Kingsun Investments Pty Ltd v Chief Executive, Department of Natural Resources
[1997] QLC 197
•12 December 1997
|
BRISBANE
12 December 1997
Re: Appeal against Annual Valuation -
Valuation of Land Act 1944 -
City of Townsville.
(AV96-575).
Kingsun Investments Pty Ltd
v.
Chief Executive, Department of Natural Resources
(Hearing at Townsville)
D E C I S I O N
Kingsun Investments Pty Ltd is the owner of land described as Lots 1 to 3 on Registered Plan 703569, and Lots 1 and 2 on Registered Plan 711695, County of Elphinstone, Parish of Coonambelah, containing an area of 5,060 square metres. Under the provisions of the Valuation of Land Act 1944, the respondent Chief Executive determined the unimproved value of that land as at 1 January 1996, at $1,230,000. Following an unsuccessful objection against that valuation, the owner appealed to the Land Court advising that its estimate of the unimproved value is $1,100,000.
At the hearing of the appeal, the appellant was represented by Mr GW Eales, a registered valuer in private practice in Townsville, who also gave evidence. The respondent was represented by Mr R Vize of Counsel, and valuation evidence on the respondent's behalf was given by Mr DA Schy, a registered valuer employed by the Department of Natural Resources.
The subject land comprises an irregularly shaped aggregation of five allotments each with an area of 1,012 square metres, which is situated on the corner of Ross River Road and Anne Street in the suburb of Aitkenvale. It has a 4-chain frontage to Ross River Road, a 5-chain frontage to Anne Street and a 1-chain frontage to Patrick Street at the rear. The subject land is near level with a slight rise to the rear boundary. There is a number of easements over all the lots, but there was no suggestion by either valuer that these adversely affected the unimproved value of the land.
The subject land is developed with a single level retail complex with off-street parking accessed from Patrick and Anne Streets. Lot 3 with access to Patrick Street is used for carparking purposes. Neither Patrick nor Anne Streets have on-street parking, but parallel parking is available along most of the Ross River Road frontage. Traffic lights are located at the intersection of Ross River Road and Anne Street.
Ross River Road is a 6-lane carriageway, three lanes in-bound and three lanes out-bound, with a median strip. Patrick and Anne Streets are 2-lane carriageways with concrete kerbing and channelling.
It was agreed that the subject land is situated in a commercial area described as "strip retail commercial", with frontage to a road with one of the busiest traffic flows in Townsville. The surrounding development is mainly single level retail buildings of various ages and designs. It is one block removed from Stockland Plaza, a major commercial shopping centre, which has recently been upgraded at a reported cost of $28 million.
The subject area is provided with all the necessary services for a commercial site. It is zoned "Local Shopping" under the Townsville City Council Town Plan of September 1994.
At the time of the previous annual valuation undertaken by the respondent, the subject land was valued at $1,100,000, or approximately $217 per square metre as at 1 January 1995. The appellant contends that there is no evidence to indicate an increase in the valuation to $1,230,000, or $243 per square metre, between that date and the date of the present valuation, 1 January 1996.
In support of that contention, Mr Eales provided details of 10 sales, only three of which are situated near the subject land. The others are situated on Charters Towers Road, one on the outskirts of the Central Business District and a 2.9 hectare site opposite the Willows Shopping Centre. These sales occurred between June 1994 and February 1996 and from them Mr Eales drew the conclusion that there had been an escalation in values in the subject area up to the 1995 valuation, but from that time until January 1996, the market was very flat, or may even have fallen slightly.
In support of the respondent's valuation, Mr Schy relied upon six sales on Ross River Road, only two of which are, like the subject land, on the out-bound side of the road, while the other four are on the in-bound or northern side of the road. The two outbound sales (Sales 2 and 5) are zoned "Local Shopping", while of the in-bound sales, three are zoned "Commercial" and one zoned "Residential 3".
Those properties sold between June 1994 and May 1996 and analysed to show unimproved values ranging between $315 per square metre to $432 per square metre. In relation to those sales Mr Schy made the following remarks:
"These sales have been presented as support evidence for the level of value applied to the subject. Of these sales, Sale No. 2 is considered to be the best supporting evidence. Sale No. 2 is somewhat smaller than the subject, and does not have street-to-street frontage. The sale block does reflect a higher value to the subject as a result of smaller area and closer proximity to Stockland Plaza. The zoning is similar. Sale 5, although after the date of valuation does reflect a reasonable value for land somewhat removed from the Stockland Plaza influence. "
It emerged in evidence that the in-bound sales (Sales Nos 1, 3 4 and 6) being commercially, or potentially commercially zoned, were regarded by both valuers as less valuable per square metre than the subject land as they are "restricted commercial", suitable for development as offices for insurance companies, banks and accountants.
It further emerged that although these properties had analysed to show rates of $315, $432, $336 and $420 per square metre, the respondent had applied $225 per square metre in respect of each of these properties. Mr Schy endeavoured to explain that the analysed unimproved values were not applied to those three properties on the in-bound side of Ross River Road as they had only recently been rezoned. It seems that the respondent was applying a conservative approach to the valuation of those properties which were in transition from residential to commercial use.
Whether that approach by the respondent is correct or not, is not a matter which I have to consider. It is sufficient to say that the respondent paid no regard to those sales in applying unimproved values to those properties. Therefore, they are not appropriate as a basis of valuation for the lands on the opposite side of the road with a different and what was agreed to be a more valuable zoning.
Mr Schy also referred to two sales (Sales A and B) with areas of 12,140 square metres and 6,422 square metres respectively, which sold for $1,000,000 and $2,087,500 respectively. Of Sale A, Mr Schy commented:
"This sale is somewhat aged, it cost about $100,000 to obtain Council approvals and rezoning, and took until 1995 before the block was developed. The total area available for development was reduced by about 2,000 square metres to protect a banyan tree and air roots. The sale has been used to show that there are $1,000,000+ sales in the general vicinity. It is noted that at the time of purchase the zoning of the sale block was inferior to the subject and still remains inferior to the subject. "
The zoning of Sale A is "Special Purposes". As at 1 January 1996, the respondent applied an unimproved value of $1,500,000 ($123 per square metre) to that property. It appears that Mr Schy used that sale only for the very limited purpose of showing that land in the vicinity of Stockland Plaza sold for more than $1 million.
Sale B was zoned "Particular Development" and was actually the sale of three lots by three different vendors to the same purchaser, Rapisarda, in June 1995, for $2,087,500. That "sale" analysed to show an unimproved value of $2 million, or $311 per square metre. The respondent applied an unimproved value of only $1,200,000 ($187 per square metre) as at 1 January 1996. Of that "sale" Mr Schy commented:"This is a good sale to use for comparison with the subject, for the sale block is superior in location to the subject, but the subject is superior in zoning and access. The sale block is slightly larger than the subject site, but overall because of location the sale block is considered superior to the subject."
Mr Eales said that Sale B had approval for a two storey office building. Although the subject land had superior zoning and access, the sale had "tremendous exposure", and overall he agreed it was superior.
I did not find either of those sales to be of assistance. They are differently zoned. Sale A which occurred in May 1991, is simply too old and Sale B was, in fact, three separate transactions.
In addition to those sales, Mr Schy included two sales in Patrick Street, both of 2023 square metres and both zoned "Local Shopping", which sold in October 1991 and September 1993 for sale prices of $275,000 and $390,000 respectively. Mr Schy said that he included those sales to demonstrate the range of values that people have paid for land with frontage to Patrick Street. However, they are simply too old to be of much assistance.
That leaves as the only useful sales Mr Schy's Sales Nos 2 and 5, both of which are zoned "Local Shopping" and which are Mr Eales' Sales 2 and 1 respectively.
Sale 2 (also Mr Eales' Sale 2) is situated at 292 Ross River Road, has an area of 2023 square metres and sold in August 1994 for $750,000. It analysed to show an unimproved value of $730,000, or $361 per square metre, (Mr Eales analysed it to show an unimproved value of $370 per square metre). The respondent applied an unimproved value of $650,000, or $321 per square metre, as at 1 January 1996. Mr Schy considered that sale provided strong support for the unimproved value applied to the subject land.
On the other hand, Mr Eales felt that the sale which occurred in 1994, was at about the peak of the market and that being closer to Stockland Plaza, it showed a level of value higher than should be applied to the subject land. Although he did not disregard that sale, it was clear that Mr Eales considered that Mr Schy's Sale No 5 (his Sale No 1) was the better sale.
Sale 5 is situated at 274 Ross River Road, on the out-bound corner opposite the subject land. It has an area of 1,012 square metres and sold in February 1996, for $390,000. Mr Schy analysed that sale to show an unimproved value of $348,000, or $344 per square metre. As at 1 January 1996, the respondent applied an unimproved value of $345,000, or $340 per square metre to that property.
Both valuers agreed that Sale No 5 was in a superior location and had better exposure and was therefore more valuable per square metre than the corner lot (Lot 1 RP 703569) of the subject land. However, Mr Eales disagreed with Mr Schy's analysis of Sale No 5. He analysed it to show an unimproved value of $300,000, or approximately $296 per square metre. Allowing for corner influence of 10% for purposes of comparison with an inside lot, Mr Eales' analysis showed approximately $270 per square metre.
The difference between the valuers' analyses of this sale arises from what they considered to be the added value of the improvements on the land at the time of sale. Their approaches to the added value of the improvements stemmed from their individual interpretations of what they considered to be the purchaser's intentions regarding those improvements.
It seems that the improvements on that sale land comprised an old corner store which is now used as a real estate office, and a former bootmaker's shop, leased to an irrigation company which had occupied the premises when the sale occurred.
Mr Schy was told by a representative of the purchaser that they envisaged demolishing the buildings within a time-frame of twelve months to four years. Since then they have spent some money renovating the premises which they use as the real estate office. It also seems that some money has been spent on the premises leased to the irrigation company.
Mr Eales' approach to the added value of the improvements was on the basis that they would continue to be used for some time. However, he did not produce his analysis of the sale but relied upon his memory. I was given no detailed evidence of how he arrived at the figure of $90,000.
On the other hand, Mr Schy's sales schedule shows the added value of improvements at $42,000. In arriving at that figure, he used the method of replacement cost less depreciation. He admitted that he had depreciated the improvements heavily because of what he understood to be the owner's intention to demolish them.
When called upon to explain his analysis of the sale, Mr Schy gave detailed evidence of the dimensions, replacement cost and depreciation applied to the individual improvements that amounted to only $8,000. He said that he analysed the sale to $382,000, then deducted development interest at 9.7% to arrive at a figure of $348,000, or $344 per square metre. At one stage under cross-examination, he said that he could agree to a value of improvements of $50,000, but not $90,000 as applied by Mr Eales.
It is clear that both valuers relied heavily upon that sale. Indeed, Mr Eales described it as the "cornerstone" of his valuation. However, the very different approach taken by each valuer to the analysis of that sale is a further illustration of the difficulty and danger of attempting to analyse an improved sale in order to arrive at an unimproved value. The concept of added value is founded on the price that a purchaser would pay for a particular improvement (see O'Brien Nominees Pty Ltd v. The Valuer-General (1979) 6 Q.L.C.R. 280). If, as seems to be the situation in this case, the purchaser had at the time of sale intended to demolish the existing improvements, such an intention would seem to indicate that in the mind of the purchaser they had little value. On the other hand, those improvements have been refurbished to some extent and continue to be used. This makes it very difficult to make any inference as to the purchaser's intention at the time of sale and to accurately attribute an added value to those improvements.
In the circumstances, I feel that there is sufficient doubt about the correct added value of those improvements to render it an unreliable basis for the present valuation.
Mr Eales relied heavily on the fact that there was no evidence of an increase in the unimproved value of the subject land between 1 January 1995 and 1 January 1996. His Sale No 1 was his primary basis for that opinion. The other sales were essentially supporting sales. Indeed, after considering the sales tendered by both valuers, I must agree that there is no evidence to demonstrate an increase in the unimproved value of lands in the area between those two dates.
However, that is not the end of the matter. Mr Schy was not responsible for earlier valuations of this area. For the valuation of the local government area of the City of Townsville carried out by the respondent as at 1 January 1996, he was given the responsibility of reviewing the valuations along Ross River Road. After investigating the sales he came to the conclusion that the previously applied valuations as at 1 January 1995 in that area were not appropriate. He felt that the previous valuer had not applied the sales which clearly demonstrated that there had been an increase in the unimproved value of those lands which had remained unchanged since 1989. He carried out further investigations and formed the opinion that the relativity was incorrect. Therefore, he adjusted the level of values to what he considered to be the correct level and altered the relativity in so doing. He admitted quite frankly that in his opinion it was not a matter of whether there had been any increase between 1 January 1995 and 1 January 1996, but what had happened since 1989.
The facts in this case require the consideration of some fundamental propositions. The provisions of the Valuation of Land Act 1944 require the respondent to determine the unimproved value of land at a particular date. It is well established that the most appropriate means of assessing unimproved value is by reference to sales of comparable lands. That is what Mr Schy has endeavoured to do, but in the process he has changed the relativity of valuations in the area.
While it is desirable that relativity of values should not be changed without good reason, it is also clear that it would be wrong to maintain a previous relativity of values where sales indicate otherwise. (See Grahn v. The Valuer-General (1992-93) 14 QLCR 327.) In this case, the valuation of the subject land had not changed since 1989. There is clear evidence that there had been an increase in the market for properties in that area of Ross River Road since that time, Mr Eales saying that the peak of the market was some time between 1994 and 1995. There is also evidence that the market had been flat thereafter. Clearly then, if the sales evidence so indicated, the valuation of the subject land should have increased during that time. In my opinion, the sales evidence produced by the two valuers, particularly what they each refer to as Sale No. 2, supports the unimproved value applied by Mr Schy of $1,230,000, or $243 per square metre.
However, there does seem to be a problem with the relativity of the respondent's valuations on Ross River Road. Although the two sales on the outward bound side of the road have been applied reasonably closely in conformity with the sales, the unimproved values on the in-bound side have no relation to the sales produced by Mr Schy. He explained that the valuers had adopted a conservative approach during the transition stage from residential to commercial. However, be this as it may, it must be of concern to the respondent and a matter which should be addressed.
The matter before the Court is the correctness of the unimproved value of $1,230,000 applied to the subject land by the respondent as at 1 January 1996. Section 33 of the Valuation of Land Act 1944 provides that any valuation made by the respondent Chief Executive shall be deemed to be correct until proved otherwise. The High Court considered that statutory presumption of correctness contained in the then Section 13(7) of the Act (the predecessor of the present Section 33). In Brisbane City Council v. The Valuer-General (1978) 140 CLR 41, Gibbs J. (as he then was), with whom the other members of the Court agreed, said at p.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 Section 13(7) is rebutted. "
Then he added at p.57:
"In my opinion once it is shown that a valuation was made by a method fundamentally erroneous the presumption is rebutted. "
In this case I cannot find that the respondent has acted upon a wrong principle. Based on sales in the area Mr Schy, acting on behalf of the respondent, came to the conclusion that the valuations were not in keeping with the market evidence. He adjusted those valuations in accordance with the relevant sales evidence. Nor can I find that the respondent made a serious error of fact. Evidence of sales produced by both valuers clearly indicates that there has been an increase in the market for land in the area since 1989. That market may have reached its peak at or before the valuation made at 1 January 1995, but as at 1 January 1996, it was certainly higher than the 1989 level.
Neither can it be said that the valuation was made by a method fundamentally erroneous. It was made essentially by comparison with sales of comparable land.
Therefore, in my opinion, the presumption of correctness is not rebutted in this case and the appeal must fail.
Accordingly, the appeal is dismissed and the unimproved value determined by the respondent as at 1 January 1996, at $1,230,000 is affirmed
(JJ Trickett)
President of the Land Court
0