McKone v Department of Natural Resources and Mines - [2002] QLC 98

LAND COURT OF QUEENSLAND
CITATION: McKone v Department of Natural Resources and Mines [2002] QLC 098

PARTIES: Percy McKone
(appellant)
v
Chief Executive, Department of Natural Resources and Mines
(respondent)

FILE NO: AV2002/0195

DIVISION: Land Court of Queensland

PROCEEDING: Appeals against annual valuation under the Valuation of Land Act 1944

DELIVERED ON: 11 December 2002

DELIVERED AT: Brisbane

HEARD AT: Brisbane

MEMBER: Dr NG Divett

ORDER: The appeal is dismissed, and the unimproved value of Lots 21 to 23 on RP 13346 as determined by the Chief Executive in the sum of $185,000 is affirmed.

CATCHWORDS: Valuation – particular factor in valuation – restriction on use – location of sewer line

APPEARANCES: Mrs B McKone for the appellant
Mr R Paterson for the respondent

Background:

This matter relates to land at 43 Keats Street, Cannon Hill, and described as Lots 21 to 23 on RP 13346, Parish of Bulimba. This subject land has an area of 1,260 m² and is located about 6 kilometres east of the Brisbane GPO. Keats Street is bitumen sealed with concrete kerbing and channelling, and the footpath is formed earth. All normal utility services are available, and the subject land has an easterly aspect. The land is designated as Low Density Residential under the Brisbane City Plan 2000, current at the relevant date of valuation of 1 October 2001. The key issues are the impact of a sewer line and manhole, and comparison of sales.
On 25 February 2002 the Chief Executive issued a valuation of the subject land at $190,000. Following an objection the Chief Executive amended that figure to $185,000 on 11 June 2002. The appellant has now appealed claiming the unimproved value should be $140,000.
Betty Frances McKone appeared and gave evidence for the appellant. Mr R Paterson, Principal Legal Officer appeared for the respondent, calling evidence from Allyn Charles Horne, the departmental registered valuer responsible for determining the valuation.

The Nature of the Land –

Mrs McKone argues that the valuation by Mr Horne has made inadequate allowance for the presence of a Brisbane City Council (the Council) sewer main and manhole that crosses the subject land. She provides evidence that the sewer line crosses the subject land diagonally in such a position that it severely disables about one third of the usability of the land. She provides a House Drainage Map by the Council of the subject land showing the location of the sewer line and manhole (Exhibit 3).
That plan shows that the sewer line passes across the subject land at a distance of about 9 metres from the rear boundary along the northern boundary, and about 6 metres from the rear boundary along the southern boundary. There is a manhole near the northern boundary which is 9 metres from the rear boundary. Mrs McKone advises that since the sewer line was installed in 1970, the manhole has regularly overflowed (about two-monthly intervals) causing disturbing nuisance to the use of the land. However she concedes that the Council always promptly attends to any overflows, and the manhole has only infrequently overflowed in recent times. Generally the extent of any overflow has been restricted to an area about 0.6 metres around the circumference at the manhole.
Mrs McKone claims that the presence of the sewer line is a limitation on any major use of the balance of the land west of the sewer line, such as for purposes of a swimming pool or building extensions. However she concedes that the owner has built a concrete base caravan shelter in the south-western corner of the subject land, to the west of the sewer line. While that structure is currently not used, it demonstrates some use of the land beyond the sewer line.
Mrs McKone argues that while the sewer line is not protected by a registered easement over the subject land, its presence is similar to the situation where an easement was in existence. She notes that had the sewer line been constrained to the normal distance from boundaries of between one to two metres, then the subject land would not be severely disadvantaged. However she claims that with a major restriction upon about one third of its area, the unimproved value of the subject land should only reflect about 66% of the determined unimproved value of $185,000. By that calculation she argues that her estimate of $140,000 provides a generous figure, allowing any benefit of doubt to the respondent. Mrs McKone argues that an allowance for the restriction or limitation of use must be provided in accordance with s.14(5) of the Act.
In allowing for that restriction Mrs McKone argues that an area four metres wide along the sewer line must be maintained free of obstructions to allow for vehicle access to the pipe. The balance area between that access strip and the rear boundary is virtually unusable for any major development purposes. Bearing in mind that restriction upon 33% of the area of the subject land, she argues a rise of $50,000 in the unimproved value from $135,000 at 1 October 2000 is unreasonable.
Mr Horne rejects that conclusion, arguing that the subject land is valued as a single dwelling site of area 1,260 m². It is his professional opinion that as a vacant site, which is required to be valued as such by s.3(1) of the Act, the subject land has sufficient development area to the east of the sewer line. He argues that would allow for a large dwelling and associated outdoor facilities such as a swimming pool and car parking. Because of its relatively larger size he does not see the location of the sewer line as a significant disability. However to provide any benefit of doubt to the appellant, he has allowed a reduction in the valuation for that purpose to an extent of $5,000. He notes that also allowed for some disability caused from the overflow of the manhole.
Mr Horne further advises that the presence of the sewer line had been an ongoing point of disagreement with the appellant over several valuations. He advises that during an objection by the appellant against the valuation of $157,000 at 1 October 1999, a reduction of $7,500 had been allowed in that valuation to $150,000, that valuation was also maintained at $150,000 at the subsequent valuation at 1 October 2000. Subsequently in the current valuation at 1 October 2001, a further reduction on objection had reduced the previously determined valuation from $190,000 to $185,000 for the same purpose, plus any benefit to ensure that larger parcels were not penalized for size differences evident in sales of smaller parcels. The valuation at 1 October 1998 was $132,000.
Mr Horne argues that allowing for the increases apportioned, and brought forward, during the mass appraisal system from 1 October 1999 at $150,000, to the current valuation at 1 October 2001 at $185,000, represents an increase of 23% over two years. If that same percentage increase was applied to the allowance for the sewer line at $7,500 in 1999, it would now reflect an allowance of $9,250, plus the extra $5,000 in the current matter, which would result in considerations of the impact of the sewer line to about $14,000 in the overall current valuation.
To test that overall consideration, Mr Horne provides evidence of two sales of land at 41 and 43 Durimbil Street, Camp Hill (Lots 541 and 542 on RP 13329) Exhibit 2. Mr Horne notes that Lot 542 was sold with a manhole evident upon the parcel, and in a position at least as intrusive as that occurring upon the subject land. He argues that Lot 542 sold on 6 June 2002 for $187,000 with the manhole in place, while the adjoining parcel to the east (Lot 541) sold on 10 June 2002, without any manhole evident, for $187,500. Both parcels have areas of 405 m²; and Lot 541 has an applied unimproved value of $116,000, but is slightly lower in elevation, while Lot 542 has an applied unimproved value of $115,000. The land falls gently from west to east. Mr Horne argues that the effective diminution in value for that manhole was $1,500.
In seeking comparisons with the impact of the manhole at Camp Hill, Mr Horne argues that the manhole is located about 14 metres from the rear boundary of that parcel. However Mr Horne has no record of the direction of the sewer line associated with that manhole, and Mrs McKone speculates that the sewer line may in fact run north/south along the length of the parcel, rather than transact it diagonally. In such a case she argues it would have a less serious impact upon the parcel than is experienced at the subject land.
Mr Horne rejects that as he notes that Lot 542 is less than half the size of the subject land, and any impact of a sewer line on that parcel would be more significant. It is also noted that if the sewer line did pass from north to south, then it would transect the rear boundary at about 2.5 metres east of the south-western corner of that parcel. Mr Horne advises that the total parcel at Durimbil Street Camp Hill has resold several times as a vacant parcel of land over the last few years. However those sales provide no further information in this matter.
Mr Horne rejects Mrs McKone’s method of assessing the impact of the sewer line on the subject land. He argues that as a qualified valuer he would never merely seek to value the parcel on a direct pro rata basis for the area east of the sewer line. He argues that is not accepted valuation methodology, and would lead to an incorrect assumption about the value of the land. Mr Horne had unsuccessfully sought information from the Council in respect of the frequency of any overflows of the sewer manhole, but had provided a liberal estimate for any impacts in order to give any benefit of doubt to the appellant.

Comparison of Sales -

Mrs McKone provides no sales evidence to support her estimate of the valuation, which is based entirely upon an apportionment approach of Mr Horne’s valuation of $185,000. She has no knowledge of Mr Horne’s sales. Mr Horne provides the following sales comparisons of vacant or lightly improved land:
·Sale 1 – (4 Cannondale Street, Cannon Hill – Lot 8 on SP 139215). This is a 350 m² parcel located about 280 metres north-east of the subject land, and close by to Wynnum Road. The sale is almost level, but is lower in elevation, and is closer to the road noise and pollution of Wynnum Road. Overall the sale is inferior to the subject land as it is much smaller and in an inferior location.
The sale sold in June 2001 for $95,000, was analysed at $93,000, and applied at $86,000.
·Sale 2– (26 Montfort Street, Cannon Hill – Lot 2 on SP 135999). This is a 623 m² parcel located about 0.7 kilometres west of the subject land. The sale is seen as comparable, but smaller than the subject land, and is in an inferior location next to commercial premises.
The sale sold in November 2000 for $128,000, was analysed at $125,000, and applied at $115,000. Neither Sales 1 or 2 have any manholes on the sale.

Decision:
Comparison of Sales –

In seeking comparisons with sales of vacant or lightly improved lands, Mr Horne has followed guidance long favoured by Courts at all levels. That was clarified by the Land Appeal Court in WM and TJ Fischer v Valuer-General (1983) 9 QLCR 44, where it said at page 46:
“It is indeed a fundamental principle of valuation that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels.”
That principle was also followed in R and MM Barnwell v Valuer-General (1990-91) 13 QLCR 13, at page 17; and also PH Clough v Valuer-General (1981-82) 8 QLCR 70, at page 76.
Where the only expert valuation evidence is that provided by Mr Horne, I am reminded by Mr Paterson that it is a difficult task for a lay person, such as Mrs McKone in the current matter, to relate her opinions of the disabilities of the subject land to its unimproved value. That principle was noted in BG and AK Wilson v Chief Executive, Department of Lands (1994-95) 15 QLCR 63, where the appellant sought to quantify the impacts upon the value of a parcel as a consequence of certain flooding and easement along a drainage pipeline. The Land Appeal Court said at page 69:
“These flooding factors shape and the existence of the statutory easement have all had their effect on the development and use of the lot. They are matters which a potential purchaser would ascertain on inspection and on making reasonable enquiry. The consideration which may be given to them (including aircraft noise) are best appreciated by a valuer who is trained in the skills of interpreting the market. Mr Skinner has that training and background. The person in the position of Mr Wilson who by comparison is a layman is at a disadvantage. Whilst he may readily identify problems, the transposition of such problems into the market place and their resolution in a market sense can easily become oblique.”
The difficulties inherent in any market appraisal, which by their nature requires the skills of interpretation demonstrated by an expert valuer, were also recognized in Chief Executive, Department of Natural Resources v Radlet Enterprises Pty Ltd (1997-98) 18 QLCR 397. In that matter the Land Appeal Court considered the application of sales evidence by the Chief Executive, and concluded at page 404:
“We are therefore unable to agree that the analysed value shown by those sales had, on the evidence, been disregarded by the Chief Executive, or that the market evidence had been discarded in favour of unsupported valuation opinion. As Mason J said in ‘Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd’ (1980-81) 146 CLR 336 at page 381:
‘Valuation is a matter of estimation, not a precise mathematical calculation.’
Valuation is intended to be an interpretation of a market, which in itself is imprecise, even when it is created by vendors and purchasers who satisfy the often quoted qualifications necessary to meet the test explained in Spencer v The Commonwealth of Australia (1907) 5 CLR 418.”
On the evidence in this matter there is nothing to suggest that Mr Horne has not correctly exercised his professional judgment as an experienced valuer. He provides one much smaller sale (Sale 1) which is analysed at $93,000 and is seen as inferior; and another smaller sale (Sale 2) which is seen as comparable in all respects expect size, and is analysed at $125,000. On that basis he has made an allowance for the larger size of the subject land (1,260 m²) concluded a valuation of $185,000, after allowing for its particular disabilities.
In making that allowance for the difference in size, Mr Horne has relied upon his professional experience, and also in guidance found in DF and M Ward v Valuer-General (1983) 9 QLCR 48, where the Land Appeal Court identified in that matter that a parcel should be valued as a “site” and not as a farming property. The Land Appeal Court said at page 50:
“Sites are valued overall and not a rate per hectare basis. The experience of the market place reflects the former not the latter practice.”
The use of a site value approach for residential lands was also determined in Hans and Else Grahn v Valuer-General (1992-93) 14 QLCR 327, where the Land Appeal Court said at page 330:
“The appellants fail on this point because the appropriate basis for the valuation of a residential lot is not the application of a rate per square metre but an assessment of the unimproved value of each lot as land used for single unit residential purposes. As the Land Appeal Court said in its decision on the appellants’ previous appeal (H and E Grahn v. The Valuer-General, AV89-246 and 247, 13 December 1990):
‘for the purpose of valuing residential sites, the preferable method of comparison is on a site to site basis and not on the basis of a unit area valued comparison. Site for site comparison should take into comparison such matters as the size of the lots, the situation of and access to the lots, the shape and topography of the lots etc. and comparisons on a unit area basis do not necessarily reflect valuation considerations for the above features.’”
Precedents therefore do not support Mrs McKone’s approach to the valuation of applying a pro rata proportion of the determined value of $185,000 in concluding her estimate of $140,000 for the subject land. That is not a correct approach to ascertaining what the land would bring as a vacant parcel of land in the market place. The correct approach is to value the subject land as a single residential dwelling site of area 1,260 m², but with some restrictions as a consequence of the presence of the sewer main and manhole.
Before moving to consider any impact of that sewer line and manhole, I pause to explain the implications of s.17 of the Act which relevantly state:
“17.(1). In making a valuation of the unimproved value of land exclusively used for purposes of a single dwelling house or for purposes of farming, any enhancement in that value for that the land has been subdivided by survey or has a potential use for industrial, subdivisional or any other purposes shall be disregarded irrespective of whether or not, in case of potential use as aforesaid, that potential use is lawful when the valuation is made.
(2) In subsection (1) – ‘single dwelling house’ means –
(a) a dwelling used solely for the habitation by a single household;”
The outcome of s.17 to the valuation of the subject land is that the parcel is treated as one single parcel, ignoring any higher potential for the land to be used individually as three existing parcels (Lots 21 to 23). That approach to the valuation provides a considerable concession to the subject land, as comparable sales evidence of such smaller parcels would support separate valuations of those three parcels at a much higher figure than in its section 17 status. However that us not an issue, and is provided to merely explain the effects of s.17 in this matter.

Impact of the Sewer Line and Manhole –

In seeking to ascertain the level of impact of the sewer line upon potential building development, I am reminded that the subject land is to be valued as if it were vacant in accordance with s.3(1) which states:
“3.(1) For the purposes of this Act –
‘unimproved value’ of lands means –
(b)in relation to improved land – 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, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist.”
Mr Horne is of the opinion that, because of the relatively larger size of the subject land (1,260 m²), there is adequate room to the east of the subject land to accommodate a suitably designed large dwelling, with outdoor facilities such as a swimming pool. Any extra land to the west of the sewer line would thus be seen as a bonus area for landscaping purposes. I would agree with that conclusion. Compared to the smaller, but comparable, area of Sale 2 (623 m²), the subject land provides a considerably superior and more flexible building site.
If I consider the agreed allowances provided for the impact of the sewer line, and the overflow from the manhole, over the period 1999 to 2001, ($14,000) I feel that has adequately allowed for any uncertainties that might influence the mind of a potential prudent buyer of the subject land.
In analyzing this evidence I am reminded that the function of this Court is limited to matters affecting the correctness of the valuation of the subject land. That was clarified in JL and I Qualischefski & Ors v Valuer-General (1979) 6 QLCR 167, where the Land Appeal Court said at page 172:
“The reasonableness of the allowances that have been made is always open to challenge on objection or appeal. 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 contradiction to jurisdiction conferred under the Land Act.”

Conclusion:

Having considered the whole of the evidence I am not persuaded that the appellant has proved his case. The appeal is dismissed, and the unimproved value of Lots 21 to 23 on RP 13346 as determined by the Chief Executive in the sum of $185,000 is affirmed.

NG DIVETT
MEMBER OF THE LAND COURT