Micallef v Department of Natural Resources and Mines

[2006] QLC 48

LAND COURT OF QUEENSLAND

CITATION:

Micallef v Department of Natural Resources and Mines [2006] QLC 48

PARTIES:

Angela and Frank Micallef
(appellants)

v.

Chief Executive, Department of Natural Resources and Mines
(respondent)

FILE NOS:

AV2005/0683

DIVISION:

Land Court of Queensland

PROCEEDING:

Appeal against annual valuation under Valuation of Land Act 1944

DELIVERED ON:

24 August 2006

DELIVERED AT:

Brisbane

HEARD AT:

Ipswich

MEMBER:

Mr PA Smith

ORDERS:

1.   The appeal is dismissed.

2.   The respondent’s contention that the valuation be increased is dismissed.

3.   The valuation of the Chief Executive as at 1 October 2004 of Eighty-four Thousand Dollars ($84,000) is affirmed.

CATCHWORDS:

Valuation – Factors in valuation – Recent Land Court Hearing – Impact of local flooding – Leading evidence to higher value – Significant error – Fundamental flaw – presumption in favour of correctness of valuation – Valuation of Land Act 1944

APPEARANCES:

Mr F Micallef on behalf of the appellants
Mr J O’Rourke, Principal Legal Officer appeared for the respondent

Background:

1. A number of features of this matter make it unusual.  This involves an appeal by the appellants against a valuation by the respondent, pursuant to the Valuation of Land Act 1944 (the VLA) which valued their property situated at 197-207 Ebenezer Road, Ebenezer in the sum of $84,000 as at 1 October 2004.  The appellants contend for a valuation of $10,000.  The first unusual feature of this matter is that Dr NG Divett, a then Member of the Land Court, delivered a decision on 29 June 2005 with respect to an appeal by the same appellants relating to the same parcel of land for the 1 October 2001 valuation. 

2. The grounds of appeal in this matter take into account the decision of Dr Divett in stating that:

   “We beleve (sic) that the DPP (DNR) know what the valuation is but do not want to value the said property to it (sic) true value.”[1]

   In simple terms, the appellants contended at the hearing of this matter that the respondent has not taken into account the factors that relate to the subject property as set out in the decision of Dr Divett.  Further, the appellants at the hearing contended that the decision of Dr Divett did not fully take in to account the evidence in the matter before Dr Divett.  This is the second unusual aspect of this matter, in that there was no appeal by the appellants to Dr Divett’s decision, yet part of the appellants’ case in the matter at hand was conducted as if it was an appeal against Dr Divett’s decision.

   [1] Exhibit 1

3. The next interesting aspect of this matter is that the respondent gave notice to the appellants prior to the hearing, and led evidence at the hearing, to a valuation figure higher than the figure appealed against.  The respondent now contends for a valuation in the sum of $105,000.

4. In light of Dr Divett’s recent decision, in my view it is not necessary for me to repeat in detail the description and other physical attributes of this land.  Those details are very well set out in Dr Divett’s decision.[2]

   [2] Micallef v Department of Natural Resources and Mines [2005] QLC 34

The 2005 appeal

1. The appellants lodged their notice of appeal in this matter on 8 August 2005 following the respondent’s decision on objection dated 19 July 2005.  Initially, the appellants did not include grounds in their appeal.  This defect was rectified by their completion of a requisition, received by the Land Court on 9 September 2005, setting out the grounds of appeal as detailed earlier in this decision.  It should be noted that the original unimproved value as at 1 October 2004, which issued on 29 March 2005, set the unimproved value in the sum of $101,000.  However, in light of the decision of Dr Divett, that figure was reduced to the sum of $84,000 in accordance with a notice that issued on 19 July 2005. 

Nature of the land and impact of flooding

1. I note that in his 2005 decision, Dr Divett analysed in great detail the nature of the subject land and the impact of flooding on that land.[3]  At the hearing of this matter in Ipswich, Mr Micallef again went into great detail concerning the nature of the subject land and the impact of flooding and stormwater on the land.

   [3] See paragraphs 7-52 of Dr Divett’s decision [2005] QLC 0034

2. It is apparent that the evidence before me is in essence the same as the evidence before Dr Divett in 2005, with one exception, that being an affidavit by a Mr Mike Townsend dated 7 February 2006.  Mr Townsend conducts a business called Townsend Earthmoving Pty Ltd, which he has owned and operated for 34 years.  He has an extensive knowledge of earthworks.  Mr Townsend attended court at the commencement of the hearing.  However, unfortunately he had suffered a family death.  The parties considered requesting an adjournment of the hearing, but the respondent concluded that he did not require Mr Townsend for cross-examination on his affidavit.  Accordingly, Mr Townsend’s evidence is as set out in his affidavit and he was not required to give evidence at the hearing.

3. In his affidavit, Mr Townsend refers to aspects of this matter within his expertise, and outside his expertise.  There is nothing in the material that indicates that Mr Townsend has any valuation knowledge or experience so I disregard all of his evidence that is an opinion as to the value of the subject property.  That said, however, Mr Townsend clearly has significant earthmoving experience.  A clear point in contention in this matter is whether or not the subject property is suitable for a building site and, if it is, whether an access track can be made to give access to the building site in most flooding and stormwater situations.

4. At this point, I should set out in some detail one particular aspect of this matter which I believe goes to the heart of the appellants’ complaint.  From the material before me and from the very helpful view of the property that I conducted in the presence of the parties, the appellants’ current dwelling is situation towards the centre front of the property, a clear low point when compared to the surrounding land.  A bund wall has been constructed around the home in order to offer it some form of protection.  From the evidence presented and from Dr Divett’s findings in the 2005 case, I am left in no doubt that the impact of stormwater rain on the subject property is significant, and at times can result in a large volume of water flowing through the lower parts of the subject property to a depth that would be considered dangerous to any person in such water.  I further find, however, that such stormwater is relatively slow moving due to the damming effect of Ebenezer Road.  I also find, consistent with the evidence and as conceded by Mr Micallef during cross-examination, that the rear, eastward part of the subject land is outside of the stormwater and flood influence.  Accordingly, that part of the subject land is suitable for construction of a dwelling.  The difficulty for the appellants as I see it is that, when they purchased the subject land, the low level house in which they currently reside was already constructed.  From my observations, the nature of the dwelling would make it a very costly exercise indeed, and I expect economically impractical, to raise the height of that dwelling.  It would seem beyond doubt to me that the appellants purchased the property as a normal prudent purchaser, expecting some stormwater runoff through the property and indeed locating a dam at the lowest point to the rear of the dwelling to take advantage of such stormwater.  However, it is also patently obvious that the appellants did not appreciate the amount of water that moves through the property after significant storm events.  By a significant storm event, I refer to rain of the nature of 50mls over a period of some hours.  Clearly, the appellants feel trapped in the situation in which they find themselves and have done the best they economically can in the circumstances by building the bund wall, at some expense to themselves, around the dwelling.  Their only other option would be the demolition of the current dwelling and rebuilding at the rear of the site.

5. The difficulty of course for the appellants is that I am required pursuant to the VLA to determine the unimproved value of the land.  Section 3(1)(c) of the VLA defines unimproved land as follows:

   “3.(1) For the purposes of this Act –
   ‘unimproved value’ of land means –

   (c)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.”

1. This aspect was explained by Dr Divett in his 2005 decision, although it is apparent to me from the manner in which Mr Micallef presented the appellants’ evidence that the thrust of this legislative provision still escapes the appellants.  Put simply, the land is to be valued as if none of the improvements are on the subject land.  An assessment is then undertaken as to the highest and best use of that land.  I note that with respect to the subject land, it is rural residential.  Imagining the subject land then as a completely vacant block, but with all the improvements on other blocks, including Ebenezer Road, around it, an unimproved value has to be determined.  In effect, the process that the respondent’s valuer, and this Court, must engage upon is a form of legal fiction.  When the subject land is viewed as if undeveloped, in my view a building could be erected at the rear, eastern side of the block which would be free from any risk from inundation by either stormwater from a significant storm event, or flood water from a very significant flood event of the Bremer River.

2. When comparing the subject block to the blocks on each side of the subject, in my view the subject block is clearly at a lower point than either of the other two blocks, making stormwater impacts greater on this block that the others.  This also makes the question of access to the block more difficult than for the other blocks. 

3. Mr Townsend’s evidence is that a suitable road could be constructed on the property for the sum of $30,000.  The valuer for the respondent, Mr O’Connor disputes that figure.  At the hearing before Dr Divett, Mr O’Connor, who has significant experience is general and in rural properties in particular, gave evidence that in his opinion and experience a suitable access road could be constructed for approximately $7,000.

4. Mr O’Connor makes the point in his evidence[4] that Mr Townsend has provided no breakdown of the sum of $30,000.  Unfortunately, in like manner, Mr O’Connor has not provided a break down of his sum of $7,000, save for the cost of 8ft x 24in diameter pipes.  In the absence of any detailed evidence by either party in this aspect, it is difficult for the court to determine the cost of construction of a suitable road.  Further, in this instance, the evidence of Mr Townsend has been accepted without cross-examination and I must take that factor into account.  I am satisfied that a not insignificant sum would be required to build a reliable access road to a building site at the rear, eastern side of the property.

   [4] See page 21 of the transcript.

Comparisons of Sales

1. The appellants did not call any valuation evidence.  Mr O’Connor for the respondent provided a valuation report and was cross-examined.  Mr O’Connor’s evidence relates to five sales as follows:

Sales	Area Ha	Date of Sale	Analysed U/Value	Applied U/Value 1/10/2004	Comparison
1 Cnr Higgs Rd / Ebenezer Rd EBENEZER	4.047	01/06/2004	$146,000	$129,000	Superior
2 Paynes Rd EBENEZER	3.237	18/07/2004	$156,000	$120,000	Superior
3 Paynes Rd EBENEZER	3.237	21/10/2004	$156,000	$120,000	Superior
4 Off Seidels Rd WALLOON	5.704	09/11/2004	$97,000	$94,000	Inferior
5 187-195 Ebenezer Road EBENEZER	4.047	08/04/2005	$147,000	$112,000	Slightly superior

1. There are a number of points in issue between the parties regarding Mr O’Connor’s comparison of sales.  The appellants agree with Mr O’Connor that Sales 1, 2 and 3 are superior.  However, there is dispute relating to Sale 4.  In his report, Mr O’Connor describes Sale 4 as comprising “mainly low lying Bremer River frontage bluegum flat with poor track access of Seidels Road over the railway line.  The sale is 95% within the 1:100 year flood line and has about 1.5ha endangered blue gum vegetation along Bremer River frontage.”  In comparing Sale 4 to the subject land, Mr O’Connor concludes that “the sale is larger but is in an inferior location, with inferior access, elevation, outlook and distance from power.  The sale is in inferior to the subject.” 

2. During cross-examination, Mr Micallef was taken through Mr O’Connor’s valuation report in some detail.  With respect to Sale 4, Mr Micallef gave the following evidence:[5]

   “Sir, I don’t think you understand our position.  Our position I was trying to get across to you earlier on is that we’re not affected in the 1-in-100.  We’re affected in the 1-in-1. … The 1-in-1 will flood to a higher minimum – 750 millimetres – just to get over the road … I can’t tell you how frequently this block here floods.  I can tell you how frequently my block floods.  I can tell you anything – even below a 1-in-1.  We’ve got a situation where one road cannot be built up because if we build that road up - and that’s the main access road.  We’ve had to put another access road in the centre so we can get out in a high water situation and that road again is no higher than 750 millimetres.”

   [5] See transcript page 9

3. Although I acknowledge Mr O’Connor’s experience and expertise as a valuer, in my view Mr Micallef has made a valid point that the significant effects of stormwater runoff that impact his property on a frequent basis should also be taken into account when considering whether or not Sale 4 is inferior or superior to the subject land.

4. As regards Sale 5, Mr O’Connor refers to that sale as being slightly superior to the subject.  Sale 5 is located immediately to the west of the subject land, also fronting Ebenezer Road.  It is clear from Mr Micaleff’s evidence that he considers the subject property to be quite inferior to Sale 5.  Having, considered the evidence and viewed both properties, I agree that the subject land and Sale 5 are similar in nature, with Sale 5 being superior to some degree.

5. Another important feature arises when considering Sale 5.  The date of Sale 5 is 8 April 2005, some six months and one week after the date of valuation.  In relying upon Sale 5, Mr O’Connor in his report has made specific reference to the decision of the President of the Land Court (Mr JJ Trickett) in Fairfax v Department of Natural Resources and Mines [2005] QLC 0011 where the President said at page 13:

   “The date of valuation was some 17 months later and there is no issue that the market was rising during that period.  With that evidence, there is little doubt that if 'Karemba' had sold closer to the date of valuation the sale price would have been higher and so would the analysed unimproved value.  Therefore, it is not surprising that Mr. Craig has applied a value higher than his analysed value at that time.”

6. It should be noted that in Fairfax the President was considering a sale that occurred a considerable period of time prior to the valuation date, whereas in this matter Mr O’Connor is relying on a sale somewhat after the date of valuation.  I accept the methodology adopted by the President that an allowance can be made to appropriate sales, taking into account whether or not such sales occurred in a rising or falling market, to ascertain a likely value of such sales at the valuation date when those sales are at a time considerably removed from the valuation date.  In the case at hand, as Mr O’Connor points out, Sale 5 is located next door to the subject land and bears many of the same characteristic as the subject land and therefore, although after the valuation date, should be taken into account, with an appropriate allowance made. 

7. My chief difficulty with this aspect of Mr O’Connor’s report comes from an analysis of the allowance that Mr O’Connor has made in applying a value for the sale as at 1 October 2004.  As can be seen from the table above, Mr O’Connor has applied a value of $112,000 from the analysed unimproved value of $147,000.  This equates to a 76% application.  Mr O’Connor argues that such application is appropriate given that Sale 5 occurred in a rising market.  My difficulty is that there appears to be little consistency with the applied value given to the five sales referred to in this matter by Mr O’Connor.  Sale 1, which occurred 4 months prior to the valuation date, has an application of 88%.  Sale 2, which occurred 2½ months prior to the valuation date, has an applied value of 77%, the same applied value as Sale 3, even though that sale occurred 19 days after the valuation date.  Sale 4, which occurred 5 weeks after the valuation date, has an applied value of 97%. 

8. Certainly, there is evidence from Mr O’Connor’s report that the sales occurred during a rising market.  For instance, Sale 1 was a re-sale in the sum of $150,000 of a March 2003 sale of $54,000 with similar improvements.  Further, Sale 4 in the sum of $100,000 on 9 November 2004 was also re-sold in June 2005, with similar improvements for $125,000.  Unfortunately, Sale 4 is the only evidence of the market movements in the period October 2004 to mid 2005.  Absent other evidence of market increases during this period, and in light of the inconsistency in the applied values presented in each sale, I am not satisfied with the applied unimproved value given to Sale 5 as at 1 October 2004. 

Legislative considerations

1. As detailed in paragraph 10 above, section 3(1) of the VLA requires the respondent to determine the unimproved market value of the subject land as at the valuation date on the basis that there were no improvements on that land, but taking into account the surrounding improvements on other lands, roads, utilities and the like.  As the President said in Fairfax:

   “The principles for determination of the 'market value' of land were established by the High Court in Spencer v The Commonwealth (1907) 5 CLR 418. In that case, the High Court found that the value of land is determined by the price that a willing but not over-anxious buyer would pay to a willing but not over-anxious seller, both of whom are aware of all the circumstances which might affect the value of the land, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding facilities, the then present demand for land and the likelihood of a rise or fall in the value of the property. (See Griffith CJ at 432 and Isaacs J at 441).

   It has been well established that the unimproved value of land is ascertained by reference to prices that have been paid for similar parcels of land.  In Waterhouse v The Valuer-General (1927) 8 LGR (NSW) 137 at 139, Pike J said that:

   'Land in my opinion differs in no way from any other commodity.  It certainly is more difficult to ascertain the market value of it but – as with other commodities – the best way to ascertain the market value is by finding what lands comparable to the subject land were bringing in the market on the relevant date – and that is evidenced by sales."”

I respectfully agree with these observations.

Presumption of correctness of valuation

1. I now turn to section 33 of the VLA, which states as follows:

   33      Status of valuation B

   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.

1. This section was considered by the High Court in the case of Brisbane City Council v The Valuer-General for the State of Queensland 1977-78 140 CLR 41 where Justice Gibbs (as he then was) made the following observation:

   “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 should be noted that s. 33 of the VLA is in essentially the same terms as what was then s. 13(7) of the Act. 

1. Land Court Member, Mr RS Jones, in the Land Court matter of Pfeffer v Department of Natural Resources and Mines [2005] QLC 0059 also considered the presumption of correctness of a valuation as set out in s. 33 of the VLA. In that case, Mr Jones concluded[6] that the valuation appealed against involved either a significant error of fact or was arrived at by a fundamentally flawed method and that, in any event, on the evidence it was clearly wrong.  He subsequently found that the best evidence supported an unimproved value which was above the valuation appealed against.

   [6] At paragraph 21.

2. In the matter at hand, and having considered all of the evidence before me, I am not satisfied that the valuation of $84,000 involves a significant error of fact or was arrived at by a fundamentally flawed method.  On the contrary, such valuation was arrived at by taking into account the detailed analysis of Dr Divett provided in his 2005 decision. 

Conclusion

1. For the reasons set out above, I have reached the conclusion that the appellants have failed to establish that the respondent’s assessment of the unimproved value should be reduced to $10,000, or in any amount at all.  Whilst there may remain some argument as to the actual costs involved in creating an access to any dwelling constructed at the back eastern corner of the property, in my view this aspect was canvassed by Dr Divett; has been taken account of in the valuation of $84,000 arrived at; and sits well in a relativity sense with Sales 1 to 4 referred to by Mr O’Connor.  It follows that the appeal must be dismissed.  However, that is not the end of the matter.

2. As detailed earlier, the respondent contends for an unimproved value of $105,000.  For the reasons set out in my evaluation of the evidence relating to Sale 5, and taking into account all of the material before me, I am not satisfied that the respondent has established that the original valuation involved a significant error of fact or was arrived at by a fundamentally flawed method.  Accordingly, I do not consider it appropriate that the valuation should be increased as contended by the respondent.  The valuation of the subject land is accordingly affirmed in the sum of $84,000.

Orders

In light of the foregoing, the orders of the court are as follows:

1.The appeal is dismissed.

2.The respondent’s contention that the valuation be increased is dismissed.

3.The valuation of the Chief Executive as at 1 October 2004 of Eighty-four Thousand Dollars ($84,000) is affirmed.

P A SMITH

MEMBER OF THE LAND COURT