval to build two houses on the property.  However, at that time there was no suggestion that the houses should be constructed on elevated pads to raise them above flood level.
The owners established a mango orchard on the land, which they ran as a commercial venture. The viability of that venture was recognised by the respondent who valued the property under the concessional provisions of s.17 of the Valuation of Land Act 1944 as land used for the business of "farming", as defined in sub-s.(2) of that section.
           Mrs Byers explained that once the enterprise was established, it was quite  profitable for about two years.  However, mango prices declined to the extent that they were doing a lot of hard work for nothing.  They decided to subdivide the land into three parcels.
           The land was subdivided into Lots 1, 2 and 3 on Plan SP120829.  The owners' residence was situated on Lot 1 and the owners' parents' residence on Lot 3.  Lot 2, the middle lot, had improvements including mango trees and a shed, but there was no residence upon it.
           The owners decided to sell Lot 2.  However, the Council had approved the subdivision of that land provided that the owners agreed to pay a bond of $9,520, being the estimated cost to construct a house pad on the highest part of Lot 2 which would raise the level of any dwelling to be constructed on the land above RL 7.5 AHD.  The conditions of that approval are contained in a letter dated 3 February 2000 from the Calliope Shire Council addressed to the owners.  That letter reads as follows:

"  Re:  Bonding on House Pad
  Lot 2 SP120829

Further to your meeting with Mr Jones on 3 February 2000, Council accepts bonding of the house pad on your development provided the following condition is added to the contract of sale.  Note that on signing of the plan of survey that there is no turning back.  The condition of sale to be placed on the contract of sale on Lot 2 SP120829 should be as follows.

'  The subdivision of this land was approved by Calliope Shire Council conditional upon the construction of a building pad to RL 7.5 AHD, immune to a 1 in 100 ARI year flood event.  The construction of the house pad has been bonded by the vendor with Council to the amount of $9520 which is the estimated cost to construct such a house pad on the highest part of the allotment.  On construction of such a house pad, a licensed surveyor shall provide to Council "as constructed" information to Council showing 300 m² of the pad is above RL 7.5 AHD.  Soil tests results showing adequate compaction of the house pad shall also be submitted to Council.  When the above requirements have been completed, Council will on the submission of an official receipt for the construction of the mound, transfer the $9520 to the persons named on the receipt.  Council will not [be] liable for any further monetary claims for the construction of this mound.  Should the mound not be constructed by the 1 February 2002, the then owners of Lot 2 SP120829 shall allow Council to enter the property and construct an earth mound on the highest area of the land to the value of $9520.  This condition shall be passed on to subsequent owners of Lot 2 SP120829 until the house pad is built to the satisfaction of Council.'

The bond being returned to the person paying for the earthworks gives some consistency for negotiating but flexibility for the final arrangement.

Once you agree in writing to the inclusion of this condition of sale for the contract, Council will seal the plan of survey.  Should you have any comments or suggested changes to this condition, please call Mr Trevor Jones on [phone]."

The letter was signed "TR Jones, Director – Engineering and Development".

Mrs Byers said that the owners paid the bond in order to obtain approval of the subdivision and to be able to sell what was then Lot 2. 
           According to Mrs Byers, the Council required other conditions to be met before approving the subdivision of the land, such as the upgrading of Handley Drive.  She said that the owners were amazed that such conditions could be applied to such a small subdivision.  She estimated that the overall cost of subdivision was about $48,000, most of which was incurred in meeting Council requirements.
           Mrs Byers went on to say that  the owners had difficulty in selling Lot 2.  As soon as a potential purchaser discovered that the property was in a flood-prone area, they quickly lost interest.  However, eventually they succeeded in selling the land to people named Kinder and Grant in October 2000 for $89,000.  However, it appears that the purchasers required more land than was contained in the original Lot 2, which necessitated a further subdivision resulting in the present Lots 4 and 5 on Plan SP133048.

The Subject Lands
           There is no dispute between the parties that the lands the subject of these appeals are very similar in character.  Both are situated on Boyne Island, Lot 3 is situated on Handley Drive with good bitumen access available, while Lot 5 is situated on the corner of Boyne Island Road and Handley Drive, with access from the bitumen formed Boyne Island Road.  Both allotments are zoned "Rural" under the Town Planning Scheme for the Shire of Calliope, gazetted on 13 April 1991 and both are used for residential purposes.  Electricity, telephone and town water are connected to the allotments, but they are not sewered.
           Mr BT Coe, a registered valuer employed by the Department of Natural Resources and Mines, appeared and gave evidence on behalf of the respondent.  He described both Lot 3 and Lot 5 in a similar manner, as being irregularly shaped coastal forest sites, intersected by a gully and with frontage to South Trees Inlet.  South Trees Inlet is tidal and fringed with mangroves.  The highest part of each allotment is at about 5 metres AHD, but the Calliope Shire Council had set a minimum building level of 7.5 metres AHD.  Brick dwellings are constructed on each of the sites.  A powerline easement traverses the northern part of Lot 5.

The Relevant Legislation
           The responsibilities of the respondent are set out in the various provisions of the Valuation of Land Act 1944.  The respondent is required to make annually, or periodically, a valuation of all land in a local government area; s.37.  For the purposes of the Act, the valuation of each parcel of land is the "unimproved value" of that land, which is defined to mean in relation to unimproved land, the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that improvements on that land did not exist: s.3(1).  However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time at which the value is required to be ascertained:  s.3(2).
           The "value of improvements" means the added value which the improvements give to the land, irrespective of the cost of the improvements.  However, the added value shall in no case exceed the amount that should reasonably be involved in effecting improvements of a nature and efficiency equivalent to the existing improvements:  s.5.  The Act thus requires the respondent to ascertain the unimproved value of each parcel of land as at the date of valuation, assuming that the improvements on the land had not been made, but also assuming the existence of all present facilities and amenities external to the land, such as roads, power and other services, and assuming also that the adjoining land and the environs are in their existing condition.
           The test of "market value" was laid down by the High Court in Spencer v. The Commonwealth (1907) 5 CLR 418. The High Court found that the market value of land at a particular date is the amount that would have been paid for that land if it had been sold by a willing but not over-anxious seller to a willing but not over-anxious purchaser, both of whom are fully acquainted with the land and aware of all the circumstances which might affect its value, either advantageously or negatively.
However, the Act provides for some exceptions to the unimproved market value concept. One of those exceptions is where land is used exclusively for purposes of "farming", any enhancement in the value of that land because of the potential for some other use, must be disregarded when the valuation is made: s.17(1). The word "farming" is defined in detail in subs.(2) of s.17 of the Act.
           It is well-settled law that sales of vacant or lightly improved land provide the best basis for the assessment of unimproved value:  see Grahn v. The Valuer-General (1992) 14 QLCR 327.

The Respondent's Valuations
           Mr Coe relied upon the sales of four basically unimproved allotments, all situated in Rainer Court, Benaraby, to support his valuations of $40,000 on Lot 3 and $41,000 on Lot 5.  Benaraby is about 10 km south of the subject lands and about  2 km further from the business district of Gladstone.  The subject lands have the advantage of being on the outskirts of Boyne Island and Tannum Sands.  These four sales range in area from 9,998 m² to 2.457 ha and sold between November 1999 and February 2000 for sale prices ranging from $70,000 to $75,000.  As at the date of valuation, 1 October 1999, the respondent had applied unimproved values to those allotments ranging from $62,500 to $67,500, considerably higher than the values applied to the subject lands.
           Mr Coe described each of those sale allotments as being below road level, with an easy slope to an intersecting gully and with a narrow higher ridge in the centre of each allotment which provides a building site unaffected by flooding (above 13.68 metres AHD at Benaraby).
           Mr Coe explained that he chose those sales for comparison with the subject lands because they had river frontage.  Although they were further from Gladstone and major centres than the subject lands, they were superior in topography, as each has a building site well above flood level.  The services available to the sale properties are similar to those available to the subject lands, neither sales nor subject properties having sewerage.  Overall he considered the sale properties to be superior to the subject properties.
           In addition to the four sales at Benaraby, Mr Coe referred to the sale of Lot 4, SP133048, the property subdivided by the appellants and situated between the two subject lands.  Lot 4, with an area of 1.681 ha, was sold by the appellants in October 2000 for $89,000.  Situated on the land at the time of sale was a shed and mango trees and some other improvements, which Mr Coe valued at $20,000.  This left a land value of $69,000 on his analysis of the sale.  As at 1 October 1999, the respondent had applied an unimproved value of $40,000 to that property.  Mr Coe noted that a bond of $9,600 was paid to the Calliope Shire Council for the provision of a building pad and on the completion of that pad the bond would be transferred to the purchaser.
           As the sale adjoins the subject lands and is very similar to each of them, it would normally provide a most appropriate basis for the valuation of the subject lands.  However, Mr Coe pointed out that the sale took place 12 months after the relevant date and, besides, he regarded it as a high sale.  This can be demonstrated by comparing his analysis of $69,000 with the unimproved value of $40,000 applied by the respondent at the relevant date.  Mr Coe said that he included the sale for information, rather than for direct comparison.

The Case for the Appellants
           The appellants' case consisted of two arguments.  First there was what they regarded as the massive increase in the valuations of the allotments, compared with the valuations which had been applied to the land in its unsubdivided state.  While they realised that some increase was inevitable, they did not expect increases of this magnitude.  Their second argument related to the severity of the Council conditions which were imposed before they could subdivide their land and sell Lot 4, the most important being the requirement to provide a house pad of over 3 metres in height and/or payment of a bond to the Council for the provision of the house pad.  They considered that these restrictions would have an adverse impact upon the valuations of the two subject properties.
           Mrs Byers made it clear that while the appellants regarded the area as a nice place to live, they were very concerned about the subdivision conditions which had been imposed.  She felt if all the circumstances had been known about those conditions, Mr Coe would not have used Lot 4 as a basis for the valuation.  Mrs Byers challenged the comparability of the four sales in Benaraby with the subject lands.  She thought that they were much superior; they have direct river frontage without tidal influence and mangroves, and they have building sites well above flood level.

With regard to relativity, Mrs Byers also referred to a property owned by a Mr Morrow which, in her opinion, was the only property comparable to the subject lands.  She had heard that the Council had said that Mr Morrow's land was suitable only for grazing a few cattle and Mr Morrow had taken his house off the market because the people who were interested in purchasing it wanted to make changes to it, but they were not allowed to do so.

The Issues
The greatest concern of the appellants is the significant increase in the valuation of their lands compared with the valuation which was applied to the unsubdivided parcel. However, Mr Coe explained that the unsubdivided parcel had been valued under the concessional provisions of s.17 of the Act as land used for the purpose of "farming". When the land was subdivided and Lot 4 sold, the land no longer qualified for such a concessional valuation. In any case, by Mrs Byers own admission, the appellants ceased to conduct a commercial mango orchard on the land before they subdivided it.
           The second concern is whether the valuations reflect the extent of the conditions which were imposed on the land before Lot 4 could be sold.  It seems that the Council may have changed its policy since the appellants built the two houses on the land before it was subdivided.  At that time, Mrs Byers said they had not been required to raise the level of the land before construction of the houses was permitted; their difficulty then was to obtain approval to build two houses on the one parcel of land.  However, it seems that if each of the subject parcels was in its unimproved state at the date of valuation , such requirements would have been imposed on both of them before construction of dwellings would have been approved.  Any further structural improvements would have to comply with the Council requirements.
           Mr Coe explained why he considered that the sales in Benaraby supported the values applied to the subject lands.  His explanations were, in my view, quite reasonable.  Furthermore, if any additional justification for the valuations was necessary, it is provided by the sale of Lot 4.  Although it occurred some 12 months after the relevant date, it was for a sale price significantly higher than the values applied to the subject lands.  Notwithstanding the requirement for payment of a bond  and the other conditions which would be imposed, in my view, that sale conclusively demonstrates that the values applied to the two subject properties are, if anything, quite conservative. 

In respect of the relativity comparison raised by Mrs Byers, Mr Coe explained that the property owned by Mr Morrow, described as Lot 8 on CTN397, with an area of 5.853 ha, was valued at the relevant date at $49,500, as a rural residential site.  According to Mr Coe, the entire property is below the level 7.5 metres AHD and has difficult access across a gully in wet weather.  Taking those aspects into account, it seems to me that the valuation applied to Mr Morrow's land is in reasonable relativity with the valuations applied to the subject lands.

I realise that the significant increases in the valuations applied to the subject lands would have been of considerable concern to the appellants, but they have been explained and, in my opinion, the evidence has demonstrated that the valuations are well supported.  Accordingly, the appeals must be dismissed.

Orders
           In the case of Appeal AV2001/0217 in the name of Stanley K and Lenore Byers, the appeal is dismissed and the unimproved value on Lot 5, SP133048 as at 1 October 1999, is affirmed at Forty-one Thousand Dollars ($41,000).

In the case of Appeal V2001/0603 in the name of Lenore Byers, the appeal is dismissed and the unimproved value of Lot 3, SP120829 as at 1 October 1999, is affirmed at Forty Thousand Dollars ($40,000).

JJ TRICKETT
PRESIDENT OF THE LAND COURT