Scott v Chief Executive, Department of Natural Resources

[1999] QLC 64

[1999] QLC 64

 

LAND COURT,

BRISBANE

4 June 1999

Re:     Appeal against Annual Valuation –

Valuation of Land Act 1944 –
  Local Government:  BCC-Ithaca
  Valuation Roll Nos 779 (AV98-776)

and 773 (AV98-777).

Graham R and Margaret G Scott

v.

Chief Executive, Department of Natural Resources

D E C I S I O N

Background:

These matters deal with two properties located at 17 Guildford Street, Kelvin Grove, described as Lots 41 and 42 on RP 20344, and 30 Guildford Street, described as Lots 33 and 34 on RP 20344 and Lot 1 on RP 41740, Parish of Enoggera.  The two matters were heard concurrently as there was common evidence for both properties, and common ownership of the properties.  Property 1 (17 Guildford Street) has an area of 607 square metres and is occupied by a single dwelling, and Property 2 (30 Guildford Street) has an area of 516 square metres, and contains four flats in a converted older-style building.  Both properties are located about 3.1 kms north-west of the Brisbane GPO, and in close proximity (600 metres) to the Kelvin Grove campus of the Queensland University of Technology.  The key issues are the impact of traffic and parking, percentage changes in the unimproved value, and the comparison of sales.

Both parcels have good access to Guildford Street which is bitumen sealed with concrete kerbing and channelling.  Property 1 is a corner lot, falling generally towards the north-east.  Property 2 is an inside lot falling generally easterly towards Guildford Street.  Guildford Street is a very narrow street, with traffic moving both ways, but is very restricted because of the narrow nature of the carriageway.  Guildford Street is 8 metres wide fronting Property 2, and 10 metres wide to the south-eastern frontage to Property 1.  All normal services are available to both properties.  Both properties are zoned “Inner Residential” under the Town Plan of the Brisbane City Council of 13 June 1987, and effective at the date of valuation at 1 October 1997. 
           On 9 March 1998, the Chief Executive, Department of Natural Resources, issued valuations for the subject lands at $145,000 (Property 1) and $125,000 (Property 2).  Following objections, the Chief Executive on 8 September 1998, confirmed the valuation of Property 2 at $125,000, and reduced the valuation of Property 1 to $140,000.  The appellants have now appealed those figures claiming the unimproved value should more properly be $116,000 (Property 1) and $104,000 (Property 2).
           Mr GR Scott appeared and gave evidence for the appellants.  Mr J O’Rourke, Legal Officer, appeared for the respondent, calling evidence from Mr DR McKinnon, the Departmental Registered Valuer responsible for determining the valuation.

The Evidence:

(1)  Traffic Problems –

Mr Scott is a long-term resident of the area and has seen traffic congestion increase considerably over recent years.  He argues that there are now two major traffic situations which have an impact upon the subject lands.  The most significant is the difficulty with regular all-day parking of cars along the sides of Guildford Street, which often impedes movement down the street for larger vehicles.  The cars tend to park quite indiscriminately, with little regard for the rights of other residents, often in an illegal situation from the photographic evidence supplied to the Court.

Mr Scott quotes examples where service vehicles are unable to traverse Guildford Street, and the appellants have had difficulties in getting goods delivered to the property as a consequence of such obstructions, requiring negotiations to arrange for a further delivery.  The respondent does not contest that description of Guildford Street, and agrees that there are parking problems.

Mr Scott also notes that parking is further exacerbated by overflow from the large funeral parlour located about 100 metres south-east of Property 1 at the intersection of Kelvin Grove Road and Guildford Street.  On occasions of very large funerals the vehicles of mourners regularly extend along Guildford Street, further impeding parking and movement in the area.  On such occasions the appellant has had to park his own vehicle in Windsor Road and walk to his home.  Mr Scott also argues that parking has been further increased by the recent approval of a new subdivision of a parcel further to the north in Guildford Street (later described as Sale 1).

A separate matter relates to traffic movements along Guildford Street involving the propensity for morning commuting traffic to use Guildford Street as an alternative route to avoid congestion in Kelvin Grove Road.  Such “rat-running”, as it is referred to, occurs as drivers seek to divert up Windsor Road to Red Hill, and then on to the City.  As a consequence of all of these traffic movements Mr Scott argues that the unimproved value of the two properties is severely impacted.

(2)  The Impact of Noise:

Mr Scott argues that the noise from the traffic along Kelvin Grove Road is now so consistent, and disturbing, that it intrudes into the subject lands almost constantly 24 hours a day.  The noise levels actually intrude into normal conversations within the dwelling upon Property 1, and appear to be accentuated by the shape of the topography along Kelvin Grove Road.

Another matter involving noise intrusion is the sound of emergency helicopters as they approach the Royal Brisbane Hospital with sick and injured people. There are no predictable time periods for such arrivals, because of the nature of the emergency evacuations of patients, and the helicopters often pass over the properties in the early hours of the morning.  Mr Scott argues that the normal approach path for the helicopters travelling to the hospital would appear to coincide with the junction of Herston Road and Kelvin Grove Road, which is very near the subject lands.

(3)       Changes in the Valuation -

The appellants argue that the large percentage increase in the valuations of the subject lands (between 20% and 25%) is not supported by market evidence.  Mr Scott argues that property values in that area have only averaged a 5% per annum increase over the last two years.  He supplies a property evaluation of the market from a sales person of a large reputed real estate agent which confirmed those figures.  However Mr Scott provided no witness to support that appraisal.  He also argues that the part of Kelvin Grove surrounding the subject lands has no local shopping facilities, and is different from the rest of the suburb because of the traffic problems outlined.
           Mr Scott also argues that because of the availability of new units in the area, which are now being rented, his current older-style flats are currently being forced to compete with those superior properties.  As a consequence of that competition his current rents make his rented flats unviable at their current improved values.  The increases in the unimproved value of the subject lands now exacerbates that situation.  Mr Scott also notes that there are properties in Guildford Street which are being offered for sale, at prices approximately the same at which they were previously purchased.  So far these properties have not sold, suggesting that the market for improved properties has not risen over recent years.

(4)               The Method of Valuation –

Mr McKinnon has valued Property 1 as a single unit dwelling in one ownership under section 17 of the Act.  As such he has sought comparisons with vacant lands used for that purpose.

While Property 2 contains four flats, and comprises three separate parcels in the same ownership, in a total area of 516 square metres, Mr McKinnon has valued Property 2 under section 34(1)(a) as a single parcel.  As the property is used for flats it would not be eligible for a concession under section 17 of the Act.  However, as the area is less than the minimum area of 600 square metres for use for redevelopment purposes, he has also treated that property as a single site, relying upon the same sales comparisons as for Property 1.

(5)          Comparison of Sales –

In support of his valuation Mr McKinnon supplied the following sales of vacant or lightly improved parcels, each zoned as “Inner Residential”:

·    Sale 1 – (42 Guildford  Street, Kelvin Grove – Lot 42 on RP902510)

This is a 309 square metre lot located 50 metres north-west of the subject lands, with a frontage of 13.95 metres.  The sale is seen as inferior to either subject land because of its smaller size.

The sale sold in July 1997 for $92,000 which, after allowing for improvements, was analysed at $91,200, and applied at $90,000.

·    Sale 2 – (46 Glen Street, Kelvin Grove – Lot 30 on Sl441)

This is a 212 square metre lot located about 400 metres south-east of the subject lands, with a 10.06 metre frontage.  Glen Street is very narrow (9 metres wide), and the sale has a northerly outlook, and is seen as superior.  Overall the sale is inferior due to its smaller size.
The sale sold in February 1997 for $95,000 which, after allowing for improvements, was analysed at $94,100, and applied at $85,500.

In drawing comparisons with those sales Mr McKinnon concedes that they are both inferior to the subject lands, but he has used his broad knowledge of property values in the area to estimate the extent of superiority of the subject lands.  He was also constrained in his comparison by having to not draw comparisons with the sale prices of larger lots in the area, as they generally reflect some potential for redevelopment into units.  He sought comparisons only on the basis of single residence sites.

In analysing the sales he noted that there had been an increase in the value of those sales, and he based his assessment of the unimproved values of the subjects by maintaining the former relativities in the area.  He also argued that the impact of traffic noise and overhead noise from helicopters would be similar for Sales 1 and 2 as for the subject lands.

Mr McKinnon also argued that the impact of parking at both sales would also be comparable as Sale 1 was also in Guildford Street, and Sale 2 (Glen Street) is a very narrow street where “on-street” parking of cars is the norm.  Mr McKinnon does agree however that there would be less “rat-running” of traffic at Sale 2, although he points out that the area of Sale 2 has a denser developed ratio as the parcels of land in that area are of a smaller nature than in Guildford Street.  Mr McKinnon argues that Sale 2 is in fact inferior to Sale 1.  Mr Scott offers no other sales but argues that the subject lands are more severely impacted by traffic than either sale, and the unimproved values should be reduced accordingly.

Decision:

(1)Impact of Traffic and Noise –

I turn first to the impact of traffic and parking problems and find that it is agreed that the subject lands are likely to experience increased intrusion into the amenity of the area to an extent greater than at Sale 2, as a consequence of peak hour “rat running” by commuters seeking ways of circumventing traffic delays.  I also accept that the subject lands are more likely to suffer problems from overflow parking of cars by mourners at the funeral parlour than at either Sales 1 or 2.  However, the general congestion of day parking along both Guildford Street and Glen Street would appear to be comparable due to the narrow widths of those streets.  On balance, because of their location further along Guildford Street from Windsor Road, I feel the subject lands have greater disabilities from traffic than at either Sales 1 or 2. 

In respect of the impact of noise from traffic along Kelvin Grove Road, or the overflying of emergency helicopters to the Royal Brisbane Hospital, I see little difference between the impacts at either the sales or the subject lands.

(2)        Changes in the Valuations –

In the matter of the difference in the percentage changes between the reported market for improved properties, and the recorded differences for vacant sales, I accept that there are two distinct markets for those purposes.  While I am aware that such percentage rises in values are often of concern to appellants in seeking to have confidence that their personal property has been fairly treated in any valuation, they in fact do not prove conclusively that any error has been made in the valuation process.  Such rises may, at best, be an indicator to owners that they should further investigate the valuation, but there may be many reasons why a valuation has changed at what would appear to be a rate out of line with some overall statistical percentage.

That matter has been considered many times by the courts, and I note from precedents that a large increase in itself is not evidence of some error in the valuation.  I note, for example, in the decision if NR and PG Tow v. The Valuer-General (1978) 5 QLCR 378, where the Land Appeal Court said at page 381:

“It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation.”

That matter was also considered in CH and BD Henricks v. The Valuer-General (1983) 9 QLCR 59 where in the Full Court of Queensland, Macrossan J (CJ) said at page 63:

“The appellants also relied upon a schedule, exhibit 4 in the Land Appeal Court, which showed percentage increases in the value applied by the Valuer-General to a number of selected parcels of land from the date of the preceding valuation up to the March 1979 valuation date.  The percentage increase shown in the selected cases was in each instance considerably less than the increase applied to the subject land as between the two valuation dates.  The weakness in such a selective comparison is obvious as there could be any number of reasons why blocks in the same valuation area should increase at different rates over a period of five years.”

As the Full Court said, there could be many reasons why parcels of land can increase at different percentage rates over a period of time.  The real test is not the percentage increase in the unimproved values, but a comparison of the subject with sales of comparable sales sites in the vicinity of the subject at the time of the valuation. 

(3)        The Method of Valuation –

I turn then to the most appropriate method for comparing sales of comparable property in order to determine the unimproved value.  I note that it is regularly held by the courts that the preferred method is to compare sales of vacant, or lightly improved lots, where they exist within the vicinity of the subject lands.  I note for instance in WM and TJ Fischer v. The Valuer-General (1983) 9 QLCR 44, where the Land Appeal Court said at page 46:

“It is indeed a fundamental principle of valuation that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels.  ”

The principal was also clearly defined by the Land Appeal Court in PH Clough v. The Valuer-General (1981-82) 8 QLCR 70, at page 76:

“It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value.  The reason is obvious.  In applying such sales there is no room for error in analyzing the value of the improvements.

Because there is less room for difference of opinion as to value of the various items of improvement and comparison is thus simpler, it has been held that highly improved sales should be avoided in preference to sales comprising a lesser degree of improvement.  ”

In considering whether Mr McKinnon has applied a reasonable consistency in comparing his sales, I note the importance of a “fair and reasonable” analysis of sales.  (See Valuer-General v. KA and LF Knuth and Others (1983) 9 QLCR 142). However in examining Mr McKinnon’s comparison I note in H and E Grahn v. The Valuer-General (AV89-246/247) 13 December 1990, unreported, where the Land Appeal Court said at page 5:

“A proper valuation calls for an exercise in balancing all the respective advantages and disadvantages inherent in or pertaining to a lot. ”

In exercising his discretion I note that Mr McKinnon has drawn upon his knowledge and experience in accordance with precedent established in Bingham v. Cumberland County Council (1954) 20 LGR 1, where in a minority decision Sugerman J said at pages 18 and 19:

“In the absence of sufficient guidance to be had from sales, the valuer may find himself in a position resembling that to which Lord Romer referred in the Raja’s case (1939) AC at pages 312 and 313, in which he ‘will have no market value to guide him, and that he will have to ascertain as best he may from the materials before him what a willing vendor might reasonably expect to obtain from a willing purchaser for the land’….  The valuer, in arriving at his opinion in these difficult matters may have to draw upon his general knowledge and experience, including perhaps experience in other situations which, although lacking in complete comparability, may yet provide an experienced valuer with guidance and suggestions as to the general approach which may be made and as to considerations which may become relevant.”

In the context of those directions, I believe Mr McKinnon has applied a reasonable level of care in comparing the sales, in view of the availability of comparable sales in the area.
           In seeking any support for his valuations on the basis of sales of improved properties, Mr Scott is faced with the more difficult task of assessing the added value that the improvements bring to each parcel.  Such added values can be distinguished from the cost of improvements, even allowing for some element of depreciation.  (See O’Brien Nominee Pty Ltd v. The Valuer-General (1979) 6 QLCR 280, at page 284.

(4)        The Comparison of Sales –

The key issue then is the comparison of sales applied to the subject lands.  In summary Mr McKinnon agrees that both subject lands are superior to Sale 1 and Sale 2, and the question is by how much are they superior?  Both subject lands are larger than the sales, although they have, in my opinion, a greater impact from traffic.  However Mr McKinnon has used the increase in value at the sales to determine an increase in those properties, and then maintained the former relativity between those sales and the subject lands, in order to ascertain the unimproved values of the subject lands.  A schedule of the relative properties reveals:

Parcel	Area	Unimproved Value	Comparison
Sale 1	309m²	$ 90,000	Inferior
Sale 2	212m²	$ 85,500	Inferior
Property 1	607m²	$140,000	-
Property 2	516m²	$125,000	-

In seeking comparisons of both sites for single dwelling purposes I note that guidance was provided by the Land Appeal Court in Hans and Else Grahn v. Valuer-General (1992-93) 14 QLCR 327, where the Land Appeal Court said at page 330:

“The appellants fail on this point because the appropriate basis for the valuation of a residential lot is not the application of a rate per square metre but an assessment of the unimproved value of each lot as land used for single unit residential purposes.  As the Land Appeal Court said in its decision on the appellants’ previous appeal (H and E Grahn v. Valuer-General, (AV89-246/247), 13 December 1990):

‘for the purpose of valuing residential sites, the preferable method of comparison is on a site to site basis and not on the basis of a unit area valued comparison.  Site for site comparison should take into consideration such matters as the size of the lots, the situation of and access to the lots, the shape and topography of the lots, etc., and comparisons on a unit area basis do not necessarily reflect valuation considerations for the above features.  ’   ”

Summary:

In summary I am reminded that under section 33 of the Act each valuation is deemed to be correct unless proved to the contrary.  The principle upon which section 33 can be challenged followed guidance to be found in the decision of the High Court of Australia in Brisbane City Council v. The Valuer-General (1977-78) 140 CLR 41, where Gibbs J found at page 56:

“In my opinion once it is shown that in making the valuation the Valuer-General acted upon a wrong principle, or made a serious error of fact, the presumption created by s.13(7) is rebutted.”

Section 13(7) is now section 33.

In the current matter there is no evidence that Mr McKinnon has faulted in either his method, or application, or that he has made an error of fact.  I am also reminded that under section 45(4) of the Act the onus of proof to prove their grounds of appeal rests upon the appellants.  In the current matter they have not satisfied that criteria.

Conclusion:

(AV98-776) – Having considered the whole of the evidence I am not persuaded that the appellants have proved their case.  The appeal is dismissed, and the unimproved value of Lots 41 and 42 on RP 20344 in the sum of $140,000 is affirmed.
(AV98-777) – Having considered the whole of the evidence I am not persuaded  that the appellants have proved their case.  The appeal is dismissed, and the unimproved value of Lots 33 and 34 on RP 20344 and Lot 1 on RP 41740 in the sum of $125,000 is affirmed.

Member of the Land Court