Hanrahan v Department of Natural Resources and Water
[2007] QLC 51
•3 July 2007
LAND COURT OF QUEENSLAND
CITATION: Hanrahan v Department of Natural Resources and Water [2007] QLC 0051 PARTIES: Michael Charles Hanrahan
(appellant)v. Chief Executive, Department of Natural Resources and Water
(respondent)FILE NO.: AV2005/1110 DIVISION: Land Court of Queensland PROCEEDING: Appeal against Unimproved Valuation DELIVERED ON: 3 July 2007 DELIVERED AT: Brisbane HEARD AT: Rockhampton JUDICIAL REGISTRAR: Mr BR O'Connor ORDER: The appeal is dismissed. CATCHWORDS: Valuation – unimproved value – sales evidence – whether comparable – relativity – sales, even if not ideal, preferred
Valuation – unimproved value – access problems - due to flooding – weight on historical evidence – appropriate allowance
APPEARANCES: Mr A Palmer (Solicitor) Rees R & Sydney Jones for the appellant.
Ms L Marshall (Senior lawyer) Department of Natural Resources and Water for the respondent.
The appellant has challenged a determination of unimproved value under the Valuation of Land Act 1944 (the Act) for his property, an aggregation of three separate parcels individually known as "Wycarbah", "Moors" and "Bunavon". The total aggregate area is 4,986.334 hectares the property is situated in the Fitzroy shire; the relevant date for determination is 1 October 2004.
The Chief Executive led evidence to a valuation figure of $1,200,000 or $240 per hectare; there had been a prior reduction, after landholder objection, from $1,250,000. The respondent led evidence to a figure of $980,000. The land is used for grazing purposes and is valued as such.
Evidence for the respondent was given by Mr Bernard Sorensen, a senior valuer in its employ. Evidence for the appellant was given by John Compton, a registered valuer in private practice. The landholder, Mr Michael Hanrahan, also gave evidence principally on the issue of access.
The case was heard in Rockhampton. However, leave was given to the legal representatives of both parties to present written submissions at a later stage; both parties have forwarded such submissions to the Court.
Grounds of Appeal
The appellant's grounds of appeal are relatively general in nature. While he is bound by these grounds of appeal at the hearing, no issue was taken by the respondent that such did not cover the matters raised in the conduct of the hearing. Accordingly, it is not necessary to list such grounds.
Issues in Appeal
The principal issue involved in this appeal is the appropriate valuation methodology and approach. Also at issue is the comparability of properties, the application of the respondent's sales and the adequacy of the allowance given for access constraints, particularly in relation to the "Bunavon" portion of the aggregation.
The Appellant's Valuation Evidence
Rather than use the traditional sales comparison approach, Mr Compton's approach was essentially one based on relativity of certain property values determined by the respondent. He submitted four comparisons in support of the value that he contended for the subject. Two of those comparisons, Trevor Holland aggregation and Richard Pierce aggregation involves an apportionment by Mr Compton of over amalgamated valuations. The two other individual basic comparisons, adopted by Mr Compton, were the properties "Meleleuca" and "Fitzroy Pocket".
In relation to the Trevor Holland and Richard Pierce amalgamations, Mr Compton classified the land in each aggregation based on his knowledge of the country and apportioned a rate per hectare to each classification. These rates per hectare were drawn from rates applied by the respondent to smaller separate comparable (and sometimes adjoining) properties. Mr Compton then considered what allowance had been made by the respondent in relation to the amalgamation of the parcels (i.e. Holland and Pierce) and determined in each case that the amount adopted by him for each apportionment contained an appropriate allowance. Using this methodology, Mr Compton claimed that the figures placed on the forest components in the Holland and Richard Pierce aggregations are incorrect relationship to his valuation of the forest country on the "Wycarbah" home block and the "Moors" block of the subject aggregation.
Mr Compton used "Meleleuca" as a separate basic comparison for the "Bunavon" portion. He contends that this block has a carrying capacity of one beast to 4 hectares as compared with a carrying capacity on "Bunavon" of one beast to 4.18 hectares. The respondent had applied an unimproved capital value on "Meleleuca" at a rate of $223.63 per hectare. Mr Compton considered that "Bunavon" is a larger block but inferior to "Meleleuca" and contended that "Bunavon" had a value of $191.39 per hectare to be in correct relativity.
Mr Compton also considered the property "Fitzroy Pocket" which adjoins "Bunavon" as a basis for his valuation of "Bunavon". "Fitzroy Pocket" has an applied unimproved value of $750,000 or $188.87 per hectare. Mr Compton assessed the carrying capacity of "Fitzroy Pocket" at a beast to 4.25 hectares and, whilst he considered the subject to be a larger superior block overall, "Bunavon" had superior scrub and superior riparian rights. The carrying capacity between the two blocks was comparable but "Bunavon" had inferior water supply and had no underground bores. Overall, Mr Compton considered the "Bunavon" to be a larger superior block but comparable on a dollar per hectare and dollar per beast area basis. Mr Compton considered the applied rate of 188.7 hectare on "Fitzroy Pocket" to be in correct relativity with "Bunavon" at 191.39 per hectare.
Mr Compton contends that, based on the relativity comparison with the four comparison applied figures, the whole of the subject aggregation should have an unimproved value of $980,000 or $196.55 per hectare.
The Respondent's Valuation Evidence
In contrast to Mr Compton, Mr Sorensen gave evidence that he applied a range of sales on a block to block basis, making comparisons of their attributes such as services, access, nature of the land and water; he then made an overall comparison. A range of comparable sales was selected to establish top and bottom figures and, after making adjustments for different attributes, he states he made a "first pass" at applying a rate per hectare to the subject.
Mr Sorensen said he then checked his per hectare figure with the carrying capacity and beast area values to make sure they were correct in comparison with the sales. Mr Sorensen acknowledged that carrying capacity and beast area values were a useful check tool, however he states his primary method of valuation was to derive a rate per hectare from the sales.
Mr Sorensen was responsible for the 2004 valuation of the Fitzroy shire; as part this exercise he states he investigated all the rural sales of grazing properties, discarded the unreliable transactions, analysed the remaining sales, inspected the properties, measured the improvements and deducted the their value (together with interest) from the sale price. He then looked at the analysed unimproved values against "benchmark" blocks to determine that a general increase of about 60% should apply to all grazing properties throughout the shire.
Mr Sorensen presents some six sales in total. He concedes that his sales were not 100% directly comparable to the subject but states that it is rare that you find a sale that is directly and readily comparable with the subject. "You have to work with those that are closest and those that are most comparable". (T. p. 63).
Sale one, "Sugarloaf", sold for $430,000 in August 2003 and its analysed unimproved value was determined at $173,903 ($353 per hectare). The property has an area of 492 hectares which is significantly smaller than the subject aggregation. Despite this smaller area, Mr Sorensen gave evidence that he used it to derive a value for the subject as a whole. He stated that he included the sale to establish a "top value" figure. The sale has inferior country and access to water but superior in access. Overall, Mr Sorensen considered the subject was inferior to the sale. The sale also demonstrated that people are willing to pay more for a small block.
Sale two, "Dungarvan", sold for $1,825,000 in October 2003 and its analysed unimproved value was determined at $565,155 ($171 per hectare). The sale property has an area of 3286 hectares slightly smaller than the subject aggregation. The sale has much poorer country as compared to the subject and thus a lesser carrying capacity at 1:7 hectares. The sale property has superior access but inferior access to water, there being no river frontage. Mr Sorensen considered the subject was superior to the sale. Mr Sorensen included this sale to demonstrate a bottom figure for the subject.
Sale three "Yarra" sold for $1,992,000 on 6 June 2003 and its analysed unimproved value was determined at $766,303 (352 per hectare). Mr Sorensen clearly indicated in his report and gave evidence that a water allocation was included in this sale.
Sale four, "Glenroy", was a primary sale relied on by Mr Sorensen. The property sold for $1,910,000 on 12 June 2003 and its analysed unimproved value was determined at $979,349 ($175 per hectare). The area of land is 5570 hectares, an area comparable to the subject property. The sale is mainly forest country with a small frontage to the Fitzroy River. Access is considered superior as compared to the subject, however the subject has far better country. The carrying capacity of the sale was identified at 1:6.15 hectares overall; Mr Sorensen states the subject was considerably superior to the sale. The sale reinforces the bottom figure established by "Dungarvan" above.
Sale five "Green hills" sold for $1,429,000 on 9 April 2003 with an analysed value at $806,044 ($375 per hectare). Mr Sorensen states he did not rely on the sale to any great extent but used it to indicate that there were sales at a higher per hectare figure and to show that people are prepared to pay those amounts. The sales help establish a top level of value should be applied to the subject.
Sale six, "Riverton", sold for $1,650,000 on 6 August 2003 an analysed value at $1,187,675 ($1,170 per hectare). Mr Sorensen gave evidence that he did not really apply this sale. It was included to show what the market is prepared to pay for good scrub blocks and highlights the Chief Executive's conservative approach to valuations.
Areas of Agreement
There is no real dispute between the two valuers as to: the sales analysis of Mr Sorensen six sales, the classification of country types on the subject, the carrying capacity on the subject, and the fact that a rise of 60% in the overall valuations in the Fitzroy shire was justified.
Consideration of Issues
After consideration of the written and oral evidence of both valuers and the written submissions of their legal representatives, I am left with a number of problems with the valuation approaches and the application of evidence of both parties. I acknowledge both Mr Compton and Mr Sorensen are experienced rural valuers and that they have approached their current task thoroughly. However, the difficulty essentially is as a consequence of the lack of suitable sales evidence to provide a proper basis of comparison for the subject amalgamation.
Mr Sorensen acknowledges that his sales evidence was not directly comparable with the aggregation while Mr Compton's approach was that the sales were not comparable at all and thus his resort to relativity was justified.
Mr Sorensen's Approach
Mr Sorensen states his range of sales across the Fitzroy shire justified an increase of 60% in the previously applicable figures. Mr Compton does not dispute this conclusion. However, the difficulty arose when Mr Hanrahan objected to and subsequently appealed against the valuation of the subject aggregation. Mr Sorensen was then required to focus on this individual block and to find an appropriate selection of sales to act as suitable bases. I should note that Mr Sorensen made a reduction at the objection stage of $50,000 due to the effect of the vegetation management restrictions on the subject block – this restriction was presumably imposed subsequent to the previous valuation and thus justified a departure from the previous relativity of Mr Hanrahan's lot with others increased by the general 60%.
Mr Sorensen selected six sales. I accept Mr Palmer's submission that sale 6 "Riverton" and sale 4 "Yarra" should be disregarded. "Riverton" because of its only being applied at 34% of the sale price and "Yarra" because of the inclusion of a water allocation as part of the overall sales analyses. Of the four remaining sales, Mr Sorensen states that two established a bottom figure below which the subject could not go. In contrast, the other two sales set an upper figure again beyond which the subject could not go. Mr Sorensen then placed a figure of $306/hecatare on the subject prior to making some specific additional positive and negative allowances. I note that the two higher sales setting the upper limit are much closer to this $306/hectare figure than are the sales used to display the bottom figure.
The difficulty I have with the $306/hectare is two fold – first, there is a very large difference in the size of these two upper level blocks compared to the subject; second, as Mr Palmer repeatedly stressed in cross-examination of Mr Sorensen, the upper sales were used more to establish the upper limit as such rather than act as a traditional basis of comparison, that is, where the sale and subject are compared with each other against a series of criteria. Mr Sorensen acknowledges this difficulty and did not claim that the sales and subject were directly comparable.
As to Mr Sorensen's positive and negative allowances, he was quite specific in what percentage (converted to dollar figures) that he had allowed. These figures essentially came out in cross-examination. They appear to be based on a wider departmental scheme to ensure relativity across the shire.
Mr Compton's approach
Mr Compton acknowledges sales normally are the preferred basis but argues that there are no such sales sufficiently suitable to compare to the subject property. However, he acknowledges the 60% across the Fitzroy shire is appropriate and also acknowledges that the applied figures on his comparison blocks are acceptable.
On this premise, there is no impediment in law or valuation principle which renders such an approach impermissible.
Mr Compton's approach in assessing a value for the "Wycarba/Moors" portion of the aggregation involves the following steps (I note that the "Wycarba/Moors" portion comprises only 8% of the total aggregation).
· Assigning his classification of country to the two selected amalgamation blocks used as comparison (i.e. Trevor Holland and Richard Pierce aggregations);
· Selecting other small departmental determined blocks to compare and arrived at a per hectare figure for the classification area of his amalgamated comparisons;
· Deducting a percentage (not uniform) from these valuations to allow for the fact that they are part of an amalgamation;
· Then applying the rate per hectare from these classified areas of country of the two basic amalgamations to come up with an appropriate valuation for the smaller "Wycarba/Moors" portion. (This presumably allows for the fact that the "Wycarba/Moors" portion was part of a wider aggregation).
This resultant figure then had to be added to the deduced "Bunavon" portion (92% of the aggregation) to arrive at a final figure.
While Mr Compton's process is logically justifiable, my concern with the exercise for the "Wycarba/Moors" portion is the considerable number of steps required in the process, opening up the possibility of compounding errors in the exercise. (Similar to the regularly expressed Court's concern with the "notional development" approach in other matters). Thirty-Fourth Philgram Pty Ltd v The Crown 14 QLCR 13 at 28.
Mr Compton's approach to the valuation of the "Bunavon" portion is more conventional. His comparison is essentially a direct one with two departmental determinations of blocks in the Fitzroy shire. My two concerns here are that there is considerable disagreement between the two valuers as to the nature of the country on these two comparisons (Meleleuca and Fitzroy River). Mr Sorensen states that he inspected both of these blocks so that his approach cannot be challenged on the basis that he merely used previous departmental records. The second concern is that Mr Sorensen states that the Fitzroy River basis is not in the same "sub-market area" as is the subject aggregation and for that reason cannot be used as a proper basis. Mr Sorensen says that the Fitzroy River is located in the south-east section of the" Fitzroy shire" which was not increased due to lack of sales in the prior valuation. In the current valuation, it merely increased the same percentage (60% as the remaining shire).
Access
Mr Hanrahan, the property owner, provided detailed statistical evidence of flooding to the main access to "Bunavon" portion of the aggregation, and the resultant access problems. While parts of this evidence were challenged by the respondent's counsel as to their formal source, for present purposes I am prepared accept Mr Hanrahan's evidence (the Land Court is not bound by the strict rules of evidence s.7 of the Land Court Act 2000).
Mr Sorensen states that he was aware of the access problems and has made a 15% allowance for such problem over the whole lot and not merely the "Bunavon" portion. He states that this is consistent with other allowances for access problems he has made for lesser affected lots. Also, on the submitted figures, there are only an average 46 days (over the last 10 years) per year when access is considered to be affected.
Further, there is evidence from a hydrographer (not challenged by the appellant) that the flooding at Hanrahan's crossing is not in a constant relationship to that at Riverleigh Crossing from where the statistical measurements were based.
Mr Compton did not seek to place any percentage allowance for the access problems.
A minor, yet valid, observation made by the respondent in submission is that whilst historical figures are presented and relevant at the date of valuation, a prospective purchaser may be less conscious of the historical flooding problems, given the now prevailing issues of drought and climate change. Should the average annual number of days when access is restricted increase (over, say, a 10 year average), I consider the respondent should review the 15% access allowance upwards. Overall, I consider the 15% allowance made across the respondent's entire property is adequate to allow for the water access problems on the "Bunavon" portion.
Conclusion
Despite these concerns with the valuation evidence from both sides, a determination must made on the available evidence and in accord with the relevant provisions of the Valuation of Land Act 1944. In current circumstances, there appears no real alternative than to revert to fairly fundamental authorities to resolve this matter. First, relativity should not be preferred to the exclusion of relevant, even if not ideal, sales evidence. W M and T J Fischer v The Valuer-General (1983) 9 QLCR 44. I consider Mr Sorensen's sales fall into the category of "not ideal" but still acceptable. Further, on all the evidence, I am not convinced that the relativity of the subject to other properties is incorrect.
Second, s.33 of the Act presumes the respondent valuation to be deemed correct unless proven otherwise. To prove otherwise it must be established that the respondent has acted on a wrong principle, applied a wrong methodology, or made an error of fact in making his valuation: Brisbane City Council v The Valuer-General (1978) 140 CLR 41. Again, it has not been established, on the probabilities, that Mr Sorensen has offended of these tests.
Order
The appeal is dismissed.
BR O'CONNOR
JUDICIAL REGISTRAR
0
2
0