Trans-World Projects Pty Ltd v Chief Executive, Department of Natural Resources and Mines

LAND COURT

BRISBANE

8 MARCH 2002

Re: AV2000-0259
An Appeal against an Unimproved Valuation
Valuation of Land Act 1944
Local Government: Townsville

Trans-World Projects Pty Ltd
v.

Chief Executive, Department of Natural Resources and Mines

JUDGMENT

Pursuant to the provisions of the Valuation of Land Act 1944 the respondent placed a value of $205,000 on land owned by the appellant, the valuation applying at a relevant date of 1 October 1999. The appellant has appealed to this Court with respect to that valuation, its grounds of appeal being expressed in sufficiently broad terms to encompass the issues between the parties that I deal with below. In its notice of appeal the appellant stated that the value of the subject land ought to be $130,000, however, led evidence before me to a figure of $135,000.
Ian Douglas Ivers, a registered valuer, gave evidence in support of the appellant. Robert Arthur Noakes, also a registered valuer, was called by the respondent to provide valuation evidence in support of the Chief Executive's valuation. Each of these valuers valued the subject land on the basis that its highest and best use was for residential unit development, the prevailing use of the subject land at the relevant date. The subject land is located at 7 The Esplanade, Nelly Bay, on Magnetic Island opposite the Nelly Bay beachfront and approximately 300 metres from the local supermarket and associated facilities. The land is zoned "Tourist Facilities" under the applicable Town Plan of the Townsville City Council. It has an area of 2,582 m² and has road frontage to The Esplanade and to Warboys Street at the rear. Both are bitumen sealed roadways with no kerbing or channelling. Access is obtained to the subject property from The Esplanade, however, access from the Warboys Street frontage would be difficult as the land is quite steep in that area.
The subject property is to be found amongst a mixture of beachside cottages and home units, however, home units dominate. Electricity, town water and telecommunication cabling are available, though no sewerage. Septic installations are used by residents in the area.
In his description of the topography of the subject land Mr Ivers wrote in his valuation report:
"The subject property falls markedly from its Warboys frontage into a severe depression before rising toward the Esplanade frontage where the property starts to level out. The rear of the property is very poorly drained, subsequently holding water for weeks on end during the wet season."

Murray James Withers was called by the appellant to give evidence concerning the "severe depression" mentioned in Mr Ivers' description. Mr Withers has been a resident of Magnetic Island for 20 years and has in recent years been employed as a part-time gardener on the subject land. He observed that the depression retained water on four occasions in the past three years and recalls that on previous occasions it has also retained water following heavy rainfall events. It will fill within 24 to 48 hours and it will take about a month for the water to dissipate. During continuous rain the depression will remain filled for extended periods. He said that the water lying in the depression was up to 3.5 metres deep and that the water covers in excess of 20% of the property, though it is confined to the rear of the land with a small area of sound land behind it. Photographs tendered by the appellant show water lying in the area of the depression with water lilies growing there. The implication is that the water had stood there for some months.
There was evidence of a natural depression running in a north-east/south-west alignment through the subject land and adjoining properties. Mr Withers said that the depression would fill from local run-off as well as from back-up water from a creek to the south-west. Mr Noakes described the depression as being similar to a swale of the type commonly found to the inland side of seaside frontal dunes. Yates Street is located one block removed to the west of the subject land. There is a drain under Yates Street to accommodate water flow along this depression. Now whilst the depression was described as if it were a single feature, it seems to me from the photographic evidence that it is deeper in parts, one such part being the large depression to the rear of the subject land extending to the adjoining block to the south-west.
Mr Ivers' method of valuation was to apply a value of $98 per m² to what he identified as being the usable area of 1,315 m², that area occupying the front area of the subject land. He excluded from this measurement the depression, as well as the flood-free area to the rear of that, an area that did not form an integrated part of the usable area given the intrusion of the depression. Mr Ivers then applied about $5 per m² to this balance area to arrive at his figure of $135,000.
Mr Ivers' Sale 1 was that of a property at 7 The Esplanade, Picnic Bay, which sold on 1 June 1998 for $145,500. The sale was between two companies with a common director. Mr Ivers is a licensed real estate agent and in that capacity negotiated the sale between the parties for no fee. He said that the property had been on the market for some time at a price between $180,000 and $200,000 and therefore was well exposed to the market. He provided no details concerning the process of negotiations. Mr Noakes said that given the fact of there being a common director of both the vendor and purchaser companies, he would not rely on the sale. He said that it was not an "arm's length" transaction in his opinion.
Mr Ivers' other sales are located in Horseshoe Bay, which is to be found on the seaward side of the island. His Sale 2, which is also Mr Noakes' Sale 2, is located at 1 Pacific Drive, Horseshoe Bay. The sale was effected on 13 May 1998 and involved the sale of 1,593 m² for $425,000. That calculates to an overall rate of $266 per m². Mr Noakes said that the sale land was a regular shaped inside allotment at the end of the street with a tidal creek at one side and at the rear. He said that the tidal creek affected 25% of the lot. He noted that the sale land was smaller than the subject property and expressed the view that overall it was superior. Mr Noakes said that the Chief Executive's valuation of the Sale 2 property as at 1 October 1999 was $415,000 or $260 per m².
Mr Ivers' Sale 3 is located at 7 Pacific Drive, Horseshoe Bay, his sale having taken place on 17 June 1998. The sale price was $158,000 for 809 m², which calculates to $195 per m². This property also sold on 15 June 1999, this sale having been included in Mr Noakes' valuation as his Sale 3. The sale price at that date was $225,000, which calculates to an overall rate of $278 per m² revealing an increase of about 42% from the price obtained in a 1998 sale of the property. Mr Ivers suggested that the increase may have been attributable to the development of a sewerage system in the Horseshoe Bay area, however, his evidence in that respect was not persuasive. Whatever the cause of the price increase may have been, it is clear that it is the sale closer to the relevant date that should be considered to the extent that it is an appropriate basis for valuation. Mr Ivers properly conceded as much. In his valuation report Mr Noakes said that the property at 7 Pacific Drive is a regular shaped inside allotment which is affected by a tidal creek to the extent of about 200 m² of the title. Overall he considered this site to be superior to the subject property.
Mr Ivers' Sale 4 is located at 8 Pacific Drive, Horseshoe Bay, the transaction having taken place on 30 April 1998. The property has an area of 809 m² and sold for $146,000, which calculates to $180 per m². I accept the view of the respondent that it would not be appropriate to rely on this sale transaction, given its sale date, which is prior to the date of Mr Ivers' Sale 3.
Both valuers relied on a sale at 9 Pacific Drive, Horseshoe Bay (numbered Sale 4 in both valuations), a property which sold on 22 April 1999 for $200,000. The sale property has an area of 860 m², which analyses to an overall sale price of $232 per m². Mr Noakes noted that this sale land was also affected by the tidal creek to an extent of 200 m² on his estimation, though on an overall basis he concluded that the sale property was superior to the subject land.
Both valuers agreed that the Horseshoe Bay area was better serviced than Nelly Bay with sewerage, a swimming enclosure and other facilities and had a more attractive beach than Nelly Bay, particularly at low tide. A project referred to in evidence as "Safe Harbour" was initiated in Nelly Bay in 1989. That project has proceeded erratically since that time and at the relevant date was incomplete there being uncertainty that completion would take place in the foreseeable future. Mr Noakes expressed the view that Nelly Bay residents, however, were reasonably confident that the project would come to fruition with a result that the ferry from Townsville would call in there, providing a distinctive advantage to the Nelly Bay commercial environment. Notwithstanding this evidence, Mr Noakes did not contend that Nelly Bay should be perceived as being superior to Horseshoe Bay at the relevant date, particularly with respect to property values. It is evident that neither Mr Noakes nor Mr Ivers fully applied the Horseshoe Bay sales to the subject property.
It will readily be observed that none of the analysed figures from the Horseshoe Bay sales approximates either the $98 per m² used by Mr Ivers for his usable area value, nor the $80 per m² applied overall by Mr Noakes. I have studied the evidence closely and cannot discern any line of reasoning that points to one or other of these figures as being preferred based on the sales discussed so far. The main sales of the two valuers, however, remain to be considered. I will put aside for the moment the concern raised by the respondent that Mr Ivers' Sale 1 is not an appropriate arm's length transaction upon which to rely. In his valuation report Mr Ivers said that the sale land "also drops away at its rear boundary but not to the significant level that the subject property does". I take this to mean that the disability of the depression on the subject land has greater impact on it than the loss of rear land does on the sale property. Mr Ivers did not supply details concerning the land area of his Sale 1 property, but did say that it had substantially more land use area than did the subject property. On the assumption that the sale land had the same area as the subject, that is 2,582 m², the sale at $145,000 would analyse to about $56 per m². Given, however, that it has a substantially larger area, as I understand Mr Ivers' evidence, the sale price would reflect an even lower figure. In his valuation report Mr Ivers said that the sale property has similar attributes to that of the subject property, but would be considered far superior due to better topography and drainage features.
Now Mr Ivers was careful during cross-examination to emphasise that he had not applied a value of $52.28 per m² to the subject property, that is $135,000 divided by 2,582 m²; but had proceeded in the manner I have described in para 7 above. I am left in the position, therefore, of having not been presented with a clear line of reasoning providing support for Mr Ivers' primary value figure of $98 per m². Let me now turn to Mr Noakes' main sale.
Mr Noakes' Sale 1 was of a property at 42 Marine Parade, Arcadia, which sold on 4 August 1999 for $210,000. The property has a land area of 2,054 m², therefore calculates to an overall sale price of $102 per m². The Chief Executive applied a value of $180,000 to that property or $87.60 per m². Mr Noakes said that the sale land is an inside allotment with an irregular shape rising to a hillside at the rear which has a strong rocky influence. He estimated that about 500 m² at the rear of the sale land was affected by the rock intrusion, therefore reducing the usable area to about 1,500 m². Whilst Mr Ivers was concerned to challenge Mr Noakes' assessment of the area of rock intrusion, I have no direct evidence from him as to the area he considers to have been affected by rock. He did point out, however, that Mr Noakes' Sale 1 enjoyed a National Park at its rear boundary and has similar views to the subject property. In his comparison Mr Noakes noted that the sale land is smaller than the subject property, has frontage to the main access road around the island and in his view is inferior to the subject property. It is in a less quiet location than the subject property. In my view this sale has the advantage of being much closer to Nelly Bay than the Horseshoe Bay sales. It is the most comparable sale given that neither valuer was able to locate a suitable Nelly Bay sale to use as a basis.
Mr Ivers suggested to Mr Noakes that the sale property had in 1989 been approved for development of 12 two-bedroom home units, however, Mr Noakes was not aware of this. Mr Noakes said, however, that the sale date was some 10 years subsequent to the suggested time of approval and since the suggested development had not taken place, it was appropriate to consider the sale independently of that approval. I accept that viewpoint.
Mr Noakes described in his report views from the subject property as being "unrestricted panoramic ocean views across Cleveland Bay". He tendered a photograph entitled "View from Subject" but, on questioning, said that the photo was taken from the Esplanade across the road from the subject property. He also conceded that the views were restricted by the presence of banyan trees and coconut palms.
Mr Noakes considered the ponding of water on the subject property as being similar to other properties to its north-east to which he had also applied a value of $80 per m². My appreciation of Mr Withers' evidence is, however, that the subject property is more greatly affected by ponding than the other properties to its north-east. He has the advantage of long-term local knowledge. Accordingly, I think that some downward adjustment to Mr Noakes' valuation is warranted. Before drawing a conclusion on that I will, however, dispose of another matter.
Frank Peter Baychek, a principal of the appellant company, had included in the notice of appeal a ground which referred to the relative values of the subject property with other unimproved values struck by the respondent in the area. He told me in evidence that he accepted Mr Ivers' view that comparison with some of the unimproved values included in his notice of appeal would not be appropriate. He deferred to Mr Ivers' opinion concerning this relativity argument.
In his valuation report Mr Ivers said that there were four valuations which were appropriate to consider in the context of this appeal. These properties and his calculation of the increase in value from the previous valuation were as follows:

Street Number	Area of Land	Previous Valuation	New Valuation	% Increase over previous valuation
9 The Esplanade, Nelly Bay	2668 sqm	$175,000	$215,000	22.80%
11 The Esplanade, Nelly Bay	2754 sqm	$180,000	$220,000	22.20%
14 the Esplanade, Nelly Bay	1450 sqm	$100,000	$125,000	25.00%
Subject	2582 sqm	$130,000	$205,000	57.69%

His argument is that there is a disproportionate increase in value in the case of the subject property when compared with the increase in value of the other three properties. In Tow v. The Valuer-General (1978) 5 QLCR 378 the Land Appeal Court said:
"The Valuer-General and the Court are concerned with finding unimproved value and not with the amount of rates that may be levied as a result. Rates are fixed by Local Authorities and may be varied annually according to the fiscal requirements of the Local Authority concerned. Any such variation may be made at any time during a valuation period and may be entirely independent of a new and increased valuation." (at 381)

It is clear then that a comparison between percentage changes in valuation as such is not a relevant consideration in considering the value of a particular property, the subject of an appeal before the Court. Apart from that, I have evidence from Mr Noakes who said that he had formed the view that past relativities of the properties referred to by Mr Ivers were wrong with the value of the subject property being too low in comparison. Nevertheless, Mr Ivers said in his valuation report that the "subject property would be the least attractive site out of all of the noted sites and would be far more uneconomically viable to develop than the other sites". He was not cross-examined on this point – a point which is reinforced by what Mr Withers had to say about the deep depression on the subject land.
In Grahn v. The Valuer-General (1992) 14 QLCR 327 the Land Appeal Court made it clear that the relativity of values applied by the Chief Executive is not an irrelevancy, though is a second order consideration in the face of relevant, even if not ideal, sales evidence. In the instant case I am left with a number of sales that are distinguished more for their lack of comparability with the subject land than their reliability in indicating the value that ought to be applied. I refer, of course, to the sales at Horseshoe Bay. By a process of attrition, therefore, I am left with Mr Noakes' Sale 1 and its less than satisfactory treatment. I have formed the view that in his comparison between the Sale 1 property and the subject property, Mr Noakes has overstated the views from the subject land. I am also of the view that it would not be appropriate to apply a constant $80 per m² value both to the relativity properties to the east of the subject land and to the subject land. The value of the subject land ought to be lower. In the circumstances, therefore, I conclude that the appeal ought to be allowed.
The valuation of the Chief Executive is set aside and the value of the subject land is determined at One Hundred and Eighty-five Thousand Dollars ($185,000).

RP SCOTT
MEMBER OF THE LAND COURT

[2002] QLC 24

8 March 2002