Grout Com Pty Ltd as Trustee v Valuer-General - [2010] QLC 135

LAND COURT OF QUEENSLAND

CITATION: Grout Com Pty Ltd as Trustee v Valuer-General [2010] QLC 0135

PARTIES:Grout Com Pty Ltd as Trustee
(Appellant)
v.
Valuer-General

(Respondent)

FILE NO:VLA207-10
DIVISION:Land Court of Queensland
PROCEEDING:  Appeal against annual valuation under Valuation of Land Act 1944
DELIVERED ON:                  7 October 2010
DELIVERED AT:                   Brisbane
MEMBER:Mr WA Isdale

ORDER/S:The appeal is dismissed. The valuation appealed against is confirmed.

CATCHWORDS: Valuation of Land Act 1944
Uniform Civil Procedure Rules, rule 426(1) and (2)
Valuation of land – sales best evidence of value – preference to sales over relativity – expert evidence – duty of expert to Court
A Hudson Pty Ltd v Legal and General Life of Australia Ltd [1986] 66 ALR 70 at 72, lines 28-32, applied
Australian Postal Corporation v Department of Natural Resources and Mines [2003] QLC0011, applied
Barnwell v Valuer-General [1990-91] 13 QLCR 13 at 17, referred to
Brisbane City Council v The Valuer-General [1977-78] 140 CLR 41 at 56-57, applied
Clough v Valuer-General [1981-82] 8 QLCR 70 at 76, referred to
Fischer v The Valuer-General [1983] 9 QLCR 44 at 46, referred to
Hans and Else Grahn v Valuer-General [1992-93] 14 QLCR 327 at 328, applied
Thomson v Department of Natural Resources and Mines [2007] QLC 0092 at [6] to [8], applied
Qualischefski v Valuer-General [1979] 6 QLCR 167 at 172, applied
GE Cominos & Co Pty Ltd v Chief Executive, Department of Lands [1996-97] 16 QLCR 311 at 336-339, applied
Perpetual Trustee Company Limited v Department of Natural Resources, Mines and Water [2006-2007] 27-28 QLCR 64 at [26], applied
NR & PG Tow v Valuer-General [1978] 5 QLCR 378 at 381, applied

APPEARANCES: Mr V Volny, Director for the Appellant
Mr P Prasad, Senior Legal Officer, Department of Environment and Resource Management, for the Respondent

Background

The appellant is the owner of Lot 5 on RP88095, County of Stanley, Parish of Yeerongpilly, Title Reference 13077128. More commonly described as 14 Megalong Street, Holland Park West. It is a residential block of 620 square metres area.
In accordance with the duty imposed by the then Valuation of Land Act 1944 the land has been valued in its notionally unimproved state as at 1 October 2009. The value was addressed as $370,000 but after an objection by the owner it was reduced to $365,000 due to consideration being given to the land being liable to suffer some flooding by way of overland flow and to noise from the Pacific Motorway.

The appeal

Not being satisfied with the valuation of $365,000, the appellant filed an appeal in this Court on 21 July 2010. The appeal was heard on 28 September 2010. The grounds of appeal became exhibit 1 and were supplemented by further material which was admitted as exhibit 2. The grounds of appeal referred to:
1.     The risk of flooding by overland flow and its impact on market value and development costs.
2.     Noise from the motorway.
3.     The restricted development potential due to the applicable zoning.
4.     The contour of the land, which drops about 3 metres overall from the road level.
5.     Restrictions on vehicle parking in the street.
6.     The absence of views.
7.     Recent sales of comparable land not supporting the value arrived at by the respondent.
8.     The relativity of the subject land to comparable land.

The appellant’s evidence

Evidence was given by Mr Volny, a director of the appellant, in support of the valuation contended for, $280,000. He explained that he arrived at this figure by starting with the valuer-general’s valuation of $365,000. He deducts 10% for the flooding problem, another 10% for the noise and arrives at $292,000. It will be observed that this figure is arrived at by deducting 20% from $365,000. By looking at relativity, he then arrives at $280,000. Although all eight points of contention referred to in [3] were agitated by Mr Volny, it can be seen that the flooding and noise aspects were most stressed.
Mr Volny did not claim any qualifications in relation to ascertaining the value of land. He provided the Court with exhibit 3, a flood map of the subject property and adjoining properties including 10 Megalong Street as well as of the land at 53 Dunrod Street, Holland Park West, which was sale 2 used on behalf of the valuer-general.
Exhibit 2 contains a list of nine valuations made by the Department of Environment and Resource Management and five recent sales are also listed. These were supplemented by exhibit 4, a list of three additional sales. Photographs were provided in exhibit 5 to illustrate properties referred to. Photographs were also provided in exhibit 2 to illustrate the subject land.
Mr Volny provided the first page of a letter dated 30 October 2009, which became exhibit 6, to illustrate when overland flow mapping information became available from the Brisbane City Council. This was in support of his submission that prior to that time, purchasers of the subject land and sale 2 would not have had access to this information. He has written on exhibit 3 that the information contained in that exhibit was published on 2 October 2009.
Mr Volny also tendered information provided by Translink showing, inter alia, the walking distances from Hockings Street and 30 Galsworthy Street, Holland Park West to where a bus can be caught. Part of this material was objected to on behalf of the respondent but was admitted as exhibit 7 after some submissions as to its relevance or otherwise.
Mr Volny gave evidence in support of the written material which he tendered and was critical of the valuation report which had been provided to him on behalf of the respondent. While some of the material which was tendered on behalf of the appellant had apparently not been disclosed to the respondent prior to the hearing, which ought to have occurred, I am satisfied that this was more likely to be due to Mr Volny being relatively unfamiliar with the litigation process rather than anything else.
In the witness box, Mr Volny had some difficulty separating evidence from advocacy but again I attribute this simply to relative unfamiliarity with the process. There may also have been an unfamiliarity with terminology as well. For instance, his evidence was that the footpath outside of the subject property was unformed. The photograph on the cover of exhibit 8, the respondent’s valuer’s report, clearly shows that the footpath is formed, with concrete kerbing and channelling. I attribute this inaccuracy to terminological inexactitude rather than anything else. I found Mr Volny to be a witness doing his best to be factually correct but having an obvious difficulty in separating his dual roles as witness and advocate, highlighting the difficulties for an appellant essentially trying to be his own lawyer. Overall, I am of the view that the appellant’s sole witness and advocate had and utilised a very full opportunity to put the case for the appellant.
Mr Volny disagreed with aspects of the assessment of attributes of sale properties considered by the valuer for the respondent. For instance, the relative levels of traffic noise at the locations of sales as compared to the subject. He focused on the exposure of the subject and the respondent’s sale 2 to overland flow and his evidence that publication by the Brisbane City Council of overland flow maps after the sales of these properties indicated that the sales failed to take it into account. He also pointed to an error in the Sales Summary at 6.3 of the respondent’s valuer’s report, which became exhibit 8, where the analysed sale price of sale 1 was stated to be $415,000 whereas it should have been $410,000.
The appellant’s case faced the difficulty that a witness who was not qualified in the expert field of property valuation was seeking to attack the report of the qualified expert. The approach taken was that if some error could be shown in the valuer’s report then it ought to crumble as it would be shown to be contaminated by the error.

Textual attacks on valuations

While no doubt appealing to those not versed in the authorities, it has been decided that an error is not necessarily fatal to a valuation unless the error is of such a fundamental nature as to bring about that result. In A. Hudson Pty Ltd v Legal and General Life of Australia Ltd,[1] Lord Goff of Chieveley, delivering the judgment of the Judicial Committee of the Privy Council in an appeal from the Court of Appeal of New South Wales said:
“In general their Lordships consider that it would be a disservice to the law and to litigants to encourage forensic attacks on valuations by experts where those attacks are based on textual criticisms more appropriate to the measured analysis of fiscal legislation.”
In my view, this is more emphatically true where the criticism is attempted by an unqualified person, no doubt intelligent, but not equipped with the knowledge and training possessed by an expert in the field.
[1][1986] 66 ALR 70 at 72 lines 28-32.
The approach of the Privy Council was followed by this Court in Australian Postal Corporation v Department of Natural Resources and Mines.[2] After referring to the decision of the Privy Council at paragraph [60] of his reasons, Dr Divett said, at [62]:
“[62] That principle of not discrediting a valuer’s determination merely because of a mistake, was later upheld in the Supreme Court of Queensland in Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd [2002] QSC 322, 11 October 2002, where Muir J said at p.10:
‘These decisions are also authority for the proposition that the determination of such a valuer will not be set aside for mistake unless the mistake is such that the valuation fails to comply with the contract.’
[63] The question then to be addressed is whether Mr Crowley has failed to complete his valuations in accordance with the directions of the Chief Executive in this matter. There is no evidence to support that conclusion. The only inference that might be reached is whether, in relying upon the analyses of another registered valuer, he has concluded an inappropriate value of those sales for comparison purposes.”
[2] [2003] QLC 0011.

Challenging valuation evidence without a valuer

The reference by Dr Divett to “another registered valuer” has resonance with the decision of the Land Appeal Court in Appeals by J.L. & I. Qualischefski and Others against determination by valuer-general-Shire of Laidley.[3] In that case valuations by the valuer-general were in issue. At page 172 of its decision, the Land Appeal Court said:
“In appeals of the nature of the subject, the onus which the appellant must assume is not an easy one to discharge without the assistance of a registered valuer who can lead evidence as to sales analyses and/or comparison with valuations made by the Valuer-General in respect of comparable properties.”
[3] [1979] 6 QLCR 167 at 172.

The conclusion of the appellant’s evidence

Mr Volny was cross-examined by counsel for the respondent and in the course of that cross-examination it was disclosed that Mr Volny does not reside at the subject property and is not qualified as a valuer. He agreed that the highest and best use of the subject land is for residential purposes. The extent of traffic noise affecting sales relied upon by the valuer-general was covered but the disagreements between the parties remained.
Mr Volny gave some brief evidence equivalent to re-examination in which he made the point that the purchasers of 10 Megalong Street, referred to in 6.4 of exhibit 8, would most likely not have been aware of the risk of overland flows when they bought the property in 2006.
At the conclusion of this evidence the case for the appellant was closed.

The respondent’s evidence

The respondent called registered valuer Mr Gaven Ooi to give evidence and to produce his report, which became exhibit 8. Mr Ooi is a registered valuer, an Associate of the Australian Property Institute and a Certified Practicing Valuer. He holds the degrees of Bachelor of Business (Management), Bachelor of Commerce and Master of Property Studies. He is employed as a valuer by the respondent.
Mr Ooi corrected several minor errors in his report, including the one in 6.3, the Sales Summary, which had been identified by the witness for the appellant. He told the Court that he valued the subject property by direct comparison with sales of vacant or lightly improved sales of lands with comparable highest and best uses in the area and around about the date of valuation. His evidence was that at the date of valuation, 1 October 2009, the market for property of this nature was steadily rising.
Exhibit 9 was produced through this witness. It shows that the valuation was issued at $370,000 and reduced after consideration of an objection by the present appellant. It was reduced to $365,000. The reason given for this in exhibit 9 is as follows:
“The reason for my decision is:
· After further consideration of adverse characteristics associated with the land, a greater allowance has been made resulting in a reduction in the valuation of the property.”
Mr Ooi’s evidence was that the adverse characteristics referred to were predominantly the flooding and freeway noise issues.
Mr Ooi’s report describes the footpaths in Megalong Street as formed with kerbing and channelling. As referred to previously, the photograph on the front of exhibit 8 shows this to be clearly correct. The land has the usual range of services available to it as would be unremarkable in the area and is close to a primary and a secondary school. A busway station is nearby but the proximity to this does bring with it vehicles parking along the street. The Pacific Motorway provides access to the north and south but there is attendant traffic noise.
Mr Ooi considers that Brisbane City Council flood mapping information, while confirming the susceptibility of the land to overland flow, shows that it is limited to between 7.5 and 13.5 metres from the rear boundary of this 40 metre deep block, the contour map of which shows a fall of 3 metres from front to rear. The appellant contended that the enlarged scale flood map produced in exhibit 3 demonstrates a greater potential area of land subject to overland flow. My examination of that map, however, inclines me to the view that Mr Ooi’s upper limit of 13.5 metres is supported by exhibit 3.
In his evidence-in-chief, Mr Ooi stated that the impact of overland flow on sale prices of the affected land considered in this case, the subject and his sale 2, was very minimal. This expert evidence is uncontradicted by any competing expert opinion and I accept its accuracy.
Sale 1, of 607 m² at 30 Galsworthy Street, Holland Park West on 19 November 2008 was considered, at 6.4 of the report, to be the best evidence of value of the subject. Mr Ooi made allowances for the overland flow, traffic noise and parking problems and adjusted upwards to account for its proximity to the motorway, busway, schools and the rising of the market up to the date of valuation. The sale price of $400,000 was analysed to $410,000 to take into account the presence of an older house which was demolished so that a new house could be built.
Sale 2, 53 Dunrod Street, Holland Park West, on 16 July 2009 is, like the subject and all eight of the sales considered by the valuer, zoned for low density residential development. It is subject to overland flow and falls to the rear, like the subject. Its area is 462 m² and it sold for $350,000. The Council flood mapping shows that the overland flow affects the forward part of one side of the block and about half of its frontage, but the purchaser informed Mr Ooi that this did not have any affect on the building of the new house being constructed there. The 10 m frontage, compared to 13.5 m for the subject, does attract the application of the Council’s Small Lot Code which imposes greater building restrictions than are applicable to the subject.
Mr Volny’s evidence was that neither the purchaser of the subject property, or of sale 2 or of 10 Megalong Street, as referred to in 6.4 of exhibit 8 actually knew of the exposure to overland flow at the time of purchase and that this was relevant to the purchase prices. In view of Mr Ooi’s evidence concerning its lack of effect on construction in regard to sale 2, its extent and rearward location on the subject land and Mr Ooi’s evidence that its effect on sale prices would be very minimal I am satisfied that the overland flows on the subject have very minimal impact on the valuation of the land.
In addition, the $350,000 realised in sale 2 is evidence contrary to the assertion by the appellant that the larger subject property, not subject to the Small Lot Code and susceptible to overland flows only at the rear, rather than the front, could be correctly valued at the figure of $280,000 contended for by the appellant.
I note also that the appellant reaches the $280,000 figure by starting with the respondent’s figure, which the appellant says is wrong, and then deducting 10% to allow for overland flow and 10% to allow for noise, so arriving at $292,000. From this $12,000 is deducted to allow for relativity. The 10% for overland flow is not supported by any evidence that this is reflecting the market and is specifically contradicted by the expert Mr Ooi, whose evidence I accept. In relation to the 10% reduction for noise, there was no evidence from which it could be concluded that a purchaser would pay 10% less for the subject property with the motorway noise than a purchaser would pay for the property without that noise. In the case of sales referred to in the appellant’s case it was not demonstrated that the sales showed a 10% reduction for the level of motorway noise experienced at the subject property, which was not quantified in the evidence by any measurements. There was no evidence of how either of the amounts of 10% used by the appellant were arrived at and they appear to be purely arbitrary.
There was no explanation of how the $12,000 allowance in regard to relativity was arrived at or indeed why it is expressed as a figure rather than as a percentage, as were the other allowances.
Mr Ooi’s report referred to sale 3, of 655 m² of vacant land at 18 Dodwell Street, Holland Park West on 27 February 2010. Assessed as superior overall to the subject, it sold for $449,000.
Sales 4 and 5 are of adjoining 450 m² vacant blocks at 36 Mulsanne Street, Holland Park West, both on 14 March 2009, to different purchasers. Sale 4 was for $350,000 and sale 5 for $355,000. They were assessed by the valuer as inferior overall to the subject and support a value of something in excess of their sales for the significantly larger subject.
Sale 6 was of a 453 m² vacant block at 3 Hockings Street, Holland Park West for $330,500 on 8 April 2009. It is subject to traffic noise from Logan Road and is considerably smaller than the subject.
Sale 7, of 449 m² of vacant land sold for $330,000 on 17 November 2009. It is burdened by an access easement, 126 m² in area which compromises privacy and quiet enjoyment. It was considered by Mr Ooi to be inferior to the subject.
Mr Ooi’s last sale, sale 8, was of 403 m² of vacant land at 22 Arkwright Street, Tarragindi on 29 October 2009 for $355,000. It is subject to the Small Lot Building Code and Mr Ooi considered it inferior to the subject.
In exhibit 8, Mr Ooi considered the relativity of the valuation of the subject land to other land in the immediate locality. A map, which became exhibit 10, was tendered to show relativity in the area. This was in response to relativity having been raised by the appellant. Mr Ooi’s evidence was that in valuation the evidence of sales is to be preferred to relativity and that individual characteristics of each site must be taken into account when considering relativity. Exhibit 10 highlights the properties which were referred to on behalf of the appellant, which is helpful as their relative locations are made clear.

Mr Ooi was present during the whole of the case for the appellant and appeared to be paying close attention. In his evidence-in-chief he was asked whether anything in the appellant’s case required him to change his valuation and he replied in the negative. This is significant as the expert, although employed by the respondent, has a duty to the Court which is greater than the duty owed to the respondent and if the valuer, as a professional, formed the view that something in the appellant’s case did require him to revise his opinion he was obliged to tell the Court and to do so.[4] The Court must have great reliance on the integrity and candour of experts and needs to be able to place great trust and confidence in experts acting in accordance with their duty to the Court. Experts are in the unique position of being able to give evidence of their opinions. Mr Ooi corrected his report where necessary and I found him to be thorough, forthright and open to considering and thoroughly answering all of the questions put to him. I accept his expert opinion and am satisfied that he is genuinely of the view that his valuation does not need to be revised in view of any matters of fact raised in the evidence presented for the appellant.
[4] Uniform Civil Procedure Rules, rule 426(1) and (2). See also GE Cominos & Co Pty Ltd v Chief Executive, Department of Lands [1996-97] 16 QLCR 311 at 336-339, a decision of the Land Appeal Court. This was applied by the Land Court in Perpetual Trustee Company Limited v Department of Natural Resources, Mines and Water [2006-2007] 27-28 QLCR 64 at [26].
In 6.4 of exhibit 8, Mr Ooi states that the sales evidence leads him to a value of $410,000 for the subject before allowing $10,000 for clearing and fencing. In its unimproved condition he values it at $400,000 as at 1 October 2009.
The respondent has valued the land at $365,000, significantly less and when I questioned this it was made clear, and such appears in 6.5 of exhibit 8, that $365,000 is the applied value and that the respondent has simply proceeded conservatively in arriving at a value which will be used for rating.
This is in the interests of the appellant and I accept that it is consistent with good valuation practice. Since a hypothetical sale of the subject property is being considered absolute precision would be impossible and a valuation is an opinion and the best the expert can be expected to do. It seems appropriate to approach valuations for rating purposes conservatively and $365,000 is, in the words adopted in 6.5 of exhibit 8, “well supported”.

The law relating to sales evidence and relativity of values

The valuation tendered for the respondent was based on sales of properties which the valuer believed to be comparable with the subject. In appeal by N.R. and P.G. Tow against determination of Valuer-General-Redland Shire[5] the Land Appeal Court said:
“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.”

The Land Appeal Court went on to point out that the duty of the Land Court is to determine value on the basis of the evidence presented to it by the parties.
[5] [1978] 5 QLCR 378 at 381. This was restated by the Land Appeal Court in Barnwell v Valuer-General [1990-91] 13 QLCR 13 at 17, having also been said in Clough v Valuer-General [1981-82] 8 QLCR 70 at 76.

The Land Appeal Court has held in Hans and Else Grahn v Valuer-General[6] that the principle of relativity should not be preferred to the exclusion of relevant, even if not ideal, sales evidence. In this case, in view of this and Mr Ooi’s evidence concerning relativity to which I have referred, I prefer to rely on sales evidence in preference to relativity considerations as the question before this Court is the correct valuation of the subject land only.[7] In any event, the relativity of the subject with adjoining properties, as shown in exhibit 10, appears to be satisfactory.
[6] [1992-93] 14 QLCR 327 at 328, following W.M. & T.J. Fischer v The Valuer-General [1983] 9 QLCR 44 at 46.
[7] Thomson v Department of Natural Resources and Mines [2007] QLC 0092 at [6], [7] and [8].

Conclusion

While Mr Volny’s evidence was detailed and clearly based on considerable research, I am not persuaded that the valuer who gave evidence for the respondent, or the respondent, made a serious error of fact or acted upon any wrong principle in arriving at the applied valuation of the subject property.[8] I am not persuaded that the valuation was made using a method which was erroneous. On the contrary, the method employed was in accordance with established authority.
[8] Brisbane City Council v The Valuer-General for the State of Queensland [1977-1978] 140 CLR 41 at 56-57. The presumption of correctness is now in section 33 of the Valuation of Land Act 1944 which applies to this appeal due to section 271(2) of the Land Valuation Act 2010.
While I accept both witnesses who gave evidence as witnesses endeavouring to be accurate and open with the Court, Mr Volny’s lack of valuation expertise, particularly as demonstrated by the unconvincing basis of his proposition that the subject should be valued at $280,000, makes it impossible for the Court to accept his propositions in preference to the opinion of the Registered Valuer. I am not satisfied that it was shown that Mr Ooi’s opinion was invalidated by any error sufficient to cause that but am convinced by the weight of the sales evidence relied on by the respondent that the value applied by the respondent is conservative and well supported by valid and reliable evidence. The valuation has not been proved to be incorrect and the presumption of correctness in s.33 of the Valuation of Land Act 1944 has not been overcome.
Accordingly, the appeal is dismissed and the valuation appealed against is confirmed at $365,000.

WA ISDALE
MEMBER OF THE LAND COURT