Trustees of Returned Services League of Australia Gladstone Sub-Branch v Chief Executive, Department of Lands
[1996] QLC 126
•18 September 1996
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LAND COURT
BRISBANE
18 September 1996
Re: An appeal against a valuation
of the Chief Executive, Department of Lands
Gladstone City Council (AV95-287)
Trustees of Returned Services League of Australia Gladstone Sub-Branch
v.
Chief Executive, Department of Lands
(heard in Gladstone)
Introduction
The Trustees of the Returned Services League of Australia Gladstone Sub-Branch (the “appellants”) hold in trust the fee simple title to Lot 27 on Plan G1410 and Lot 1 on RP618019, Parish of Gladstone, an irregularly shaped block of land at Goondoon Street, Gladstone.
The respondent Chief Executive determined that the unimproved value of the subject land to be $237,500 as at 1 January 1995. The appellants objected against that valuation. The objection was allowed and the valuation was reduced to $227,500. The appellants then appealed to the Land Court nominating a value of $107,000. At the hearing, they amended their original estimate of the unimproved value of the land and nominated $165,000 as the appropriate figure (see Exhibit 3).
The grounds of appeal set out in the notice of appeal were as follows:
The unimproved value assessed is not supported either by unimproved land sales or analysed improved sales evidence.
The unimproved value assessed is not in relativity with either applied 1985 values or values amended following consideration of notices of objection.
The unimproved value assessed does not take into consideration the disadvantages and the disabilities of the land.
The application of an overall percentage increase is unrealistic and does not follow market evidence or trends.
The allotment is located within a tidal surge area.
The appellants were represented at the hearing by Mr P Little, a solicitor, and valuation evidence was given on their behalf by Mr MD Sheehan, a registered valuer. The respondent was represented by Mr B O’Connor and valuation evidence was given by Mr RG Hewitt, a registered valuer employed by the Department of Lands (now the Department of Natural Resources).
This case was one of five appeals against annual valuations of land in or near to the main commercial district of Gladstone. The cases raised the same issues and were heard successively. The appellant in each case drew on a common set of information about properties in that area prepared by Mr Sheehan (Exhibit 5). The respondent relied on sales evidence drawn from a common set of information prepared by Mr Hewitt for these proceedings. The parties relied on many of the same sales when making their respective submissions.
The law
The legal principles to be applied in this case were usefully summarised in Grahn v TheValuer General (1992) 14 QLCR 327. In its reasons for judgment, the Land Appeal Court relied on decisions of the High Court of Australia and the Land Appeal Court as authority for a series of propositions which, in summary (updated to reflect legislative and administrative changes) are as follows:
(a) It is desirable that valuations made for the purposes of the Valuation of Land Act 1944 of comparable land 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.
(b) The best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land.
(c) Section 33 of the Valuation of Land Act 1944 creates a presumption that the value in money terms shown by the Chief Executive in his notice of valuation is correct.
(d) Once it is shown that:(1) in making the valuation the Chief Executive acted upon a wrong principle, or made a serious error of fact; or
(2) the valuation was made by a method fundamentally erroneous,
the presumption created by section 33 is rebutted.
(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.
(f) If possible, the Chief Executive 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.
The subject land
The subject land has an area of 4,152 square metres and has frontages to Goondoon Street and Lord Street. Both are full-width bitumen sealed carriageways, with single opposing lanes and with concrete kerbing and channelling and parallel parking. The land also has a frontage to Central Lane, which is a bitumen sealed carriageway with single opposing lanes with concrete kerbing and channelling. Good access is available from Goondoon Street and Central Lane. Access from Lord Street is restricted as a result of the access turnaround installed for the Auckland Creek Bridge.
Lot 27 is an almost square block with a 40.23 metre frontage to Goondoon Street. The adjoining block to the north is a similarly sized and shaped block on the corner of Goondoon Street and Lord Street. The other part of the subject land, Lot 1, is an irregularly shaped block which adjoins the southern and western boundaries of Lot 27 and extends in part to Lord Street and in part to Central Lane. That part of Lot 1 which adjoins the southern boundary of Lot 27 is a strip with a 10.058 metre frontage to Goondoon Street. Together Lots 1 and 27 have a combined area frontage to Goondoon Street of approximately 50.3 metres. Part of Lot 1 has a 23.146 metre frontage to Lord Street. The allotments are below street level with a gentle fall to the rear western boundary. There is a medium to steep cross slope from south to north.
The land is at the northern end of Goondoon Street, just outside the main business area of Gladstone. It is zoned Comprehensive Development and is used for a licensed service club and off-street carparking purposes.
Electricity, water, sewerage and telephone services are connected to the land.
The method for calculating the unimproved value of the subject land adopted by Mr Hewitt is set out in his report (Exhibit 7) as follows:
Lot 1
Goondoon Street
10.058 metre frontage at $3,900/m x 1.075 $ 42,168
plus,
34.883m at $3,900/m x 1.075 = $146,246
less, 34.883m at $3,900 x 0.91 $123,799 $ 22,447
5.4m at $3,900/m x 1.075 = $ 22,639
less, 5.4m at $3,900/m x 1.058 = $ 22,281 $ 358
Lord Street
23.146 metre frontage at $3,000/m x 0.91 $ 63,188
plus,
15.245m at $3,000/m x 0.91 = $ 41,618
less, 15.245m at $3,000/m x 0.68 = $ 31,099 $ 10,519
$138,680plus, Side Access of 5% $ 6,934
$ 145,614
less, Shape Allowance 25% $ 36,403
$ 109,211
Lot 27
40.23 metre frontage at $3,900/m x 0.91 $ 142,776
$ 251,987
less, encumbrance on title of 10% $ 25,198
$ 226,789
Adopt: $ 227,500 (an average of $54.79/m²)
Sales Evidence
It has long been established by numerous court decisions that the best basis for the unimproved value of land is evidence of sales of vacant or likely improved parcels of comparable land.
Mr Sheehan, in his valuation report, stated that the only vacant land sale within the area of subject land was Sale 1 (the respondent’s Sale 3).
Sale 1 (respondent’s Sale 3) Lot 132 on CP 843037: The block is an easy sloping inside lot rising from Goondoon Street to Oaka Lane on the rear eastern boundary. It is located further than the subject from the main commercial development in Gladstone. Auckland Inlet is reasonably close and the land has restricted views over the Inlet. It has better views than the subject land.
The land has an area of 2,400 square metres (smaller than the 4,152m² of the subject land) is zoned Comprehensive Development and was sold in November 1994 for $162,000. Its analysed value was $158,000 and the applied value was $142,000 (or 90%). Mr Hewitt calculated the unimproved value as follows:
31.24 metre frontage at $3,750/m
plus, extra depth of 16% and rear access of 5% = $141,751
adopt: $142,000 (an average of $59.17/m²).
Mr Hewitt described the sale land as “slightly inferior” to the subject. He noted that the subject land is closer to the Mall and main business area than the sale land. The subject land is superior in size, though that part of the land facing Goondoon Street is more valuable than the other part. In Mr Sheehan’s opinion, however, the sale land is superior to the subject land. He noted that the sale land has a regular shape (as compared with the irregular shape of the subject), good access is available from the street and the lane, and the views are superior to those from the subject land. In other proceedings in respect of nearby land Mr Sheehan expressed the opinion that the sale land will not be developed for commercial purposes, except a motel.
Mr Sheehan seemed to characterise the subject land as unattractive for commercial purposes because it is at the bottom of a relatively steep hill. Although people might walk down to it they would not, he thought, want to walk up from it. That might be a cogent suggestion if the principal users of the land are pedestrians from the Mall area, but it disregards or discounts uses of the land which rely on people arriving by vehicle and parking on or near to the land (as is presently the case). Clearly, the relative values of the sale and the subject land would be influenced by what a purchaser had in mind for each. On balance, I accept Mr Hewitt’s characterisation of the relative values of the blocks for commercial purposes.
In support of the respondent’s valuation, Mr Hewitt relied on sales of six parcels of land in Central Gladstone, though the emphasis was on Sales 3, 4 and 6 in his schedule.
For the valuation of that part of the land with the frontage to Goondoon Street at $3,900/m, reliance was placed on Sale 3 (the appellant’s Sale 1, described above) and Sale 6, which is further north of the central business district. For the valuation of that part of the land with the frontage to Lord Street at $3,000/m, reliance was placed on Sale 4. Much less reliance was placed on Sales 1, 2 and 5, and they are described below for completeness.
Sale 4 - Lot 3 on RP838993: The block with an area of 686 square metres is located on the corner of Lord Street and Central Lane, opposite part of the subject land. It is zoned Special Business and was sold in February 1995 for $47,500. Its analysed unimproved value was $46,000 and the applied value was $43,000 (or 93%).
The block is generally level to low lying and is comparable to the Lord Street frontage of the subject land. Any access problems to that part of the subject land would also be experienced at the sale land.
The unimproved value of the land was calculated by Mr Hewitt as follows:18.53 metre frontage at $3,000/m
plus corner of 10% less easement allowance 17.5% and
shallow depth of 12% less fill of $1,500 = $43,250
adopt: $43,000 (an average of $62.68/m²).
Although Mr Sheehan suggested that a vendor would be in “real trouble” trying to sell the Lord Street part of the Lot 1 land for $70,000, Sale 4 supports the analysis made in Mr Hewitt’s calculations.
Sale 6 - Lot 1 on RP607177 and Lots 110 and 111 on G15341: The land comprises three lots with a total area of 2,332 square metres with a frontage to Flinders Parade. The land is zoned Comprehensive Development and was sold in March 1995 for $255,000. Its analysed unimproved value was $220,000 and the applied value was $191,000 (or 87%).
The moderate to steeply sloping inside lots rise from Flinders Parade to the rear. It is inferior to the subject land in position (not being located in Goondoon Street) but has better views. Overall, Mr Hewitt described the sale land as inferior to the subject land. The applied value was calculated as follows:
34.5 metre frontage at $3,400/m less shallow depth of 10% = $105,570
23.1 metre frontage at $3,400/m plus extra depth of 8% = $84,823 (adopt $85,000).
Total value = $191,000 (an average of $81.90/m²)
Sale 1 (appellants’ Sale 3) Lot 10 on RP619101: This block is on the corner of Goondoon and Bramston Streets in Gladstone. It has an area of 1,551 square metres and is zoned Special Business. It is an easy sloping lot, slightly below Goondoon Street road level. It was sold in August 1994 for $256,500. Its analysed unimproved valuation was $246,500 and the applied value was $180,000 (or 73%).
The sale is superior in position to the subject land being located in a more commercially developed area in Goondoon Street. Because the land is below Goondoon Street, access from that street is difficult. The sale land is a corner lot, however, and as such has good exposure. Mr Hewitt described the sale land as overall superior to the subject.
The applied unimproved value was calculated as follows:32 metre frontage at $5,400/m
plus corner of 10% for 20m and less shallow depth of 2% = $179,928
adopt $180,000 (an average of $116/m²)
Sale 2 (appellants’ Sale 5) Lots 13 and 14 on G141: The block in William Street near the Goondoon Street Mall, has an area of 1,520 square metres and is zoned Comprehensive Development. It was sold in October 1994 for $150,000. Its analysed unimproved value was $114,150 and the applied value was $111,000 (or 97%).
The land was originally moderate to steeply sloping inside lots rising from Williams Street to the rear. The land has been excavated to provide a level site and the calculation of the unimproved value allowed $30,000 for the excavation work. Although the land is not situated in Goondoon Street, it is close to the Mall and Mr Hewitt described it as overall comparable to the subject.
The value is calculated as follows:50.3 metre frontage at $3,500/m
less shallow depth of 20% and excavation of $30,000 = $110,840
adopt $111,000 (an average of $73/m²)
Sale 5 (appellants’ Sale 2) Lot 5 on RP606125 and Lot 3 on RP617715: The sale land comprises two narrow rectangular blocks inside lots with a total area of 1,630 metres. The land, which is zoned Comprehensive Development, has an easy to moderate slope falling away from Goondoon Street Mall to Central Lane. The sale land is superior to the subject because it is located on the Mall. The unimproved value was calculated as follows:
Goondoon Street lot - 14.02 metre frontage at $10,300/m
plus Central Lane Lot - 925 square metres at $60/m² = $199,906
adopt $200,000 (an average of $122.70/m²).
Sales 4, 5 and 6 occurred six to ten weeks after the relevant date of valuation. According to Mr Hewitt, each provides good support to the values applied to the subject land.
For annual valuation purposes, the best sales evidence concerns sales of comparable blocks of unimproved land which occurred within a year before the date of valuation. Some support for the use of subsequent sales can be drawn from the following passage from Williams J in McCathie v Federal Commissioner of Taxation:"Values must be calculated in the light of circumstances which existed on the material date, ... but subsequent events can be taken into account in order to determine the proper weight to attach to such circumstances. Subsequent sales are just as admissible in evidence as prior sales, provided that in all the circumstances they are comparable. If between the material date and the date of the subsequent sale supervening events occur which alter the condition previously existing, the subsequent sales would not be comparable and would be useless." ((1944) 69 CLR 1, at 16).
In GA Nichol v the Valuer-General (1961) 28 QCLLR 161 the Land Appeal Court rejected a submission that sales after the effective date of valuation should be ignored. Having quoted the dicta of Williams J in McCathie, the Court noted that his Honour had stated the rationale for the approach as being the tendency of courts "to admit evidence of any events prior to the date of the trial which will throw any real light on the issues" (69 CLR at 16 and authorities cited there). In the opinion of the Land Appeal Court, "there appears to be no sound reason why a Court or any of the parties should be denied the assistance of sales of comparable land occurring after the effective date, provided market conditions or other relevant conditions have not materially altered" (at 292).
The statement by Williams J has been applied by other courts. In Federal Commissioner of Taxation v Harris (1980) 30 ALR 10, Bowen CJ stated that, if evidence of subsequent events is available which shows that the possibility of an event occurring has become a reality, it is proper for the Court to have regard to the actual events when assessing the position as it was at the relevant date (at 18; see also Deane J at 19). In the same case, Fisher J referred to the limitation on the principle stated by Williams J, namely that subsequent events can only be used to determine the weight to attach to circumstances which existed at the relevant date. The subsequent event cannot create an expectation which was not in existence at the relevant date (at 25 quoting from John Martin (Elizabeth) Limited v Commissioner of Land Tax (1965) SASR 217, at 225).
In the present case this Court can only have regard to later sales evidence to confirm the circumstances which applied at the relevant valuation date. In some annual valuation cases, the date of sale may be so far after the relevant date of valuation, and so close to the next date of valuation, that evidence about the sale should be disregarded or given very little weight. In Eastwell Pty Ltd v The Valuer-General (1987) 11 QLCR 169, the appellant submitted that only one sale presented by the Valuer-General in that case could be used as a basis for valuation because the other sale was an after date sale. The Court considered that the sale in issue had occurred "a mere 26 days after the relevant date" and there was no suggestion that there was any change in the market place in "that short space of time". It held that the valuer quite properly had had regard to the later sale (see (1987) 11 QLCR at 173, 176-177).
The preceding discussion of the law relating to after date sales has recently been confirmed by the Land Appeal Court in Scougall v Chief Executive, Department of Natural Resources (AV93-119, AV94-364, unreported decision dated 13 September 1996).
There is no reason to disregard the after date sales in the determination of the present appeal. Sales 4 and 6 are sufficiently comparable to the subject to be useful in this case.
It must be remembered that the appellants bear the onus of proving each ground of their appeal. Strictly speaking, the respondent did not need to adduce evidence of how the disputed valuation was calculated. The information that he provided assists the Court. Subject to what follows concerning other grounds of appeal, the evidence called by the appellants did not show that the respondent acted upon a wrong principle or made a serious error of fact or used a method fundamentally erroneous in making the disputed valuation. Rather, that evidence and the evidence relied on by the respondent supports the valuation. I accept that, in the circumstances of this case (particularly given the ownership of the land and the terms of the Deed of Grant), it is appropriate to value the two lots comprising the subject land together and that the approach taken in Mr Hewitt’s calculation is suitable.
No issue was taken with the linear frontage approach (so long as suitable allowance is made for such factors as depth, access and shape) and it is an uncontroversial method for commercial properties such as these. The calculations show an allowance for the irregular shape of the land as well as other features (including the encumbrance on title, a matter dealt with below).
Mr Sheehan’s valuation report on the subject land (Exhibit 4) states that the valuation was undertaken having regard to improved sales and rental data, as well as vacant land sales. The information and his analysis of it is discussed in some detail in other reasons for decision, particularly in Macefoil Pty Ltd and Robsan Investments Pty Ltd v Chief Executive, Department of Lands, AV95-324, decision dated 18 September 1996. It is not necessary to deal with the evidence in detail in this judgment.
First, there was sufficient evidence of sales of unimproved or lightly improved blocks for a decision to be made in this case without having to rely on that other evidence. Both valuers were able to give their opinions about the comparability of the sale blocks and the subject land.
Second, as Mr Hewitt explained, use of rental properties is hypothetical and fraught with problems. The amount of rent paid will be influenced by such things as the age, layout and design of the building, how the rent is negotiated, and the supply of and demand for commercial floor space in the area. In Gladstone there has been a high level of vacancies and that would influence whether there was any shift in the level of rents being paid for commercial premises. By contrast, there had been more sales of vacant land in the relevant year than in other recent years and they provided better evidence than had been available for some years.
Third, Mr Sheehan’s analysis of the evidence of the improved sales to the effect that the unimproved value applied was too high in each instance does not overcome the effect of section 33 of the Valuation of Land Act 1944 which provides that any and every valuation (or alteration of the valuation) of land made by the respondent shall be deemed to be correct until proved otherwise upon objection or appeal or until altered.
The first ground of appeal fails.
Relativity
The appellant contended that the unimproved value assessed by the respondent for the subject land is not in relativity with either applied 1995 values or values amended following consideration of notices of objection.
In his report, Mr Sheehan referred to two other sites in Gladstone for comparison with the subject land.
One block, described as the Indoor Cricket site (V272) was said to have an area of 5,345 square metres and to have been valued at $310,000 or $57.99 per square metre. Mr Sheehan described it as a larger but superior site to the subject land. Most of the evidence about this site was given in another of the four cases heard successively with this case. The land is a corner block with frontages to Goondoon Street, Herbert Street and Oaka Lane. It is located between the main commercial district and the Valley shopping area. Other evidence shows that the land has an area of 3,939m² and was valued at $315,000, an average of approximately $80/m². Mr Hewitt ascribed a value of $5,000 per metre for the Goondoon Street frontage. It is clear that, on both an average rate per unit area or rate per metre frontage the land is more valuable than the subject land.
The other block, described as the Centrepoint site (V268) is located within the main business area. It has an area of 3,757 square metres and was valued at $212,500 or $56.56 per square metre. Mr Sheehan described it as a smaller but superior site to the subject land. It was the subject of other proceedings, Radgown Pty Ltd as Trustee for Centrepoint Unit Trust v Chief Executive, Department of Lands, AV95-323. The features of the property, and its relativity to the Indoor Cricket site, are described in the reasons for decision in that case, dated 18 September 1996.
Based on the relativity of the subject land and those two sites, Mr Sheehan considered that the assessed unimproved value for the subject land should be reduced to $175,000. He urged, however, that if the unimproved value of V-268 be reduced on appeal, then the unimproved value of the subject land should be reduced to $165,000. The appeal in that case was dismissed, and this ground of appeal also fails.
Disadvantages and disabilities of subject land, tidal surge zone
The appellants contended that the unimproved value assessed by the respondent does not take into consideration the disadvantages and the disabilities of the subject land. In particular, reference was made to:
(a) the Deed of Grant trust of the land and the restrictions on the use of the land contained in that Deed; and
(b) the location of the land in a tidal surge zone.
Lot 27 was granted in May 1968 to the Trustees of the Returned Sailors’, Soldiers’ and Airmen’s Imperial League of Australia, Queensland Branch, Gladstone Sub-Branch and their successors “Upon Trust for Recreation (Soldiers’ Memorial Hall) purposes and for no other purpose whatsoever”. The Deed of Grant also provides that “if the Trusts, Conditions, Reservations and Provisos herein contained be not duly observed and performed” by the appellants and their successors as trustees then the land “shall revert unto” the Crown.
The appellants submitted that although the subject land is zoned Comprehensive Development it cannot be so used because of the terms of the Deed of Grant.
The terms of the Deed constitute an encumbrance on Lot 27. It is not an encumbrance on Lot 1. Although the Deed applies to part only of the subject land, Mr Hewitt’s calculations show a 10% allowance on the value of all the land for the encumbrance. Mr Sheehan seems to have adopted a similar approach. He valued the land at $204,300 then deducted 15% for restrictions on the title. On my calculations, the value would be $204,300 - $30,645 = $173,655 (adopt $175,000). There was no clear criterion by which the percentage or amount to be allowed was calculated. Indeed Mr Sheehan stated that he made an “arbitrary allowance” after working out the market value of the land.
The application by each valuer of an overall allowance for the encumbrance was consistent with Mr Sheehan’s opinion that Lot 27 is the main part of the subject land and that Lot 1 without Lot 27 is of limited value. At the hearing, however, Mr Hewitt sought to adjust his valuation on the basis that the encumbrance was confined to Lot 27 and the remaining land could be used with the Lord Street frontage. On these revised calculations he reached a valuation of $237,709 which he rounded to $237,500.
Given the imprecision with which the allowance was made, it is necessary to look at the reasoning adopted by each valuer. Mr Hewitt noted that the premises are licensed, have poker machines and are fully operational in a commercial sense. There is potential for further commercial development of the site consistently with the existing purposes. In his opinion, the practical effect of the encumbrance is very small.
As noted earlier, the particular circumstances of this case lend support to a valuation of the whole of the land having regard to its ownership and the limitations of the use of one part which have some bearing on the use of the other, less valuable land. On the evidence available, it is not possible for the Court to be any more precise than the valuers in assessing the amount of the allowance to be made for the effect of the encumbrance. A 10% deduction across the whole of the land is appropriate.
Little mention was made of the possible influence of being in a tidal surge area. In the absence of direct evidence in the point I cannot make a finding in favour of the appellant on this ground of appeal. The effect, if any, on the market for such land was presumably reflected in the price of the Sale 4 land in Mr Hewitt’s schedule of sales.
This ground of appeal fails.
Percentage increase
The appellants contended that the application of an overall percentage increase is unrealistic and does not follow market evidence or trends.
Mr Sheehan noted that, in the 1995 revaluation, the assessed unimproved value of the subject land was increased from $107,000 to $237,500, an increase of some 139.6%. The figure to which the valuation was reduced on objection reflected an increase of some 112.62%. In his opinion, such a large increase is not substantiated by sales.
He added that, there has been little or no development in the area around the subject land since 1980. That area comprises land which slopes away from the main business district to the south. Rental levels for the limited commercial buildings have illustrated little or no increase over the previous five years. Any increases have been caused primarily by Consumer Price Index rises.
For reasons give above, the analysis of improved land sales or rentals of improved properties does not provide a reliable basis for ascertaining the unimproved value of the subject land. Apart from the numerous variables which may affect the result of any such analysis, it has not been shown that the movement (or lack of movement) in the market for improved commercial properties is in direct relationship to the state of the market for unimproved land. Furthermore, the market for comparable unimproved land supports the valuation in dispute.
The ground of appeal must fail.
Order
The appeal is dismissed and the determination of the Chief Executive in the amount of $227,500 is affirmed.
GJ NEATE
MEMBER
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