Multiplex 240 Queen Street Landowner Pty Ltd v Department of Natural Resources, Mines and Water - [2007] QLC 10

LAND COURT OF QUEENSLAND

CITATION: Multiplex 240 Queen Street Landowner Pty Ltd v Department of Natural Resources, Mines and Water [2007] QLC 0010

PARTIES: Multiplex 240 Queen Street Landowner Pty Ltd
(appellant)

v.

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

FILE NO: AV2005/0805

DIVISION: Land Court of Queensland

PROCEEDING: An appeal against the unimproved value of an improved commercial property in the Central Business District of Brisbane.

DELIVERED ON: 28 February 2007

DELIVERED AT: Brisbane

HEARD AT: Brisbane

MEMBER: Mr JJ Trickett, President

ORDER:
The appeal is allowed, the valuation of the Chief Executive is set-aside and the unimproved value of Lot 5 on Registered Plan 200175, Parish of North Brisbane (240 Queen Street), is determined at Thirteen Million Four Hundred Thousand
Dollars ($13,400,000).

CATCHWORDS:
Valuation - unimproved value - Central Business District improved commercial site - highest and best use - methods of valuation - direct comparison with sales - analyses of sales.

Valuation – statutory construction - Valuation of Land Act 1944 – unimproved value of improved land – method of valuation – relevance of sales – analyses of improved sales – comparability of sales for different purposes.

APPEARANCES: Mr R Traves SC, with him Mr R Anderson, for the appellant
Mr T Quinn, with him Mr S Fynes-Clinton, for the respondent

SOLICITORS: Gadens Lawyers for the appellant
Legal Services, Department of Natural Resources and Water for the respondent.

This is an appeal by Multiplex 240 Queen Street Landowner Pty Ltd (the appellant), against the unimproved value applied to its improved commercial land by the Chief Executive, Department of Natural Resources, Mines and Water (the respondent) in an annual valuation made by the respondent as at 1 October 2003 under the provisions of the Valuation of Land Act 1944 (the Act). It is one of five appeals against the valuations of commercial lands by various landowners which were heard consecutively, with the evidence in each case being the evidence in all others.

Background

The appellant is the owner of land situated at 240 Queen Street, in the Brisbane Central Business District (the CBD). The land has been developed with a modern "A" grade 26 level commercial office tower, with a ground floor banking chamber spread over three levels. It has a total lettable area of 28,074 m², with basement parking for approximately 100 vehicles.
As at 1 October 2003, the respondent determined the unimproved value of the subject land at $15,000,000. The appellant objected against that valuation, but the objection was disallowed. The appellant then appealed to the Land Court, contending for an unimproved value of the land of $12,860,000.
The grounds of appeal were:
"The respondent's valuation is excessive having regard to the following:
1.     Ground 1:
The appellant's assessment of the unimproved value of Lot 5 on RP 200175 (the 'land') is lower than the respondent's assessment of the unimproved value of the land.
Particulars
1.1   The appellant's assessment of the unimproved value of the land is $12,860,000.
1.2   The appellant's assessment of the unimproved value of the land is $15,000,000.
2.     Ground 2
The appellant's assessment of the unimproved value of the land is supported by sales evidence.
Particulars
2.1The appellant's assessment of the unimproved value of the land relies on sales of properties in Brisbane including but not limited to:
(a)        175 Eagle Street, Brisbane (Lot 10 on SP 151098);
(b)        75 Eagle Street, Brisbane (Lot 3 on SP 140664); and
(c)        120 Edward Street, Brisbane (Lot 5 on SP 135597).
3.     Ground 3
The appellant's assessment of unimproved value of the land has been made in accordance with the Valuation of Land Act, 1944.
Particulars
3.1   The market evidence relied upon by the appellant to determine the unimproved value of the land supports the assessed value;"
At the hearing, the appellant relied upon the evidence of registered valuer, Mr G Jackson, who submitted valuation reports and gave oral evidence contending for an unimproved value as at the date of valuation of $12,230,000.
The respondent did not attempt to support the issued valuation of $15,000,000, but sought to lead evidence through registered valuer, Mr M Denman, to a valuation under s.3(2) of the Act as at the relevant date of $43,000,000. However, when that valuation was ruled inadmissible[1], Mr Denman provided written reports and gave oral evidence of several unimproved values which he ascertained by:
(i)        The deduction method (analysis of the sale of the subject land)            $34,000,000
However, if that was not accepted –
(ii)       By direct comparison with site sales
·Dominant retail use sales   $21,300,000
·Dominant commercial use sales   $13,900,000
·Dominant residential use sales   $11,700,000
[1]Multiplex 240 Queen Street Landowner & Anor v Department of Natural Resources, Mines and Water [2006] QLC 30.
After arriving at those various unimproved values, Mr Denman made the following statement:
"As my assessment of value having regard to retail dominant use sales evidence is higher than by reference to commercial dominant or residential dominant I adopt this as the highest and best use of the site for valuation purposes."[2]
[2] Ex 12, p 35

The Subject Land

The land is situated on the northern corner of Queen and Edward Streets directly opposite the eastern end of the Queen Street Mall, but separated from it by Edward Street. Its frontage to Queen Street is 54.17 metres while its frontage to Edward Street is 39.28 metres. It also fronts Rowes Lane which provides vehicle access. The total area of the site is 2,127 m².
At the date of valuation, the property was designated as "Multi-Purpose Centre MP1 – City Centre" under the Brisbane City Plan 2000. It is within the "Retail Heart" precinct of the City Centre Local Plan, which area is intended primarily as an intensive retail locality, and which is largely affected by height limits to prevent high-rise development in the Queen Street Mall. However, the subject property is not subject to those height restrictions. The designation allows for a wide range of activities to be clustered together.
The preferred outcomes and strategies for the City Centre include a statement that high intensity offices and higher order retail activities are to be located in a compact City Centre, linked by transport corridors to Major Centres. The City Centre is also to contain high intensity residential uses that promote the vitality of the Centre and make best use of existing infrastructure.
The City Centre contains Queensland's largest office employment area. It is the only major high-rise commercial area in the City and the Plan seeks to promote and support office development in the City Centre. However, both high-rise commercial and residential development are permitted in the area and residential development is encouraged either as stand-alone projects or in combination, including some component of retail, throughout the City Centre. The subject property is situated in an area dominated by high-rise commercial development, although to the south and west is the intensive low-rise retail area, with a few residential developments principally in refurbished heritage properties, such as MacArthur Chambers and Anzac Square.
At the relevant date, the CBD was dominated by commercial office accommodation, with a compact retail trading heart located on the Queen Street Mall. Mr Denman expressed the view that the CBD was undergoing a demographic shift to accommodate more residential development, which he regarded as part of a broader wave of urban renewal in Brisbane, including large-scale residential development within fringe CBD residential localities.

The Relevant Legislation

The responsibilities of the respondent in valuing the subject land and, indeed, all land in Queensland, are contained in the Act, which provides that the respondent is required to make annually or periodically a valuation of all land in a local government area: s.37. The valuation of each parcel of land is to be the "unimproved value" of that land, which is defined differently in relation to "unimproved land" and "improved land". Those definitions are contained in s.3:
"3 Meaning of unimproved value
(1) For the purposes of this Act –
unimproved value of land means –
(a)in relation to unimproved 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; and
(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.
(2) However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act.
(3) …
(4) Notwithstanding anything contained in this section, in determining the unimproved value of any land it shall be assumed that –
(a)the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates; and
(b)such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used;
but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that any improvements referred to in subsection (1) had not been made."
It is well established that the unimproved value of unimproved 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, in dealing with provisions similar to the Queensland legislation, Pike J said at 139:
"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."
However, there are few areas in Queensland where there is completely unimproved land, as essentially all land has been improved to a greater or lesser extent. When considering the unimproved value of improved land, it is necessary to have regard to the provisions of s.3(1)(b) and ascertain the unimproved value of such land, assuming that the improvements on the land did not exist. The use of sales of improved land in establishing the unimproved value of land was considered by the Land Appeal Court in The Valuer-General v Marano (1978) 5 QLCR 194, where the Court said at 200 – 201:
"It is well established that the best way to ascertain the unimproved value of land is by applying to it sales of unimproved, comparable, lands which took place reasonably close to the date at which the valuation is to be made. But in many districts it is impossible to obtain sufficient unimproved sales to form a sound foundation, and it therefore becomes necessary to analyse sales of improved lands for the purpose of ascertaining, as far as is possible, what part of the purchase price of the sale property relates to improvements and what part is attributable to the land itself."
It has consistently been held by the Land Court and the Land Appeal Court that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land (see for example Fischer v The Valuer-General (1983) 9 QLCR 44 at 46; Barnwell v The Valuer-General (1989) 13 QLCR 13 at 17; and Grahn v The Valuer-General (1992) 14 QLCR 327 at 328.)
There is therefore little difference in establishing the unimproved value of unimproved land by comparison with sales of unimproved land (s.3(1)(a)) and the unimproved value of improved land (s.3(1)(b)) by comparison with unimproved values deduced from sales of lightly improved land (where the value of the improvements on the sale lands are assumed not to exist), by deducting the value of the improvements from the sale prices.
A difficulty arises when there are no sales of lightly improved land which can be used as a basis for the valuation of improved land. The valuer then has to resort to the analyses of highly improved sales to determine the unimproved values of those lands, which then can be used as comparisons for the valuation of similar lands.
However, the difficulties in arriving at unimproved values from highly improved sales cannot be overstated. While estimating the value of improvements on lightly improved land is a relatively uncomplicated task, the difficulty and uncertainty of accurately ascertaining the added value of improvements on a highly improved sale property increases with the complexity and intensity of the improvements. There is such a high likelihood of error in such analyses, that even the most competent valuer can have little confidence in an unimproved value arrived at by that process. This was clearly recognised by the Land Appeal Court in Clough v The Valuer-General (1981) 8 QLCR 70, where after confirming that the best guide to unimproved value is sales of vacant or lightly improved land, the Court went on to explain at 76:
"The reason is obvious. In applying such sales there is no room for error in analysing the value of improvements.
Because there is less room for difference of opinion as to the value of the various items of improvement and comparison is thus simpler, it has been held that highly improved sales should be avoided in preference to sales comprising a lesser degree of improvement."
The principle has most recently been affirmed by the Land Appeal Court in Department of Natural Resources and Mines v Spender, where the Court reiterated that it has long been held that sales of vacant or lightly improved land provide the best evidence of unimproved value.[3] In Spender and in all the previous cases, the Land Appeal Court was dealing with the unimproved value of improved land.
[3] [2003] QLAC 86 at [59].
There is no definition of "improved land" in the Act. However, "improved value" is defined in s.4 as follows:
"4. Meaning of improved value
For the purposes of this Act -
improved value means, in relation to land, the capital sum which the fee simple of the land, including improvements, might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require." (Emphasis added)
That definition makes clear the distinction between "unimproved land" and "improved land". However, while the distinction may be clear, because of other definitions contained in the Act, it is sometimes quite difficult to ascertain whether the land is unimproved or improved: see for example, Department of Natural Resources and Mines v QNI Metals Pty Ltd [2002] QLAC 71.
The Act provides a definition of "improvements" in s.6:
"6 Meaning of Improvements
(1)Improvements means, in relation to land, improvements thereon or appertaining thereto, whether visible, invisible or intangible, and made or acquired by the owner or the owner's predecessor in title, and includes all such destruction of suckers and seedlings as is incidental to the destruction of timber, and also includes the destruction of other vegetable growths and of animal pests on the land to the extent to which such destruction retains its utility, but does not include the destruction by any person of any such growths or pests which are allowed to establish themselves on the land during the ownership, except to the extent (if at all) to which it restores wholly or partly so much of the utility of a previous improvement in the nature of the destruction of such growths or pests as is, by the subsequent provisions of this definition, deemed to have been lost, and any improvement consisting of the destruction of such growths or pests, by whomsoever the same may be effected, shall be deemed to have lost its utility to the extent to which, after it has been made, other growths or pests (as the case may be) are allowed to establish themselves on the land.
(2)…
(5)In this section -
intangible improvements, in relation to land, include the benefit of -
(a)the following non-physical improvements to the land -
(i)a lease, licence or other right;
(ii)the goodwill associated with the purpose for which the land is being used; and
(b)other non-physical improvements prescribed under a regulation."
The Act also provides a definition of "value of improvements" in s.5:
"5 Meaning of value of improvements
(1) The value of improvements means, in relation to land, the added value which the improvements give to the land at the time as at which the value is required to be ascertained for the purposes of this Act, irrespective of the cost of the improvements, including in such added value the value of any hotel licence the value of which has been included in the improved value.
(2) However, the added value shall in no case exceed the amount that should reasonably be involved in effecting, at the time as at which the value is required to be ascertained for the purposes of this Act, improvements of a nature and efficiency equivalent to the existing improvements." (Emphasis added)
The distinction between added value and cost, as well as the limit on added value, are crucial to the analyses of improved sales, or valuation by the deduction method.
The concept of "intangible improvements" was introduced into the Act by the Valuation of Land Amendment Act 2003, inserting the term in the definition of "improvements" in s.6(1) and defining the term in s.6(5). In addition a new s.35A was included:
"35A Valuing intangible improvements
(1)An owner of land may apply to the chief executive to have the value of intangible improvements to the land taken into consideration by the chief executive in making a valuation of the land.
(2)The application must -
(a)     be in the approved form; and
(b)state, for the land including improvements, the market value mentioned in the owner’s financial records; and
(c)     state the type of intangible improvements; and
                   (d)     include -
(i)an assessment by the owner of the value of each of the intangible improvements; and
(ii) the information used by the owner to make the assessment including supporting documents; and
(e)be given to the chief executive by 30 June in the year before the year in which the valuation is to have effect.
(3)The chief executive may require the person to provide further information or documents to enable the chief executive to make the valuation.
(4)The chief executive is required to take the value of intangible improvements into consideration in making a valuation only if -
(a)an application has been made under this section; and
(b)the chief executive has received any information requested under subsection (3).
(5)The chief executive must not value intangible improvements at more than the percentage prescribed under a regulation of the improved value of the land.
(6)Subsection (7) applies if -
(a)the chief executive has valued intangible improvements under this section; and
(b)the owner of the land to which the intangible improvements relate has not made a further application under this section.
(7)The chief executive, in making a valuation of the land, may take the value of the intangible improvements, decided under this section, into consideration for up to 3 years after the application is made."
However, in the present appeals, the value of intangible improvements is to be excluded from the unimproved values regardless of whether a s.35A application had been made for the reasons given in my decision on preliminary points in these appeals.[4]
[4] [2006] QLC 30.

Methods of Valuation

Section 3(1)(a) of the Act requires that in relation to unimproved land, the unimproved value is the market value of that land at the date of valuation. The appropriate method of valuation is by comparison with sales of unimproved land.
In relation to improved land, s.3(1)(b) requires that the unimproved value is the market value of that land at the date of valuation, assuming that the improvements on that land did not exist. As discussed earlier, the authorities indicate the most appropriate method of determining the unimproved value of improved land, is to value the land by comparison with sales of unimproved or lightly improved land. However, where there are no such sales, the unimproved value may be determined by comparison with the unimproved values derived from the analyses of sales of similar improved land. As discussed earlier, that method of valuation is difficult and unreliable where the sales are highly improved.
There is yet a third method of valuation available under s.3(1)(b). If the improved value of the land can be established, for example by the sale of that land itself at or near the date of valuation, the unimproved value can be ascertained by deducting the value of improvements from the sale price. The improved value of income earning properties may also be established by other means, such as the capitalisation of net income. In the present cases, that method was referred to as "the deduction method". That method of valuation also suffers the same problems associated with the previous method, when it comes to ascertaining the unimproved value of highly improved land.
That method of valuation is provided for in s.3(2) of the Act and sets the minimum figure for the unimproved value "… shall in no case be less than …". Although the deduction method is available under s.3(1)(b), in practice it is generally considered to relate to the deduction of the value of improvements from the sale price. However, where the improved value is derived by capitalisation of income, the exercise is considered to be a valuation under s.3(2). In my decision on preliminary points in relation to the CBD appeals for the reasons set out in that decision, I held that the evidence of the valuations made under s.3(2) of the Act was not admissible in these cases.[5] However, it is appropriate to explain that method of valuation.
[5] [2006] QLC 30.
Although similar to the deduction method of valuation available under s.3(1)(b), a s.3(2) valuation is different in a practical sense, as the improved value is usually established by a means other than the sale of the subject land, such as the capitalisation of net income. In such circumstances, not only is there the difficulty of estimating the added value of improvements, but in arriving at the improved value to commence with. Establishing the appropriate net income and capitalisation rate are often fraught with difficulty. As I have ruled that the evidence of the s.3(2) valuations in these cases is inadmissible, there will be no need to further consider the valuations made under that provision.
The methods of valuation explained above have been applied by the valuers employed by the respondent and its predecessors since the Valuation of Land Act was enacted in 1944. That Act mirrored the relevant provisions of the Queensland Land Tax Act 1915, which in turn was based on the provisions of the Commonwealth Land Tax Assessment Act 1910.
As indicated in the various authorities referred to, the traditional approach adopted by the respondent's valuers has been to ascertain the unimproved value of land by comparison with sales of lightly improved land, where such sales are available. However, in these CBD appeals, the valuer for the respondent, Mr Denman, contended that for investment properties, such as regional shopping centres and commercial office developments, the use of unimproved or lightly improved sales as the basis for such valuations was inappropriate. He maintained that it is only by the analyses of highly improved sales or, if the s.3(2) method of valuation was admissible, by the deduction of the value of improvements from the deduced improved value of each parcel of land, that the true unimproved value of the land can be ascertained.

Mr Denman's Theory

Mr Denman's theory is based on his interpretation of s.3(1)(b) and s.3(2) of the Act. Mr Denman contended that the improved sale price of a commercial property reflects the value of land that has proven its ability to provide a successful development on the site. He reasoned that the risk and profit that a developer would seek for undertaking such a development under uncertain circumstances, is embedded in the land value.
Mr Denman reasoned that compared with undeveloped commercial sites, where there is a risk inherent in any proposed development, an existing successful development has tested its ability to attract tenants and there is no uncertainty. Therefore, he reasoned, the land value assigned to the subject land based on sales of vacant or lightly improved properties, would include only a conservative allowance for likely costs and does not contain a profit and risk component, as those risks are yet to be encountered. He contended that the prices paid for vacant land reflect the unfulfilled potential of those properties and their associated development risks. They would therefore be less than the land value component of successfully improved land.[6]
[6] Ex 12, p 31.
Counsel for the appellant attempted to summarise Mr Denman's theory:
"Where land is being utilised successfully for its highest and best use, the underlying land value increases to the extent that the existing use enlightens the hypothetical, prospective purchaser, removing risk…
In the context of commercial office accommodation, the risks removed by the successful use are two-fold: first, the risk that the land would not provide an environment suitable for the proposed development of the site; secondly, the risk that there is insufficient capacity in the market to accommodate new accommodation of an office nature of the land.
Where land is being used successfully for its highest and best use, it is the analysis of an improved sale of the subject, or a comparison with other sales of similar improved properties which will, following proper analysis, provide the more reliable guide to unimproved land value. Vacant land sales are less reliable because they have never before been put to their unfulfilled potential of the properties and their associated development risks."[7]
[7] Appellant's written submissions p 14.
In other words, Mr Denman's theory is that the analyses of sales of comparable improved land more accurately reflect the unimproved value than sales of vacant or lightly improved land. Mr Denman contended that the method of valuation should be applied to investment properties generally. Specifically, in these cases it should be applied to each of the CBD improved properties. For the subject land, Mr Denman attempted to apply his theory by the analysis of the sale of the subject land and also by comparison with the unimproved values derived from the sales of other improved commercial properties.[8]
[8] Ex 12, p 24, p 31.
That method was applied by the respondent in valuing a number of regional and other shopping centres as at 1 October 2002. Appeals against those valuations have been heard by the Land Court and judgment in the Chermside Shopping Centre, in PT Limited v Department of Natural Resources and Mines [2006] QLC 68, was delivered on 20 October 2006. The respondent contended that the Court should apply the method in the five present CBD appeals.
However, Mr Denman did not suggest that this method of valuation must be universally adopted. Having advanced that theory, Mr Denman made the surprising admission that in four times out of five, perhaps nine times out of ten, the best evidence of unimproved values will be the sales of vacant or lightly improved land.[9]
[9] eg T567.
As was recognised by the Land Appeal Court in The Valuer-General v Marano, in valuing agricultural and grazing land, sales of unimproved or lightly improved land are seldom available. Therefore, the traditional method of ascertaining unimproved values of such lands has been by comparison with unimproved values derived by the analyses of sales of comparable improved rural properties. The method is by no means revolutionary, it is quite orthodox. What is revolutionary about Mr Denman's theory, is the extent to which it is asserted that certain elements of value (principally profit and risk, or entrepreneurial profit) remain embedded in the unimproved value.
In the PT Limited case (Chermside Shopping Centre), the learned Member in a detailed analysis, traced the history of the relevant legislative provisions commencing with the Commonwealth Land Tax Assessment Act 1910. He explained that the High Court endorsed the subtraction (or deduction) method in Commissioner of Land Tax v Nathan (1913) 16 CLR 654, and other cases, but the method was disapproved by the Privy Council in Tooheys Limited v The Valuer-General (1925) AC 439. Tooheys case was followed by the High Court in McGeoch v Federal Commissioner of Land Tax (1929) 43 CLR 277. However, the Commonwealth Government passed amendments to the land tax legislation in 1930, re-establishing the original Nathan subtraction method. The Queensland Government amended its Land Tax Act accordingly and that legislation was later mirrored in the Valuation of Land Act.
For the reasons set out in the Chermside Shopping Centre decision, the learned Member explained that many decisions of the Land Court and the Land Appeal Court which were based on the Tooheys principle, were decided without argument as to the effect of the 1930 amendments which have been carried into the Queensland legislation. Therefore, the learned Member found, the various Land Appeal Court judgments to the effect that sales of vacant or lightly improved land are the best basis of valuation, were not binding upon him. Further, in considering the effect of the 2003 amendments to the Act, the learned Member concluded that those provisions apply only to valuations made under s.3(2) and that the 2003 amendments have not altered the approach to valuation under s.3(1)(b). Therefore, intangible improvements could not be deducted in a subtraction method valuation under s.3(1)(b), but could be under s.3(2). The decision in the Chermside Shopping Centre case is subject to an appeal to the Land Appeal Court.
Because of my rejection of both valuers' analyses of the improved commercial sales later in these reasons, the validity or otherwise of Mr Denman's theory and the approach adopted by the Land Court in the Chermside Shopping Centre case, are not issues in this case. I return now to the evidence in the present appeal.

Highest and Best Use

Mr Jackson contended that the highest and best use of the subject land was for commercial office development, with lower ground floor retail use, consistent with the existing use and general development within the immediate locality. Mr Denman did not disagree, but thought that the highest and best use was a mixed retail and commercial office development.

The Market in the CBD

Both valuers agreed that at the date of valuation the market for commercial office development sites was subdued, with few site sales occurring in the three-year period prior to that date. Mr Denman saw little change in the general market level in the CBD for land suitable for various purposes, such as residential unit sites and commercial sites. However, he considered that there had been growth in the market on the outer fringes of the CBD for residential development.
Both valuers referred to major commercial office developments either under construction or committed at the date of valuation, including the MacArthur development (259 Queen Street), Riparian Plaza (75 Eagle Street), Brisbane Square (6 Queen Street) and the retail development at Queens Plaza (226 Queen Street).

Mr Jackson's Valuation Methodology

Mr Jackson's primary method of valuation was direct comparison with sales of unimproved or lightly improved land for commercial office tower development. For convenience, I will refer to sales of unimproved or lightly improved land as "site sales", to distinguish them from sales of highly improved land.
Mr Jackson's commercial site sales were:

Property Sale Date Area Sale Price Analysis per m²

259 Queen Street (the MacArthur development) March 2000 5,529 m²    $35,000,000 $4,793

6 Queen Street (Brisbane Square) June 2003 7,348 m²    $25,480,000 $3,467

175 Eagle Street October 2000 3,459 m²    $21,500,000 $2,746

75 Eagle Street (Riparian Plaza) December 1998 3,663 m²    $15,000,000 $3,893

120 Edward Street May 1998 1,822 m²      $6,000,000 $2,841

In addition to the commercial site sales which formed Mr Jackson's basis of valuation, he analysed the improved sale of the subject land and two other improved sales of commercial premises in the Brisbane CBD. However, he said that he had analysed those improved sales only to establish whether there was any scarcity premium paid by the purchasers of the commercial site sales, in accordance with the principle established by the High Court in Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111. In that case, the High Court had held that where there are few vacant land sales in an area there may have been a premium paid because of a scarcity factor and it would be wrong to rely exclusively on those sales, as such a method was unduly selective. The High Court held that regard should be had to the wider market, including the analyses of improved sales.
Sales of sites for commercial development in the Brisbane CBD were very scarce. In the three-year period from 1 January 2001 to 1 January 2004, there had only been one commercial site sale.

Mr Jackson's Improved Commercial Sales

A summary of Mr Jackson's improved sales appears in the following table:

Property Land Area Date of Sale Sale Price Analysed Land Value

240 Queen Street (the subject land) 2,127 m² December 2003 $116,439,300 $3,801/m²

Comments: A 26-level office tower with ground level banking chamber; major tenant the Commonwealth Bank.

260 Queen Street 1,384 m² December 2002 $24,000,000 $3,863/m²

Comments: A 24-level commercial office tower with ground level banking chamber; major tenant Westpac Bank.

324 Queen Street 1,820 m² June 2001
October 2003
$38,630,000
$40,000,000

(50% share)

$3,650/m²

$2,665/m² (8.5% depreciation)

$538/m² (15% depreciation

Comments: A 26-level commercial office tower, originally constructed 1975, recently refurbished; major tenant ANZ Bank.

The results of those analyses satisfied Mr Jackson that no scarcity premium had been paid by the purchasers of the commercial site sales. I will return to the improved commercial sales later.

Residential Potential and the QNI Case

Mr Jackson contended that quite apart from other considerations, the subject land and the other four appeal properties could have no potential for residential development because of the principle in Department of Natural Resources and Mines vQNI Metals Pty Ltd [2002] QLAC 71. Mr Jackson understood that case to establish the proposition that for land to have a higher and better use than its present use, it must be demonstrated that the land would have an unimproved value higher than the unimproved value for its present use, plus the cost of demolishing the structures on that land.
In the QNI Metals case the Land Appeal Court was concerned with the unimproved value of land developed with a nickel refinery at Yabulu, outside Townsville. It was accepted in that case that if the highest and best use of that land was its continued use as a nickel refinery, the structures added value to the land and were improvements as defined. The issue was if the improvements were to be notionally removed as required by the Act, does use as a nickel refinery remain its highest and best use?
The Court referred to the definition of unimproved value contained in s.3 of the Act:
"[9]It is to be observed that s.3(1) of the Act provides two definitions of unimproved value –for land which is unimproved and land which is improved. The first issue to be determined, therefore, is whether the land was improved or unimproved as at the date of valuation. This will depend on whether the structures on the land constitute improvements…
[10]Whether these structures are improvements is a question of fact which will be answered by determining whether, in the market place as at the date of valuation, the land with the structures in place was worth more than it would have been without them. If the structures enhance the value of the land, they are improvements and the unimproved value is to be determined as though the structures did not exist."
In the following paragraphs the Court went on to say that the highest and best use is determined by the market place and that the current use of the land may indicate, but not determine, the highest and best use. While in many cases the structures on the land do not make any difference to its highest and best use, in that case the refinery structures were of such magnitude that they could not be ignored if a different use was proposed. For that different use, the structures would be rendered useless. The Court then went on to say at [13]:
" A purchaser would be faced with demolition costs of the buildings or, perhaps, might decide not to use that part of the land which is occupied by the buildings and tailing dams. For an alternative use to represent a higher and better use, the land would have a value greater than as currently developed for the existing use, together with costs associated with removing the existing structures."
However, the Court found that there was no evidence that there would be a price higher than the value of the land and the buildings for the alternative uses.
The passage above was understood by Mr Jackson to mean that there could be no residential potential in the subject land. However, in my view, Mr Jackson misunderstood the effect of the Land Appeal Court's finding. In that passage, the Court was referring to the improved value of the property, not the unimproved value. In paragraph [14] the Court made it clear that the existing use of the improved land could also be the highest and best use of the unimproved land once the improvements have been notionally removed:
" We consider that there is no difficulty, in principle, in regarding the existing use of the land as its highest and best use. Although the improvements are to be disregarded for the purpose of determining the unimproved value of the land, the Act does not require that the existing use be ignored or that the valuation be made in a vacuum."
In paragraph [15] the Court went on to say that even though s.3(1)(b) requires that the improvements on the land be notionally removed, the unimproved value should be made taking into account any statutory restrictions (or advantages), affecting the use of the land. Then, applying that reasoning to the facts of the QNIMetals case itself, the Court held that the land should be valued at its current (improved) use, but ignoring the improvements, unless it could be demonstrated that a higher price could be obtained for the (notionally unimproved) land for some other purpose. On the evidence in that case, that had not been established.
In summary, it is my view that the Land Appeal Court decision in the QNIMetals case is authority for the proposition that if it can be demonstrated that the subject land is improved land (that is, the structures and other works on the land add value to the land), s.3(1)(b) requires that those improvements be notionally removed and the land is then to be valued as if the improvements did not exist. As part of the valuation process, the highest and best use of that land must be determined as unimproved land and, depending on the evidence in the case, that highest and best use may be the use to which the improved land was put at the date of valuation.

There was agreement in the present cases that the buildings add value to the appeal lands. Therefore, in my view, Mr Jackson was not correct in excluding any residential potential for the subject land simply because the cost of demolition of the existing improvements would be prohibitive. That stems from his misunderstanding of the effect of the QNI Metals decision, which requires the lands to be considered as notionally stripped of improvements and then the highest and best use of the land in that condition be considered.
Therefore, in my view, Mr Jackson was wrong to refuse to at least consider whether there was residential potential in the appeal lands and was wrong in rejecting the residential site sales because of the QNI Metals decision. I will return to the residential sales later.

Mr Jackson's Reasoning

Mr Jackson's analyses of the commercial site sales indicated a range of values from $2,746 per m² to $4,793 per m² for sites ranging in area from 1,822 m² to 5,529 m². Towards the lower end of the range was the sale of 120 Edward Street, in May 1998 for $2,841/m². Although it is smaller than the subject property and situated in an inferior location, it is on a prominent, well-recognised commercial corner. At the higher end of the range is 259 Queen Street, which sold in March 2000 for $4,793/m². Although similarly located to the subject property, it has a substantial retail component and is impacted upon by the heritage building, MacArthur Chambers, located on the corner of Queen and Edward Streets.
Mr Jackson concluded from those sales that the subject land should be valued at $5,750/m², including a premium for its corner location. That equates to an unimproved value (rounded) of $12,230,000. I note that Mr Jackson's contended unimproved value is less than the previous unimproved value of $12,860,000, which had been determined by the Land Court in July 2002, in respect of a valuation date of 1 October 2000.
From Mr Jackson's analyses of the improved commercial sales, the sale of the subject property in December 2003 reflected an unimproved value of $3,801/m², while the other two improved sales reflected unimproved values of $3,650/m² and $3,863/m². However, Mr Jackson reasoned that if he was to rely on that sales evidence alone, he would adopt an unimproved value of $4,000/m² for the subject land, which would equate to $8,500,000 (rounded), much lower than the unimproved value from the site sales.
As will be discussed later, Mr Jackson had no confidence in the unimproved values derived from the sales of such highly improved properties. He claimed that he had analysed those sales only to demonstrate that there was no scarcity premium paid for the commercial site sales, which were his primary basis of valuation. Just how he drew that conclusion from those sales was not explained, as his unimproved value derived from the improved sales was less than from his site sales, which could lead to the conclusion that the site sales might be high for some reason. However, in the absence of any evidence of a scarcity premium in the site sales, I accept that there was no such premium.
Mr Jackson also undertook a valuation of the subject land under the provisions of s.3(2) of the Act. However, in my decision on the preliminary points in this case,[10] I found that the evidence of valuations made under s.3(2) was not admissible on the grounds of irrelevance.
[10] [2006] QLC 30.
Mr Jackson also had regard to the relativity of valuations of nine other properties in the CBD which had been the subject of appeals against unimproved values assessed as at 1 October 2001 and 1 October 2002. It seems that those appeals were resolved between the parties without court hearings and that the unimproved values assessed as at 1 October 2003, have also been resolved.
Mr Jackson referred to the agreed unimproved values of those nine properties as at 1 October 2003, comparing the rates per m² to support his valuation assessment of the subject land. The respondent denied that there was any such agreement.
Mr Jackson had raised a somewhat similar argument in the appeal against the valuations of 175 Eagle Street as at 1 October 2001 and as at 1 October 2002. In the Land Court's decision, Perpetual Trustee Company Limited v Chief Executive, Department of Natural Resources, Mines and Water [2006] QLC 17, the learned Member held at [48] that in his view there was no agreement as to what the overall rate per m² ought to be, rather the unimproved value of each property was settled by reference to an overall lump sum. With respect, I agree with and adopt the reasoning of the learned Member in that case.

Mr Denman's Approach

Mr Denman adopted two methods of valuation, the deduction approach and the direct comparison approach. The deduction approach consisted of deducting the value of improvements from the improved value of the subject land under s.3(2), which I held to be inadmissible and under s.3(1)(b), by analysing the sale of the subject land. As explained earlier, Mr Denman's theory was that the deduction method is the correct method of assessing the unimproved value of highly improved commercial lands. However, if his theory was rejected, he would revert to direct comparison with site sales.
The designation under the Planning Scheme allows the subject land to be developed for retail, commercial, residential, or a mixture of those uses. Therefore, Mr Denman reasoned, if the subject land was unimproved, there would be competition for each of those uses, so regard should be had to what a prudent purchaser would pay for each of them. Accordingly, Mr Denman considered the available site sales with potential for retail, commercial and residential uses.

Retail Highest and Best Use

Mr Denman arrived at an unimproved value of $21,300,000 on the basis that if the improvements on the land did not exist, it could be developed for dominant retail use. He arrived at that value by direct comparison with the sales of two properties, each of which involved more than one transaction.
The first of those sales is a property referred to as 175 Albert Street, which is an accumulation of sites acquired over a number of years by the Queensland Investment Corporation (QIC). The amalgamated site is on the corner of Albert and Elizabeth Streets, just off the Queen Street Mall, but within the Retail Heart of the CBD and within the height restricted area. The following table is compiled from the details in Mr Denman's statement.[11]
[11] Ex 12, p 28.

Sale Date Area Sale Price Analysis $/m²

175 Albert Street
(cnr Elizabeth Street) 29/05/2002 476 m² $7,500,000 $15,756/m²

20/06/2001 1,275 m² $7,060,000 $5,537/m²

22/07/2005 66 m² $495,000 $7,500/m²

Aggregate 1,824 m²
(1,817 m²) $15,055,000 $8,253/m²

The analysed figure in each case is simply a division of the sale price by the area. A more detailed analysis of these transactions was included in Mr Denman's Volume of Common Documents where the cost of demolition of the existing improvements had been estimated by Mr Denman to be $160,000 in respect of the 2002 transaction and $600,000 in respect of the 2001 transaction[12]. Under the principle in The Valuer-General v Fenton Nominees (1982) 150 CLR 160, he added the cost of demolition to the sale price to indicate what a prudent purchaser would pay for the land if it was vacant. When the cost of demolition is added to the sale price for the 2002 transaction, the resulting analysis shows $16,092/m². When the cost of demolition is added to the sale price for the 2001 transaction, the resulting analysis is $6,008/m².
[12] Ex 13, p 16.
The transaction on 22 July 2005 seems to be the sale by the State of Queensland to QIC of an area of 66 m² of road. That transaction occurred well after the date of valuation. Without explanation, I cannot accept that sale as evidence of value. If that transaction is excluded from the calculation, the other two transactions (including the costs of demolition in each case), show that an area of 1,751 m² was acquired at a cost of $15,320,000, or $8,749/m².
Mr Denman explained that the sale was an amalgamation of parcels to form a suitable development site. The two transactions are 11 months apart, but he considered that they were made under similar market conditions. Those sales were to an adjoining owner, as QIC owns the adjoining T & G Building, located at 141 Queen Street. However, while adjoining owner sales must be treated with caution, Mr Denman expressed the view that both sales were openly marketed and the adjoining building offers limited scope for synergy in the development of the site. According to Mr Denman, the property is proposed to accommodate a four-level retail development of 4,500 m², with an eight-level tower accommodating 8,800 m² of commercial office accommodation; in his opinion, a predominantly retail development.[13]
[13] Ex 13.
As I understand Mr Denman's evidence, he concluded that the sale was comparable to the subject land in terms of anticipated development. That is somewhat curious, as the sale property is subject to height limitations, while the subject land is not. However, Mr Denman did not consider the sale to be as well located as the subject land, as it does not enjoy the pedestrian traffic through the northern end of the Mall towards Central Station. Overall, he considered the sale property to be inferior on a pro-rata basis to the subject land.
On the other hand, Mr Jackson did not think it was a like with like comparison. He noted that the sites were acquired by the adjoining owner and the development will form an integrated complex linking to the Queen Street Mall. In Mr Jackson's opinion, it was clearly evident from the three transactions that a substantial premium had been paid. I understood him to mean the 2002 transaction, compared with the transaction 11 months earlier.
The second retail sale relied on by Mr Denman was the sale and resale of the property situated at 226 Queen Street, with an area of 5,378 m². According to Mr Denman, the property sold in December 1997 for $51,000,000, which he analysed to $9,438/m²; it resold in January 2000 for $59,250,000, which he analysed to $11,783/m². That site has subsequently been developed with a five-level retail complex, with two levels of commercial office accommodation above that. The development comprises basement, ground and levels one to three, with David Jones occupying the whole of levels two and three. Speciality tenants occupy the basement, ground floor and level one.
Mr Jackson explained that the sale was a complex transaction, related to a subsequent purchase of the adjoining lots for the construction in two stages of the development known as Queens Plaza.
It emerged in cross-examination that Mr Denman knew little about the overall transaction and he agreed that his analysis of the sale was unreliable. In the circumstances, the sale is of no assistance in arriving at the unimproved value of the subject land.
That leaves Mr Denman relying entirely on the transactions comprising the sale of the site at 175 Albert Street for his retail valuation of the subject land. Setting aside for the moment my reservations about the circumstances of the transactions, I do not accept Mr Denman's comparison of this sale site with the subject land.
First, I am of the view that it has greater retail potential than the subject land. It is directly opposite the Elizabeth Street and Albert Street entrance to the Myer Centre and seems to have been purchased with the intention of an integrated development with the adjoining 141 Queen Street situated on the Mall.
Second, it is situated in a retail precinct and can be accessed from the Queen Street Mall without the need to cross a busy thoroughfare and that is reflected in the proposed development.
On the other hand, although situated directly opposite the David Jones development and the subregional shopping centre development at 259 Queen Street, the subject land is separated from both by busy streets. It is not on the Mall, but in an area appropriately described as a commercial precinct.
For those reasons, I reject Mr Denman's contended unimproved value of $21,300,000 based on a highest and best use of the subject land as dominantly retail.

The Commercial Sales

Mr Denman also provided an unimproved value based on what he considered to be three relevant commercial site sales. One of those sales is of the property situated at 120 Edward Street, with an area of 1,822 m², which sold for $6,000,000 in May 1998. That sale was relied upon by valuers in previous cases determined by the Land Court, which I will discuss later. He expressed the view that the sale is outdated, having regard to more contemporary evidence. Despite his contention that it is still useful in demonstrating a "floor to value", I am of the view that it is of no assistance in establishing the unimproved value of the subject land as at 1 October 2003.
Mr Denman's second commercial site sale was the sale of a property situated at 70 Eagle Street, with an area of 1,044 m², in July 2002. He recorded the purchase price of this property as $2,200,000 for a half interest. He reasoned that if the half interest sold for $2,200,000, the total site would have sold for $4,400,000 and analysed the sale on that basis to show $4,062/m². It seems that this property was already jointly owned by QIC and this transaction was the purchase by QIC of the 50% interest of the other joint owner, CPQ Limited, a subsidiary of National Mutual. QIC was the owner of the adjoining Central Plaza One and Central Plaza Two and the sale property is the site of the proposed Central Plaza Three commercial office tower development. It seems that the site includes 869 m² of transferable development rights from a property in Ann Street which allow for an increase in the plot ratio of developments.[14]
[14] Ex 13, p 19.
Mr Jackson rejected that sale because its special circumstances made it unreliable as a basis of valuation. Having regard to the background of that sale, I tend to agree. I am of the view that no reliance should be placed upon it.

The Sale of 6 Queen Street

Mr Denman's third commercial site sale is of the property known as 6 Queen Street, from Suncorp Metway Limited (Suncorp) to Brisbane Square Pty Ltd (a subsidiary of ABN Amro), with an area of 7,348 m², in June 2003, for $28,028,000.[15]
[15] Ex 12, p 30; Ex 13, p 11.
That sale was relied on by both valuers, but their analyses and comparisons with the subject land were quite different. Mr Jackson first analysed the sale by dividing the sale price of $25,480,000 (ex GST) by the site area of 7,348 m² to a value over the whole site of $3,467/m². Later he adjusted the sale price by 10% for the agreements for lease and development approval to $3,121/m².
Mr Denman initially analysed the sale by adding $500,000 for the demolition of the Trittons building to the sale price of $28,028,000, to arrive at an analysed sale price of $28,528,000, or $3,882/m². However, Mr Denman did not consider it appropriate to analyse the sale over the entire site area, reasoning that the analysis should be confined to the development footprint area, which he initially assumed to be 5,000 m².[16]
[16] Ex 13, p11.
However, when Mr Denman discovered that car parking would be developed under the public open space Plaza area, he adjusted his analysis of the sale, this time taking into account the correct building footprint area. His reanalysis was not produced, but from his oral evidence his apportionment of the sale price of $28,028,000 appears to be:
"Plaza area 2177 m² at $521 per m² $1,132,117
Building footprint area 5,171 m² at $5,211 per m² - $26,946,081"[17]
However, there was no provision in that reanalysis for the demolition of the old Trittons building, which seems to have been omitted without explanation.
[17] T 665-666.
On the final day of hearing, Mr Denman further adjusted his analysis of the sale. The question of whether the sale price adopted by Mr Jackson of $25,480,000, or the sale price adopted by Mr Denman of $28,0280,000 was correct, had been an issue since the beginning of the case. At that late stage, Mr Denman admitted that he had wrongly assumed that the sale price of $28,028,000 had excluded GST and conceded that the sale price of $25,480,000 adopted by Mr Jackson was correct.
In comparing the sale property with the subject land, Mr Denman considered it to be inferior on a pro rata basis. He asserted that it was inferior in terms of exposure to the Queen Street Mall and had a permissible development density far below that of the subject land, its development being restricted along its Queen Street frontage to prevent shadow over the Mall and so that lines of site down the length of the Mall are not impeded. In addition, public open space areas were required under the development approval. He also contended that the sale property incurred cost penalties associated with development over 40 levels and public area requirements.[18]
[18] Ex 12, p 30.
Mr Jackson took a somewhat different view. He stated that the site enjoys a very prominent location, being an island site with four street frontages. It has uninterrupted views and aspect over the Brisbane River, adjoins the Queen Street Mall at the southern end and is directly opposite the Treasury Casino, a low-rise heritage building and opposite the low-rise Queen Street Mall, affording future protection for views and aspect and natural light to any development of the site. Mr Jackson noted that the site enjoys a number of similar attributes to the subject property.[19]
[19] Ex 6, p 17.
In Mr Jackson's opinion, the sale price should be discounted to reflect that the site was purchased with the risk associated with the development being substantially reduced by the pre-commitment by two quality blue chip tenants.[20]
[20] Ex 6, p 17.
Apart from their different approaches to the analysis of the sale, both valuers regarded it as a very relevant sale for the valuation not only of the subject land, but for the other appeals in the CBD. With the agreement about the purchase price of $25,840,000, there were two main points of difference between the valuers:
·whether the sale should be analysed over the entire site area or over the area to be developed; and
·whether the sale price should be discounted because of the pre-commitments or agreements for lease by such major tenants and the development approval.

Site Area or Development Area

While Mr Jackson analysed the sale over the entire site area, Mr Denman contended that it should be analysed over the development footprint area of 5,171 m². Mr Jackson reasoned that the development approval was over the whole of the site area and required an area for a plaza public place, which in his opinion enhances the overall development. Furthermore, the setback requirements to protect the heritage significant Treasury Building and to provide a continued line of sight and pedestrian traffic link, effectively create an extension to the Queen Street Mall. In Mr Jackson's view, there will be a greater incentive for pedestrian traffic to cross George Street and access the substantial retail component of the development. In addition, three levels of basement car parking were to be constructed below the public space area.[21]
[21] Ex 8, p 10.
On the other hand, Mr Denman's contention was not so much that the site was under-utilised, but that it could have been better arranged. He conceded that the market would not allow for any greater development. Mr Denman seemed to regard the fact that the development was built up to the Adelaide Street frontage and that it was a narrow, rectangular building, side-on to the river, as a constraint. However, he admitted the advantage of the uninterrupted aspect over the Brisbane River and agreed with the other advantages identified by Mr Jackson, so that their evidence was reasonably consistent. In all, I found Mr Jackson's evidence to be the more persuasive and have concluded that the analysis of this sale should be over the entire site area.

Discount for Agreements for Lease and Development Approval

The second issue was whether Mr Jackson was correct in discounting the sale price because of the agreements for lease by two major tenants, the Brisbane City Council and Suncorp and the development approval, to reflect a land value of $3,121/m². There was no dispute that the agreements for lease added value to the land when it was purchased. Indeed, there was evidence that they were of considerable value and that the whole deal would not have proceeded without them. Mr Jackson regarded the pre-commitment of two such major tenants as being of substantial benefit to the purchaser. That commitment eliminated a substantial level of risk and would encourage any prudent purchaser to pay more for the land.
On the other hand, Mr Denman, while agreeing that the agreements for lease were of considerable value, disagreed that the sale price should be discounted. He reasoned that it was simply prudent business practice for a purchaser to obtain such pre-commitments before purchasing a development site.
The appellant submitted that a lease is an improvement in the definition in s.6(5) and deemed not to exist. Therefore, it was argued, the value of an agreement for lease must be removed before comparison can be made with the subject land. While conceding that there is some difficulty in assessing the value of such agreements in the sale of 6 Queen Street, it was submitted that they add value to the land and that value must be excluded.
The respondent contended that agreements for lease are not improvements, they are simply contractual obligations or entitlements with respect to the granting of rights in the future and cannot be brought within the definition in s.6(5) as the "benefit" of a lease.
It seems to me that the subject land must be considered to be hypothetically sold on the valuation date, with the agreements for lease and development approval in place. The development approval and the agreements for lease were steps taken in realising the development potential of the land and in that sense added value to it.
In my view, that issue was settled by the Land Appeal Court in AMP Society v Chief Executive, Department of Lands (1995) 15 QLCR 344. That matter concerned the unimproved value of the land upon which is situated the Pacific Fair Shopping Centre at Broadbeach. The appellant's valuer in that case relied principally on the sale of land at Browns Plains which was intended for development as a shopping centre. That sale included binding agreements for lease by the major tenants and a net rental guarantee. In analysing that sale, the valuer for the appellant deducted an amount of $4,960,000 for what he called "the added value of tenants".[22]
[22] at p 346.
The Land Appeal Court endorsed the finding of the Land Court rejecting the valuer's approach finding that the rental guarantees were "no more than a reflection of the potential of the land for development to the standard of a particular proposal".[23]
[23] at p 347.
The Land Appeal Court explained its reasoning thus:
"We emphasise that in comparing the potential in the sale land for shopping centre purposes with the potential in the subject land for the same purpose but with much greater scope, the fact that the subject land has been successfully developed for regional shopping centre purposes does not have to be ignored in considering the 'ripeness' of the potential in the land as unimproved land for the purposes of the Act. Relatively speaking then, we think the true impact of the rental agreement was an act to confirm (or to remove doubts about) the degree of 'ripeness' of the sale land for shopping centre purposes and thus, as the learned Member said, is relative to the potential in the land and hence its unimproved value.
We are of the opinion that a purchaser of the subject land in an unimproved state at the relevant date for its highest and best use and with all relevant zonings and approvals in place would not see it necessary to seek such guarantee. Indeed the 'ripeness' of the subject site would tend to suggest that any form of tenancy agreements could be readily achieved."[24]
[24] at pp 349-50.
I do not accept the appellant's contention in the present case that an agreement for lease is an improvement. That is not correct. Section 6(5) of the Act includes the benefit of a lease as an intangible improvement, but the lease itself is not an improvement under the general law, it is an estate or interest in land. An agreement for lease is a separate legal concept. It is a contractual entitlement to the grant of a lease in the future.
In my view, it would be incorrect to discount the sale price because of the pre-commitments or agreements for lease. As was pointed by the Land Appeal Court, those agreements for lease simply indicate the degree of "ripeness" of the sale property for development. That becomes a point of comparison with the subject land. Whether the subject land has a similar degree of "ripeness", or whether it is greater or less, is a matter of judgment.
Similarly, the development approval, like the agreements for lease, adds value to the property because it demonstrates the development potential of the land. The development approval attaches to and runs with the land itself: Maurici v Chief Commissioner of Revenue (NSW) (2005) 142 LGERA 315, Talbot ACJ at 323.
As discussed earlier, regard can be had to the successful development of the subject land as a commercial investment property. The evidence was that it was usually fully tenanted with the major tenant being the Commonwealth Bank, but with many other substantial tenants. It has demonstrated that capacity.
Having regard to the evidence of both valuers, I have come to the conclusion that all things being considered, the "ripeness" of the sale property and the subject property are similar.

The Respondent's Criticism of the Sale of 6 Queen Street

With both valuers placing such significant reliance on the sale of 6 Queen Street, it was surprising that counsel for the respondent in written and oral submissions, contended that the transaction was not one upon which the Court could rely with confidence. Based on information provided to the respondent by a representative of Suncorp (Mr Tim O'Neill) on 20 August 2004, and on the evidence of both valuers, it was submitted that the transaction was not an arm's-length sale, and the sale price was nothing more than a nominal figure chosen by the parties for convenience.
The history of the site and the circumstances leading up to the sale were contained in a 2005 Cityscope Publication annexed to Mr Denman's statement.[25]
[25] Ex 13, Annex 1, p 11.
It seems that Suncorp amalgamated the property in seven separate transactions between April 1981 and December 1995. After several attempts to sell or develop the land, ABN Amro agreed to purchase the site in June 2003. The purchaser acquired not only the land, but also the development rights for the proposed development, referred to as the Brisbane Square Project. Settlement of the purchase occurred in May 2004, following an extension of a put and call option agreement between the parties. The vendor had secured development approval and a proposed building had been designed and approved.
It seems that prior to the transaction, the Brisbane City Council had been seeking expressions of interest for the construction of premises suitable for a new administration centre, with the Council as a long-term tenant. Suncorp responded with an expression of interest.
One the Council's particular requirements was the provision of a large plaza area of publicly accessible open space to enable the administration centre to become a focal point for the community. An overall development proposal was formulated for a 40-level high-rise tower to be situated on the western end (the Adelaide Street frontage), thus permitting the eastern side of the site to incorporate a plaza area of approximately 2,000 m² as a separate component. That proposal received development approval from the Council.
With that arrangement in place, Suncorp was then in a position to offer a purchaser a comprehensive development package whereby the 40-level tower would be constructed to be wholly tenanted by Suncorp itself and by the Council, with the addition of some ground-level retail.
Against that background, it was submitted that the entire transaction was driven by the requirements of the Brisbane City Council and the sale of the land was merely a component in the overall proposal. Therefore, it was contended, it could not be considered to be an arm's-length sale of a vacant site, the "sale price", the figure which appeared on the land transfer documents, being merely a figure that the parties agreed upon using Suncorp's "book value" for the land.
That part of the submission seems to be based on the information provided to the Department contained in the Annexure to Mr Denman's statement, where in answer to a question as to whether the transfer price reflected the market value of the property at the time, the response from Mr O'Neill (Suncorp's representative) was as follows:
"The transfer price reflected the value of the land on the Suncorp accounts at the time. Suncorp considers the value of the land on the accounts at the time to be the freehold market value because the land had been independently valued on an annual basis."[26]
[26] Ex 17, Annex 1.
Counsel argued that such valuations are not direct evidence of market value. They are simply opinions, which may be correct or may be proved to be incorrect, once the site is actually tested in the market; this site was never tested against the market as a vacant site and the Court cannot know whether the "book value" is representative of true arm's-length market value.
Therefore, it was submitted, the nominated land transfer price shown in the transfer document cannot be treated as the purchase of a vacant site; there may be ongoing financial obligations owed by the purchaser to the Council as part of the overall package, including the development approval. Details of the overall agreement between the parties were not available to the valuers for either party. In the absence of those details, but having regard to what was known, it was submitted that there was no basis for concluding that any of the requirements of market value as outlined in Spencer v Commonwealth (1907) 5 CLR 418, had been met.
Not surprisingly, counsel for the appellant argued that the respondent's submissions should be rejected. Mr Jackson had no doubt that the transaction was an arm's-length one. The parties were, he said, "… both very well informed, hard-nosed entities … who have to do the right things by their shareholders …. the inquiries I have made have in no way led me to believe it's a situation where there is any untowardness in the sale process."[27]
[27] T 973.
The appellant contended that the respondent's submission was speculative. Neither Mr Denman nor Mr Jackson had taken that position and, it was submitted, it was contrary to the evidence. Suncorp had clearly stated that it considered the value of the land to be the freehold market value at the time because the land had been independently valued on an annual basis. Furthermore, it was submitted, the respondent's position was even more unusual because the adjustment of this sale, by a relatively small amount, persuaded Mr Denman that the highest and best use of three of the appeal properties was residential and not commercial. Mr Denman regarded the sale of 6 Queen Street as his best sale, the sale upon which he placed most reliance for the valuation of 239 George Street.
In reply, counsel for the respondent was critical of the appellant's submission, contending that it simply ignored the fact that there was no evidence that the price shown in the land transfer document was part of a multi-faceted overall purchase, construction and lease-back arrangement. With no evidence of the overall transaction, it was submitted, the Court is entirely deprived of the broad range of information to determine whether the price shown in those documents reflected market value. The land was not sold as a vacant or lightly improved site, so the argument went, but as one component of a complex overall package, the elements of which are unable to be dissected and analysed on the information available.
In his oral submissions, Mr Fynes-Clinton, counsel for the respondent, submitted that although both valuers relied upon the sale of 6 Queen Street to support their valuations, the sale should be disregarded, because the valuers had failed to understand the factual matrix of the transaction which made any opinions which either of them expressed, fundamentally unreliable.
Mr Fynes-Clinton further submitted that both valuers had entirely misunderstood the facts in relation to the transaction. He made the following submissions:
"This land transaction is not and never was an arm's-length sale of a vacant or lightly improved site. It never went to the market. There was some evidence that it went to the market in earlier periods but in terms of this transaction it never went to the market. Brisbane City Council went to the market looking for new office accommodation but it wasn't a purchaser of land or a purchaser of buildings. The evidence is that it sought a party to provide land to build a building and give it a long-term lease. That was the genesis of the transaction, not between the vendor and the purchaser at all but between the vendor and the Brisbane City Council. The evidence is in that exhibit as to how things developed. The fact that the parties involved would not release any of the relevant documentation to the valuers means that both the valuers and the Court do not know and cannot know enough about what actually went on, but what we do know … is that this was not land sold as a vacant or lightly improved site. The transfer was merely a part of a package, a package involving … the pre-committed leaseback to the vendor of that land … a legally separate but directly related agreement for the construction of a multi-million dollar office tower, … shows the development agreement for the construction of a building, though separate from the land and leasing arrangements, was linked with a put and call which would actually bring that contract into effect, so that they were all part of a package and the put and call option was not to be exercised until and unless the development and building arrangements had been put into place."[28]
[28] T 1824–25.
Mr Traves SC contended that the submission by the respondent that the sale of 6 Queen Street was unreliable, was quite bizarre; both valuers had relied upon it and Mr Denman had regarded it as his best sale; that sale was so important that following his adjustment to it, Mr Denman changed his mind that the highest and best use of three of the appeal properties was not commercial but residential.
I do not accept that the sale of 6 Queen Street should be disregarded. Both valuers have investigated the background of the sale and both of them have placed a significant reliance upon it. Although at one stage in his oral evidence Mr Denman seemed to have had some doubts about the arm's-length nature of the sale he continued to rely upon it.[29] Mr Jackson had no such doubts. There was no evidence that the figure shown in the transfer document was no more than a nominal figure chosen by the parties for convenience. There was evidence that the sale price, or the figure shown in the transfer document, was based on an independent valuation. Although that valuation was not produced, there was no suggestion that it was fraudulent or that it was made to suit the convenience of one or other of the parties.
[29] T 1044–45.
The factual matters that the respondent was able to ascertain about the transaction were contained in an attachment to Mr Denman's report, that is, the information provided by Mr Tim O'Neill of Suncorp on 20 August 2004.[30] None of that information was disputed by Mr Jackson.
[30] Ex 17.
It was said that the transfer of the land was only part of a much more complicated transaction, the details of which have not been able to be ascertained. In my view, however, that is no different to many of the other sales produced in evidence by the respondent and relied upon by Mr Denman, the full details of which have not been produced, for example, the transactions making up the sale of 175 Albert Street.
I will consider the impact of this sale later in these reasons.

Improved Commercial Use Sales

In addition to the sale of the subject land, Mr Denman analysed two other sales of CBD properties which were developed with commercial office towers.
The subject land at 240 Queen Street, with an area of 2,127 m², sold for $116,439,300 in December 2003 and was analysed to $33,877,632, or $15,927/m².[31]
[31] Ex 12, p 24.
Mr Denman's second improved sale was the property situated at 324 Queen Street, with an area of 1,820 m² for $80,000,000, in October 2003, which he analysed to $17,082,170 or $9,386/m².[32] Other analyses by Mr Denman show values of $12,938/m²[33] and $14,765/m².[34] This was the sale of a half-interest in the property for $40,000,000. Both Mr Denman and Mr Jackson reasoned that the sale price for the property would be $80,000,000. An earlier sale of a half-interest for $38,630,000 in June 2001, was analysed by Mr Denman to $10,786/m².[35]
[32]          Ex 53, p 22, p 29.
[33]          Ex 12, p 31.
[34]          Ex 13, p 25.
[35]          Ex 13, p 26.
Those were the sales of half-interests in a 25-level commercial office tower with some ground floor retail, completed in 1975, on the corner of Queen and Creek Streets.
Mr Denman's third improved sale was the property situated at 157 Ann Street, with an area of 944 m², which sold for $16,550,000, in September 2003, which he analysed to $3,662,780 or $3,994/m².[36] Another analysis by Mr Denman shows $3,926/m².[37]
[36] Ex 13, p 27.
[37] Ex 12, p 31.
That was the sale of a 13-level commercial office tower on the fringe of the CBD, built in 1984.
From the analyses of those improved commercial sales, Mr Denman concluded that there was a discrepancy between the assessments of unimproved values based on site sales and the unimproved values derived from the analyses of the improved sales, particularly the sale of the subject land. In his opinion, that discrepancy was attributable to his theory.
Mr Denman's contended unimproved value of $34,000,000 was derived from his analysis of the sale of the subject property under s.3(1)(b) of the Act. In another analysis purporting to be under s.3(2), he did not deduct the added value of intangible improvements, because the owner had not made the required application under s.35A of the Act. Therefore, under the provisions of s.35A(4), Mr Denman analysed the sale by deducting only the value of tangible improvements, leaving the value intangible improvements included in the land value.
However, as explained earlier, in my decision on the preliminary points in relation to the CBD appeals I found that:
1. The valuation of intangible improvements is to be taken into consideration in making the valuations of the subject lands and is to be excluded from the unimproved values.
2. The evidence of the valuations made under s.3(2) of the Act is not admissible in these cases.[38]
[38] [2006] QLC 30.
Therefore, Mr Denman's primary valuation from the "deduction method", was the analysis of the sale of the subject property. Indeed, Mr Denman on occasions during the hearing, referred to this case as a "one sale case".[39] I understood him to mean that he placed little or no reliance on the other improved sales.
[39] T 681.
Mr Denman accepted that the sale price of $116,439,300 in December 2003, was market value of the improved property as at the date of valuation. From that sale price he deducted his estimates of the value of intangible improvements and the value of tangible improvements, to arrive at an unimproved value of $34,000,000 (rounded). That figure became the unimproved value contended for by the respondent as at the date of valuation.

When that advantage was added to the unimproved value assessed on the basis of his commercial dominant use site sales of $13,900,000, the result was an unimproved value under s.3(4) of the Act of $17,000,000.
In my view, that is not an appropriate method. Quite apart from its other defects, the assumptions made by Mr Denman, in terms of town planning, design and costing are beyond his expertise. If this was put forward as a serious method, it would require at least the evidence of both a town planner and a quantity surveyor to prove the assumptions made by Mr Denman.
Mr Denman assumed that if the site was vacant, a prudent purchaser on his reasoning, would pay $13,900,000 for it. However, if it was vacant, a building appropriate to the purchaser's requirements, but in conformity with the planning scheme, could be designed for that vacant site. It defies belief that a prudent purchaser would pay in excess of $3,000,000 for the advantage of knowing that the building which previously existed on the land would have to be redesigned in order to achieve the same gross floor area. It seems to me that this reasoning by Mr Denman stems from his theory that the prior existence of the successful development of the land must be recognised in the unimproved value.

Conclusions from Mr Denman's exercises

In accordance with his theory, Mr Denman's primary method was the deduction method, the analysis of the improved sale of the subject land, which produced an unimproved value of $34,000,000. I have rejected the reliability of that analysis.
However, if the subject site was to be valued by direct comparison with site sales, Mr Denman concluded that based on dominant retail use sales, the unimproved value would be $21,300,000. I have also rejected that approach.
His next alternative from the dominant commercial use sales, was an unimproved value of $13,900,000. Based on of the residential site sales, the unimproved value was $11,700,000, substantially lower than any of the others.
Therefore, I conclude that the highest and best use of the subject land at the relevant date was for commercial development and that the unimproved value will be determined by direct comparison with site sales.

Recent Land Court Determinations

Before doing so, it is relevant to consider two recent decisions of the Land Court, one determining an appeal against an earlier valuation of the subject land. The other decision determined the unimproved values for previous years for another appeal property, 175 Eagle Street.
In Emergency Services Superannuation Board v Department of Natural Resources and Mines [2002] QLC 57, delivered on 19 July 2002, the Court concluded that the subject land should be valued on the basis of its commercial office use, with ground floor retailing. It determined the unimproved value as at 1 October 2000 at $12,860,000.
The unimproved value remained at that figure until the valuation the subject of this appeal, when the unimproved value as at 1 October 2003 was increased to $15,000,000.
In the Emergency Services case, several sales were considered which were also raised by one or both of the valuers in the present matter. Those sales included:
·259 Queen Street in March 2000
·120 Edward Street in May 1998
·75 Eagle Street in December 1998
·175 Eagle Street in December 2000
Those sales were of sites, the agreed highest and best use of which was for high-rise commercial, with ground-floor retail. No residential sales were considered in that case.
The second Land Court determination concerned the unimproved values of 175 Eagle Street as at 1 October 2001 and as at 1 October 2002. In Perpetual Trustee Company Limited v Department of Natural Resources, Mines and Water [2006] QLC 17, the Land Court determined the unimproved value of 175 Eagle Street as at 1 October 2001 at $8,700,000 and as at 1 October 2002 at the same figure. As at 1 October 2003, the unimproved value of that property was increased to $12,500,000. The appeal against that valuation was one of five appeals in the CBD, including the present appeal.
In those earlier cases, the Land Court found that as at 1 October 2001 and 1 October 2002, the highest and best use of 175 Eagle Street was for commercial development. However, in making that finding the Court emphasised that this did not mean that all the sales of so-called residential sites should be disregarded in assessing the unimproved values of the land at the relevant dates.
In those cases, the following commercial site sales were considered:
·175 Eagle Street (the appeal property "parent parcel")in October 2000
·75 Eagle Street (Riparian) in December 1998
·120 Edward Street in May 1998
In addition, several improved commercial sales were referred to, including the sale of 175 Eagle Street (the appeal land) in August 2002. However, the Court rejected the analyses of those sales as unreliable and of no assistance.
As well as the commercial sales, the following residential site sales were considered by the Court:
·Aurora
·Felix
·Emerald Tower
The Land Court found that:
"After considering the evidence concerning all of the sales relied on by each of the valuers I have come to the conclusion that the best sales evidence for the developable part of the subject land is: the 'Aurora' site, the 'Riparian' site, 120 Edward Street and the 'Felix' site."[52]
[52] [2006] QLC 17 at [112].
Those four sales were then examined in detail, in addition to the Emerald Tower sale, which the Court considered to be of some relevance, as it tended to establish the bottom line for the value for the northern area of 175 Eagle Street.
The Court found that for the unimproved value of 175 Eagle Street as at 1 October 2001, the Aurora, Felix and Emerald Tower sales offered the best evidence of value of the northern area of that land, leaving aside what premium ought to be attributed for adjacency to the river.[53] From those sales, but making allowance for the complexities of the valuation of 175 Eagle Street, the Court determined the unimproved value as at 1 October 2001 at $8,700,000.
[53] at [148].
For the unimproved value of 175 Eagle Street as at 1 October 2002, the Court could find no evidence that would justify any meaningful increase of the unimproved value between 1 October 2001 and 1 October 2002. Therefore, the unimproved value was also determined at $8,700,000.
The Land Court's decision in respect of the unimproved values of 175 Eagle Street has recently been the subject of an appeal to the Land Appeal Court. A decision on those matters is still pending.

The effect of those previous Land Court determinations

In the present cases, both Mr Jackson and Mr Denman gave evidence that there had been little movement in the market for commercial development sites between 1998 and 2003 and there had been very few sales of such sites. It is therefore not surprising that several of the sales that were considered by the Land Court in each of those earlier cases, were again presented as evidence in the present cases. The 1998 sales of 120 Edward Street (both valuers) and 75 Eagle Street (Riparian) (Mr Jackson), together with the October 2000 sale of the "parent parcel" of 175 Eagle Street (Mr Jackson), were relied on by the valuers for the unimproved values of the appeal lands as at 1 October 2003.
While those sales were relevant in establishing the unimproved values for those earlier years, in my view they can have little relevance as a basis for different unimproved values in the present cases. They have served their purpose, there is no utility in once again considering those sales. Similarly, with the residential development site sales of Aurora, Felix and Emerald Tower. I do not propose to discuss those sales in any detail. Instead, I will concentrate on the later sales which should more relevantly reflect the market as at 1 October 2003.
Before considering the relevant sales evidence, I should deal with two further issues which were argued by the parties in these appeals.

Allowance for Deferred Settlement of Sales

Where there had been deferred settlements, Mr Jackson discounted the sale prices to adjust them to the prices they would have achieved on a cash sale basis. In his opinion, a cash sale would be on 10% deposit with settlement of the balance within 60 – 90 days. Where the deposit was less than 10%, or settlement exceeded 90 days, he discounted the sale price to recognise the departure from the normal terms.
The appellant argued that the principle was accepted by the Land Court in the Emergency Services case and the Perpetual Trustee Company case. In the Emergency Services case, the Court found that the approach was consistent with that adopted by the High Court in Federal Commissioner of Land Tax v Duncan (1915) 19 CLR 551.
On the other hand, Mr Denman did think not that discounting was warranted, as it implied that prices in excess of market had been paid to take into account the longer settlement periods. However, except for one sale (Riparian) there was no evidence of that. Furthermore, the transfer documents in each of the sales which Mr Jackson adjusted, showed that it was a "cash sale".
As I understand it, the respondent accepted the principle, but contended that the application of the principle must be established by evidence in each instance before such adjustment could be made. It is only where it can be established that a sale price has been inflated by the interest paid on the purchase price for the period of the deferred settlement, that allowance should be made in the analysis of that sale to identify the true purchase price. In the sales which Mr Jackson identified as requiring such an adjustment, it was contended, he had not demonstrated that the 90-day settlement period was "standard practice", or that there was a departure from what the sales demonstrated was standard.
In Duncan the sale under consideration involved "very unusual" terms, an unusually small deposit, very long credit and a very low rate of interest (Griffith CJ at 556), "in other words, that the terms were unreasonably generous" (Isaacs J at 561). Duncan's case was quite different to the matter under consideration because there was a great deal of evidence that they were "exceptional terms", whereas there is no such evidence in Mr Jackson's sales.
The sales which Mr Jackson maintained required adjustment were:
·    175 Eagle Street – option date June 2000, sale date October 2000, sale price $21,500,000, adjusted sale price $20,752,105, interest at 8.5%.
·    75 Eagle Street – sale date December 1998, settlement date November 1999, sale price $15,000,000, adjusted sale price $14,260,403, interest at 8.5%.
·    120 Edward Street – sale date May 1998, settlement date April 1999, sale price $6,000,000, adjusted sale price $5,681,319, interest at 8.5%.
·    420 Queen Street – sale date August 2001, settlement date August 2002, sale price $12,000,000, adjusted sale price $11,306,639, interest at 8.0%.

· 400 George Street – sale date August 2003, settlement date August 2004, sale price $15,000,000, adjusted sale price $14,217,928, interest at 8.0%.

· 333 Ann Street – sale date September 2002, settlement date April 2003, sale price $5,272,727, adjusted sale price $5,148,513, interest at 8.0%.

· 26 Felix Street – sale date June 2001, settlement date November 2001, sale price $5,500,000, adjusted sale price $5,384,597, interest at 8%.

(Details of those analyses are to be found in Mr Jackson's statement Exhibit 70, Annexures 3 and 5; Exhibit 77 Annexures 4 and 6).

Based on the evidence in the Perpetual Trustee Company case, the Land Court accepted Mr Jackson's adjustment of the sale price for 420 Queen Street (Aurora)[54] because of deferred settlement and similarly, for the sale of 75 Eagle Street (Riparian),[55] because of the deferred settlement of that transaction. In the present cases, Mr Denman agreed that the Riparian sale should be adjusted, because the contract provides for it.[56]
[54] at [124].
[55] at [132].
[56] T 1744.
There was no argument that the principle relied upon by Mr Jackson in making those adjustments is well established. Where it can be demonstrated that a sale price was increased to account for the period between date of contract and date of settlement, then it is appropriate to make such adjustment in any analysis of that sale. However, where there is no evidence that a sale price was increased because of the delayed settlement, in my view, it would be wrong to assume the sale price negotiated between the parties at the date of contract contained a component for the settlement period. In many cases, a vendor may be prepared to accept the delay, secure in the knowledge that the purchaser was locked into a fixed price, whether the market rose or fell.
Therefore, apart from the sales of Aurora and Riparian, which were accepted by the Land Court in the Perpetual Trustee Company case as requiring adjustment, there was no evidence in respect of the other sales to indicate that the sale prices required adjustment for the delayed settlement periods.

The Statutory Presumption of Correctness

Section 33 of the Act provides:
"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."
However, that presumption of correctness can be rebutted where it can be shown that the valuation was based on a wrong principle, or involved a serious error of fact, or was made by a fundamentally erroneous method: Brisbane City Council v The Valuer-General (1978) 140 CLR 41 at 56 – 57.
In the present case, the appellant submitted that the respondent did not seek to support either the valuation itself, or the methodology by which the valuation was made; the respondent led no evidence in support of the valuation; to the contrary, the respondent's valuer expressed the opinion that the issued valuation was incorrect; on the other hand, the appellant contended for a valuation which was less than the issued valuation. Accordingly, the appellant submitted, the presumption of correctness has been rebutted.
The respondent argued as follows - the mere fact that the respondent's valuer gave evidence to a different figure did not establish that the original valuation appealed against must be assumed to be incorrect. The respondent cannot disown the valuation, or overcome the presumption of correctness of that valuation, by merely leading evidence to a different figure. The Court cannot assume that the valuation is incorrect merely because the respondent and the appellant led evidence to valuations which differed from the issued valuation. The issued valuation must still be proved incorrect.
In the Perpetual Trustee Company case, the Land Court was faced with a similar situation and a similar argument. The learned Member disposed of the argument thus:
"It seems to me that in appeals such as this, even where the evidence led on behalf of the appellant is not sufficient on its own to disturb the presumption of correctness, where the respondent department elects to lead positive evidence of a figure different to that actually attributed to the land that evidence may lead to the conclusion that the presumption is unjustified. It is the totality of the evidence that must be taken into account in determining whether or not the valuation appealed against ought to be affirmed or altered. In my view it does not matter that the evidence fatal to the operation of the presumption comes from the respondent and that the appellant's evidence alone would not have justified interfering with the valuation appealed against."[57]
Similar sentiments were expressed by the Land Court in State Government Insurance Office (Qld) v Valuer-General (1981) 7 QLCR 171 at 193 – 194.
[57] at [24].
The respondent countered that argument by contending that the appellant cannot adopt the evidence of the respondent's valuer in order to assist the discharge of the onus of proof, but then ask the Court to reject that evidence in determining the value of the land. If the appellant wished to rely on that evidence, it was argued, then it should ask the Court to accept it and act upon it.
I do not accept that argument. In the present case, the issued valuation was $15,000,000. Mr Denman's evidence was not directed towards supporting that valuation. To the contrary, his valuations on a commercial highest and best use and on a residential highest and best use, were below that figure. On his other bases, Mr Denman's valuations were substantially above $15,000,000. In oral evidence, Mr Denman admitted that in his view the valuation under appeal was incorrect. On the other hand, the evidence of Mr Jackson was that the valuation was excessive and should be less than $15,000,000.
I do not accept in total the evidence of either valuer. However, as will be apparent in these reasons, the combined evidence of both valuers shows clearly that a valuation of $15,000,000 cannot be sustained. Therefore, in my view, that valuation must be set aside and another valuation substituted in its place. It is to the amount of that valuation which I now turn.

The Relevant Evidence

Mr Denman conceded that the highest and best use of the subject land at the relevant date was as used, that is, commercial with ground level retail.[58] That was consistent with Mr Jackson's opinion. Therefore, the retail sales provided no real assistance, except for the MacArthur sale (259 Queen Street), which was the key sale in the Emergency Services case. In that case, the Land Court determined the unimproved value of the subject land as at 1 October 2000, at $12,860,000, or $6,046/m². In the present case, Mr Jackson regarded the sale of 259 Queen Street as a commercial sale, notwithstanding the substantial retail component of the subregional shopping centre which was developed on that site. The sale is also impacted by the effect of the heritage listed MacArthur Chambers, on the corner of Queen and Edward Streets. Mr Jackson analysed the sale to $4,793/m². That was the same rate that was agreed upon by the valuers in that case for the vacant land component of 259 Queen Street. However, their comparisons with the subject land were different. After considering those differences the Land Court determined the unimproved value at $6,046/m².
[58] T 645.
In the present case, Mr Denman did not refer to that sale in his first report, Exhibit 12, but addressed it in his response report, Exhibit 14. Although it had been the key sale for the determination of the unimproved value of the subject land as at 1 October 2000, Mr Denman thought that there was better evidence for the 2003 valuation. He reasoned that if the sale was to be considered, the analysed unimproved value should be apportioned between the Queen Street and the Adelaide Street portions, but in different proportions to those applied by the Land Court in the Emergency Services decision. Mr Jackson regarded Mr Denman's apportionment as unrealistic. He preferred not to make any apportionment of the sale, because the apportionment found by the Court did not accord with the way in which the site had subsequently been developed.
Mr Jackson did not agree with the Emergency Services decision. The Land Court had applied a 20% premium to the subject land for its additional access and exposure because of its corner location. Mr Jackson thought that to be excessive. However, the decision was not appealed and I can see no reason not to regard it as reflecting the unimproved value of the subject land as at 1 October 2000. Nor can I see any reason to suggest that the sale of 259 Queen Street provides any basis for an unimproved value less than $6,046/m² determined by the Court in the Emergency Services case. However, there have since been further indicators of the unimproved value of land in the CBD.

In the Perpetual Trustee Company case, the Land Court concluded that the best sales evidence for the valuation of that land as at 1 October 2001, were the sales of Aurora (at 420 Queen Street), Riparian (at 75 Eagle Street), 120 Edward Street and Felix (at the corner of Felix and Mary Streets), as well as Emerald Tower (at 550 Queen Street).
The Court found that the sales of Aurora (at $3,800/m²), Felix (at $3,850/m²) and Emerald Tower (at $3,365/m²), were the best evidence of value, as those sales occurred in the latter part of 2001 and were sufficiently comparable to the northern area of the site. The Court had found that the highest and best use of 175 Eagle Street was for commercial development. However, in considering the comparability of the sales, the Court found there was no objective reason to suggest that the Aurora site was one where the highest and best use was residential and not commercial and that of 175 Eagle Street was commercial and not residential. The Court stated that those comments applied equally to the Felix site. Clearly, the Court considered 175 Eagle Street had potential for development as either commercial or residential, finding that the sales would support a rate/m² of $3,500 for the northern area of 175 Eagle Street, excluding any premium for river frontage.
In that case the Court also had regard to the sale of 120 Edward Street and of Riparian at 75 Eagle Street, but did not rely on them other than as part of the overall sales pattern. Those sales were also in evidence in the subject appeal. However, both are 1998 sales and in my view do not assist in determining the unimproved value of the subject land as at 1 October 2003. Furthermore, additional evidence was presented in relation to the Riparian sale, particularly concerning the development lease, which cast doubt on any analysis of that sale. The other sales which were tendered in the Emergency Services case and the Perpetual Trustee Company case, were of no real assistance in the present case.
That leaves only limited sales evidence of relevance to the valuation of the subject land as at 1 October 2003, as I have rejected the analyses of improved sales and of the retail site sales of 175 Albert Street and Queens Plaza. In effect, it comes down to the commercial site sale of 6 Queen Street and the more recent residential sales.

The Adjusted Sale of 6 Queen Street

Mr Denman did not tender his reanalysis of the sale of 6 Queen Street excluding G.S.T., but it caused him to rethink the valuations which he considered should be applied to four of the present appeals but not, it seems, of the subject land, 240 Queen Street. As I understand his evidence, he reasoned that if it was to be assumed that the improvements on the subject land did not exist and their prior existence could not be taken into account in accordance with his theory, then as a consequence of his adjustment of the 6 Queen Street sale the commercial value range dropped below that of the residential level. He therefore considered that the highest and best use of the appeal properties at 140 Creek Street, 324 Queen Street and 175 Eagle Street was residential and not commercial and adjusted his contended unimproved values accordingly. He also adjusted the commercial unimproved value of 239 George Street.
However, he said that if the properties were to be valued on the assumption that the prior existence of the improvements could be taken into account, his valuations on the commercial highest and best use would not change. I understood this to mean the valuations derived from his analyses of the improved commercial sales, which I have rejected.
As a consequence of adjusting his analysis of the sale of 6 Queen Street, Mr Denman adjusted the unimproved values of the other appeal lands as follows:
175 Eagle to $9,350,000 (a reduction of approximately 5%) (now residential)
140 Creek Street to $19,000,000 ( a reduction of approximately 5%) (now residential)
324 Queen Street to $9,400,00 (a reduction of approximately 6%) (now residential)
239 George Street to $12,800,000 (a reduction of approximately 8.5%) (still commercial)[59]
[59] T 1711, T 1764.
When asked why the valuation of 175 Eagle Street was reduced by only 5%, Mr Denman said that he placed more weight on the sale of 70 Eagle Street. However, as discussed earlier, in my view, no reliance can be placed on that sale.
Although Mr Denman reconsidered his opinion of the highest and best use for 175 Eagle Street, 324 Queen Street and 140 Creek Street from commercial to residential, he seemed to maintain his view about the commercial highest and best use of the subject land 240 Queen Street and of 239 George Street. However, he expressed the view that if it could be assumed that the improvements on any of the CBD properties did not exist and the prior existence of those improvements could not be taken into account, then he was of the opinion that with the exception of the properties in the Queen Street Mall, the highest and best use of each site in the CBD was equally commercial or residential.
Somewhat surprisingly, Mr Denman's reanalysis of the sale of 6 Queen Street did not seem to have any effect on his contended unimproved value for the subject land at 240 Queen Street. However, it seems that Mr Denman still regarded the sale of 6 Queen Street as a very important basis for his commercial valuation of the subject land, as did Mr Jackson.
I found it difficult to follow the reasoning of both valuers in their comparisons of that sale with the subject land. As I have found that his adjustment for the agreements for lease to be incorrect, Mr Jackson's analysis would remain at $3,467/m² over the whole site. I was not provided with his net lettable area analysis, but if 55,000 m² is the correct NLA, that would reflect a rate of $463/m². In his statement,[60] Mr Jackson contended for an unimproved value of $5,750/m² for the subject land, a considerably higher rate/m² than shown by the sale of 6 Queen Street. However, Mr Jackson relied more on the sale of 259 Queen Street, which I have found to be of only limited assistance. Similarly with Mr Jackson's other commercial site sales.
[60] Ex 6.
Mr Denman's other commercial sales were no more helpful. He applied a rate of $6,500/m² to the subject land on a commercial site area basis and $500/m² to the 28,074 m² of net lettable area. However, his reanalysis of the sale of 6 Queen Street must affect his assessment of the unimproved value to be applied to the subject land. It does not seem reasonable that he could adjust the unimproved values to be applied to the other four appeal properties, but not adjust the unimproved value of the 240 Queen Street.
I find the sale of 6 Queen Street relevant, but difficult to compare directly with the subject land. The property at 6 Queen Street is a large site in a very prominent location, with four street frontages (an island site), with uninterrupted views and aspect over the Brisbane River, with the Mall at the southern end. It is directly opposite the low-rise heritage Treasury Casino which affords protection to its views, aspect and natural light. However, I accept the opinions of both valuers that because of its location, the subject land is superior on a pro-rata basis.

The Relevant Residential Sales

Having rejected the retail sales and the analyses of the improved sales, it remains to be considered whether the residential sales provide any evidence of the unimproved value of the subject land as at 1 October 2003. Mr Jackson did not rely on residential sales and suggested that Mr Denman had been selective in his choice of Aurora and Festival Towers. However, I do not consider the sales which Mr Jackson suggested as alternatives to be any more relevant.
One such alternative, was the sale of 45 Eagle Street (Eagle Street Pier) of 4,206 m², in January 2004, for $16,000,000 which Mr Jackson analysed $2,675/m². That is a narrow property with extensive frontage to the Brisbane River, developed with a two-storey retail complex with two levels of basement car parking. Mr Denman rejected the sale as too difficult to analyse. I tend to agree. It suffers from the same problems as the highly improved sales. Furthermore, it was purchased by the Stockland Group, the owners of the adjoining Waterfront Place.
Although none of the residential site sales is in the vicinity of the subject land, I have found that there is a merged market in the CBD, where developers were in competition with one another for available sites. There was evidence that there was a strong demand for residential sites in earlier years, probably culminating with the sale of Charlotte Towers in December 2001, for $5,059/m². However, there was also evidence that for various reasons the market may have cooled somewhat in the period following that sale.
The later sales, M on Mary, Festival Towers and Vision Tower, show that the market for residential development as at 1 October 2003, was approaching $5,000/m² for sites some distance removed from the Mall. There was no dispute between the valuers that the market for well-located commercial land was higher than the market for similarly located residential land. Therefore, it could be assumed that the market for the subject land, a prime corner site in the commercial precinct adjacent to the Mall, must be substantially higher.

Conclusion

There is no directly comparable sale, but doing the best I can with all of the evidence, I conclude that the unimproved value of 240 Queen Street as at 1 October 2003 is $6,300/ m², or $13,400,000, that is approximately $475/m² net lettable area.

Order
The appeal is allowed, the valuation of the respondent is set aside and the unimproved value Lot 5 on Registered Plan 200175, Parish of North Brisbane (240 Queen Street) is determined at Thirteen Million Four Hundred Thousand Dollars. ($13,400,000).

JJ TRICKETT
PRESIDENT OF THE LAND COURT

CITATION:	Multiplex 240 Queen Street Landowner Pty Ltd v Department of Natural Resources, Mines and Water [2007] QLC 0010
PARTIES:	Multiplex 240 Queen Street Landowner Pty Ltd (appellant)
v.
Chief Executive, Department of Natural Resources, Mines and Water (respondent)
FILE NO:	AV2005/0805
DIVISION:	Land Court of Queensland
PROCEEDING:	An appeal against the unimproved value of an improved commercial property in the Central Business District of Brisbane.
DELIVERED ON:	28 February 2007
DELIVERED AT:	Brisbane
HEARD AT:	Brisbane
MEMBER:	Mr JJ Trickett, President
ORDER:	The appeal is allowed, the valuation of the Chief Executive is set-aside and the unimproved value of Lot 5 on Registered Plan 200175, Parish of North Brisbane (240 Queen Street), is determined at Thirteen Million Four Hundred Thousand Dollars ($13,400,000).
CATCHWORDS:	Valuation - unimproved value - Central Business District improved commercial site - highest and best use - methods of valuation - direct comparison with sales - analyses of sales. Valuation – statutory construction - Valuation of Land Act 1944 – unimproved value of improved land – method of valuation – relevance of sales – analyses of improved sales – comparability of sales for different purposes.
APPEARANCES:	Mr R Traves SC, with him Mr R Anderson, for the appellant Mr T Quinn, with him Mr S Fynes-Clinton, for the respondent
SOLICITORS:	Gadens Lawyers for the appellant Legal Services, Department of Natural Resources and Water for the respondent.

Property	Sale Date	Area	Sale Price	Analysis per m²
259 Queen Street (the MacArthur development)	March 2000	5,529 m²	$35,000,000	$4,793
6 Queen Street (Brisbane Square)	June 2003	7,348 m²	$25,480,000	$3,467
175 Eagle Street	October 2000	3,459 m²	$21,500,000	$2,746
75 Eagle Street (Riparian Plaza)	December 1998	3,663 m²	$15,000,000	$3,893
120 Edward Street	May 1998	1,822 m²	$6,000,000	$2,841

Property	Land Area	Date of Sale	Sale Price	Analysed Land Value
240 Queen Street (the subject land)	2,127 m²	December 2003	$116,439,300	$3,801/m²
Comments: A 26-level office tower with ground level banking chamber; major tenant the Commonwealth Bank.
260 Queen Street	1,384 m²	December 2002	$24,000,000	$3,863/m²
Comments: A 24-level commercial office tower with ground level banking chamber; major tenant Westpac Bank.
324 Queen Street	1,820 m²	June 2001 October 2003	$38,630,000 $40,000,000 (50% share)	$3,650/m² $2,665/m² (8.5% depreciation) $538/m² (15% depreciation
Comments: A 26-level commercial office tower, originally constructed 1975, recently refurbished; major tenant ANZ Bank.

Sale	Date	Area	Sale Price	Analysis $/m²
175 Albert Street (cnr Elizabeth Street)	29/05/2002	476 m²	$7,500,000	$15,756/m²
20/06/2001	1,275 m²	$7,060,000	$5,537/m²
22/07/2005	66 m²	$495,000	$7,500/m²
Aggregate	1,824 m² (1,817 m²)	$15,055,000	$8,253/m²