Olsson v Chief Executive, Department of Natural Resources
[1999] QLC 17
•19 March 1999
|
BRISBANE
19 MARCH 1999
Re: Appeal against Annual Valuation
Valuation of Land Act 1944
Valuation Roll No.: 9575
Local Government: Redland
(AV98-351)
Ian J and Christine A Olsson
v.
Chief Executive, Department of Natural Resources
D E C I S I O N
Background:
This matter relates to a property at Grevillea Street, Russell Island, and described as Lot 13 on RP 131371, Parish of Russell. The subject is a rectangular vacant parcel containing 546 m², and is located about 650 metres south of the island's barge landing jetty. The island retail area is located as a strip development near the jetty, and along the roadway leading to the jetty. The subject has a slight cross fall from west to east, and there are glimpses of the water from the parcel along Grevillea Street towards the east. The land is zoned "Residential A" under the Town Planning Scheme of the Redland Shire Council of 20 February 1988, and effective at the date of valuation of 1 October 1997. Reticulated town water, electricity and telephone are able to be connected. The key issues are the nature of the market, selected comparable sales, relativity, the nature of the land, the impact of planning policies and the method of valuation.
On 23 March 1998 the Chief Executive, Department of Natural Resources issued a valuation at $6,500. Following an objection, the Chief Executive confirmed that value on 2 July 1998, and the appellants have now appealed that figure claiming the unimproved value should more properly be $22,000. Following an unsuccessful Court supervised preliminary conference on 15 October 1998, the matter was heard on 8 December 1998.
Mr I Olsson appeared and gave evidence for the appellants. Mr J O'Rourke, Legal Officer, appeared for the respondent, calling evidence from Mr GW Knight, the departmental registered valuer now accepting responsibility for the valuation. The valuation was formerly undertaken by Mr R Tilley. Mr Knight has reviewed the valuation and concurs with Mr Tilley's assessment.
The Evidence:
(1)The History of the Site –
Before examining the details of the evidence, it is interesting to note the history of this matter. The appellants have carried out extensive investigations of this property, and a determination of the unimproved value of the subject was heard by this Court in 1993. (See Olsson v. Chief Executive, Department of Lands (AV93-384), 29 October 1993, unreported). The issues raised in the current matter closely resemble the arguments placed before the Member (now President) in 1993, however, they seek to supply a fresh perspective to those conclusions.
In seeking to understand the background to this appeal, it is worth noting something of the background to developments upon Russell Island. Russell Island has been the subject of major public debate and controversy since the undertaking of major redevelopment during the period 1966 to 1973. The first registered subdivision on the island occurred in 1867. (See Inquiry into the Surveying of Allotments on Russell Island, by JF Morgan, Surveyor-General for Western Australia, 4 May 1979, unpublished).
That report was commissioned to determine the events surrounding the subdivision of some 13,000 lots, many of which (about 3,600) were subsequently found to occupy land which is seen as drainage problem areas. The key to that problem lay in the lack of development control that applied to certain offshore islands (including Russell Island) during that period. Those islands in fact lay outside the control of any local government, and development standards were left entirely to either the developers, or personal ethical standards of the professionals employed to develop the lands. The resulting lots were then sold off in a marketing strategy that left much to be desired. The consequences of such a scenario were that many unsuspecting purchasers, often interstate and overseas, were left with parcels of land which subsequently proved to be uninhabitable, and practically worthless.
Now the subject land in this matter is not one of those drainage problem lots, and it is land which would normally be suitable for residential purposes for which it has been zoned. However, the level of investment or speculative profit that has plagued the island since the 1960s has left an inheritance that would appear to continue to impact the owners of those lands today. There has also been varied speculation that a bridge to connect Stradbroke Island with the mainland would also be connected to Russell Island, and a high level of speculation has persisted during the 1970s and 1980s. Current plans are that no bridge is proposed, and many people now are recasting their future use of the land, which they often had purchased up to 20 years previously. As a consequence, there has been a significant number of parcels placed on the market during recent years, and the demand for vacant and improved lands would now appear to be considerably less than the supply of lots for sale.
It is in interpreting the impact of such a shift in the marketplace that the parties in this matter find greatest difference in their assessments of the unimproved values of the subject.
(2)The Grounds of Appeal –
The appellants have sought a revaluation of the subject land on the following grounds:
Sales are inconsistent with the valuation as there is no local market.
Selective use of some sales results in a lower valuation.
Most low sales are forced sales and should be discounted.
Listings on Russell Island do not have the same evidentiary value as completed transactions and it is argued that these should be discounted outright.
The valuation is unlikely to be seen to be objective as it has coincided with a concerted push by Government and Council to earmark residential land on Russell Island for resumption for overland flow paths and for conservation purposes.
The erection of what is in effect a new valuation system on the interior part of the island is inconsistent to the previous graded valuation system.
The value of land must be much more than the court arrived at $7,500 for a lot that could not be built on in the Erola Pty Ltd v. Redland Shire Council case and the whole valuation process must use this value as a base value and add at least $10,500 (the difference between the subject land and the poorest island lot prior to date of valuation).
Forced sales are influenced by valuations of previous year.
Sales are unfairly influenced to forced sale by vendors informed prejudicially by Redland Shire Council that they cannot build.
The value must take into account that the land could sell with improvements.
The unimproved value of the land should include those items applicable to the land that have been subject to a claim for injurious affection against Redland Shire Council. Naturally, these items affect its value to be sold and consequently its unimproved value but are tied to the land's owners and their heirs and successors. As the land is physically unimproved it may include those items being claimed.
The unimproved value should be increased as water views from a second or third floor level will not be obscured by development or by remnant vegetation of conservation significance to the east.
In presenting his evidence, Mr Olsson has combined his grounds of appeal (3) and (9) into an analysis of what he refers to as "forced sales". Mr Olsson also follows a similar procedure to that presented in his former appeal in 1993, but has continued to document and review matters as they have progressed since that time. There is no doubt that his concerns are reflected in the commitment that he demonstrates in this matter, and the detailed examination of his conclusions in respect of the forces impacting the valuation of the land. For the purposes of this decision I will consider the evidence as follows.
(3) Nature of the Land –
Basically, the only real difference between the parties in respect of the nature of the land lies in the two perceptions of the impact of any views from the subject. During the former hearing in 1993, the learned Member noted at p.2:
"However, it emerged during evidence that the land does have views of North Stradbroke Island, but the extent of these views are in contention."
In the current matter Mr Olsson claims that since 1993 the land has been cleared of cow cane, and there are now views of the waters of Moreton Bay along Grevillea Street to the east, towards North Stradbroke Island, towards Canaipa Passage to the East, towards Mt Cotton on the mainland, and possibly Macleay Island to the north. Mr Olsson has based this ability to obtain water views upon the rights of any owner to erect a three-storey dwelling (up to 12 metres) upon the subject.
Mr Knight contests that opinion noting that he has personally climbed trees on Lot 11 (two lots west of the subject, and about the same elevation) with the purpose of checking any views obtainable. Mr Knight argues that any distant views would be marginal, and would not, in his opinion, add anything to the value of the land. Photographs were supplied by both parties to support their contentions, and on the evidence before me, I am inclined to accept Mr Knight's interpretation of what might constitute a "view of the water". Certainly there was no significant impression of a commanding view of Moreton Bay, which is really what purchasers seek when acquiring land with water views. I see the subject as a normal internal parcel with occasional glimpses to the distance through surrounding trees.
In drawing comparison with other properties on the island, which have commanding water views, Mr Knight draws reference to parcels to the east of the subject in Trimaran Street, where the land falls more steeply towards the water (Exhibit 7 Photo C). He argues there are no similar views from the subject. Both parties agree that lands with water views on the island have increased in value over recent years.
(4) Access to Services –
There is no difference between the parties in respect of access to services. Mr Olsson notes that access to electricity is guaranteed up to the year 2050 AD by an agreement to supply power between the South-East Queensland Electricity Corporation and the Redland Shire Council of 22 December 1995 (Appendix 23). Water is guaranteed by the payment of a water charge currently levied by the Council, under s.569 of the Local Government Act. However, he notes that current Council policy conditions the provision of water, as subject to the lodgment of a development application. While there could be some uncertainty associated with the success of a development application, the availability of water is not an issue in this valuation.
(5) Planning Implications –
Mr Olsson provides considerable evidence of planning studies which have been undertaken on Russell Island over recent years. He notes:
(a)"Draft Redland Environmental Directory", 6 March 1996, Chenoweth & Associates (Appendix 16).
(b)"Southern Moreton Bay Islands Planning Study", September 1997, Gutteridge Haskin & Davies Pty Ltd (Appendices 7, 11, 13 and 14).
(c)"Strategic Plan for Redland Shire 1996", 26 February 1998, Buckley & Vann (Appendix 17).
It is his argument that such studies often contain limited evidence of selective environmental issues, which are then used to support moves by the Council to resume areas of "Residential A" land on Russell Island, in the context of maintaining the future viability of the environment of South Moreton Bay. Such uncertainty about the future use of certain lands on Russell Island, in his opinion, tends to undermine confidence in the market, which is then reflected in the values obtained for the sale of land parcels.
While Mr Olsson has no direct evidence of such a causal relationship between the extensive strategic planning process, and the current fall in land values in that area, he argues, in his opinion, that the correlation cannot be coincidental. The "South Moreton Bay Islands Planning Study" has been some three years in gestation, and has been widely publicised, and in public consultation, in the area. However, he agrees that the study still has no official endorsement by the Governor in Council, and continues, at this time, to be merely a draft statement of future Council policy. The "Study Plan" has been in circulation since October 1995, and claims for injurious affection under that scheme were to be lodged by September 1998.
Mr Knight argues that the respondent has had no official advice of the impact of the "Southern Moreton Bay Islands Planning Study", and in fact requests by the respondent to obtain copies of the proposal have been ignored by Council. As a consequence, the respondent has been forced to produce topographic mapping of the island by its own resources in order to assist the valuation process. The respondent's valuers have no detailed knowledge of the study or its outcomes. In respect of the respondent's valuers providing input to the "Strategic Plan", that was restricted only to providing valuation advice on potential loss of revenue to the Crown following proposed zoning of reserves for conservation purposes.
The different understanding of the status of the "Southern Moreton Bay Islands Planning Study" may reflect either some breakdown in communication between the Council and the respondent, or perhaps some personal special knowledge obtained by Mr Olsson in his capacity as a professional planner. Mr Knight believes that, as the study is an extensive process, it currently is merely recommendations, and will not have the force of law until it has been formally approved.
Another planning implication impacting Mr Olsson's assessment of the subject, lies in his understanding of the as-of-right conditions which apply to all "Residential A" land on the island. It is Mr Olsson's argument that under the Redland Shire Town Planning Scheme of 20 February 1988 (the Scheme), "Residential A" parcels of area of 450 m² or more, may have a dwelling erected of no more than two storeys in height as of right (column (iii)). Section 4 of that Scheme determines the maximum height of such buildings at 8 metres (later amended to 8.5 metres on 10 October 1997).
Mr Olsson further argues that by Amendment 7 of 18 February 1988, the Scheme was changed to allow for amendments to the permitted height of buildings under the Scheme. He notes also that Amendment 7 took effect from 27 October 1995. It is noted that under Amendment 7 the height of dwelling houses in "Residential A" zone will generally continue to be no greater than two storeys (s.4 part(ii) division 2 clause 5).
It is also noted under Amendment 7, s.10, part (iv) clause 8(b) that development of dwelling houses of allotments of area less than 600 m², or width less than 20 metres, shall also require the approval of Council in respect of:
(i)the slope of the land from front to rear not to exceed 5%;
(ii)the slope of the land across its width is not to exceed 10%;
(iii)the extent of cut and fill and its effect on drainage;
(iv)whether buildings can be properly drained;
(v)support given for any retaining walls;
(vi)access arrangements for vehicles; and
(vii)removal of natural vegetation and any proposed revegetation.
Mr Olsson also argues that a further change to the Scheme (Amendment 14 of 18 February 1988) which took effect from 14 February 1997, modifies the conditions for the erection of dwelling houses on "Residential A" land in s.1 part (ii) division 3 clause 5, and which in effect differentiates the Bay Islands, including Russell Island, from the rest of the Shire.
Mr Olsson further gave evidence that under a recent town planning amendment that has been adopted, but not gazetted at the date of valuation of 1 October 1997, a three storey dwelling house to 12 metres remains a consent use (for injurious affection purposes) under the old Town Plan until 27 October 1998 (Exhibit 2 p.16). As the amendment relaxed the consent requirements of column (ii) for a three storey dwelling, Mr Olsson therefore argues that a three storey dwelling could continue to be erected upon the subject, and from which views of the water would be obtained.
However, Mr Olsson provides no documented official record to confirm that Council consent of three storeys would be considered under column (iii)(b) or (iv) of the amendments. In fact, s.7 part (ii) division 3 Table of Zones shows that even in "Residential B" zoning, the maximum height of dwellings is two storeys with approval subject to administrative requirements of the Scheme.
(6) Defining the Market –
A matter of concern to Mr Olsson is the method adopted by the respondent in defining the market for comparable parcels to the subject. It is his conclusion that by restricting selected sales to those between parties in a geographical area of South-East Queensland, the respondent has, in effect, introduced a bias into the analysis, to the detriment of the appellants.
Mr Knight argues that he has followed guidelines provided by this Court in 1993, by seeking comparisons on a local market basis, and excluding sales of land development companies, who tend to sell to distant purchasers who may not exercise all the prudence required in order to be a well informed buyer. The Member found "that there are at least two levels of market for land on Russell Island, depending whether the land is sold through a so-called land development company or not" (p.16).
While this Court examined the various levels of market for lands on Russell Island in 1993, concluding that the higher level demonstrated a level of value which may not meet the test required by Spencer v. The Commonwealth (1908) 5 CLR 418, Mr Olsson has continued to argue that it is inappropriate to restrict the number of sales examined. He further claims that such a strategy is demonstrated to be wrong by the sudden large drop in the unimproved values at the current valuation on 1 October 1997. Mr Knight confirms that this was the first significant reduction in the valuations.
In outlining the method of selecting comparable sales from the approximate 300 recorded sales on the Island during the period 1 October 1996 to 1 October 1997, Mr Knight explained that the respondent had sought to exclude any method which could introduce a value bias into the process. Both parties agree that there is a range of sales, including high and low sales.
The respondent chose to select about 60 sales which were recorded between parties resident in an area defined as generally in South-East Queensland. Mr Knight agrees that there could be well informed buyers resident outside that area, but argues that could only be assessed after personal contact with the parties, and analysis of those sales. Because of the logistics involved, he restricted his comparisons to the geographical area chosen.
As a further input to his analysis, the respondent spoke to local real estate agents (two) on the Island. Mr Tilley (the former valuer who undertook the current valuation) examined sales by this approach, as also did Mr Knight, for the succeeding valuation on 1 October 1998, yet to be determined. Both separate analyses made similar independent conclusions of the state of the market for lands on Russell Island. Their conclusions are that there is currently a very large oversupply of available lots for sale, and a much smaller demand for those lots. As a consequence of the forces of supply and demand, Mr Knight argues the market price for the lots on the Island is now reducing.
As supporting evidence of this trend, there was discussion about the current "listings" of sales upon the Island. It was claimed that, because of the large number of parcels for sale, and the low asking price, one agent will only accept the listings subject to an arrangement for a minimum commission of $500 subject to every sale. The agents claim in excess of 2,000 vacant parcels currently being offered for sale. Both parties agree that there are a number of owners now seeking for the Council to accept the lot as a trade-off arrangement in lieu of rates currently owed to the Council.
Mr Knight further argues that in interpreting the sales evidence he has applied a generous estimate of the value. It is his opinion that the evidence could more correctly be interpreted to support a valuation about half the current unimproved value, at about $3,500.
A key argument of Mr Olsson is that many of the sales adopted by the respondent could, in his opinion, be referred to as "forced sales", particularly those sold to the Council in lieu of rates owing. Mr Knight rejects such a conclusion, claiming that the definition of a "forced sale" does not include a sale where the normal market forces prevail. Mr Knight argues that it is the normal operations of the marketplace which are currently impacting the sale price of lots on Russell Island.
Mr Knight agrees that the introduction by Council of an infrastructure levy upon owners on Russell Island had a "damning effect upon sale prices" (transcript p.48). He notes that there was an immediate large increase in the number of lots for sale. However, he does not agree that such an event could be interpreted as a forced sale. However, he does agree that the Queensland Ombudsman found that infrastructure levy to be unlawful, and it was later rescinded. Mr Knight interprets a forced sale as "when a third party is saying to you it's time to sell it" (transcript p.48).
(7) Relativity –
Mr Olsson argues that an artificial step in the unimproved values has been introduced by the respondent as a consequence of his defining three separate market areas on Russell Island. Mr Knight confirms that sales evidence would support three sectors in the market:
· waterfront land (steady or fall of 10% in value);
· lands with water views (steady); and
· inland parcels (falling).
In pursuing his comparison, Mr. Olsson draws comparison with the following parcels:
| Parcel | Description | Area | Unimproved Value |
| 1 | Fern Tce (Lot 1 on RP 865861) | 1,000 m² | $21,000 |
| 2 | 41 Trimaran St (Lot 232 on RP 128908) | 564 m² | $12,000 |
| 3 | 80 Jackson Rd (Lot 13 on RP 134541) | 576 m² | $4,500 |
| 4 | Subject | 546 m² | $6,500 |
Mr Olsson argues that changes in the unimproved value of Parcels 2, 3 and 4 have all declined by large amounts since 1993, while the unimproved value of Parcel 1 has remained fairly consistent. He argues that the current stepped values do not reflect the principle that lots at higher elevations tend to be more valuable. He claims that Parcel 1 will have a 5 metre wide drainage easement along its eastern side (Appendix 26).
Mr Knight, however, notes that such a proposal for Parcel 1 is part of a proposal for overland drainage as part of the "Southern Moreton Bay Islands Planning Study", which still has no formal endorsement by the Governor in Council. He also argues that Parcel 1 is a superior parcel of much larger area, with bitumen road frontage, and with vastly superior views (transcript p.35). He sees no real comparison between Parcel 1 and the subject. Parcel 1 is zoned "Non Rural" and can be used for the erection of a two-storey dwelling.
In respect of Parcel 2, Mr Knight believes that that lot has much superior uninterrupted views and is above road level, with a gentle fall towards the east. He argues that Parcel 2 was used to set the levels of value for the parcels in that area, and is a vastly superior lot.
In seeking support for his assessment of several separate market sectors on Russell Island, Mr Knight draws reference to the findings in Erola Pty Ltd v. Council of the Shire of Redland (A97-46), 2 June 1998, unreported. That matter dealt with the resumption of a waterfront parcel on Russell Island which, because of the extent of certain filling required, could not be used for residential purposes. In comparing four sales of lots near the middle or western side of the Island, the learned Member found that they provided no real comparison in view of a lack of any "water frontage or noteworthy views" (p.18).
It is also noted that in accepting that waterfront land does entail, under normal circumstances, some additional premium, the Member said at p.24:" I consider that, in making his alternative assessment of value, Mr Kinivan gave too little weight to what was effectively a prohibition on building on the land, and gave too much weight to the value of the deep water frontage. I have no doubt that the particular waterfront characteristics of the subject land make it more valuable than nearby blocks, all other things being equal. But I am not convinced that, in assessing the value of the land at the date of resumption, one must assume that its water frontage features make it superior to nearby, more elevated blocks which have similar views and on which a dwelling house may be constructed."
In the end the Member found that the value of that waterfront land at resumption, with the restrictions upon its future use, was $7,500.
(8) Comparison of Sales
Both Mr Olsson and Mr Knight provided a range of details about sales which, in their opinion, supported their conclusions of the unimproved values. Mr Olsson also rejected any reliance upon the use of any listing of properties upon Russell Island, as they could not be relied upon to support what a buyer might actually pay for the land. He also challenges any reliability of listings in view of the practice of "bait advertising", the wide variance in the listed prices, the different zonings of land listed and the condition of the land.
In respect of applying some weight to the use of listings, Mr Knights notes that the Member found in Olsson v. Chief Executive, Department of Lands (supra) at p.10 that, "A prudent purchaser would inquire and become aware of such listings before buying land". However, Mr Knight agrees that listings do not carry the same weight as concluded sales.
In support of his estimate of the unimproved value Mr Olsson notes the following sales which he claims provide no comparison in view of, in his opinion, their nature as a forced sale:
· Sale 1 – (2 Tails Street – Lot 72 on RP 133991). This is a vacant parcel of area 577 m² which sold (Beers to Philpott) on 26 August 1996 for $5,500; and an adjoining parcel Lot 71 (569 m²) was also sold (Beers to Philpott) on 4 December 1996 for $5,500. The combined Lots 71 and 72 (1,146 m²) was subsequently resold (Philpott to Lewis and McGlinn) on 18 November 1997 for $10,000.
· Sale 2 – (41 Trimaran Street – Lot 232 on RP 128908). This is a vacant parcel of area 564 m² which sold (Aufderheide to Rosler) on 26 February 1996 for $10,000. The lot was resold (Rosler to Fabri and Ferrari) on 20 December 1996 for $12,500.
Mr Olsson has investigated his Sales 1 and 2, and concludes that the price achieved on both sales was considerably lower than what the vendor had expected, and reflected the anxious nature of the vendors due to the uncertainty of obtaining Council approval and the restricted nature of dwellings that could be constructed upon the lots.
In support of his valuation, the respondent analysed a number of sales, and supplied the following sales which are representative of those sales:
· Sale 1 – (Tails Street, Lot 71 on RP 133991). This is the same sale as Mr Olsson's Sale 1. The sale is of regular shape, above street level, with a slight rise to the rear and a cross fall to the south. It is similar in area and zoning, and slightly inferior in topography and elevation. Overall it is inferior to the subject.
The sale sold in December 1996 for $5,500 and, after allowing for improvements, was analysed at $5,000, and applied at $5,000.
· Sale 2 – (Trimaran Street – Lot 232 on RP 128908). This is the same sale as Mr Olsson's Sale 2 and has similar zoning, shape and slope as Sale 1 and the subject. The sale is similar in area and zoning, but has vastly superior uninterrupted bay views of the water. Overall the sale is seen as superior.
The sale sold in November 1996 for $12,500 and, after allowing for improvements, was analysed at $12,000, and applied at $12,000.
Mr Knight rejects that either sale could be considered as forced sales, as his discussions with the vendor Mr Beer (Sale 1) disclosed no direction from the bank to sell. Mr Knight claims Mr Beer had formerly transported homes from the mainland and re-established them on vacant lots on Russell Island. That market had dried up and Mr Beer decided to withdraw from that activity. The Tails Street lots had about eight to nine months of market listings exposure prior to the sale to Mr Philpott, and he accordingly saw that sale as a normal market transaction.
In further support of his valuation, Mr Knight provided the following additional sales:
| Sale | Parcel | Date | Price |
| 3 | Goolagong St – Lot 116 on RP 135151 – 516 m² | August 1997 | $3,250 |
| 4 | Goolagong St – Lots 118 and 119 – 1,032 m² | October 1997 | $7,000 |
| 5 | Titala St – Lot 7 on RP 135151 – 506 m² | September 1998 | $3,500 |
| 6 | Jiwali St – Lot 53 on RP 135390 – 668 m² | April 1998 | $3,000 |
| 7 | Grevillea St – Lot 19 on RP 131371 – 546 m² | March 1997 | $3,000 |
| 8 | Grevillea & Dryandra Sts – Lot 91 on RP 131371 – 539 m² | June 1997 | $6,000 |
| 9 | Trimaran & Callistman Sts – Lot 30 on RP 131371 – 534 m² | July 1998 | $3,000 |
| 10 | Cutter & Trimaran Sts – Lot 238 on RP 128908 – 559 m² | July 1998 | $10,000 |
| 11 | Cutter & Seaview Sts – Lot 212 on RP 128908 – 653 m² | Recent | $6,000 |
| 12 | Bernborough St – Lot 10 on RP 133991 – 551 m² | October 1996 | $5,500 |
In response to Mr Olsson's claim that many of those sales are forced sales, particularly where the land is sold to the Council, Mr Knight argues that such sales are often sold after exposure to the market. In such cases it is not that the vendors are actually forced to sell to the Council. However, in respect of the additional sales, he confirms that he has not fully analysed all of those sales, and in fact he has not yet contacted the parties in some of them. However, he suggests that the level of value of those additional sales provides an indication of the level of the sales that surround the subject.
Decision
This matter is just one of a number of similar appeals in this area which are currently before this Court. The matter is an unusual appeal inasmuch as the appellants claim that the respondent has determined an inappropriate unimproved value, and the correct value should be much higher. The purpose of such an appeal would appear to be related to the perception by the appellants that inappropriately low values may later lead to reduced compensations. They see that this may flow following any possible resumptions by the Council as part of its move to implement the environmental strategy outlined in the "Southern Moreton Bay Islands Planning Study".
However in considering this matter, it is not for this Court to speculate on what may or may not occur in another place. Should the appellants' fears prove to eventuate, the determination of compensation would be assessed entirely on the evidence supplied at that time, and any determination of unimproved value at 1 October 1997 would have little impact upon any conclusions about the value of land lost. I therefore consider this matter entirely upon the evidence supplied.(i)The Nature of the Land –
I turn first to the nature of the land and note the difference in perception by the parties in respect of the impact of water views upon the unimproved value. As noted, I see no reason to alter the previous assessment of the nature of the subject by the Member (now President) in 1993.
(ii)Planning Implications –
There are two impacts that planning matters are likely to have upon this matter. Firstly, there is the public perception of a Council strategy which could lead to the eventual claiming of vacant lands for some environmental purpose; and, secondly, there is the right to erect a dwelling up to three storeys in height, and any effect that may have upon views from the subject. In respect of the second matter, if it is a fact, I see little special benefit that could accrue to the subject, beyond that which would also accrue to surrounding "Residential A" properties. If such a height for a dwelling could be achieved, so too could surrounding dwellings be built, and any possible views towards the water from the subject are likely to be impeded.
In the matter of any public perception that Council is about to embark upon a strategy which would severely curtail future building upon the subject, I note that the environmentally sensitive nature of mangrove areas, particularly in the southern foreshores of Moreton Bay, has been an issue for both the State Government and the Council for some time. The existence of a series of strategic studies, and the development of a strategic plan to protect those areas, would appear to be sensible responses by the Council. Indeed, as a planner, I believe that Mr Olsson would support such moves.
Whether such a strategy should also extend to the higher inland areas of Russell Island, and the environmental consequences of development on those areas, is a matter for final decision by the Council in the public interest. The ultimate adoption of any such plans would, of course, rest upon the approval of the Governor in Council, and would be likely to occur only after a period of public consultation. I note that the "Southern Moreton Bay Islands Planning Study" has still to obtain official standing.
In seeking guidance about any impact upon a valuation that changes to a proposed rezoning of land may have upon the sale price of those lands, I am led to the decision of the Full Court of Queensland in JR & DM Stubberfield v. The Valuer-General (1988-89) 12 QLCR 328. That matter dealt with land at Redland Bay which was initially valued by the Valuer-General for purposes of the Valuation of Land Act 1944 at $90,000. On appeal, the value was reduced to $80,000, and a subsequent appeal to the Land Appeal Court was rejected, and then referred to the Full Court on a point of law.
The argument of the appellants was that the Land Appeal Court had failed to have regard to the possible effect of a proposed rezoning of part of the land from "Residential" to "Public Open Space". At the time of that valuation a new proposed town plan for Redland Shire was on public display for a period of three months, and that plan proposed a change to dual zoning for the Stubberfield land. The Valuer-General argued that the correct method of valuing the land was to have regard to its zoning as "Residential" under the existing town plan, and to ignore any effect that the proposed amendment might have upon the value. In considering that conclusion by the Valuer-General, Carter J said at p.339:
"It was Mr Stubberfield's submission that in applying value to the land the valuer was bound in terms of the Spencer test, to consider as relevant to the valuation the fact that the local authority had advertised its intention to rezone part of the land as Public Open Space and this is in the context of the considerations which may well lead to resumption of that portion by the local authority either on account of its published intention for the Public Open Space Zone or because of its dealings with A.S.L. and the Minister.
I my view these were relevant considerations for the valuer and as it is conceded that such matters were deliberately left out of account the Land Court and Land Appeal Court erred in not considering them."
In considering the matter of the impact upon the unimproved value of directions given by the High Court of Australia in Spencer v. The Commonwealth [1907] 5 CLR 418, Carter J in Stubberfield also noted at p.331:
" It is also a well recognised principle that land be valued for its highest and best use. What it can best be used for will be reflected in its true market value which takes account of any detriment the land possesses relevant to its use as well as any potential it has for its present or other use. Again the relationship between value and land use is immediately apparent. The hypothetical purchaser and vendor referred to by the High Court in Spencer will therefore take full account of the inherent characteristics of the land as well as the restrictions or otherwise upon its present or future use when deciding what sum of money the one will pay to the other to acquire it."
And finally, in considering whether the Valuer-General was correct in ignoring any impact upon the value, inasmuch as the advertised zoning of the Stubberfield land was not lawfully effective at the date of the issue of the valuation notice, Carter J said at p.340:
" Finally the statement in the judgment of the Land Court viz. 'The Court cannot give prospective recognition to the new Town Plan' is literally true but if it is intended to convey that an advertised new planning proposal which goes on display either before the date of valuation or within the period between that date and the date of the issue of the valuation notice must necessarily be ignored it is in error. Whether such a proposal will affect the value on the date of valuation is a matter of fact but it remains a relevant matter to be considered and there is no provision in the Valuation of Land Act either express or implied which requires or permits the Valuer-General to ignore it."
Now I am aware in this matter that Mr Olsson does not argue that the respondent should ignore any impact of the planning studies or the strategic plan. Rather he concludes that the existence of those studies is adversely impacting the unimproved value of the land. It is Mr Knight who seeks to disregard any impact of the "Southern Moreton Bay Islands Planning Study" in view of its investigatory nature at this time. Indeed, in his valuation Mr Knight has not allowed for any special decline in value as a direct result of those studies, and has relied upon the market forces.
In adopting such an approach, Mr Knight would appear to follow guidance given by the Full Court of Queensland in DR Murphy and Cove House Australia Pty Ltd v. The Crown (1988-89) 12 QLCR 301. In that matter the Full Court found that it was not a valid exercise of powers conferred by s.32(a) of the Local Government Act 1936 for the Woongarra Shire Council to take into account the effects of an environmental impact study upon an application to rezone land, because of the existence of a turtle rookery at Mon Repos. The Land Appeal Court had previously found that the local authority would have refused a rezoning application to "Residential" rezoning because of the existence of the turtle rookery.
The Full Court overturned that decision, but that was subsequently reversed by the High Court in The Crown v. Murphy and Cove House Australia Pty Ltd (1990-91) 13 QLCR 90, and the decision of the Land Appeal Court was affirmed. (See 11 QLCR 34 (1989); and also 68 LGRA 286.)
The relevant issue of that decision to the current matter is the reference to the expectation of a prudent purchaser in respect of rezoning the land in the knowledge of the environmental significance of the area. The Land Appeal Court found at p.41:
" On the totality of the evidence before us, we do not believe that the hypothetical prudent purchaser of the resumed land at date of resumption, disregarding the resumption and any associated scheme but being fully conversant with the Council's attitude against rezoning the subject land and other land in the locality to Residential zoning and with the public/scientific interest in protecting the rookery, would have realistically or reasonably been optimistic of the successful outcome of an application to rezone to Residential zoning. Likewise, given that environmental matters have been held by the Local Government Court to be a proper consideration to be weighed, and given that he, the purchaser, would have had to show that the existing zoning should be changed, the purchaser would not have entertained reasonable expectations of pursuing a successful appeal against the Council's refusal to rezone."
In the current matter, and following the principles outlined in Murphy, I conclude that any prudent purchaser of land on Russell Island, at the time of the valuation, was likely to have concluded that the area was possibly destined for some environmental protection purposes. As such, an outcome was likely to have a deleterious impact upon the unimproved value of the land, and Mr Knight, in providing no allowance for such environmental impact, has provided a generous assessment of the land.
The matter of whether a local government strategic plan, and its moves to preserve the environment, could be construed to conclude some premeditated attempt to reduce future resumption costs, was also examined by the Land Appeal Court in J & OM Alroy v. The Crown (1988-89) 12 QLCR 67. That matter dealt with the resumption of Kangaroo Island in the area between South Moreton Bay and the Southport Broadwater. The environmentally sensitive nature of that island has similar characteristics to those of the area of the "Southern Moreton Bay Islands Planning Study", and were part of the adjoining Albert Shire's Strategic Plan.
However, the Alroy matter considered whether a future development of Kangaroo Island might be considered, and the Land Appeal Court concluded at p.70:
"The history of Town Planning for the locality has been one of conservation and low key recreational use. The locality has been recognised as a Mecca for boating and angling enthusiasts – a recreation area worthy of preservation. This concept was incorporated in the Albert Shire Council's 1972 Strategic Plan and seems to have been jointly accepted by the Local Authority and the Queensland Government. The 1982 Strategic Plan continued the concept and Kangaroo Island can be categorised as land within a large conservation and recreation area, where facilities to serve that recreation area are to be located elsewhere within or adjacent to it. The evidence discloses that the history of applications in respect of Kangaroo island for consent for particular uses such as subdivision and nursery is one of rejection."
That matter can be distinguished inasmuch as the key issue was whether a proposal to subdivide Kangaroo Island might have been approved. With the subject land at Russell Island subdivided land is already in existence.
In respect of Mr Knight's decision not to adopt the "Southern Moreton Bay Islands Planning Study", in view of its yet undecided status, I note that the final authority of a strategic plan was discussed in Osterley Pty Ltd v.Caboolture Shire Council [1996] 2 QdR 34, where the Court of Appeal said at p.36:
"The dismissal of Bachrach's appeal to the Planning and Environment Court would not have obliged the Governor-in-Council either to rezone Osterley's land or to adopt the draft Strategic Plan as the new Strategic Plan for the Shire. Both matters would have remained entirely for the Governor-in-Council's decision. The reasons for the dismissal of Bachrach's appeal to the Planning and Environment Court would have provided information for the use of the Governor-in-Council in making those decisions, but would not have impeded or otherwise influenced the decision-making process in any respect."
Clearly, the final decision in respect of the adoption of a local government strategic plan is entirely the role of the Governor in Council. It is therefore appropriate for Mr Knight to conclude that some uncertainty might remain about the future use of the subject land, until such time as a formal plan becomes enforceable in law. However, valuation is not an exact science, and any interpretation of the market value of the land, must be interpreted bearing in mind the vagaries of the marketplace. The impact of a draft planning study, if widely known to the public, is likely to create some uncertainty for potential buyers.
(iii)Defining the Market –
The difference between the parties in respect of the appropriate method of selecting comparable sales for comparison purposes lies really in their different understanding of what constitutes a forced sale. It has already been established by this Court that sales orchestrated by land development companies in 1993 were at prices well above prices for which comparable lands could be acquired by other private treaty. Indeed, the only differentiation made by the Member in that matter was between the land development companies and other vendors (p.16).
The Member also noted Mr Olsson's concern that vendors who sell at lower market level are unwilling vendors. However, he directed that such vendors merely reflect the demand for land at a particular time (p.16). When the market is buoyant, with a healthy balance between vendors and purchasers, the vendors tend to achieve higher prices. At times of over supply the purchaser has greater bargaining powers, and prices will tend to be more competitive. Such is the nature of the marketplace, and it is not appropriate to define such sales as forced sales.
I accept Mr Knight's definition that a forced sale has the connotation of a third party exerting pressure upon the vendor to part with his land. This may often relate to a financial body who is seeking to recover its costs, or some other party who has a claim against the vendor. Mr Olsson argues that such is the case where the local Council has established a minimum rate charge which, in Mr Olsson's opinion, does not represent a fair comparison with other lands not on the offshore islands.
While the former attempt to set a special levy upon island properties was seen to be illegal by the Ombudsman, the establishment of an across-the-board minimum rate charge for all ratepayers is a legitimate strategy for the Council. The Council is charged after all to balance its budget in the overall community interest of its broad rate base. As there is a certain minimum cost in dealing with rating matters, there is nothing illegal for the Council to seek to recover those costs, rather than pass them on to other ratepayers.
However, that is an entirely separate matter to any apparent decline in unimproved values of lands on Russell Island. As those values have declined, the relative impact of the minimum rate charge becomes increasingly unattractive to owners, who see the Council charges in the perspective of their interest in the land. When a measure of their interest (the unimproved value) reaches a point where the costs of rates reflect a major part of the cost of ownership, the owners are likely to seek to dispose of the asset. After all the costs of owning a parcel are really the costs foregone of doing something else with the money equivalent of the land.
In analysing the respondent's method of selecting a reasonable sample for analysis purposes, I note that Mr Knight has chosen a stratified sample which, for normal statistical inference purposes, should be relatively unbiased. The selection process is based entirely upon the geographical residential location of the parties, and is used merely to select those properties which are then separately analysed for comparison purposes. While it would always be preferable to fully analyse all sales in the area, such a selected representative sample is a reasonable approach, bearing in mind the 300-odd sales that occurred in the relevant period.
(iv)Relativity –
In seeking to understand Mr Knight's conclusion that there are three market sectors currently operating on the Island, I note that he determined that from an analysis of a wide range of sales of vacant lands. I note Mr Olsson's conclusion is that those sectors would appear to contravene the broad principle that lands at higher elevations should reflect the highest values.
However, while the overall market for lands on Russell Island is likely to have some general consistency, compared to mainland areas, the special features of individual lots will always determine what prudent purchasers will pay for the land. While elevation is an important feature of any lands, it is only one feature that attracts the interests of buyers. Certainly location overlooking expansive water views, or direct access to water, are both features which regularly attract high values. Such was noted by this Court in Erola Pty Ltd v. Council of the Shire of Redland (supra).
In relying upon relativity in his estimate of the unimproved value, Mr Olsson has followed the principle outlined in R & MM Barnwell v. The Valuer-General (1990-91) 13 QLCR 13, where the Land Appeal Court said at p.16:
" We are conscious that it is desirable that valuations made for the purposes of the Valuation of Land Act of comparable lands should bear proper relativity, one to the other, if the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis."
However, the adoption of appropriate relativities to the subject relies upon a comparison of comparable properties. In selecting his comparison with his Parcel 1, Mr Olsson has drawn comparison with a lot which is twice the size of the subject, has better access to a bitumen road, and has far superior views. By that comparison, there is no reason to discredit the comparisons made by Mr Knight, and I believe the relativity between Parcel 1 and the subject is a changing relationship due to the changing nature of the two market sectors in which those parcels are located on the Island.
(v)Comparison of Sales –
In comparing the subject to the selected Sales 1 and 2, Mr Knight has compared both sales to the subject as follows:
Sale 1 - unimproved value $5,000 – inferior.
Sale 2 - unimproved value $12,000 – superior.
To further support his valuation, Mr Knight has supplied a wide range of additional sales which, although not analysed, indicate a much lower level of value for parcels surrounding the subject. Mr Olsson's only comparisons of Sales 1 and 2 is to claim that they do not reflect a fair comparison of the subject. However, in declining to provide his own comparison of comparable sales, Mr Olsson has not sought to adopt the method which most Courts at all levels in Australia have preferred. (See PH Clough v. The Valuer-General (1980-81) 8 QLCR 70, at p.76).
Costs of the Appeal
The respondent has claimed that Mr Olsson has been frivolous and vexatious in pursuing his appeal, as he has failed to raise any new evidence, and has failed to provide any comparable sales evidence that might support his case. Mr O'Rourke argues that Mr Olsson has relied upon an inaccurate interpretation of the meaning of a forced sale, and has ignored conventionally accepted wisdom about the value of water views and direct access to water. He argues all of those matters were addressed previously by this Court in either Olsson v. Department of Lands (supra), or Erola Pty Ltd (supra).
As a consequence of that approach, the respondent argues that he has been required to prepare and defend his valuation at an estimated cost of $1,300, being $500 for valuation costs and $800 for legal costs. Mr Olsson resists those costs and requests that each party be required to meet its own costs in accordance with the directions found in Bowden v. The Valuer-General (1980-81) 7 QLCR 138, where the Land Appeal Court said at p.145:
" It appears to us that the legislature intended to leave all questions of costs in the Court's unfettered discretion subject to the prohibition against granting costs to the party whose valuation is nearer the valuation determined."
The Land Appeal Court also went on to say at p.147:
" Easy access to the Land Court to air grievances and have valuations reviewed is, as we have already stressed, most desirable in revenue cases, and such access should be available without fear of costs being awarded to either party except in special cases."
However, I am also aware of the findings of Moyses & Morris & Ors v. The Council of the City of Townsville (1979) 6 QLCR 271, where the Land Appeal Court said at p.274:
"The public interest, it would seem to us, is amply protected by the scheme of the legislation as a whole, by the fact that the discretion as to costs is one which is to be exercised judicially, and by the restriction on the exercise of that discretion which is imposed by sub-section (2) of Section 27."
…
"Second, where the Court is considering whether it should award costs to an authority, it could be wrong to have regard merely to the amounts of the claim and of the award and of the value put in evidence by the authority. We would think that usually it would be more relevant to enquire whether the conduct of the claimant, including his making of an exorbitant claim, if he has made one, has been such as to force the authority; unreasonably and unnecessarily, into litigation."
In exercising my discretion in this matter, the key lies in whether Mr Olsson has introduced new evidence not formerly decided by this Court, or whether circumstances of the matter have changed significantly since 1993. While I understand the respondent's concerns that Mr Olsson has appeared to pursue the same general trend of his former appeal, I find that certain features of the current matter open new areas of dispute.
Firstly, there is his opinion that the subject does have some potential for views towards the water, not previously concluded. And secondly, the significant reduction in the unimproved value of the subject, and recent planning studies, lead to a changed market situation upon the Island. In view of the extensive research undertaken by Mr Olsson, and his obvious commitment to his task of seeking clarification as to why the values on the Island are now declining rapidly, I believe as the former Member said at p.14, there is no doubting his bona fides in this matter. On that basis I find no reason for awarding any costs, and direct that each party bear their own costs.
However, in so doing I make this observation that, should the appellants continue to pursue another matter without the development of a more persuasive evidence, then the matter of costs may well become an issue for further consideration at that time. In the current matter I find that Mr Olsson has failed to satisfy the onus of proof required by s.45(4) of the Valuation of Land Act. In that regard I note that under s.33 of the Act the valuation of the Chief Executive is found to be correct.
Conclusion:
Having considered the whole of the evidence, I am not persuaded that the appellants have proved their case. The appeal is dismissed, and the unimproved value of Lot 13 on RP 131371 as determined by the Chief Executive is affirmed at Six Thousand Five Hundred Dollars ($6,500).
NG DIVETT
MEMBER OF THE LAND COURT
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