Re Universal Trade Broking Company Pty Ltd
[1997] QLC 100
•1 July 1997
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BRISBANE
1 JULY 1997
In the matter of an application for conversion of tenure
Special Lease No.: 51152, Brisbane District
Lessee: Universal Trade Broking Company Pty Ltd
D E C I S I O N
On 20 June, 1996, Universal Trade Broking Company Pty Ltd (“Universal”) lodged an appeal against a decision of a delegate of the Minister of Natural Resources (“the Department”) dated 24 May, 1996 in respect of an application to convert Special Lease No. 06/51152, Brisbane District to freehold tenure. Universal is the lessee of that Special Lease which was granted in respect of Lot 245 on Plan SL 10688, Parish of Woogaroo, County of Stanley (“the subject land”). The conversion application was dated 11 August, 1995.
Universal’s grounds of appeal were based on the valuation applied to the subject land. The facts put forward were that the value of Lot 246, Cobalt Street, Carole Park (“Lot 246”), which adjoins the subject land, is $60.00 per square metre as at 7 August, 1995.
At the hearing of the appeal, Universal was represented by its Managing Director, Mr Harris. The Minister was represented by an officer of his Department, Mr Jacobson. A letter dated 19 June, 1996 from Mr Harris to the Registrar of the court was admitted in evidence in support of Universal’s case. At the hearing, a valuation report dated 24 October, 1995 for the conversion of the subject land to freehold was admitted in evidence. That report was prepared by Mr McDonald, a registered valuer in the Department of Natural Resources (“the Department”). A schedule of the sales upon which Mr McDonald relied was also admitted and he also gave oral evidence.
BACKGROUND
There was no disagreement as to the general description of the subject land as set out in Mr McDonald’s report. On that basis, I have accepted his description.
I find that the subject land is situated in Cobalt Street in the Carole Park Industrial Estate. That estate was established some 15 years ago and accommodates a mixture of light to medium industries. It is located approximately 25 kilometres south west of the Brisbane Central Business District. It has easy access to both the Logan Highway and to Ipswich Road and the Cunningham Highway. Cobalt Street is bituminised, kerbed and channelled.
The subject land is approximately rectangular in shape comprising 2,095 square metres. It has been cut and retained to accommodate and factory buildings. In its unimproved state, it would have had a gentle fall to Cobalt Street. Electricity, reticulated water, sewerage and telephone services are connected to the property.
There are various improvements to the subject land. They comprise a main workshop area, an attached office, concrete sealing with car parking for five vehicles, landscaping and earthworks. These improvements comprise the first stage of a two stage factory development on the subject land. Universal, which operates a light engineering business on the subject land, proposes to proceed with the second stage when it is able. The Ipswich City Council has zoned the subject land as “Medium Industry”.
THE EVIDENCE
Mr McDonald’s report described the improvements and assessed their value as $323,800, say $325,000. He originally assessed the value of the land to be $65 per square metre. As the area of the subject land is 2095m2, his valuation amounted to $136,175. On 16 June, 1996, he re-assessed the value of the land to be $130,000.
Mr McDonald had prepared a schedule of sales upon which he relied in reaching his valuation of the subject land. That schedule set out relevant information about each of the sales and also compared each with the subject land. Its contents may be summarised in the following tables:
| Sale Number | 1 | 2 | 3 | 4 |
| Property | L137/SL845092 39 Cobalt St Carole Pk | L226/SL10439 Cnr Mica & Argon Sts | L163/SL8392 38 Cobalt St Carole Pk | L298/SL845092 Cobalt St Carole Park |
| Area | 1.505 ha | 3976m2 | 2.03ha | 1.505ha |
| Zoning | Medium Industry | Medium Industry | Medium Industry | Medium Industry |
| Description | Medium elevation with crossfall to rear northern corner. Requires 4 metre cut to obtain level site. | Medium elevation with gentle rise to the rear north eastern corner. Requires minimal cut to obtain level site.. | Medium elevation with gradual rise to south eastern rear corner. Requires cut of 2 metres to obtain a level site. | Medium elevation with gradual fall to north west corner. Requires 3 metre cut to obtain a level site. |
| Comparison with subject land | Larger in size, similar in location, inferior in topography, similar zoning. | Larger in size, inferior in location , slightly superior in topography, similar in zoning | Larger in size, superior in location, slightly inferior in topography, similar in zoning. | Larger in size, similar in location, inferior in topography, similar in zoning. |
| Date of Sale | 7/4/94 | 25/5/94 | 11/11/94 | 21/12/94 |
| Sale Price | $520,000 | $200,000 | $607,000 | $451,500 |
| Improvements | Clearing, cut and fill, office/factory, fencing | Clearing, fencing | Clearing, Fencing | Clearing, Fencing |
| Analysed Value | $480,000 | $197,000 | $598,500 | $444,000 |
| Rate p m2 | $31.89 | $49.55 | $29.58 | $29.50 |
| Sale Number | 5 | 6 | 7 | 8 |
| Property | L311/ SL842242 Cobalt St Carole Park | L246/ SL10686 Cobalt St Carole Pk | L147/ SL9184 37 Antimony St Carole Pk | L286/SL800307 L287/SL11477 Mica St Carole Park |
| Area | 6095m2 | 2,400m2 | 4539m2 | 4475m2 |
| Zoning | Medium Industry | Medium Industry | Light Industry | Medium Industry |
| Description | Medium elevation with gradual fall to north western corner. Requires 2 metre cut to obtain level site. | Medium elevation with gentle rise to south eastern corner rear corner. Requires minimal cut to obtain level site. | Medium elevation with gradual fall to south eastern corner. Requires 2 metre cut to obtain level site. | Medium elevation with central fall to north. Required 2 metre cut to obtain level site. |
| Comparison with subject land | Larger in size, inferior in topography, similar in zoning. | Slightly larger in size, similar in location, similar in topography, similar in zoning. | Larger in size, inferior in location, similar in topography, slightly inferior in zoning. | Larger in size, inferior in location, similar in topography, similar in zoning. |
| Date of Sale | 6/7/95 | 7/8/95 | 22/8/95 | 29/9/95 |
| Sale Price | $233,500 | $144,000 | $249,650 | $242,950 |
| Improvements | Clearing, Fencing | Clearing, Fencing | Clearing, Fencing | Clearing |
| Analysed value | $235,000 | $142,500 | $246,150 | $241,450 |
| Rate p m2 | $38.31 | $59.37 | $54.23 | $53.95 |
In his oral evidence, Mr McDonald said that the sales indicated that, when regard is had to the price per square metre, purchasers pay different rates for properties of different sizes. The size is more important than the rate per metre of the frontage of the properties. The council requires that off street parking be provided on the properties in Carole Park. Other requirements of the council relate to landscaping and the area on which development is permitted.
Smaller blocks sell for a greater price per square metre than do larger properties. There are more people in the market for smaller properties than for those of 2 or 3 hectares. Those larger properties cost larger amounts of money and more to cut and fill. If one property is 2,000 square metres in area and the property next door is 2,500 square metres, there will be a difference of 5% between the prices per square metre for the two properties. Taking a property of 2,000 square metres and its value per square metre as the benchmark, then the value per square metre of a property with an area of 2,500 square metres would be 95% of the value per square metre of the smaller property. Conversely, if the value per square metre of a 2,500 square metre property were $60, the value per square metre of a 2,000 square metre property would be $62.50. The value per square metre of a 12 hectare property would be 30% of the value per square metre of the 2,000 square metre property.
Mr McDonald said that the market is not perfect. It varies over time. Between October, 1994 and September, 1995 when the relevant sales occurred, the market was moving upwards.
Mr McDonald was asked to compare his valuation of the subject land with Sale No.6 in his schedule of sales. Sale No.6 relates to the sale of Lot 246 upon which Mr Harris relied. There was, Mr McDonald stated, a difference of 14.5% in the area of Lot 246 and the subject land. While he would normally expect there to be a difference of approximately 5% between the value of the two properties on the basis of a per square metre basis, Mr McDonald said that there was a difference of 9.6% per square metre between his amended valuation and the analysed sale price achieved on 7 August, 1995.
Mr Harris suggested to Mr McDonald that all of the sales other than that of Lot 246 are irrelevant. The subject land and Lot 246 are both located on Cobalt Street, Carole Park. That is the street in Carole Park which has the greatest visibility. The other sales are not of properties of comparable size or location. The dates of those sales are not sufficiently close to the date of Universal’s application on 11 August, 1995 to be relevant.
Apart from the sale of Lot 137 at 39 Cobalt Street, Carole Park (“Lot 137”), all of the sales in the schedule of sales were made by the Minister for Industrial Development (“the Minister”) as the vendor. The sale of Lot 137 was made by a vendor other than the Minister to a third party. Mr McDonald said that the fact that the Minister is the vendor in seven of the eight sales does not affect the validity of a comparison with those sales. He is obliged to obtain a fair market value for the properties he sells.
CONSIDERATION
Section 170 of the Land Act 1994 (“the Act”) provides for the manner in which the purchase price for the conversion of a lease to a deed of grant is to be calculated. Unless the lease either sets a purchase price or a formula for determining that purchase price, it is to be determined by the Minister (sub-section 170(1)). The purchase price is
“... an amount equal to the total of -
(a)the unimproved value of the land being offered, as if it were fee simple; and
(b)the market value of any commercial timber that is the property of the State on the land.” (sub-section 170(3))
Sub-section 170(4) provides that the day on which the unimproved value of the land is to be calculated is the date on which the Minister receives the conversion application. In this case, I find that he did so on 11 August, 1995.
In response to Mr Harris’s reference to the unimproved values set for rating purposes, Mr Jacobson submitted that there is a distinction to be drawn between an unimproved value assessed for the purposes of a conversion application and that assessed under the Valuation Land Act 1944 for rating purposes. The latter assessment will always be conservative because it is for rating purposes. The unimproved value assessed for the purposes of a once only sale should reflect the fair market value which can be obtained for the land. It follows, Mr Jacobson submitted, that there may be two different assessments of the unimproved value.
I agree with Mr Jacobson’s submission and refer to a passage from Mr White’s judgement in Richardson v The Crown (1990-91) 13 QLCR 236 when he considered the issue in relation to a conversion application under the Land Act 1962. There is no difference of substance between that legislation and the Act that would lead me to differ from Mr White when he said:“Under the Land Act, (the Act which prescribes the principles for making this determination), the Court is required to ascertain a value which in its opinion experienced persons would be willing to pay for an estate in fee simple in the land, assuming that the land was in an unimproved state and were offered for sale on such reasonable terms and conditions as a bona fide seller would require (s.141). When valuing the land under the Valuation of Land Act as one unit, the test is similar (S.12). One, however, (the latter), is for rating and taxing purposes and the other (the former) is for the purpose of alienation of the land in fee simple. Dixon J., as he then was, in Commissioner of Succession Duties (SA) v. Executor Trustee and Agency Co. of SA. Ltd (1946/47) 74 C.L.R. 358 drew a distinction between the ascertainment of a value for taxing purposes and the ascertainment of a value for compensation purposes, notwithstanding that the test of value in both instances was the same. This [is] what he said at pages 373/374:
`... I should like, however, to add for myself that 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 money 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.’
It is the submission of the Crown that the alienation of the fee simple is akin to the converse of a resumption and that the vendor (the Crown) is entitled to have the benefit of the more liberal estimate spoken of by Dixon J. I find that there is force in this submission. The sale of the fee simple, relatively speaking, is an alienation once and for all and thus has more affinity with the attitude the Court takes to resolve compensation than it does with the attitude the Court takes in ascertaining value for rating and taxing purposes.” (pages 238-239)
Although there is a distinction in the final analysis and the Act does not impose a legal burden of proof upon the appellant, the fundamental principles applied in assessing the unimproved value under the Act and under the Valuation of Land Act 1944 are the same. These were summarised in Grahn v Valuer-General (1992-93) 14 QCLR 327 by the Land Appeal Court when it said:
“The decision of the High Court of Australia in Brisbane City Council v The Valuer-General ((1978) 140 CLR 41, 5 QLCR 283) and the decisions of the Land Appeal Court in cases such as WM and TJ Fischer v The Valuer-General ((1983) 9 QLCR 44) and R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, are authority for the following propositions:
(a)It is desirable that valuations made for the purposes of the Valuation of Land Act 1944 of comparable lands should bear proper relativity, one to the other, so long as the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis. (R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at p.16 and cases cited in it).
...
(e)Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence (WM and TJ Fischer v The Valuer-General (1983) 9 QLCR 44, at p.46).
(f)If possible, the Valuer-General should obtain uniformity between different blocks in the same land category or type, but should do so (preferably by reference to sales of comparable land) by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error (R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at pp.16-17 and cases cited in it.)
These principles must be seen against the broad approach set out by the High Court in Spencer v The Commonwealth (1907) 5 CLR 418. As Isaacs J described that approach,
“To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and congnizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.” (page 441)
Seven of the eight sales relied upon by Mr McDonald were sales by the Minister to various purchasers. Only one sale was from a vendor other than the Minister. Even the sale of Lot 246 relied upon by Mr Harris (Sale 6 in Mr McDonald’s schedule of sales) was a sale by the Minister as the vendor. During the hearing, I questioned whether a group of sales with a common vendor for all but one and with a vendor who fixes the price can reflect the price that might be reached “... by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration.” (Spencer’s case)
Mr Jacobson replied that the Minister is in the market to obtain the most he can for the properties. The seven sales represented straight market transactions. None, for example, involved a premium on the basis that the sale was to an adjoining owner. Each transaction was at arm’s length. The Minister set the price and purchasers could “take it or leave it”. The Minister wanted as much money as he could for the sites.
I would not in anyway wish to be seen as critical of the Minister’s approach in setting the price for that is a matter for him. Nor am I critical of Mr McDonald for I accept Mr Jacobson’s assurance that reliance upon such sales is common. What I am concerned about is that Minister’s prices should be used as a substantial aid to establish the value of the land on the basis set out in Spencer’s case. There is no element of voluntary bargaining in any of the seven sales effected by the Minister. Only the first sale, by a private vendor, can be presumed to have that element. I have decided not to take the matter further than to raise it in this case. There is no other sales evidence to which I can have regard apart from that given by Mr McDonald and Mr Harris has chosen to rely upon one of the sales with which I am concerned.
Mr Harris argued that it is to be expected that the value per square metre of comparable parcels of land on Cobalt Street, Carole Park at approximately the same time could be expected to be identical. In arguing for a variation in the values depending upon the size of the properties, Mr Jacobson relied upon Mr McDonald’s evidence which I have set out in the paragraphs above.
It was generally accepted that those properties situated on Cobalt Street, Carole Park enjoyed a location to those situated on other streets in Carole Park. Properties which were not situated on that street were the subject of sales 2, 7 and 8. All three were significantly larger in size than the subject land. The topography of sales 7 and 8 were similar to that of the subject land while that of sale 2 was slightly superior. Apart from sale 7, which had a slightly inferior zoning, all are similar in that regard.
Sales 1, 3,4,5 and 6 were in respect of properties in Cobalt street. All are larger in size than the subject land. Except in the case of sale 6, they are significantly larger. Even on Carole Street, locations vary and, on Mr McDonald’s assessment, only sales 1,4 and 6 enjoy similar locations. Their zonings are the same but there are slight variations in their topography.
As Mr Harris submitted, of the properties listed in the sales schedule, Lot 246 (sale 6) is the property which is most similar to the subject land. They share similar locations, topography and zoning and are closest in size. The properties are next door to each other on Carole Street.
There was disagreement between the parties as to the significance that variations in size have on the value to be ascribed to a property. Mr Harris argues that the difference between an area of 2,095m2 for the subject land and an area of 2,400m2 for Lot 246 is not such that it should lead to a variation in their unimproved values when assessed on a per acre basis.
The sales evidence, however, does not support that position. Even allowing for variations amongst the properties, the evidence points to the conclusion that the larger properties realised a lower value per acre than the smaller properties when regard is had to their analysed values (ie. unimproved values). In the first instance, there is a marked difference between the sales of properties above 1.5 ha (sales 1,3 and 4) from those of a lesser area (sales 2,5,6,7 and 8) with the larger properties realising a markedly lower price per acre. Looking at the sales of a lesser area, they also show a difference in the amounts realised per acre. Taking into account Mr McDonald’s evidence that prices were tending to increase during the period of the sales and allowing for the variation in the dates of the sales, the tendency of the figures is to show an increase in the price per acre as the overall size of the property decreases.
That tendency for the value of property in Carole Park to increase on a per acre basis as the size of the property decreases, is reflected in the value set by the Minister of $62.05. On the evidence available to me, I am satisfied that it is an appropriately reflects the unimproved value of the subject land as at 11 August, 1995 having regard to the evidence of comparable sales and the market trends at the time. In doing so, I note that the process of valuation is not a science with clearly defined formulae, the application of which will lead to a consistent and definite conclusion each time they are applied. The process will lead instead to valuations which, when taken in isolation as in the case of the subject land and Lot 246, may appear to be inconsistent but which, when considered in the overall context of property valuations, go towards making up a pattern which has an overall consistency.
For the reasons I have given, I confirm the decision of the Minister dated 24 May, 1996.
SA FORGIE
MEMBER OF THE LAND COURT
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