Smith Brothers Pty Ltd v Chief Executive, Department of Natural Resources
[1997] QLC 153
•19 September 1997
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BRISBANE
19 SEPTEMBER 1997
Re: AV96-434, 435, 436, 439, 445, 446 and 447 -
Appeals against unimproved valuations -
Valuation of Land Act 1944 -
Shire and Town of Longreach
Smith Brothers Pty Ltd and Ors
v.
Chief Executive, Department of Natural Resources
(Hearing at Longreach)
D E C I S I O N
These are appeals against various valuations of land in the Eagle Street commercial precinct of the Town of Longreach, Parish of Longreach, as at 1 January 1996.
The appeals were heard together. Mr R. Jones, Barrister, appeared on behalf of the appellants and called one witness, Mr G.W. Litherland, a registered valuer in private practice.
Mr R. Paterson, Barrister and Legal Officer employed by the Department of Natural Resources, appeared on behalf of the respondent chief executive. Mr R.B. Hyman, registered valuer employed by the Department took responsibility for the valuations appealed against.
Each of the lots is zoned "Town", under the Longreach Shire Town Planning Scheme and each is within the area designated "Commercial" in the Strategic Plan.
Details of the individual appeals are as follows:
Appeal AV96-434: Appellant - Smith Brothers Pty Ltd - Lot 205 on L3571 - 1,214 m² - 20.12 metres frontage by 60.34 metres depth, rectangular shape - situated 109 Eagle Street through to Crow Lane.
Valuation appealed against - $181,000
Appellant's valuation - $170,000
Appeal AV96-435: Appellant - Smith Brothers Pty Ltd - Lot 206 on L3571 - 1,214 m² - 20.12 metres frontage by 60.34 metres depth, rectangular shape - situated 111 Eagle Street through to Crow Lane.
Valuation appealed against - $201,000
Appellant's valuation - $170,000
Appeal AV96-436: Appellant - Smith Brothers Pty Ltd - Lot 314 on L3571 - 1,214 m² - 20.12 metres frontage by 60.34 metres depth, rectangular shape - situated 114 Eagle Street through to Magpie Lane.
Valuation appealed against - $201,000
Appellant's valuation - $160,000
Appeal AV96-439: Appellant - Smith Brothers Pty Ltd - Lot 2 on R. 607057 - 549 m² - 9.1 metres frontage by 60.3 metres depth, rectangular shape - situated 115 Eagle Street through to Crow Lane.
Valuation appealed against - $82,000
Appellant's valuation - $69,000
Appeal AV96-445: Appellant - The Proprietors Wilsons Place Building Units - Lot 2 on R. 841500 - 1,153 m² - 13.631 metres frontage to Eagle Street, 30.186 metres to Crow Lane, 20 metres to Swan Street - depth 60.35 metres Eagle Street through to Crow Lane and 16.6 metres off Swan Street - inverted L-shape - situated 117 Eagle Street.
Valuation appealed against - $157,000
Appellant's valuation - $120,000
Appeal AV96-446: Appellant - Outback Legal Services Pty Ltd - Lot 1 on R. 618507 - 670 m² - frontage 16.6 metres Eagle Street and 40.45 metres Swan Street - rectangular corner site - situated 119 Eagle Street corner of Swan Street.
Valuation appealed against - $130,000
Appellant's valuation - $100,000
Appeal AV96-447: Appellant - G and J Hetherington - Lot 2 on R. 620099 - 325 m² - 10.06 metres frontage to Eagle Street and 28.67 metres to Swan Street - reverse L-shape - situated 122 Eagle Street corner of Swan Street.
Valuation appealed against - $60,500
Appellants' valuation - $45,000
The grounds of appeal are identical in each case as follows:
" 1. The valuation is excessive and unreasonable.
2. The valuation is wrong in law and contrary to law.
3.The valuation proceeds on wrong principles and fails to take into account correct principles.
4.The capital sum which the fee simple of the land (if unimproved) might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require is greatly less than the unimproved value entered on the valuation roll.
5.The Department of Natural Resources has been influenced by sales made in such circumstances and under such conditions as to render them no basis for assessing unimproved value.
6.In making its valuation, the said Department has adjusted previous relativities of unimproved values upwards despite the fact that sales do not support this adjustment.
7.Failed to adequately, or at all, consider the effect that the Town Plan of Longreach and the existing zoning of the property has on the unimproved value of the property.
8.All facts have not been taken into account in arriving at the unimproved value."
Mr Litherland and Mr Hyman had relied on the same two sales in Eagle Street as providing the basis for valuation of the commercial precinct. Details of those sales are as follows:
1.120A Eagle Street (now Studio Exclusive Arcade); Beattie to Harris; January 1993; $75,000; Lot 2 R. 608392; 604 m² - 10.02 metres frontage by depth 60.33 metres through to Magpie Lane - applied valuation $75,000 (1995 and 1996) - approximately $124 per m².
2.132 Eagle Street (now Coola Carpets site); Gamecliffe Pty Ltd to Fickling; June 1994; $80,500; Lot 615 Plan L3571; 1,214 m² - 20.12 metres frontage by 60.34 metres depth through to Magpie Lane - applied valuation $80,000 (1995 and 1996) - approximately $66 per m².
In fact little, if any, reliance was placed by either valuer on the second sale in the matters before the Court.
Mr Litherland had provided details of the sales of another three vacant commercial sites but for various reasons these sales were not accepted by either valuer as representing open market value.
Mr Litherland also provided details of sales of five improved commercial properties (three of the sales being subsequent to the date of valuation). He had not attempted to analyse the improved sales by identifying the added value of the improvements but saw the evidence as useful in his considerations relevant to the state of the local commercial market. He was concerned that the yields available to purchasers of improved commercial properties were in some instances so high (up to 16%) as to make speculative development of vacant land unviable. One of the improved sales was of the Royal Hotel which sold near the date of valuation, in November 1995, for $250,000 exclusive of stock but otherwise as a going concern. The Royal Hotel is situated at 111 Eagle Street on the land subject of the Department's valuation of $201,000 in Appeal AV96-435. There was some evidence from Mr Hyman that while he had not seen the necessity to consider improved sales he believed that the financial position of the vendors at the time of the sale of the Royal Hotel was such as to taint that transaction as providing any evidence of market value. It should be said that Mr Litherland did not seek to rely on any evidence from improved sales except to the degree that he believed a conservative approach was warranted when assessing unimproved values. It is clear that he accepted that the sales of the two vacant lots and particularly the lot at 120A Eagle Street provided the best available evidence of unimproved value.
Mr Hyman had not carried out the valuations appealed against but had taken over responsibility for valuations in the Town of Longreach in September 1996 "inheriting" these appeals. He had, for his part, investigated the sales evidence which was available and concluded that the valuations appealed against were supported by that sales evidence.
Mr Hyman said that his considerations had relied on a direct comparison of the land subject of the valuations with, in particular, Sale 1, the land at 120A Eagle Street. If he had become aware of any methodology adopted by the original valuer in weighting the comparison process to include such matters as corner location, street frontage, size and shape of the various lots to be valued, the effect of easement encumbrances etc., then such methodology was not disclosed to the Court.
All of the appeal blocks, with the exception of one (which was directly opposite to the south) were in the central to southern section of the main block within the commercial precinct (between Swan Street and Duck Street).
The Department was of course, in the first instance, obliged to value each and every lot within the commercial precinct. It would have been necessary for decisions to have been made as to the relative worth of each lot. In these matters, there seemed to be no disagreement that the hub of the business centre was in the vicinity of a pedestrian crossing in Eagle Street midway between Swan and Duck Streets. The primary sale was in close proximity to that hub but not immediately within it, being adjacent to the Swan Street corner on the eastern side of Eagle Street. The values in the southern section of the main block were, when cogent comparisons were possible, readily established by that sale. Further south in the next commercial block, values were set by the second sale and that indicated a significant tapering off from the peak levels of value.
Mr Hyman was not concerned so much with the alteration in relativity from the levels of value which had previously existed (see Ground 6). He held the opinion that correct relativity had been effected as at 1 January 1996. He saw that relativity as being in accord with Eagle Street pedestrian movement and shopper activity. He had observed that for example, vehicles moved from the Post Office locality at the north-eastern corner of Eagle and Duck Streets and then parked as close as possible to the pedestrian crossing. As I understood his evidence, the main pedestrian activity existed on the eastern side of Eagle Street opposite that crossing. He had observed that there was pedestrian flow distributed from that point mainly southerly along Eagle Street on the eastern side, or across the pedestrian crossing to the western side and then predominantly to the south. In his opinion there was a slight preference for pedestrians to use the western side of the street southerly of the crossing rather than the eastern side. There were bank premises established on the western corners of Eagle and Swan Streets and the only supermarket in the town was located off the Swan Street frontage immediately to the west of Eagle Street.
The valuations applied by the Department in the main block ranged from the $124 per m² on the sale land and $132 per m² near opposite on the western side up to a peak level of $166 per m² on both sides of the street opposite and to the south of the pedestrian crossing, plateauing for frontages of about 40 metres. The transition between the sale land and the peak occurred over a frontage of about 40 metres.
Mr Litherland held the opinion that the transition of value from Swan Street northerly to the peak would realistically have been much "flatter" than had been found by the Department. He seemed to be comforted in that opinion by drawing attention to the wide variance in increases which had been found from the evidence of the one sale, when the relativity as existed with the 1994 levels of value had been disturbed in the 1995 valuation. Mr Litherland saw it as unrealistic in a town such as Longreach, for significant variations in value to be found for adjoining blocks of identical size and shape such as for example No 109 Eagle Street valued at $181,000 and 111 Eagle Street at $201,000.
Findings
It is a matter of professional valuation opinion as to the peak level of commercial value in Eagle Street which might be interpreted from the one primary sale, which was within close proximity but not within the immediate hub of the business centre.
Mr Hyman's local knowledge and specific observations of traffic and pedestrian flows has been of assistance in understanding the base direct comparison approach he took to the relativity issue. I am not convinced, however, on that evidence, that the peak level of value should plateau to the extent that the Department's valuations has found or alternatively decline as sharply from lot to lot in the absence of market evidence to that effect. To that degree I see the logic in Mr Litherland's argument that the transition should be "flatter" than is expressed in the Department's valuations.
On Mr Hyman's specific evidence as to the pedestrian flow past 109 Eagle Street, immediately to the north of the pedestrian crossing, it seems to me that its valuation should be somewhat lower than 111 Eagle Street. Nevertheless, the Department's valuation of 109 Eagle Street seems to be too high in comparison with the primary sale. For that reason, and there not being a wide difference between the Department's valuation of that land and Mr Litherland's valuation, I will adopt the latter which was $170,000 or about $140 per m².
While I agree with Mr Litherland that, in a practical sense, there should not be the degree of difference between 109 Eagle Street and the adjoining No 111 Eagle Street, as expressed in the Department's valuations, I do not agree that the two blocks should be of equal value as he found. I will therefore adopt a valuation of $182,000 or about $150 per m² for 111 Eagle Street.
Both valuers have accepted that a valuation of 115 Eagle Street should be, on a unit of area basis, about 10% less than 111 Eagle Street. I will therefore adopt a valuation of $75,000 or about $135 per m² for 115 Eagle Street.
Then, across Eagle Street on the eastern frontage at 114 Eagle Street, the evidence indicates to me that a tapering off in peak level of value should have occurred on that site and I will adopt the same level of value as I have done for 111 Eagle Street, being $182,000 or about $150 per m². Although at reduced valuations, that maintains the same relativity between those two lots as had been applied by the Department.
It should be said at this point that I am not persuaded that the altered relativity from 1994 to 1995 and then to 1996, is in itself an argument which should be accepted as supporting Mr Litherland's adopted valuations. It was his evidence that in the 1995 annual valuation, the levels of value had increased significantly from those applied in 1994. The valuations of 1995 (after the results of decision on objections in some cases) had then been rewritten in 1996. However, in 1995 the levels of increase had been seen to be too wide, ranging from almost 33% to about 105%, with the result that the previously existing relativity between valuations, including those now appealed against, had been altered. He saw good reason for some adjustment, but not to the extent which had occurred. If the one sale in this block is to be adopted as evidence of value, which it has, then that sale in itself supports a certain level of value for Eagle Street lands in the close vicinity of Swan Street. The Court was not informed by Mr Litherland of the 1994 valuation of the sale land, but no doubt it was the evidence provided by that sale which led to the degree of increase in valuations in that specific location. If, as Mr Litherland's evidence indicates, a lesser degree of increase was applied by the Department to the hub of the business precinct, then the Department must have at least "flattened out" to some degree, the relativity which had previously existed.
I have experienced difficulty in interpreting much of the "direct comparison" evidence relative to the remaining appeal lands, two of which comprise corner sites and another an irregularly shaped lot. Quite apart from the rather precise levels of value which he asked the Court to accept in each of the appeal lands, Mr Hyman, by direct comparison with the sale of an inside rectangular shaped lot was able to apply by some mental process, units of value of $194 per m², $186 per m² and $136 per m² to these lands. Mr Hyman refused to be led into any cogent explanation of the weighting process which exercised his mind in directly comparing each lot with the sales evidence. Not unnaturally, that led to the inference that both Mr Hyman and the original Departmental valuer in the absence of some formula, had by extraordinary coincidence, arrived at precisely the same valuations for the appeal lands.
In Mr Hyman's defence, Mr Paterson correctly submitted that the valuations appealed against were technically the valuations of the chief executive. It was not unusual, for reasons including transfers and resignations, for another valuer to have to step into the shoes of the original valuer. However, it seems to me that the chief executive's defence of the subject valuations, once challenged, would have been better served by frank explanation of the comparison procedure on which the valuations, particularly of those lands of irregular shape or with corner position, were based.
Except in the case of his valuation of the land at 117 Eagle Street which was of inverted L-shape, the same criticism is directed at the lack of any cogent weighting process offered to the Court by Mr Litherland for his valuations of the two corner sites.
Dealing first with the L-shaped lot at 117 Eagle Street, Mr Hyman offered the opinion that by direct comparison with the sale the unit of area value must be higher overall because the appeal land had the additional frontage to Swan Street. In comparison with the sale land at $124 per m² he valued the appeal land at $136 per m². Mr Litherland did not agree. His opinion was that, on a pro-rata unit of area value, the Swan Street frontage was considerably less valuable than the standard Eagle Street frontage through to the rear laneway. As proof of his opinion that the land was worth $104 per m² overall, he apportioned value of $125 per m² to the Eagle Street/Crow Lane section calculated as containing 822 m², based on the sale near directly opposite, then $60 per m² for the additional area of secondary Swan Street land calculated as containing 331 m².
As Mr Hyman offered no cogent proof in support of his opinion, I am unable to accept that in the end result he was comparing like with like. There is no doubt that, on a pro-rata basis, the valuation should, as Mr Litherland suggested, recognise that the additional street frontage adds value less than that attaching to Eagle Street. Nevertheless, I accept on the evidence, that at least in this location there should be a slightly higher level of value on the western frontage of Eagle Street as compared with the sale property while Mr Litherland's apportionment reflects the same level of value. Then his apportionment of value to the additional area appears to ignore the inherent association with the balance of the land. Assisted by the proof suggested by Mr Litherland but not accepting the levels of value he adopted, I have decided to determine this valuation in the amount of $138,000 which is about $120 per m² overall.
Next, the land at 119 Eagle Street and the corner of Swan Street near opposite the sale land, has the advantage of a prominent corner position but does not extend through to Crow Lane. Mr Hyman's valuation of $130,000 was said to be based on a unit of value of $194 per m², again by direct comparison with the sale. Mr Litherland valued the land at $100,000 or "about $150/m²" also by direct comparison with the sale. With no real assistance as to the proof of either valuation it seems to me that from the base value of $124 per m² shown by the sale an inside lot on the western frontage opposite with depth through to Crow Lane would be valued at a little higher unit of value per m². Then the prominent corner location and exposure would no doubt enhance to some significant degree the inside unit of value, the only disadvantage in this case, being the loss of the rear laneway access. Then a lot such as the subject, with closer association with the more valuable Eagle Street frontage would be expected to carry a proportionally higher level of pro-rata value than one with the rear land associated with the extra depth and rear laneway access. In the absence of cogent valuation assistance I am confident that Mr Litherland's valuation is too low. Mr Hyman's valuation clearly includes the positive features of the site and it has not been shown to my satisfaction to be wrong. I will adopt his valuation in this case.
The last appeal land to be considered is a small reverse L-shaped site of 325 m² on the south-eastern corner of Eagle and Swan Streets, diagonally opposite the land in the previous matter. The site is surveyed to include a strip of land behind the small site adjoining to the south. As I understood the evidence, the adjoining property enjoys the benefit of an access easement over that strip continuing through to Swan Street as a private laneway. No details of the encumbrance were provided by either valuer and I am forced to assume that use of an area equivalent to about 74 m² is shared with others. Mr Hyman's valuation was $60,500 rounded from $186 per m². Mr Litherland's valuation was $45,000 or "about $140/m²". Again I have received no assistance from the valuers as to the comparison methodology adopted. It seems to me however that if all other things were equal this site, on the evidence, should be regarded as having inferior corner location to the land in the previous matter. The site is of smaller area, (and there was difference in valuation opinion as to the practical effect that smaller size would have in the marketplace). In the circumstances I am unable to accept Mr Hyman's view that the smaller area would be measurably advantageous, on a pro-rata basis. The particular site area identifies more closely through its reduced depth with the Eagle Street frontage but is then affected to a significant degree by the assumed easement encumbrance, or at least by the reduced usable area at the rear. Again I am confident that Mr Litherland's valuation is too low. However in this matter, on the evidence, I have no confidence on any analysis that Mr Hyman's valuation recognised the reduced usable area of this site. Giving the benefit of that doubt to the appellant I adopt a valuation of $55,000.
Orders
Appeal AV96-43 - 109 Eagle Street.
The appeal is allowed, the valuation of the chief executive set aside and the unimproved value determined in the amount of One Hundred and Seventy Thousand Dollars ($170,000) as at 1 January 1996.Appeal AV96-435 - 111 Eagle Street.
The appeal is allowed, the valuation of the chief executive set aside and the unimproved value determined in the amount of One Hundred and Eighty-two Thousand Dollars ($182,000) as at 1 January 1996.
Appeal AV96-436 - 114 Eagle Street.
The appeal is allowed, the valuation of the chief executive set aside and the unimproved value determined in the amount of One Hundred and Eighty-two Thousand Dollars ($182,000) as at 1 January 1996.
Appeal AV96-439 - 115 Eagle Street.
The appeal is allowed, the valuation of the chief executive set aside and the unimproved value determined in the amount of Seventy-five Thousand Dollars ($75,000) as at 1 January 1996.
Appeal AV96-445 - 117 Eagle Street.
The appeal is allowed, the valuation of the chief executive set aside and the unimproved value determined in the amount of One Hundred and Thirty-eight Thousand Dollars ($138,000) as at 1 January 1996.
Appeal AV96-446 - 119 Eagle Street.
The appeal is dismissed and the valuation of the chief executive affirmed.
AV96-447 - 122 Eagle Street.
The appeal is allowed, the valuation of the chief executive set aside and the unimproved value determined in the amount of Fifty-five Thousand Dollars ($55,000) as at 1 January 1996.
RE WENCK
MEMBER OF THE LAND COURT
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