Macuga v Chief Executive, Department of Lands
[1996] QLC 102
•8 August 1996
LAND COURT BRISBANE
[1996] QLC 102
8 AUGUST 1996
In the matter of an appeal against a valuation Valuation of Land Act 1944
Valuation Roll No.: 23882 Local Government: Maroochy (V95-64)
Helen H Macuga, Kathleen B and Dieter W Pukall, Patricia M and John S Reed and Harriett J Rutledge v.
Chief Executive, Department of Lands
(Hearing at Maroochydore) D E C I S I O N
This appeal relates to the valuation placed on land owned by the appellants by the Chief Executive as at 30 June 1993 in the amount of $1,075,000. The land comprises a number of parcels and, following the sale of one parcel, a valuation was required pursuant to s.28 of the Valuation of Land Act 1944. Prior to this fresh valuation being carried out the subject land had been valued at $605,000 using mass appraisal methods only. The appellant says that the land should be valued at $486,924 as at the relevant date. Additionally, the appellant mentioned a later valuation struck by the Chief Executive in the amount of $1,182,000, however I have had no regard to this figure given that this matter is not before me by way of appeal.
Mr. Kevin Edward Covey, Consulting Civil Engineer from the firm Covey & Associates Pty Ltd appeared for the appellants and gave evidence in support of the figure contended by them. Mr. Damian Peter Hyde, a registered valuer in employment of the Department of Natural Resources (which includes the former Department of Lands) appeared and provided his valuation in support of the Chief Executive’s figure. In describing his approach to the task of valuing the subject land, Mr. Hyde said that it was “quite a difficult valuation” a description which I find on the evidence that I heard to be one of eloquent understatement.
The subject land is situated approximately 3.5km west of the Coolum Post Office on the Yandina-Coolum Road and is described as Lots 1 to 4 on registered plan 198757 and Lots 8, 10 and 11 on registered plan 198758 in the Parish of Maroochy, County of Canning, having a total area of 90.644 ha.
Lot 1. 14.23 ha 2. 15.97 ha 3. 14.15 ha 4. 3.971 ha 8. 13.89 ha 10. 24.46 ha
3.973 ha
Subsequent to the relevant date, that is in December, 1995, Lot 11 sold for $240,000, however still falls for consideration in this appeal. Two other lots in the original aggregation have also sold, the first being Lot 5 which sold for $85,000 in May 1989, followed by the sale of Lot 9 in January 1994 for $400,000.
The Yandina-Coolum Road is a bitumen sealed arterial road connecting the coastal precinct of Coolum with the Bruce Highway and the hinterland town of Yandina. Access to the property is off Quanda Road a minor bitumen sealed service road described by Mr. Covey as being of poor standard, a description relating to its construction specifications rather than to the quality of the surface as I understood him.
The land consists primarily of low lying coastal wallum in its native state with the exception of Lot 11 which had been cleared and filled at the relevant date. The soils on the subject land comprise wallum sands. The water table is close to the surface.
Electricity and telephone services are available to the land, however sewerage and water is not connected being unavailable in close proximity to the land.
The subject land comprises a mix of Light Industry, Medium Industry (lots 1,2,3, 8 and
11) and Rural B (lots 4 and 10) zones under the Maroochy Shire Council’s town plan which was gazetted on 9 October 1990. Mr. Hyde gave evidence that a proposed strategic plan for the Shire designates the whole of the area for industrial uses, however the status of the proposed strategic plan is that it has not yet been endorsed by the relevant State Minister. This may not be relevant however, as it appears that the previous strategic plan also designated the area of the subject land for industrial purposes.
The Sunshine Motorway located to the east of the subject land is constructed in a north- south direction and has the effect of land locking the Coolum area to the east of the motorway. The indication of the evidence is that broadscale land development which is necessary to service local demands would occur west of the motorway, however, the pace of such development is at the relevant time somewhat slow compared with the growth areas to the north and the south of the subject land in the Sunshine Coast area.
In summary, Mr. Covey approached the task of valuing the subject lands in this way. First, he estimated the cost of bringing the individual lots to a fully developed state, that is fully filled (on one option) with roads constructed to local authority standards for industrial developments and with water and sewerage available. He then placed a value on the land so improved, deducted from this value the costs of improvements and deduced a negative figure. Mr. Covey then reasoned that the Chief Executive’s valuation must be too high therefore should be reduced to a figure in the order of the original valuation. In reference to a sale Mr. Covey applied a figure of $6,000 per hectare to the land zoned industrial and $4,000 per hectare to the land zoned rural, the lesser figure being applied to take account of the need for such land to be rezoned. Before commenting on this approach I will detail the material evidence provided by Mr. Covey commencing with his estimate of development costs.
Fill levels were based on the 1992 flood which was recorded in this area as RL 3.52 (on Australian Height Datum) and therefore to raise the estate above a Q100 storm event Mr. Covey used RL 3.55 as the minimum allotment level. He supplied figures indicating the approximate volume of fill required on each lot, both on a total cubic measurement basis and on a per hectare basis and costed the fill in situ at $10 per cubic metre. The resultant total cost of filling on the industrial zoned lands is $4,372,000.
Mr. Covey estimated that the cost of upgrading the existing Quanda Road to the standard provided for in the Maroochy Shire Council’s standards and in constructing an as yet unformed road named Dalmar Road, which also services the land internally, would be in the order of
$760,320 plus $74,200 for storm water construction.
Mr. Covey costed water reticulation on the basis that connection would need to be made to the existing system, approximately 2,500 metres away at Coolum. He allowed for a 300 mm diameter main to run the whole length, the boring of the main under the main highway plus an allowance for the extension of a 150 mm diameter main up each roadway in the estate. The total costs for this is $1,581,000. Sewerage connection would involve connection over a similar distance and was estimated by Mr. Covey to cost in the order of $1,036,000. A pump station would be required on site and a new rising main would be required to pump sewage back to the Coolum treatment plant.
None of Mr. Covey’s costings were challenged by Mr. Hyde. I might add that in the preparation of the costing material mentioned above, Mr. Covey had discussions with the local authority however, it is not clear to me as to whether Mr. Covey raised with the local authority the question of which, if any, of the costs of improvements would be required to apply the land to an industrial usage. Mr. Covey referred to the Maroochy design standards however, did not tender these nor any extract from them, nor was there evidence concerning the status of these standards and the circumstances in which they were applicable.
Mr. Covey referred to five relativity properties, three zoned industrial and two zoned rural, together with their unimproved values struck by the Chief Executive, as at 1 January 1996. He explained that the costs of improvements ie. filling, roads, water and sewerage mentioned earlier were also taken as at 1 January 1996 but that such costs would not have been dissimilar to 1993 costs. I understand from other evidence from Mr. Covey, however, that it would be his view that values for the relativity properties referred to by him would not have remained static for the period between 1993, the relevant year for my purposes, and 1996.
Mr. Covey selected one property from his list of five namely a block at Runaway Drive, Mudjimba, which has an area of about 6.8 ha, is zoned industrial, has road access at industrial standard, has water and sewerage, but requires filling. By reference to this property, Mr. Covey placed a value of $1,940,640 on the 62.2 ha of the subject which is zoned industrial. He then averaged the applied values of two rural properties included on his list at $27,700 per hectare and applied this to the 28.4 ha of the subject which is zoned rural to produce a figure of $786,680 which together with his value placed on the industrial land gave a total value of the estate of
$2,727,320. From this figure he deducted the costs for sewer, water, road work and storm water
mentioned above and a further figure of $19,500 for power totalling $3,574,500 leaving a negative figure of $847,180. It is to be noted that in this comparison Mr. Covey has not included any allowance for fill as the relativity property referred to at Runaway Drive, Mudjimba also required filling.
As a support exercise, Mr. Covey took two other properties from his list of five, namely two industrial blocks not requiring fill located in Cordwell Road, Yandina valued respectively at
$395,000 (5.228 ha at $75,555 per ha) and $400,000 (4.648 ha valued at $86,059 per ha) and applied an average value of $81,000 per ha to the 62.2 ha of industrial land on the subject to produce a figure of $5,038,200 for that part of the subject land. To this was added the value of the rural lots at $786,680 mentioned earlier giving a gross total value of $5,824,880. From this figure all of the costs mentioned earlier were deducted including an amount of $4,372,000 for fill on the industrial land leaving a negative figure of $2,121,820.
There is a number of criticisms that I would make concerning Mr. Covey’s approach. The first is that he has compared the subject land with his basic properties on a “cost to develop” basis only and has not made any allowances for other factors such as situation and size differential. It is not clear whether the basic properties zoned as rural would have a similar use to the subject lands having a similar zoning, however, assuming for the moment that the basic properties are rural residential in usage, the value would normally be struck on the basis of a site to site comparison and not on a price per unit area method as employed by Mr. Covey (see for example Grahn the Valuer-General(1992-1993)14 QLCR 327). I note that also that Mr. Covey has used an averaging method with respect to the values placed on his basic properties, a method criticized by the High Court in Commonwealth of Australia v Milledge (1953)90 CLR 157.
These criticisms however, are mere refinements when one considers the purpose of the exercise carried out by Mr. Covey. He explained that the process was not designed to yield a value but rather to indicate that the valuation of the Chief Executive on the subject land must be too high. If I put aside for the moment the criticisms listed thus far with respect to the methodology, I ask the question as to what the value of the exercise really is. In my view it does not tell me, by itself, that the Chief Executive’s valuation is too high but it may indicate that the highest and best use of the subject land is not that of development at the relevant date in the manner indicated. This is a proposition with which Mr. Covey appeared to agree in answer to a question which I put to him. In fact, the evidence shows that blocks are being used without all of the improvements referred to by Mr. Covey. For example, Lot 11 has a cement batching plant constructed on it which uses large quantities of water from underground sources and functions without the benefit of sewerage. Whilst Lot 11 has been fully filled, Lot 5 has not and has a building constructed on a building pad only and operates a truss manufacturing plant there without sewerage and water being connected. I would add there was also some inconclusive evidence that the local authority is concerned about filling in the flood plain, an issue which would need to be explored fully for a development of the type assumed in Mr. Covey’s method to be initiated. Additionally, I should note that utilisation of the bulk of the subject land for industrial purposes requires no local authority approval separate from building approval, hence
the opportunity for the local authority to impose obligation relating to sewerage, water and road works would only rise to the extent that these matters were relevant to a building approval.
I now turn to consider the reference that Mr. Covey made to three sales. The first of these was the sale of Lot 9 out of the original aggregation of the subject which sold in January 1994, that is, some six months after the relevant date, for $400,000. Mr. Covey described this land as being the highest land in the aggregation needing only 48,000 cubic metres to fill and said that, in his view the sale was at a exaggerated price and should be disregarded. Mr. Covey put an argument that said that if one assumes an increase in value of Lot 9 at 13% from its sale date until 1996 and then compared that with his relativity basic property at Runaway Drive, Mudjimba, mentioned earlier then the comparison was awry. Whilst Mr. Hyde agreed with Mr. Covey that the Lot 9 sale appeared to be on the high side I should record that I do not accept the reasoning put forward by Mr. Covey. It is obviously flawed.
Mr. Covey also mentioned the sale of Lot 5 out at the original aggregated subject block in May 1989 for $85,000. Neither Mr. Covey or Mr. Hyde relied on this sale.
The sale of Lot 11 in December, 1995 at $240,000 is the sole basis of the figure of
$6,000 per ha which Mr. Covey said should be placed on the industrial land in the subject. Prior to sale, Lot 11 had about 20,000 cubic metres of fill placed on it at an estimated cost of $200,000. Electricity was connected and Mr. Covey mentioned in his written statement that there were three income producing tenants involved in the transaction. However it is not clear to me what the nature of that involvement was. In evidence in-chief he also mentioned sheds being on Lot 11 however, these were not included in his written statement. Mr. Covey said that after deducting the value of the improvements on Lot 11 at the time of sale, the unimproved value was about $25,000 (that is $6,000 per ha approximately) and it was this figure that he applied to the overall 62.2 ha of light industry zoned land on the subject.
In my view it would be unsafe to place reliance on Mr. Covey’s analysis of the sale of Lot 11 as the single basis for striking a value of the subject land. Mr. Hyde was not aware of the transaction and was unable to assist the Court as to how he thought the transaction might be applied. He did express the view however, that the price was low and if used as a basis would indicate that a large number of valuations applied by the Chief Executive in the general area of the sale would be shown to be substantially high. On the evidence that I heard I find it would be a case of imprudency, panic or a combination of both for a land holder to spend an excess of
$200,000 on a parcel of land in the hope of making a nett $25,000 before land cost is taken into account. The commercial considerations involved in real estate investment do not usually reveal such proportions of risk and return.
If I consider the sale of Lot 11 at $6,297 per ha in November, 1994 and compare that, in a financial sense only, with the sale of Lot 5 in 1989 which showed $11,470 per ha and after which, on Mr. Covey’s evidence, the market increased: quite clearly the figures in the Lot 11 transaction require further explanation.
In the context of the rather difficult valuation exercise posed by the subject land, I am loathe to reject any evidence which would throw some light on what ought to be the appropriate
figure to apply. I find however, it would be unsafe to proceed on the basis of the Lot 11 transaction so find myself in a position of not being able to accept the evidence put forward on behalf of the appellants as to the value that should be struck for the subject land. It remains to be seen, however, whether the appellants were able to point to any evidence from the Chief Executive’s side which would support the appeal.
Mr. Hyde’s approach on behalf of the Chief Executive was to employ two methods. His primary method was to use two basic sales and to apply a dollar per hectare value over the whole of the subject. He then employed a check method which involved establishing a value for each lot in the aggregated subject by reference to rural residential sales evidence, added to this a premium for the potential change to industrial usage in the future, then deducted from the total amount a “discount for bulk”, to cater for the assumption that a number of lots were being purchased by the one owner on the one date. In using this check method Mr. Hyde does not assert that rural residential usage is an appropriate use of the subject land at the relevant date nor is available under the current zoning, nor did he say that such use would be put into place but that the rural residential value provided a “base line”, from which he could check his primary method of valuation. It will be convenient if I deal with the check method first of all.
What Mr Hyde did was to apply a value to each lot in the subject aggregation, such individual values reflecting a base rural residential value to which was added a premium to cater for the industrial potential inherent in the land. Using this method he valued Lot 1 at $200,000, Lot 2 at $200,000, Lot 3 at $200,000, Lot 4 at $80,000, Lot 8 at $200,000, Lot 10 at $275,000 and Lot 11 at $150,000 giving a total of $1.305 million. I have no evidence as to the value of each lot without the added premium. From the total he deducted a discount for bulk of 17.5% yielding a net figure of $1.075 million or $12,000 per ha. Mr. Hyde said that he had no concrete sales evidence to suggest that 17.5% was an appropriate discount but that valuers in his department adopted a 2.5% figure per lot as a rule of thumb and in the circumstances, he employed this. Mr. Hyde said that the $12,000 per ha arrived at seemed appropriate as he was aware that in globo rural residential land had been selling at between $15,000 to $30,000 per ha within the locality.
In striking his values for each lot in the subject aggregation, Mr. Hyde referred to two supporting sales. The first supporting sale, Mackay to Babfern, was described by him as a low- lying cane paddock requiring extensive fill, well exposed and having some potential for a higher use than rural residential. He said that this sale was far superior in its locality to the subject but is a lot smaller than each of these subject allotments having an area of only 3.048 ha. The sale price on 29 January 1993 was $205,000. His second supporting sale is located fronting the esplanade at Lake Weyba, has an area of 5.87 ha, is low-lying and sold on 15 February 1993 for
$110,000. Whilst Mr. Hyde said that this second supporting sale is not in a sought after area, it was Mr. Covey’s view that the frontage to the esplanade of Lake Weyba was a positive feature that must be catered for in the comparison. In cross examination, Mr. Covey also pointed out that Lot 1 of the subject on which Mr. Hyde placed a figure of $200,000 would require more fill for full development than would Lot 8 which also had $200,000 placed on it and therefore there
ought to be some differentiation in their respective values. Mr. Hyde’s response was to say that his comparisons were broad brush in nature and that refinements of the type being suggested by Mr. Covey should not feature in the approach employed by him. There seems to be agreement between the parties however, that in comparison with the value applied to Lot 9 by the Chief Executive at $145,000 the values placed on the individual allotments of the subject by Mr. Hyde were too high. Mr. Hyde’s response to this suggestion was to say that the $145,000 placed on Lot 9 is probably too low. This is a matter to which I will return later.
Mr. Hyde valued the subject land as if the two lots zoned rural would automatically be able to be re-zoned to industrial. He said that he had formed this view of the re-zoning prospect following a discussion with the local authority. Mr. Covey, on the other hand, did not see re- zoning as such a real prospect, thus his discount of the value of the rural blocks from the $6000 per ha he had applied to the industrial portion of the subject to $4000 per ha. That is, the combined value of the rural-zoned lots 4 and 10 on Mr. Covey’s approach is $113,724. Given that his own relativity evidence includes rural blocks with values of $265,000 and $290,000, and Mr. Hyde’s rural sales were at $205,000 and $110,000, I see no warrant for applying such a low value to the rural lands on the subject.
It is useful to bear in mind, when carrying out a valuation, what the highest and best use of the subject land is. In this case there appeared to be some agreement between the parties that industrial use is generally of higher value than rural residential use; but that the full industrial potential of the subject land would probably not be recognised for some years hence. Within the context of this Mr. Hyde also said that some lesser intermediate use than a full industrial use could be made of the subject land by, for example, putting a building pad on the land to accommodate some intermediate use until the opportunity to fill and fully develop the land emerged. This is a rationale which seems to me to be eminently reasonable on the evidence that I heard. In this regard I have located a case which bears some similarities with the subject case, both in terms of the class of land involved and in the approaches adopted by the parties: issues examined by the Land Appeal Court in Santos Ltd v. The Valuer-General (1988-89)12 QLCR
231:-
“ Mr Hall’s approach to valuing the land was to consider its fair market value as filled land and to deduct an amount which represented the necessary earthworks and site preparation works that would be incurred if property were developed for normal industrial use. By reference to a number of sales, he arrived at a valuation of the subject land of $438,975 or $75,000 per hectare in a filled state. To get to that state a minimum expenditure of $848,190 is required. He therefore concluded that the subject land had a nominal value only as unimproved land at the relevant date. He adopted a value of $5,000 per hectare or $30 000 overall in round figures. This figure is based upon his opinion and his experience as a valuer.” (pg 233).
“We can appreciate that a method of deduction from an improved value to an unimproved value or from a hypothetically developed state to a raw state may be a useful means of testing value when the end justifies the means. For example, it is not uncommon to check the value of englobo urban land by a
method of hypothetical subdivision. Among other things the result may tend to prove that the land is ripe for subdivision or at the bottom end of the scale, it may prove that it is not. But it does not follow that if the check proves that the land is not ripe for subdivision the land has no value or only a nominal value. Courts have consistently pointed out that such methods are check methods only and that if comparable sales exist such evidence carries the greater weight. The position is not so different here and this is where we see a lot of sense in the reasonings of Mr. Glancy. He included among the possible purchasers a purchaser who would hold the land and fill it as the opportunity arose or fill to the extent of his immediate needs and take opportunity fill thereafter. Such a course was taken by Jenyns. He said that Jenyns had obtained 6000 m3 of fill from a large construction site which was obtained either free or for the cost of carting the material from the construction site. In our view, this class of purchaser would pay more than what might be described as a nominal value for the land.”
(pg. 235-236)
Mr. Hyde’s suggestion of what the highest and best use might be accords with the evidence that was placed before me and it is useful to consider his check method in the context of this finding. I appreciate that he says that striking a rural residential value provides a “bench mark” only and therefore is not to be taken as indicating a value for a present use, however, the valuation arrived at by use of this check method is the actual figure which the Chief Executive has determined and therefore the check method assumes a somewhat greater significance than it might otherwise. In view of this the principle expressed in Royal Sydney Golf Club, v. The Federal Commissioner of Taxation (1957) 2 LGRA 203 demands consideration. In particular, I take the following quotation from pg.213:-
“ In the result my opinion is that a notional intending vendor and
purchaser, treating about the appellant’s land on 30th June, 1951, and fully informed as to all relevant considerations, would have proceeded, in discussing price, on the footing that there was only a slender chance that it would ever become permissible to use any part of the land for other than recreational purposes. For that reason, I do not think that a method of valuation can be supported which aims first to ascertain what value the land would have had on the relevant date if it had been free from the restrictions of the Ordinance, and then to fix upon a deduction to be made from that value in order to reflect the depressive effect of the restrictions. That may be an acceptable method of allowing for restrictions which operate merely for a limited period, but it is not with restrictions of that kind that this case is concerned. I think the proper course is to inquire first what was the value of the land on the footing that there was no possibility of its ever being turned to other than recreational purposes, and then how much extra should be allowed for such chance as there was of securing permission for residential use at some future time.”
I understand this case to be authority for the proposition that it is appropriate in relevant circumstances to strike a value for land on the basis of an available lesser use and to add to that a premium for the fact that a higher use is possible. In the matter before me the actual timing of the change, if it occurs at all, between the intermediate use currently available and the higher use
of blocks of land ripe for full development as industrial land is indeterminant. I find, then that the approach described in Royal Sydney Golf Club is appropriate, an approach which valuers often refer to as the “bottom up” method. To some extent this is the method employed by Mr. Hyde in his check method; however, in the instant case, what Mr. Hyde has done is to value the subject land for residential uses on the clear understanding that the current zoning of the land does not allow that use and that even if it were able to be put to such use any improvements placed upon the land may be an impediment if and when the higher industrial use emerged. I found no specific support in the cases for such an approach. There is authority which supports a valuer referring, for example, to his experience in the absence of suitable sales evidence (see King Ranch Pastoral Co Pty. Ltd. v. The Valuer-General (1968)35 CLLR 255) however Mr. Hyde has not adopted this technique of last resort but has attempted to provide a rationale for the valuation determined for the subject land. The practice of employing sales differently zoned from the subject was approved of in Port Macquarie West Bowling Club Ltd. v. The Minister (1972-74) 28 LGRA 23:-
“ The main attack on the board’s decision was based on the provisions of
the Port Macquarie Planning Scheme Ordinance under which the subject land is zoned as open space (existing), in consequence of which it can be used only for certain purposes, set out in the land use table, of a recreational nature, those specified in divs. 2 and 3 of Pt XIII of the Local Government Act, 1919, and others which the council may approve as responsible authority under the Ordinance. As Mr Walker’s evidence of value sought to apply prices per square foot deduced from sales of land in other zones, mainly Residential 2c zones which have different incidents, it was contended that his assessment of value should have been rejected. However, it should be pointed out that the evidence of Dr Murray was likewise based on a sale of land in a zone having different incidents from the subject land, namely, a non-urban zone and it seems probable that both valuers regarded the provisions of the planning scheme Ordinance as flexible or possibly open to some variation. Whether this is so or not may be immaterial because there were, in any case, no sales of comparable open space land which might be used as a basis for valuing the subject land.”(pg.24)
“ It appears to me that the board was entitled to take this course in the circumstances of the case, because it was common ground that there were no sales of land similarly zoned and that left little option to the valuers but to use sales of land differently zoned, subject to a deduction for such difference as a basis for determining the value or price of the subject land.”(pg.25)
There is Queensland authority where comparisons between land in different zones have not been accepted by the Court (see for example Determination of Unimproved Value for Conversion Purposes - Perpetual Suburban Lease no.2339 (1978) 5 QLCR 21) however, there is at least one example in which the Land Appeal Court indicated that a comparison between different highest and best uses may be relied upon in circumstances where there is a paucity of directly comparable evidence. In Beanland v. The Valuer-General 1986-87 11 QLCR 131 at 137 the members of The Land Appeal Court wrote:-
“ We accept that it is preferable, if the appropriate sales are available, to
compare land with a highest and best use for pineapple production with sales of land with a similar highest and best use. Based on the admission of Counsel for the Valuer-General and the presence of clay sub-soil in some part at least of the land it seems that the subject property is not suitable for avocado growing. This, however, does not make it an unsupportable proposition to compare the property with the sales that have been used by the Valuer-General (one of which it is noted was a former pineapple farm purchased to grow sweet potatoes ) provided that in the comparison process appropriate allowances are made for relevant differentiating factors.”
What the authorities I have referred to indicate to me is that whilst it may be appropriate in certain circumstances to strike a valuation by comparing between subject and basic properties having different highest and best uses, the manner of comparison needs to be explicit and must take into account all relevant factors. I do not think it is sufficient for Mr. Hyde to have described his rural residential valuation method as a check method, and rural residential values as bench mark figures, in circumstances where this method appears to have been significant in producing the figure finally determined by the Chief Executive. The epithets of ‘check method’ and ‘benchmark’ are not sufficient to relieve the valuer of the responsibility of advancing reasoning which is transparent to both the land owner and to the Court. In the instant case I am left asking questions not asked by Mr. Covey: how does one deal with the issue of zoning difference and what the attitude of the local authority may be; why is it appropriate to strike a rural residential value presumably on a site basis but then add a premium for a use which is normally valued on a value per unit area basis; what was the value placed on each lot before the industrial-potential premium was added; would a rural residential usage blight in any way the land thereby inhibiting a change to industrial usage; if it is the case that the land may be currently used for industrial purposes in the way that Lot 9 is then where is the logic that says that such a limited industrial usage somehow adds a premium to a rural residential usage. In short, I am not left in a position of feeling comfortable with the check method advanced by Mr. Hyde but I am prepared to say that in the circumstances I will refer to his method as being useful background.
I will now examine Mr. Hyde’s primary method which is to compare the subject land directly with two sales. There is abundant authority for the proposition that a comparison between land to be valued and comparable sales is generally the most reliable method of valuation. In using this method Mr. Hyde referred to two sales, sale one being of an area of 21.3 ha of light industry zoned land occuring in August 1990 for a price of $460,000 that is $21,600 per ha. Mr. Hyde described this land as being a low lying swampy industrial zoned parcel requiring approximately 1 metre of fill over 90% of the area. Borrow fill is available from a ridge situated in the south-eastern corner of the parcel and according to Mr. Hyde, and agreed to by Mr. Covey, the sale provides a relative indication of ceiling values when weighed in terms of location, zoning, and transaction date. In comparison with this sale a figure of $12,000 per ha has been applied to the subject. Mr. Covey explained that the sale block fronts a road build to industrial standard, has services adjacent to the boundary and may be filled without the need to transport fill in. The sale is some distance from the subject land in a developing area. The issue
is whether Mr. Hyde has made sufficient allowance for the advantages enjoyed by the sale in comparison with the subject. Putting aside the other evidence from Mr. Hyde and confining my comments to the evidence regarding this sale, I have on the one hand Mr. Hyde’s opinion that he has sufficiently taken into account the disabilities of the subject compared with the sale; and on the other, Mr. Covey’s submission that insufficient allowance has been made.
It seems to me that Mr. Hyde has stretched the comparison with the sale almost to its limit. To put this another way, were I to hypothesise that this sale might support Mr. Covey’s figure of $6000 per ha. I would, in effect, be rejecting direct reliance on the sale as to suggest that a price of $21,600 per ha. on a sale can reliably indicate a value of $6000 per ha on a subject is not valid. Now, this is not to say that it follows that the figure of $12 000 per ha is correct, but I treat as relevant the fact that Mr. Covey did not submit that this sale was not comparable, but challenged the comparison between it and the subject land. Contrast this with his submission that the lot 9 sale ought not be used as a basis.
Mr. Hyde’s second main sale is the sale of Lot 9 referred to earlier, the lot being part of the aggregated subject land prior to, but not at, the relevant date for valuation. The sale was unimproved except for clearing for which Mr. Hyde allowed $5,000 therefore analysing the transaction to $395,000 which Mr. Hyde applied to only $145,000. He wrote in his valuation that this demonstrates a conservative application by the Chief Executive, however, in answer to a question from me concerning the level of discount from the analysed figure to the applied figure
he said:
“I just can’t remember what exactly happened there. I honestly thought I put more on the property but it appears not according to the data base Sir. I really can’t explain that. But the sale itself for all intents and purposes seemed to be at arm’s length and the asking price was - and I believe that the vendors if they do sell the rest of the aggregate parcel of the aggregation would ask similar values, but $450,000 they were asking. It was agreed at 400. I felt that I might have been imprudent using this particular sale to its fullest extent when there was only one sale that had transacted.”
Mr. Hyde who, as with Mr. Covey, saw the sale as being somewhat high, interviewed the purchaser who revealed, to my mind, a somewhat optimistic view of the land, in particular, in relation to the cost of bringing the land to a fully serviced and filled state.
I wrote earlier of Mr. Covey’s criticism, and Mr. Hyde’s acceptance of it, that in comparison with the $145,000 applied to lot 9, the rural residential values that Mr. Hyde placed on the individual subject blocks appeared too high. Now lot 9 is a basis which is a sale and also a relativity. The evidence to which I have referred above casts doubt on the reliability of the sale both because of the evidence, which I accept, that the sale was high probably involving an imprudent or partly uninformed party, and because of the level of discount employed by Mr. Hyde. This latter factor indicates to me, in the absence of further explanation, an implicit lack of confidence in the level of the transaction as an indicator of market value. I am aware of the practice employed by valuers employed by the Chief Executive of not fully applying basic sales and, indeed, the instant case may be one where a conservative approach may be called for,
however the evidence indicates something quite different from mere conservatism.
In Grahn v Valuer General (1992-93) 14 QLCR 327 the Land Appeal Court provided and endorsed a summary of the authorities on the question of relativity and I refer, in particular, to the following words taken from p.328:
“It is desirable that valuations made for the purposes of the Valuation of Land
Act 1944 of comparable lands should bear proper relativity, one to the other, so long as the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis (R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at p.16 and cases cited in it).”
Now the question I ask about the applied figure of $145,000 on lot 9 is: is it soundly based? In the context of the instant case where basic evidence is difficult to find it is quite appropriate for Mr. Hyde to make reference to lot 9, however, it is quite another thing for me to refer to this basis as a precise indicator either of the value of the subject parcel or of the value of the individual lots in the subject as rural residential blocks. The best I can do is to say that if the sale were a suitable basis, and if Mr. Hyde’s applied figure of $145,000 was appropriate then
the value of about $15,000 per ha. on the sale is in tolerable proximity to the $12,000 per ha. Mr. Hyde placed on the subject land.
My analysis of the evidence and the arguments from both sides brings me to a point where I have on the one hand, Mr. Hyde’s two sales with the background of his check method and Mr. Covey’s reference to the sale of Lot 11 which I have already rejected as a suitable basis. In circumstances such as this I must refer to the legal burden of proof which remains with the appellant throughout. This is expressed in s.56 (2) of the Valuation of Land Act which provides:
“56.(1) An appeal shall be instituted by filing in the Land Court registry a notice of
appeal.
(2)Such notice shall state the grounds of appeal and the appeal shall be limited to the grounds so stated, and the burden of proving any and every such ground shall be upon the owner.”
Section 33 of the Act provides:
“ 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.”
The precursor to section 33 was considered by the High Court in the case of Brisbane City Council v. The Valuer-General (1978) 140 CLR 41 and the following quotation explains the nature of the obligation that an appellant has in a case such as this:
“The question then is whether a court on appeal is bound to accept the Valuer-General‘s
figure as correct unless it is positively established that the true value is lower, or whether it is enough to show that the value was reached as the result of an error in principle. 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 is true that the Valuer-General might by coincidence reach the right result by a wrong process of reasoning, but I cannot attribute to the legislature the capricious intention that a valuation shown to have been erroneously made should be presumed correct simply because by mere chance the Valuer-General may have hit on the right figure. If, for example, lands were valued as suitable for high rise city buildings although the law forbad them to be put to that use, or as rich agricultural land when in fact they had been rendered useless be excessive salinity, it would be absurd to hold that the valuation, although shown to be radically wrong, still must be deemed correct. In my opinion once it is shown that a valuation was made by a method fundamentally erroneous the presumption is rebutted. In the present case the presumption of correctness was rebutted once it was held that the submerged land should be valued in its actual state and not in the notional state in which the Valuer-General had valued it.”(pg 56 and 57)
His honour referred to the precursor to s.56(2) then went on to say:
“ The effect of these provisions is that an owner on appeal to the Land Appeal Court has the burden of proving the grounds of his appeal, but not the burden of proving that the amount which in his opinion should be the valuation is correct. Obviously the Court, if it allows an appeal, may determine the valuation at an amount different from that for which the owner contends.
The argument on behalf of the Valuer-General was that, once the valuation of the Valuer-General was rejected, there was no evidence as to the value of the submerged land. The case stated that the evidence of value called by Brisbane City Council was confined to the emergent land and the evidence of value called by the Valuer-General was rejected. Therefore, it was submitted, there was no evidence to support the valuation of one dollar per acre put on the submerged land by the Land Appeal Court, and indeed no evidence that the value of the submerged land in its actual state, as part of a dam, was less than its value in the notional state as grazing land. There was therefore, it was said, no evidence to support the decision which was accordingly erroneous in law.” (pg 57)
“ The fact that no valuer had expressed an opinion as to the value of the submerged land in dollars and cents did not mean that there was no evidence on which a valuation could be made. In these circumstances the conclusion reached by the court was not erroneous in law.” (pg 59)
It may be useful if I summarise the position that I have reached. I have found that the
evi den ce of the app ella nts as
to the val ue of the subj ect lan d is of no assi stan ce as an indi cato r of val ue. I
hav e fou nd that the resp ond ent’ s pri mar y met hod of dire
ct co mp aris on wit h sale s is the pref erre d met hod but that one sale suff ers in bei ng hig h and hea vily disc oun ted in its app lica tion and ther efor
e not a stri ctly suit able basi s; whi lst the oth er has the disa dva nta ge of bei ng so me wh at rem ove d fro m the subj ect area and of bei ng
sub stan tiall y sup erio r to the subj ect. I
hav e fou nd, also
,
that the che ck met hod em plo yed by the resp ond ent mig ht be usef ul bac kgr oun d
evi den ce but sho uld not be reli ed upo n as a pri mar y indi cato r of val ue in the wa y that it app are ntly has.
Bea ring ther e find ings in min
d I will exa min e the Gro und s of Ap peal
.
In the instant case the appellants’ Grounds of Appeal are:
“1. The subject land is low lying and flood prone and requires extensive filling for development as ‘industrial land’ and to comply with the Local Authority’s requirements for such use.
2.No water reticulation is available to the subject land.
3.No sewerage reticulation is available to the subject land.
4.Roads servicing the subject land are of an unsatisfactory standard for industrial use.
5.The valuation given by the Chief Executive is excessive when compared to land of a similar position and quality.”
There is agreement concerning the facts asserted in Grounds of Appeal 1,2 and 3 however the central question is whether these proven facts indicate that the valuation of the Chief Executive is excessive. It is not clear to me that ground 4 has been made out as Mr. Covey referred to the costs of road development only with respect to his comparison with the relativity properties, his valuation for the subject land turning on the application of the sale of Lot 11 only and there was no evidence that Quanda Road was unsatisfactory for present purposes nor that there was a requirement by the Local Authority for this road to be upgraded prior to lands being turned to an industrial use. Certainly the unmade road needs to be constructed.
Insofar as Ground Appeal no. 5 is concerned, Mr. Covey has not made out a case on the evidence that he has put forward, however the question remains as to whether he has been able to make out a case on the evidence put forward by Mr. Hyde.
In Appeals against Determinations of the Valuer General, Shire of Concurry (1971) 38 CLLR 1 Mr Dodds said at pp.3 and 4:
“No doubt if the Valuer-General elects to give evidence the appellant is entitled to seize
on any revealed weakness in his evidence in relation to any ground of appeal,”...
“But when all the evidence is in, then at the end of the day if the balances are not tipped in favour of the appellant in relation to any or all of his grounds of appeal, even if the balances are then level as between the two parties, then in my view the decision must go against the appellant. The Land Court has wide powers in its decisions under the equity and good conscience provisions of the Land Acts, in s.41(5)(a), but these cannot save the appellant in the circumstances outlined immediately above.”
Certainly the appellant has created in my mind a doubt about the correctness of the Chief Executive’s valuation. However it is insufficient to discharge a burden of proof by simply raising such a doubt. The doubt in my mind is seemingly the same doubt shared by Mr. Hyde and is brought about only because of the paucity of the evidence and the difficulty in establishing a value for the subject land in its situation and having regard to its present and potential uses. I have wrestled with the question as to whether Mr. Hyde has made sufficient allowance in the application of his first primary sale however, I have neither suitable evidence nor argument nor do I have an attack on Mr. Hyde’s approach from the appellants which persuades me that other conclusions should be drawn in the comparisons made. Despite my misgivings about the check method employed by Mr. Hyde the appellant has not converted the doubt that I have about the Chief Executive’s valuation into an argument in favour of a reduced valuation. In the circumstances I find the following quotation from Qualischefski v The Valuer-General (1979) 6 QLCR 167 at 172 most appropriate:
“However upon appeal a statutory onus of proof is cast upon the appellant and he has to
accept, within the confines of the grounds set out in his Notice of Appeal to the Land Court, the burden of proving the Valuer-General incorrect. Neither this Court nor the Land Court in the subject jurisdiction may assume the role of an investigating tribunal requiring the Valuer-General to substantiate his case. This is in contradistinction to jurisdiction conferred under the Land Act.
In appeals of the nature of the subject, the onus which the appellant must assume is not an easy one to discharge without the assistance of a registered valuer who can lead evidence as to sales analyses and/or comparison with valuations made by the Valuer- General in respect of comparable properties.”
In the result I dismiss the appeal and affirm the valuation of the Chief Executive.
RP SCOTT MEMBER OF THE LAND COURT
0