Payne v Valuer General

[2005] NSWLEC 106

Land and Environment Court

of New South Wales

CITATION:

Payne v Valuer General [2005] NSWLEC 106

PARTIES:

Keith David Payne v Valuer General

FILE NUMBER(S):

30543 of 2004

CORAM:

Murrell C

KEY ISSUES:

Valuation of Land :- Coastal Hazard Zone

LEGISLATION CITED:

Valuation of Land Act 1916
Local Government Act 1993

DATES OF HEARING:

19/10/2004 and 05/11/2004

 
DATE OF JUDGMENT: 

03/15/2005

LEGAL REPRESENTATIVES:

APPLICANT
Mt K D Payne, in person

RESPONDENT
Ms T Jowett, barrister
Instructed by Ms A Gray, solicitor
Crown Solicitor's Office

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Murrell C

13 March 2005

30543 of 2004 Keith David Payne v Valuer-General

JUDGMENT

1 This judgment is for an appeal under s 37 of the Valuation of LandAct 1916 (the Act) in respect of the land known as 68 Kalakau Avenue, Forresters Beach on the Central Coast of New South Wales. The owners of the subject land are contesting the land value of $993,000 for the base date of 1 July 2003. The date the valuation was made was 14 October 2003.

2 The subject land is Lot 200 DP223884 with dimensions of about 16.5 m x 36m x 36 m yielding an area of about 594.4 sq m. The land has a street frontage to Kalakau Avenue and the rear boundary adjoins the beachfront reserve. The land is in Precinct I, and is subject to coastal erosion as shown on Fig 1, depicting the immediate hazard line that affects about half the property, the 15 year hazard line that affects the land up to the footprint of the house and the 45 year hazard line that takes in the dwelling and leaves very little land.

3 On the northern boundary there is a vacant block of land and on southern side there is dwelling house. The allotment known as No. 74 is also a vacant parcel of land that was purchased by the Gosford City Council in 1999 as part of the voluntary acquisition programme for properties affected by coastal hazards. To the east of the site there is a vegetated public reserve that adjoins the ocean beach. Forresters Beach is a relatively open beach with rocky outcrops and cliffs on the northern and southern parts of the beach. There is also a reef that runs parallel to the shore. The dunal area on the eastern side of the property and the foreshore reserve are vegetated mainly with native shrubs and trees.

4 The owners of the land wrote a letter of objection to the Department of Lands in January 2004. The objection was disallowed for the reasons that the valuation represents the market level as of the base date and is based on the analysis of vacant and/or improved sales which occurred on or about that date

5 Mr Payne contends that the subject land has a limited life as it is severely affected by coastal hazard and will disappear in 50 years.

6 On behalf of the Valuer-General evidence was given to the Court by Mr Ian Davey, a consultant valuer and Mr Bruce Druery, an engineer with specialist knowledge in coastal processes. The Court also had the benefit of a site inspection of the subject land and the comparable sales identified in Mr Davey’s statement of evidence and as identified by the appellants. Mr Payne presented evidence to the Court in support of his own case.

7 I record that there are two other appeals that are of a similar nature, although not identical to this matter. These other properties are also affected by the Coastal Management Study (CMS) and Coastal Management Plan (CMP) with the 2015 and 2045 hazard lines traversing the 3 properties. These appeals are: Dewey v Valuer-General proceedings No. 30497 of 2004; and Munter v Valuer-General, appeal No. 30630 of 2004. At the end of each of these hearings the parties were asked if there was any objection to the Court having regard to the evidence heard in the other proceedings to be taken into consideration in the determination of each of the appeals. The parties raised no objection and I am mindful that there are individual differences between the three appeals.

8 Mr Davey and Mr Druery gave evidence in the 3 proceedings and the applicants were given the opportunity to cross examine both experts on their oral evidence and the Statement of Evidence tendered.

9 The subject site at 68 Kalakau Avenue is zoned Residential ‘A’ under the Gosford Planning Scheme Ordinance. Development Control Plan No. 125 – Coastal Frontage must also be taken into consideration in development of the subject site. The purpose of the DCP is to guide development of land having regard to minimising the risks associated with building on land which has frontage to a coastal beach or a cliff. The DCP was prepared to give effect to the Coastal Management Plan that the council prepared and adopted following the Coastal Management Study and Coastal Process Investigations that were carried out 1993 and 1999. The Coastal Management Plans were prepared in accordance with the principles of the Coastline Management Manual prepared by the New South Wales Government and gazetted 16 February 1996.

10 The DCP contains a number of definitions that are relevant to these proceedings:

‘Major investments’ in relation to building work and renovations is defined as the expenditure on improvements, changes, additions or renovations of more than 20% of the cost (or current value) of the building. The cost of the investment and the cost of the building shall be calculated by council and shall be compared at equivalent current prices.
‘Maintenance’ is defined as replacing defective, worn-out, rotten and/or damaged materials within the building with similar new materials. Maintenance includes the following:


(a) Replacement of rotten or white ant affected timbers with new timber or recycled timber of the same or similar dimensions.

(b) Replacement of damaged, rotten or deteriorated doors and windows with new materials of approximately similar overall dimensions.

(c) Replacement of wall and ceiling sheet cladding materials with new sheet cladding materials.

(d) Replacing roofing materials with new roofing materials to the same slope and framework as previously existed.

(e) Replacing floor and wall tiles and plumbing fittings and PC items within the building.

(f) Replacing kitchen cabinets with new kitchen cabinets and benchtops in the same kitchen room area as existed.

(g) Movement, deletion or including of doorways within the structure which do not cause a change in room sizes or layout of the approved building.

'Maintenance' does not include any increase in floor area or the movement of walls, replacement of one type of wall with another (such as replace a timber frame wall with brickwork), building decks, moving kitchens to other areas or changing the roof shape, pitch or height.

11 Section 8 sets out a number of development exceptions:

Council will not permit buildings to be constructed on land which has been identified by the Coastal Management Plan for Gosford City Open Coast Beaches as subject to designated coastal hazards except where permitted below:

8.1.1 Existing buildings which have been identified as being within the designated coastal hazard areas will not be permitted to carry out major investments in renovations except as permitted below. Planned retreat of the buildings is recommended.

8.1.2 The designated coastal hazard areas are areas seaward of the year 2045 erosion line and the high risk cliff stability line. The lines are shown within the Council's Coastal Management Plans.

8.1.3 All structures constructed in the coastal frontage zones shall:
(a) be compatible with the coastal hazards identified;
(b) be set back as far landward as practicable;
(c) not give rise to any increased hazard;
(d) be designed to not be damaged by the designated hazard;
(e) give consideration to the effects of larger events than the designated hazard;
(f) be constructed in a manner or to a level which overcomes any problem from the coastal hazards of run-up and inundation.

8.1.4 On Wamberal Beach building will be permitted seaward of the 2045 erosion line but landward of the proposed revetment subject to the following:
(a) adequate foundation treatment designed to withstand the stormwave erosion;

(b) that the building shall be set back from the alignment of the proposed revetment as required by Council;
(c) an indemnity being provided as detailed below.

8.1.5 Renovations will be considered in the designated coastal hazard areas provided that they do not increase the risk of loss or increase the level of coastal hazard. Such renovations will not be approved until an indemnity has been provided as detailed below. Maintenance of buildings is permitted, provided that the maintenance work carried out does not change the nature of the structural element maintained.

8.1.6 Idemnity is to be provided in the format approved by Council for any building structure proposed before approval of any development application seaward of the 2045 hazard line or the high risk cliff stability line.

8.1.7 Major investment in redevelopment of existing buildings within the designated hazard areas recommended for planned retreat will not be permitted.

8.1.14 Removable buildings may be considered within the designated hazard areas provided that it can be shown that they are readily removable and an indemnity is provided. In the event of severe erosion threatening a removable building, Council may condition such development and/or instruct the owner at short notice to relocate the building. Removable buildings will not be permitted within the high risk cliff stability zone.

12 As part of the Coastal Frontage DCP the council prepared maps to show the immediate hazard line and a 2015 hazard line and a 2045 hazard line and the affectation of these lines on the subject property is shown in the extract at Fig. 2.

13 In Mr Druery’s report, he states:

The council’s Coastal Management Plan recognises that the process of coastal erosion and natural change is intrinsically uncertain. This is particularly evident where the plan has to cater for long-term climate change and sea level rise. The global scientific community is uncertain about the likely magnitude of the affects over time. These uncertainties are magnified, the greater shoreline behaviour is projected into the future.

14 The council’s Coastal Management Plan adopted the erosion hazard lines determined by Public Works Department in 1994. These lines comprise:

• Immediate hazard line – defined zone which could experience erosion if a design storm (i.e. repeat of 1974 storm) were to occur now;
• Year 2015 hazard line – defines a more landward zone which takes into account long tern recession. It identifies the possible limit of erosion if a design storm occurred in 2015; and
• Year 2045 hazard line – defines a more landward zone which takes into account long term recession. It defines the possible limit erosion if a design storm occurred in 2045.
  

15 Mr Drurey said that the council’s proposed implementation principles are: approve development outside 50 year hazard zone; voluntary purchase a general option in 50 year hazard zone where no feasible alternative is available; and immediate action in 20 year hazard zone funded and implemented over 5 years and this includes: beach restoration; voluntary purchase; and setback outside hazard zone where retreat is feasible.

16 In his statement Mr Drurey quotes that the Coastal Management Plan notes there was uncertainty about the interpretation and projection of the erosion hazard lines at Forresters Beach.

There has been considerable discussion with regard to the definition of the longer term hazard zone at Forresters Beach. This includes some disagreement among respected coastal engineers about how the historical changes to the beach and dune should be interpreted and used for projecting future trends …
Emphasis is placed on taking immediate action in the 20 year rather than the 50 year hazard zone. Provision is made to continue monitoring and review the hazard in about 20 years time.

17 The council has adopted planned retreat as the principle strategy for managing the coastal hazard at Forresters Beach. This means that no protective works are proposed and properties within the 2045 hazard zone are eligible for voluntary purchase as the threat of coastal erosion gradually increases over time.

18 Table 5.6 from the Coastal Management Plan shows the recommended action for Precinct 1 at Forresters Beach where the subject site is located.

Precinct I - Southern Section	Funding Category	Priority
· Geotechnical study and review of hazard zone	11	H
· Review case for allowing building with indemnity in erosion hazard area (in this case where the risk is to the properties not the beach)	11	H
· Subject to the above: Voluntary purchase of vacant freehold land together with voluntary purchase of occupied allotments in 20 year erosion hazard zone	11	M-H
· Allow only removable and adequately piled houses in the year 1015 to year 2045 erosion hazard zone	VI	-
· Voluntary purchase of properties in the year 2015 to year 2045 erosion hazard zone	1 or 11	M
· Monitoring of sand quantities and coastal processes	11	0
· Dune vegetation management in accordance with CaLM practices and procedures	11*	0

*Community assistance with implementation

19 It is noted that for Precinct 2 - the central portion of the beach, Dune Management is seen as an on-going priority and the removal of the stormwater outlet as a low priority.

20 The plan envisages a review of the plan when new data is available no later than 2012 leading to a Coastal Management Plan Review by the year 2015. The plan has been in place since 1995 and neither the council nor DIPNR have commenced a formal coastal process review or geotechnical investigation at Forresters Beach. Forresters Beach is the only Beach where council has adopted a voluntary purchase scheme where there are approximately 14 homes identified. With respect to sand nourishment of the beach this is aimed only at maintaining beach amenity and not protection of property from coastal erosion.

21 With respect to sea level rise and coastal recession, Mr Druery points out that the original estimates of the Intergovernmental Panel on Climate Change (IPCC) have been revised down from 1990-2001 by some 40% and that the hazard zones in the CMP were based on the best available sea level change predictions then available.

22 The recession rates are projected and factored into the 2015 and 2045 hazard lines. Mr Druery says that these were determined by detailed photogrammetric analysis of aerial photography over the period 1941 to 1993. He explained that the shorter the period of record the more likely the averaging will be skewed towards the more extreme events that occurred in the period. Consequently, the 1941 to 1993 record is likely to be skewed towards a high recession rate because of the occurrence of the 1974 (‘design’ storm) and 1978 storms. Since 1993 there have not been any extreme storms and hence the land losses averaged over the extended period will yield a lower average annual loss rate than the 3 cubic metres per year previously identified. Mr Druery concludes that:

When applied to Forresters Beach to determine the projected shoreline recession, it is considered likely that the component of the erosion hazard zone attributable to shoreline recession will be reduced.

23 The extent of coastal erosion is based on a 50 year projection of the assessed storm cut retreat and sea level rise influences. Forresters Beach is described as “being backed by high vegetated dunes to the north and south and an old transgressive dune in the central portion of the beach. This dune reaches an elevation of around 40 m and its seaward face is relatively steep and has in part been developed”. It is also described as “having dramatically high dunes and steep paths down to the beach and is described as the most remote or ‘wild’ of the beaches in the study area.” The soil mechanics are described as:

After a storm event that erodes the dune face, a very steep scarp can be formed. This unstable scarp will remain for a time but the dune will slump eventually causing a sudden recession at the top of the scarp. As well, there is a zone of reduced strength and limited foundation capacity which extends some distance landward of the slumped dune face. This is a key issue at Forresters Beach since the adopted angle of slope stability has a substantial impact on the horizontal extent of land assessed as being potentially within the hazard zone”.

24 In terms of hazard erosion the Study states that:

The map defines the areas of possible hazard associated with coastal processes for Forresters Beach on the basis that no underlying rock strata exist to restrict dune retreat.

25 The study also notes that:

The degree of risk to development varies along the beach and is site specific.

26 The Study notes that the foreshore is steeply sloping and the toe of the slope is subject to wave erosion during severe storms.

Such erosion can reduce significantly the stability of the slope and, hence the safety of any development located thereon … The dune at the centre of the beach has been modified by lowering and seaward progradation. Some of the dwellings there are constructed on sandfill. While those properties may lie outside the zone of immediate wave impact during severe storms, in the longer term the foundations may be threatened by dune slumping. Storm erosion of beach and dune sand is a hazard to development at Forresters Beach.

27 The Coastal Study also states:

A more comprehensive subsurface investigation is needed to define properly the consideration of the bedrock underlying the dune which may restrict the potential for long term dune retreat. While the existing houses lie landward of the zone of immediate wave attack, the properties and most of the houses located seaward at Kalakau Avenue are at risk of erosion The projected shoreline retreat for this beach associated with long term sand loss and sea level rise; erosion scarp slumping and potential wind erosion of the exposed dune face; the diminished foundation capacity of the dune zone adjacent to the erosion scarp.

28 For Precinct I where the subject site is located the table shows that the erosion of private land is immediate and stretches of private houses fall in the category of the 20 year and 50 hazard zones. Neither of these factors affect Precinct II. And for Precinct III, the north end, the erosion to private land is immediate, however, the threat to private houses falls in the 50 year hazard.

29 Table 5.4 of the Management Plan for Forresters Beach discusses the erosion hazard management options for the three precincts and this appears as Fig. 3.

30 Mr Druery advised the Court that the Coastal Management Plan did not benefit by any geotechnical input and since it was prepared there have been bore hole investigations of a number of properties along Forresters Beach. And for the northern end of Precinct I there is a 3 to 6 m thick layer of loose to dense, medium grained sand lying on top of an 18 m thickness of hard indurated sand which sits on bedrock at RL 6 m AHD. This more recent geotechnical data adds weight to the preliminary view expressed in the CMS that it is possible that erosion resistant strata may exist below the surface layers of non-cohesive dune sand. However, Mr Druery goes on to say that the available geotechnical information is still sketchy and it is insufficient to characterise the stratigraphy of the Forresters Beach area. He further comments that:

It is considered that the current erosion hazard lines are likely to be conservative because they have been determined on the assumption that only cohesionless beach sand pervades the entire soil profile of the high dune area. … and there is a high probability that the review will recommend that the erosion hazard zones be reduced.

31 The evidence of Mr Druery assisted the Court and the parties in understanding the nature of coastal processes and the role and function of the Coastal Management Study and Plan undertaken by Gosford City Council under the auspices of the State Government’s Coastal Manual. In terms of the Local Government Act 1993 s 733, the council does not incur liability in respect of advice furnished in good faith by the council relating to the likelihood of any land in the coastal zone being affected by a coastline hazard where a Development Control Plan in accordance with the Manual has been prepared. Mr Druery provided background as to the preparation of the council’s Coastal Management Study and Plan and advised the Court that it was based on the best information available at the time. He considers that the Plan is conservative in its estimates of the hazard zones and that in the light of recent geotechnical information identifying the presence of bedrock and the reduced estimates of sea level rise that it is likely that a review of the council’s CMS, CMP and DCP a reduction in the hazard zone for Forresters Beach may occur. He also pointed out however, that while there may be a recommendation that the Coastal Hazard Zones be reduced at Forresters Beach, at the end of the day the decision as to whether the Plan and the hazard zones are amended is a matter for the council to decide. Mr Druery further advised that while a review was recommended when the plan was first prepared it would appear that neither the council nor any Sate Government department has commenced work on further studies as a input to the review and a comprehensive review would be a costly exercise. To date council has proceeded to acquire lots under the Voluntary Acquisition Programme to which the Sate Government contributes.

32 As Mr Druery advised there are no works proposed for Forresters Beach whereas at Wamberal Beach a revetment wall has been proposed to assist in the protection of coastal properties at Wamberal. For prospective purchases of land at Forresters Beach the s 149 Certificate under the Environmental Planning and Assessment Act provides advice on the Coastal Hazard Lines and Zones as contained in DCP 125 and this is consistent with the council’s adopted Coastal Management Plan and this advice will continue to be provided until such time as there is a formal amendment to the Development Control Plan following a review if any of the Coastal Management Plan.

33 At the end of the day prospective purchases for land affected by the Hazard Zones should factor in the extent of the hazard as shown in the DCP which is reflected in the purchase price of properties in the area. The extent to which this may result in a price variation from one property to the next, may also depend upon the extent of the hazard zones and from the available sales this is difficult to try and quantify. The best method to ascertain the land value for properties along Forresters Beach is comparable sales including not only vacant land but land with improvements with a deduced land value.

34 From the evidence there was an unprecedented escalation of property values in the 12 month period from mid 2002 to mid 2003 in particular in coastal areas. Therefore the most comparable sales will be those at or around the base date of the valuation in close proximity to the site with similar characteristics, however, such properties are not always available.

35 Mr Davey for the respondent in his schedule of comparable sales included other beach-front properties on the Central Coast including those at Pearl Beach, MacMasters Beach and Wamberal. He agreed that many of these beach locations are more highly sought after than Forresters Beach, however, he considered them to be more relevant than choosing non-waterfront reserve properties in the town of Forresters Beach itself.

36 During these proceedings and the proceedings of the appeals relating to Nos. 66 and 78 Kalakau Avenue, a number of other beach front/reserve sales in Kalakau Avenue were raised and the circumstances surrounding such sales. Fig. 1 shows these properties as well as the hazard lines and zones. The following provides some basic facts for a number of properties.

• No. 48 Kalakau Avenue sold in 2001 for $920,000 and was resold in 2003 for over $2,000,000.
• No. 56 with direct access to the beach and 594 sq m sold in June 2002 for $978,000.
• No. 72 sold in September 2000 for $770,00.
• No. 74 was purchased by Gosford City Council at the end of 1999 for $340,000.
• No. 88 was sold in 1998 for $470,000 and resold in May 2003 for $1.375 million. It has a land area of 582 sq m.
• No. 92 was purchased by the council at the end of 2000 for $375,000.
• No. 96 was sold in July 2002 for $1.55 million. This property has a substantial dwelling with extensive landscaping at the northern end.

37 Land value under s 6A of the Valuation of Land Act 1916, as amended, provides for two methods to determine land value in subsec 1 and 2 as follows:

1) the land value of land is 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 the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made.

2) notwithstanding anything in subsection (1), in determining the land 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 the improvements, if any, other than land improvements, referred to in subsection (1) had not been made.

38 For the respondent Mr Davey said that the subject land has been valued under 6A(2) due to planning restrictions outlined in Gosford City Council’s DCP:

This is to reflect the fact the subject land has an existing dwelling but the plan identifies cannot be rebuilt, however, the existing dwelling can be maintained. It is uncertain though whether rebuilding will be permitted when no current structure exists.

39 Mr Davey valued most of the other properties under 6A(1) except for Sales 1 and 2 and the subject land as dwellings could be rebuilt on the land even though some show hazard lines but the impact is not to the extent of making it impossible to erect a new dwelling. The 6A(2) basis for land value is applied to the situation where a new dwelling may not be built on the land. However, 6A(2) is used to “capture the highest and best use value”. While Mr Davey describes this as “existing use” he recognised the dwelling is a conforming use. Therefore this is not to be confused with ‘existing use rights’ in the planning context. This point is clarified in the case referred to below.

40 I am satisfied that Mr Davey has adopted the correct approach. I was referred to a number of judgments and an important case that I must have regard to in terms of valuation principles in this regard is the Illawara Meat (Developments) Pty Ltd v Valuer-General [Land & Valuation Court No. 119 of 1977, 10 March 1978 unreported) wherein Rath J said at p 6):

In Illawarra Meat (Developments) Ptv Ltd v Valuer-General (Land and Valuation Court No. 119 of 1977, 10 March 1978, unreported), Rath J said (at p.6):
"section 6(2) appears to have been inserted in the Act as a consequence of the decision of Hardie J in Wunderlich Ltd v Valuer-General (1959) 5 LGRA 50; see Act No. 31, 1959 ss 2 and 4). In that case it was held that the unimproved value must be determined without taking into account a non-conforming use of the land the continuance of which depended upon there being buildings on the land that might be maintained pursuant to clause 32 of the County of Cumberland Planning Scheme Ordinance. Though the immediate purpose of the legislature was to deal with this particular state of affairs, I think the plain meaning of the language is that the continuance of an existing use is to be assumed, whether or not in the zone in which the land lies the use is a non-conforming use. As Else-Mitchell J said in Pye v Valuer-General (29 LGRA 160 at 162 'the purpose or object of the amendment was to remove the obligation which ensued from s 6(1) to determine the unimproved value on the basis of the land having no potentiality of use for the very purpose for which it was in fact being used at the date of the valuation'."

41 This case was referred to in Burns Philip Trustee Co. Ltd. V Valuer General [30229 of 1990] in the Land and Environment Court where it was stated:

The predecessor of s 6A(2) was the now repealed s 6(2), which related to "unimproved value", a concept no longer found in the Act…
Applying the remarks of Rath J (which were made in relation to a conforming use of the land as an abattoir) it is apparent that s 6A(2} is not limited to an " existing use ” as defined in s 106 of the Environmental Planning and Assessment Act, 1979. Later in that case Rath J said (at p.7) that restrictions imposed by town-planning legislation are to be taken into account.

42 The majority of properties in NSW are valued under 6A(1) and clearly this is a much more straightforward approach to valuation. However, in exceptional circumstances such as this land where it must be valued on the one hand having regard to the fact the existing dwelling can continue to be used but not be rebuilt, then the 6A(2) method is required to determine land value. The existence of a dwelling on the subject land is a conforming use but also the best use and 6A(2) is recognition that the land is worth more with the dwelling than without any dwelling because it cannot be rebuilt. Therefore the land must be valued to include the notion that the dwelling exists on the land or as Ms Jowett aptly describes the situation as to temporarily suspend the house over the land to allow the valuation under 6A(2).

43 Mr Davey provides a number of comparable sales and the table at Fig. 4 compares the sales with the subject land. It was submitted on behalf of the respondent that the most comparable sale to the subject site is that known as Sale 1 in the comparative table at 88 Kalakau Avenue, Forresters Beach. Sales 2 – 8 are at Wamberal, MacMasters Beach, Copacabana, Pearl Beach, and the Entrance.

44 Mr Davey referred to the High Court of Australia in Maurici v Chief Commissioner of State Revenue [2002] 212 CLR111 and said where there is a scarcity of vacant land sales in established location then valuers now must have due regard to a wider market which includes sales of improved properties. This is so that as many comparable sales can be possibly used. Therefore for the valuation of the subject land he said all the beach front sales used in this report are considered the most appropriate given there was only one vacant beach front property sale on the Central Coast in 2003. Mr Davey considered it appropriate to use as many beach front sales as possible as opposed to properties that were non-beach front or water front but in closer proximity because of the differential in price paid for beach front properties. Similarly sales close to the base date of the subject land are more reliable than properties sold much earlier.

45 To assist the reader in understanding the comparative sales table from Mr Davey’s analysis and attached as Fig. 4 to this judgment, the following extract from his report on No. 78 under the heading of comments follows:-

When assessing the land value for the subject land, due regard was had to DCP 125. This was principally in relation to Part 8 and Sections 8.1 through to 8.1.3. which identifies the designated coastal hazard areas being seaward of the year 2045 erosion line. As such, in assessing the land value I have had due regard to the existing dwelling located on the subject land. I have also had regard for the downward creeping sandy slope. In addition to the above factors I have also had regard to the fact the immediate (1995) erosion line is still seaward of the rear boundary of the subject land.

A number of sales were analysed to ensure an overall basis was considered. The following eight sales are considered the most comparable and sustain the level on the subject land. Sale Nos. 1. 2. 3. 4. 6. 7 and 8, as provided in the annexures, are properties affected by Coastal erosion hazards. I have examined each comparable property with specific reference to the hazard lines and where they fall within or out of the property.

The analysis of the sales showed that Sale Numbers 1 and 2 were the most comparable when compared with the subject land. This was due to the similar characteristics of dwellings being located on land that had no where else to rebuild the dwelling as a result of the erosion hazard lines taken up 80% of the land. That is the dwellings can only be maintained within the existing footprint. Where there is a limitation upon the potential to rebuild the dwelling on a northern part of the property, this is considered to have more of an impact upon the market for such properties.

Along the Wamberal/Terrigal beach frontage, Sales Numbers 2 and 3 annexed, continued redevelopment may occur landward of the proposed revetment seawall) works. Wamberal/Terrigal area is considered to be at the most risk due to a sandy bay whereas Forresters Beach is partly protected by a rocky foreshore. The Wamberal Beach area has been zoned 2(a) Residential (Beach Frontage). This is a more cautious zoning than for 2(a) Residential due to past severe hazard erosion along the beach. There were large storms that affected much of the NSW coastline in the 1970s and in Wamberal, some dwellings collapsed down the slope onto the beach.

Wamberal/Terrigal is considered one of the prime beachside areas on the Central Coast. This is due in part to the scenic qualities of the area with the beach and headlands, the strong retail strip with many cafes popular with local people, holidaying people and people visiting over weekends. Terrigal also has an international hotel popular with both overseas and national guests and this venue is also regularly used for conferences. The Wamberal/Terrigal area is within a two-hour drive from the centre of Sydney via the Sydney-Newcastle Freeway, Gosford exit and The Entrance Road via Erina. This area is slightly closer to Sydney when compared with Forresters Beach which is about another 10 minutes drive further north.

Pearl Beach is highly sought after and a popular beachside locality with celebrites. It is also a popular beach for families with young children due to the quiet beach, picnic facilities and the usually gentle waters. Hazard lines also affect the comparable prooerties. Sales Number 6 and 7 annexed. Pearl Beach is accessed via roads through the Woy Woy, Umina Beach areas of the Central
Coast. Access to Pearl Beach is a more indirect route than for Terrigal, via narrower and winding roads.

MacMasters Beach, Sale Number 4, is sought after by affluent retirees. MacMasters Beach generally has an easterly aspect and is a relatively sheltered location. This is unlike Copacabana, Sale Number 5, which has more of a southerly aspect and therefore more open to stormy weather. Both areas though are also within the two-hour drive from central Sydney, however access is more indirect and also via narrower and winding roads. This is particularly so with regard to access to Copacabana, making it more remote than for MacMasters Beach. The beaches at MacMasters Beach and Copacabana are similar to Forresters Beach in that there is little parkland amenity along the beaches.

While ocean clifftop properties such as the Sale Number 5 at Copacabana tend to be valuable properties given the proximity of beach areas and views of ocean and coastlines, these are still not beachfront properties with the advantages of direct beach access.

The Entrance North, Sale Number 8, is a more remote area than Copacabana. Access to The Entrance North from Central Sydney is also via the Sydney-Newdcastle Freeway, however the exit point is further north at the Wyong exit. From this point, access is via Wyong Road through Tuggerah to Killarney Vale, then via The Entrance Road through The Entrance, within two and a half hours north of Central Sydney. The south-east facing beach alongside The Entrance North is unattractive, has no parkland amenity and is exposed to onshore winds.

On the whole families tend to prefer beaches where there is room to move. Other attractive features are parks, picnic areas and treelined street locations such as at Avoca Beach or Terrigal. These latter beaches are more popular than Forresters Beach, which has little in the way of shelter or parkland amenity.

Although the Central Coast of NSW covers a large area, all the aforementioned places have no great differences between travelling times from Central Sydney.

The other six sales used in this report indicate for Sale Numbers 1 and 2 reasonable prices have been paid and are therefore considered to be reliable. For Sale Numbers 3, 4, 6 and 7, despite there being the potential to rebuilt the dwelling on another part of the property, the existing dwelling is located to capture the best views available. The existing dwellings are therefore generally located seaward of the 2045 erosion hazard line for the sales in Wamberal and MacMasters Beach and for the Pearl Beach sales, the existing dwellings are generally located seaward of the 2097 erosion hazard line.

46 Mr Davey concluded that the land component of the subject property is $1,210,000 with a total value of $1,450,000:

For the purposes of satisfying the Court…. This is supported by using the summation method of valuation (a more aribtrary method) …The market valuation of the subject land, the comparable sales method is the most appropriate, whereas the summation method of valuation is merely for checking purposes.

47 The valuation of the subject land was primarily based on market sales of properties similarly affected by both DCP 125 and the Plan. Mr Davey comments “The sales demonstrate that people are still prepared to purchase properties in beachfront locations despite the threat of erosion hazards. Sale No. 1 in particular is considered the most comparable, given it is also sold within 32 days before the base date of 1 July 2003 and this supports my contention that the issued valuation $993,000 ($1,707/sq m) is fair and reasonable.”

48 When the purchase by Gosford City Council of No. 74 Kalakau Avenue for $340,000 in November 1999 was referred to Mr Davey he said it represented the market value for vacant land at that time despite it being blighted by DCP 125.

49 In response to Mr Payne’s questions Mr Davey said that the beachfront properties are more valuable. However, at Forresters Beach the cliff top properties are bringing very high prices because they are not affected by hazard lines, Mr Payne said that No. 88 has the advantage of being able to view the whole of Forresters Beach and it also relates more directly to the beach than his property. Mr Davey responded by saying that it does not have the same street presentation with an unattractive garage near the road and access via a steep set of stairs from the street to the dwelling.

50 When questioned about whether he was aware of the circumstances surrounding the sale of No. 88, Mr Davey had not made enquiries when he prepared his report. However, he later assisted the Court and advised that the purchaser has a serious illness but it was bought on the open market after three weeks of being on the market for the asking price.

51 Mr Payne questioned Mr Davey’s calculations of the improvements on his land compared to No. 88. The totals being $250,000 and $200,000 respectively and $139,000 and $105,000 for the dwellings alone. Mr Payne also pointed out that the garage to his dwelling is not a standard size and cannot fit a family car and this would be a drawback in selling the property. In fairness, Mr Davey responded by saying that his expertise is in land valuation and he is not a quantity surveyor, but errs on the side of generosity when estimating the cost of houses.

52 No.68 is in Precinct 1 which includes Nos. 62-78 and No. 88 is in Precinct III and therefore is not comparable to his land. The angle/slope of the dune in Precinct 1 is much greater and Precinct III has a longer time frame before erosion. Mr Payne pointed out a number of problems with his dwelling house and outside area. In particular the steep slope down to the beach and the fact nearly all his land may be lost by coastal hazard and erosion having regard to the 2045 hazard line.

53 I accept that there has been an unprecedented rise in land values in coastal areas. In particular a dramatic rise between 2002 and 2003. The percentage rise in itself is not a reason to vary a valuation on appeal and any variation must be based on comparative sales either of vacant land or of improved properties with a deduced land value.

54 It is recognised that the concept of land value may appear artificial and in the circumstances of this case, the concept appears even more artificial. That is the land valued on the basis that the improvements are not there (the dwelling house and associated works) but at the same time I must have regard to the fact that a dwelling house could continue to remain on the land, and be used, as of at the base date.

55 Just as the percentage rise in valuations from one base date to another is not a relevant factor in my determination, so to is the fact that across the board valuations often made on properties in the State may not have regard for individual constraints or opportunities. The process of land owners being able to write letters of objection to the Department of Lands, and failing objections not being allowed, and then appeal to the Land and Environment Court allows inaccuracies for the lack of precision in across the board valuations, commonly referred to as generic valuations, to be corrected. This process allows for greater scrutiny of individual properties having regard to their characteristics. This principle has been held in many valuation judgments including the matter of Bruce Kevin Coram v the City of Springvale in County Court of Victoria 1962 wherein it was stated that:

The assessment authority should not sacrifice correctness to ensure uniformity, but if possible, obtain uniformity by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error.

56 The fact that many properties along Kalakau Avenue have similar or the same valuations but are affected in different ways by the hazard line may seem unfair but to allow a variation on this basis alone would be in error. I must have regard to the comparable sales method as the best means to ascertain movement in the market and the best benchmark. This approach also allows for adjustments for variables such as: views, the extent of affectation of the hazard lines, physical effects, topography, the element of value, access to the beach etc. I can then make adjustments for the property under appeal compared to the sales.

57 Valuation is not a science nor does it purport to be. But at the end of the day I must base my analysis on the evidence of the sales with the benefit of the site inspection to understand the variables or characteristics of the various sites compared to the subject land.

58 In undertaking this analysis I have considered all the evidence, including the site inspection and previous decisions of the Courts. I am also conscious that “on appeal to this Court under s 40(2) of the Act that the appellant has the onus of proving the appellant’s case.”

59 In the proceedings of Munter v Valuer-General, Mr Munter tendered a print out from the ‘home price guide service’ for Kalakau Avenue. This lists the properties in Kalakau Avenue and the dates of transactions. For Nos. 48, 88 and 96 the type of sale has a notation private treaty price warning that has a note:

Price as reported by the relevant State Valuer-General or equivalent that home price guide research indicates the price may be too low or too high for single residential property. These prices are not included in the statistical analysis.

60 A property I have referred to for comparative purposes is No. 56 Kalakau Avenue. This is not impacted by hazard lines and is uphill from the subject property but it also has direct walking access to Forresters Beach from the property to the public reserve dunal area. It is assumed that the entry 2 July 2002 in the price index reflects the transfer date of this property. For my analysis I accept Mr Davey’s percentage rise of 15-20% from mid 2002 to 2003, the base date, and I have factored in 20% in the table at Fig 4. I have valued the improvements at $200,000. This is consistent with Mr Davey’s estimates of the subject appeals of between $240,000 to $300,000 for improvements to the land. No 56 is not dissimilar to the properties under appeal in terms of improvements and it would appear to be a good comparison.

61 Mr Davey said that the most comparable sale is No. 88 Kalakau Avenue and for the purpose of cross-checking this one sale he used a number of sales of beach front properties on the Central Coast. During the hearing of the three related matters he provided two additional sales at Forresters Beach Nos. 48 Kakalau Avenue and 23 North Scenic Drive that are not affected by the hazard lines to have regard to the ‘fear factor’ for the sale at No. 88.

62 The sale of No. 74 to the council under the just terms legislation also became known to the Court by the applicants. For adjustment purposes I I accept Mr Davey’s indexation of 285% as the sale of this property was November 1999. In the table, below at figure 4, I compare the properties in Kalakau Avenue as they require no adjustment for locality, and this is often a difficult variable to ascertain to arrive at a land value for the subject properties under appeal.

63 In carrying out this exercise I am cognizant of the factors and adjustments that Mr Davey made in his table in terms of an adjustment for the immediate hazard line but I have also given limited weight to the 2015 line and to a much lesser extent again to the 2045 hazard line. The concept of planned retreat is not possible for these parcels of land in terms of council’s currently adopted Coastal Management Plan and DCP but the immediate hazard line would be a more immediate impact for potential purchasers.

64 In this regard I accept the submission of the respondent that people are still prepared in the market place to pay high prices for land affected by hazard zones. But on Mr davey’s own evidence he does attribute some weight to the coastal hazard as seen in his table of comparisons. I have also made adjustments for size including usable open space on the site and an adjustment for topography and views. Number 88 was considered to be superior compared to all the properties in terms of the location of the dwelling and topography.

65 While I accept Mr Davey’s comment that access to the dwelling house at No. 88 is more difficult at the same time the relationship of the dwelling to the be the Court are:

1. The appeal in respect of the property known as No. 68 Kalakau Avenue, Forresters Beach, is upheld.
2. The valuation of $993,000 for the above property as at the base date of 1 July 2003 is adjusted to a land value of $850,000.
3. The exhibits are returned.

__________________
J S Murrell
Commissioner of the Court
rjs/ljr