Perpetual Trustee Company Limited v Department of Natural Resources, Mines and Water
[2006] QLC 17
•7 April 2006
LAND COURT OF QUEENSLAND
CITATION: Perpetual Trustee Company Limited v Department of Natural Resources, Mines and Water [2006] QLC 17 PARTIES: Perpetual Trustee Company Limited
(appellant)v. Chief Executive, Department of Natural Resources, Mines and Water
(respondent)FILE NOS: AV2004/0154 and AV2004/0155 DIVISION: Land Court of Queensland PROCEEDING: Appeals against Annual Valuations under the Valuation of Land Act 1944 DELIVERED ON: 7 April 2006 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER: Mr RS Jones ORDERS: 1. Appeal AV2004/0154 is dismissed and the unimproved value of Lot 10 on SP151098 Parish of North Brisbane as at 1 October 2001 is determined at Eight Million, Seven Hundred Thousand Dollars ($8,700,000).
2. Appeal AV2004/0155 is allowed and the unimproved value of Lot 10 on SP 151098 Parish of North Brisbane as at 1 October 2002 is determined at Eight Million, Seven Hundred Thousand Dollars ($8,700,000).
CATCHWORDS: Appeals against the unimproved value of land pursuant to the Valuation of Land Act1944 – onus of proof- presumption of correctness in favour of statutory valuation – obligations of expert witnesses including the obligation to ensure all relevant matters are dealt with in reports relied on.
admissibility of evidence about matters not directly raised in grounds of appeal – comparable sales evidence – reliability of heavily improved sales when assessing unimproved value – potential difficulties associated with the valuation of land under s.3(2) of the Valuation of Land Act 1944 involving heavily improved properties – findings of fact in absence of reliable evidence in valuation cases.
APPEARANCES: Mr W Cochrane of Counsel for the appellant
Instructed by Gadens Lawyers
Mr T Quinn of Counsel for the respondentInstructed by Mr Heather Senior Legal Officer, Department of Natural Resources, Mines and Water.
BACKGROUND
These appeals concern land located at 175 Eagle Street, Brisbane, more properly described as Lot 10 on Survey Plan 151098, Parish of North Brisbane, County of Stanley. The land is of an irregular "L" shape having some 37.5 metre frontage to Eagle and Queen Streets, about 88.2 metre frontage along the Brisbane River and about 57.4 metre depth along its northern boundary. The shape and dimensions of the land are conveniently shown in the valuation reports of Mr Jackson, (Exhibit 8, Annexure 2) and of Mr Kirby (Exhibit 10, Annexure 4).
The total area of the land is 3377 m². However, of this area only some 2236 m² is available for high rise commercial or residential development. The balance of the site is affected in the following ways. A volumetric lot, Lot 11 on SP 151098, was subdivided from the original holding described as Lot 3 on SP 141856. Lot 11 has a surface area of 1141 m², is generally cuboid in shape, has about 54.5 m of river frontage running from the south east boundary of the land and is about 25.2 m wide at its widest point. The lowest elevations of Lot 11 range between RL 1.14 to RL 6.98 rising to a maximum elevation of RL 18.1.[1] In addition, effectively superimposed over the footprint of Lot 11 is Easement NN on Registered Plan 909669 which extends from RL 14.2 to RL 250.0. The stated purpose of Easement NN is "light and air" and is primarily for the benefit of the adjoining lot (Lot 1 on RP 905881) located at 167 Eagle Street. 167 Eagle Street has been developed for high rise commercial purposes.
[1] the shape and dimensions of Lot 11 are shown in Mr Jackson's report Exhibit 8, Annexure 2.
The combined impact of Lot 11 and Easement NN is to effectively prevent any significant development on 1141 m² of the land having in excess of 50 m of river frontage. During the course of the hearing the affected area was sometimes referred to as the "southern area" and the balance as the "northern area".
The land is located towards the northern end of the prestigious Eagle Street commercial district which forms a part of a wider commercial district comprising the area generally bounded by Eagle, Adelaide, Edward and Mary Streets. The land has pedestrian access from its frontage to Queen and Eagle Streets and vehicle access via Eagle Street to a basement car park. The land is serviced by the usual services and amenities associated with the business district of Brisbane. In the near vicinity, mainly to the north, are a number of high rise residential developments. The heritage listed "Customs House" building adjoins the northern boundary of the land. While residential development has occurred and is continuing to occur towards the southern end of Eagle Street I am of the view that the northern end, at the relevant dates, had a slightly different and inferior commercial character when compared to the southern end of Eagle Street where a number of prestigious commercial buildings have been erected. These include Waterfront Place, the Riverside Centre, the AMP towers and more recently the Riparian Plaza building. That is not to say that the land is anything other than a prestigious riverside CBD site.
The appellant has appealed the respondent's assessment of the unimproved values of the land determined as at 1 October 2001 in the amount of $8,700,000 and as at 1 October 2002 in the amount of $9,500,000. In its Notices of Appeal the appellant estimated the unimproved value as at both dates to be $3,500,000. By the time these appeals came before the Court the respondent's assessment of the unimproved value for both relevant dates increased dramatically. More will be said about this below.
The land at the relevant dates was identified in the Brisbane City Plan 2000 as lying within the "Multi-Purpose Centre MP 1- City Centre" area. Within this area the Brisbane City Council seeks to encourage, maintain and reinforce the existing high rise commercial character of the precinct. However, under this Plan high rise commercial and residential development could be carried out either as stand alone projects or as some combination thereof including some component of retail.
As at the date of the hearing of these appeals, consistent with City Plan 2000, the land had been developed for commercial purposes. Improvements on the land predominantly comprise of a modern and relatively high standard office tower of 20 storeys including the ground floor. Floors 1 to 19, which lie above Eagle Street and include a mezzanine floor, comprise of some 23,000 m² of floor space predominantly leased to various commercial tenants. Some limited retail activity occurs at the ground floor level. Below ground floor levels comprise of two plaza areas providing for various uses including office space, a conference centre and an area intended to be used for restaurant purposes.
The balance area of the land, the southern area comprising of 1141 m², was also identified by Mr Jackson, the valuer for the appellant, as the "subterranean area" and by both valuers from time to time as the "basement". That is so because it lies below the underside of the volumetric lot, Lot 11. The southern or subterranean area is used predominantly for car parking purposes and the location of a building services core area. As I understood this part of the evidence, the basement area consists of three levels which extends without any physical impedient under the adjoining building located at 167 Eagle Street.
Not surprisingly the land is encumbered with numerous easements in addition to Easement NN which has already been referred to. These easements are for various purposes including car park access rights, encroachments and support. Easements also exist for the benefit of Lot 11. The building erected on the subject land also benefits from Easement NN in that its river views and natural lighting are protected to a significant extent.
The somewhat unusual circumstances surrounding the creation of the volumetric lot and the overall basement areas arise, at least in part, as a consequence of the development history of the land. The basement area, as originally constructed, was designed and built for what was to be part of the more ambitious "World Trade Centre" development proposed in the early 1990's. As a consequence of the abandonment of that proposal, when the existing building on the land was constructed the original basement works had to be materially altered. Arguably the most significant change involved the construction of a new service core within the original basement but in a different location to that originally planned for. The cost and value of the original basement works is considered further below.
Construction of the building now located on the land commenced at or about February 2001 and was completed at or about mid 2002. The evidence leads me to the conclusion that the land was "improved land" for the purposes of s.3 of the Valuation of Land Act 1944 ("VLA"). As at 1 October 2001 the land was improved in the sense that with the existing basement works in place the land was worth more than it would have been without those works. Of course by 1 October 2002 the building on the land consisted of the just completed 20 storey office tower.
The recent sales history associated with the land
Subject to the more detailed analysis of the sales evidence below, a general overview of the recent sales concerning the land could be summarised as follows: In October 2000 Lot 3 on RP 905881, together with the improvements thereon sold for in excess of $22,000,000. The parties to that transaction were Merson Property Pty Ltd as vendor and 175 Eagle Street Pty Ltd as purchaser. In or about June 2002 Lot 3 was subdivided into Lots 10 and 11 on SP 151098. Lot 11 was apparently sold prior to registration of the survey plan in May 2002 for $3,380,000 but, for reasons not really explained, the purchase price had increased to $3,900,000 by November 2002. In August 2002 the subject land together with the 20 storey office block completed sold for, at face value, $95,950,000. The parties to this transaction were 175 Eagle Street Pty Ltd as vendor and Perpetual Trustee Company Ltd as purchaser.
For the sake of completeness I would point out that, as at around June 2002 at least one proposal for the development of Lot 11 involved the construction of five large multi-storeyed riverside town houses.
THE GROUNDS OF APPEAL AND PRELIMINARY MATTERS
With the exception of the amount of the valuation appealed against (Ground 2) the grounds of appeal in respect of each appeal are materially the same and are:
"1. Ground 1
The assessment of unimproved value is too high.
Particulars
1.1 The unimproved value of the land should not exceed $3,600,000.00.2. Ground 2
The assessment of unimproved value is not supported by comparable sales evidence of other similar properties.
Particulars
2.1The appellant is unable to locate any comparable sales of other properties in Brisbane which, on proper analysis, support the assessment of unimproved value of $8,700,000.00 arrived at by the respondent.
3.Ground 3
The assessment of Unimproved Value does not have sufficient regard to existing improvements or future requirements in assessing the development potential of the land and the conditions surrounding such development for its purported highest and best use.
Particulars
3.1The respondent has had insufficient regard to factors such as the fill or other requirements required to develop the land and the need to remove or alter existing structures or impediments on the land in any future developments.
4.Ground 4
The assessment of unimproved value has not been made in accordance with the Valuation of Land Act 1944, is contrary to law and erroneous.
Particulars
4.1The market evidence relied upon by the respondent to determine the unimproved value of the subject property does not support the applied value;
4.2The respondent's assessment of unimproved value is based on sales evidence from other properties in the Central Business District which, on proper analysis, are either not comparable or do not support the respondent's assessment of unimproved value;
4.3Further or alternatively, the respondent has erroneously assessed the highest and best use of the subject property as being suitable for residential purposes, when its highest and best use is its existing use as a commercial property located in the Brisbane Central Business District.
4.4In the further alternative, if the highest and best use for the subject property is for residential purposes then the respondent has failed to allow for the cost of demolition and removal or other costs and allowances which should properly be made for removal or modification of the existing improvements on and use of the land to allow it to be used for residential purposes, in arriving at a proper determination of the unimproved value on that basis.
These are the best particulars that the appellant can provide on its grounds of appeal until after disclosure of the respondent's documents concerning the subject property and any comparable sales or other matters taken into account by the respondent in determining the unimproved value of the subject property."
Dissatisfied with the particulars of the grounds of appeal as originally stated further and better particulars were sought by the respondent and provided by the solicitors for the appellant on 17 June 2005 and 21 July 2005. Grounds 4.2 and 4.4 of the Notice of Appeal were abandoned by the appellant in respect of both appeals.
Before turning to the methodology and evidence relied on by the parties, I consider it appropriate to deal with a number of preliminary but nonetheless important issues which arose during the course of these appeals.
Presumption of Correctness and Onus of Proof
Section 45(4) of the VLA provides:
"Such notice shall state the grounds of appeal and the appeal shall be limited to the grounds so stated and the burden of proving any and every such ground shall be upon the owner."
It can be seen that this section not only imposes the burden of proof upon the appellant to prove its case, not a surprising concept, but also restricts the matters upon which the appellant can rely to advance its case on the hearing of its appeal.
Section 33 provides:
"Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection on appeal or until altered or further altered."
In my view it is now well established that the presumption of the correctness of the statutory valuation is able to be rebutted where it can be shown that the valuation was based on a wrong principle and/or involved a serious error of fact and/or was made by a fundamentally erroneous method: Brisbane City Council v Valuer General (1977-78) 140 CLR 41 at 56-57; G Cominos & Co. Pty Ltd v Chief Executive, Department of Lands (1996-97) 16 QLCR 311 at 331-332 (LAC).
When these appeals came before me, the respondent relied on the evidence of Mr Kirby, a registered and experienced real estate valuer but not the valuer who carried out the actual valuations under appeal. In his primary report (exhibit 10) Mr Kirby concluded that as at 1 October 2001 the unimproved value of the land should have been $16,900,000 and as at 1 October 2002, $18,700,000. Mainly as a consequence of matters which arose during the course of the appeals the respondent's final position was that as at 1 October 2002 the unimproved value should have been $22,090,000. Mr Kirby's valuation for 2001 remained unchanged.
The evidence revealed that the valuer responsible for the valuations in 2001 and 2002 was a Mr David McKinnon who, at the date of the hearing of the appeal, was no longer employed by the respondent. Mr McKinnon is employed as a valuer in Ipswich in private practice. Mr McKinnon was not called by either side to give evidence in these appeals.
No attempt had been made by the respondent to alter the statutory valuations pursuant to Part 3 of the VLA. That is, had the appellant elected to withdraw its appeals the unimproved value of the land would have remained as originally assessed and imposed.
In his written submissions Mr Quinn, counsel for the respondent, concluded his argument by saying:
"The Chief Executive submits that the Appellant has failed to prove the primary valuations to be incorrect.
The Chief Executive further submits that the Appellant has failed to prove the matters contended for in its grounds of appeal as particularised.
In the result therefore the Chief Executive submits that the appeal ought to be dismissed.
Alternatively, if the Court is satisfied that the Appellant has in fact discharged its onus of proof, thereby displacing the primary valuations, the evidence of Mr. Kirby is to be preferred to that advanced on behalf of the Appellant through Mr. Jackson.
In consequence the Chief Executive's alternative submission is that the appeal ought be allowed and the valuation of the subject land determined at 1 October 2001, as $16.9M and, as at 1 October 2002, $22.09M".
As understood by me, the respondent's primary position is that I should dismiss the appeal notwithstanding the evidence given by Mr Kirby on the basis that the evidence led on behalf of the appellant failed to satisfy the burden of proof imposed by s.45(4). And, as a consequence, the valuations appealed against (not those contended for by the respondent at trial) should stand due to of the statutory presumption of correctness provided for in s.33. The second limb of the argument is to the effect that, if I was satisfied that the evidence led on behalf of the appellant was sufficient to show that the valuations appealed against were wrong and could no longer be presumed to be correct, the contest was then between the evidence of Mr Jackson for the appellant and Mr Kirby for the respondent. That is, the evidence of Mr Kirby only needed to be considered when the evidence led by the appellant convinced me that the statutory presumption of correctness ought to be disturbed.
If I have correctly understood these submissions made on behalf of the respondent I do not agree with them. It seems to me that in appeals such as this, even where the evidence led on behalf of the appellant is not sufficient on its own to disturb the presumption of correctness, where the respondent department elects to lead positive evidence of a figure different to that actually attributed to the land that evidence may lead to the conclusion that the presumption is unjustified. It is the totality of the evidence that must be taken into account in determining whether or not the valuation appealed against ought be affirmed or altered. In my view it does not matter that the evidence fatal to the operation of the presumption comes from the respondent and that the appellant's evidence alone would not have justified interfering with the valuation appealed against.[2]
[2]AMP Life Limited & Ors v DNRM [2002] QLC 099 at [26] and [27]; Pfeffer v DNRM [2005] QLC 0059 at [8] to [11]; State Government Insurance Office (Qld) v Valuer General 7 QLCR 171 at 193.7 to 194.2
Credit Issues
Submissions were made on behalf of the respondent to the effect that I should be very wary of the weight to be afforded to the evidence of Mr Jackson. The bases for these submissions included: First, Mr Jackson's demeanour in the witness box which was said to reveal a "touch of arrogance". Second, a suggestion that Mr Jackson might have been involved in champertous fee arrangements. Third, that Mr Jackson was selective in respect of a number of matters of fact raised during the hearing. Fourth, that Mr Jackson, for tactical reasons, wrongly withheld for inclusion in his report in reply (Exhibit 9) matters that should have been addressed in his primary report (Exhibit 8).
These assertions on behalf of the respondent raise in a direct way the obligations and responsibilities of expert witnesses to the Court. Some of these responsibilities were set out by the Land Appeal Court in Cominos & Co Pty Ltd v Chief Executive, Department of Lands (1996-97) 16 QLCR 311 at 338-339 where the Court said:
"In view of the above, it is relevant to remind those concerned with the preparation of experts' reports of some of what Cresswell J. said in The Ikarian Reefer [1993] FSR 563 at p.565:
'The duties and responsibilities of expert witnesses in civil cases include the following:
1. Expert evidence presented to the court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation: Whitehouse v. Jordan [1981] 1 WLR 246 at 256, per Lord Wilberforce.
2.An expert witness should provide independent assistance to the court by way of objective, unbiased opinion in relation to matters within his expertise: Polivitte Ltd v. Commercial Union Assurance Co. Plc [1987] 1 Lloyd's Rep 379 at 386, Garland J. and Re J. [1990] FCR. 193, Cazalet J. An expert witness in the High Court should never assume the role of an advocate.
3.An expert witness should state the facts or assumptions upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion (Re J., supra).'
It is clear that in saying that, Cresswell J. had just as much in mind the expert's report as the evidence given orally at trial."
In my view there is no real substance to the first and second of the matters raised by the respondent. There was no probative evidence to suggest that Mr Jackson's fees and/or the quantum thereof were linked to the success and/or degree of success achieved in these appeals. Further, while from time to time in cross-examination Mr Jackson did show signs of frustration and, to a much lesser extent, signs of impatience, I did not form the view that Mr Jackson's opinion of himself was such as to raise any concerns about his ability to make appropriate concessions and retain the necessary degree of objectivity required from an expert witness.
In respect of the matters identified concerning the third issue raised by the respondent they are set out at pages 16-23 of the respondent's written submission and I do not intend to identify and deal with them separately here. I accept that on occasions during the course of the evidence some of the explanations provided by Mr Jackson revealed degrees of uncertainty and in some instances apparent inconsistency. However, in my view, the same criticism could be directed towards Mr Kirby. In circumstances where both valuers were required from time to time to deal with matters beyond their areas of expertise and to deal with matters involving degrees of speculation and subjectivity some uncertainty and inconsistency was almost inevitable. Where the uncertainties and inconsistencies of both valuers are of sufficient relevance I have attempted to identify them below.
The fourth issue raised concerns about Mr Jackson's failure to include in his primary report his assessment of the unimproved value of the land as at 1 October 2002 based on the sale of the land in its fully improved state. This valuation was commonly referred to as the "section 3(2) valuation". Mr Jackson's analysis of this sale was dealt with in his report in reply and yielded an unimproved value for the land as at 1 October 2002 of $3,170,000 (Exhibit 9A). This is to be compared to the valuation contained in his primary report which yielded the figure of $3,500,000.
To understand the relevance of the so called s.3(2) valuation it is necessary to consider s.3(1)(b) and s.3(2) of the VLA. Section 3(1)(a) is not relevant as the Court is concerned with determining the unimproved value of improved land. Sections 3(1)(b) and 3(2) provide:
"3. Meaning of "unimproved value's Act –
(1) For the purposes of this Act –
‘unimproved value’ of land means –(a) …
(b) in relation to improved land – the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist.(2) However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time as at which the value is required to be ascertained for the purposes of this Act."
By reference to the appellant's further and better particulars provided on 17 June 2005 it is asserted that "... the valuation attained by the applicant using the method under section 3(2) of the Act was lower than the valuation attained using the method under section 3(1)(b ) of the Act …". The respondent sought disclosure of the "valuation" under s.3(2) referred to in the particulars but was told that no such written document existed. In Exhibit 8 Mr Jackson, at page 4 says in part "In adopting this approach I am aware of the further requirement under section 3(2) of the Act. I have therefore undertaken an analysis of the unimproved value under this section …". This assertion is repeated at page 32 where we are told that the s.3(2) analysis yielded a lesser figure than the valuation under s.3(1)(b).
Despite the references in Exhibit 8 to Mr Jackson having undertaken an "analysis" pursuant to the requirements of s.3(2) no such calculations appear in that report. On the other hand, Mr Kirby in his primary report (Exhibit 10) set out in a quite detailed way his s.3(2) analysis. The primary reports of Messrs Jackson and Kirby were exchanged prior to the hearing of these appeals pursuant to directions made by this Court.
The respondent complained to the Court about the approach adopted by Mr Jackson in effect saying that his valuation under s.3(2) was deliberately withheld for tactical reasons. Not surprisingly when Mr Jackson was cross-examined he was asked a series of questions as to why his s.3(2) valuation was not included in his report which he knew was to be exchanged in return for Mr Kirby's report. His explanation was largely to the effect that that was the manner in which he had done things in previous cases. I find this explanation less than satisfactory in the circumstances of these appeals. The 2002 sale of land and improvements was at the very least prima facie a sale of relevance for the 2002 appeal. This is particularly so when Mr Jackson's analysis produced a figure which strongly supported his valuations and contradicted those of the respondent. In circumstances where Mr Jackson had regard to improved sales of other commercial properties in 2001 to 2003 it is hard to accept that the sale of the land and improvements in one of the years in issue, ought not have been addressed in some detail.
In all the circumstances I am left with the impression that Mr Jackson's s.3(2) valuation was deliberately withheld for reasons best known to Mr Jackson but for what I suspect were tactical. In my view Mr Jackson's s.3(2) valuation should have been dealt with in his primary report and the fact that it did not warrants criticism.
However, notwithstanding the views I have expressed on this topic I do not accept that I should treat all of Mr Jackson's evidence with the degree of caution urged by Mr Quinn.
The attack on the credit of Mr Kirby was more subdued than that directed towards Mr Jackson and was more concerned with apparent errors and inconsistencies than with allegations of misrepresentation, selective treatment of evidence and generally unprofessional conduct. In respect of this issue I repeat and rely on the comments already made in paragraph 28 above.
Overall I was left with the general impression that both Mr Jackson and Mr Kirby were intelligent and, subject to the reservations expressed later herein, reliable witnesses.
Highest and Best Use
In addition to having regard to what the valuers referred to as "commercial" sales they also had regard to what were described as "residential" sales. This was necessary because at the relevant dates there was strong demand for land by the developers of high rise residential buildings in the CBD area. Mr Jackson's view was that despite the stronger demand for residential land, the sales of land to be developed for office space still yielded a slightly higher dollar rate per square metre and, given the physical characteristics of the land (particularly location), its highest and best use at the relevant dates was for "commercial office development with lower ground retail use …".[3] This is of course the use to which the land and buildings have been put since building on the site was completed in mid-2002.
[3] Exhibit 8, page 16.
The original position of the respondent on this issue was less clear. It was submitted on behalf of the respondent that the evidence led Mr Kirby to conclude that the market did not differentiate between commercial and residential sites and the prices paid for those sites. To an extent that is no doubt correct. However that does not necessarily mean that residential buyers and commercial buyers will be prepared to pay the same price for the same site or sites. Nor does it necessarily mean that the same sites will be of equal interest to each of the buyer types.
Mr Kirby's analysis also revealed a slightly lower rate per metre being paid for residential sites when compared to that paid for commercial sites. After having regard to the residential sales evidence Mr Kirby concluded that the unimproved value of the land in 2001 and 2002 would have been $13,800,000. Based on commercial sales activity the unimproved value was assessed at $16,900,000 as at 1 October 2001 and $18,700,000 as at 1 October 2002. Eventually, although somewhat reluctantly, Mr Kirby did concede that the highest and best use of the land was for commercial development.
For the reasons canvassed above I find that as at 1 October 2001 and 2002 the highest and best use of the land was for commercial development. By that I mean high rise office development typically occupied by a number of tenants paying commercial rent. This finding however does not mean that all of the sales of the so-called residential sites should be disregarded in assessing the unimproved values of the land at the relevant dates. This issue will be discussed in more detail below when considering the market evidence relied on by the respective valuers.
Objections to Evidence
Mr Quinn objected to specific parts of Mr Jackson's primary report Exhibit 8. The first objection was to that part of the report dealing with what Mr Quinn referred to as the "Q.N.I" issue. The second objection went to that part of the report dealing with the so called "Relativity" Issue.
Put perhaps at its crudest, the QNI issue raises the potential of having to look at the existing structures on the land not as improvements but as negatives or detriments.[4]
[4]This matter was considered by the Land Appeal Court in Chief Executive, DNRM v QNI Metals Pty Ltd & Anor (2001-2002) 23 QLCR 261.
Mr Quinn, quite appropriately in my view, accepted that if it was no part of the appellant's case to treat the structures on the land as anything other than improvements then it would not be necessary for me to rule on this objection.
In the circumstances of these appeals it is unnecessary to rule on this objection. In reaching this conclusion I have had regard to the oral submissions made on behalf of the appellant and, more importantly, to the evidence of Mr Jackson. In my view his evidence was clearly to the effect that, as at 1 October 2001 and 2002, the highest and best use of the land was for commercial use and the structures on the land were substantial improvements having regard to that use. There was no question of the structures having to be demolished or substantially renovated to accommodate another potential use, namely high rise residential.
The next objection to the contents of Mr Jackson's report was directed to the last paragraph of page 19 and the whole of page 33 of Exhibit 8 which is titled "Relativity".
In the last paragraph of page 19 of Exhibit 8, Mr Jackson refers to nine CBD properties which were the subject of appeals to this Court against the respondent's determination of the respective unimproved values for 1 October 2001 and 2002. These appeals were settled between the parties thus avoiding litigation and findings of fact by the Court. Mr Jackson seeks to place some reliance on these settlements as evidence in support of his valuations and in contradiction to the valuations of Mr Kirby.
I should point out here that I agree with Mr Quinn's objection to the use of the words "agreed analysis" in the table at page 33 of Exhibit 8. In my view, there was no agreement as to what the overall rate per square metre ought to be, rather the unimproved value of each property was settled by reference to an overall lump sum figure. The recorded rate per square metre is simply a product of dividing the agreed value by the area of the land. As acknowledged by Mr Jackson himself in his valuation of the subject land, different rates per square metre might be attributable to different parts of a parcel of land depending on a range of matters including shape, access and encumbrances over the land or parts thereof.
Mr Quinn submits that as no relativity point is raised in the grounds of appeal the evidence dealing with that topic is inadmissible. As pointed out above, s.45(4) of the VLA provides that the appeals are to be limited to the grounds stated in the notice of appeal. On the other hand the appellant submits that it is wrong to say that no relativity case has been raised. In this context ground 2 of the Notice of Appeal and s.28(g) of the VLA are specifically referred to.
I do not accept that s.28(g) of the Act supports the argument advanced on behalf of the appellant. Section 28 and Part 4 of the VLA which contains s.45(4) in my view deal with quite unrelated and unconnected aspects and requirements of the legislation.
Ground 2 of the Notice of Appeal provides: "the assessment of unimproved value is not supported by comparable sales evidence of other similar properties …". I do not agree that Ground 2 could be reasonably construed so as to raise the issue of relativity. Ground 2 refers to the valuation under appeal not being able to be supported by comparable sales evidence. The transactions identified at page 33 of Exhibit 8 are not sales. Further, in the particulars of the grounds of appeal provided on or about 21 July 2005, details of seven sales are set out under the heading "Comparable Sales Evidence". All seven of these sales coincide with sales relied on by Mr Jackson in his primary report and response report. None of them coincide with any of the transactions detailed in Exhibit 8 at page 33.
Having regard to what I have said above, it follows that no relativity case is expressly raised in the grounds of appeal as particularised. And, accordingly as a consequence of the operation and effect of s.45(4) of the VLA, the success of the appellant depends on it being able to satisfy the Court that the appeal should be upheld on one or more of the grounds of appeal as pleaded.
The conclusions reached above however, in my view, do not finally dispose of the question of the admissibility of the evidence in question. I have accepted that the evidence set out in page 33 of Exhibit 8 and the oral evidence directly concerned with that part of Mr Jackson's report cannot be relied on to expand upon the existing grounds of appeal. Does that mean that all the facts and matters referred to therein are inadmissible and should be struck out and ignored? Or, can the evidence still be relied on by the appellant as a part of its case to challenge the correctness of the valuations under appeal and/or to check or support the accuracy of the valuations it contends for?
In Jayar Pty Ltd v The Valuer General (1984-85) 10 QLCR 132 the then President of the Land Court, Mr Smith at 134 said:
"It is mandatory that an appellant is limited in the conduct of his appeal to the grounds set out in his Notice of Appeal and the burden of proof is cast upon him – section 21(3) of the Valuation of Land Act. The only value which, within the grounds of appeal, it is competent for the appellant to dispute is that in respect of the area of about 40 hectares above the 50 metres contour. Mr Hart's valuation was not so confined and to the extent that it was not so confined, was strictly inadmissible."
In my view, the passage from Jayar set out above must be read in context. As identified by the Learned President in that case the grounds of appeal under consideration were extremely narrow and the evidence sought to be relied upon clearly went beyond the grounds of appeal as pleaded. In effect the evidence sought to create an entirely new case. That is not the situation in these appeals where the grounds of appeal are stated in quite broad terms even as particularised.
In the earlier case of State Government Insurance Office (Qld) v The Valuer General (1980-81) 7 QLCR 171, Mr Smith was confronted with a more complex appeal and both parties were represented by experienced senior and junior counsel. Having the benefit of legal argument the President, in considering the operation and effect of the predecessors to s.45(4) and 33 of the VLA to the facts of that case said at 193-194:
"The jurisdiction conferred on this Court by the Valuation of Land Act is not inherently investigatory in nature. The Court's powers of investigation, generally speaking, are confined to the appellant's grounds of appeal. However providing the grounds of appeal are sufficiently wide, there is no doubt in my mind that if the Valuer-General elects to join issue and in so doing weaknesses, errors and/or omissions of fact, reason or principle are revealed in his process of valuation, he cannot win by default by seeking to rely on the provisions of section 13 (7). The Court in those circumstances has a duty to consider the totality of the evidence put before it and give judgment according as it views the cogency thereof." (emphasis added)
I consider the reasoning of the then President of this Court in the SGIO case to be more consistent with the reasoning of the Land Appeal Court in Franklin v The Valuer General (1978) 5 QLCR 181 where at 184-185 the Court said:
"The provisions of the Valuation of Land Act as to the appeal procedure are restrictive in their operation, more especially to an appellant who has made his appeal on narrow and particular grounds rather than on a broad general ground such as "the valuation is excessive and contrary to law". The language used by the Legislature is mandatory and binding not only on the parties but also on this Court and the Land Court. The relevant part of section 21 (3) states:-
'An appeal under this section shall be instituted by filing in the Land Court Registry a Notice of Appeal.
Such notice shall state the grounds of appeal and the appeal shall be limited to the grounds so stated, and the burden of proving any and every such ground shall be upon the owner.'
This Court is constituted pursuant to section 44 of the Land Act 1962-1975 and all appeals are brought by way of re-hearing.
It seems to us that it is not competent for an appellant before us to add to his grounds of appeal as initially contained in his Notice of Appeal to the Land Court. If he were permitted to do so he would be flouting the mandatory provisions of the Valuation of Land Act previously enumerated. In simple terms in the conduct of his appeal before us an appellant remains limited to the grounds of his original Notice of Appeal to the Land Court.
On the other hand, the Valuer-General is not limited as to the nature of the reply he makes to an appellant's appeal. He may decide to restrict his case to the specified grounds of appeal or, as more often happens, he places before the Court the whole basis of the valuation appealed against and in doing so endeavours to answer the specific grounds of appeal. The latter procedure is more conducive to satisfying an appellants dissatisfaction, and if in so doing matters other than those raised in the appellant's grounds of appeal emerge, it would seem unfair if the Court denied cross-examination on them. At the same time, as the Act is presently drawn, the Court is not an investigating tribunal and we do not see how it could uphold or dismiss an appeal on grounds other than those specified in the appellant's Notice of Appeal." (emphasis added)
In Wiggins v The Valuer General[5] the Land Appeal Court appeared to be applying a stricter test when it said:
"Under section 16j of the Valuation of Land Act 1944, an appeal to the Land Court is limited to the grounds stated in the notice of appeal and the burden of proving any and every such ground shall be upon the owner. In proceedings before this Court the owner is limited to the grounds stated in the original notice of appeal and cannot rely upon evidence relating to matters not referred to in the notice of appeal".
Although reference is made to Franklin and the decision of the Land Appeal Court in Pratt v The Valuer General (1981-82) 8 QLCR 145 there is no discussion of those cases in Wiggins, nor does it appear that the principles stated in Franklin were important or directly relevant to the issues to be determined by the Court in that instance.
[5] unreported decision of the LAC; AV 91-1071, November 1992.
Having regard to the authorities referred to above, I have reached the conclusion that once the respondent elects to lead evidence in support of the valuation appealed against and the grounds of appeal are wide enough to make the evidence relevant the evidence is admissible. In this context I agree with the reasoning of Mr Dodds in the Shire of Cloncurry Appeals (1971) 38 CLLR 1 where at 3 and 4 he concluded:
"There are, however, one or two general principles of law applicable in these cases which should be repeated by me. The first is that the onus is on the appellant in each to prove any or every ground of appeal, s.21(3) of the Valuation of Land Acts. No doubt if the Valuer-General elects to give evidence the appellant is entitled to seize on any revealed weakness in his evidence in relation to any ground of appeal, and throw that also into the scales to add weight to his own evidence but this is a very different thing from expecting the Valuer-General to assume the full burden of proving his valuation correct."
I do not consider that the decision of the Land Appeal Court in Wiggins prohibits the conclusions I have reached. The second sentence of the passage referred to above is with respect, obiter and is concerned with appeals to the Land Appeal Court involving quite unusual, if not unique grounds of appeal.
It is my view, and I so find, that the grounds of appeal as particularised are sufficiently wide to make the relativity (or lack thereof) of the valuations contended for by the respondent with the unimproved values attributed to other sufficiently comparable CBD blocks, to be a relevant consideration in these appeals. Accordingly I find the evidence set out at page 33 of exhibit 8 and the oral testimony concerning the matters raised therein is admissible for the purposes of providing evidence tending to support or contradict the valuations contended for by either of the parties.
Counsel for the respondent also raised the question of the weight that should or could be attributed to this evidence particularly having regard to circumstances in which the agreed values were struck. I agree that the question of the weight to be attributed to this evidence is an important issue and it is dealt with in more detail below.
THE VALUATION METHODOLOGY
Mr Jackson
Mr Jackson first derived a site value for the land and from that derived an unimproved value by making allowance for improvements, described by him as "site works", on or to the land. The site value Mr Jackson attributed to the land for both 2001 and 2002 is $7,278,500. This figure was arrived at by attributing a rate of $3,000 per m² to the northern area and $500 per m² to the southern or subterranean area. The site value, under the heading "Commercial Land Sales Approach", is calculated as follows:
·northern area 2236 m² x $3,000 m² = $6,708,000
·southern/subterranean area 1141 m² x $500 m² = $ 570,500
$7,278,500
The relevant valuation calculations for 2001 and 2002 are then set out at pages 30 and 31 of Exhibit 8 and are as follows:
1 October 2001
Site Value $7,278,500
LessSite Works – Coffer dam and bulk excavation and shoring
Building Price Indices – Brisbane March 1988 89.58 $2,409,750
Escalate to Building Price Indices October 2001 128.31Total Costs $3,451,608
Sub-Total $3,826,892
LessHolding costs during construction period of 6 months $ 192,357
Gross Land Value $3,634,535
LessHolding Costs on Gross Land Value – 6 months @8.5% pa $ 148,171
Unimproved Value $3,486,364
Rounded to$3,500,000
1 October 2002
Site Value $7,278,500
LessSite Works – Coffer dam and bulk excavation and shoring
Building Price Indices – Brisbane March 1988 89.58 $2,409,750
Escalate to Building Price Indices October 2002 132.80
Total Costs $3,572,391
Sub-Total $3,706,109
LessHolding costs during construction period of 6 months $ 192,357
Gross Land Value $3,513,752
LessHolding Costs on Gross Land Value – 6 months @8.5% pa $ 143,246
Unimproved Value $3,370,506
Rounded to$3,370,000
Given the closeness of the 2001 and 2002 results the figure of $3,500,000 was adopted for both dates.
The commercial land sales Mr Jackson relied on are dealt with in some detail at pages 20-21 of Exhibit 8 and can be summarised as follows:
Address Sale Date Sale Price Area Site Value
(as analysed)175 Eagle Street October 2000 $22,600,000 3459 m² $2,843/m² 75 Eagle Street December 1998 $15,000,000 3663 m² $3,869/m² 120 Edward Street May 1998 $6,000,000 1822 m² $2,841/m²
In Mr Jackson's opinion his rate of $3,000 per m² for the northern area was justified having regard to all of the sales upon which he relied including residential sales. Given the severe limitations on any commercial development of the balance land a rate of only $500 per m² was adopted. The figure of $500 was more a function of Mr Jackson's professional opinion rather than the product of the analysis of sales evidence.
Mr Kirby
Like Mr Jackson, in carrying out his valuation exercise Mr Kirby had regard to the sales of land intended for commercial development, the sales of land intended for high rise residential development and an analysis of the fully improved sale of the subject in August 2002.
The commercial land sales relied on by him are identified in summary form at page 10 of Exhibit 10 and are, by reference also to pages 17-23 of Exhibit 10:
Address Sale Date Sale Price Area Rate/m²
(Analysed)175 Eagle Street October 2000 $23,664,319 3,377 m² $4,719/m² 71 Eagle Street December 1998 $15,000,000 3,663 m² $3,839 m²- $4,082 m² 175 Eagle Street August 2002 $95,950,000 3,377 m² $5,536 m²
The first two sales are common to Mr Jackson. 71 Eagle Street is the same site identified by Mr Jackson as being located at 75 Eagle Street. This land was typically referred to by both valuers as the "Riparian" site as a consequence of the name given to the high rise development which now stands on that land.
Mr Kirby's residential sales of the "Felix" and "Aurora" sites are also common to Mr Jackson. Mr Kirby analysed each of these sales to reflect a rate per m² of $3,492 and $3,872 respectively. Mr Jackson's analysis revealed rates of $3,411/m² and $3,284/m² respectively.
Based on his residential sales, Mr Kirby arrived at an unimproved value for the land as at 2001 and 2002 of $13,800,000. At pages 13-14 of Exhibit 10 this figure is arrived at in the following way:
2,236 m² x $5,200/m² = $11,627,200
1,141 m² x $3,650/m² = $4,164,650
Less site works $1,911,707
$13,880,143
As $13,800,000The 1,141 m² area identified by Mr Kirby is of course the same area of land referred to by Mr Jackson as the southern, or subterranean area. Mr Kirby also had regard to the sale of the volumetric lot, Lot 11 which, according to him revealed a rate of $2,191 per m², although at the end of the day he did not place much weight on this sale.
According to Mr Kirby the best evidence to assess the unimproved value as at the relevant dates was the fully improved sale of the subject land in August 2002. At page 11 of Exhibit 10, using his analysis of this sale, Mr Kirby concluded:
"It is considered that the best evidence of value is the sale of the subject land. Accordingly the value of the subject land is as follows:
Valuation 01/10/2001
3,377 m² @ $5,000 = $16,885,000
As $16,900,000Valuation 01/10/2002
3,377 m² @ $5,536 = $18,695,000Adopt $18,700,000"
As mentioned above the final valuation contended for by Mr Kirby as at 1 October 2002 was $22,090,000. Mr Kirby seemed to have had some difficulty in determining the unimproved value for 1 October 2002. At pages 11.1 and 15.1 of Exhibit 10 it would seem that, at least at some stage, Mr Kirby considered it to be $14,605,000.
The various assessments of the unimproved value of the land as the relevant dates can be summarised as follows:
Valuer Date UV Mr McKinnon 01/10/01 $8,700,000 Mr Jackson 01/10/01 $3,500,000 Mr Kirby 01/10/01 $16,900,000 Mr McKinnon 01/10/02 $9,500,000 Mr Jackson 01/10/02 $3,500,000 Mr Kirby 01/10/02 $22,090,000
For the purposes of some further overall comparisons, if Mr Kirby's method of applying an average rate per m² over the entire area of land is adopted the comparisons are:
Mr McKinnon 01/10/01 $2,576/m² Mr Jackson 01/10/01 $1,036/m² Mr Kirby 01/10/01 $5,004/m² Mr McKinnon 01/10/02 $2,813/m² Mr Jackson 01/10/02 $1,036/m² Mr Kirby 01/10/02 $6,541/m²
The 2002 Sale of the Subject
My concerns about the use of this sale were aroused at a very early stage in these proceedings when copies of the valuer's reports, Exhibits 9 and 10 were filed prior to the hearing of the appeals. Mr Jackson's analysis of this sale yielded an unimproved value as at 1 October 2002 in the amount of $3,170,000. Mr Kirby's analysis yielded a figure of $18,700,000 later revised to $22,090,000.
I have no confidence in the analysis of this sale by either of the valuers and accordingly reject it as providing any probative evidence of the unimproved value of the land as at October 2001 and October 2002.
Looking first at the exercise of Mr Kirby, his last analysis yields a rate of about $6,541 per m² over the whole of the area of the land. Even at face value this figure seems at odds with the other sales evidence to which Mr Kirby had regard.
At page 5 of Exhibit 10 Mr Kirby states that the market for land in the Brisbane CBD did not differentiate between commercial and residential users of land and that his investigations led him to conclude that only slightly higher prices were being paid for land intended for commercial uses when compared to that being paid for residential uses. However, as at 2002, the analysis of residential sales yields a figure of $13,800,000 for the unimproved value of the land at an average overall rate of $4,086 per m². The differences between these figures and the figures of $22,090,000 and $6,541 per m² could hardly be described as being "slight" or indicative of a lack of differentiation between end use buyers of CBD land.
At page 5 of Exhibit 10 Mr Kirby also states that between late 2001 and late 2002, while there was very little change in the general market in the Brisbane CBD area, riverfront sales did show increases in values. In my view, there is no reliable evidence to support the assertion about increasing values of riverfront land and certainly no reliable evidence justifying an increase of about 30% from $16,900,000 to $22,090,000 being Mr Kirby's respective assessments of the unimproved value for 2001 and 2002.
In Exhibit 10, when dealing with his residential sales, Mr Kirby applied a rate of $5,200 per m² for the northern area and $3,650 per m² to the southern or subterranean area of the land. However, when valuing the land on a commercial basis no such distinction was made. When pressed on this point in cross examination Mr Kirby, in my view, acknowledged that a similar adjustment ought also be made for any analysis of the land on a commercial basis. Regardless of any concession on this issue by Mr Kirby I would have concluded, and I so find, that the limitations on development of the southern area require a significant discount when compared to the value of the northern area regardless of whether the development is commercial or residential in character.
Leaving aside for the moment the correctness or otherwise of the 30% variation in value between the northern and southern areas adopted by Mr Kirby, an application of this variation yields interesting results. If the southern area is worth about 70% of the value of the northern area and the average rate per m², based on $22,090,000 is $6,541, then the northern area would reflect a value of about $7,250 per m² and the southern area about $5,100 per m². Apart from Mr Kirby's analysis of this sale, no sale, residential or commercial, comes close to supporting the rate of $7,250 per m². In fact, the rate for the southern and heavily encumbered area of land is only some $100 per m² less than that attributed to the developable northern area in Mr Kirby's residential analysis.
In addition to the matters identified above, Mr Kirby's exercise concerning this sale suffers from the lack of certainty often associated with the analysis of a highly improved sale. As this criticism applies equally to Mr Jackson's evidence about this transaction I deal with it in more detail below.
Finally, the results produced from Mr Kirby's analysis bear no resemblance whatsoever with the unimproved values applied by the respondent to the other CBD properties identified at page 33 of Mr Jackson's primary report nor with the actual values attributed to the land and appealed against.
I accept Mr Quinn's submission that where reliable sales evidence supports the unimproved value attributed to land, that evidence is superior to evidence about the relativity or lack thereof between the value as determined and the unimproved values attributed to other parcels of land. That view is now well established by decisions of the Land Appeal Court and this Court.[6]
[6]e.g. Tow v Valuer General (1978) 5 QLCR 378 at 381.
I also acknowledge that the settlement of litigation involves consideration by the parties of a number of uncertainties including the risks and the costs associated with proceeding to trial. That is, commercial and practical considerations may tend to outweigh matters of principle. That said, in the absence of evidence to the contrary, I do not accept that a responsible government department would agree to values being attributed to CBD parcels of land which were significantly lower than what they should be. In my view no such evidence exists. The issues raised by Mr Quinn concerning these settlements including the changes in lawyers and valuers and the illness of Mr Kirby, all of which occurred at a critical time, do not convince me that no regard could be had to the settlement figures set out at page 33 of Exhibit 8. If the respondent felt grossly prejudiced by the events identified an application for an adjournment would, in my view, have been a more appropriate course of action rather than the adoption of values significantly below that which they should have been. Mr Kirby was himself responsible for the valuation of the land located at 300 Queen Street, 300 Adelaide Street and 100 Creek Street. At no time did he say that the valuations he was responsible for were significantly compromised by the settlements. Nor did he say that, in his opinion, the other settlements involved a significant underestimation of value. Of course these valuations are also entitled to the benefit of the presumption of correctness pursuant to s.33 of the VLA.
While I accept that on its own the relativity issue or point may not be a particularly persuasive one, when put with the other matters addressed above, it forms part of a consistent pattern of evidence all of which suggests Mr Kirby's analysis of the 2002 sale of the subject yields an unreliable result.
Turning to Mr Jackson's analysis of this sale I also find it to be of no evidentiary value.
Both valuers, relying to an extent on the same material, adopted the figure of $46,589,049 as being the construction cost or cost of replacing the existing office tower. However, when it came to attributing a value to the other structural improvements on the land, the valuers were of vastly different views. Mr Jackson's cost for the basement/car park was $12,000,000. Mr Kirby's cost for the same item was $5,910,750.
In Exhibit 9A, when relying on the figure of $12,000,000, Mr Jackson in Note 7 states: "value of existing basement area derived from discussions with purchaser of the property prior to development and calculation of replacement cost exercise…" The said discussions, according to Mr Jackson revealed that the purchaser considered that the existing basement works were worth between $12,000,000 and $15,000,000. This evidence is clearly hearsay evidence and, for this reason alone, its weight is questionable going as it does to such an important matter.
In Attachment 7 of Exhibit 9 Mr Jackson sets out the methodology relied on to arrive at his assessment of the worth of the basement. In essence, Mr Jackson adopts an estimate of the so called construction costs in 1988 dollars which are then indexed to give the value of those works in 2002. The 1988 "estimate" of $8,361,000 can be found in Attachment 3 of Mr Jackson's primary report Exhibit 8. A reading of this document makes it clear that the figure of $8,361,000 is only an estimate to provide "…an appreciation of expected costs at tender and completion" based on architectural drawings of a building design concept. The author of this document was not called.
Yet another difficulty I have with this aspect of Mr Jackson's evidence is the uncontested statement of Mr McEvoy (Exhibit 15). Mr McEvoy is a quantity surveyor who had some involvement with the construction of the building now located on the land. It was Mr McEvoy's expert opinion, which was not challenged, that the cost of constructing the car park (basement) would be in the order of $3,000,000. While I readily accept that cost does not always equal value, in the absence of some reliable explanation as to how to resolve a difference of some $9,000,000 it is difficult to accept Mr Jackson's figure of $12,000,000. In my view no such explanation exists.
Mr Kirby's estimate of the value of the car park is $5,910,750. This figure is the product of him adopting a total of 185 car parks and multiplying that figure by the rate of $35,500 per car park and then allowing a 10% reduction in value for depreciation. The Rawlinsons publication relied on by Mr Kirby to derive his rate of $35,500 per car park is only a guide as to what the actual construction costs might be. In the absence of some expert evidence supporting the application of the rate prescribed by Rawlinson to the actual works under consideration this evidence is unpersuasive. To some extent this is highlighted by the difference between the figure of $3,000,000 provided by Mr McEvoy and that applied by Mr Kirby. As was the case with the approach of Mr Jackson the difference was not satisfactorily explained.
Other matters including, for example, how the "income" or "rental" guarantee of $3,000,000 ought to be treated were never satisfactorily resolved by the evidence led on behalf of the appellant in my view. However, I do not propose to go into that matter in any more detail as I have reached the conclusion that the issues surrounding Mr Jackson's treatment of the basement area raises sufficient concerns for me to reject his analysis of the 2002 sale.
For the reasons canvassed above I reject the analyses of the 2002 sale of the subject. There are, in my view, too many inconsistencies and uncertainties associated with the exercises of both valuers.
On this matter I am not convinced that a discount of in the order of 83% is warranted when assessing the unimproved value of the southern area of Lot 10. On the other hand I am of the view that a discount of 30% is insufficient.
I acknowledge that there is no reliable evidence which would justify some sort of exact assessment of what the encumbered area of the subject might be worth. As has been recognised in a number of cases involving the valuation of land, sometimes it is necessary for the Court to do the best it can on the evidence available to it even if it may involve an element of the "best guess" available.[12]
[12]Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409 at 434; AMP Henderson v Valuer General (2004) 134 LGERA 426 at 440.
Doing the best that I can with the evidence available to me I find that a discount of 45% is appropriate. That results in a value for the southern area of $2,310 per m².
Applying the methodology adopted by Mr Jackson at page 30 of Exhibit 8 and by Mr Kirby at page 13 of Exhibit 10, I assess the unimproved value of the land, before bringing into account any allowances for site works, as at 1 October 2001 to be:
2,236 m² x $4,200/m² = $9,391,200
1,141 m² x $2,310/m² = 2,635,710
$12,026,910Turning to the question as to what is the appropriate value to be attributed to the site works, Mr Jackson in Exhibit 8 at page 30, allowed the sum of $2,409,750 for "coffer dam and bulk excavation and shoring". This figure was arrived at by deducting from the so called original cost of $2,835,000 for those works in March 1988, those items which Mr Jackson did not consider appropriate to include. The resultant figure of $2,409,750 was then escalated by reference to Rawlinsons Cost Construction Guide Building Price Indices publication to $3,451,608 to represent October 2001 dollars. Essentially the same exercise was carried out by Mr Jackson in respect of his valuation for October 2002.
At page 14 of Exhibit 10, when carrying out his valuation on a residential basis, Mr Kirby made an allowance of $1,911,707 for what he described as "site works". This figure reappeared in various documents including Annexure 23 to Exhibit 10 as representing the value of what was there described as "capital works 1991 - 1992" and was the result of depreciating the amount of $2,124,119 described as the "replacement cost" by 10% to allow for wear and tear since construction. These figures were later revised by Mr Kirby so that the original figure of $2,124,119 was reduced to $1,637,355 which, after depreciation of 10%, meant that the initial allowance of $1,911,707 was further reduced to $1,473,619. These adjustments were necessary according to Mr Kirby because of information disclosed by the appellant which he had not previously taken into account. As I understand it the revised figure of $1,473,619 was meant to represent the "historical cost" of those works which, when adjusted to reflect 2002 dollars, resulted in a final allowance for site works, after depreciation, of $2,063,066.
The starting point for Mr Jackson's exercise concerning site work costs was the figure of $2,835,000 which appeared in an extract from a report of the quantity surveyors Ryder Hunt contained in Appendix 3 of Exhibit 8. This part of the Ryder Hunt report is heavily qualified and appears to be no more than an estimate of construction costs to provide an "appreciation of expected costs at tender and completion". The qualifications attaching to this report and the fact that no quantity surveyor was called to explain or verify the figures contained therein severely weakens the reliability of this evidence. The fact that Mr Jackson then sought to adjust these figures by 85% to account for matters including, for example, the removal of existing obsolete structures, further weakens the reliability of this evidence, involving as it must elements of speculation on his part about matters beyond his area of expertise.
The starting point of Mr Kirby's exercise was the adoption of the figure of $1,243,424 which was then escalated, after allowance for depreciation, to 2002 dollars. The source of the figure of $1,243,424 is the Napier and Blakeley Pty Ltd report (Exhibit 21), already referred to above. This report was prepared to provide an independent analysis of the capital allowances available under the Income Tax Assessment Act 1997. No source for the figure of $1,243,424 is given nor full details of the scope of works meant to be covered by it. No witness from Napier and Blakeley Pty Ltd was called to explain or verify any of the contents of this report. In my view, there are too many uncertainties associated with the figures Mr Kirby relied on for the purposes of estimating the value of the site works for them to provide any reliable evidence for the purposes of either the 2001 or 2002 appeals. As was recognised by the Land Appeal Court in the QNI case[13] valuation reports, in the absence of their authors being called, are unlikely to be of much assistance to the Court. I respectfully agree and do not consider that the learned Members of that Court meant to limit their criticism to just valuation reports.
[13] 23 QLCR 261 at [22].
The value of the site works were also the subject of consideration of others within the offices of the respondent. In Exhibit 35, a document being a record of data concerning the subject property held by the respondent, a figure of $3,611,040 was identified as being an appropriate deduction for retaining wall works. This figure was based on the rate of $48,000 per metre multiplied by the length of 75.23 metres of river frontage. The figure of $3,611,040 in Exhibit 35 was one of the inputs relied on by the author or authors of those documents to yield "calculated rounded values" of $8,712,089 as at 1 October 2001 and $10,085,835 as at 1 October 2002.
The figure of $3,611,040 was also used in yet another of the respondent's internal documents.[14] This document is not easily understood but it seems to suggest, and that is as high as it could be stated, a valuation or estimate of $10,000,000 as at some uncertain date but quite possibly 2002.
[14] Exhibit 18, Attachment 7.
At the end of the day I am left with three estimates of the value of the site works all of which, in my view, involve elements of inherent unreliability. These estimates are in the order of:
·Mr Jackson – about $3,500,000 plus interest thereon.
·Mr Kirby – about $2,100,000.
·Unknown DNR sources – about $3,610,000.
Without resorting to some artificial manipulation of these estimates there is no sensible way of resolving the differences between them. Doing what I can with the evidence before me I intend to resolve doubts concerning this issue in favour of the appellant and adopt a figure tending towards the higher end of the estimates being $3,500,000. In this context I rely at least in part on what was said by Dixon J in Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co. of South Australia (1947) 74 CLR 358 where at pages 373 – 374 His Honour said:
"There is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full monetary equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a Court's attitude in the application of the test. In a case of compensation doubts are resolved in favour of a more liberal estimate in a revenue case, of a more conservative estimate."
This passage was cited with approval by Callinan J in Boland v Yates (1999) 167 ALR 575 at 669 [356].
The adoption of these figures results in an amount of $8,526,910 made up of the aforesaid amount of $12,026,910 less site works in the amount of $3,500,000.
Bearing in mind that the figure of $8,526,910 is the result of adopting a relatively arbitrary allowance for site works and involves a variation of less than 5% from the valuation appealed against I consider that it really tends to confirm the unimproved value as originally determined. In my view, it would be quite artificial to disturb that value and replace it with my own assessment where they are so close.
Accordingly, I determine the unimproved value of the land as at 1 October 2001 to be $8,700,000.
The 2002 Appeal
I can find no evidence which would justify any meaningful increase of the unimproved value of the land between 1 October 2001 and 1 October 2002. The approach adopted by Mr Jackson clearly reflects that it was his opinion that there was no recognisable movement in the market between 2001 and 2002. This is largely consistent with Mr Kirby's opinion expressed at page 5 of Exhibit 8. In this context I again note Mr Kirby's purported distinction between the general CBD market and river front sales. For the reasons set out above I have already rejected this distinction. The existence of a flat market between 1 October 2001 and 2002 is also consistent with the acceptance by the respondent of one level of value to cover the same valuation periods for the settlement of those appeals referred to by Mr Jackson at page 33 of Exhibit 8, which were the subject of consent orders by this Court on 26 April 2005.[15] It is also supported by Mr Kirby's valuation of the land on a residential basis where the same unimproved value is applied to both October 2001 and 2002 dates.
[15] Exhibit 16.
In circumstances where there is no evidence to support any meaningful adjustment of the value set for 1 October 2001 I determine that the unimproved value of the land as at 1 October 2002 is $8,700,000.
ORDERS
Appeal AV2004/0154 is dismissed and the unimproved value of Lot 10 on SP151098 Parish of North Brisbane as at 1 October 2001 is determined at Eight Million, Seven Hundred Thousand Dollars ($8,700,000).
Appeal AV2004/0155 is allowed and the unimproved value of Lot 10 on SP 151098 Parish of North Brisbane as at 1 October 2002 is determined at Eight Million, Seven Hundred Thousand Dollars ($8,700,000).
R S JONES
MEMBER OF THE LAND COURT
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