Litherland v Chief Executive, Department of Natural Resources
[1997] QLC 178
•21 November 1997
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BRISBANE
21 NOVEMBER 1997
Re: An appeal against an unimproved valuation -
Valuation of Land Act 1944 -
Valuation Roll No.: 32
Local Government: Redland Shire (AV97-248)
Barry M and Cynthia C Litherland
v.
Chief Executive, Department of Natural Resources
D E C I S I O N
Background
This matter relates to a property located at 4 Old Ballow Street, Amity Point, Stradbroke Island, and described as Lot 109 on Plan A3391, Parish of Stradbroke. The subject has an area of 4,047 m², and is located approximately 20 km north-east of the public barge ramp and water taxi facilities at Dunwich, and about 1.9 km north-east of the Amity Point Post Office. The key issues are the impact of major erosion, comparison of sales, and the impact of flood and drainage problems.
The subject has access from Old Ballow Street, which is a formed earth and gravel carriageway which has minimal maintenance undertaken by the Redland Shire Council. The roadway construction was undertaken personally by the appellants in order to connect their property to the existing bitumen roads on the island. It is subject to major flooding during periods of heavy rainfall, and may be inundated by up to 0.6 metres of water for extended periods of up to three weeks. Reticulated town water, power and telephone services are available. The subject land at the front is level with the road, and rises slightly to a ridge line diagonally across the parcel, then falls to the north-east corner which is low lying.
The subject is used as a single residential house site, and is designated as "Comprehensive Development" under the Development Control Plan for Amity Point. The subject is zoned as "Comprehensive Development" under the Town Plan of the Redland Shire Council of 20 February 1988, and effective at the date of valuation of 1 October 1996.
The Chief Executive, Department of Natural Resources issued a valuation on 1 April 1997 at $170,000. Following an objection, the Chief Executive confirmed the valuation at $170,000 on 21 July 1997. The appellants have now appealed that figure, claiming the valuation should more properly be $100,000.
Mr B Litherland appeared and gave evidence for the appellants, calling evidence also from Mr C McElwaine, a neighbour. Mr J Dewar appeared for the respondent, calling evidence from Mr GC Ide, the departmental registered valuer now responsible for the valuation.
Evidence
Mr Litherland argues that the Chief Executive has failed to take appropriate notice of the impact of long-term erosion upon the subject. The appellants have had a long association with the island, over 50 years, having been residents for 32 years, during which period Mr Litherland operated as a commercial fisherman. He claims that periods of extended heavy rainfall occur at frequencies about every seven years in this area, and there are also sporadic major impacts upon the area by the influence of severe cyclones. During these times the rate of erosion of the waterfront land has been up to about 8 metres per year. He has been effective in slowing down that erosion by planting she-oaks along the dune areas to the north of the subject.
Evidence was given that initially, when the survey of the land was undertaken, there was a row of lots to the north of the subject, fronting the ocean. These lots have nearly all been subsequently eroded away by the sea and are now below the high-water mark. In fact, Mr Litherland gave evidence, which was not refuted, that the real erosion line now extends even further towards the subject (through Lot 102), and was now located only about 20 metres north of the subject. An aerial photograph supplied by the respondent confirmed evidence of erosion through the sparse tree cover to the north of the subject. The appellants can now access the beach directly from the rear of the subject.
Evidence was also given for the appellants by Mr McElwaine who had purchased Lot 210 in 1962, and built a dwelling there in 1968, and has lived on and off for 15 years on the island. Mr McElwaine has lived full time on Lot 210 since 1986, but has lived on Stradbroke Island since 1966, and visited the island since 1956. Mr McElwaine confirmed that during the 1974 cyclone, the sea eroded land to the north of his lot at the rate of 6 metres per night, and after losing 60 metres of his land the tidal surge came within 3 metres of his dwelling. Without the protection of the timber planted as an erosion measure, he confirms that, in his view, the rate of erosion is likely to have not been abated.
Evidence was also supplied by Mr Litherland that the late Mr Crouch had a residence located on Lot 103 which had to be relocated twice towards the south and eventually onto the adjoining Lot 108 in 1955. Since then the sea has further eroded Lot 108 such that the erosion line in 1997 is currently just north of the dwelling.
Mr Litherland also sought support in respect of erosion upon the island in a recent landslip that had occurred to the west in the Amity Point area on 20 September 1997. He conceded that the recent slip area adjoined deeper water and was therefore more prone to slippage than the surfing beach area north of the subject. However, he argues that the sand bars north of the subject can move quickly during cyclones, and the subject would then be impacted by heavy seas, with consequential further erosion. Mr Litherland noted that the area in Macland Street to the north-east of the subject had surf pounding the area during a cyclone about 20 years ago.
In respect of access to the subject, Mr Litherland confirmed that the Redland Shire Council has only graded the current earth road about three times in the last 20 years. When heavy rain occurs, the road can be inundated by up to 0.9 metres of water. Because of the poor drainage characteristics of the area, the water is very slow to dissipate, and in 1996 the road remained flooded for several weeks. However, in any case he has to stop the traffic from using the road in order to avoid major damage to the road surface.
Mr Ide confirms that his inspection of the access road had been during a period of reasonable weather, and that he had noticed potholes in the surface. However, he claims that the Council supervisor at Dunwich advised that the access track was graded once every two years, and that flooding was only associated with cyclonic periods which occurred with high tides. On this basis Mr Ide had assessed the access as reasonable.
In response to this advice, Mr Litherland claims that the Council supervisor has no experience of grading the roads in the area, and that he had never worked on Old Ballow Street. Mr McElwaine confirmed that he had never seen a Council grader working on Old Ballow Street.
In support of his valuation, Mr Ide provides the following sales evidence:
Sale 1 - (8 Old Ballow Street, Amity Point - Lot 107 on Plan A3391). The sale is one lot removed west of the subject, rectangular in shape, with an area of 4,047 m². The sale comprises gently undulating coastal forest, is zoned as "Comprehensive Development" and is designated as "Comprehensive Development" under the Development Control Plan for Amity Point. The sale is seen as overall slightly superior to the subject.
The sale sold in October 1996 for $240,000, which after allowing for improvements, and the gutting and renovating of the existing cottage, was analysed at $215,000, and applied at an unimproved value of $175,000.
Sale 2 - (6 Cook Street, Amity Point - Lot 1 on RP 880797). The sale is an irregular shaped level lot, located about 1.7 km south-west of the subject. The sale is in a severely eroded area, such that from past erosion, the sale now has direct access to Moreton Bay. The sale is designated as "Comprehensive Development" and is being used as a single residence site. It has superior views, topography and access, but is inferior in area, shape and location as the subject is near to the sandy beach foreshore. Overall the sale is inferior to the subject.
The sale sold in November 1996 for $180,000, which after allowing for improvements, provided an analysed value of $175,000, and an applied unimproved value of $160,000.
Mr Ide also provided three supporting sales:
Sale 3 - (Gore Street, Amity Point - Lot 31 on Plan A33930). This is a lot of area 617 m², zoned "Residential B", which sold in December 1996 for $95,000, which after allowing for improvements was analysed at $94,000, and applied at $64,000.
Sale 4 - (Kindara Street, Amity Point - Lot 4 on SL 810058). This is a lot of area 700 m², zoned "Residential B", which sold in April 1996 for $77,500, which after allowing for improvements was analysed at $76,500, and applied at $71,000.
Sale 5 - (Providence Street, Amity Point East - Lot 25 on Plan A33927). This lot has an area of 607 m², is zoned "Residential B", and sold in November 1995 for $120,000, which after allowing for improvements was analysed at $119,000, and applied at $108,000.
To support his argument, Mr Litherland supplied evidence of a sale at the corner of Ballow and Kindarra Street, Amity Point (Lot 11 on Plan A3393). This is a 4,047 m² lot, in the centre of town with bitumen roadway, kerbing and channelling, and developed with three dwellings, a shop and a post office. He noted that the sale had in excess of $100,000 worth of rock retaining wall to prevent erosion at its rear, and had been on the market for some time, before selling for $500,000. After allowing minimum values for the dwellings, and the cost of the rock wall, the land he claims has no unimproved value.
Mr Litherland also claims that some recent sales of waterfront lots in the area had occurred at unrealistic prices, to owners who had little knowledge of the erosion problems. The recent landslip on 20 September 1997 had now heightened the concerns of those purchasers. In respect of the sale at Old Ballow Street, he noted that the lot was originally purchased by the former owners from the Redland Shire for arrears of rates. After the dwelling was erected there was a marriage breakdown and the improved site was resold to the current owners in 1996. The new owners, he claims, had no personal knowledge of the extent of possible flooding and erosion during cyclones, although they had lived in the area for two years prior to the sale.
Mr Litherland also conceded that the most recently erected dwelling in the area is located on the adjoining Lot 1 on RP 104707, at the corner of Old Ballow and Geera Streets. This was erected by a long-term resident on the island (25 years), who is a fisherman and has lived all his life in the area. However, the appellant also noted that a condition of approval for the dwelling was that the building must be removable in times of erosion or flooding. He noted that any new buildings erected east of Old Ballow Street must now be removable as a condition imposed by the Council.
In respect of the new dwelling erected upon Lot 1 on RP 104707, Mr Litherland advised that he had sold his fishing business to that owner, who had recently inherited some money. The owner needed a site where he could operate tractors as part of his fishing business. Because of a shortage of alternative sites where his operations would not be objected to, the owner therefore decided to spend the money building a new residence. He also noted that as a corner site the adjoining Lot 1 had two street frontages which was also an advantage to that site.
Mr Dewar noted relativity between the subject and the adjoining Lot 2 on RP 104707 to the east, which was a smaller lot (area 2,023 m²), has lower elevation than the subject, and was subject to flooding. He noted its unimproved value was $100,000. Mr Litherland noted that Lot 2 was further removed from the current erosion line and, he claims, that the Council will not allow anyone to build upon it.
In support of his valuation, Mr Ide noted that his Sale 1 was the most relevant for comparison. He had valued the subject as a single residence site under s.17 of the Valuation of Land Act. He noted that in purchasing Sale 1 the owners had placed some emphasis upon a likely verbal advice, prior to the sale, from the Redland Shire Council, that under the current land classification as "Comprehensive Development", the land had potential beyond merely as a homesite. Mr Ide believed that in applying Sale 1 at $175,000, that figure makes allowance for the premium the purchasers paid for the land's higher potential use. Mr Ide argues that his Sale 5 shows the premium that buyers will pay for land near the foreshore. He suggests that other sales near his Sale 3 showed that in applying that sale he had adopted a conservative valuation.
Decision
In the matter of the impact of erosion upon the subject, there is clearly a long history of movement of the high-water mark in the area. There has been major erosion of all land parcels fronting Moreton Bay, and recent landslips in the Amity Point area highlight the current fragility of the land/water interface. I accept Mr Litherland's recollection of past erosion patterns during the last 50 years. The potential impact from erosion is also clearly demonstrated by the Redland Shire Council in their current policy of requiring all new dwellings erected north of Old Ballow Street to be removable or relocatable. In my view it would be an imprudent purchaser who ignored some potential for the impact of severe erosion in the area.
In comparing sales of comparable properties in the area, I note that Mr Ide acknowledges that his estimate of reliable formed earth road access, and the impact of flooding, was based upon an inspection during good weather, which was supported by the advice of the local Redland Shire supervisor. However, I accept the appellants' evidence that road maintenance to the subject is basically minimal and generally left to the appellant to undertake. On balance, I believe that the weighting for access to the subject has been overestimated when compared to other sales in the Amity Point area near Sales 2 and 4. However, the access to Sale 1 is comparable to the subject, as is also the impact of flooding.
I turn then to the comparison of sales. In this respect firstly I note that Mr Litherland draws support from his sale at the corner of Ballow and Kindara Streets, which is a sale of a considerably improved property. I note he has concluded that, after deducting a conservative estimate of the value of improvements, the sale has a nil unimproved value for the land.
While I can understand the appellant's concern to check his comparison by this approach, which is often to referred to as the "summation" method of valuation, nevertheless the approach can be flawed unless undertaken correctly. In arriving at his unimproved value for the land on that sale, the appellant has concluded that much of the fall in the value must lie in the value of the land.
In this approach I note, however, that difficulties have previously been found in similar circumstances where appellants have sought to conclude that most of the decline in value relates to the land and not to the improvements. In this respect I note in O'Brien Nominees Pty Ltd v. The Valuer-General (1979) 6 QLCR 280, at p.284:
"The basic properties have sold at prices considerably below the value of the improvements assessed on the traditional method of replacement cost less accrued depreciation.
In such circumstances it is unrealistic to conclude that land, the commodity basic to the enterprise, has a minus or nominal value. It is logical to assume that in times of adversity and depression, when purchasers pay less for properties as a going concern, that the lesser price attaches not only to the land component but also to the improvements. The question facing valuers in analysing improved sales in these circumstances is what value is fairly to be attributed to the improvements?
It appears to us that the only tenable approach is to abandon the traditional method of replacement cost as at sale date less depreciation and to adopt an 'added value' concept."
The difficulty lies in assessing the added value of the improvements. Because of uncertainties in determining that value, the preferred approach which has been adopted many times by the Courts is to compare sales of vacant or near vacant lots where they occur in the area. This was best described in PH Clough v. The Valuer-General (1981-82) (LAC) 8 QLCR 70, where the Land Appeal Court said at p.76:
" It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc, to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value. The reason is obvious. In applying such sales there is no room for error in analyzing the value of improvements.
Because there is less room for difference of opinion as to value of the various items of improvement and comparison is thus simpler, it has been held that highly improved sales should be avoided in preference to sales comprising a lesser degree of improvement."
I note therefore that the respondent has adopted the preferred approach when determining unimproved values. In examining his sales I note that his Sale 2 is in fact of a severely eroded lot with deep-water frontage near to the town centre. While Mr Ide sees the sale as inferior to the subject, in view of the latter's closer proximity to the surfing beaches, I believe this sale is likely to have attracted a different type of market. I accept that Sale 2 demonstrates that lots designated as "Comprehensive Development" are in fact being purchased as single residence sites. While apparently the potential use of land designated as "Comprehensive Development", subject to Council approval, has the capacity to allow for a higher use of the land, such as for cabins or caravans, it would appear that a major use of that zoning by Council is to provide increased control over the type of buildings erected.
In examining Mr Ide's supporting sales, I note his contention that they demonstrate the premium that purchasers are prepared to pay for close proximity to the surfing beaches. The comparison between the analysed Sale 3 ($94,000) and Sale 5 ($119,000), which are near the beaches, and Sale 4 ($76,500), near the bayside, are designed to demonstrate that premium. However, I note that they are all considerably smaller than the subject, and all are considerably markedly inferior. I note also that Sale 3 occurred after the relevant period for the 1.10.96 valuation, and should be discounted accordingly. For those reasons, I find they do not assist me greatly in this matter.
In the end, I find the key sale for comparison is Sale 1. That the purchasers may have paid an additional amount beyond what they estimated for only a single residence site, is balanced by Mr Ide applying the analysed value of $215,000, and an applied value of $175,000 (81%).
I note also that in valuing the subject Mr Ide has applied s.17(1) of the Valuation of Land Act in that he has treated the subject as a single residence without any added value as a result of any higher use of the land. As a consequence of that decision, he has afforded the appellants a concessional valuation.
In judging the prudent nature of Sale 1, I note that the current owners have lived upon the island for two years prior to the sale. Without proof to the contrary, it would be a reasonable conclusion by Mr Ide to assume that the owners would have had some knowledge of the possible fragile nature of the island. He would therefore have determined his valuation in accordance with directions given in H & E Grahn v. The Valuer-General (AV89-246/7), 13 December 1990, unreported, where the Land Appeal Court said at p.5:
"A proper valuation calls for an exercise in balancing all the respective advantages and disadvantages inherent in or pertaining to a lot."
In view of the paucity of sales in the Amity Point area, Mr Ide has drawn upon his experience as a valuer in assessing market trends on North Stradbroke Island. He notes that at Dunwich the parcels do not have direct access to the water and front an esplanade, in comparison to Amity Point and Point Lookout where direct access to water is available.
In using his discretion in this matter, I note that Mr Ide has drawn upon his knowledge and experience in accordance with precedents established in Bingham v. Cumberland County Council (1954) 20 LGR 1, where in a minority decision Sugarman J said at pp.18-19:
" In the absence of sufficient guidance to be had from sales, the valuer may find himself in a position resembling that to which Lord Romer referred in the Raja's case (1939) AC at pages 312 and 313, in which he 'will have no market value to guide him, and he will have to ascertain as best he may from the materials before him what a willing vendor might reasonably expect to obtain from a willing purchaser for the land'.
The valuer, in arriving at his opinion in these difficult matters may have to draw upon his general knowledge and experience, including perhaps experience in other situations which, although lacking in complete comparability, may yet provide an experienced valuer with guidance and suggestions as to the general approach which may be made and as to considerations which may become relevant."
In the context of this current matter, I believe Mr Ide has applied a reasonable level of care in comparing the sales.
Finally I note that under s.33 of the Act, the onus of proof rests upon the appellant to prove that the Chief Executive has made an error or has adopted an inappropriate method in determining his valuation. On the weight of evidence I find the appellants have not discredited Mr Ide's valuation.
Conclusion
Having considered the whole of the evidence I am not convinced that the appellants have proved their case. The appeal is dismissed and the unimproved value of Lot 109 on Plan A3391, as determined by the Chief Executive, Department of Natural Resources, in the sum of One Hundred and Seventy Thousand Dollars ($170,000) is affirmed.
NG DIVETT
MEMBER OF THE LAND COURT
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