Kingston & Wallace Pty Ltd v Department of Natural Resources and Water
[2007] QLC 124
•7 December 2007
LAND COURT OF QUEENSLAND
CITATION: Kingston & Wallace Pty Ltd v Department of Natural Resources and Water [2007] QLC 0124 PARTIES: Kingston & Wallace Pty Ltd
(appellant)v. Chief Executive, Department of Natural Resources and Water
(respondent)FILE NO: AV2005/0775 DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 7 December 2007 DELIVERED AT: Brisbane HEARD AT: Ipswich MEMBER: Mr PA Smith ORDER: 1. The appeal is dismissed.
CATCHWORDS: Valuation – unimproved value – factors in valuation – competing valuation evidence – presumption in favour of correctness of valuation – after date sales – development approvals
Valuation of Land Act 1944
APPEARANCES: Mr A West of Counsel instructed by Walker Pender, Solicitors, for the appellant
Mr J O’Rourke, Principal Legal Officer, Department of Natural Resources and Water, for the respondent
Background
This matter involves an appeal by the appellant against a valuation by the respondent, pursuant to the Valuation of Land Act 1944 (the VLA) which valued its property situated at 93 Raceview Street, Raceview, Ipswich in the sum of $2,400,000 as at 1 October 2004. The appellant contends for a valuation of $1,840,000.
The subject land is made up of three parcels of land, described as Lot 1 on RP 193006 containing an area of 1.1110 hectares; Lot 2 on RP 193006 containing an area of 1.7320 hectares; and Lot 5 on RP 24426 containing an area of 0.8311 hectares, making a total area for the three parcels of 3.6741 hectares. The subject land is located at the corner of a relatively busy intersection of Raceview and Cascade Streets, Raceview. This intersection has installed traffic lights to control the volume of traffic.
The subject land, in total, comprises a relatively regular shaped block, although the rear part of Lot 2, which wraps around Lot 1, has a number of residential allotments separating it from Raceview Street. Nevertheless, the subject land enjoys significant two street frontage with 244 metres to Cascade Street and 62 metres, approximately, to Raceview Street as frontage.
Lot 1 is zoned RM2, while Lots 2 and 5 are zoned RM3. RM2 allows for residential development to 2 storeys high with a density of 50 dwellings per hectare. RM3 denotes residential mixed density and provides for residential development up to 3 storeys high with a density of 75 dwellings per hectare.
As at the date of the valuation, a furniture factory was located on that part of the site closest to the intersection of Raceview and Cascade Streets, with the balance of the subject land vacant. It is common ground between the parties that the current use of the land is a permitted non-conforming use and that, should the furniture factory cease operation, no other industrial use will be permitted on the site.
The respondent has valued the property on the basis that the highest and best use of the land is as a multi-unit development site having mixed use RM2 and RM3 designation.
The appellant was represented at the hearing by Mr West of Counsel and called evidence from a registered valuer, Mr Elwyn Denman. The respondent was represented by Mr O’Rourke, Principal Legal Officer employed by the respondent, and relied on the evidence of a registered valuer, Mr John Mauchline.
Relevant legislative provisions
Pursuant to s.13 of the VLA, the respondent is required to determine the unimproved value of the land. Relevantly, s.3(1) of the VLA says as follows:
“3.(1) For the purposes of this Act –
‘unimproved value’ of land means –(a) in relation to unimproved land – the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require; and
(b) in relation to improved land – the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist.”
I note that the subject land in this matter is improved. Accordingly, put simply, the task is to find the market value of the land on the assumption that none of the improvements are on the subject land. An assessment is then undertaken as to the highest and best use of that land.
As the President said in Fairfax v Department of Natural Resources and Mines [2005] QLC 0011 at paragraphs 11 and 12:
“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 the property. (See Griffith CJ at 432 and Isaacs J at 441).
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."”
I respectfully agree with these observations.
Presumption of correctness of valuation
I now turn to section 33 of the VLA, which states as follows:
“33 Status of valuation
Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered.”This section was considered by the High Court in the case of Brisbane City Council v The Valuer-General for the State of Queensland 1977-78 140 CLR 41 where Justice Gibbs (as he then was) made the following observation at page 56:
“In my opinion once it is shown that in making the valuation the Valuer-General acted upon a wrong principle, or made a serious error of fact, the presumption created by s. 13(7) is rebutted.”
It should be noted that s. 33 of the VLA is in essentially the same terms as what was then s. 13(7) of the Act.
The issues in the Appeal
The differences between the appellant and respondent can best be summarised by looking at two extracts from the valuation reports of the respective valuers as follows:-
“There has been a tremendous rise in the value of unit development land from 2003 to 2005 and I would contend that the Department of Natural Resources has been influenced too much by the sales which have occurred after the date of valuation, rather than those before the date. My view is that the rise was more general through 2003-2004 and then marked from the end of 2004 to the present. This rise, I believe, has been brought about by the demand for fuller care units with the demand for conventional duplex or townhouse type development being much more subdued.” (extracted from Mr Denman’s valuation report)
“The property is located in an area that is highly sought after by both property developers and land bank companies alike. Raceview is a residential area that is in close proximity to the Central Business District and benefited from a booming residential market in the 2004 period. The valuation carried out in 1/10/2004 was a period in which the Ipswich residential market across the metropolitan area witnessed record prices being paid for large undeveloped low density residential englobo landing and around the immediate area of the subject property.” (extracted from Mr Mauchline’s valuation report)
Comparison of sales
Mr Denman relied upon the following sales:
Sales Area
HaDate of Sale Sale Price Zoning DNR Application 1
Grange Rd
SILKSTONE4.664
26/09/2007
$1,540,000
RM3
$1,800,000
2
52 Thornton St
RACEVIEW4.05
04/05/2004
$864,000
RL2
$1,450,000
3
Edwards St
FLINDERS VIEW4.5
14/11/2003
$2,100,000
RL2
$1,700,000
4
Edwards St
FLINDERS VIEW4.469
11/08/2004
$2,000,000
RL2
$1,450,000
5
40 Gledson St
NORTH BOOVAL2.72
18/08/2004
Resale
31/12/2004$1,000,000
$2,350,000
RL2
$1,000,000
Mr Mauchline relied upon the following sales in his report:
Sales Area
HaDate of Sale Sale Price Zoning Analysed sale price Applied U/Value Comparison 1
Ash St
FLINDERS VIEW8865m²
07/06/2002
Resale
22/04/2005$410,000
$1,205,000
LR2
01/10/2004
$405,00001/10/2005
$1,100,00001/10/2004
$575,000Far superior 2
40 Gledson St
NORTH BOOVAL2.7170
28/07/2003
Resale
18/08/2004Resale
31/12/2004$150,000
$1,000,000
$2,350,000
LR2
01/10/2004
$1,000,000$1,000,000
01/10/2005
$1,850,000Inferior
3
7 Workshop St
BRASSALL3.9310
16/10/2003
Resale
30/04/2004$850,000
$3,200,000
RM2
01/10/2004
$3,000,00001/10/2004
$3,000,000Inferior
Mr Denman places particular reliance on his Sale 1. Sale 1 is situated approximately 1km from the subject. The sale property is in effect a back lot with very limited access from the street. Mr Denman contends that this is not an issue as the type of development suited to the sale property and the subject property are both gated type community developments which require a single access point. In Mr Mauchline’s view, Sale 1 suffers a considerable disadvantage given its limited street access. Mr Mauchline finds the subject property far superior in this regard. It is undisputed that the general topography of the subject land is superior to that of Sale 1.
In my view, Mr Denman’s evidence is correct insofar as he has considered the respective sites for their developmental capacity as gated communities. However, I agree with Mr Mauchline and the submissions by Mr O’Rourke that the subject property, with its excellent street frontage to two streets, offers a far superior street access which of itself must give any developer additional developmental options than a site such as Sale 1 with limited access.
A further feature of Mr Denman’s Sale 1 is that it is a dated sale, particularly when one takes into account that the key feature of this particular valuation is finding the appropriate value for the subject property as a 1 October 2004 in circumstances where it is the view of both valuers that the market for high density residential development land was very slow in the region of the subject land in 2003, but it is disputed whether the market for such land increased during 2004 leading up to the valuation date or predominantly occurred after the date of valuation.
Mr Denman’s Sale 2 is located approximately .5km from the subject site and sold in May 2004 for $864,000. Importantly, this land is zoned as “Low Density Residential”. Mr Denman relies upon this sale as showing that as at the date of the valuation of the subject, demand for large parcels of land on which high density residential development could occur simply was not in existence at that time. Mr Mauchline does not consider Mr Denman’s Sale 2 as a good comparison due to its zoning and also to the fact that Sale 2 has water overflow problems.
Mr Denman’s Sale 3 is located in Edward Street, Flinders View, approximately 2kms from the subject property. Sale 3 is zoned “Residential Low Density 2” and the property sold on 14 November 2003.
Mr Mauchline has similar comments regarding Mr Denman’s Sale 3 as he has for Mr Denman’s Sale 1. In my view, it is particularly relevant that the sale occurred in 2003 at a time when it is the evidence of both valuers that the market for high density residential land in Ipswich was not moving.
An additional feature of Mr Denman’s Sale 3 relied upon by Mr Mauchline is that the sale land is contained within a “mining influence area”.[1] Mr Mauchline described Mr Denman’s Sale 3 this way:
“its got one access point to the property, basically a back block and the other thing wrong with the property is its severely undermined which Mr Denman didn’t bring forward. Its got severe undermining on the site. I’ve got copies of the undermining map here.”[2]
[1] See Exhibit 6.
[2] Transcript p 22.
During cross-examination by Mr West, Mr Mauchline’s evidence regarding undermining of Mr Denman’s Sale 3 changed somewhat. The relevant evidence is as follows:[3]
[3] Transcript p 34.
“What’s the basis for saying it’s severely undermined?—Council records.
What’s the basis for saying that it is severely undermined?—I haven’t gone to the full extent and full report, engineer’s report, on the extent and the depth of the undermining, no I haven’t got that.
All we can say is that the land falls within the mining influence area?—Mining influence or undermined we don’t know, we can’t determine. What I’m trying to do is to tell the truth at the 10.’04 valuation we did not have the time to go into depth into the mining influence, the cuts, the angle of the cuts, all that sort of thing. At the 10.’04 valuation what I’m doing there is I’m telling you that because it was undermined at that time and we didn’t have the time to check it out we made allowances for it.
We don’t actually know whether that particular block is undermined?—We know it’s undermined.
Sorry?—We know it’s undermined.
Do we, how?—It was a mining influence area.
It’s in the area where it might be undermined?—That’s right.”
In my view, both valuers are at fault in their evaluation of Mr Denman’s Sale 3. The fact that Mr Denman’s Sale 3 is located in a mining influence area is without dispute and is a relevant feature that Mr Denham should have taken into account. However, Mr Mauchline’s evidence is also in error in that he has taken a quantum leap in assuming that, because the Sale 3 land is within a mining influence area, then that land must be severely undermined. That is not necessarily the case. In my view, a prudent purchaser would take the existence of the mining influence area into account when considering any purchase of the land in Sale 3. In short, Mr Mauchline has overstated the impact of the mining influence area, whilst Mr Denman has failed to take the impact of such area into account at all.
Mr Denham’s Sale 4 is also located in Edwards Street, Flinders View. The sale land is zoned “Residential Low Density 2” and is recorded as having been sold on 11 August 2004 for $2,000,000. Mr Denham relies upon Sale 4 as showing the market for large parcels of land suitable for development at a date close to 1 October 2004. Although Mr Denham concedes that such land was zoned for “Residential Low Development 2”, nevertheless Mr Denham’s evidence is that Sale 4 supports his view that the market was not moving for larger parcels of land in the Ipswich region at this time, such market movement in 2003 and most of 2004 being limited to single unit housing sites.
Mr Mauchline is particularly critical of Sale 4, which he considers to be a bogus sale. His evidence in this regard is as follows:
“Sale No. 4?-- That’s also an Edwards Street property. I’ve had quite a bit to do with that sale actually. When this property first exchanged I actually met the owner on site because at the time it was one many in globo parcels that had sold in the area. The owner owns a fairly substantial palatial home towards the rear of the site with a large inground concrete pool. At the time I met the owner on site he was trying to negotiate a deal with the developer who bought the site to retain a tiny area around his house, survey his house off from the in globo parcel. Those negotiations were in process for two or three months before anything was done but the crux of the matter was that the sale was transacted in early 203. It wasn’t recorded in our system until 2004 deliberately by the developer. The developer at the time had proposed to cut off the area fronting towards Edwards Street large quarter acre block and he had those properties under contract. This is going from word to mouth to myself from the owners and I’ve spoken to the developer. Because the residential market had boomed along he’d had the quarter acre blocks under contract for $120,000 to $130,000. They were severely under-valued and at the time the market was belting along. He didn’t want to carry on with the sales of those properties. He withdrew them from the market and reneged on the contract prices I believe and then he pulled them off the market and two months later put them on the market for $165,000 to $180,000 each, so rather than lose money on contracts that were put in place he somehow got out of the contract, re-put them on the market for $180,000. There is quite a lot of history on that site but what Mr Denman had drawn my attention to when I’d looked at the sale although that is a low sale regarding a rate per metre and I agree it’s low but it was because it was a 2003 sale. Mr Denman has failed to mention that the site diagonally across the road from that sale property which is Lot 22 RP809292 there’s a sale and a resale on that property and it was a vacant in globo parcel of land bearing in mind both these properties are low res sales, they not multi unit sales or RM sales. The property Lot 24 RP809292 on the corner of Wildey Street and Edwards Street sold – I’ve got a map here also.
The property is this one that you’re speaking about?-- Directly across the road.
From sale 4?-- Sale 4. It’s important to bring that out. Mr Denman has brought out the sale of this property regarding the level that was applied to the property but the property across the road has been ignored. That’s also a sale and resale which shows the movement in the market.
MR WEST: Sir, I know the rules of evidence don’t apply here but this wasn’t put to Mr Denman as I recall. He hasn’t really been given the opportunity to comment on it.
WITNESS: It wasn’t mentioned I should say, sorry.
MR WEST: Could I just formally object at this stage. I know the rules of evidence don’t apply but I do object to this evidence.
MR SMITH: I’ll note your formal objection.
MR WEST: Thank you.
BY MR O’ROURKE: Go on Mr Mauchline?-- That property 160 Wildey Street, Raceview sold on 14.6.’03 for $582,000 and the area is 1.357 hectares. It sold again on the 17.6.’04 for $1.25m., same area.
What does that tell us about sale 4?-- It tells us that the applied rate for that sale $90-odd a square metre on that sale I just mentioned but the $2m. sale that has been recorded it doesn’t stack up. If you’ve got $1.25m. across the road and $2m. well there’s something seriously wrong with the sale and no forced sale. The sale property is reported to have sold on 8.11.’04 and yet the sale across the road has sold in a similar period and it’s half the size, a third the size. What I’m getting at is that the sale of $2m. shouldn’t be trusted as a sale.
It’s a low sale?-- A low sale.”[4]
“No. 4 was some strange case of somebody trying to subdivide off a house block and then trying to --?-- I know that sale very, very well. What would you like to know?
I just want to make sure I’ve got this clear in my mind. You had somebody who was trying to subdivide an old house off it?-- The owner.
And then sell blocks of land?-- The owner was trying to negotiate with the developer who entered into an agreement to purchase that site. The current owner is negotiating with the developer to excise his existing house and land from the sale of that property, that feel through. The developer went ahead and proceeded with the sale. The sale was in early to mid 2003 but wasn’t transacted or wasn’t recorded in the Land Titles system till 2004 so it’s a bogus sale.”[5]
[4] Transcript p 23-24.
[5] Transcript p 34.
As the transcript shows, I noted Mr West’s objection to Mr Mauchline’s evidence regarding a sale over the road from Mr Denman’s Sale 4. The additional sale referred to by Mr Mauchline had not been put to Mr Denman and only came up for the first time during Mr Mauchline’s examination-in-chief. However, even if Mr Mauchline’s evidence of the sale over the road from Sale 4 is not taken into account, nevertheless in my view Mr Mauchline’s evidence in cross examination as set out at page 34 of the transcript (recited above) is compelling. On the basis of Mr Mauchline’s evidence that Mr Denman’s Sale 4 occurred in early to mid 2003 but was not recorded in the Land Title system until 2004, I agree that such sale should be treated as a suspect sale and not taken into account. I note that this position is affectively conceded by Mr West in his written submissions where he says “For his part Mr Mauchline says that it is a late reported sale showing a 2003 price. If that be the case, it still shows comparability in the prices of two Edwards Street properties”.[6]
[6] Appellant’s submissions paragraph 6d.
Clearly, there is merit in Mr West’s submission that Mr Denman’s Sale 4 is appropriate to consider for the purposes of determining market trends in 2003 and 2004. However, as already pointed out, there is common evidence between Mr Mauchline and Mr Denman that the relevant market in Ipswich was not moving in 2003. The issue in question is the movement in the market in the months approaching 1 October 2004, and unfortunately Sale 4 is of no assistance in this regard.
Mr Denman’s Sale 5 is a common sale with Mr Mauchline’s Sale 2. For ease of reference, I will refer to this property as the Gledson Street property. The Gledson Street property has been subject to sale and resale during the relevant valuation period. There is a marked difference between the evidence of Mr Denman and Mr Mauchline regarding the attributes and disabilities of the Gledson Street block. However, despite their differences, there are a number of features which both valuers view in common.
I will turn first to the raw sales evidence of the Gledson Street property. This sales evidence shows that the Gledson Street property was first sold on 28 July 2003 for the sale price of $150,000. The Gledson Street property is a block containing 2.717 hectares. The Gledson Street property resold on 18 August 2004 for $1,000,000, and subsequently resold on 31 December 2004 for $2,350,000. At the time of the sales and resales, the Gledson Street land was zoned low-density residential. An application was subsequently made by the latest owner of the Gledson Street property on 30 May 2005 for a material change of use for 107 dwellings on the Gledson Street property.
I now turn to the differences in the evidence relating to the Gledson Street property. In doing so, I have noted the images of the Gledson Street property as contained in two photographs which make up Exhibit 5. A number of observations are clear from those photographs. Firstly, the Gledson Street land enjoys a wide access to Gledson Street. In viewing the Gledson Street property as far inferior to the subject property, Mr Mauchline during cross-examination had this say:
“Firstly it’s a fairly modest housing area, Housing Commission homes. There are two street frontages but the only street frontage is to an unformed road, there’s no kerb and channelling to that road. It’s just a gravel road base side road. The subject property is fully developed with kerb and channelling and bitumen sealed road. The contour is not as favourable as the subject property. The subject property rises from the road up to the rear of the site throughout the entire site whereas the sale property falls below Gledson Street.” [7]
[7] Transcript p 29.
Mr Denman on the other hand describes the Gledson Street property in the following way:
“While some might argue that Raceview is a better suburb than North Booval, the North Booval land is closer to major shopping at Booval and in topography is flat with a minor fall from Gledson Street. It is also about one hectare smaller than the subject property as a whole and would have a shorter development period.” [8]
“Sale 5 is a property that was zoned low density residential. It’s since been approved to 108 units. It’s situated in North Booval which is in reasonably close proximity to the Big W shopping complex, banks and all sorts of things there, doctors and chemists so it’s quite handily situated.
Railway lines?-- It’s on the northern side of the railway line so it’s close to Booval station, reasonably close to Booval station. It was land that was flooded in ’74 but I think today with the adjustment the Ipswich City Council has made to their flood maps through Wivenhoe it would be largely non flooded as with the ’74 level. I think there’s probably a pretty god situation for units there because of its proximity to services.
In terms of comparability with the subject land?-- I think it’s better because it’s closer to facilities.”[9]
[8] Exhibit 2.
[9] T 5.
It is clear from the evidence that both valuers when considering the relevant merits of the Gledson Street property as opposed to the subject property have taken into account personal, subjective views as to the desirability of living in North Booval. Mr Denman has conceded that some argue that the subject property is superior to living in North Booval, but he is swayed by Gledson Street’s proximity to public transport (in particular, a railway station) and relatively proximity to a major regional shopping centre. He makes no real observations on the standard and quality of housing in the vicinity around the Gledson Street property.
Mr Mauchline on the other hand clearly prefers the subject property. He notes that it is in relatively close proximity to the CBD of Ipswich and also has close proximity to a supermarket with various speciality shops, as well as a significant tavern located directly across the intersection from the subject property. As already indicated, Mr Mauchline describes the residences surrounding the Gledson Street area as housing commission housing, although it is clear that he has nothing other than observations to justify those comments. On the basis of the evidence, I am not prepared to accept that the housing surrounding Gledson Street is housing commission homes, but I do accept that the housing around Gledson Street is generally of an inferior standard to that in the vicinity of the subject property.
As regards development approval for the Gledson Street property, whilst Mr Mauchline concedes that prior to the resales there had obviously been discussions had with Council regarding development approval, he makes the point strongly that at the time of the resales in August and December 2004 there had been no applications made to the Council for development approvals on the Gledson Street property. Mr Mauchline spoke to both owners to confirm that information.
For his part, Mr Denman concedes that he is not aware of the circumstances of the development application process but states[10] that he would be extremely surprised if there had not been preliminary discussions with Council before the land was purchased. As he says:
“I can’t imagine a prudent developer not knowing whether he’s going to be able to get a higher use out of it than the residential low density use that is already there.”[11]
[10] Transcript p 13.
[11] Transcript p 13.
Mr Denman went on to concede in his evidence that obtaining a development approval from Council is not a “sure thing” and that the development approval process “depends on the mood of town planning at the time and how they value the development. I think there’s a whole range of things go into their melting pot.”[12] Mr Denman went on to state that a prudent developer would hold many meetings with Council prior to lodging any applications until they got to a point where they had some confidence that their proposals for the land would be favourably received by Council. In Mr Denman’s view, such negotiations with Council must be taken into account in determining the price paid for the Gledson Street land.
[12] Transcript p 13.
Perhaps the situation with respect to the Gledson Street is best summed up by the written submissions of Mr West where he states, at paragraph 8:
“8. WHATEVER else maybe said about the Gledson Street land, it seems clear that in late 2004 something happened to increase its value. Mr Denman is of the view that there was a change of use or development consent granted, or at least some understanding reached with the local authority. Mr Mauchline says there was no development consent be cannot really comment on whether there was an understanding of some sort. By contrast, at all times the subject land did not have a development consent and was subject to the uncertainty of that process. In addition, it had (and has) an industrial building in use on it. That building would have to be cleared off and the site cleaned up as part of any development. On the other hand, Mr Mauchline asserts that it enjoys proximity to the Ipswich CBD. Mr Denman rightly suggests that with a 40% vacancy rate in the Ipswich City Mall, this would hardly be an asset.”
I now turn to Mr Mauchline’s Sale 1. This sale is of a block of 8865m² situated at Ash Street, Flinders View. In Mr Mauchline’s view, access to the sale property is quite inferior to the subject, with the subject having a superior location and superior frontage to major streets. Mr Mauchline is also of the view that the sale property has a shape and contour inferior to that of the subject.
Mr Mauchline’s Sale 1 was first sold on 7 June 2002 for $410,000, and resold on 22 April 2005 for $1,205,000.
In Mr Denman’s view, this sale is an appropriate sale to use for the 2005 valuation period but not appropriate for the 2004 period. Mr Denman argues that Mr Mauchline’s Sale 1 supports his view that the market for such blocks rose after the valuation date of 1 October 2004.[13]
[13] T page 14.
Mr Mauchline’s Sale 3 is situated at 7 Workshop Street, Brassall and has an overall area of 3.931 hectares. It is zoned for residential medium density (two storeys), with approximately 1.79 hectares of the land classified as recreation land that cannot be built on. The Sale 3 property was sold on 16 October 2003 for $850,000 and subsequently resold on 30 April 2004 for $3,200,000.
In Mr Mauchline’s view, the subject property is comparable to Sale 3 and has similar services available. He also considers that the subject property has far superior access, and that the overall nature of the subject property is superior to that of the sale property. Mr Mauchline is also of the view that the subject property, which is designated RM 2 or RM 3 in its entirety, is superior by way of designation to Sale 3 in light of the significant area of land in Sale 3 which is designated as recreational land. The land is designated recreation as a flood buffer between the balance of the subject land and the Bremer River.
Mr Mauchline also pointed out in his evidence that there was a development approval in place for Sale 3 at the time of its resale in April 2004.[14]
[14] See T page 20.
Mr Denman views Mr Mauchline’s Sale 3 as superior to the subject for a number of reasons. Mr Denman considers Mr Mauchline’s Sale 3 to be close to Brassall Village shopping centre, and also bordering the Bremer River which will be a feature for lifestyle living with river landscaping occurring for the benefits of residents on the sale site. He notes that the sale property is close to a doctors and dentists surgery, two major food supermarkets, banks and speciality shops, as well as a large Baptist church.
Decision
From the evidence and the submissions of the appellant and the respondent, there are a number of key issues to be determined on this appeal. These issues relate to the applicability of after date sales; the impact of a relative zoning or development approval; and determination of the date of the rise in market conditions.
After date sales
In his submissions, Mr West[15] argues that the respondent’s valuation relies to too great an extent on sales after the valuation date. In quoting Scougall v Chief Executive, Department of Natural Resources,[16] Mr West asserts that the best sales evidence concerns sales of comparable blocks of unimproved land which occurred within a year before the date of valuation. By further reference to Scougall at page 552, Mr West submits that there must be no change in the market conditions or other relevant conditions which would render subsequent sales incomparable. Mr West contends that there was such change in the case at hand.
[15] At paragraph 4.
[16] (1996-7) 16 QLCR 536.
Mr O’Rourke, in his reply,[17] contends that after date sales can be relevant for showing market trends. Mr O’Rourke also points to the fact that Mr Mauchline gave evidence as to the volatility of the market in the period both before and after the date of valuation.
[17] Paragraph 2.
On an issue as important as this in a matter where the evidence shows a high rise in the relevant market at or around the date of valuation, it is unfortunate that neither Mr West no Mr O’Rourke have provided the Court with any authorities on point apart from Scougall. The use to which after date sales may be put by the Land Court has been considered in numerous cases. I note in particular the case of Scougall & Anor v Department of Natural Resources and Mines[18] the 2003 Scougall case relates to a subsequent appeal by Mr Scougall. In the second case, the relevant valuation date was 1 October 2001. Similar to the evidence in this matter, Mr Scougall argued that the market commenced to accelerate on or about the valuation date, while the valuer for the respondent argued for a steady rate of increase throughout 2001. Of course, in the matter at hand, the evidence of the respondent’s valuer Mr Mauchline is that there was a sharp increase in value, but that such increase occurred prior to 1 October 2004 and continued thereafter.
[18] [2003] QLC 0035.
Land Court member Dr Divett made the following observations in the 2003 Scougall matter:[19]
[19] Paragraphs 58 to 61.
“In respect of the level of market increase during the relevant period, Mr Scougall argues that the market commenced to accelerate about 1 October 2001, while Mr Brown argues that it maintained a steady rate of increase throughout 2001. While there is no other supporting evidence to confirm either understanding of market change, it is a reasonable assumption to conclude that the market level did increase between the date of valuation at 1 October 2001, and the date of issue of the valuation at 25 February 2002. On that basis I note guidance in respect of sales subsequent to the date of valuation in McCathie v Federal Commissioner of Taxation (1944) 69 CLR 1, where Williams J said at p.l16:
‘Values must be calculated in the light of circumstances which existed on the material date. … But subsequent events can be taken into account in order to determine the proper weight to attach to such circumstances. Subsequent sales are just as admissible in evidence as prior sales, provided that in all the circumstances they are comparable. If between the material date and the date of subsequent sales supervening events occur which alter the conditions previously existing, the subsequent sales would not be comparable and would be useless.’
That guidance was also followed in a previous appeal by Mr Scougall in RJ Scougall v Chief Executive, Department of Natural Resources (1996-97) 16 QLCR 536, at 551. In the matter of McCathie, Williams J also drew reference to a previous matter in the High Court of Daandene Pastoral Company Pty Ltd v Commissioner of Land Tax (1943) 7 The Valuer 299 per Williams J at 304. The balance of whether a subsequent sale may provide useful guidance is a matter that relies upon the skill and experience of the expert valuer.
In selecting the comparable sales evidence, I am also aware of guidance provided in respect of comparable sales in Brewarrana Pty Ltd v Commissioner of Highways (SA) (1973) 32 LGRA 170, where Well J said at page 180:
‘… there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not. … some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. … the assessment of the risks of adjustment is peculiarly within his (the expert valuer’s) sphere of skill.’ ”
I note that in the 2003 Scougall decision, Dr Divett ultimately decided not to rely upon the respondent’s after date sales as, on the evidence of that case, the respondent’s valuer had apportioned such low applications of the analysed sale price to the after date sales that, in his opinion such sales “would be more relevantly associated with the next valuation”.[20] Importantly, however, Dr Divett in the same paragraph of his decision also noted that the after date sales “were consummated prior to the date of issue of a valuation, and therefore were matters that could have been considered in forming the opinion of a relevant unimproved value of a subject land”. Dr Divett also noted that such sales occurred “during a period of moving market level”.
[20] 2003 Scougall paragraph 64.
There are two after date sales relied upon by Mr Mauchline which the appellant challenges. The first is the Gledson Street resale of 31 December 2004. The second is the resale of Mr Mauchline’s Sale 1 at Ash Street, Flinders View on 22 April 2005. I will deal first with the resale of Sale 1.
I note that the Ash Street resale has occurred some seven months after the date of valuation. I considered similar circumstances in the case of Micallef v Department of Natural Resources and Mines[21] where I said:[22]
[21] [2006] QLC 0048.
[22] At paragraphs 20 to 22.
“The date of Sale 5 is 8 April 2005, some six months and one week after the date of valuation. In relying upon Sale 5, Mr O’Connor in his report has made specific reference to the decision of the President of the Land Court (Mr JJ Trickett) in Fairfax v Department of Natural Resources and Mines [2005] QLC 0011 where the President said at page 13:
‘The date of valuation was some 17 months later and there is no issue that the market was rising during that period. With that evidence, there is little doubt that if ‘Karemba’ had sold closer to the date of valuation the sale price would have been higher and so would the analysed unimproved value. Therefore, it is not surprising that Mr. Craig has applied a value higher than his analysed value at that time.’
It should be noted that in Fairfax the President was considering a sale that occurred a considerable period of time prior to the valuation date, whereas in this matter Mr O’Connor is relying on a sale somewhat after the date of valuation. I accept the methodology adopted by the President that an allowance can be made to appropriate sales, taking into account whether or not such sales occurred in a rising or falling market, to ascertain a likely value of such sales at the valuation date when those sales are at a time considerably removed from the valuation date. …
My chief difficulty with this aspect of Mr O’Connor’s report comes from an analysis of the allowance that Mr O’Connor has made in applying a value for the sale as at 1 October 2004. As can be seen from the table above, Mr O’Connor has applied a value of $112,000 from the analysed unimproved value of $147,000. This equates to a 76% application. Mr O’Connor argues that such application is appropriate given that Sale 5 occurred in a rising market. My difficulty is that there appears to be little consistency with the applied value given to the five sales referred to in this matter by Mr O’Connor. … ”
Essentially, my concerns regarding the after date sale in Micallef are similar to those expressed by Dr Divett in the 2003 Scougall. Further, in the case at hand, I note that the resale of Ash Street has an applied unimproved value as at 1 October 2004 of $575,000, or approximately 47.7%.
I now turn to the question of the appropriateness of the Gledson Street resale on 31 December 2004 as an after date sale. As was the case in the 2003 Scougall matter, of prime importance in determining this case is an evaluation of market movements at the date of valuation. In my view, leaving aside all other issues with respect to the Gledson Street property but looking just at the dates of sales and resales, the history of the Gledson Street sales, being on 28 July 2003, 18 August 2004 (both within the relevant valuation period) and 31 December 2004 (three months after the valuation date but before the date of issue) is of great assistance to the Court in determining the appropriate value of the subject block as at 1 October 2004.
Applying the authorities set out above regarding after date sales, I am left with no doubt that the Gledson Street resale on 31 December 2004 is an appropriate sale for the Court to consider. Each valuer has referred to the resale in their respective valuation reports. Each valuer has given their expert opinion as to the relevant market trends both at the time of the previous Gledson Street sales and the December 2004 resale. Indeed, it is somewhat curious that Mr West for the appellant seeks the Court to not take into account the Gledson Street resale as an after date sale in circumstances where his own valuer has both relied upon that same resale and referred to it specifically in evidence and cross-examination.
Zoning and development approval
An important feature of the appellant’s case relates to an explanation of the increases in value in the Gledson Street property. Mr Denman puts the increases, particularly that from the August 2004 resale to the December 2004 resale, as arising out of what he presumes must have been significant discussions by the owner with the City Council regarding development approval (DA) and permission for a higher use of the Gledson Street land. Mr Mauchline for his part concedes that prior to each of the resales of Gledson Street there would have been some negotiations with Council. Nonetheless, he says that a DA was not in place at the time of the resales. This has the effect of the resales incurring the risk that a DA would not be granted by Council.
As a starting point, in considering this matter I turn to the noted text by Hyam titled “The Law Affecting Valuation of Land in Australia Third Edition”. Under the heading “Enquiries as to permissible uses”, Hyam makes the following observation:[23]
“It is a well established principle that before making a valuation a valuer should make enquiries of the appropriate responsible authorities as to the permissible land uses applicable at the date of the valuation, any decisions which have been made to alter those uses, and any draft scheme or instruments that are in the course of preparation which may amend the existing provisions. As Else-Mitchell J said in Edinburgh Pty Ltd v The Minister (1962) 8 LGRA 45 at 51:
It seems to me, as it seemed to Hardie J in Hurdis v The Minister (1957) 2 LGRA 132 at 136 that ‘it is reasonable to anticipate that a prospective purchaser would make enquiries from the responsible authority and/or other sources’ on the permissible uses to which the land might be put.
In making enquiries a valuer is placing him or herself in the same position as the hypothetical prudent prospective purchaser in accordance wit the criteria laid down in Spencer v Commonwealth (1907) 5 CLR 518.”
[23] Hyan at page 109.
The Land Court has recently considered the impact of DAs on the valuation process. In the case of Limson Investments Pty Ltd v Department of Natural Resources and Mines,[24] Member Jones had this to say:[25]
[24] [2007] QLC 0050.
[25] At paragraphs 10, 12, 13 and 16.
“As at the relevant dates of valuation the subject land, while zoned Residential D, had no development approvals (DA) in place authorising more intensive development of the land. On the other hand, according to Mr Limbada, properties C.D and E all had DA’s in place as at the dates of valuation and, in respect of property D, a building approval (BA) was also in place. …
According to Mr Limbada, the unimproved value of the subject land should be significantly reduced relative to the values attributed to properties C,D and E to take account of the fact that those properties had approvals in place as at the relevant dates of valuation and those approvals add significantly to the value of the land.
According to Mr Corder, the existence of such approvals has only a minor impact on value. That is so according to Mr Corder because the zoning of the land is paramount and the relevant approvals would flow almost “as of right”. Mr Corder however was prepared to acknowledge that having the approvals in place would attract some premium but, as I understand his evidence, the worth or value of that premium would be limited to the cost savings associated with not having to retain the experts necessary to complete the relevant applications, the savings of application fees and the avoidance of the delays associated with actually getting the approvals from the Redcliffe City Council. The best evidence was that this could take 6-12 months.
…
While intuitively I might have some sympathy for the case as argued on behalf of the appellant, it produced no reliable evidence to support either the impact n land values DA’s have or the levels of unimproved value contended for by it.”
The Land Appeal Court in PT Limited & Westfield Management Limited v Department of Natural Resources and Mines[26] considered certain aspects of the impact of a DA on the valuation process. Although that decision was principally concerned with whether or not the benefit flowing from a DA could be characterised as an intangible improvement for the purposes of section 6(5) of the VLA, the Land Appeal Court also made important observations relating to the nature and characteristics of DAs.[27] In particular, I note that the Land Appeal Court adopted the following characterisation of Land Court Member Scott:[28]
[26] [2007] QLAC 0077.
[27] At paragraph 63-73.
[28] At paragraph 69.
“A DA is therefore a permit or licence which allows the ongoing use of a regional shopping centre as long as the building is completed and put to shopping centre use before the expiry of the currency period (which may be extended — s 3.5.22) and it allows the use of the buildings to continue indefinitely. … ”
The Land Appeal Court further commented as follows:[29]
“As the learned Member observed, because a DA may be a creature f statute, in this case the Integrated Planning Act 1997, it is not in law or fact a statutory right. He said:
‘… A DA is not a right merely given by the process of statute, or which ‘accrues’ to the developer, but is a right whose form and content are moulded by what the applicant developer contributes to the process. It is quite different from a statutory right merely given.’
We agree with that observation.”
[29] At paragraph 71.
Applying the characterisation of a DA from PT Ltd & Westfield Management Ltd, and consistent with the position the Land Court found itself in in Limson Investments, in my view, whilst the existence or non-existence of a DA on the Gledson Street property at the time of the two resales is a significant factor which should be taken into account in assessing those resales, the evidence in this particular case brought before the court by the appellant does not contain sufficient particularity to delineate the impact on land values that the negotiations for DAs had on the Gledson Street resales.
Conclusion
In my view, taking into account all of the evidence, but leaving to one side Mr Mauchline’s Ash Street resale as an unreliable sale, I am left in no doubt that the market for the subject land was relatively static throughout 2003 but increased significantly in 2004. In my view, the significant increase did not all, or substantially all, occur subsequent to 1 October 2004 as contended for by the appellants, but began at least some months prior to 1 October 2004 and was a significant feature for valuing the subject land as at 1 October 2004. Although I have sympathies for the valuers in this matter in attempting to apply an unimproved value to the subject land as at 1 October 2004 in light of the significantly increasing market conditions, as has been previously noted, the exercise of determining an unimproved value of land is far from an exact science. The Gledson Street sale and two resales clearly show, in my view, the significant market movement occurring in the Ipswich area during the relevant period and shortly thereafter. Although I acknowledge that determining the unimproved value as at 1 October 2004 in these circumstances is fraught with difficulty, in my view the respondent has failed to show that the valuation of the subject land has been obtained using a wrong principle or that the respondent’s valuer made a serious error of fact. The respondent has failed to overcome the presumption of the correctness of the valuation as set out in s.33 of the VLA and, in those circumstances, I have no option but to dismiss the appeal.
Postscript
It is unfortunate that the delivery of this decision has taken longer than anticipated. At the time that I heard the matter, I only held a part-time appointment to the Land Court, my full-time appointment being as Deputy President of the Land and Resources Tribunal. Requirements of the Land and Resources Tribunal, beyond my control, necessitated all Land and Resources Tribunal work taking precedence over this matter. Fortunately, that situation has been resolved by the amalgamation of the bulk of the jurisdiction of the Land and Resources Tribunal into the Land Court, and my corresponding appointment as a full-time Member of the Land Court.
Orders
1.The appeal is dismissed.
P A SMITH
MEMBER OF THE LAND COURT
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