Daniel M & Nirmala J Kolapudi v. Chief Executive, Department of Natural Resources

[1998] QLC 86

LAND COURT,

BRISBANE

28 July 1998

Re:  Appeal against a valuation -

Valuation of Land Act 1944 -
Valuation Roll No: 4749/90135
Local Government: BCC-Tingalpa

(V98-58).

Daniel M and Nirmala J Kolapudi

v.

Chief Executive, Department of Natural Resources

D E C I S I O N

unregistered valuer.

• Sale 2 - (Nardie Street, Eight Mile Plains - Lot 479 on RP 851855).

This is a 616 square metre regularly shaped elevated "Residential A" lot, with an easy fall from rear to the road. The restricted local views are impacted by an overhead electricity tower about 200 metres to the south-east. There are glimpses of the Gateway Arterial Road to the south. Because of its closer proximity to the highway there is an increased level of traffic noise. Services and access are similar to the subject. The sale is seen as inferior due to its smaller size, and inferior location, topography and position.

The sale sold in March 1996 for $73,000, which after allowing for improvements was analysed at $71,000, and applied at $62,000.
•	Sale 3 - (12 Brampton Street, Eight Mile Plains - Lot 23 on RP 839086).

This is a 700 square metre "Residential A" lot of regular shape, generally level, and falling gently towards the road. The sale is elevated in a good quality area with local views. Access and services are similar to the subject. The sale is seen as slightly inferior due to its smaller size, although its topography, position and location are seen as slightly superior.

The sale sold in May 1996 for $72,000, which after allowing for improvements was analysed at $70,000, and applied at $70,000.
•	Sale 4 - (120 Holmead Road, Eight Mile Plains - Lot 496 on RP 846681).

This is an 840 square metre "Residential A" lot, which is generally level, regularly shaped, with a crossfall which has subsequently been cut and filled for building purposes. The lot is well elevated with good local views, in a good quality new area. Access and services are similar to the subject. The sale is seen to have a slightly superior position and is seen overall as comparable to the subject.

The sale sold in January 1997 for $91,000, which after allowing for
improvements was analysed at $89,300, and applied at $75,000.

In considering the sales evidence, Ms Becke noted that her Sale 4 occurred well after the relevant period, but she argues that the sale demonstrates that the market in that area had not changed from 1996 to 1997. In respect of Sale 3 she also noted that the Departmental record of that sale had an "exceptional circumstances" notation, indicating that there had been some unusual circumstances involved in the sale, and it should therefore be treated with some caution in its application. On checking with the vendor she found that the vendor had purchased the land for $81,000 about four years previously and had therefore sustained a loss of $9,000 with Sale 3. She concluded that the vendor may have been an anxious party to Sale 3 and its representation of the market should also be accepted with some caution.

In respect of the sale of the subject the respondent was not aware of that sale when the original valuation was determined in 1996, however she had considered the sale following the objection by the appellants. Her investigations revealed the earlier conditional contract at $72,000 and, as the sale of the subject at $62,500 appeared to be out of line with other sales evidence, she contacted the former vendor, who was quite elderly, and now with ill health is in a nursing home. The vendor is the current owner of Lot 497, which is currently also for sale. Apparently the sale of the subject in 1996 was negotiated on behalf of the vendor by a real estate agent who advised that the vendor was short of cash at the time and anxious to sell. The agent was of the view that the appellants had bought the subject at a very good price.

Ms Becke had not been aware of the soil test problems on the subject until the Court- supervised preliminary conference in April 1998. Following that conference she allowed for an additional $3,000 deduction in the valuation acknowledging the soil problems, and the Chief Executive under section 68 reduced the valuation to $72,000. Ms Becke had confirmed the advice about the need for additional foundations with officers of the Brisbane City Council who provided copies of the new building plans for the subject. She based the reduction of $3,000 upon Departmental costs for similar underpinning and piers. A request to the appellants for further evidence of the costs associated with removing the fencing encroachment had not been responded to, so that such costs were not considered in the reduction of the valuation to $72,000. Doctor Kolapudi also sought to draw comparisons with several other parcels in the area, however the details were not specific and the sales tended to be of an older nature. Ms Becke claims that relativity with the larger parcel (Lot 497) is in line with the general relativity for the area. She claims that relativity with adjoining Lot 496 is appropriate, as both parcels have similar characteristics, although Lot 496 is at the top of the hill and is level with the road, while the subject is slightly below the road. She draws her primary comparison with Sale 1, which is higher and on a quieter cul-de-sac.

Decision: I turn first to the Legislation and noted that the meaning of "unimproved value" is

defined in section 3(1) of the Act which says:

"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.

(2) 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 as at which the value is required to be ascertained for the purposes of this Act. "

In seeking direction on the understanding of the meaning of what might constitute a fair market price for the land if offered for sale, I note that guidance was given by the High Court of Australia in Spencer v. The Commonwealth of Australia (1907) 5 CLR 418, where Griffith C.J. said at page 432:

"

In my judgment the test of value of land is to be determined, not by enquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e. whether there was in fact on that day a willing buyer, but by inquiring `What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell? ' ’

It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together. "

The key to understanding that guidance lies in the meaning of a "willing but not over- anxious vendor and purchaser". In the sale of the subject I note that the vendor would appear to have been under the dual pressures of ill health and financial unpredictability at the consummation of the sale in August 1996. This may have been heightened by the collapse of the former offer which had defaulted in view of uncertainty of the nature of the soil of the subject. For whatever reason, I find that Ms Becke's caution in adopting the sale of the subject would appear reasonable, in view of her concern that the sale appeared to be out of line with other comparable sales.

I note in this regard the findings discussed in Determination of Rents and Unimproved
Values for Conversion Purposes - Perpetual Lease Selections and Grazing Selections -

Goondiwindi District (1974) 1 QLCR 45 where the President said at page 48:

"

I think I should say at this juncture that whilst a sale of a subject property around about the relevant date in normal circumstances is cogent evidence of its value, it is always necessary to check the analysed value against the standard reflected by other sales of comparable properties to ensure that it conforms to the `norm' of the market. If the sale does not so conform caution must be used in its application and it may even be proper to reject it if it is shown to be a sale out of line with the market `norm'.

This check becomes vital, in my opinion, in times of a varying market be it rising or falling or in times of an erratic market. One cannot assume, ipso facto, that the analysed sale figure equates fair market value for the subject purposes. "

Generally speaking, the sale of a parcel of land is strong evidence of the market value of that parcel, except where there is other evidence to discredit that sale. That was found by the Land Appeal Court in Chief Executive, Department of Lands v. J and L Lorenzen (AV93-22), 1 June 1994, unreported, where the Land Appeal Court said at page 4:

" Whilst we agree that a sale of the subject land should always be considered in assessing its value we hasten to stress that such a sale is only prima facie evidence of its value. The weight which will be given to the sale is dependent upon a number of factors, the most important of which is whether the sale is in reasonable conformity with the market as demonstrated by other sales of comparable land."

Where a sale of the subject is out of line for some reason the correct approach by a valuer is not to seek to adjust the price to what the valuer considers should represent the market value, but rather to examine the features of the sale to determine whether there was some unusual aspects of the sale. That was found in Collins & Ors v. The Minister (1922-24) 6 LGR 84, where Pike J. is reported as saying:

" You have either got to take the sale as representing the fair market value, or reject it. You cannot take a sale at a price and say: `That was the sale price, but in my opinion it is not the correct price: I am going to alter the price paid by this particular purchaser'. If that is done in the analysis of sales, one might as well reject the whole of those sales, and simply say what is the witnesses' opinion of the land to be valued. "

(See "Land Valuation and Compensation in Australia" Rost & Collins (1996)
Page 87.)

In the current matter Ms Becke has quite properly chosen not to use the sale of the

subject for the reasons given.
In seeking comparison with sales of other vacant lands in the area, I note that the
respondent has followed the principle outlined the Land Appeal Court in PH Clough v. The
Valuer-General (1981-1982) 8 QLCR 70, where the Land Appeal Court said at page 76:

" It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value. The reason is obvious. In applying such sales there is no room for error in analyzing the value of improvements. "

That was also supported in R and MM Barnwell v. Valuer-General (1990-91) 13 QLCR

13, at page 17.
The approach by Doctor Kolapudi to seek comparison with other parcels on a pro rata
basis is also not in line with guidance provided in Hans and Else Grahn v. Valuer-General
(1992-93) 14 QLCR 327, where the Land Appeal Court found at page 330:

"

The appellants fail on this point because the appropriate basis for the valuation of a residential lot is not the application of a rate per square metre but an assessment of the unimproved value of each lot as land used for single unit residential purposes. As the Land Appeal Court said in its decision on the appellants' previous appeal (H and E Grahn v. The Valuer-General, AV89-246 and 247, 13 December 1990):

` for the purpose of valuing residential sites, the preferable method of comparison is on a site to site basis and not on the basis of a unit area valued comparison. Site for site comparison should take into comparison such matters as the size of the lots, the situation of and access to the lots, the shape and topography of the lots etc and comparisons on a unit area basis do not necessarily reflect valuation considerations for the above features."

I turn then to the respondent's sales and note that Sale 4 occurred well after the date of issue of the valuation on 22 October 1996. In respect of the relevant dates of sales analysed, I note that under section 18(1) the Chief Executive shall fix the date of valuation, and under section 18(2) all lands in the area shall be valued at the date so fixed. This sets the date at which sales occurring from the last date of valuation are to be analysed. However, section 52 of the Act establishes the date from which an appellant may appeal a valuation, as being within 60 days of the date of issue of the valuation. This principle has been adopted by the Court and noted in KP and RD Weisenberger v. Valuer-General (1978) 5 QLCR 125, and again in RG McMurray v. Valuer-General (1983) 9 QLCR 35, where the Court found at page 36:

" As is stated in the decision handed down by the learned President, the Land Court, and on appeal the Land Appeal Court, can only consider the primary production activities carried on on the land between the date of the valuation (31st March 1980) and the date of the issue of the valuation (12th February 1981). "

I note that Ms Becke has also treated her Sale 3 with some caution in respect of the "exceptional circumstances" notation on the record of the sale. However, while the vendor in that sale had in fact lost $9,000 over a period of four years with Sale 3, such an occurrence on its own does not necessarily indicate that Sale 3 did not reflect the state of the market in May 1996. There could be many reasons why the value of a parcel of land may change over a period of time. Changes in the value of land were noted in CH and BD Henricks v. Valuer-General (1983) 9 QLCR 59 wherein the Full Court of Queensland, Macrossan J. (C.J.) said at page 63:

" The percentage increase shown in the selected cases was in each instance considerably less than the increase applied to the subject land as between the two valuation dates. The weakness in such a selective comparison is obvious as there could be any number of reasons why blocks in the same valuation area should increase at different rates over a period of five years. "

The use of comparable sales depends upon the skills of the valuer, and involves certain judgments and adjustments, however some guidance was provided in Brewarrana Pty Ltd v. Commissioner of Highways, S.A. (1973-76) 32 LGRA 170, where Wells J. said at page 180:

" ... there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not. It is, in my view, all a matter of degree: some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. Just where the line is to be drawn is, it seems to me, the very sort of question that is fit for the expert valuer to determine; the assessment of the risks of adjustment is peculiarly within his sphere of skill. "

While her Sales 1, 2 and 3 all occurred within the relevant period for this valuation, I note that she has relied mainly upon her Sale 1 as the most comparable sale. In drawing that comparison she has concluded that Sale 1 is slightly superior with an analysed value of $83,700. Because the purpose of the valuation is for revenue collection, the respondent has sought to apply that analysed figure at a conservative value of $72,500.

Such an approach follows the principles established by the High Court of Australia in
Commission of Succession Duties (S.A.) v. Executor Trustee and Agency Company of South
Australia Limited and Others H.C. (1946-47) 74 CLR 358, where Dixon J said at page 373:

" I have had the advantage of reading the judgment prepared by Williams J. and agree in it. I should like, however, to add for myself that there is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a court's attitude in the application of the test. In a case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate. "

From the evidence there would appear to be some misunderstanding by the appellants of the intentions of the computer outputs from the respondent. Doctor Kolapudi has concluded that wherever the determined unimproved capital value differed from a known sale price, the difference reflected only the value of improvements upon the parcel of land. He was apparently unaware that the Chief Executive also applies some discretional factors in an effort to apply a conservative approach to the valuation in accordance with the principles outlined above.

On the evidence before me I find that the appellants have not seriously challenged the methods of calculations of the respondent in determining the valuation. Under section 33 of the Act, the unimproved value is to be accepted as correct unless proved otherwise:

" 33. Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered. "

I note further that the onus to prove that an error has occurred is found in section 45(4) of the Act, which, when referring to an appeal to the Court says:

" 45.(4) Such notice shall state the grounds of appeal and the appeal shall be limited to the grounds so stated and the burden of proving any and every such ground shall be upon the owner. "

The need to demonstrate that the Chief Executive has made some error in method or calculation was established in Brisbane City Council v. The Valuer-General (1977-78) 140 CLR 41, where Gibbs J. said at page 56:

" In my opinion once it is shown that in making the valuation the Valuer-General acted upon a wrong principle, or made a serious error of fact, the presumption created by s.13(7) is rebutted. " (Now section 33).

On balance I believe the revised valuation of the subject at $72,000 is supported by the sales evidence, and makes an appropriate allowance for any likely problems emanating from the soil tests. Because of the two-storey nature of the existing building it is possible that some additional foundation costs may have been required, over and above those needed for a single storey dwelling. Such extra costs can therefore be a function of the improvements to be constructed, rather than entirely as a consequence of problems with the soil. Ms Becke has made a conservative allowance for soil problems which provide some concession to the appellants.

Conclusion: proved their case. The appeal is dismissed, and the unimproved value of the Chief Executive is affirmed at $72,000.

(NG Divett)
Member of the Land Court

This matter relates to a property located at 114 Holmead Road, Eight Mile Plains,
Brisbane, and described as Lot 495 on RP 846681. The land has an area of 840 square metres
and is located approximately 1.5kms south-east of the Mt Gravatt Garden City Regional
Shopping Centre. There is also a local shopping centre about 100 metres west of the subject, and
primary and secondary schools are in close proximity.
Background: and channelling. The lot has a southerly aspect, and is slightly below road level, and there is currently some ponding of surface water on the front of the parcel after rain. The lot is regular in shape and falls slightly towards the level building site, then falls a further 1 metre towards the north-western rear corner. The key issues are the sale of the subject, the nature of the land, and comparison of sales.
The land is zoned as "Residential A" under the Town Planning Scheme of the Brisbane City Council of 13 June 1986, and effective at the date of valuation at 1 January 1996. On 22 October 1996, the Chief Executive, Department of Natural Resources, issued a valuation at $75,000. Following an objection the Chief Executive confirmed that figure on 2 December 1997. The appellants appealed on 2 February 1998 claiming the valuation should more properly be $62,500. The date of effect of the valuation is 16 August 1996. Following a Court- supervised preliminary conference on 7 April 1998, the Chief Executive reduced the valuation under section 68 of the Valuation of Land Act 1944 to $72,000 on 26 May 1998.
Doctor D Kolapudi appeared and gave evidence on behalf of the appellants. Ms S Watt appeared for the respondent, calling evidence from Ms S Becke, the Departmental Registered Valuer now accepting responsibility for the valuation, which was originally undertaken by an The Evidence:
The appellants argue that they purchased the subject in August 1996 for $62,500 in an "arms length" transaction. Doctor Kolapudi confirmed that there had been an initial conditional contract for $72,000 with the former owner, from which the appellants had withdrawn following detailed investigations of the subject. Their investigations disclosed that there had been a fencing encroachment along the western boundary, and soils tests indicated that additional pier foundations would be required for the two-storey building now erected upon the subject.
Advice to the appellants at that time indicated that additional building costs of between $5,000 and $12,000 would need to be incurred for the foundation piers. Doctor Kolapudi claims that as a prudent purchaser he withdrew from the sale at $72,000, and renegotiated the final sale of the subject at $62,500.
Doctor Kolapudi also drew comparison with relativity between the subject and the adjoining parcel to the east, 116 Holmead Road (Lot 496), which is also currently valued at $72,000. He claims that Lot 496 has a lesser fall from front to rear, and does not require a retaining wall similar to that currently proposed on the subject in order to achieve a level building pad. Estimates of the cost of the retaining wall vary between $5,000 and $10,000. He also claims that views from Lot 496 are superior to the subject, and Lot 496 is a more regular shape than the subject. Doctor Kolapudi also drew comparison with relativity with 124 Holmead Road (Lot 497), which has an area of 2,000 square metres with an unimproved value of $135,000. On a pro rata basis he claims this supports a lower unimproved value for the subject.
In respect of the fencing encroachment along the western boundary of the subject, Doctor Kolapudi engaged the services of a licensed surveyor to establish the correct alignment, and the fence has subsequently been located to that position. He claims that this additional cost also mitigated against the value of the subject when the appellants acquired the property in 1996.

In support of her valuation, Ms Becke supplied the following comparisons of sales of

vacant lands:

• Sale 1 - (Lindeman Place, Eight Mile Plains - Lot 26 on RP 839087).

This is a 700 square metre "Residential A" corner site, of slightly irregular shape, which is generally level and falls gently to the road. The sale is well elevated, with local views, and is located in a quality area. Access is good to Lindeman Place which is bitumen sealed with concrete kerbing and channelling. Electricity, water, sewerage and telephone are available. The sale is smaller in area, has slightly superior topography, location and position and is seen as overall comparable to the subject.

The sale sold in October 1995 for $85,500, which after allowing for
improvements was analysed at $83,700, and applied at $72,500.