Masters v Chief Executive, Department of Natural Resources
[2001] QLC 23
•12 April 2001
|
BRISBANE
12 APRIL 2001
Re: Appeal against Annual Valuation
Valuation of Land Act 1944
Brisbane City Council: Division of Toombul
(AV99-666)
Peter W Masters
v.
Chief Executive, Department of Natural Resources
D E C I S I O N
This is an appeal by a landowner against the unimproved value applied to his land as at 1 October 1998 by the Chief Executive, Department of Natural Resources (the respondent) under the provisions of the Valuation of Land Act 1944 (the Act).
Background:
Mr Masters is the owner of land situated at 35 Lewis Street, Clayfield, described as Lot 2 on RP 76640 and Lots 69-78, 91-95, 108-117, 127-144, and 155-168 on RP33833, Parish of Toombul, comprising some 58 allotments and containing an area of 2.459 hectares. Various parts of the land have access to Jackson, Milman and Kemble Streets and three groups of allotments are separated from one another by Milman Street and Kemble Street, which are unmade between the groups of allotments. The respondent has valued all 58 allotments as one parcel rather than as three separate groups of surveyed allotments. There was no issue about that method of valuation.
At the date of valuation, Lot 155 was zoned "Residential A", while the balance of the land was zoned "Non-Urban" under the Town Planning Scheme for the City of Brisbane. One house had been constructed on the land, but not occupied, while two others were under construction at the date of valuation. The land is situated approximately 5 km north of the Brisbane Central Business District. Toombul-Westfield Shopping Town is within 1km north-east of the property. Eagle Junction Railway Station is approximately 500 metres south of the property. There are residential areas to the east, south and west of the property, while Kalinga Park is along the northern boundary.
As at the date of valuation, 1 October 1998, the respondent determined the unimproved value of the subject land at $300,000. Mr Masters unsuccessfully objected against that valuation and subsequently appealed to the Land Court, advising that his estimate of the unimproved value was minus $1.5 million.
Mr Masters had previously appealed against the valuation of $285,000 applied by the respondent to the subject land at the date of the previous valuation, 1 October 1997. At that time, Mr Masters' estimate of the unimproved value was also $1.5 million. That appeal was dismissed on 29 September 1999 and Mr Masters appealed to the Land Appeal Court. That appeal was dismissed on 11 May 2000.
In the present matter, Mr Masters appeared and gave evidence on his own behalf, while evidence for the respondent was given by Ms JR Manners, a registered valuer employed by the Department of Natural Resources.
The Subject Land:
The details which follow have been taken from the report submitted by Ms Manners. Mr Masters did not dispute any of those details.
Access:
At the date of valuation, the subject land had poor access; Lewis Street and parts of Milman Street and Kemble Street that lie within the site were unfenced, unformed, virtually impassable in wet weather and generally indistinguishable from the subject land. However, access was available onto the property from Jackson Street and Kemble Street, via Fitzroy Street. Since the construction of Lewis Street, flood-free access is now available from the north-west. However, at the date of valuation Ms Manners assumed that Lewis and Milman Streets were mostly unformed; Kemble Street was only partially formed at the Jackson Street intersection; while Jackson Street was generally formed. For the most part the roads were flood prone. Lewis and Milman Streets are now newly sealed cul-de-sac roads, construction of which may have started prior to the date of valuation.
Nature of Land:
The subject land is low-lying and together with the adjoining residential land and much of the area, is subject to intermittent flooding following heavy rain. A large proportion of the land, approximately 2.3 ha, lies within Brisbane City Council flood regulation lines between RL2.7 and RL5.0 AHD, where Ms Manners thought development would be restricted. An open stormwater gully traverses the land, flowing south-west to north-east, near the eastern boundary. Ms Manners said that it appeared to be a continuation of a watercourse from nearby Kalinga Park.
There are several small areas of the subject land outside the flood regulation lines. In Ms Manners' opinion, the best building site is in the north-west corner around Lots 155 to 158 fronting Lewis Street. Other possible sites are in the south-east corner in the area of Lot 77-78 in Kemble Street and the smaller site on Lot 141 at the Milman and Jackson Street corner.
According to Mr Masters, the three houses constructed or partially constructed at the date of valuation were situated on Lots 155 and 156 (outside the flood regulation lines), and on Lots 161 and 162 and Lots 164-168 (inside the flood regulation lines).
The respondent's valuation approach:
Ms Manners explained that the respondent valued the subject land as a single large residential site, which had more than one house site available; the valuation of $300,000 took into account the low-lying nature and frequent flooding of most of the site and the fact that a large proportion of the land was within flood regulation lines between RL2.7 and RL5.0 AHD, the use of which would be restricted. The valuation also took into account the access problems and the state of the roads at the date of valuation and that the stormwater gully traversed the land..Ms Manners was aware of a decision of the Planning and Environment Court of 31 January 1996, and the decision of the Court of Appeal of 6 March 1998, which found in favour of the appellant's right to place fill on the land to RL4.0.
Basis of valuation:
Ms Manners produced a schedule of sales of residential allotments in the vicinity of the subject land, including the sale and resale of a vacant allotment, which indicated to her that the market for residential allotments in the general area had increased by at least 5% since the date of the previous valuation.
She also included the sale of a property situated at 189 Hedley Avenue, Hendra, with an area of 8.7 ha, zoned "Non-Urban" which sold in February 1999 for $850,000, or $9.70 per m². She described that transaction as a supporting sale of a large, low, vacant parcel of land with poor access. That land adjoins the East-West Arterial Road at the corner of Hedley Avenue, adjacent to the Hendra State High School. Access from Hedley Road is prevented by a steep drop from the road to an open drain which traverses the land. Schultz Canal is on the opposite side of the East-West Arterial Road. The area is subject to regular flooding and mostly lies between RL1.0 and RL4.0. The Brisbane City Council Q100 flood height is RL5.3, the minimum habitable flood height is 5.8 metres AHD.
In comparing that sale with the subject land, Ms Manners commented that it is the most comparable with the subject land in terms of size, zoning, topography, flooding incidence and access. The subject land is slightly higher in elevation, but affected by BCC flood regulation lines, both properties being subject to regular flooding after heavy rain. She considered the subject land to be superior to the sale in respect of location, proximity to the CBD, public transport, parks and schools; however, the subject land is smaller but subdivided into many small allotments. By comparison with the $9.70 per m² reflected by the sale, she considered the subject land would have an unimproved value of approximately $12 per m².
In addition to those unimproved or lightly improved sales, Ms Manners provided a schedule of improved properties which sold and resold between late-1996/early 1997 and early to mid-1998, which indicated an even more substantial increase in the value of improved properties between the two dates for valuation. While she readily conceded that those improved sales did not provide direct evidence of any increase in unimproved values, they indicated the upward trend of real estate prices in the general area in that 12-month period.
Although he accepted the details of all the sales referred to by Ms Manners, Mr Masters expressed the view that the purchasers of Ms Manners' Sale 6, the large property situated at 171 Hedley Avenue, Hendra, had received preferential treatment from the Council in contrast to the way that he had been treated. He based that assertion on the fact that the owners appeared to be allowed to place filling and do other development work on the land during the period that the development application was being advertised.
The case for the appellant:
Mr Masters did not challenge Ms Manners' evidence. He accepted that the respondent's unimproved value would probably be correct in normal circumstances. However, he contended that the circumstances of the present case were far from normal and that it had cost him in excess of $1.5 million to bring the subject land to its present state of development. He confirmed that he purchased the property in October 1992. However, he said at the time he did not know that the Brisbane City Council was thinking of acquiring the property for park purposes to prevent its development.
Mr Masters explained what had motivated him to purchase the land; prior to the purchase he assumed that the "Non-Urban" zoning would allow the construction of one residence per allotment. He knew there was access by means of Jackson Street; although there was a road barrier in Kemble Street at the end of Fitzroy Street, there were no road barriers at the other access points from Kemble Street or from Lewis Street or Milman Street.
He thought that it was likely that the best land was in Lewis Street, where two of the present houses have since been built. Water, sewerage and power were available in Lewis Street and partly available generally. As far as he knew there were no flood regulation lines. As for the potential of the land, he thought he may be able to sell some blocks for residential purposes or as a park.
He said that he had intended to acquire a large house site, to reach an amicable outcome with the Council and residents and to sell off some land to defray a substantial part of his acquisition cost. He did not expect an unreasonable outcome. When he was made aware that the Council was intending to buy the land for parkland, but apparently could not make up its mind, and that an architect was interested in purchasing the land for $300,000, Mr Masters offered to purchase the property for that amount and signed a contract to that effect.
He then engaged a town planner to approach the Council on his behalf. The town planner advised him that the Council would not permit any use of the land. Mr Masters then attempted to terminate the contract. That resulted in a Supreme Court action and on 28 June 1993, the Supreme Court ordered by consent that the contract for the sale was rescinded, Mr Masters forfeited his deposit of $15,000 and the parties agreed to enter into a new contract of sale for $285,000.
Mr Masters stated "I had become a more informed prudent unwilling purchaser who was prepared to forfeit a $15,000 deposit provided I did not buy the property. With associated legal expenses the property was now worth minus $50,000 to me."
In the present case, Mr Masters presented a detailed and documented explanation of his attempts to get building and development approvals. He alleged that the Council put every obstacle in his way and ultimately approvals were gained only by resort to the Building Tribunal, the Planning and Environment Court, the Court of Appeal, and the Ombudsman.
For the purposes of this case it is not necessary to go into details of Mr Masters' applications and the various Court actions. It is sufficient to say that he eventually gained approval to fill part of the land and building approval for various allotments. The result was that at the date of valuation, as stated earlier, there was one house completed and two houses partially completed. By the date of hearing, five houses had been constructed, but one was awaiting final inspection by the Council. In addition, Mr Masters had 39 building applications before the Council.
Mr Masters gave evidence of what he perceived as the Council's interference with his application to the Department of Natural Resources to drain the subject land. The Council also erected metal barriers at the various access points, preventing easy access to the site. The first building was constructed under difficulties, with materials being carried some distance, because the most direct access was prevented. However, it seems that by the date of valuation, the metal barriers had been removed.
As he had argued in his previous appeal (AV98-683), Mr Masters contended that the Council's flood regulation lines are inaccurate and of no legal status. As I understand his argument, a flood study which he had commissioned indicates that significantly more land is available for development. If that is so, it would indicate that the subject land would be of greater value.
With that background, Mr Masters' case can be stated simply: he had purchased the subject land not knowing that the Council would endeavour to prevent development of the land; in that sense he was an imprudent purchaser; with great difficulty, in the face of strong Council opposition and at great expense he has been able to construct a number of houses on parts of the subject land; he has done so, he said, without the Council granting approval at any stage, all approvals have been obtained as the result of Court action; the exercise has cost him in excess of $1.5 million. That is the reason Mr Masters estimates that the unimproved value of the subject land to be minus $1.5 million.
Mr Masters contends that a hypothetical prudent purchaser, knowing of all the difficulties and expense that he has been put to, knowing that the Council opposed any development of the subject land, and having regard to the physical features of that land, would not pay $300,000 for the land in its unimproved state at the date of valuation. A vendor of the property would be obliged to inform a potential purchaser of the difficulties and cost of attempting to make use of the land. As he put it:"If you buy this property you can only expect similar behaviour. It might take you five years to get a house approval and during that time zonings may well be changed, local area plans altered, building standards changed to the specific detriment of the property owner, and therefore you might buy a property upon which firstly you will have to pay rates … You have to pay rates, land tax, if that's applicable, and if you want to try to defend your property you'll run up massive expenses of consultants, barristers and lawyers, but the very minimum cost is the maintenance of the property, the expectation that the Government eventually will take most of it from you, you won't be allowed to use it and you will have to possibly take out insurance cover to protect yourself against public liability on the property, so in actual fact that you might be buying a property that you can't use at all. If you seek to use it you run up enormous expenses, … I do have actual ownership of such a property that you can't use, you can't sell, and you have to incur these expenses, and that property is superior to this one. You don't know what the rating situation will be, but you could reasonably expect to spend at least possibly $10,000 a year and just look at it as a privately-held park." (Transcript p.20)
Before considering the merits of the various arguments, it is necessary to turn to the statutory requirements applicable in this case.
The Relevant Legislation:
Under the provisions of the Valuation of Land Act, the respondent is charged with the duty of making a valuation of all land in an area, subject to certain exceptions which do not apply in the present circumstances (s.37). "Unimproved value" is defined to mean "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 … the improvements did not exist" (s.3(1)). In other words, it is the unimproved market value of the land that is to be assessed.
The classic definitions of market value are contained in the various judgments of the High Court in Spencer v. Commonwealth (1907) 5 CLR 418. In the previous appeal by Mr Masters, the learned Member set out part of the judgment by Griffiths CJ at p.432. I will not repeat that passage quoted by the learned Member, but will turn instead to the judgment of Isaacs J where he said at 441:" To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property."
If the subject land is considered in that context, then no-one can assume that a prudent vendor would pay someone $1.5 million to take the property off his hands. Mr Masters' case is based on the treatment which he received at the hands of the Brisbane City Council. He considers that the Council has acted unreasonably. He contends that a prudent purchaser, aware of how he was treated by the Council, would be deterred from purchasing the land if it meant enduring the delays, cost and legal action he had to undergo; such a purchaser, he suggests, would certainly not pay $300,000 for the subject land at the date of valuation.
However, in my view, that is not the test. A hypothetical prudent purchaser must consider that the Council would act lawfully and reasonably. Such a purchaser would see that the vendor has obtained building approval for at least three houses. On the evidence of Ms Manners, there are at least three areas upon which houses could be built above the flood lines. At least one of the building approvals obtained by Mr Masters is below the flood regulation lines. Furthermore, the owner is permitted to fill at least some of the land. Therefore, in my opinion, a prudent purchaser considering the land in its unimproved state, would have regard to the fact that there are areas upon which a house could be built, access is available, although perhaps not easy, there were at least three building approvals, no matter how gained, and there was approval to fill part of the land. The fact that the vendor of that land had great difficulty and incurred great expense in gaining those approvals, would be irrelevant to a prudent purchaser. In other words, a prudent purchaser would conclude that the land had a positive value. It remains to consider whether the valuation of $300,000 is appropriate in the circumstances.
The Respondent's Valuation:In defending the respondent's valuation of $300,000 as at 1 October 1998, Ms Manners was aware of the determination by the Land Court of the previous valuation of $285,000 as at 1 October 1997, which was confirmed by the Land Appeal Court. Sales of unimproved or lightly improved land in the vicinity indicated an increase of at least 5% between the two dates of valuation. Sales of improved properties indicated that the real estate market for improved properties had increased by an even greater percentage. She found support for her opinion about the valuation of the subject land by reference to the sale of a larger parcel of land at 189 Hedley Avenue, Hendra, which, although it differs from the subject land in several characteristics, is a large, low-lying, vacant parcel of land with poor access. The sale price of that land, shortly after the relevant date of valuation, indicates that the unimproved value of $300,000 for the subject land is not unreasonable.
The respondent has chosen to value the land as one large residential parcel. Although three groups of allotments on the subject land are separated by unmade streets, the respondent has taken a practical approach and valued the whole of the land as one parcel. There is provision in the Valuation of Land Act for the respondent to have taken a different approach, which might well have resulted in a higher unimproved value. However, I have no evidence of that and no exception was taken to the approach of valuing the whole of the land as one parcel.
Conclusion:
There is evidence that a good quality residential site of 809 m² in the vicinity of the subject land sold near the date of valuation for in excess of $200,000. Notwithstanding all the negative characteristics of the subject land, its difficult access, the low-lying nature of much of it, the watercourse, and the other undesirable features, they are, in my view outweighed by the fact of its area and the fact that a potential purchaser would have the choice of at least one of three house sites.
Therefore, I am of the opinion that Mr Masters has not demonstrated that the land has a negative value. The respondent's evidence supports an unimproved value of $300,000 on the subject land as at 1 October 1998. Accordingly, the appeal is dismissed and the valuation of the respondent is affirmed.
JJ TRICKETT
PRESIDENT OF THE LAND COURT
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