Homan v Chief Executive, Department of Natural Resources

[1997] QLC 179

[1997] QLC 179

 

LAND COURT

BRISBANE

21 NOVEMBER 1997

Re:     Appeal against Annual Valuation -

Valuation of Land Act 1944 -

Valuation Roll No.:    775

Local Government:    Stanthorpe (AV97-219)

Murray H and Audrey H Homan
v.
Chief Executive, Department of Natural Resources

(Hearing at Stanthorpe)

D E C I S I O N

Background:

This matter relates to a property at Railway Street, Stanthorpe, and described as Lot 1 on RP 206380.  The subject has an area of 5,374 m², and is located 200 metres west of the Post Office, and is adjacent to the Quart Pot Creek Beautification Area.  The key issues are the impact of flooding, the comparison of sales, relativity, and the impact of the Quart Pot Creek Beautification Area.

The subject is an irregular shaped lot with a small street frontage and extending along the creek.  It has a gently sloping cross fall from east to west towards the creek.  There are pleasant views across Quart Pot Creek towards the west.  The entire lot is flood-prone, and it is agreed that it is perhaps the most severely impacted by flooding in that area.  The subject is zoned "Residential B" under the Town Planning Scheme of the Stanthorpe Shire Council of 29 March 1996, and effective at the date of valuation of 1 October 1996.  The zone permits the use of multi-residential developments, and lists the existing use as a "permitted development subject to conditions".  The property is used as a "Home Business", relating to the hire of types of equipment.  The hire business is operated from under the existing residential dwelling, and also from a large shed (about 200 m²) to the rear of the dwelling.  The current use of the subject is seen as its highest and best use.

The Chief Executive, Department of Natural Resources, on 10 March 1997 issued a valuation at $30,000.  Following an objection, the Chief Executive amended the valuation, and on 2 July 1997 issued a revised valuation at $27,500.  The appellants have now appeared that figure, claiming the correct valuation should more properly be $20,000.

Mr MH Homan appeared and gave evidence for the appellants.  Mr DP Coe appeared for the respondent, calling evidence from Mr DB Redgen, the departmental registered valuer responsible for determining the valuation.

The History of Appeal:

This appeal is one of four appeals heard at the one sitting of the Court, all of which relate to the impact of flooding upon the subject, and changes in relativity with adjoining lots in the area as a consequence of the development of the Quart Pot Creek Beautification Area.  Much of the evidence provided during those hearings were similar in respect of the extent and severity of the flooding since 1976, and how the Quart Pot Creek Beautification Area was now impacting the amenity, and consequential valuations of surrounding properties.  For those reasons, those comments which are common to all four properties will be dealt with under common headings.

The Quart Pot Creek Beautification Area

This was a stream management and beautification scheme undertaken apparently as a bicentennial project in 1988.  The scheme was designed to create scenic recreational areas and pathways, and to clean out the partly clogged and marshy old Quart Pot Creek.  The scheme appears to have improved the general amenity of the Quart Pot Creek Area which is close by to the town centre.  With the agreement of both parties in one appeal, the Court inspected the area and walkways.

At the time of the inspection the area appeared to be used by the public, although it was apparent that most existing older homes, in fact, had the rear of the dwelling facing the creek.  While there were some very pleasant vistas along the creek area, some dwellings merely had views across the creek to backyards on the other side of the creek.  Some new homes had been designed to face the creek, while some older homes had built terraces from which to view the area.  However, to summarise, I feel the area is a definite benefit to the town overall, although not necessarily to each individual owner, as will be explained later.

From an overall perspective, the "beautification area" contains five weirs and five bridges, together with picnic areas, children's playgrounds and landscaping, and concrete walking paths.  There are also two low-level foot bridges across the creek.  At its most downstream end at Weir (1) and the road crossing in Britannia Street, the weir is only about 0.3 metres high.  During flooding water backs up to approximately near Allison Street at Weir (2) near the bend in the creek near Talc Street.  The next, Weir (3), is located just upstream of the road bridge at Lock Street, and Weir (4) is located upstream of the Maryland Street bridge, while Weir (5) is further upstream near the Granite Street bridge.  The impact of those weirs is to virtually provide an artificial level of permanent water which has little flow except in periods of heavy rainfall.  The water levels provide a habitat for wild ducks.

Between Weirs (3) and (4) there are also bridges over Railway Street and Folkestone Street.  The Folkestone Bridge is really a seven-pipe, low-level causeway.  Apparently the current low-level structures of the three bridges at Lock, Railway and Folkestone Streets all contribute to local damming of floodwaters during periods of flood as the road virtually dams the water until it flows around the bridges and across low-lying lands adjoining the public parkways.  In the views of some of the appellants, the bridges exacerbate the flood problems.

Evidence from long-term residents of the area suggest that the culvert pipes at Weir (1), and Weirs (4) and (5) provide no problems for the residents.  However, the combination of Weirs (2) and (3) and the three bridges collectively all have adverse impact upon the already flood-prone lands adjoining the "beautification area" in that locality between Lock Street and Folkestone Street.  However, this detriment needs to be balanced by the enhanced nature of Quart Pot Creek.

The Impact of Flooding:

Evidence was given that major floods occurred in 1976, 1984, 1988, 1994 and 1996.  The highest recorded flood in the area was 1976, when floodwaters extended across the western side of Denham Street between Lock Street and Folkestone Street in the west, and almost to the western side of Granite Street, between Lock Street and Railway Street, and east of Creek Street between Railway and Folkestone Streets in the east.  A map of Stanthorpe was provided showing the 1976 flood line, which is now adopted by the Stanthorpe Shire Council as the limit of flood-prone land.  Any building erected below the 1976 flood level must either be constructed on stumps, or have a building pad built up to a level at least 0.5 metres above the flood level.

The flood line was apparently determined after the 1976 flood from verbal advice from residents about the extent of floodwaters.  As such the line has a certain degree of approximation and is presumably used as the best estimate of the extent of the highest flood line (1976) in the area.  As you move downstream the flooded areas widen considerably.

Evidence was also given that floodwaters in 1988 and 1996 rose to similar levels of 1984, in spite of the "beautification area".  Pathways, revetment walls and a car-parking area were all damaged, requiring repairs in the case of the pathways and walls.  The car park has now been abandoned.  Some houses in the 1976 floods had water up to the windows.  Other land in Bridge Street, fronting Quart Pot Creek, was also badly flooded but has subsequently recently sold in 1997 at significant prices, suggesting that the flooding has lost some of its impact to certain purchasers.

Relativity Matters:

Evidence was given that sales of improved properties in the area indicate that relativity is now changing between properties adjoining the Quart Pot Creek Beautification Area, and those lots further removed.  A map was provided showing the pattern of sales of improved properties, which indicate a developing trend for improved properties adjoining the creek to have a premium loading above improved properties further removed from the creek.  This premium varied from 11% to 17%.

However, the respondent agrees that in view of the nature of the improved properties, and a lack of in-depth analysis of each improved sale, the sales evidence merely provides an indication that previous relativities are now changing.  This is presumably as a consequence of an increased acceptance of the improvements along Quart Pot Creek.

However, from the site inspection there are several properties in Denham Street adjoining the creek, including an appellant, which are now for sale, apparently as a consequence of the consistent flooding.  The respondent also notes, however, that further upstream from Folkestone Street, there are some new up-market dwellings which indicate that some more affluent buyers are seeking to relocate to land adjoining the "beautification area".  Because of the higher land south of Folkestone Street the flooding problem is clearly less in that area, and values are accordingly higher.

Evidence was supplied that the respondent intends a major review of targeted areas in the Stanthorpe Shire during 1998, to allow full property inspections.  Apparently the Council is in agreement with that proposal, subject to the respondent completing a review of properties adjoining Quart Pot Creek prior to the setting of the annual rate levy for 1998/1999.   The recent change in relevant valuations of those properties in the current valuation is the major reason for the current appeals from some owners of those properties.  The outcome of those appeals will have an impact upon the respondent's review which will produce the new valuations.

Impacts upon the Subject:

The appellant, Mr M Homan, is a long-term resident of the area having lived upon the subject for 30 years.  He has a detailed knowledge and understanding of the flooding problems of the area, having been subjected to flood damage each time there is major flooding.  His knowledge of the overall Quart Pot Creek Beautification Area provided much of the broader understanding of the matter for the Court.  Mr Homan agrees that overall the Quart Pot Creek Beautification Area is good for the town, but because of his location he gains no direct benefit.

Mr Homan explained how the previous bridge in Railway Street was washed away in 1956, and subsequently replaced with the existing bridge.  Previously the flood waters passed over the old bridge and dissipated quickly down the creek.  With the current bridge the structure acts as a weir as flood waters rise, eventually flooding up Railway Street to the east and spilling over across his land.  Mr Coe agrees that the subject is by far the worst flood-affected parcel in the Quart Pot Creek area, and for its size it has the lowest valuation.  Mr Homan noted that he had lost his trucks in the 1976 flood, his tractor was immersed in the 1996 flood, and he has also had damage to machinery under his house in 1996.

The existing house was erected in 1948 on the front part of the subject, and following the repeated floods, he has had the dwelling raised above the level of the 1976 flood.  The dwelling in 1976 was on stumps and was flooded to a depth of about 1 metre above the floor.  The current dwelling is about 2.4 metres above ground level.  Mr Homan also noted that because of the low nature of his land, and any impacts upon the flow of flood waters, the Council will not apparently allow the planting of a significant number of fruit trees on the rear part of the subject.  For these reasons he finds the balance of the land is virtually unusable, and is currently merely used to store some old vehicles.  Mr Homan argues that, because of the "beautification area", the permanent water level is now well above the old level prior to the development works.  As such he argues that the subject is potentially more at risk from damage than previously.  He claims this impact has not been adequately allowed for in the valuation.  As the subject is on the upstream side of the Railway Street bridge it suffers the most flooding as the waters back up because of the bridge.

Comparison of Sales:

Mr Redgen confirmed that generally across the Stanthorpe town area the market has been in decline.  To support his valuation, he supplied three sales, none of which are subject to flooding:

·Sale 1 - (High Street, Stanthorpe - Lot 1 on RP 169980).  This is a 1,097 m² lot zoned as "Commercial A", and has been developed as a modern Red Rooster Fast Food Restaurant.  The sale is located in the Central Business District (CBD).  It is considered superior in location, access, zoning and exposure, similar in services, and inferior in size to the subject.  The sale is superior overall, and on a rate per m² basis.

The sale sold in July 1996 for $580,000 which, after allowing for improvements, provided an analysed value of $82,435 ($75.15 per m²), and was applied at $73,000 ($66.50 per m²).

·Sale 2 - (Creek Street, Stanthorpe - Lot 1 on RP 861156).  This is a 900 m² lot zoned as "Commercial B", and has been developed with a timber dwelling which is now converted into a veterinary surgery.  The sale is located about 200 metres south-west of the Post Office.  The sale is superior in location and access, superior in exposure and size, and similar in services to the subject.  The sale is superior overall and also on a rate per m² basis.

The sale sold in August 1995 for $74,000 which, after allowing for improvements, provided an analysed value of $32,500 ($36.15 per m²), and has been applied at $30,500 ($34 per m²).

·Sale 3 - (Minna Street, Stanthorpe - Lot 8 on Plan S16820).  This is a 3,761 m² lot, zoned as  "Residential", located about 1 km north-east of the Post Office.  It is inferior in location, zoning, access, size and exposure, and similar in services to the subject.  The sale is inferior overall and on a rate per m² basis.  The sale is steeply sloping to the west and backs onto the railway.

The sale sold in October 1996 for $19,400 which, after allowing for improvements, was analysed at $19,400, and applied at $19,200.

In addition to these basic sales, Mr Redgen also drew comparison with an additional sale:

·Sale A1 - (Marsh Street, Stanthorpe - Lots 33 and 34 on Plan S1687).  The sale of area 4,047 m² is located about 1 km north of the town centre, is inferior in location, views, access, zoning, size and exposure, similar in services, and is also totally flood prone.  The sale is seen as the most flood-prone land in Stanthorpe town area, and is seen as inferior overall and on a rate per m² basis.  The sale does not adjoin the Quart Pot Creek Beautification Area.

The sale sold in December 1995 for $20,000 which, after allowing for improvements, provided an analysed value of $18,000 ($4.45 per m²), and applied values of $17,800 ($4.40 per m²) at 1 January 1996, and $12,400 ($3.05 per m²) at 1 October 1996. 

Firstly in comparing the comparable sales, I note that all three sales are flood free.  I note also that Sales 1 and 2 are both highly improved properties, which, while being used for businesses of a commercial nature, bear little other comparison with the subject.  Sale 1 in particular, as a highly improved property in the CBD, provides little assistance to me in this matter.  In comparing Sale 2 I note that it has a regular, almost square shape, and is on the high side of Creek Street, well clear of any flooding.  While the subject has a higher exposure than Sale 2, because Railway Street is one of a series of minor arterial roads feeding the CBD, this would be more than balanced by the disabilities of flooding upon the subject.

In considering the comparison in size between Sale 2 and the subject, I note that Mr Redgen has seen Sale 2 as inferior.  However, I note the shape and location of the subject adjoining Quart Pot Creek, and I believe the extra size of the subject provides little advantage, if any, to the appellants.  In fact, I believe only a comparable building size to Sale 2 is of any use to the appellants, with the balance of the subject being more of a disadvantage in that maintenance of that balance area outweighs any possible use.

I note also that Mr Redgen has reached his conclusion when he sought to compare the subject on a "Residential" basis.  On that basis, allowing for an average building lot of 1,300 m² he concluded a value of $26,000, less fill to develop a building pad at $7,500, giving a value of $18,500.   To this he then added the balance of 4,074 m² at a nominal value of $7,000, giving a value of $25,500 as a residential site.

However, Mr Redgen advised that as the subject is currently zoned as suitable for multiple units, and is used as a "Home Business", which is a non-conforming use under the Town Plan, he was obliged under s.3(4) of the Valuation of Land Act, to value the subject on the basis of its current use.  In this regard I note that the Act specifies:

“Meaning of ‘unimproved value’

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

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

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

but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that any improvements referred to in subsection (1) had not been made."

After considering the possible development of the subject for units, as allowed under the Town Plan, Mr Redgen found that, in view of the major filling needed to raise the building site above the 1976 flood level, the resulting unimproved value was found to be of a negative amount.  This calculation further reinforced the severely impacted nature of the subject.

Mr Redgen therefore compared the subject on the basis of a commercial site.  Based on a site of 1,000 m² he determined the following estimate:

1,000 m² x $42.50   =  $42,500

Less fill (approx)  =  $27,000

Unimproved site area  =  $15,500

Plus balance of land

4,374 m² x $2.90  =  $12,000

Total  =  $27,500 or $5.10 per m²

In support of his estimate of $42.50 per m² for the commercial site, I note that Mr Redgen has placed emphasis on the superior exposure of the subject compared to Sale 2 at $34 per m².  He has also sought comparison in respect of the balance of the subject at $2.90 per m², with the applied value of Sale A1 at $3.05 per m².  In allowing for filling of the site, Mr Redgen has allowed a depth of 2.5 metres, and an area adequate to allow for the dwelling, shed, car park, entrance and access to the elevated site above the current road level.

While the exercise of filling a commercial building site is appropriate under the Valuation of Land Act, I note also that there was no provision made for any retaining walls to avoid erosion  of the large quantity of fill.  In the event of any such filling being allowed in the flood plain by the Council, it is unlikely that the appellants would be allowed to proceed without providing some erosion prevention measures.  It is also likely that Council would reject the proposal on the basis of its impact upon general flooding in the Quart Pot Creek area.

The purpose of these latter observations, however, is mainly to emphasise the importance of the Chief Executive applying a conservative approach in his determination.  Mr Homan drew attention to the problems of filling and noted that he had had a tentative estimate of providing a retaining wall only around his dwelling at approximately $30,000.  Mr Redgen acknowledges that "possible developments" were merely hypothetical, but appropriate under the Valuation of Land Act.  Mr Redgen also noted that if the dwelling and business was removed from the subject, then the land would only be valued for park purposes.  Mr Redgen has based his quantities of fill upon estimates of costs from local developers, and a compaction rate of 25%.

I note also that Mr Redgen informed the Court that the Council had in fact allowed several new buildings to be erected in the flood plain, subject to one in McGlew Street constructed on a building pad, and another in Creek Street being a transportable dwelling erected on stumps.  He concluded it was therefore reasonable for him to value the subject on the basis of building up a building pad above flood level.

Decision:

In determining the valuation, Mr Redgen has assessed the subject as a flooded commercial site of 5,374 m² at $5.10 per m².  In seeking comparison with comparable sales, he has analysed two highly improved sales of commercial land (Sales 1 and 2) which are markedly superior, and a third, Sale 3, of vacant residential land which is seen as inferior.  None of those three sales are impacted by flooding.

In comparing Sale 3, which is a residential homesite, I note that it is usual for homesites to be compared on a site basis, and not on a rate per m² basis.  This was upheld by the Land Appeal Court in R and MM Barnwell v. The Valuer-General (1990-91) 13 QLCR 13, which said at p.18:

"It again is well established that when valuing homesites, then the best method of comparison is on a site to site basis."

This principle was also followed in AT Dewar v. The Valuer-General (LAC) (1980-81) 7 QLCR 112, at p.115:

"The market for rural homesites demonstrates that they are purchased on a site basis and not on a pro-rata per hectare basis."

and also in DF & M Ward v. The Valuer-General (1983) (LAC) 9 QLCR 48, where the Land Appeal Court said at p.50:

"Sites are valued overall and not on a rate per hectare basis.  The experience of the market place reflects the former not the latter practice."

I understand Mr Redgen's concern to seek the most appropriate comparison with the subject, bearing in mind the overall paucity of sales in the area.  However, I find the comparison of the subject as a flooded commercial site, with Sale 3 as a sloping residential site, provides no real comparison.

I note also that in seeking support for his valuation, Mr Redgen has sought to infer the impact of the "beautification area", upon lots adjoining the creek.  In this respect, he has compared his additional Sale A1, which is directly comparable with the subject, in that both are totally flood-prone, although Sale 1 is a residential site and not a commercial site.  I note also that Sale A1 does not adjoin the "beautification area".  In that respect, however, I also note the applied value of Sale A1 at $12,400 (1.10.96).

In seeking to compare like with like, I understand Mr Redgen's dilemma in that definitive text such as Land Valuations and Compensation by RO Rost and HG Collins (1984), have said at p.89:

"The sales which afford most assistance to the valuer are those which most closely resemble the land being valued, provided the date at which the sales were made is reasonable close to the date of valuation."

This principle was further explained by Rost and Collins supra, at p.88:

"In valuation practice, 'comparable sales' are sales that are used or which can be used as a bases for the valuation of lands of a similar nature.  This does not mean that sales from which basic values are deduced must be the same in every way as the lands to which the basic values apply...  Sale and subject properties should, however, be reasonably similar as to location, magnitude, tenancy, permitted land use and, if rural, productivity per hectare.  Analyses enables the valuer to assess points of agreement and of difference."

In drawing comparison, therefore, Mr Redgen is basically comparing the subject with a commercial flood-free Sale 2, and a residential flooded site, Sale A1.  Added to this comparison is the compounding of any influence in the valuation as an impact of the "beautification area".

In the matter of the impact of flooding upon the subject, I note that repeatedly the subject has been inundated by floodwaters, and prior to the dwelling being raised, water has entered the building.  The existing other workshop has been totally flooded.  The entire lot is noted as flood-prone land, and there are special building conditions that would be attached to any new building upon the subject.  There would also be a recognition in the mind of any prudent purchaser that the land is impacted by floodwaters at periodic intervals.  Such a disability would result in a reduced reduction in the valuation compared to levels further removed from the creek.  The impact of flooding would involve not only the immersion by floodwaters, but also any damage and costs involved in repairs to fencing and other improvements.

In the impact of relativity along the Quart Pot Creek, I note that upstream of Folkestone Street the values indicate an increase, in view of their higher elevation and improved views along the Quart Pot Creek Beautification Area.  Likewise, there are some indications from the raw improved sales along Denham Street that relativities are changing.  However, until the improved sales are fully analysed, or in light of further sales of vacant lands in that area, it is premature to increase the unimproved value of the subject at this time solely for that reason.

The impact of the "beautification area" is providing a positive contribution to the creek environment.  There is no doubt that the area is more pleasant than prior to the construction of the beautification works.  I have no doubt that, south of Folkestone Street, the environment is now attractive to purchasers who now see advantage in fronting the creek area, and are prepared to pay a premium to do so.  However, to conclude that premium extends also through the area from Folkestone Street to Lock Street is not supported by the evidence at this time.  I believe that area is not experiencing the same benefit from proximity to the "beautification area" as is being experienced upstream of Folkestone Bridge.  Until reliable evidence of sales supports a broad application of a premium, I suggest the impact of flooding balances any possible enhancement in values as a consequence of the "beautification area".

Mr Redgen has sought to apply a conservative approach to the determination in accordance with the findings of Commissioner of Succession Duties (SA) v. Executor Trustee and Agency Company of South Australia Limited (1946-47) 74 CLR 358, where Dixon J said at pp.373-374:

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

Under s.33 of the Valuation of Land Act, the onus to prove his case falls squarely upon the appellant.  Unless the appellant can prove that the Chief Executive has made an error, the appeal must fail.  This was established by the High Court in Brisbane City Council v. The Valuer-General (1977-78) 140 CLR 141, where Gibbs J found at p.56:

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

In the current matter I believe the comparison of sales leaves considerable room for judgment in determining the valuation.  In assessing the value as a commercial site, I believe the appropriate rate per m² should be similar to Sale 2 in view of the balancing impact of flooding and exposure of the subject.  In then adopting the balance of the subject (4,374 m²) at $2.90 per m², I believe Mr Redgen has given little consideration to the subject for its considerably inferior shape and accessibility compared to Sale A1.  However, in view of any lack of alternate rate for totally flooded land, I adopt the rate of $2.90 per m².

The determination is then:

1,000 m² x $34.00   =  $34,000

Less fill  =  $27,000

Unimproved site area  =  $7,000           Plus balance of land

4,374 m² x $2.90  =  $12,684

Total  =  $19,684

Say  $20,000

Conclusion:

Having considered the whole of the evidenced, I am persuaded that the appellants have proved their case.  The appeal is allowed and the unimproved value of Lot 1 on RP 206380, as determined by the Chief Executive, Department of Natural Resources, is set aside, and the unimproved value is determined at Twenty Thousand Dollars ($20,000).

NG DIVETT
  MEMBER OF THE LAND COURT