Mayne Property Development Pty Ltd v Chief Executive, Department of Natural Resources

[1996] QLAC 161

[1996] QLAC 161

 

IN THE LAND APPEAL COURT OF QUEENSLAND

Re:Appeals against decisions of the Land Court Determination of unimproved value -

City of Brisbane (AV94-64, AV94-366)

BETWEEN:

Mayne Property Development Pty Ltd and

Chief Executive, Department of Natural Resources

Appellant

Respondent

JUDGMENT

Delivered at Brisbane this Twentieth day of December 1996

The appellant, Mayne Property Development Pty Ltd (“Mayne Property”), appeals against two decisions of the Land Court determining the unimproved value of land it owns in Albion (“the subject land”) to be $300,000 on 31 March, 1992 and on 30 June, 1993. The appeals were heard together.

At the hearing of the appeals, the appellant was represented by Mr Cox , who is a director and the secretary of Mayne Property. He focused upon four substantive grounds set out in the notice of appeal. They were:

“1.      The  evidence  as  to  sales  of  other  properties  submitted  by  the

representative of the Department of Lands, accepted by the Land Court, was incorrectly taken into consideration since the properties the subject of all such sales are not comparable with the Appellant’s land.

2.          The evidence as to the unimproved values of land at the respective dates as submitted by the Appellant was not properly considered by the Land Court.

3.          The analysis of the valuation approach used by the Department of Lands that was submitted by the Appellant was not properly considered by the Land Court.

4.... [not proceeded with]

5.          The Land Court has accepted evidence as to sales of property submitted by the Department of Lands without full consideration of the legal constraints upon its acceptance of such evidence

6.        ...

7.        ...”

The fourth ground was not proceeded with. Flowing from the four grounds pursued by Mr Cox were the remaining two grounds of appeal. In these it was contended that the Land Court had drawn conclusions not supported by the evidence submitted by the respondent, the Chief Executive of the Department of Natural Resources (“the Chief Executive”) and that its decision was wrong in fact and law.

The hearing of these appeals to the Land Appeal Court was by way of a rehearing on the evidence given to the Land Court (Valuation of Land Act 1944 s.64(2)). Although the appellant is confined in these proceedings to the grounds of appeal set out in the original notices of appeal (see Gibson Investments Pty Ltd v. The Valuer-General (1978) 5 QLCR 223 (LAC), Pratt v. The Valuer-General (1982) 8 QLCR 145 (LAC)), the notice of appeal to the Land Appeal Court set out differently worded grounds of appeal. No objection was taken to the latter notice, and it is clear that, although the grounds take issue with aspects of the decision of the Land Court, those grounds particularise matters contained in the original notices of appeal. By operation of s. 45(4) of the Valuation of Land Act 1944 (“the Act”), Mayne Property is limited to the grounds of appeal it specified in the original notices of appeal and bears the onus of proving them.

Mr Cox presented a written submission, parts of which were objected to by Mr O’Connor representing the Chief Executive on the ground that they comprised further evidence which was inadmissible in these proceedings. The objections were upheld and reasons for doing so given orally during the hearing.

BACKGROUND

The subject land is described as Lots 35 to 41 on Registered Plan 18372, Parish of Enoggera, County of Stanley and contains an area of 2,843 square metres. It is located approximately 4 kilometres north of the GPO and is zoned “Service Trades” under the City of Brisbane Town Planning Scheme. Of the seven lots comprised in the land, three front Elliot Street and three front Immarna Street in Albion. The seventh is a corner lot and fronts onto both streets. The seven lots have been developed as one site and an industrial warehouse has been built upon it. Elliot Street and Immarna Street are both fully made but are narrow and have poor vehicular access for industrial usage.

The land’s unimproved value was determined by the Chief Executive to be $310,000 as at 31 March, 1992. That valuation remained unchanged when he again determined its value as at 30 June, 1993. Mayne Property objected against both valuations but both were disallowed. The Land Court considered the two appeals lodged by Mayne Property which argued that the unimproved value should be $274,000 at both dates. It did not accept Mayne Property’s contention and determined the unimproved value of the land to be $300,000 at both dates.

CONSIDERATION OF GROUNDS OF APPEAL

Property	37 Butterfield Street Herston (“the Herston land”)	31 Longland Street (cnr Masters Street) Newstead (“the Newstead land”)	19 Elliot Street (cnr Immarna Street) Albion
Zoning	“General Industry”	“General Industry”	“Services Trades”
Area	3,247m2 304 m2 affected by easement for encroachment.	1,083m2	2,843m2

 

The Land Court preferred the evidence of Mr Houghton, a registered valuer employed by the Department of Natural Resources, to evidence led by Mr Cox at the hearing. In Mr Houghton’s opinion, the unimproved value of the land was $300,000. He referred to the sales of five parcels of land but relied particularly upon two of those sales. Those sales were described in Mr Houghton’s report and in his oral evidence and were compared with the subject land. The information relating to the two particular sales upon which Mr Houghton relied is summarised in the following table together with the relevant information about the subject land.

Elevation	Adjacent to Enoggera Creek and flooded in 1974.	At road level of low elevation and flooded in 1974.	Generally level but of low elevation in unimproved state, Flooded in 1974 and, until recently, surrounding streets subject to minor local flooding.  Much of site now filled to approximately 1 metre above natural ground level to overcome flooding.
Access	Butterfield Street is a fully made road carrying local traffic only.  No Standing signs in front of property.	Corner lot at road level.	Elliot and Immarna Streets fully made but narrow.  The subject land has poor vehicular access for industrial usage.
Date of Sale	24/1/90	5/3/93	-
Sale Price	$520,000	$250,000	-
Improvements	Obsolete industrial sheds and land treatment.	Derelict building and clearing.	Industrial warehouse building and filling
Value of Improvements	$40,000	$15,000	$53,730 (filling - no value shown for building)
Analysed U/value	$480,000	$235,000	-
Unimproved value	$440,000	$175,000	$300,000
	($135/m2)	($161/m2)	(i.e. $2,843m2 @
			$125/m2 ($355,375)
			less $53,730 rounded)
Valuer’s overall	Butterfield Street is	Sale has since been	-
comparison with	wider than the streets	redeveloped.  It is
subject land	fronting subject land.	considered superior to
	Sale is inside lot with	the subject land on a
	smaller frontage than	standard metre rate due
	subject but slightly	to access.
	superior due to easier
	access.

Mr Cox referred to a photograph, taken in June, 1996, of the buildings on the Herston land. He submitted that the buildings shown on the land were the same as those at the date of its sale. They could not, he said, be described as “obsolete industrial sheds” as Mr Houghton has done. They would be worth well in excess of $40,000 to the purchasers.

In addition, Mr Cox submitted that the area in which the Herston land is located could not be compared with that of the subject land. Butterfield Street adjoins the Royal Brisbane Hospital to the north and is a busy through road leading from Bowen Bridge Road to Ballymore Park. Modern office and showroom development has been undertaken in Butterfield Street.

The sales of the remaining three parcels of land were not relied upon particularly by Mr Houghton. Mr Cox submitted that they should not be taken into consideration in any way. The properties situated at 49 Allison Street, Bowen Hills and on the corner of Abbotsford Road and Taylor Street, Mayne both have good exposure to a main arterial road and, in that respect, cannot be compared with the subject land. The area of the latter property is only 15% of that of the subject land and so is not of a comparable size. The final sale related to the property at Nariel and

Wallace Streets, Albion. It should be disregarded because of its relatively small size and because it was purchased by persons having a relationship of some nature to the owners of other properties in the vicinity.

Mr Cox relied upon the sales of another eight parcels of land. Three were at Northgate, four at Virginia and one at Albion. The essence of the evidence presented by Mr Cox in relation to those properties can be summarised in the following table:

Property	15-19 Nariel St Albion	10 Pritchard St Virginia	Yarraman Place Virginia	Crock- ford St Northgate	Crock-ford St Northgate	Yarraman Street Virginia	Vauxhall Street Virginia	Went- worth Place Northgate
Zoning	“Services Trades”	“General Industry”	“General Industry”	“General Industry”	“General Industry”	“General Industry”	“Light Industry”	“General Industry”
Area	1,424m2	3,799m2	3,135m2	3,018m2	3,041m2	3,135m2	3,248m2	4,011m2
Date of Sale	25/7/91	30/10/91	15/11/91	20/12/91	9/3/92	24/12/92	4/5/93	25/6/93
Sale	$160,000	$340,000	$205,000	$180,000	$165,000	$245,000	$242,500	$200,000
Price	$112/m²	$90/m2	$65/m2	$60/m2	$54/m2	$78/m2	$75/m2	$50/m2

Mr O’Connor submitted that the Land Court had properly disregarded all of these sales, other than that of Nariel Street, Albion, on the basis that they were too far removed from the subject land. It had not been persuaded by Mr Cox’s analysis of the rentals that the location of the sales and of the subject land is of only limited importance. Mr Cox argued that the sales were comparable with the subject land as the land was of a similar utility with the highest and best use being a large commercial building. The properties at Nariel Street, Albion and 10 Pritchard Street, Virginia were the most capable of direct comparison. He did not attempt to value the land by reference to the capitalisation of rentals.

The Land Court had “... prefer[red] not to place too much reliance upon ...” the sale of Nariel Street, Albion as Mr Houghton’s evidence had been that it was part of a larger transaction between the same vendor and associated purchasers on the same day. Mr Cox acknowledged that it was a sale by a mortgagee-in-possession but submitted that the mortgagees were aware of their obligations under s.85 of the Property Law Act 1974 (“the Property Law Act”) and would do everything to preserve the rights of the mortgagor. Those rights were considered in Emerson v Custom Credit Corporation Limited [1994] 1 Qd.R. 516.

As the learned President said, not every sale by a mortgagee must be disregarded. This is clear from the cases of Waterhouse v Valuer-General (1927) 8 LGR 137 and Re Murray (1934) 13 LVR 25 to which he referred. It is also clear from the fundamental concepts expressed in Spencer v The Commonwealth of Australia (1907) 5 CLR 418, that it is essential that a sale be free of any suspicion of compulsion on either party if it is to be taken into account. As Isaacs J

said:

“To arrive at the value of the land at that date, we have ... 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.” (page 441)

In the Waterhouse case, Pike J observed that the mortgagor, as well as the mortgagee’s agent, had both been active in introducing possible purchasers and it was not unknown that the site was for sale.

Certainly, as Mr Cox submitted, s.85 of the Property Law Act provides that

“(1)  It is the duty of a mortgagee, in the exercise after the commencement of this Act of a power of sale conferred by the instrument of mortgage or by this or any other Act, to take reasonable care to ensure that the property is sold at the market value.

(2)        Within 28 days from the completion of the sale, the mortgagee shall give to the mortgagor notice in the approved form.

(3)        The title of the purchaser is not impeachable on the ground that the mortgagee has committed a breach of any duty imposed by this section, but a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale.

(4)        A mortgagee who, without reasonable excuse, fails to comply with subsection (2) shall be guilty of an offence.

Maximum penalty - 2 penalty units.

(5)        An agreement or stipulation is void to the extent that it purports to relieve, or might have the effect of relieving, a mortgagee from the duty imposed by this section.

(6)        Nothing in this section affects the operation of any rule of law relating to the duty of the mortgagee to account to the mortgagor.

(7)        This section applies to mortgages whether made before or after the commencement of this Act but only to a sale in the exercise of a power arising upon or in consequence of a default occurring after the commencement of this Act.”

It must be noted that the obligation is not to sell a mortgaged property for the market value but to take reasonable steps to ensure that the market value is secured. The two concepts are different and a mortgagee-in-possession may fulfil his, her or its statutory obligation without actually securing the market value.

The outcome of the cases and of a consideration of s.85 is that the circumstances of a mortgagee sale would need to be considered carefully before it could be taken into account in assessing a value. In this case, there is no direct evidence of the events surrounding the sale of Nariel Street, Albion. Both Mr Houghton and Mr Cox had “understandings” of what had occurred but their evidence can be put no higher than that. In the absence of any direct evidence as to what occurred, we agree with the learned President that the sale must be disregarded in this case. We cannot be assured that, even assuming the mortgagee met its statutory obligation, the sale was made without coercion or was not influenced by factors peculiar to the particular

mortgagee and purchaser.

The use of “comparable sales” in valuing land was discussed by Wells J in Brewarrana Pty Ltd v Commissioner of Highways, S.A. (1973) 25 The Valuer No.4. He said:

“It is general valuation practice for sales characterized as comparable sales to be

used as bases for the valuation of lands said to be similar. But allowances must always be made before such sales can be so used. No two parcels of land are identical in all respects: the sale price of any given piece of land is not necessarily the price at which it ought to have been sold, or the same thing as its true value. Before using any allegedly comparable sale, therefore, the valuer must consider whether, having regard to the circumstances (using that word in its broadest sense) appertaining to the parcel of land in question, and to the transaction of sale, there are sufficient similarities to the circumstances appertaining to the subject land and to the notional sale presupposed by the test formulated in Spencer v The Commonwealth of Australia and in later cases to warrant a court’s reasoning from the sale price paid under the allegedly comparable sale, with or without other evidence, to a value for the subject land. Adjustments must, of course, be made every time reasoning of that kind is undertaken. For example, in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography, location, size, shape, slope, view, land use (actual and potential), scope for, and difficulties of, development, services and amenities; and in relation to the transaction of sale, the valuer must weight such things as the character, business and relationships of the parties, their motives, the terms and conditions in their contract of sale, and any other special considerations that induced or may have induced them to conclude the contract at the selling price agreed, as well as the dates when the contract of sale and the transfer were concluded or effected. I do not for a moment pretend that I have been exhaustive. What I am concerned to emphasise is that, as I understand the evidence, and according to the inferences that I feel I can safely draw from it, there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not. It is, in my view, all a matter of degree: some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. Just where the line is to be drawn is, it seems to me, the very sort of question that  is  fit for  the  expert  valuer to determine; the assessment of the risks of adjustment is peculiarly his sphere of skill.” (page 331)

In light of these principles, we accept Mr Cox’s submission that the three sales to which Mr Houghton referred but upon which he did not rely should be disregarded. They should be disregarded for the reasons advanced by Mr Cox. The remaining sales evidence is, as the learned President observed, far from ideal in this case. The sales relied upon by Mr Cox are at some distance from the subject land but the same can be said, though to a lesser extent, of the Herston land and the Newstead land. Mr Cox’s sales are, however, much further away from Brisbane’s Central Business District (“CBD”) than either the subject land or the Herston land and the Newstead land. The Herston land and the Newstead land are a little closer to the CBD than the subject land.

In his oral evidence at the hearing, Mr Cox accepted that people will pay a premium for land with closer proximity to the CBD but said that the premium would be very marginal. In light of that, the relevance of the sales of the Herston land and the Newstead land to the valuation of the subject land would not be affected by their having slightly closer proximity to the CBD.

The properties at Virginia and Northgate are, however, substantially further removed from the CBD than any of these properties. We are not persuaded by Mr Cox’s evidence that the premium would be marginal given the distance. He based his opinion on his understanding that the rental would be only 20% greater for property closer to the CBD than for property further removed from it. We are wary of accepting that basis for rental values may or may not be directly linked to the unimproved value of land. Other economic forces not explored in the evidence will determine whether the link does or does not exist.

In reaching this conclusion, we accept Mr Cox’s submission that he was not attempting to value the subject land by means of a capitalisation of rentals. He was attempting to compare “like with like” in the use of comparable sales. We have concluded, however, that he has not discharged the burden of proof to establish that they are indeed sufficiently “like” the subject land and that their substantially greater distance from the CBD is of no relevance.

That leaves us with the Herston land and the Newstead land. There are points of difference between those properties and the subject land. Their zoning is different but their land use and utility are similar as are their elevations if the subject land’s filling is disregarded. They differ in their access although there is no suggestion that they otherwise differ in the services they enjoy. We have already considered their location.  There are certainly differences between the Herston land and the Newstead land on the one hand and the subject land on the other. The Herston land and the Newstead land are superior to the subject land and that was common ground between the parties. The differences, however, are not so great as to lead to the conclusion that they cannot be regarded as comparable.

The improvements on the Herston land are said by Mr Cox to be worth substantially more than the $40,000 attributed to them by Mr Houghton. We had a photograph of the premises. Even if we accept Mr Cox’s statement that the buildings have been used by a taxi company since 1990 and that they are worth more than $40,000 to the company, this does not of itself mean that the building has any greater value than $40,000. The value of improvements is “... the added value which the improvements give to the land at the time ...” (Valuation of Land Act, ss.5(1)). It is not the value of the improvements to any particular owner or potential purchaser. There is no evidence of their value contradicting Mr Houghton’s evidence and so no basis for making any finding other than that the value of the improvements were $40,000.

The date of sales of the Herston land is some two years before the first of the dates on which the value of the subject land must be considered. Mr Cox submitted that there was a severe economic recession during those two years.  No evidence of this was submitted but, even if it had been, we are reluctant to speculate upon the effect it would have had upon the valuation of the subject land. The best evidence of value is that of sales. In that regard, the sale of the Newstead land on 5 March, 1993 was a sale between the two dates with which we are concerned. It is, therefore, a sale that is directly relevant even though allowances must be made in applying  it as it was the sale of land superior to the subject land. In the absence of evidence about a recession between 1990 and 1993, we cannot disregard the evidence of the sale of the Herston land on 24 January, 1990.

Mr Houghton said that he based his valuation upon these sales and

“...used relativity to make sure everything fits into place and that relativity has been checked in light of the previous Court decision and it fits like a hand in a glove.” (transcript page 36)

Mr Cox pointed to the documents which he had obtained from the Department of Natural Resources under the Freedom of Information Act 1992 to argue that there was conflict between Mr Houghton’s evidence and his summary. That summary considered the subject land on the basis of its relativity to others in the area. The summary document appears to be an internal departmental document in which the author considers the response that should be made to Mayne Property’s objection to the valuation. It does not purport to be a valuation. It has all of the hallmarks of being what Mr Houghton said it was - a means of using relativity to ensure that everything fits into place. There is no evidence that there has been any attempt to use relativity as a substitute for sales evidence.

The  sales  evidence  is  not  completely  satisfactory.       In  determining  a  valuation  of

$300,000 at each of the relevant dates, the Land Court has made an adjustment to the sales evidence relating to the Herston land and, a greater adjustment to that relating to the Newstead land. In doing so, it has accepted Mr Houghton’s evidence that the value is $125/m² for the filled land. That equates to approximately $105.50/m² when the cost of the filling is deducted. The evidence led on behalf of Mayne Property is not of comparable sales for the reasons we have given. Consequently, as it has not discharged its burden of proof in this matter, its appeals must be dismissed.

Orders

The appeals in matter AV94-64 and   matter AV94-364 are dismissed and the value of the subject land as determined by the Land Court in the sum of $300,000 is affirmed.

HELMAN J JUSTICE OF THE SUPREME COURT

GJ NEATE

MEMBER

SA FORGIE MEMBER OF THE LAND COURT