Moar v Minister for Natural Resources and Minister for Mines and Energy
[2004] QLC 67
•29 July 2004
LAND COURT OF QUEENSLAND
CITATION: Moar v Minister for Natural Resources and Minister for Mines and Energy [2004] QLC 0067 PARTIES: Vonda Lisa Moar
(applicant)v. Minister for Natural Resources and Minister for Mines and Energy
(respondent)FILE NO: LA2003/0744 DIVISION: Land Court of Queensland PROCEEDING: Application for conversion to freehold DELIVERED ON: 29 July 2004 DELIVERED AT: Brisbane HEARD AT: Cairns MEMBER Mr RP Scott ORDER: I set aside the review decision appealed against and determine the valuation of the subject land for the purpose of conversion to freehold at Forty-Eight Thousand Dollars ($48,000). CATCHWORDS: Land Act 1994 – Conversion to freehold – Unimproved value – Relevance of valuation under Valuation of Land Act 1944 – Best evidence – Sales evidence preferred. APPEARANCES: Mr A McCaffrey appeared as agent for the applicant
Mr K Fisher, Barrister appeared as counsel for the Minister.
Vonda Lisa Moar holds term lease 210880 under the provisions of the Land Act 1994 and has applied to the Minister to convert that lease to freehold tenure. The subject land is Lot 56 on Plan TS55 in the Parish of Muralug, County of Torres. The lease commenced on 17 August 1998 and is to expire on 16 August 2028.
Section 170(4) of the Land Act provides:
“170(4) The unimproved value of the land is calculated at the day the Minister receives the conversion application.”
The application for conversation was received by the Minister on 10 March 2000 therefore that date becomes the relevant date at which the subject land falls to be valued.
By letter dated 13 June 2003 the Minister offered to the applicant conversion of the subject land at a price of $50,000. The applicant applied for internal review of the decision concerning the conversion price. That review was conducted under divisions (1) and (2) of Part 3 of Chapter 7 of the Act. The outcome of that review which was advised by letter of 17 September 2003 was to maintain the figure in the original offer. Following that the applicant has appealed to this Court.
The right of appeal arises by virtue of s.423 of the Act and Schedule 2 and by s.170(2) which provides:
“(2) The lessee may appeal against the Minister’s decision on the purchase price.”
The powers of the Court in this matter are as provided for in s.429(3):
“Powers of court on appeal
429(3) The court may –
(a) confirm the review decision; or
(b) set aside the review decision and substitute another decision; or
(c) set aside the review decision and return the issue to the Minister with directions the court considers appropriate.”
The grounds of appeal were expressed in narrative form. They included complaints about the process employed by the Minister’s Department in dealing with a conversion application. These are matters that are not within the jurisdiction of the Court which is confined to a consideration of the decision, that is the offer price. The nub of the relevant grounds of appeal appears to me to be the applicant’s contention that the value of the subject land for conversion purposes ought to be $32,500 – the same figure as the Chief Executive of the Department of Natural Resources and Mines applied to the subject land under the provisions of the Valuation of Land Act 1944 as at a date of 1 October 1998.
Allister McCaffrey appeared as agent for the applicant and provided evidence on her behalf. He is an economist and is employed in the Commonwealth Public Service. He has experience over a period of 30 years in the purchase and sale of real property both as part of his employment and privately. He has enjoyed two postings on Thursday Island during the period September 1989 to August 1997, and has travelled throughout the Torres Strait including Prince of Wales Island where the subject land is located.
The Minister called Robert Grant Moroney, a registered valuer who provided a valuation report in support of the $50,000 conversion offer.
In his report Mr Moroney said that the subject land has an area of about 1.012 hectares. Mr McCaffrey’s evidence, which was not challenged, was to the effect, however, that the subject land has a usable area probably a little over 8,000 square metres as a creek which traverses the property towards its rear reduces the available area. I might mention at this point that in the comparisons that Mr Moroney undertook between the subject land and sales properties referred to by him, the size of the subject land, as he understood it, appears as a matter of some significance.
The subject property is situated at Long Beach on the west coast of Prince of Wales Island in the Torres Strait about 16 kilometres from Thursday Island. Access to Long Beach from Thursday Island, the administrative centre for the Torres Strait, is via boat. There is a settlement of some five lots at the northern end of Long Beach and another of five lots to its south where the subject property is located. Vehicular access between the two settlements is via a 30 kilometre rough earth-formed track which is not maintained by the Torres Shire Council. Mr Moroney considered that access to be not all-weather.
Mr McCaffrey said that there was no public ferry between Long Beach and Thursday Island and that the residents have for many years used private dinghies for that purpose. During the monsoon season which falls between October and about February/March, access to Long Beach is difficult. The better drop-off point is to the north, which means that the southern settlement is comparatively disadvantaged at that time. He said also that during periods of low tides access is inhibited.
Whilst landline telephone is available two lots from the subject property, the applicant has been provided by Telstra with a solar powered satellite telephone for reasons which are not fully understood by Mr McCaffrey.
In his valuation report Mr Moroney said that underground domestic water supplies are readily available at shallow depths on the subject property. Mr McCaffrey disagreed with that explaining that creek water is available during the wet season, however the water there turns brackish when flow stops during the dry. Mr Moroney accepted Mr McCaffrey’s evidence as being the more accurate, however said his main sale basis which is Sale 3 in his schedule of four sales is similar in that respect to the subject land. He said that the residents on Long Beach employ rain water tanks and several of these have been installed by the applicant.
Mr Moroney valued the land as a rural residential site. That highest and best use was not challenged by the applicant. He said that generally the best use of properties in the Long Beach locality was as a weekender residential usage, however Mr McCaffrey said that some residents commuted between Long Beach and Thursday Island. Mr Moroney said that there had been a limited number of sales in Long Beach in recent times, all of which had been developed to some extent. All of the Long Beach properties were at some stage held at Special Leases under the provisions of the various Land Acts, and a number of these leases had been converted to freehold tenure.
The value of the subject land for the purpose of conversion to freehold tenure is to be determined in accordance with s.170(3)(a):
“170(3) The purchase price is an amount equal to the total of –
(a) the unimproved value of the land being offered, as if it were fee simple;”
Section 434(1) and (3) provides:
“434 Meaning of “unimproved value”
(1) In this Act, the “unimproved value” of land is the amount an estate in fee simple in the land in an unimproved state would be worth if there were an exchange between a willing buyer and a willing seller in an arms-length transaction after proper marketing, if the parties had acted knowledgably, prudently and without compulsion.
…
(3) To remove any doubt, it is declared that the Valuation of Land Act 1944 does not apply to the meaning of unimproved value in this section.”
The main thrust of the applicant’s case is that there are considerable difficulties in finding sale properties which are suitable to compare with the subject land for valuation purposes. Accordingly Mr McCaffrey argues, resort should be had to the unimproved value determined by the Chief Executive under the Valuation of Land Act close to the relevant date. I will adopt the term “rating valuation” as the parties did in referring to such valuations. The value figure of $32,500 is the rating valuation struck by the Chief Executive, as at 1 October 1998.
The applicant submitted that the effect of s.434(3) of the Land Act is not such as to preclude any reliance being placed on a rating valuation. I accept that submission.
Section 434(4) of the Land Act relevantly provides:
(1)In this section –
“unimproved state” includes, if the value of improvements and development work to the land performed by the State has not been paid to the State, the improvements and development work finished before the lease started or the deed of grant was issued.”
Section 3(1) of the Valuation of Land Act is to the effect that the land is to be treated as unimproved or as if any improvements did not exist. There will therefore be factual circumstances where there will be a coincidence between the statutory requirements for ascertaining unimproved value under both Acts whilst, given the language in s.434(4), there will be cases where there can be no such coincidence.
It follows that a rating valuation need not be excluded from consideration by virtue of the language of s.434(3) of the Land Act. Whether, however, a rating valuation provides a suitable basis for striking a value under s.170(3) is a question of evidence. That is, it is a question that can only be dealt with following a consideration of all of the evidence and based on the principle that the best available evidence is to be employed. Before I come to the other evidence I should say that the rating valuation of $32,500 does not in the context of the present case enjoy a particular status effected by the statutory process that gives rise to its creation and supports its validity for local authority rating purposes. In the present context it is nothing but an opinion whose provenance is unknown. Presumably at some stage the subject land was valued by reference to sales evidence for the purpose of striking a rating valuation. Whether that process was employed in striking the $32,500 or whether this figure resulted from an escalation of an earlier figure by some process of implementation is not in evidence. If the rating valuation was arrived at by the use of sales evidence: which sales were used? Are they the same sales as are used by Mr Moroney before me?
In the absence of answers to such questions the confidence that I might otherwise place on the rating a valuation would not be high. The critical question as to the appropriate basis for arriving at the conversion price for the subject land turns, however, on a consideration of the sales evidence and its comparative suitability.
Mr Moroney provided evidence of four sales in his valuation report. One of these was the sale of the subject land to the applicant on 27 October 1998 when, of course, the land was leasehold. Mr Moroney deducted $3,000 from the $28,000 sale price to calculate an unimproved figure of $25,000. It seems that he included reference to this sale for completeness as he expressed no direct reliance on the transaction as his basis for valuation.
Mr McCaffrey said that the applicant would not have applied for conversion of the subject lease to freehold had she not been concerned about the possible effect of native title claims on the land. The Kurareg Tribe has been actively pursuing native title claims and was particularly targeting the Prince of Wales Island. Whilst there may have been a degree of confidence held amongst lawyers and others that both freehold and leasehold land was immune from claim, that confidence was not reflected in the Prince of Wales Island community with respect to leasehold land in particular.
I can understand how the concern about native title claims may have influenced the applicant to seek the protection of freehold title. However I cannot see how that sad irony affects the value of the subject land for the purpose of conversion to freehold, other than perhaps to enhance it in the view of the market place. Indeed Mr McCaffrey thought that the prominence of the Kurareg Tribe’s activities had a softening effect on leasehold values. He said that the subject land had been on the market for about 2 years at a price of $35,000 before the applicant purchased it and that there was no competition at the negotiated purchase price of $28,000. He said that the land would certainly not have achieved a price of $50,000 at that time.
I need to make it clear that the task which I need to undertake pursuant to the provisions of the Land Act is to ascertain the value of the subject land as if it were freehold not leasehold. And it seems to me that it is quite clear that the freehold value of the subject land must be greater than the $25,000 analysed figure paid for the leasehold by the applicant.
Sale 1 is Mr Moroney’s valuation report is to be found in the northern section of Long Beach. The sale comprised a freehold block described as Lot 79 on CP 846984 having an area of 0.478 hectares. The sale took place on 24 July 2000 for a price of $140,000 which Mr Moroney analysed to an unimproved figure of $45,600. The sale land comprises a regular shape near level allotment of open sandy forest with esplanade frontage. No permanent natural water supplies are available. In comparison with the subject land Mr Moroney said that the sale property has a similar location, services, access and topography to the subject property, though is smaller overall. His conclusion was that the sale land is inferior to the subject property. Whilst he had not mentioned in his comparison between this sale property and the subject the fact that the northern part of Long Beach enjoys a superior anchorage to that available to the south, I notice that this point was mentioned in the narrative part of his report.
This access issue was raised by Mr McCaffrey who also said that the sale land enjoys a better outlook than the subject property which has its view of the beach and water screened by vegetation on the esplanade.
Mr McCaffrey’s main concern with this sale and Sales 2 and 3 in Mr Moroney’s report lay in an area which he saw to be more fundamental. He saw difficulty with the sale analysis approach saying that the improvements and the freehold title are intrinsically part of the asset which was sold. He therefore expressed the view that these sales ought to be jettisoned in favour of the adoption of the rating valuation. I will take these points in sequence.
First, the purpose of the present hearing is the determination of the valuation of the subject land as if it were unimproved fee simple, that is freehold land. The best evidence to be employed in that exercise comprises comparable freehold sales.
Second, whilst it is clearly preferable in determining unimproved value to rely on unimproved or lightly improved sales the use of more heavily improved sales, if that is all that is available, is acceptable. Such improved sales need to be analysed to reveal the value of the land in the transaction. Mr Moroney has done this by the use of conventional valuation methodology.
Whilst Mr McCaffrey was keen to emphasise the cost and difficulty in erecting dwellings and other structures on Prince of Wales Island he did not directly challenge any of Mr Moroney’s values of improvements either in Sale 1 or in Sales 2 and 3, both of which were also improved. I must therefore in the absence of some patent defect in Mr Moroney’s sales analysis, evidence accept that evidence. He is an expert in that respect.
Sale 2 comprised the sale of a property on Packe Island held as a freeholding lease that commenced on 5 November 1996 for a term of ten years, but which was sold on a freehold basis whereby the balance of freeholding monies due to the State were deducted from the sales proceeds and remitted to the State. The Sale 2 land is described as Lot 50 on CP 825784 containing an area of 0.3415 hectare. The sale took place on 11 August 2000 for a price of $131,000 which was analysed by Mr Moroney to reveal an unimproved land figure of $30,350.
Access to the Sale 2 land is by boat only from Thursday Island travelling along the eastern side of Prince of Wales Island which Mr Moroney said is exposed to the predominant south-easterly winds. Whilst Mr McCaffrey supported this comment he said that experienced dinghy operators used a route that utilised protection from the south-easterly afforded by Horne Island for a large part of the journey. He accepted that Rattlesnake Point offered challenging conditions on occasions but expressed the view that an experienced operator could traverse this Point in safety. The evidence leads me to a conclusion that the sea route from the Sale 2 land to Thursday Island compares less favourably than that available from the subject property. However the deep water anchorage available throughout the year at the Sale 2 property is superior to that available to those lots at the south of Long Beach.
Mr Moroney described the Sale 2 land as being a semi-isolated retreat located about 22.5 kilometres via boat southerly from Thursday Island. He said the irregularly shaped sale property is situated on the north-western coastline of Packe Island and comprises part mangrove fringe to the high water mark, rising gently then in a more moderate to steeply sloping rise to the rear boundary. The land has an easement of 51 square metres recorded on the title to provide access to land held as a cemetery reserve. No permanent natural water is located on the land, however there is a natural spring on adjoining State land which lasts a short time after rain.
Mr Moroney formed the view that the Sale 2 property is overall inferior to the subject. Whilst there are many similarities between the two properties he concluded that the size of the subject land ought to favour it in terms of value.
Mr McCaffrey described the Sale 2 land as being in a picture postcard setting. He said the sale land was truly a waterfront site whereas the subject had its views of the water screened by vegetation. He noted that a communication tower was constructed on Packe Island during the early pearling days in the Torres Strait so that the residents there enjoy telephone, internet and television reception. His main point however was that the sale did not provide a meaningful comparison with the subject property as each were on different islands. He reiterated his view that it was preferable to consider sales evidence in the group of five lots found at the Long Beach south location.
Mr Moroney identified his Sale 3 as being the best basis for valuation. The sale land sold as a freeholding lease however on the basis that freeholding monies due to the State were deducted from the sale proceeds, such that the purchaser acquired a freehold title. The sale land is located two lots to the north of the subject and is described as Lot 53 on CP 901032 having an area of 0.8098 hectares. The sale took place on 5 November 1997 and whilst Mr Moroney expressed the view that the market had improved following that date he applied the sale directly in comparison allowing no escalation for market improvement. He analysed the sale price at $130,000 to an unimproved figure of $55,900 following the deduction of improvement values.
The sale land comprises a level to slightly undulating open forest block, with esplanade frontage. There is a creek running along the rear of the lot. Whilst inspecting the subject land, Mr Moroney did not personally experience mosquitoes or sandflies in the vicinity of the creek there, however he expressed the view in cross-examination that the creek towards the rear of the Sale 3 land would probably have generated a similar insect problem. The sale land is timbered with bloodwood, wattle and tea tree forests, and has restricted sea views according to Mr Moroney. Mr McCaffrey on the other hand suggested that the Sale 3 land had a better outlook as the view is less screened by timber than in the case of the subject property.
The sale land is comparable to the subject property in Mr Moroney’s opinion as each is affected by the same features of location, services, access and topography though he said that the sale property was comparatively disadvantaged in having a smaller area than the subject. In making this last mentioned comment Mr Moroney was relying on his understanding that the area of the subject property was about 1.012 hectares whereas I accept the evidence of Mr McCaffrey that it is probably a little more than 8,000 square metres.
The applicant had received advice in the form of a ministerial letter of 27 October 2003 which Mr McCaffrey had understandably construed as indicating that the Sale 3 had been converted at a price of $25,000 as at 13 February 1996. The actual date of conversion value however was 4 May 1995. The conversion figure is too remote in date from the relevant date in the present matter to be of any assistance in striking value. The sale referred to as Sale 3 in Mr Moroney’s valuation took place some two and a half years later than the date of conversion and is much closer to the relevant date for the purpose of valuation.
The ministerial letter also indicated that another property (Lot 54 on Plan TS 55) converted as a price of $25,000 with a relevant date of 15 February 1996. The actual date for conversion value purposes was 11 May 1993 when that property’s rating value was $16,600 as at the relevant date of 31 March 1992. In passing I notice also that Lot 46 at Frenchman’s Beach, Prince of Wales Island was freeholded for $40,000 as at 23 March 1998 when that land’s rating value was $17,400 with a relevant date of 1 January 1996.
The evidence as to conversion values is of no assistance to the applicant’s case here but points quite clearly to the differential that can occur between the value for conversion purposes and the rating value.
The best evidence upon which I can rely for the purpose of striking a value for conversion purposes is the sales evidence provided by Mr Moroney and in particular Sale 3 in his schedule of four sales. It is evidence that is preferable to that of rating valuations whose provenance is unknown. I notice in his comparison between the Sale 3 property and the subject land Mr Moroney has assumed an available area on the subject land greater than that which was actually available. I will therefore reduce the value ascribed to the subject land by him; however, I make the point for the benefit of the applicant that such a reduction should not be on a pro rata basis as the valuation approach employed is that of striking a value for the land as a site not on the basis of its pro rata value. The reduction in value ought to be nominal only therefore and I will settle on a figure of $2,000 as being appropriate.
Accordingly I set aside the review decision appealed against and determine the valuation of the subject land for the purpose of conversion to freehold at Forty-Eight Thousand Dollars ($48,000).
RP SCOTT
MEMBER OF THE LAND COURT
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