GPT RE Limited v Valuer-General (No 2)
[2018] QLC 9
•15 May 2018
LAND COURT OF QUEENSLAND
CITATION: GPT RE Limited v Valuer-General (No 2) [2018] QLC 9 PARTIES: GPT RE Limited
ACN 107 426 504 as responsible entity under instruments 704481554 and 709013845(appellant)
v Valuer-General
(respondent)FILE NO: LVA106-14 DIVISION: General Division PROCEEDING: Appeal against valuation under the Land Valuation Act 2010 DELIVERED ON: 15 May 2018 DELIVERED AT: Brisbane HEARD ON: 22 & 23 February 2016; 23, 24, 25, 27, 30 & 31 January 2017; 1, 2 & 3 February 2017; 24 & 25 May 2017
HEARD AT: Brisbane MEMBER: PA Smith ORDER/S: 1. The appeal is allowed.
2. The site valuation of 123 Eagle Street, Brisbane City (PID 40906821) as at 1 October 2012 is determined in the sum of Seventy Million, Eight Hundred Thousand Dollars ($70,800,000).
CATCHWORDS: REAL PROPERTY – VALUATION OF LAND – OBJECTIONS AND APPEALS – QUEENSLAND – where appellant objects to valuation – where the site value is the basis of valuation – where there are constraints on the development potential of the land – whether certain works on the land are site improvements
REAL PROPERTY – VALUATION OF LAND – OBJECTIONS AND APPEALS – QUEENSLAND – where appellant objects to valuation – where there are sales of other CBD blocks of land in proximity to the valuation date – whether sales are comparable to the subject land
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – CONDUCT OF PARTY OR PROCEEDING – MODEL LITIGANT – whether the respondent acted as a model litigant as regards its analysis of sale evidence – what factors are to be considered
STATUTES – ACTS OF PARLIAMENT – INTERPRETATION – whether use can be made of extrinsic material – whether interstate legislation and case law is of assistance
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – GROUNDS OF APPEAL – whether grounds of appeal are sufficient to support appellant’s contentions
EVIDENCE – GENERAL PRINCIPLES –RULING AND FINDINGS – whether expert evidence should be dismissed on the grounds of impartiality – whether expert evidence from valuation experts can be relied uponLand valuation Act 2010, s16, s 17, s 18, s 19, s 22, s 23, s 169
101 Collins Street P/L v City of Melbourne; Dinias P/L v City of Melbourne (Unreported, Supreme Court of Victoria, Batt J, 2 April 1996) 85, applied
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, followed
Body Corporate for “147-153 Mary Street Gympie” CTS v Valuer-General (2013) 34 QLCR 298, considered
Brisbane Square Pty Ltd v Valuer-General [2016] QLC 69,
Fairfax v Department of Natural Resources and Mines [2005] QLC 11, applied
Buckler v Department of Natural Resources and Water [2011] QLC 7, applied
Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378, followed
GPT RE Limited (as responsible entity) & Anor v Department of Natural Resources and Water (2009) 30 QLCR 100, considered
Hughes Aircraft Systems Internation v Airservices Australia (1997) 76 FCR 151, considered
Macarthur Central Shopping Centre Pty Ltd as TTE v Valuer-General (No.2) [2016] QLC 80, considered
Meiers v Valuer-General [2012] QLC 19, applied
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, followed
Spencer v The Commonwealth of Australia (1907) 5 CLR 418, followed
Steers v Valuer-General [2012] QLC 12, applied
The Melbourne Steamship Co Ltd v Moorehead (1912) 15 CLR 333, followed
Trust Co Limited (ATF Opera House Car Park Infrastructure Trust No 1) v Valuer-General (No 3) [2011] NSWLEC 85, consideredAPPEARANCES: RN Traves QC with ND Loos of Counsel (instructed by Clayton Utz) for the appellant
DB Fraser QC with SP Fynes-Clinton of Counsel (instructed by In-house Legal, Department of Natural Resources and Mines) for the respondent
INDEX
Subject
Background
The subject land
The hearing
The valuation process
Summary positions of the parties
The engineering evidence
Mr Ainsworth
Mr Gould
Analysis of expert engineering evidence
Scope of works
Comparison between 123 Eagle Street and the comparable sales sites
River front retaining wall
Boardwalks
Other site construction issues
The quantity surveying evidence
Mr McHardy
Mr Davidson
Analysis of the quantity surveying expert evidence
The Valuation Evidence
Mr Jackson’s impartiality challenged
Valuer-General’s adoption of different approaches in different cases for the same sale challenged – Model Litigant Principles
Potential intensity of development of subject land
304 George Street sale
111 Mary Street - Vision sale
55 Elizabeth Street sale
Site improvements on 123 Eagle Street
What premium should be applied for 123 Eagle Street as a superior property to the 304 George Street sale
Adjustments relating to size
Site penalty
GPT’s position
The Valuer-General’s position
Conclusions on site penalty
The Valuer-General’s pleading point
Conclusion
Paragraphs
[1]
[2] – [11]
[12] – [17]
[18] – [29]
[30] – [57]
[58]
[59] – [60]
[61] – [62]
[63] – [77]
[78] – [83]
[84] – [88]
[89] – [90]
[91] – [92]
[93] – [95]
[96]
[97] – [100]
[101] – [111]
[112] – [118]
[119] – [132]
[133] – [145]
[146] – [171]
[172] – [181]
[182] – [201]
[202] – [214]
[215] – [222]
[223] – [261]
[262] – [274]
[275] – [278]
[279]
[280] – [315]
[316] – [341]
[342] – [350]
[351] – [354]
[355] – [359]
Background
[1] The appellant, GPT, has appealed against the respondent, Valuer-General’s, valuation of GPT’s land situated at 123 Eagle Street, Brisbane as at 1 October 2012. The Valuer-General’s valuation of the subject land as at that date is $87,000,000 and GPT contends in its Notice of Appeal[1] for a valuation of $68,900,000. The final position adopted by GPT is a valuation of $62,000,000.[2]
[1]Ex 1.
[2]Appellant’s Submissions, page 7, para 2.
The subject land
[2] The subject land has a rather complex make-up. The details that follow are taken from the valuers joint expert report (JER)[3] and their individual reports.[4]
[3]Ex 2A.
[4]Ex’s 2B, 2C and 2D.
[3] The subject land is situated on the eastern side of Eagle Street with extensive frontage to Eagle Street and the Brisbane River. The land slopes gently from Eagle Street down to the river.
[4] A premium grade building, known as the Riverside Centre, is constructed on the subject land. The Riverside Centre contains 43 levels of office accommodation; a ground level retail plaza with restaurants, dining facilities and retail tenancies; and two basement levels of car parking.
[5] The Riverside Centre forms part of what is known as the “Golden Triangle” which is, broadly speaking, that part of the CBD bordered by the Brisbane River, Queen Street, Edward Street and Margaret Street between Edward Street and the river.
[6] It is necessary to understand the tenure make-up of the subject land as there are encumbrances on Lot 123 on SP 208982. These encumbrances have the effect of reducing the land area subject to the valuation from the total area of Lot 123 of 10,700 m2 to an unburdened site area of 6,601 m2 and a burdened site area of 2,082 m2.
[7] Firstly, there is an office tower known as “One One One Eagle Street” located within its own volumetric lot (Lot 111 on SP 208982) in Lot 123. The volumetric lot has three parts. Part A has a footprint of 1,465 m2, extending from RL -150.0 to RL 1.525 and contains the basement car park of that building. Part B has a footprint of 2,017 m2, extends from RL 1.525 to RL 18.5 and contains the ground floor foyer of that building. Part C has a footprint area of 1,897 m2, extends from RL 18.5 to RL 300 and contains the building tower. The general ground surface level is RL 5.0.
[8] The valuers agree that by deducting the footprint area of Part B of Lot 111 (2,017 m2) from the total land area of Lot 123 (10,700 m2), the effective site area for the subject land is 8,683 m2.Consideration must then be given to Easement K.
[9] Easement K has a total area of 2,184 m2 as stated in SP 121079. It is an easement for light and air purposes. It restricts development on the subject land above RL 20. The easement affected portion of the subject land has been calculated by the valuers at 2,082 m2.
[10] Accordingly, taking in to account Part B of Lot 111 and the restrictions associated with Easement K, both valuers agreed that there is an unburdened site area of 6,601 m2 and a burdened site area of 2,082 m2 as regards the subject land.
[11] Survey Plan 208982, clearly showing Lot 123, volumetric Lot 111, and Easement K, is set out in Exhibit 6B and is reproduced below. It should be noted that Easement K is a triangular wedge shape and runs along the boundary with the Brisbane River.
The hearing
[12] The hearing of this matter was rather tortured. It commenced on 22 February 2016 and, by 23 February 2016, it became obvious to all involved that the parties were not in a position to continue with the hearing. Following the taking of further evidentiary steps by the parties, the hearing resumed on 23 January 2017 and continued for 9 days.
[13] At the conclusion of the evidence on 3 February 2017, both parties sought orders requiring written submissions and oral submissions. Due to the complexity of the matter, the parties’ requests were agreed to. Written submissions were subsequently produced and oral submissions heard on 24 and 25 May 2017.
[14] The subsequent delay in providing these reasons is regretted, but was, at least to some extent, beyond my control. At my request, the parties were advised in writing subsequent to the hearing that I suffered an injury requiring surgery and an extended leave of absence to recover to the point where I could return to duties. This unfortunately delayed this decision. My overall recovery continues.
[15] GPT was represented by Mr Traves QC and Mr Loos of Counsel instructed by Clayton Utz. The Valuer-General was represented by Mr Fraser QC and Mr Fynes-Clinton of Counsel, instructed by In-house legal, Department of Natural Resources and Mines.
[16] A total of six expert witnesses gave oral evidence at the hearing. All experts provided JER’s and individual reports. Expert engineering evidence was given by Mr Ainsworth, called by GPT, and Mr Gould, called by the Valuer-General. Expert quantity surveying evidence was given by Mr McHardy, called by GPT, and Mr Davidson, called by the Valuer-General. The expert valuers were Mr Jackson, called by GPT, and Mr Hart, called by the Valuer-General.
[17] An inspection of the subject land and various sales properties was conducted by the Court in the presence of the legal representatives of the parties on 22 February 2016. A bundle of material referred to during the site inspection is Exhibit 5.
The valuation process
[18] It is the responsibility of the Valuer-General, pursuant to the provisions of the Land Valuation Act 2010 (LVA) to undertake valuations of all properties throughout Queensland. Those valuations are the basis for rating and land tax and related purposes.
[19] I note with approval what his Honour Isdale said in Steers v Valuer-General:
“[8] The use of sales to provide comparisons of value is well established. In NR and PG Tow v Valuer-General (1978) 5 QLCR 378, the Land Appeal Court constituted by Stable SPJ, Mr Smith and Mr Carter said at page 381:
‘Courts of the highest authority have laid down that the best test of value is to be found in the sales of comparable properties, preferably unimproved, on the open market round about the relevant date of valuation and between prudent and willing, but not over-anxious parties.’
[9] This Court is required to follow the decisions of the Land Appeal Court and accordingly must prefer the evidence of comparable sales to the method contended for by the appellant, simply increasing a previous value by a factor of 10. Mr Steers did not explain why this particular multiplier and not some other one should be applied.” [5]
[5][2012] QLC 12.
[20] Market value is also a relevant feature to consider under the LVA.[6] As then President Trickett said in Fairfax v Department of Natural Resources and Mines:
[6]Land Valuation Act 2010, s 18(2)(b).
“[11] The principles for determination of the “market value” of land were established by the High Court in Spencer v The Commonwealth (1907) 5 CLR 418. In that case, the High Court found that the value of land is determined by the price that a willing but not over-anxious buyer would pay to a willing but not over-anxious seller, both of whom are aware of all the circumstances which might affect the value of the land, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding facilities, the then present demand for land and the likelihood of a rise or fall in the value of a property.
(See Griffith CJ at 432 and Isaacs J at 441).
[12] It has been well established that the unimproved value of land is ascertained by reference to prices that have been paid for similar parcels of land. In Waterhouse v The Valuer-General (1927) 8 LGR (NSW) 137 at 139, Pike J said that:
‘Land in my opinion differs in no way from any other commodity. It certainly is more difficult to ascertain the market value of it but - as with other commodities - the best way to ascertain the market value is by finding what lands comparable to the subject land were bringing in the market on the relevant date - and that is evidenced by sales.’” [7]
[7][2005] QLC 11.
[21] The concept of a bona fide sale in the Spencer test[8] has, in essence, been codified in s 18 of the LVA. As the question of what is, or is not, a bona fide sale has been raised as an issue in this appeal, it is essential to consider closely the specific provisions of the LVA.
[8]Spencer v The Commonwealth of Australia (1907) 5 CLR 418.
[22] Section 16 of the LVA provides that, for deciding the value of land, all land is taken to be granted in fee simple; that is, freehold. Section 17 then goes on to provide as follows:
17 What is the land’s expected realisation
(1) The expected realisation of land under a bona fide sale is the capital sum that its unencumbered estate in fee simple might be expected to realise if that estate were negotiated for sale as a bona fide sale.
(2) In this section—
unencumbered means unencumbered by any lease, agreement for lease, mortgage or other charge.
[23] Bona fide sale is then described in s 18 of the LVA:
18 What is a bona fide sale(1) A bona fide sale, for land, is its sale on reasonable terms and conditions that a bona fide seller and buyer would require assuming the following (the bona fide sale tests)—
(a) a willing, but not anxious, buyer and seller;
(b) a reasonable period within which to negotiate the sale;
(c) that the property was reasonably exposed to the market.(2) For subsection (1), in considering whether terms and conditions are reasonable, regard must be had to—
(a) the land’s location and nature; and
(b) the state of the market for land of the same type.(3) To remove any doubt, it is declared that if—
(a) there is a sale of the land in question; and
(b) the bona fide sale tests are complied with;
the sale is a bona fide sale.(4) In this section—
land in question means land whose value is being decided.
[24] The subject land in this matter has received a site value under the LVA. An important aspect of site value, depending on the circumstances of the particular matter, is the question of what are site improvements. In the case at hand, it is hotly disputed between the parties whether or not certain works on the subject land are properly classified as site improvements or not under the LVA.
[25] Section 19 of the LVA provide as follows:
19 What is the value of improved land
(1) If land is improved, its site value is its expected realisation under a bona fide sale assuming all non-site improvements for the land had not been made.
(2) However, the land’s site value is affected by any other relevant provisions of this chapter.
[26] Various statutory assumptions for existing uses are set out in s 22:
22 Assumptions for existing uses
(1) This section does not apply for a Land Act rental valuation.
(2) In deciding land’s site value, the following must be assumed (the existing use assumptions) —
(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, (each an existing use) on the valuation day;
(b) improvements may be continued or made to the land to allow it to continue to be used for any existing use.
(3) To remove any doubt, the following are declared for the existing use assumptions—
(a) they do not prevent regard being had under section 17 to any other purpose for which the land might be used;
(b) in deciding the site value, new non-site improvements may be hypothesised instead of non-site improvements actually used for an existing use.
[27] The provisions of s 23 are of paramount importance in determining certain aspects of this appeal. The section provides as follows:
23 What are site improvements
(1) Site improvements, to land, means any of the following done to the land—
(a) clearing vegetation on the land;
(b) picking up and removing stones;
(c) improving soil fertility or soil structure;
(d) if the land was contaminated land as defined under the Environmental Protection Act 1994 –works to manage or remedy the contamination;
(e) restoring, rehabilitating or improving its surface by filling, grading or levelling, not being irrigation or conservation works;
(f) reclamation by draining or filling, including retaining walls and other works for the reclamation;
(g) underground drainage;
(h) any other works done to the land necessary to improve or prepare it for development.
(2) However, a thing done as mentioned in subsection (1)—
(a) is a site improvement only to the extent it increases the land’s value; and
(b) ceases to be a site improvement if the benefit was exhausted on the valuation day.
(3) Also, excavating the land for any of the following is not a site improvement—
(a) footing or foundations;
(b) underground building levels.
Example of an underground building level-
an underground car park
(4) In this section-—
clearing vegetation on land—
(a) means removing, cutting down, ringbarking, pushing over, poisoning or destroying in any way, including by burning, flooding or draining; but
(b) does not include destroying standing vegetation by stock or lopping a tree.
[28] The primary question concerning s 23 is whether or not works done below ground level on the subject land, in the vicinity of the Brisbane River, are site works of the type referred to in s 23(1)(e)-(h), or are excavations, footings, foundations and/or underground building levels and therefore not site improvements as stated by s 23(3). The relevant evidence on this point; the submissions of the parties; and my conclusions; will be set out later in these reasons.
[29] Other sections of the LVA are also relevant. Section 169(1) provides that appeals are by way of rehearing. Further, s 169(3) places the onus of proof for each of the grounds of appeal on the appellant, GPT. Importantly, it should be noted that appeals under the LVA are to be determined on what is essentially the balance of probabilities.[9]
[9]Meiers v Valuer-General [2012] QLC 19, [27].
Summary positions of the parties
[30] Both parties have provided extensive written and oral submissions to support their contentions. The following paragraphs are adapted from GPT’s executive summary of its submissions.[10]
[10]Appellant’s Submissions, pages 3-6.
[31] GPT contends that there are disagreements between the valuers as to the proper analysis of some of the comparable sales. Of the comparable sales it is common ground that the sale of 304 George Street is the most useful sale. GPT says that the proper analysis of that sale, and its application to the subject, are important issues in the appeal. In GPT’s opinion, the Valuer-General has made a number of critical errors with respect to the analysis of that sale.
[32] As GPT puts it, the proper analysis of the 304 George Street sale is as follows:
304 George Street Sale Analysis
Sale Price $63,000,000
Plus Demolition $4,000,000
Less Infrastructure Credits $4,800,320
Less Added Value of existing Excavation $900,000
Adjusted Sale Price $61,299,680
Analysis $7,767/
[33] GPT goes on to argue that their analysis of 304 George Street should be adopted because:
(a)That is the better view, taking into account the evidence of the valuers in this case;
(b)It accords with the position arrived at by the Court in Brisbane Square Pty Ltd v Valuer-General,[11] wherein the President determined an analysed rate of $7,793/m2;
(c)It accords with the position conceded by the Valuer-General in Brisbane Square, which was to accept that $7,793/m2 was a sound assessment.
[11][2016] QLC 69.
[34] In GPT’s view, the valuers agreed that the other comparable sales are of lesser relevance as they are, variously, of smaller size, different uses and difficult to analyse.
[35] GPT focuses on the site conditions of the subject, arguing that they are relevant because those site conditions affect value by making development of the site more expensive or reducing development flexibility, or both. Site conditions are relevant to the process of comparison, as are other features including (for example) location, size and accessibility.
[36] GPT goes on to contend that, in the context of site conditions, there are a number of sub-issues. GPT outlines those as:
(a)what are the features of the site conditions on the subject and the other sites;
(b)whether the site conditions on the subject are inferior, or more difficult, than those on the comparable sale sites, particularly 304 George Street;
(c)whether certain components on the subject are “site improvements” for the purpose of the Act, such that they should be assumed to exist on the subject on the valuation date; and
(d)what, if any allowance should be made for the site conditions.
[37] The evidence shows, as GPT puts it, that the site conditions on the subject are plainly more difficult than the conditions on the comparable sale sites, particularly 304 George Street, and that the evidence demonstrates that for a development of the nature of that on 304 George Street, the subject would be four times more expensive to develop. GPT notes that that is not to say that the highest and best use of the subject would require a development of the same form as 304 George Street, but does demonstrate the difficulties and extra costs generated by the site conditions increasing the cost of development of the site to its highest and best use or decreasing development flexibility, or both.
[38] GPT says that it is therefore appropriate to make an allowance for the adverse site conditions in the process of comparison with the comparable sales, noting that the valuer, Mr Jackson, made a deduction of 10% to the total value to take account of the extraordinary site penalties on the subject site. GPT is critical of the valuer called by the Valuer-General, Mr Hart, for making no allowance for the site conditions/penalties.
[39] GPT also submits that the Valuer-General is incorrect when it contends that certain parts of the Riverside Centre basement, including the river wall, basement slab, and the piles supporting those items, are “site improvements” for the purposes of the LVA. However, even if the Valuer-General is correct, GPT says that it would be appropriate to make an allowance in any event because:
(a)It is more likely than not that the “site improvements” would not be retained in any development of the subject for its highest and best use; and
(b)Even if they were retained, the development potential of the site would remain constrained by the site conditions, for example, reduced flexibility in development options.
[40] GPT concludes its summary this way. It submits that the starting point for the analysis of value of the subject is the rate of $7,767/m2 applied to the analysis of 304 George Street. In order to reflect the superior location of the subject as against 304 George Street, Mr Jackson applied a premium of 10% to his original analysis of $8,189/m2 or 15% to his revised analysed rate of $7,767/m2, resulting in a rate for the unburdened area of the subject at $9,000/m2. It was common ground between the valuers that the unburdened rate should be reduced by 30% in respect of the area of Easement K. The valuers made a negative adjustment of 5% for flooding (which also was common ground). Mr Jackson made a further negative adjustment of 10% to take account of the site conditions constraining the subject site.
[41] As a consequence of the above, GPT contends that the correct analysis for the subject site is as follows:
Subject property analysis
Unburdened Area 6,601m2 @ $9,000/m2 = $59,409,000
Burdened Area 2,082m2 @ $6,300/m2 = $13,116,600
Site Value $72,525,600
Less 5% flood allowance $3,626,280
Site Value s $68,899,320
(rounded to $68,900,000)Less indicative estimate of site penalty costs (10%) $6,890,000
Site Value Assessment $62,010,000
(rounded to $62,000,000)
[42] Just as I did with GPT’s executive summary, the following paragraphs are adapted from the Valuer-General’s executive summary of its submissions.[12]
[12]Respondent’s Submissions, pages 3-8.
[43] The Valuer-General contends that GPT’s case is fatally flawed for two reasons:
(a)Its valuer, Mr Jackson, did not value the subject land with the site improvements, but rather valued the subject land on the basis that no site improvements were present; and
(b)Its case about site improvements is flawed because the hydrostatic slab (or basement slab) and river wall are site improvements which were required to be included in the valuation of the Subject Property, and there is no contention from the engineers that in order to reclaim land a barrier needs to be built against inundation under flood conditions.
[44] The Valuer-General goes on to allege that Mr Jackson made a major change to his valuation approach after the JER in contrast to the Valuer-General’s valuer, Mr Hart, who did not alter his approach. The Valuer-General explains the change this way. The trial valuation by Mr Jackson referred to his analysis of a number of sales and while regarding the smaller sales as being of “limited comparability” he “primarily relied upon the two larger sales” which were the sale of 304 George Street and the “Vision” sale. Notwithstanding the valuation of Mr Jackson, GPT’s submissions effectively proceed on the premise that his valuation was a “one sale” valuation. The Valuer-General says that GPT has been driven to do so because the Vision sale was a forced sale which could not be safely relied upon by Mr Jackson. The contention that Mr Jackson placed little weight on the Vision sale is not borne out by the evidence. That contention is presumably advanced because, if Mr Jackson did place weight on it, as appeared in his sworn testimony, then that was brought to account in a negative way in his assessment of the relative premium to be applied to the subject.
[45] Further, the Valuer-General says that GPT is driven to ignore another comparable sale relied upon by Mr Jackson, the sale at 55 Elizabeth Street, because his analysis of it was also flawed as he had not properly investigated it and was not aware of the put and call option which preceded the sale, notwithstanding it was a controversial sale referred to in Mr Jackson’s valuation, Exhibit 2B at paragraphs 102, 106 and 107, and as part of his “check”. The premium which Mr Jackson assessed based upon his analysis of the Vision sale and his other primary sale, the sale of 304 George Street (and inter alia the 55 Elizabeth Street sale) is 10% as set out at paragraphs 101-121 of Exhibit 2B especially at paragraphs 103, 106, and 108-110.
[46] The Valuer-General’s attack on Mr Jackson continues, alleging that what it calls Mr Jackson’s subjective comparison of the subject property to the sale of 304 George Street as attracting a premium of 10% was further flawed involving a mistaken appreciation of the quality of the office accommodation there offered and a failure to analyse that sale properly, including the circumstances that three separate uses for its development were proposed. The sale must be taken for what it shows if it is a sale for development of a particular use which is not the use that Mr Jackson identifies for the subject property, then it may have to be disregarded or otherwise allowed for. While Mr Jackson accepted that principle in an answer about the sale at 140 Alice Street, he was not, the Valuer-General says, prepared to apply the principle in his comparison between the subject property and the other comparable sales including 304 George Street or the Vision sale. That was a premium he arrived at, notwithstanding that there is no issue that a single use, comprising premium office accommodation, was identified as the highest and best use for the subject in a two tower configuration with the flexibility of being able to stage construction, in contrast to the use proposed for the sale at 304 George Street involving three separate uses in a precinct which had not been established for any of those uses.
[47] The Valuer-General goes on to criticise Mr Jackson for not referring to any sales or other market evidence to set a ceiling and that his 10% premium rests solely on his subjective judgment flawed in the manner identified and on any objective assessment, fails to give effect to the circumstances that the subject property is in the long established premium office accommodation precinct of the Brisbane CBD and has superior views and amenity. He then proceeded to subtract 10% for the penalty of site conditions based on the premise that the subject property will be more difficult to develop being alongside the river but without doing any hypothetical development exercise to arrive at any impact on his residual land value of any such additional expenses. The Valuer-General says that the premium assessed by Mr Jackson also ignores the requirement to value the subject with the site improvements in place and his 10% deduction also includes addressing matters which the site improvements have already, in part at least, provided for, and for which the 5% flood allowance is provided.
[48] Additionally, the Valuer-General says that Mr Jackson failed to investigate matters referable to the highest and best use of the subject property in terms of the car parking being able to be constructed over two full levels because of the presence of the site improvements or deeper into the rock in the same fashion as at 304 George Street, if deemed necessary by the developer. In contrast, the high-level exercise carried out by Mr Davidson involving locating a second tower appropriately in the area presently occupied by the Pig and Whistle, corroborated Mr Hart’s approach that the development which is carried out will be one which is suitable for the site in realising its agreed highest and best use. The number of car parking places which are actually constructed would depend upon the developer’s choice as precisely occurred when the adjoining property, 111 Eagle Street, was developed. It provided far fewer car parking spaces than the maximum allowable for the same use that both valuers contemplated for the subject property. The Valuer-General says that the exercise, although criticised by GPT, is a far more logical one to carry out than the exercise promoted by GPT of constructing a sale property development on the subject when that would never occur in reality.
[49] The Valuer-General’s attacks on Mr Jackson then get even stronger, submitting that Mr Jackson was not independent or impartial, and his evidence should not be relied upon, because his approach was designed to reduce the valuation of the subject property, rather than to be objective and measured. Further, the Valuer-General says Mr Jackson’s approach and subjective assessments were found wanting when contrasted to extrinsic material and standards of valuation practice and that, because GPT’s case rests squarely on his evidence, it must fail.
[50] The Valuer-General says that GPT’s attack on the Valuer-General based upon the requirements of the “model litigant” is baseless because the model litigant is not required to adopt the same position in litigation regardless of what contentions the model litigant faces. Further, the model litigant, like this Court, is bound by the LVA and is also limited by the evidence of appropriately qualified experts, who must be true to their oaths.
[51] In the Valuer-General’s view, the attack by GPT based on Mr Hart adopting an unburdened rate in his analysis of the sale of 304 George Street mistakes the requirements both of the valuation practice and of the Land Court’s previous decision as to a valuation of this kind. Similarly, the attack on Mr Hart for not having made a proper enquiry of the purchaser of that property is hollow, given the terms of the contract of sale and Mr Jackson’s omissions of greater moment, including not having made any enquiry of the purchaser as to excavation or demolition costs. Mr Jackson’s attempt to attribute blame to Mr Hart for the need to change his own allowance for demolition, in the Valuer-General’s view, does him no credit.
[52] The Valuer-General submits that GPT’s contention that a 10% deduction should be made for site penalties proceeds upon:
(a)A flawed premise that there are no site improvements present at the subject property;
(b)A failure to understand the proper process of valuation which already had an agreed deduction of 5% for flooding;
(c)The replacement of the fundamentally flawed exercise of deducting the costs estimated to replace the site improvements at the subject property;
(d)A failure to allow for the feature that much of the “bad ground” at the subject property was not able to be developed above podium level because of the presence of Easement K; and
(e)A failure to allow for the feature that the “good ground” at the subject property could be developed for a second tower and to provide additional car parking, if required, without the need to remove the hydrostatic slab and river wall.
[53] The Valuer-General says that a major issue in dispute concerns the extent of superiority of the subject property over the 304 George Street sale, noting that the subject property was previously involved in extensive consideration by this Court in GPT RE Limited (as responsible entity) & Anor v Department of Natural Resources and Water[13] and that, consistent with that case, it should be accepted that the Golden Triangle and, in particular, the subject property which is pre-eminent in that triangle, will command a premium rate in comparison with other parts of the CBD in Brisbane.
[13](2009) 30 QLCR 100.
[54] The Valuer-General submits that the approach of direct comparison with supporting sales and market evidence as to the extent of the premium, 23%, will be preferred over the approach of GPT’s valuer, which involved using a forced sale (the Vison Sale at 111 Mary Street) and making unwarranted adjustments to another sale (55 Elizabeth Street). The Valuer-General further submits that Mr Hart, in contrast to the approach of Mr Jackson, has exposed his reasoning process, including making allowance for the inefficiencies associated with larger parcels of land. Contrary to the contentions of GPT, Mr Hart brought to account the various different features of the sales evidence in comparison with the subject property, including size. The Valuer-General contends that Mr Hart’s view that the market evidence does not demonstrate any discount for size per se is supported by the purchase resulting in the amalgamation sale concerning 111 and 105 Margaret Street, as well as the need for a property to be of a sufficient size to accommodate premium quality office accommodation.
[55] Unsurprisingly, GPT in its reply submissions rejects the factual and legal positions adopted by the Valuer-General. GPT’s position is well summarised on pages 2-7 of its reply submissions. I have, of course, fully taken those submissions into account. However, to save making this decision any longer than it has to be, I will not include a synopsis of the reply executive summary of GPT in this general analysis as the material set out above clearly identifies the issues before the Court, which is sufficient for present purposes.
[56] All the evidence and submissions as relevant will be, of course, considered in further detail as I examine the various issues in this matter.
[57] I now turn to consider in detail the evidence in this matter, starting with the engineering evidence.
The engineering evidence
[58] This Court has had the privilege of hearing evidence from two very accomplished and skilful expert engineers, Mr Ian Ainsworth and Mr Mike Gould.[14] Together, Mr Ainsworth and Mr Gould produced a JER marked as Exhibit 3A. Their supplementary JER is Exhibit 3B. Mr Ainsworth’s Statements of Evidence are Exhibits 3C and 3E and Mr Gould’s Statements of Evidence are Exhibits 3D and 3F.
[14]Ex 3A to Ex G.
Mr Ainsworth
[59] Mr Ainsworth is the engineering expert called by GPT. With 31 years of engineering experience, a Bachelor of Engineering (First Class Honours) and various professional qualifications, Mr Ainsworth has an impressive understanding of engineering complexities. Mr Ainsworth is currently a Principal of Arup, Brisbane.
[60] Mr Ainsworth impressed me as an expert witness. He clearly has a deep knowledge and understanding of the relevant material and has, to a significant degree, been able to apply theoretical, technical knowledge to evidence relating to this specific site. The evidence advanced by Mr Ainsworth was very clear, particularly during cross-examination where his evidence comprised of short, simple answers to complex scenarios.
Mr Gould
[61] Mr Gould is a director of Gould Development Solutions Pty Ltd, with vast experience as a civil and structural engineer. He was called by the Valuer-General. Mr Gould completed his Bachelor of Engineering with Honours and also holds a Graduate Diploma of Environmental and Municipal Engineering. Over 30 years’ experience as an engineer, and considerable experience as an expert witness of this Court is demonstrated through the professional evidence put forward by Mr Gould.
[62] Although quietly spoken, Mr Gould patently knows the material extremely well and was confident in his opinions. I was impressed by Mr Gould’s evidence, in that, in my view, he always gave what appeared to be his professional expert opinion, even when that opinion was somewhat at odds with the Valuer-General’s preferred position. This was particularly evident during cross-examination by Mr Traves QC. Mr Gould is of course to be commended for this.
Analysis of expert engineering evidence
[63] Where there are areas of disagreement, I am tasked with a difficult assessment of having to compare the evidence of two, exceptionally helpful and knowledgeable experts; Mr Ainsworth and Mr Gould.
[64] Mr Gould, however, damaged his evidence somewhat by his reference, both during cross-examination and at paragraph 5.3.2 in the supplementary JER, to the river wall existing at the date of valuation.
Mr Gould’s evidence during cross-examination is as follows:
“And, of course, you’re not aware and there hasn’t been a decision which describes the wall or the river wall or the Broadwater wall, as it might be called there, as a site improvement. There has never been such a determination? --- No. No. It’s an engineering consideration…”[15]
[15]T 9-2, lines 29 to 32.
…
“It follows, does it not, that your opinions necessarily reflect your understanding of what the Act means? --- No, I think it follows that I was trying to interpret what those words are saying as it relates to an engineering process of site improvements, and – and there’s various descriptions given, but – so when looked at each of those descriptions, did any of those fit with the works that were undertaken on the site or --- …
Inevitably, in your process of reasoning, it requires you to form a view about what the legislation means? --- From an engineering perspective, yes.”[16][16]T 9-8, lines 23 to 28; lines 37 to 39.
The Supplementary JER has this to say:
“5.3.2 S23(1)(f) defines “site improvements” to include “reclamation by draining or filling, including retaining walls and other works for the reclamation”. Mr Gould states that the river front wall complies with this definition and therefore is considered “site improvements”.
5.3.3 Mr Gould states that the effect is that the riverfront wall is assumed to pre-exist, and cannot be considered in the “nature and scope of different or additional work.
5.3.4 Mr Gould notes that the river wall also acts as part of the support structure for the basement. However the Instructions stipulate that it not be included in the different or additional work.
5.3.5 Mr Gould also notes that the qualification in paragraph 3(d) of the Instructions requires “excavation for footings or foundations and for basements” – not the footings, foundations or basement structures, to be excluded from already existing.”[17]
[17]Ex 3B.
[65] During cross-examination, Mr Gould denies interpreting the LVA.[18] However, he later concedes his interpretation was from an engineering perspective.[19] In any event, it is evident to me, that Mr Gould has adopted the exact wording of the legislation, rather than coming to some interpretation as he suggests.
[18]T 9-8, line 35.
[19]T 9-8, lines 11 to 14; T 9-34, lines 28 to 33.
[66] This, of course, is a key legal issue to be resolved in this Court, pursuant to s 23 of the LVA. What Mr Gould needed to, and indeed should, have focused on was the factual engineering position in the way in which Mr Ainsworth did:
“5.3.6 Mr Ainsworth states that the 123 Eagle St “riverfront wall” to which Mr Gould refers in paragraphs 5.31 to 5.33 above is actually an integral part of the basement carpark of the Riverside development, and thus is clearly not a “site improvement” – refer to S23(3)(b) that an “underground car park” is an example of an underground building level and “is not a site improvement”. Any small riverwalls that existing [sic] prior to the circa 1986 development of the 123 Eagle St site would not have been suitable to act as the river wall of the development of the site that was carried out circa 1984, or any similar development in the time since then. I believe that there is different and additional work required to develop the 123 Eagle St site arising from the presence of a river boundary, as confirmed by both experts in the JER Engineering Issues and Expert Responses Letter Reference 2(a) (i).”[20]
[20]Ex 3B.
[67] I accept Mr Ainsworth’s analysis.
[68] Whether or not the river wall is an integral part of the Riverside Centre building was also a consideration for Mr Gould during cross-examination:
“And the basement car park is an integral part of the development as a whole? --- That’s correct.
And the river wall, as it’s been called, is an integral part of the basement car park? --- It is, yes.
It depends upon the basement car park slab and the upper basement slab and the plaza slab for its structural integrity? --- To perform its role to keep the flood out to that level.
For its structural integrity, it depends upon those other slabs? --- For its role in keeping the flood out to that level…
Thanks, Mr Gould. And then it also, can I suggest, through the piles below it, supports those structures: the upper basement slab and the plaza slab? It supports them physically? --- It does, yes.
It’s integral to their structural integrity? --- It is.
And it’s integral to the structural integrity of all of the development which appears above the slab: the restaurants and Friday’s and all those sort of things. Correct? The river wall’s taking all that – is taking weight from those structures? --- It is taking weight from those structures.
All right. So in every sense of the word, the river wall is an integral part of the development of the Riverside Centre? --- It is, yes.” [21]
[21]T 9-25, lines 10 to 21; 34 to 46.
[69] It is clear from the cross-examination of Mr Gould, and Mr Ainsworth’s aforementioned position, that both experts are of the opinion that the river wall is, in fact, an integral part of the Riverside Centre. Despite this, there is a discrepancy in each expert’s ultimate conclusion. Mr Gould is of the opinion that the river wall is a site improvement in accordance with s 23 of the LVA and Mr Ainsworth is minded that it is not.
[70] There are vast complexities in the engineering evidence relating to the site due to the interactions of the Brisbane River. Where there is a conflict in the expert evidence, for the reasons set out above, I prefer the more concise evidence of Mr Ainsworth than that of Mr Gould.
[71] Helpfully, Mr Ainsworth and Mr Gould set out their areas of agreement in the JER as follows:
1. The nature of the walls and supporting foundations along the river edge of properties with a river boundary are different to that of a corresponding site without a river boundary.
2. The construction of piled foundations along a river boundary do not typically require different construction techniques compared to a boundary not on a river edge.
3. Barge-mounted piling rigs are not the only solution for installing river boundary foundations to enable construction:
(a) Temporary platforms may be constructed to allow conventional piling rigs to access the river edge without use of barges (depending on ground conditions and water levels at the boundary).
(b) The riverside area at Lot 123 would likely require construction of a barge mounted plant, due to presence of the river.
4. Where there are boardwalks adjacent to the river edge of a riverfront site, such presence will affect construction on the riverfront site.
(a) In this case the boardwalk is not within the site (123 Eagle Street), but is linked to structures on the site (Lot 123).
5. Structures on non-riverfront properties are not exposed to the structural design risks and risks associated with river vessel and flood borne debris impacts.
6. Risks relating to flooding are largely related to site level. Risks are typically comparable for riverfront and non-riverfront sites that share similar ground levels.
(a) 123 Eagle Street is relatively low thus, subject to flood risks and the associated need for protection and mitigation measures.
7. Approximately half of the plan area of the 123 Eagle Street site has soft soils requiring piled and suspended basement slabs:
(a) The soft soils exist typically in the 2 and 3 level parking basement areas.
(b) The main building structure is founded on medium strong schist utilising a high level raft slab foundation technique.
(c) The Riverside Tower has foundation conditions which differ from the deep layers of soft soil over sloping bedrock and this portion is not in its nature unusually complex or expensive.
8. Acid Sulphate soils are present at 123 Eagle Street.
(a) Acid Sulphate soils are usually present in low ground levels, where soft soils are present irrespective of being on the riverfront.
(b) Excavating and removing acid sulphate soils, depending on hardness will incur additional development time and costs.
9. Where ground conditions include high water table and high permeability layers and lenses, basements do typically need to be designed as ‘tanked’ structures.
(a) High water table levels and sand and gravel layers exist at 123 Eagle Street.
(b) Approximately half of the basement constructed on the 123 Eagle Street property is a tanked structure.
(c) High ground water levels and pervious soils are not restricted to riverfront sites. Thus, may be found in low-lying, non-riverfront sites.
10. Risks associated with flooding depend on the site level. Risks for riverfront and non-riverfront sites are comparable when similar ground levels are shared.
(a) 123 Eagle Street has relatively low ground levels and thus subject to flood risks.
11. Development costs are increased and development potential is limited by areas present on the 123 Eagle Street site (i.e., a shared loading dock, requirements for vehicular and pedestrian access or carparks), which restrict the positioning of building structures and usage when compared to a site without such restrictions.
(a) The precise nature of the restrictions and benefits for 123 Eagle Street and adjoining sites due to the areas present are not identified.[22]
[22]Ex 3A.
[72] In Mr Ainsworth’s and Mr Gould’s first JER,[23] dated 31 July 2015 there were no areas of disagreement between them; the experts were as one.
[23]Ibid.
[73] Following the quantity survey evidence,[24] discrepancies arose between the expert engineer opinions. A request was made for a further JER by GPT and the Valuer-General. The instructions were to the effect that the experts:
[24]Ex 4A.
1. Identify the nature and scope of different or additional work required to be carried out on Lot 123 after purchase in order to construct a development similar to that actually constructed on the Comparable Sales Sites in relation to:
(a) The location of Lot 123, including adjacent developments and proximity to the Brisbane River;
(b) Soil and inherent site conditions; and
(c) Construction of a tower building and other structures generally similar to what has been constructed, would be a more difficult or complex, and therefore more expensive for a purchaser/developer of Lot 123 than would be the case for commercial or residential construction on some or all of the comparable sites. [25]
[25]Ex 3B, Attachments A, B and C.
[74] The experts sought clarification which confirmed that the task required consideration of Lot 123 compared to the comparable sales sites on the assumption that works existing on 123 Eagle Street as at 1 October 2012 are ‘site improvements’ in accordance with s 23 of the LVA and continue to exist in the same form.[26]
[26]Ex 3B, Attachment C.
[75] In the further JER,[27] dated 8 October 2015, Mr Ainsworth and Mr Gould set out their areas of agreement and disagreement propounded through their assessment of the quantity survey evidence and instruction.
[27]Ex 3B.
[76] Mr Ainsworth and Mr Gould were in agreement that the comparable sales sites are:
(a) 273-318 George Street
(b) 111 Margaret Street
(c) 105 Margaret Street
(d) 103 Mary Street
(e) 55 Elizabeth Street
(f) Combined 111 Mary Street and 222 Margaret Street
(g) 127 Charlotte Street
(h) 16 Albert Street and 140 Alice Street
[77] The Comparable Sites Sales Summary[28] prepared by Mr Ainsworth and Mr Gould demonstrates an assessment of each property, having regard to:
[28]Ibid, Attachment E.
·Ground levels;
·Residential flood levels (RFL);
·Whether the ground level of a site is above or below the RFL;
·The presence of acid sulphate soil (ASS);
·Soil types;
·Whether riverfronts are present at a site;
·Whether a site is affected or likely to be affected by groundwater within 2 basement levels of ground;
·The existence of adjoining sites, unconventional underpinnings and sensitive adjoining structures; and
·The existing or proposed development on a site.
Scope of works
[78] Helpfully, Mr Ainsworth proposes that the site-specific characteristics of the 123 Eagle Street site, as advised by his previous analysis on 13 January 2009,[29] can be simplified into two propositions. In my words, these are:
(a) The presence of the river boundary impacts the site in several ways, including river boundary construction, boardwalks, and flood risks and mitigation; and
(b) Deep layers of soft soils at 123 Eagle Street impacts the site in several ways including the need for piled and suspended basement slabs, the need to treat acid sulphate soils and the need to design basements to be tanked to exclude water arising from high groundwater levels.
[29]Ex 3A, Appendix C.
[79] Works undertaken to address item (a) are summarised by Mr Ainsworth as follows:
“Sheet piling and river wall: [a]pprox 220m plan length average 12m pile length of sheet piling along the river edge was required to secure the site from the river during construction… Permanent river wall along similar length 300mm thick RC…
Boardwalk: [r]efer to the drawings that you have for the extent and details of the precast piles and planks that make up the extensive boardwalk area to the east of the riverwall.”[30]
[30]Ibid.
[80] In regard to item (b), Mr Ainsworth summed up the works undertaken:
“Excavation: [t]he site levels before excavation varied approx from RL 0m along the east (river edge) to RL 4.5m (SW corner Eagle St elevation) to RL 8.0m (NW corner Eagle St elevation). The site was excavated to approx RL 0m across the site... It would be reasonable to assume that at least half of the material excavated from the area under the 400mm thick slabs…would bee [sic] acid sulphate soils requiring special handling and disposal.
Base Slabs: [a]long the southern and eastern edges of the site the presence of soft, wet clays required construction of heavy 400mm thick slabs with permanent ground anchors and piles. Over the rest of the site the presence of reasonable rock allowed conventional on ground and pad footing construction…
Shoring: [r]equired along the southern boundary (Dalgety House – approx 40m plan length x approx 6m depth, 300mm thick concrete panels installed with temporary anchors), the western boundary (approx 130m along Eagle St, soldier piles and concrete infill with temporary anchors…) and the northern boundary (Australia House, 50m plan length, 300mm RC shoring panels with temporary anchors..)…” [31]
[31]Ibid.
[81] Mr Gould was of the opinion that Mr Ainsworth’s aforementioned analysis of the scope of works and reliance on his opinion in January 2009, compared the subject site to a theoretical standard site whereas the instructions provided for the second JER required comparisons to be made to certain defined other sites. Mr Gould’s opinion was that considerations of sheet piling, river wall and boardwalks to be excluded from consideration in the further JER.
[82] In response to Mr Ainsworth’s analysis of the deep soft soils, Mr Gould pointed out that the presence of such soil only existed on part of the site, namely, the part under the carpark structures. The tower building was located on rock and constructed with a pad footing.
[83] In my view, Mr Gould is essentially correct in this statement. However, the soft soils are also clearly evident under Easement K, and a full, lay reading of all of Mr Ainsworth’s evidence clearly shows his acceptance of solid rock on parts of the subject land.
Comparison between 123 Eagle Street and the comparable sales sites
[84] Both experts identified:
·None of the comparable sites as requiring river boundary Construction or boardwalks;
·Parts of sites d (103 Mary Street), f (111 Mary Street & 222 Margaret Street), g (127 Charlotte Street) and h (16 Albert Street & 140 Alice Street) as being located under the defined RFL, thus subject to risk of inundation and require flood risks and mitigation; and
·Both sites d and f as having deep soft soils requiring piled and suspended basement slabs, are likely to have ASS requiring treatment and removal during development, and will likely require a tanked base slab to resist full hydrostatic pressure.[32]
[32]Ex 3B, Table A1.
[85] Mr Gould disagreed with the inclusion of ‘river boundary construction’ and ‘boardwalks’ in the consideration of site specific works on the comparable sites as his opinion was that the later instructions required a change to the method adopted in the earlier report.[33]
[33]Ex 3B, 5.2.4.
[86] Mr Gould further qualified that ‘piled and suspended basement slabs’ in relation to the subject site had piles only under the carpark structure and the tower building was supported by high level hard rock.[34]
[34]Ibid 5.2.5.
[87] Mr Gould further elaborated on the nature and scope of the different or additional works required on the subject site compared to the comparable sites, which differed from Mr Ainsworth’s opinion in respect of the access for façade construction and access for site construction management.
[88] Mr Gould’s analysis provided:[35]
[35]Ibid Table M1.
River front retaining wall
[89] Whether the river front wall is or is not a site improvement within the confines of s 23 of the LVA is a question of law. Thus, Mr Gould’s opinion that the riverfront wall falls within the definition of site improvements is of no assistance as outlined at [65].
[90] The preferred evidence of Mr Ainsworth demonstrates that the riverfront wall is an integral part of the basement carpark and the Riverside Centre as a whole. Mr Ainsworth is of the opinion that there is different and additional work required to develop the 123 Eagle Street site arising from the presence of a river boundary as was confirmed by both experts in their JER as shown at [69].
Boardwalks
[91] Mr Gould did not consider boardwalks to be relevant to the further JER on the basis that the instructions required consideration of the nature and scope of different or additional work and that the boardwalks are ‘external’ to the site.[36]
[36]Ibid 5.4.1.
[92] Mr Ainsworth is of the opinion that the presence of boardwalks and other structures adjacent to the 123 Eagle Street site provide substantial obstruction to construction. His opinion is premised on the need for different construction techniques when compared to non-riverfront sites (as was agreed by the experts at [71]).[37]
[37]Ibid 5.4.3.
Other site construction issues
[93] Mr Gould summarises additional site construction issues as follows:
·123 Eagle Street – Space available for loading and gantry. Scaffold and external access is straightforward as the tower is set back from the site footprint boundary. Construction of the tower would not affect pedestrian traffic to the ferry terminal and boardwalk. As the river wall pre-existed, construction of the carpark would be on the other side of this wall and would not interfere with boardwalk traffic. The adjacent building to the northeast (145 Eagle Street) is positioned on the boundary and affected the interface to the low level restaurant building on the subject site. At the reference date of 2012, 111 Eagle Street on the adjoining southwest boundary was partly constructed and a similar interface is to be considered.
·(a) 273-318 George Street – Space available for loading and gantry. Scaffold and external access is straightforward as the tower is set back from the site footprint boundary.
·(b) 111 Margaret Street & (c) 105 Margaret Street – No proposal for building footprint. However, adjacent buildings only 1 and 2 level and needle support scaffold probable. Site access only through the front of Margaret Street with some traffic restrictions likely. Gantry possible but narrow. Considered a restricted site in terms of materials management.
·(d) 103 Mary Street – Narrow site. Limited street access. Abutting facades on two sides for part height of tower requiring management of façade interfaces. Considered a restricted site in terms of materials management.
·(e) 55 Elizabeth Street – Needle support scaffold probable. Site access only through the front at Elizabeth Street with some traffic restrictions likely. Gantry possible but narrow. Considered a restricted site in terms of material management.
·(f) Combined 111 Mary Street & 222 Margaret Street – Adjacent buildings only 1 and 2 level and needle support scaffold probable. Site access from two streets with some traffic restrictions likely. Gantry possible but narrow (and Qld Globe view during construction shows gantry along left hand boundary).
·(g) 127 Charlotte Street – Site access only through the front at Charlotte Street with some traffic restrictions likely. Gantry possible but narrow. Considered a restricted site in terms of materials management.
·(h) 16 Albert Street & 140 Alice Street – Corner site, two street frontage, access restricted in Alice Street. Façade construction management straightforward. Considered less restricted site in terms of materials management.
[94] Mr Ainsworth did not consider the site access and potential scaffolding arrangements to be relevant based on the instructions for this further JER. Below is Mr Ainsworth’s expert view in response to Mr Gould’s assessment:
·123 Eagle Street – the Construction Access and Site Construction Management issues presented by the location and characteristics of this site are at least as challenging, if not more challenging, than any of the comparable sites. 123 Eagle Street has single street access, a river boundary which is blocked by a boardwalk, and is bounded to north and south by large developments built to boundary. The site lies in an extremely busy vehicle and pedestrian precinct which in the case of post 2012 development would require provision of numerous temporary pedestrian and vehicular routes to be maintained through the site for access to the ferry terminal, shared loading dock, shared carpark entries and the like.
·(a) – agrees with Mr Gould that the site is relatively unrestricted. Construction Access and Site Construction Management is less onerous than 123 Eagle Street.
·(b) & (c) – challenges are substantially less onerous than the 123 Eagle Street site. The 105 and 111 Margaret Street sites have unobstructed frontage to Margaret Street, with the majority of the site boundaries clear of existing structures.
·(d) – in agreement with Mr Gould that 103 Mary Street is a narrow site with single street frontage. Challenges to Construction Access and Site Construction Management are similar to or slightly less onerous than the 123 Eagle Street site.
·(e) – agrees that 55 Elizabeth Street has single street frontage. Is of the opinion that challenges are similar to or slightly less onerous than the 123 Eagle Street site.
·(f) – in agreement with Mr Gould. Challenges are slightly less onerous than the 123 Eagle Street site.
·(g) – Agrees with Mr Gould’s assessment. Considers the challenges to Construction Access and Site Management to be substantially less onerous than the 123 Eagle Street site.
·(h) – full agreement with Mr Gould. The challenges are substantially less onerous than the 123 Eagle Street site.
[95] What this analysis shows is that, when comparing the various sale properties to the subject 123 Eagle Street, the expert engineers are substantially in agreement. For the reasons clearly stated, but in particular due to his detailed knowledge of 123 Eagle Street, I prefer the evidence of Mr Ainsworth as regards his comments relating to other site construction access for 123 Eagle Street.
The quantity surveying evidence
[96] The quantity surveying evidence was provided to the Court by two expert witnesses, Mr Craig McHardy, called by GPT, and Mr Malcolm Davidson, called by the Valuer-General. Exhibit 4A is their JER. Statements of Evidence by Mr McHardy are Exhibit’s 4B, 4D and 4F, while Mr Davidson’s Statements are Exhibit’s 4C and 4E.
Mr McHardy
[97] Mr McHardy has 35 years of professional experience. He has worked in at least eight countries. Mr McHardy obtained his Bachelor of Science (Quantity Surveying) in Scotland, and joined WT Partnership in 1984. He has remained with WT Partnership, where he is now an Executive Director of WTP Australia Pty Ltd. Mr McHardy relocated from Scotland to Australia in 1987 and has extensive experience in projects in the Austral/Asia region
[98] Mr McHardy is a Professional Member of the Royal Institution of Chartered Surveyors and an Associate of the Australian Institute of Quantity Surveyors.
[99] I was highly impressed by Mr McHardy as an expert witness. He displayed not only a thorough knowledge of his area of expertise, but also a detailed application of that knowledge to 123 Eagle Street, with which he is very familiar. From my observations and assessment, he sought at all times to assist the Court with his honest opinion, while remaining very careful not to stray from his area of expertise.
[100] Despite the complexity of parts of his evidence and the detailed cross-examination has was subject to, his evidence did not falter. An example of this is when, during cross-examination by Mr Fynes-Clinton, Mr McHardy conceded that some of Mr Davidson’s adjustments to his figures were mathematically correct. However, he was still able to successfully explain that his overall conclusions remained correct. I will let the transcript speak for itself.
“MR FYNES-CLINTON: And – and I certainly won’t labour this, and I’m not going to disregard the answers you’ve just given, but just to be clear, in terms of the actual areas to which this work would relate, for a purchaser on 1 October 2012, Mr Davidson’s adjustments are mathematically correct, because the area is smaller? --- Yes.
That part, as far as it goes, is correct? --- Correct.
Your proposition, of course, is, “But there’s other issues to deal with at the interface,” and --- ? --- Correct.
--- you’ve just told the court that you have a view that the costs of doing that would at least balance out --- ? --- Correct.
--- the reductions. Where in --- ? --- I do say that in my – sorry; I do say that in my reports.
Indeed. Where in your reports do I see your calculation of those additional costs, to enable me to understand and test the proposition that those costs would equal or exceed the reductions that Mr Davidson’s approach has adopted? Where are the quantities and calculations? --- They’re not in my report.
Thank you? --- I do have, in – I’m just looking at my text – explained that, and said I would be happy to do so. In my opinion, there would be a lot of time, a lot of engineering advice required, and estimating advice required, and in my opinion, the end result would be very similar to the estimated allowances for that southwest area that are already included. And that comes from a discussion with Mr Ainsworth, several discussions with Mr Ainsworth. And rather than go down the path of, “Right, Ian, please sketch out – describe the process,” and I will then measure and price and come to an estimate, those – that was not done. That was not done. If it had been done, then the quantities and rates would be spelt out in the – in this appendix.
And, Mr McHardy, I appreciate that you did (a) what you thought was appropriate professionally, and (b) what you were instructed to do. So I’m not being critical; I’m just trying --- ? --- No; I just ---
--- to find out what’s been done, and what hasn’t? --- I’m hoping it’s clear why those specific quantities and rates are not contained in the ---
That’s --- ? --- --- detail.
You’ve given evidence about your conclusion, and your conclusion is also in your report. And you’ll also confirm that there are no quantities and rates available to, as it were, mathematically support that conclusion? --- Correct.”[38]
[38]T 5-40, line 13 to T 5-41, line 12.
Mr Davidson
[101] Mr Davidson has over 35 years’ experience in the construction industry. He is a Director – Cost Management of Turner Townsend Pty Ltd and is the Gold Coast Manager of that firm. Mr Davidson has experience in the UK/Middle East/Australia/USA and India, and is a recipient of the RICS Medal 1982 from NAPIER University.
[102] Like Mr McHardy, Mr Davidson is also a Professional Member of the Royal Institution of Chartered Surveyors and an Associate of the Australia Institute of Quantity Surveyors.
[103] Mr Davidson was an impressive expert witness. He has a high level of expertise and experience.
[104] Mr Davidson clearly sought to assist the Court with his evidence. He understood the role of an expert to assist the Court and not to promote the position of his client, particularly in circumstances where his professional opinion and the position of his client vary. It was also abundantly clear to me that Mr Davidson was very careful to follow his specific instructions.
[105] Overall, I found Mr Davidson to be a reliable expert witness. He clearly did not seek to deceive or confuse the Court, although in my view some of his answers could have been better explained and of more assistance to the Court, such as when he was being cross-examined about the size of the basement levels. In this regard, Mr McHardy takes into account a wall thickness of 2.17 metres to arrive at a total area of approximately 7988 m2, while cross-examination made it clear that Mr Davidson did not remove any allowance for wall thickness when making his assessment of the size of the basement levels.[39]
[39]T 9-61, lines 45 to 47.
[106] Mr Davidson gave interesting evidence regarding his suggestions for a carpark layout for a hypothetical development on 123 Eagle Street.[40]
[40]Ex’s 42 and 43.
[107] Mr Davidson acknowledged that he completed his carpark proposal over the weekend.[41] This was of course very late in the proceedings. Mr Davidson also conceded that his carpark concept would require architectural and engineering advice.[42]
[41]T 9-70, line 21.
[42]T 9-74, lines 34 to 37.
[108] I note, in particular, the evidence that Mr Davidson gave regarding his carpark proposal:
“Why does your proposal not propose building basements 1 and 2 as they currently are and basements 3 and 4 the same size? Why aren’t you doing the same size for 3 and 4?‑‑‑Because to do that you would have to demolish the improvements that are already there.”[43]
[43]T 9-75, lines 39 to 42.
[109] I am in no doubt that the improvements that Mr Davidson says would have to be demolished are the river wall etc, which are of course part of the central legal question to be resolved in this matter as to whether or not such improvements are site improvements under s 23 of the LVA and retained or foundations etc of the existing building which are to be notionally removed for the LVA valuation exercise.
[110] Mr Davidson explained his views regarding his carpark proposal this way:
“Well, you have created a scenario for the court. And you told the court earlier that it works just as well for the site with or without the site improvements?‑‑‑It does.
So I’m asking you, without the site improvements, why you created and produced all these documents to support a scenario where there’s two large basements, and then the basements become abbreviated. And the prob – look, let me make it really clear to you: the proposition is the reason you did that is because it’s expensive and difficult to build in the river. And you didn’t want to build your basements 3, 4 and 5 out into what you call the “bad ground” because it’s expensive and difficult?‑‑‑Absolutely.
And that sets this site apart from the George Street site?‑‑‑Well, I don’t – it does in as far the external wall to floor ratio on the bad – on the good ground car park for basements 3, 4, 5, 6 and 7.
But you’ve got to agree that on George Street, they’re not thinking about abbreviating their car parks to stay away from something you call “bad ground”, are they?‑‑‑When you say “abbreviating” – you’ve said that word quite a lot. Five thousand five hundred is not a small area for a car park.
But it’s not the same size as your car parks 1 and 2?‑‑‑No, it’s not.”[44]
[44]T 9-76, lines 14 to 34.
[111] In a great number of respects, the evidence of Mr Davidson is not in conflict with that of Mr McHardy. In all those instances, I accept the evidence of Mr Davidson. Further, as I indicated when assessing Mr McHardy’s evidence, there are circumstances where Mr McHardy agrees with Mr Davidson’s revised estimate of Mr McHardy’s costings, although not necessarily agreeing with the conclusions reached. In so far as it may be necessary, I am comfortable with the evidence of Mr Davidson as to differences in estimates compared to Mr McHardy. However, for reasons which I will develop below, I prefer the overall conclusions of Mr McHardy to those of Mr Davidson.
Analysis of the quantity surveying expert evidence
[112] The short statements that I have made regarding Mr McHardy’s and Mr Davidson’s evidence does not do justice to the detail of their reports and the depth of their evidence. In this regard, I note the submissions made by the Valuer-General at paragraphs 222 and 223 of its written submissions as follows:
“222. The disagreements between Mr Davidson on the one hand, and Messrs Ainsworth and McHardy on the other, about how many additional levels of parking would be required and what it might cost was are not matters which can be resolved one way or the other on such skeletal evidence. The real point is that Mr Davidson identified the type of exercise which would need to be done before there could be any meaningful consideration by valuers about “site penalties” as might be perceived by a purchaser of the Subject Property for its highest and best use. The unresolved and unresolvable disagreements about what is freely acknowledged to be an exercise done at a high level highlights the logical deficiencies in the Appellant’s approach of seeking to assert “site penalties” based on historic works and an exercise of building on the Subject Property a 3 tower mixed use development involving construction of 943 car spaces, neither of which are shown on the evidence to have any demonstrable relationship to the construction works which would be carried out to achieve the agreed highest and best use.
223. Ultimately, however, neither valuer made any direct or express use of the evidence from either QS. The outcome does not turn on any aspect of that evidence.”
[113] To be absolutely clear, I should stress that the above quote from the Valuer-General’s submissions relate to the Valuer-General’s assessment of Mr Davidson’s car parking exercise. However, importantly in my view, the quoted paragraphs do give a summary view of the Valuer-Generals analysis of this litigation from a quantity surveying exercise.
[114] When the respective instructions of the quantity surveying experts are viewed, it becomes clear that Mr McHardy was tasked with the exercise of producing a rather comprehensive quantity surveying analysis of the subject site and certain sales sites. As I have already mentioned, it is clear that Mr McHardy has a great depth of knowledge of the subject site of 123 Eagle Street, which greatly assisted the Court in this matter. On the other hand, Mr Davidson was instructed to, in effect, provide a critic of the work of Mr McHardy. I offer absolutely no criticism of the Valuer-General in providing those instructions and taking that approach. That is entirely a matter for the Valuer-General as to how it chooses to run its case. Indeed, as I have pointed out in other valuation cases before the Court, there is no duty or obligation on the Valuer-General to produce any expert evidence to assist the Court; the duty of course lies on the appellant to prove its appeal. However, when it comes to an assessment of the evidence between one expert and another, the nature of the evidence that those experts give to the Court is relevant, and such evidence is of course framed by the instructions provided to experts.
[115] Mr McHardy provided a fulsome quantity surveying analysis, and that is apparent from a reading of his reports. On the other hand, Mr Davidson, though of course detailed in the areas of his critic, did not do his own independent quantity surveying assessment. I agree with the submissions of GPT in reply[45] that the JER process is compromised by one expert providing a detailed assessment and the other only a critic of that work. This is but one reason to prefer the evidence of Mr McHardy to that of Mr Davidson.
[45]Appellant’s Reply Submissions, para 82.
[116] I do agree with the Valuer-General that an exact costing from either a quantity surveying, or indeed an engineering, perspective is not warranted in a valuation case under the LVA. We are, after all, dealing with hypothetical, statutory based assumptions to arise at the applicable site valuation. So much was indeed conceded by GPT throughout the hearing. What is important is not so much the exact cost per square meter of a certain material, but the impact of the cost of hypothetical building works on the subject and sale sites in the mind of a hypothetical prudent purchaser and how such hypothetical prudent purchaser would take that knowledge into account in arriving at a dollar value for the land in a purchase/sale. I agree with the reply submissions of GPT that there is clear evidence before the Court in this case that a prospective purchaser would do due diligence, the results of which would affect the amount that person would pay for a site improved but otherwise undeveloped 123 Eagle Street.[46]
[46]Ibid para 85.
[117] I note the submissions of the Valuer-General at paragraphs 215 and 216 in so far as the Valuer-General is critical of GPT’s evidence as not being applicable in “a comparable sales context”. Importantly, the Valuer-General in paragraph 216 contends that GPT made no attempt to demonstrate that a hypothetical prudent purchaser of the subject at the valuation date would carry out any thought process involving the transposition of the existing riverside development to the 304 George Street site nor the 304 George Street development to the notionally site improved but otherwise vacant subject. GPT, on the other hand, argues that such criticism is misdirected because the exercise GPT undertook in its engineering and quantity survey evidence was separate from the analysis of the comparable sales, and that Mr Jackson analysed sales first and then, in a separate exercise, reasoned that a prospective purchaser would carry out a due diligence process that would lead to 10% less being offered for the subject site because of its peculiar difficulties.
[118] I will leave resolution as to whether or not Mr Jackson is correct to make a 10% reduction because of the particular site difficulties of the subject to my consideration of the expert valuation evidence. However, from an engineering and quantity surveying perspective, I am satisfied that GPT, through the evidence of Mr McHardy and Mr Gould, has demonstrated that the subject site of 123 Eagle Street does present building difficulties particular to it, not to be found at the comparable sale sites referred to generally in this proceeding and, in particular, the sale of 304 George Street.
So excavation from ground level down to the level where you’re going to start those works is not an unusual or extraordinary cost. It’s an ordinary cost of development, is it not?‑‑‑Excavation is a normal cost of development, yes.
All right. In this case, if we hypothesise the subject site, and leaving aside the debate between the parties bout [sic] the river wall and the hydrostatic slab, in the state in which you and Mr Callaghan considered it in 2009 – we’ll go back there for ease of reference – it sloped down from Eagle Street to the river, did it not?‑‑‑Correct.
In terms of excavating now, the items 13 to 15 relate to excavating the site down to a level to commence works that – and I may have this wrong – but it was about a zero AHD or something close to that?‑‑‑Something close to that.
Right. If the subject site had been the hypothetical normal site, the excavation down to about 0 AHD would have been a rectangular block of excavation from surface level down to that level; correct?‑‑‑Correct.
But the subject site, of course, because mother nature has given us the slope, the excavation to get down to the same level, involves a lesser volume of material than would be involved for our hypothetical normal site?‑‑‑Yes.
Because mother nature’s already taken ‑ ‑ ‑?‑‑‑Yep.‑ ‑ ‑ a part of it away by the wedge – or the slope, rather. In other words, the excavation is a wedge shape rather than a rectangle shape, agreed?‑‑‑Correct.
So is that not, in respect of this specific item, a construction advantage for the subject site, rather than a cost or construction penalty?‑‑‑It is an advantage to the – to the – to the site, having that ‑ ‑ ‑And even if one were to step back from the language of advantage, the excavation to get down from a ground level to the level where you’re going to start building your cores and your basements, is an ordinary construction requirement for the normal site anyway; correct?‑‑‑Correct.
It’s the same for both sites. The quantities will differ but it’s the same exercise for both site?‑‑‑Correct.
Thank you. Now, in respect item 14, specifically. You were dealing there with the additional cost to treat acid sulfate soil, and there’s no dispute that the subject site in the state we’re conditioning – we’re considering has acid sulfate soil issues, but as a matter of logic, should that figure not merely be for the extra over normal excavation costs as compared to if the soil was not acid sulfate-affected?‑‑‑Correct.
All right. And as for item 15, whether we’re dealing with the subject site or our utopian normal site, if one is going to excavate down to a level where one can start constructing the base of the core and the basements, one needs to have a ramp to provide access for the plan to get down to that level and start working – to excavate and then start working?‑‑‑Yes.
Can I suggest to you simply that items 13, 14 and 15, apart from the particular issue of acid sulfate soil, properly treated, works required for the normal site and, indeed, any construction site?‑‑‑Yes, I – I must say in the evolution of this – these three items, in particular, I would prefer to research how I have come to that conclusion, but as you’ve described, yes.”[183]
[183]T 5-35, lines 19 to T 5-36, lines 29.
[326] The Valuer-General considers that the above-outlined evidence of Mr McHardy demonstrates that a number of the penalties included were not, in fact, unique to the subject and, in the case of excavation down to the basement level to commence basement construction, that this actually reflected an advantage for the subject (because its natural slope down to the river reduced the total volume of excavation required).[184]
[184]Respondent’s Submissions, para 209.
[327] The Valuer-General submits that if Mr Jackson’s approach is correct, the differences between his and Mr Davidson’s evidence in relation to various ‘line items’ is not material and does not affect the outcome of this appeal. In contrast, providing, if Mr Jackson’s approach is otherwise incorrect, the entirity of the quantity surveyor evidence, in so far as it is sourced from the 2009 report, is irrelevant.[185]
[185]Ibid para 210.
[328] The Valuer-General contends that the works included as penalties by Mr McHardy are site improvements. The Valuer-General submits, if the Valuer-General’s position is correct, the works and their attributed costs are plainly irrelevant, as a purchaser does not need to consider the ‘penalty’ cost of constructing works that are already in existence.[186]
[186]Ibid para 212.
[329] The Valuer-General says that GPT’s quantity surveying evidence and the case it wishes to run do not align because the works Mr McHardy refers to are works carried out to develop the subject yielding a lettable floor area of 50,000 which the Valuer-General says has no demonstrated relationship to a development giving effect to the highest and best use of up to 150,000.[187]
[187]Ibid para 213.
[330] The Valuer-General is critical of Mr McHardy for assessing the site penalties in comparison to a hypothetical ‘normal site’, providing that the ‘penalty’ comparisons between the subject and 304 George Street have nothing to do with any sales evidence.[188]
[188]Ibid para 215.
[331] Mr McHardy conceded this point under cross-examination:
“I’ll ask you the question, so it’s 5.2A for the 123 on 123, the $11,887,000, that’s a figure of costs for development which are more than what; what’s it being compared to? ---Yes, okay. Yes. Yes, it is being compared to an easier construction site. So normal is the word you used. Yes. That is---
It’s not being compared to any of the sales upon which the appellant relies in its valuation evidence, is it? Not ---?---Nothing to do with the sales, no.
No. Nothing to do with the sales at all?---No.”[189][189]T 5-25, lines 38 to 46.
[332] Continuing its criticisms, the Valuer-General argues that the exercise carried out by Mr McHardy of attempting to transpose:
(a) The existing Riverside development (which does not reflect the highest and best use of the notionally site improved but otherwise vacant subject) to the 304 George Street site (which does not have a highest and best use comparable to the existing Riverside development);
(b) The approved 304 George Street development to the notionally site improved but otherwise vacant subject (where it is not a form or configuration of development which anyone suggests would be carried out on the subject)
is an entirely arid one. The Valuer-General says there was no attempt made to demonstrate that a hypothetical prudent purchaser of the subject as at the date of valuation would carry out any thought process involving that kind of transposition. In the words of the Valuer-General, the exercise undertaken has no evidentiary value and was pointless.[190]
[190]Respondent’s Submissions, para 216.
[333] The Valuer-General submits that the point of the proposal by Mr Davidson was to identify the type of exercise which would need to be done before there could be any meaningful consideration by the valuers about ‘site penalties’ as might be perceived by a purchaser of the subject for its highest and best use. The Valuer-General submits that the unresolved and unresolvable disagreements about what is freely acknowledged to be an exercise done at high level highlights the logical deficiencies in GPT’s approach of seeking to assert penalties based on historic works and an exercise of building on the subject a 3 tower, mixed use development involving the construction of 943 car spaces, neither of which are shown on the evidence to have any demonstrable relationship to the construction works which would be carried out to achieve the agreed highest and best use.[191]
[191]Ibid para 222.
[334] The Valuer-General goes on to criticise Mr Jackson for coming to a deduction of 10%, stating, “…it was simply a way of applying another discount in his subjective comparison with the sales evidence”.[192]
[192]Ibid para 225.
[335] In response to the Valuer-General’s criticisms of Mr Jackson, GPT says that the proposition that in order to assert a 10% reduction in site value it would be necessary for Mr Jackson to carry out a hypothetical development exercise is, with respect, unsound. GPT points out that this Court has long discouraged the use of hypothetical developments to arrive at values of unimproved (and, by analogy, site improved) land. GPT submits that the exercise carried out was useful and indicative of costs and site difficulties that a likely form of development would need to confront and respond to.[193]
[193]Appellant’s Reply Submissions, para 4(e)(vi).
[336] In response to the Valuer-General’s assertion that Mr Jackson’s 10% deduction includes an allowance already made for floods, GPT says this assertion is incorrect and without proper evidentiary basis.[194]
[194]Ibid para 4(e)(vii).
[337] During cross-examination the following discussion occurred between Mr Fraser QC and Mr Jackson:
“All right. So – but you and Mr Hart have agreed on a five per cent reduction of the analysed value for the – for flooding, haven’t you?‑‑‑That’s right. The – it was ‑ ‑ ‑
So what’s that for?‑‑‑It was a matter of – well, the – the Valuer-General, following the flood event, for all those properties along the CBD – it was sort of a matter of policy – allowed a five per cent allowance for those properties which were the subject of – of flooding as a result of that event, and what – what that was for – it’s actually explained in the Valuer-General documents – to say the perception of any diminution in market value of those properties as a result of this – what was a major event at the time – and there was a certain obvi – obvious level of concern around that flood event and the – the impact it had on the market at that time.
All right. But to the extent that you’ve allowed for the flooding issues in your deduction of 10 per cent, aren’t you doubling up with agreed amount of five per cent deduction?‑‑‑No. I – I think you’re probably misunderstanding the two concepts. You – if you need to, for instance – you need to – if you need to build a retaining feature of some nature in whatever new form of development you do on the land, you’ve got to deal with the – the reality of flooding, not – not a flood event. You’ve got to deal with the site being on the river full stop, and, you know, listening carefully to the engineering evidence, you know, you’ve got to dewater the site when you pump out the sludge out of the land and the – the high water table. They’re just issues associated with it being adjacent to the river.”[195]
[195]T 7-51, lines 16 to 37.
[338] As to the criticisms regarding the four-scenario exercise, GPT has this to say:
“Paragraph 12(c) [of the Respondent’s submissions] presumably refers to the further exercise by Mr Jackson as a consequence of the four scenario exercise developed by the engineer and quantity surveyor. Mr Jackson has consistently brought to account a deduction for site conditions and the exercise of doing so is entirely sound if the Court is satisfied that the site conditions are a matter which would influence a hypothetical purchaser (just as might any other physical or locational feature of the site).”[196]
[196]Appellant’s Reply Submissions, para 4(j)(iii).
[339] GPT goes on to criticise the Valuer-General for not engaging with Mr Ainsworth’s evidence about the subject site involving greater engineering challenges than other sites, particularly the 304 George Street site. GPT says the fact is, the Valuer-General refuses to acknowledge or properly deal with the site specific penalties of the subject site, as raised by GPT and as subject to so much scrutiny of GPT’s experts.[197]
[197]Ibid paragraph 75-6.
[340] Addressing Mr Davidson’s evidence, GPT submits the Valuer-General misunderstood GPT’s submissions. GPT says the point it wishes to make is, Mr McHardy was the only one to quantify the relevant site penalties; Mr Davidson’s exercise either ignored some of the evidentiary issues (e.g. costing a like development to 304 George Street on 123 Eagle Street); or was limited to commenting on aspects of Mr McHardy’s evidence. GPT says, where Mr Davidson has not engaged in the exercise at all, then Mr McHardy’s evidence (with qualifications, as far as they are established), is the only reliable evidence. GPT submits that this is so because only Mr McHardy has actually undertaken the whole of the relevant exercises.[198]
[198]Ibid para 78.
[341] GPT submits Mr Jackson analysed sales first, then separately reasoned that a prospective purchaser would carry out a due diligence process that would lead to 10% less being offered for the subject because of its peculiar difficulties, which is a transparent and evidence based approach.[199]
[199]Ibid para 86.
Conclusions on site penalty
[342] Even a brief reading of the above as to the parties’ positions with respect to site penalty considerations involves an amount of doubling up of facts and circumstances referred to in other parts of this decision. This helps highlight both the difficulties with this topic and the dangers of doubling up on considerations already taken into account in applying the comparable sales methodology.
[343] I will start with flooding. I am not at all satisfied with Mr Jackson’s oral evidence as to his distinction between the 5% allowance agreed to with Mr Hart and his inclusion of “the presence of flooding” as one of his dot point contentions[200] in support of his 10% site penalty. This represents a classic case of doubling up and that part of Mr Jackson’s site penalty allowance must be rejected.
[200]Ex 2B, para 128.
[344] Mr Jackson also relies on the need to excavate rock at 123 Eagle Street as support for his site penalty. Of course, for the reasons already stated, I am relying on the sale of 304 George Street. The engineering and quantity surveying evidence clearly establishes that exaction of rock was a major consideration for development on 304 George Street. Logically, therefore, it forms part of the comparable sale analysis already undertaken and to consider it again under this heading would be a doubling up.
[345] In my view, the issue of easements burdening the land and their impact on construction has also, implicitly, been taken into account in the comparative sale approach between 304 George Street and the subject. I have applied burdened/unburdened rates to the 304 George Street sale. To apply the issue of easements again as a site penalty for 123 Eagle Street would also be a doubling up.
[346] Although not listed in Mr Jackson’s list in [128] of his Exhibit 2B Report, it is clear from the evidence given by the experts called by GPT that difficulties with site access during construction is also a factor supporting a site penalty for 123 Eagle Street. Just like the issue of easements, access to both 304 George Street and 123 Eagle Street have already been taken into account in the comparative approach.
[347] The other points raised by Mr Jackson have received support, not only from Mr Ainsworth, but also from Mr Gould (called by the Valuer-General). I accept that evidence; that is, that 123 Eagle Street involves greater engineering challenges than 304 George Street.
[348] As already pointed out, some of those challenges have already been taken into account. However, when the evidence is viewed in its entirety, others have not.
[349] As a matter of legal principle, it is my view that the better approach is to include all such issues as part of a comparable sales approach wherever possible. This avoids the dangers of doubling up. I also accept, however, that there may be cases where that is either difficult or not appropriate. Due to the conflicting positions of the parties going into the hearing, I accept that this is a case where an additional allowance for site penalty is arguable, but noting of course the great care which must be exercised to ensure that there is no doubling up.
[350] Doing the best that I can on the evidence before me, and being careful not to cause any doubling up, and having regard to all of my findings, I consider it appropriate to allow a site penalty of 5%.
The Valuer-General’s pleading point
[351] GPT in its reply submissions expresses a concern that the Valuer-General alleges against it that the hearing proceeded on a false premise due to the nature and scope of GPT’s grounds of objection.
[352] GPT has seven grounds of appeal. Those grounds have been particularised. As GPT has pointed out,[201] the situation at hand is analogous with the comments by this Court in Buckler v Department of Natural Resources and Water[202] where I had this to say:
[201]Appellant’s Reply Submissions, para 96.
[202][2011] QLC 7.
“[23]It is common ground between the parties that the appellant is unable to rely on grounds of appeal outside of those listed in each appeal in light of s.56 as then enacted. The operation of s.56 of the VLA, then numbered as s.21(3) of the VLA, was considered by the Land Appeal Court in the case of Franklin v Valuer-General. The Court made the following observations:
“The provisions of the Valuation of Land Act as to the appeal procedure are restrictive in their operation, more especially to an appellant who has made his appeal on narrow and particular grounds rather than on a broad general ground such as ‘the valuation is excessive and contrary to law’. The language used by the Legislature is mandatory and binding not only on the parties but also on this Court and the Land Court.”
[24]One of the quirky features of appeals under the VLA has been that those appellants who go to the detail of explaining exactly what their nature of objection is often make their grounds of appeal so restrictive that they are unable to lead evidence as to matters of significant concern to them regarding the valuation complained about simply because such evidence does not properly fall under the heads of one of their specific grounds of appeal. On the other hand, those experienced in filing grounds of appeal in the Land Court often file grounds of appeal worded in the most general way possible and thus tend to capture each and every possible aspect of appeal that could be raised in evidence at the hearing of the appeal. I call this situation “quirky” as those appellants who attempt to specify their grounds of appeal in a meaningful way are often caught short at a hearing, whilst those who file grounds of appeal which, in real terms, reveal nothing to either the respondent or to the Court of what the actual grounds of appeal are, have free rein to admit whatever evidence they choose on appeal.
…
[26]In my view, the question is not so much whether the 2006 grounds of appeal are limited by their failure to include the specific ground of objection relating to the golf course policy as contained in the 2007 grounds of appeal, but rather whether, if the specific ground had not been included in the 2007 appeal, all of the evidence adduced by the appellant could have been sustained by the general grounds of appeal set out in both notices of appeal. In my view, the answer must be a resounding yes.
[27]In my view, whilst the appellants are limited to the grounds of appeal as set out in their notices of appeal, the broad nature of those notices of appeal is sufficient to encompass all of the evidence presented by the appellants at the appeal hearing of both valuation appeals.” (citations omitted)
[353] Although Buckler was a case under the VLA and not the LVA, in my view the principle remains intact. His Honour, Member Cochrane, expressed like views in Bunnings Properties Pty Ltd v Valuer-General[203] where he analysed various case law and came to the same conclusion with respect to the VLA.[204]
[203][2016] QLC 63.
[204]Ibid [62]-[84].
[354] I agree with GPT that I have grounds of appeal before me that permit me to consider and make findings on all of the issues in dispute in this matter.
Conclusion
[355] All that remains to be done is to apply a mathematical calculation to the various findings that I have made to ascertain the site value for 123 Eagle Street pursuant to the LVA as at 1 October 2012.
[356] The relevant findings are that the comparative sale, 304 George Street, has an unburdened rate of $8,031 m2. As the subject is 20% superior, that needs to be added to arrive at an unburdened rate for 123 Eagle Street. $8,113 m2 plus 20% equates to an unburdened rate for 123 Eagle Street of $9,736 (rounded).
[357] Having ascertained the unburdened rate for 123 Eagle Street, it is now necessary to adjust that amount to arrive at the burdened rate using the agreed rate of 30% as a reduction. The calculation is therefore $9,736 * 70% which equals $6,815 (rounded).
[358] Using the unburdened rate of $9,736 m2 and $6,815 m2 as the burdened rate as the starting point, the calculation for 123 Eagle Street is as follows:
Subject property analysis Unburdened Area 6,601 m2 @$9,736/m2 = $64,267,336 Burdened Area 2,082 m2 @$6,815/m2 = $14,188,830 Site Value $78,456,166 Less 5% flood allowance $3,922,808 (rounded) Site Value $74,533,358 Less site penalty costs (5%) $3,726,668 (rounded) Site Value Assessment $70,806,690 Rounded to $70,800,000
[359] On the whole of the evidence, I find that the appeal must be allowed and the valuation of 123 Eagle Street Brisbane as at 1 October 2012 set at $70,800,000.
Orders:The appeal is allowed.1.
The site valuation of 123 Eagle Street, Brisbane City (PID 40906821) as at 1 October 2012 is determined in the sum of Seventy Million, Eight Hundred Thousand Dollars ($70,800,000).2.
PA SMITH
MEMBER OF THE LAND COURT
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