Chief Executive, Department of Main Roads v Body Corporate for Golden Sands Community Title

[2000] QLAC 81

[2000] QLAC 81

 

IN THE LAND APPEAL COURT HELD AT BRISBANE

Re:Appeal against a decision of the Land Court - Determination of Unimproved Value -

Local Government: GCCC-Gold Coast (AV99-280)

BETWEEN

ChiefExecutive, Department of Natural Resources AND

Body Corporate for Golden Sands Community Title

Appellant

Respondent

BEFORE THE HONOURABLE MR JUSTICE MUIR, MR RP SCOTT AND MR RE WENCK

REASONS FOR JUDGMENT

Delivered at Brisbane this Fifteenth day of December 2000

1. This appeal arises out of a valuation having been carried out by the appellant of land owned by the respondent, that valuation being prepared pursuant to the Valuation of Land Act 1944 as at a relevant date of 1 October l997. The Chief Executive appellant had valued the subject land at $9,300,000, but that figure had been reduced by the Land Court at first instance to $8,060,000. The subject land is located at 3577 Main Beach Parade, Main Beach, Gold Coast, and is described as Building Unit Plan 7933, Parish of Gilston. There is constructed on the subject land a 17-storey building known as "Golden Sands" which contains 65 residential units or apartments. The building was described by the learned Member at first instance as being of "an older design" not having en suites to the bedrooms nor an entry vestibule nor other features of more modern buildings in the area. The land enjoys direct frontage to the beach and is located about 2 km east of the Southport Central Business District (CBD) and about 2.5 km north of the Surfers Paradise CBD.

2. The subject land has an area of 3,503 m² and is zoned "Residential Multi Unit" under the Gold Coast City Town Planning Scheme, which was gazetted on 11 February 1994 and which applied at the relevant date for valuation purposes. The relevant "Residential Density and Height Control Map" identifies the land as D2 and H3. This means  that,  together  with  the  need  for  compliance  with  density  constraints,  the

maximum permissible height of any building on the land would, at the relevant date, be three storeys not the 17 storeys found in the "Golden Sands" structure. The lawful use of the building presently on the land is, however, protected under s.15 of the Town Planning Scheme and by s.3.1(1) of the Local Government (Planning and Environment) Act 1990 which provides:

"3.1(1) A lawful use made of premises, immediately prior to the day when a planning scheme or an amendment of a planning scheme commences to apply to the premises, is to continue to be a lawful use of the premises for so long as the premises are so used notwithstanding -

(a)     any provision of the planning scheme or amendment of the planning scheme to the contrary (other than a provision to which subsection (1A) applies); or

(b)   that the use is a prohibited use."

1. It is common ground between the parties that this provision applies to the subject land and that therefore the use of the building on the land may be described as an "existing lawful non-conforming use", a phrase used in common parlance and also one employed in s.3.2(1) of the Local Government (Planning and Environment) Act. It is this particular feature of the subject land which underlies the central issue in the appeal before us.

2. Valuations pursuant to the Valuation of Land Act 1944 are carried out on the basis that the land is unimproved. Section 3(1) of the Act provides:

   "3.(1)  For the purposes of this Act - 'unimproved value' of land means -

   (a)     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; and

(b)     in relation to improved 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, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist."

1. It has been made abundantly clear in the authorities that land to be valued as unimproved must be treated as if any improvements on the land, had never been made. One such authority is Toohey's Ltd v. Valuer-General (1925) AC 439 in which it was

said at p.443 by the Privy Council in respect of the then existing New South Wales legislation:

"Now, what he (that is, the valuer) has to consider is what the land would fetch as at the date of the valuation if the improvements made had not been made. Words could scarcely be clearer to show that the improvements were to be left entirely out of view. They are to be taken, not only as non- existent, but as if they had never existed."

Those observations are equally applicable to the statutory provisions under consideration.

1. The valuation process is therefore one of valuing the land on an unimproved basis thus opening up the inquiry as to what the highest and best use of the land may be (Spencer v. The Commonwealth (1907) 5 CLR 418) for any lawful uses outside the existing use of the land.

2. That proposition is, however, subject to the statutory proviso contained in s.3(4) of the Valuation of Land Act:

   (4)Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed that -

(a)     the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates; and

(b)     such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used;"

1. The unanimous view of the Full Court in Stubberfield v. The Valuer-General (1989 ) 12 QLCR 328 was that this provision was introduced into the Act to deal with the situation where land to be valued under the Act was subject to a lawful non- conforming use. The provision, which is expressed in similar terms to s.6(2) in analogous New South Wales legislation, was designed to meet factual situations of the type encountered for example in Wunderlich Limited v. The Valuer-General (1960) 5 LGRA 50. In that case, which concerned a lawful non-conforming use, it was held that the statute, as it stood, required that the unimproved value should be determined not by reference to the actual use of the land but by reference to the permitted use under the relevant by-laws. In the result the land value was determined on the basis of a much lower valued use than the actual use.

2. The parties agree that in the case before us the value of the subject land is to be determined in accordance with s.3(4) of the Act. It will be useful at this point to provide

a sharper focus to the issue which separates the parties by describing the valuation method employed by the Chief Executive at first instance and the consideration by the learned Member of that method. No useful purpose will be served by providing a description of the valuation evidence provided to the Land Court by the landholder. The Member placed no reliance on that evidence and no complaint concerning that was raised before us.

1. The Chief Executive's valuer, Mr Crowley, approached his task by valuing the subject land on the assumption that the improvements did not exist (in accordance with s.3(1)(b) of the Act), and then adding a premium in recognition of the fact that the land had been developed to a higher level than would have been permitted under the zoning. He did not provide a discrete assessment of the premium for that higher usage but added an allowance of 15% to cater both for the premium and for what he saw to be certain locational advantages of the subject land. He obtained the basis for his valuation from the evidence of three sale transactions, the details of which were included in his valuation report. His valuation method cannot properly be described as the "bottom up" method discussed in Queensland Turf Club v. The Valuer-General (1979) 6 QLCR 180 as he did not first express a view as to the value of the subject land as if s.3(4) did not apply, then add the premium. It would generally be preferred that this be done as it provides a clearer view of the importance the valuer places on the added premium. This comment is not, however, a criticism of any principle of the valuation methodology employed. We note that in Muir v. The Valuer-General (1977) 4 QLCR 81 the Land Appeal Court accepted the "bottom up" method in a case involving the provision presently under consideration though then designated as s.12(1A) of the Act.

2. In adding the premium for the higher usage of the subject land over, in particular, his Sale No. 1 which was limited to development not exceeding three storeys, Mr Crowley had regard to the dimensions of the existing 17-storey building in the form of its gross floor area and plot ratio, but carried out the valuation on the basis that a new building of similar dimensions could be constructed on the land. The value revealed by the comparison of any land with unimproved or lightly improved sales would, of course, be arrived at on this basis usually, however, without any question arising as to whether a new or old building was envisaged. In this case, however, given the particular requirements of s.3(4), the landholder raised a concern that Mr Crowley had valued the land by assuming a new building. An issue collateral to that concern was agitated before the Court at first instance and that was: in considering the prospect of a new

building on the subject land with similar dimensions to "Golden Sands", should there be some allowance in the valuation for the possibility that approval to develop such a building might not be forthcoming from the local authority. We will deal first of all with the question of whether it is appropriate to carry out the valuation on the basis that a new building may be constructed on the land.

1. The submission for the respondent landholder is that s.3(4) contemplates a valuation being carried out on the basis of the actual building existing on the land, and, as Mr Crowley had not carried out his valuation on that footing he had made an error of law. Mr Needham for the respondent submitted that s.3(4) covers both the case of existing improvements enjoying classification as a lawful non-conforming use and the prospect of the improvements being destroyed, but being able to be reinstated. In support of that understanding of the provision he provided a grammatical break-up of the section as follows:

   "(4)     Notwithstanding anything contained in this Section, in determining the unimproved value of any land it shall be assumed that -

(a)the land

(i)      may be used …. for any purpose for which it was being used, or

(ii)     may continue to be used for any purpose …. for which it could be used

at the date to which the valuation relates, and

(b)such improvements may be

(i)continued, or

(ii)made

on the land in order to enable the land to continue to be so used."

1. Mr Needham's proposition is that in the (i) situation in each of the subparagraphs

(a) and (b) above, the improvements are actually on the land and are being used for the particular lawful non-conforming purpose. In the (ii) situation the land is, under the town planning provisions, able to be used for the particular purpose for which it was being used and it is to be assumed that the land may continue to be used for that purpose and that improvements may be made in order to enable that continued usage.

1. In the facts before us there has been no destruction of the building concerned, thus the valuation must have regard to the existing "Golden Sands" building.

1. As we understand counsel's submissions, the valuation must take into account the quality of the use afforded by the building. Thus in the case of an existing older building such as "Golden Sands" a lower value would be found than would be the case were "Golden Sands" destroyed and about to be replaced by a new building of similar dimensions. We do not agree with that submission. Whilst we have an appreciation of the manner in which Mr Needham has grammatically deconstructed s.3(4), we think that this does not lead to the understanding he urges upon us.

2. It is our view that the statutory provision contemplates a valuation based not on some refined view as to the use of the land, but on its use "for any purpose for which it was being used"; that is, in the present case, for the use of units or apartments for residential purposes. The use of the broad word "purpose" does not in our view invite an inquiry as to whether the manner and quality of the use for that purpose in the case of "Golden Sands" differs from the manner and quality of use in the case of a more modern structure. The word "purpose" must be construed objectively in the context of the section with a purpose, and thus the use, ascertained from the nature of the building, not from some inquiry or observation of its occupants. It will therefore generally be the case that the use so discovered may be described in similar terms to uses dealt with in the relevant town planning scheme

3. The construction we have placed on the provision is reinforced by our understanding of s.3(4)(b). Whilst, as Mr Needham properly pointed out, s.3(4) is concerned both with the continued use of an existing building and, alternatively, with the prospect of replacement of such a building in circumstances of its destruction, s.3(4)(b) refers to such existing or new building "to enable the land to continue to be so used". That is, the provision is concerned not with a different manner or quality of use emerging in the event of a new building being constructed, but with a continuation of the type of use previously carried out on the land.

4. Our consideration of this first issue of the construction of s.3(4) therefore leads us to conclude that no error of principle is revealed by the use of unimproved or lightly improved sales of the type included by Mr Crowley in his valuation in valuing the subject land, notwithstanding that such method coincidentally involves the assumption of a new building of similar dimensions to the existing building being constructed on the land. Before leaving this point, however, we make one further observation. Whilst the issue as to whether a new building might be contemplated in the valuation process under s.3(4) appears not to have been raised previously, the point that the dimension of the

building on the subject land needs to be taken into account has been the subject of a consistent line of decisions in this Court and in other jurisdictions. (Frodor Pty Ltd v. The Valuer-General unreported Land Court 13 May 1988; GFM Investments Pty Ltd v. The Valuer-General unreported Land Appeal Court 28 June 1991; 64 Thorn Street Pty Ltd v. The Valuer-General (1983) 9 QLCR 71; Hopgood v. The Valuer-General (1977)

4 QLCR 31; and Pye v. The Valuer-General (1973) 29 LGRA 160 - Land and Valuation Court of NSW)

1. We will confine ourselves to quote from the headnote of Pye where Else- Mitchell J was concerned with the provision in the New South Wales Act, the wording of which is reflected in s.3(4) of the Valuation of Land Act:

   "In determining the value, the appropriate assumption was neither that the land was vacant nor that it could be utilised for the unlimited erection of a residential flat building. The land should be valued on the basis that the maximum development which could be comprehended on it is a building of the dimensions and having the use of that presently erected thereon." (at p.160)

1. His Honour's reasoning expresses in short form the consistent approach of this Court on this question. In support of that approach, we express the view that it is consistent with the language of s.3(4)(b) without which the type of use assumed to continue following the application of s.3(4)(a) would arguably be without physical limitation as to the size of building that might be envisaged. Section 3(4)(b) introduces such a limitation and makes it clear that it is a building of the dimensions of the existing building that needs to form the basis of the statutory valuation in a case such as this.

2. This brings us to the second concern raised in this appeal and that was with respect to the application of a risk factor with respect to the prospect of local authority consent not being granted to allow a replacement building in the event that the existing building were destroyed. In his reasons the learned Member said, "I believe there could be a very real risk that approval to redevelop 17 storeys would be approved, and Mr Crowley should have allowed for that risk …". Consistent with that conclusion the Member found a value of the subject land ignoring the lawful non-conforming use, added a premium to cater for the higher actual usage, then applied a discount to that higher value to allow for the risk as described. That element of this process which provides the discount for risk is the aspect of the Land Court's judgment of which the appellant complains.

3. The appellant submitted that there was no requirement on the facts before us for the Court to direct its mind to the prospect of "Golden Sands" being destroyed and the

landholder being forced into a position of applying for local authority permission to rebuild. We are concerned here with an existing building, therefore with the requirement to proceed on the assumption that the existing use of the land may continue. That is the statutory basis upon which the valuation must proceed. An intending purchaser of land with improvements which enjoy the potential of lawful non- conforming use provisions, may factor into the price an allowance for the prospect that local authority permission to rebuild the improvements, in the event of their destruction, may not be forthcoming or may be difficult to obtain. We are not concerned, however, with the assessment of improved market value in a case under the Valuation of Land Act but with unimproved value. Section 3(4) does not change that. All that the statutory provision does is to take out of consideration the wide range of uses that a valuer might direct his mind to in settling upon the highest and best use of the land and instructs him to accept the present use of the land as the use upon which the valuation must be based.

1. The result is then that we find that the landholder has not shown that the Chief Executive "acted upon a wrong principle, or made a serious error of fact" (Brisbane City Council v. The Valuer-General (1978) 140 CLR 41 at 56 per Gibbs J). Therefore, in accordance with s.33 of the Valuation of Land Act the valuation of the Chief Executive is "deemed to be correct". The appeal is therefore allowed and the value of the subject land is determined at Nine Million Three Hundred Thousand Dollars ($9,300,000).

(Muir J) JUSTICE OF THE SUPREME COURT

(RP Scott) MEMBER OF THE LAND COURT

(RE Wenck) MEMBER OF THE LAND COURT