West v Chief Executive, Department of Natural Resources and Mines
[2014] QLC 31
•24 September 2014
LAND COURT OF QUEENSLAND
| CITATION: | West v Chief Executive, Department of Natural Resources and Mines [2014] QLC 31 |
| PARTIES: | Carolyn Sybil West (Appellant) |
| v. | |
| Chief Executive, Department of Natural Resources and Mines (Respondent) | |
| FILE NO: | LAA844-12 |
| DIVISION: | Land Court of Queensland – General Division |
| PROCEEDINGS: | An appeal against a review decision by the Minister regarding the purchase price for conversion of tenure under the Land Act 1994. |
| DELIVERED ON: | 24 September 2014 |
| DELIVERED AT: | Brisbane |
| HEARD AT: | Charters Towers |
| MEMBER: | His Honour Mr WL Cochrane |
| ORDERS: | 1. The appeal is allowed. 2. The Chief Executive’s review decision is set aside. 3. The purchase price of Special Lease Lot 23 on Crown Plan 855246 (Title Reference 17744203) County of Davenport Parish of Millchester is determined at One Hundred and Forty Thousand Dollars ($140,000). |
| CATCHWORDS: | Valuation – Unimproved Value for Conversion of Tenure – Purchase Price – Method of Valuation – Principles to be applied – Analysis of improved sale – Description of Country – Relativity with purchase price of other land – Allowance made for quality of land - Land Act1994 – ss 170, 434 |
| CASES REFERRED TO: | Biggin v Permanite (1951) 1 KB 422. Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409. Thirty-Fourth Philgram Pty Ltd v The Crown (Brisbane Exposition and South Bank Redevelopment Authority) 1992-93 14 QLCR 13. Merivale Motel Investments Pty Ltd v Brisbane Exposition and South Bank Redevelopment Authority (1984-85) 10 QLCR 175 (Land Court); 268 (Land Appeal Court) and 1986-87 (11 QLCR 235) Full Court; Neray Holdings Pty Ltd and Blocksidge and Badgery v Brisbane Exposition and South Bank Redevelopment Authority - Land Court - 13 May 1988 (not reported) Land Appeal Court – 26 April 1989 (not reported); Full Court (1991) 1 QdR 1. |
| APPEARANCES: | Mr P Elliott, Solicitor, Giudes & Elliott, for the Appellant. Mr P Prasad, Lawyer, Department of Natural Resources and Mines, for the Respondent. |
This is an appeal pursuant to s 170 and s 427 of the Land Act 1994 (“the Act”) brought by a landowner in the Charters Towers district against an internal review decision upholding the decision of the Chief Executive of the Department of Natural Resources and Mines (the Chief Executive) as to the purchase price of land for conversion of tenured premises.
Background
Mrs Carolyn Sybil West is the holder of a special lease being Lot 23 on Crown Plan 855246 (Title Reference 17744203) Country of Davenport, Parish of Millchester and which is otherwise described as being located at 149 Palmer Road Millchester.
The subject land has an area of 10.78 hectares.
Mrs West and her husband own an adjoining Lot 16 which adjoins the subject on the northern boundary.
The lease is expressed to expire on 30 June 2024 and the subject land is used for grazing purposes.
On or about 5 May 2011 Mrs West made an application pursuant to s 166 of the Act to convert the tenure to freehold.
The leased land has improvements in the form of fencing, a house, a shed and native trees on it.
She was subsequently advised that the valuation contended for by the Chief Executive was $250,000.
That valuation was contained in an offer made to Mrs West on or about 8 May 2012.
As she was entitled to do, Mrs West sought an internal review of that valuation.
By correspondence dated 27 September 2012 Mrs West was advised by the Minister’s representative that:
“after considering the characteristics of the site together with comparable sales evidence, the valuation of $250,000 has been amended to $220,000.”[1]
[1] Exhibit 1.
From that determination Mrs West has appealed to this Court against the review decision.
In her notice of appeal, Mrs West contends that the land should be valued at $110,000 and, with respect to improvements on the property, contended that the current asset values (improvements) were:
“House and Shed $80,000 Fencing $5,000, Phone ?, Connection of Power $40,000. Connection of Water $10,000, Tree and Seed Planting $1,000 all at lessee expense.”
Within the form for the notice of appeal Mrs West identified the following ten grounds of appeal:
“1.Existence of 1 capped and 3 uncapped mine shafts and their adverse impact on value.
2.Existence of a possible 4 other mine shafts and their adverse impact on value.
3.Rocky nature of the majority of the site and the adverse impact on value.
4.The presence of an old cyanide dump on site and its adverse impact on value and impact on appeal.
5.Gravel/dirt road frontage.
6.Located in gully/depression and as such has little to no views.
7.It is felt that the Departmental Valuer had too much regard to superior land parcels and associated sales within the general locality.
8.The rocky nature of the property and the existence of known and unknown shafts reduces the full potential of the property.
9.This is not an attractive site – it is suited to a limited sector of the market – lower economic sector.
10.The majority of sales that have occurred in the immediate area are far superior type lands.”
Mrs West obtained the property consequent upon the death of her father and holds it on trust.
The Statutory Framework
Pursuant to s 476 of the Act a special lease is taken to be a term lease issued under the Act, hence the applicability of s 166(3) permitting conversion of that lease to freehold.
Pursuant to s 167 of the Act the Chief Executive has to take into account a number of factors in deciding whether or not to offer to convert a lease.
There is no issue in this appeal with respect to compliance with the Chief Executive’s obligations.
The Act speaks in terms of a deed of grant being offered to a lessee seeking conversion of land and the dictionary at Schedule 6 to the Land Act provides that:
“deed of grant means—
(a) land granted in fee simple by the State; or
(b)the document evidencing the grant, including an indefeasible title under the Land Title Act 1994.”
Pursuant to s 170 of the Act the Chief Executive decides the purchase price for the conversion of a lease to a deed of grant and further, pursuant to s 170(3) that purchase price is an amount equal to the total of:
“(a)the unimproved value of the land being offered, as if it were fee simple; and
(b)the market value of any commercial timber that is the property of the State timber that is the property of the State on the land.”
Section 170(4) provides that the unimproved value of the land is calculated at the day the Chief Executive received the conversion application, in this case 5 May 2011.
The meaning of the expression “unimproved value” for the purposes of the Act is contained within s 434 which provides:
“434 Meaning of unimproved value
(1)In this Act, the unimproved value of land is the amount an estate in fee simple in the land in an unimproved state would be worth if there were an exchange between a willing buyer and a willing seller in an arms-length transaction after proper marketing, if the parties had acted knowledgeably, prudently and without compulsion.
(2)The unimproved value must be decided without regard to the commercial value of the timber.
(3)To remove any doubt, it is declared that the Land Valuation Act does not apply to the meaning of unimproved value in this section.
(4)In this section—
paid to the State does not include rent paid to the State.
unimproved state includes, if the value of improvements and development work to the land performed by the State has not been paid to the State, the improvements and development work finished before the lease started or the deed of grant was issued.”
The framework setup within the Land Act for an appeal requires, in the first instance, an application for internal review pursuant to s 422.
After reviewing the original decision the Chief Executive must, pursuant to s 426, make a further decision (the review decision) to either confirm the original decision, amend the original decision, or substitute a new decision.
In the present case, by correspondence dated 27 September 2012 the Chief Executive advised that the valuation of $250,000 had been amended to $220,000.
It is from that decision reducing the valuation to $220,000 that the Appellant appeals, relying upon the provisions of s 427.
Once an appeal comes before the Court, the powers of the Court set out in s 429 are the same powers as the decision maker had.
Section 429(2) provides that the appeal is by way of rehearing and the Court’s powers with respect to the appeal are set out in s 429(3) which provides that the court may confirm the review decision; set aside the review decision and substitute another decision; or set aside the review decision and return the issue to the Minister with directions the court considers appropriate.
The effect of s 429 is that the appeal, being dealt with by way of rehearing in a strict sense, is not confined to the evidence considered by the original decision maker.
The Evidence in the Appeal
In the conduct of the appeal Mr Elliott, the solicitor for the Appellant, called evidence from each of Mr Robert Joseph West and Mrs Carolyn Sybil West. He also called evidence from Mr Denis Schy, a certified practicing valuer in the employ of Herron Todd White.
Mr Schy had prepared a valuation report which became Exhibit 5 before the Court.
For the Respondent, valuation evidence was given by Mr Michael McDougall, a registered valuer in the employ of the Department of Natural Resources and Mines based in Townsville. Mr McDougall’s report became Exhibit 6.
The Subject Land
Mr Denis Schy, the valuer called by the Appellant, described the property in summary in the following terms:
“The subject property is a small rural residential site on the peripheral (sic) of the old mining town of Charters Towers.
The land comprises open, sloping forest country and is developed with a small cottage and some fencing.”[2]
[2] Exhibit 5, page 1.
The valuer called by the Respondent Chief Executive, a Mr McDougall, gives a more detailed description of the land in the following terms:
“The property comprises an irregular shaped parcel, generally falling easily from the north-western corner down to Gladstone Creek in the south and east. The land is generally undulating in nature, but contains gullies adjacent to Gladstone Creek. It was originally an open woodland of ironbark and bloodwood on a gravelly red clay loam. The original vegetation has been cleared, with only mimosa, Chinese apple and rubber vine remaining. The land is stony in parts with some larger granite rocks present in some areas.
The southern section of the property was the site of two mine tailings areas and a cyanide plant in the late 1800’s and contains a large scar of approximately 4,000 m² which shows signs of contamination.
Additionally, there are a number of capped and uncapped mine shafts in the northern and eastern section of the property.
A high voltage power line traverses the north western corner of the property.” [3]
[3] Exhibit 6, page 2 – 3.
The land lies within the Local Government Area of the Charters Towers Regional Council which was formed by the amalgamation of the former Dalrymple Shire Council and the Charters Towers City Council.
Under the Planning Scheme for the Charters Towers City (which remains the applicable Planning Scheme) at the date of valuation the land was zoned “Rural”.
Mr McDougall sets out in his report the relevant provisions of the Charters Towers Planning Scheme as at July 2006 for land zoned “Rural”:
Exempt Park Self-Assessable Agriculture, dwelling house, rural activity Code Assessable Accommodation building, caretaker’s residence, home occupation, roadside stall, telecommunication facility. Impact assessable All other uses.
The minimum requirements for reconfiguration in the “Rural” zone are as follows:
Use Minimum Area Frontage Rural Industry 1 ha 50 m Intensive agriculture 20 ha 200 m Rural residential development 5,000 m² 50 m
There was no dispute between the respective valuers that the land was currently used for rural residential purpose being improved with a low-set cottage and associated residential infrastructure.
Similarly they agreed, as will be referred to later, that the highest and best use for the land was as a rural residential use.[4] The difference between the two valuers was that Mr Schy for the Appellant contended that the highest and best use involved the land remaining intact for the purpose of a single dwelling whereas Mr McDougall for the Respondent contended that the land ought be contemplated as a development lot suitable for reconfiguration into eleven lots.
[4] Exhibit 5, Report of Schy page 7 and Exhibit 6, Report of McDougall page 4.
There was also agreement between them that pursuant to the “Rural” zoning under the Charters Towers Planning Scheme 2006 the land could “theoretically” be reconfigured into 5,000 m² lots subject only to the requirement that each lot should have a minimum of 50 metres of road frontage.[5]
[5] Exhibit 6, page 4.
Mr Schy described the land in the following terms:-
“The subject property is located in close proximity to the main CBD area. To the north east of the subject site is the Venus Battery which is now a local tourist attraction; to the east on the Broughton Road there is a cement batching plant and an engineering workshop, to the south and to the west are rural residential sites, while to the north and north west are the old mine fields with the remnants of some of the most densely mined areas within the Charters Towers area. The remnant mines and shafts do present a danger to the general community. This immediate area between Gladstone Creek and Queenton was the location of numerous mines (in large numbers) during the 1872 to 1899 gold mining area.”
Highest and Best Use
In this instance the existing rural residential usage is considered to be consistent with the highest and best use for this property at this time. The majority of Lot 23 has little to no safe use for further development.
Land Description and Classification
The property comprises a 10.78 hectare site that is irregular in shape and has Gladstone Creek as its eastern and southern boundary and Palmer Road as the western boundary. The total site does have large amounts of surface rock amongst the grass and when this rock is moved it is found that there are numerous other and larger rocks below the surface.
The land generally has a sloping to gently sloping topography running from the road frontage to Gladstone Creek. The road frontage represents the most elevated area of the site and then the block drops away to the creek.
The topography is such that the site only possesses restrictive views of the general area as the higher slopes are on the western side of Palmer Road. The views possessed by the property are limited to the Battery, to the industrial area and to the creek. Gladstone Creek is a narrow creek line that does not have a permanent waterhole and usually only has a water flow during and after a downpour.
At some stage the property has been cleared and it is believed that this clearing occurred as a requirement for cord wood during the gold mining days.
The site is polluted by the remnants of some type of mining structure and it has the remnants of an old cyanide heap. There are four known mine shafts on the property of which only one has been capped and in addition it is thought that there could be as many as four more unknown shafts on the site. There are several suspect depressions to be found on the southern section of the property while the known four sites are on the northern half of the property.”
The Evidence of Carolyn Sybil West
Mrs West had prepared a statement to which were attached a number of colour photographs together with some correspondence from government departments.
In her statement Mrs West focused upon the existence of identified mine shafts and the possible existence of unidentified mine shafts.
With respect to the mine shafts she sought advice from the Department of Economic Development and Innovation as to mine shafts on her properties. On 26 July 2012 she received a letter from the Mining Registrar at Charters Towers dealing with the issue of mine shafts on her properties. It is relevant to recite the contents of that correspondence.[6]
“We refer to your enquiry into historic mine shafts within the boundaries of the lots described above in the urban area of the City of Charters Towers, received at this office on 26 July 2012. Following a search of information held by this office, we offer the attached map which provides approximate locations of historic mine shafts for the lands described above.
The historic information relating to shafts and underground workings held by the Department for this area is known to be incomplete, and its accuracy cannot be guaranteed. Take notice that Charters Towers is an area of intensive historic underground gold mining, and there is the possibility that additional mining may have occurred on this land in the past and not recorded.
The underground mining which occurred in Charters Towers was carried out in hard rock, and is generally stable. To date, this office has no record of instances of surface impact from failure of underground workings other than shafts. However, the enquirer is encouraged to seek independent advice on the stability of the land described above.
Whilst all care has been taken in the preparation of the above mining information, take notice that the State of Queensland (Mines DNRM) does not guarantee the reliability of the information contained herein nor of it being suitable for any particular purpose and disclaims liability for any loss that may arise from the use or reliance upon such information.”
[6] Exhibit 4, Attachment 4.
Mrs West said in her statement, with reference to the possibility of as yet unidentified mine shafts existing on her property, the following[7]:
“When we purchased our block which boundaries (sic) block in question there were no visible mine shafts. After time shafts appeared from nowhere and we now have five capped shafts and three fenced awaiting capping.”
[7] Exhibit 4, page 1.
In that observation she is referring to adjoining Lot 16 not the subject Lot.
Mrs West identified a number of depressions in land where she says it is possible that unknown mine shafts may exist and she points to the fact that it is common knowledge that those used shafts were backfilled with waste, timber, iron and dirt which blocked the shaft hole, leaving no evidence of the shaft being on site.
Mrs West also expresses concern about the dangers of letting children explore and play on the subject land because of this possibility of the mine shafts.
By way of explaining her anxiety she says:[8]
“We reside on adjoining block and my husband was clearing land close to boundary fence (between blocks) when the back of dozer sank into an unknown mine shaft. Mines Department capped this asap. If this is happening with only a fence between blocks the likelihood of this occurring on block in question must be high.”
[8] Exhibit 4, Attachment 1, page 1.
Mrs West also points to the subject land having a remnant mine/mill site and exhibited photographs showing the existence of mine building foundations on the site.
As to its utility for grazing purposes she exhibited photographs showing large rocky outcrops both on and under the surface over the majority of the block and points out that that rock presence inhibits any farming.
Importantly she refers to the presence of an old cyanide heap on the block and points out that even after many years lying vacant no vegetation grows on that site.
Mrs West gave evidence and was available to be cross-examined with respect to her opinions expressed in her report. There was no challenge raised by the Respondent to the veracity of Mrs West’s observations.
Mr Robert West also gave evidence and was cross-examined.
Mr West’s evidence-in-chief consisted of an affidavit sworn by him which became Exhibit 7 before the Court.
In his statement Mr West referred to land on Lot 16 having depressed under the weight of a small bulldozer which he was using.
He made enquiries of the Mines Department in Charters Towers and after an inspection a number of mine shafts were identified and capped or fenced.
In his statement he said:[9]
“I am very concerned about the presence of mine shafts and, since discovering the first shaft have conducted inspections every couple of months. During the inspections, I have noticed after the heavy wet, depressions have started to occur on the southern portion of Lot 23.”
[9] Exhibit 7, paragraph 16 – 17.
Mr West exhibited to his statement photographs of those depressions on Lot 23. He says that until a few years ago there was no sign of those depressions.[10]
[10] Exhibit 7, Attachments RW1. RW2, RW3 and RW4.
As with his wife’s evidence Mr West spoke of the large number of rocks and boulders present in the area. He backed up his observations of the rocky characteristic of the subject land with photographs.
Mr West said that consequent upon receiving the valuation from Mr McDougall in which Mr McDougall carried out a hypothetical subdivision exercise in which he assessed that the capital contribution and cost for street lights payable to the North Queensland Electricity Board would be zero and the cost of electricity construction would be $82,500, he contacted Ergon Energy.
Mr West gave evidence that he spoke to Mr Alan Gulbransen and having shown him a map identifying Lot 23 enquired as to how much it would cost to put power on the subject site.
Mr West’s evidence was that Mr Gulbransen responded that Ergon would charge to erect a new power line to the land and Mr West would have to remove the existing line as it was a two wire 11 KvA line with a capacity of 10 KvA line to replace it. Mr Gulbransen informed him that he would require three phase power and estimated the cost of getting electricity to the subject site as being $150,000 to $200,000.
Under cross-examination Mr West conceded that that was the current estimated cost as at April 2013. It might be recalled that the valuation date is the date upon which the application for conversion is made and that occurred in May 2011.
Mr West was not challenged in cross-examination as to the accuracy of his recollections of the conversation with Mr Gulbransen. Indeed the conversation was confirmed by Mr McDougall who contacted Ergon.
The Valuation Evidence
Mr Schy the valuer called by the Appellant had prepared a valuation which referred to a valuation date of 8 April 2010 when in fact the relevant date was 5 May 2011.
Mr Schy was cognisant of the discrepancy in the date utilised by him but his evidence was that even if he had gone back and revised his valuation to reflect a date of 5 May 2011 he would come up with the same figure as he had at 8 April 2010. He explained that by saying that he considered that any values that he included in his valuation report from the year 2009 up until the date of preparation had been realistic as to the values relevant at 5 May 2011.
Mr Schy’s evidence was that the discrepancy in the date was a result of misinformation accidentally provided to him by Mr and Mrs West.
In his evidence-in-chief Mr Schy had been asked about the impact of the global financial crisis which occurred in late 2008 and he told the Court that any flow-on effect from that 2008 financial crisis was probably more reflected in the year 2009 across the whole of the north region because it took a little while for people to sort out what was really happening in the financial institutions. People became more cautious about their outlook and things in the 2009 year than in the 2008 year.
Mr Schy expressed the view that the Charters Towers market may have been a little more buoyant than the rest of Australia for a longer period and, in explaining why that was so, he said:[11]
“Charters Towers is a little bit more diverse than the average rural city or western city in Queensland. It had the benefit of the mining and grazing industries, so that the full effect of any downturn in Charters Towers was sheltered to some degree by the dual economy of the city, the rural and the mining industries combined, but there was a downturn.”
[11] T1-23 and 24.
As to the timing of that quote Mr Schy told the Court that he thought:[12]
“Really the fall away probably started to happen some time in the year 2009 in relation to more so your residential type sales, but there was a general cautious approach to things from 2009 on.”
[12] T1-24 L 10.
In his report Mr Schy pointed to the reservation in the lease by way of condition of H17 for the granting by the lessee to the North Queensland Electricity Board of an easement across the subject property.[13]
[13] Exhibit 5 Annexure 1.
That condition H17 provided:
“The lessee shall, if and when required by the North Queensland Electricity Board, enter into an Easement Agreement with the said Board to allow for free and unrestricted access by the Board, its Officers, Employees, Agents and Servants, to, from, across and along the strip of land shown as Lot B on Plan DV726 for electrical purposes. No compensation shall be payable to the lessee for such Easement.”
That easement appears to pass across the north western corner of the subject land from Palmer Road. One confusing feature of the evidence contained in the valuation reports by both valuers is that some maps seem to show a street designated as Carroll Street crossing the subject land about a third of the way down the site in an easterly westerly direction. There was no evidence put before the Court as to the relevance of that street which does appear on a number of plans including a plan as drawn as recently as 1993.[14]
[14] Exhibit 5 Annexure 2 CP Plan 855246.
In his report Mr Schy referred to a large number of sales of land which occurred in Charters Towers between the period 2008 and 2010. He identified 11 sales which occurred in 2008 for rural residential home sites, ranging in area from 2 hectares to 21.64 hectares within a selling range of $110,000 to $250,000, with only 2 of those 11 sales yielding a price in excess of $200,000.[15]
[15] Exhibit 5 section 6.2 page 11.
The similar figures for the 2009 sales, of which there were 17, were that those sales reflected rural residential home sites ranging in area from 2 hectares to 19.57 hectares having a sales price range from $100,000 to $270,000, with only one sale out of the seventeen achieving in excess of $200,000.[16]
[16] Exhibit 5 section 6.2 page 12.
In 2010 Mr Schy identified four sales of rural residential home sites with areas ranging from 2 hectares to 16.63 hectares within a selling price range of $150,000 to $215,000, with only one sale exceeding $200,000.
By way of illustration of the difficulty which both valuers had finding comparable sales, Mr Schy’s report contains a sales reconciliation analysis of all 32 sites, for all of which the sales reconciliation fell into one of two categories: either the land was considered to be superior to the subject site, or was felt to be more in line with an urban or town site and not considered to be directly comparable.
In my view some weight can be attached to the sales of rural residential land which was considered to be superior to the subject site. The key elements which, on Mr Schy’s analysis, made the various rural residential sales superior to the subject site were the presence of a bitumen road frontage, the absence of a power line easement and the fact that the lots had no historical mining activity or old mine shafts located on them.
My review of the report by Mr Schy reveals the following features of those sales of rural residential land judged by Mr Schy to be superior to the subject site.
Lot 1 on SP20711 Parish of Millchester with an area of 8.2 hectares at a price of $120,000 was a sale of property within 3 kms of the subject site but with a smaller area and a bitumen road frontage.
It is unnecessary to deal in detail with all of the 32 sales referred to by Mr Schy.
In his report he observes as follows:[17]
“From all the sales addressed above the Picnic Creek Road and Kings Gully Road sales would be the most relevant for comparison purposes. These sales are reasonably close to the subject and are considered to be located in a superior locality to that of the subject that is found amidst old established mine shafts and unknown shafts where constantly safety is an issue as most shafts have now been disused for a over a hundred years and whatever the shafts were originally capped with is now deteriorating and caving in. Remediation works on the shafts is costing between $100,000 and $250,000 per shaft and as such this is quite prohibitive to any landowner to complete themselves if they are unlucky enough to have several shafts on their property.”
[17] Exhibit 5, page 16.
Reference back to his report reveals the following details of the Picnic Creek and Kings Gully Road sales.
The first sale in Picnic Creek Road is Lot 1 on SP 200711 with an area of 8.28 hectares which sold in March 2008 for $120,000.
Sale 2 is Lot 3 on SP 210834 with an area of 9.399 hectares which sold for $120,000 on 19 March 2008.
Sale 3 is Lot 4 on SP 210834 with an area of 10.09 hectares which sold for $110,000 in April 2008.
Sale 4 is Lot 5 on SP 210832 with an area of 8.865 hectares which sold for $110,000 in July 2008.
Sale 5 is Lot 15 on SP 221814 with an area of 8.06 hectares which sold for $150,000 in April 2009.
Sale 6 is Lot 12 on SP 226386 with an area of 10.28 hectares which sold for $167,000 in July 2009.
Sale 7 is Lot 16 on SP 226386 with an area of 8.174 hectares which sold for $165,000 in October 2009.
Sale 8 is Kings Gully Road, Lot 3 on SP 226391 with an area of 16.63 hectares which sold for $198,000 in March 2010.
Having regard to all of those sales Mr Schy observes as follows:
“Because of these factors and the sales comparisons of $110,000 has been applied to the subject site. It may also be that if hypothetically offered to the market $110,000 may be difficult to achieve within a reasonable timeframe. This site does not have any appeal to the general market in its present state with the shafts uncapped and it will be many years at the rate that the government is presently capping these sites before all the shafts on the subject property will be capped and thus giving the property owners some degree of comfort with regard to the changes associated with the presence of the shafts. The unknown shafts do present a very pronounced and ongoing safety risk.”
Somewhat surprisingly Mr Schy, in his report, does not appear to pay much attention to the contaminated land issue constituted by the presence of the cyanide on the subject site.
It may be that he was unaware of that feature.
His views on the matter really only arose as a consequence of a question which I felt obliged to ask him in the following terms:[18]
“You skated blithely over, Mr Schy, the presence apparently acknowledged by Mr McDougall as well of the cyanide plant, what is the relevance of that if any to the valuation you have conducted?”
[18] T1-31 L 30.
Mr Schy replied:
“The cyanide area, Your Honour, is completely or almost completely denuded of vegetation and has been that way for possibly a hundred odd years or since the cyanide operation ceased or the deposits ceased. With regard to remediation, I would imagine that that would be a cost for the landowners to take on. I am not saying it is not an impossible job but it does not present well when compared to other rural residential properties that may have been put to the market.”
I find it surprising that a valuer would ignore contamination as serious as that posed by the presence of cyanide tailings on a landsite.
Mr Schy did attach some significance to the outlook or view from the subject property. He told the Court[19]:
“In addition to the cyanide and other things, the aspect of this property is not overly great when compared to the more elevated or rolling bushland views, backward city views or views looking back towards Charters Towers in the day or evening. This property here, because of its topography, looks down onto Gladstone Creek which is a narrow creek that doesn’t necessarily contain water for the majority of the year. It is usually only full when it rains and may remain as a trickle for a couple of weeks. So there is really no benefit in a creek view.”
[19] T1-32 L19-29.
He continued[20]:
“So instead, this has an overview of some bushland areas but you are looking into Grumpy’s, (that was his name), - Grumpy’s old engineering works and cement batching plant and the Venus Battery. Now you can’t look back towards the city because of the low rise that prevents that type of an aspect from our subject property so this property has an aspect over the rural setting with these industrial buildings behind it or in it.”
[20] T1-32 L31-40.
When invited to compare the outlook from the subject properties which influenced his opinion with the subject property, Mr Schy said:[21]
“Look, their outlook would be more of a bushland or rural outlook, plus some of them will have strategic views of the city, either in the day time or the city lights at night. So I think that their outlook would be a lot better than many of the attributes of the – visible attributes of our subject property.”
[21] T1-32 L40-50.
In his comparisons Mr Schy also paid attention to the advantages of a bitumen road frontage as compared to the gravel surface of Palmer Road, which the subject site fronts.[22]
[22] T1-32 and 33.
When asked to comment upon the report and inclusions reached by Mr McDougall, the valuer called by the Respondent Mr Schy said as follows:[23]
“Reading Mr McDougall’s valuation, it is evident that this primary application of values relates to a potential for subdivision on our – on our area and when you read within the report or the content of Mr McDougall’s report, the major detractions of the block seem to have been swept aside as if they – they aren’t major issues at all. Things like capping of mine sites that are located in the middle of a cul de sac within the proposed development. There’s just no costings that I can see within Mr McDougall’s report that address those types of issues. Any proposed development that may contain, especially a 5,000 square metre block that has an actual uncapped mine site on it, located on it. I don’t think they’re even going to get any type of interest from anybody to purchase that block. Yeah, that’s just an accident waiting to happen. And so, when you start to look at the way Mr McDougall has designed his blocks in relation to the location of the mine shafts, then doesn’t seem to correlate an associated cost and within that too, there’s no pricing structure to see what type of a discount would apply to the properties that have the mine sites located on them. And then also within the report, there doesn’t seem to be an allocation of a risk component for the – for the – for any mine sites that are unknown or may pop up within the site. And as I say, within our inspection, we found about three possible sites that we believe could be mine sites.”
[23] T1-34 L 54 T1-35 L20.
The report prepared by Mr McDougall for the Respondent, which I will deal with shortly, contains within it a hypothetical subdivision as a basis for estimating the relevant value of the subject block.
In respect of Mr McDougall’s hypothetical subdivision Mr Schy had the following to say:[24]
“Reading Mr McDougall’s valuation, it is evident that his primary application of values relates to a potential for subdivision on our – on our area and when you read within the report or the content of Mr McDougall’s report, the major detractions of the block seem to have been swept aside as if they – they aren’t major issues at all. Things like capping of mine sites that are located in the middle of a cul de sac within the proposed development. There’s just no costings that I can see within Mr McDougall’s report that address those types of issues. Any proposed development or block that may contain, especially a 5,000 square metre block that has an actual uncapped mine site n it, located on it. I don’t think they’re even going to get any type of interest from anybody to purchase that block. Yeah, that’s just an accident waiting to happen. And so, when you start to look at the way Mr McDougall has designed his blocks in relation to the location of the mine shafts, then doesn’t seem to correlate an associated cost and within that too, there’s no pricing structure that have the mine sites located on them. And then also within the report, there doesn’t seem to be an allocation of a risk component for the – for the - for any mine sites that are unknown or may pop up within the site. And as I say, within our inspection, we found about three possible sites that we believe could be mine sites.”
[24] T1-34 L 52 to T1-35 L 21.
Under cross-examination Mr Schy explained his approach to identifying the $110,000 value which he ascribes to the subject site in the following terms:[25]
“With our subject property has a residential component attached to it. It doesn't matter whether it's - where the existing dwelling is or whatever, there will be a site somewhere that would be suitable for a residence. As far as a second or third residence, who's to know? But I just have - it is my belief that the $110,000 represents probably the worst or the lowest value or a reasonable value that people would pay for the worst block in the worst street. We've got a sale somewhat removed from town at $110,000 up on the Lynd Highway. I'm not suggesting it's comparable to our subject, but that seemed to be about the lowest price that I could see that people were prepared to pay for a rural lifestyle property within close proximity to the city of Charters Towers. So based on the evidence that the sale were showing us in that Picnic Creek area and all the rest of it, and out on the Lynd Highway and all the rest of it, I thought well, a poor quality rural res home site or lifestyle property is not worth a lot of money, 110 is probably the - probably about it. And that's how I've come up with 110,000.”
[25] T1-57.
Mr McDougall for the Respondent told the Court that notwithstanding that his valuation report begins with an examination of a hypothetical subdivision on the subject land, his primary method for valuation was to attempt to consider comparable sales.
With respect to the hypothetical subdivision exercise carried out by him he explained his approach this way:[26]
“Well, initially when I started looking at this, this particular valuation, as a matter of course I look at the planning scheme. I've worked in Charters Towers for a long time and you have to - it's one of your first ports of call. What is, you know, what is the planning scheme allowed? Does it allow reconfiguration? If it does, well, I need to probably try and start looking at - of sales that may be comparable in that regard. So I looked at the property. I said - I looked at the planning scheme and the planning scheme said all right, it's rural, zoned rural in Charters Towers city plan. Now, there's not much rural zone land available in Charters Towers city for development. There's a fair swathe of rural zone land, the larger parcels but the majority of them are tied up as unallocated State land with native title complications and therefore there's no subdivision land really, apart from some small reconfigurations in town and that's why there's been all this rural residential development in what is the old Dalrymple Shire, because that was - parts of that was old mining homes and perpetual leases and they've now gone to freehold so they're not encumbered by this native title constraints. So supply simply doesn't meet the demand. So the development, because it couldn't continue in town because we don't have that zoning or that - that available land, it's occurred - it started to push right out in the rural environs of what is the old Dalrymple Shire. So I've gone through the process. I've said, all right, well, it's zoned for potential subdivision. I could initially make some - you know, 1 searched and I was aware of the englobo sales that had occurred and I could then go on a direct comparison.• But once again with englobo, in making comparison englobo and it's really difficult unless you have an in depth knowledge of what - of what development costs are, what the yields are, all that sort of business. So even as a matter of course with englobo sales, often you have to do a hypothetical subdivision over the englobo parcel, even though it is a sale and it's told you it's paid this, just to see what sort of yield they get and what their development costs are. You know, just so you can make some comparisons because there's differences between those englobo parcels. So as - it's - you might consider it back to front but from my way of thinking, I thought, I'll go through and do a hypothetical subdivision over the property and I'll have a look at it just as a feasibility test and it's a check method. It's not my primary method but I'll go through that and I'll look at the viability and see if - if there is viability from a subdivision potential. I realised the constraints on it but I went through that process and so I've included that in the report, more so to allow me to make comparisons with the englobo parcels that I've used as my direct comparison. To say, it's difficult to say, well, this block sold for 500 so I'm going to come up and this is going to be worth 200. I mean, you need to have some basis of comparison. You need to have some knowledge of what it costs to develop and those sort of things to begin to understand how the englobo market might work and therefore, what constraints you might have on your subject property and that's the process I went through. . So, hypothetical subdivision as a bit of a check just to give me an idea of the viability and feasibility and then direct comparison with the similar size, be it base properties smaller than the subject but similar zoned land in Charters Towers rural zone.”
[26] T1-65 L 40 to T1-66 L 42.
I found that explanation very difficult to follow.
Doing my best and having regard to what Mr McDougall said in his written report[27] it appears to me (and in my opinion is confirmed by other evidence) that Mr McDougall was driven primarily by the size of the subject site rather than by some demand for subdivision in the immediate area of the subject site.
[27] Exhibit 6.
I am satisfied that Mr McDougall, from a previous Court case, has a sound knowledge of the subject site but I have come to the view, for reasons which I will explain below, that his hypothetical subdivision exercise is of little probative value because of what I see as deficits in his methodology and his disinclination to give weight to the potential contamination, the existence of mine shafts and the rocky nature of the land.
As mentioned above Mr McDougall justifies his value of $220,000 on two bases. The first of those he says (although it appears second in his report) is by direct comparison with sales or what he describes as relevant lots. The second method (but the first mentioned in his report) is by way of a hypothetical subdivision.
I will deal first with the hypothetical subdivision.
The hypothetical subdivision was described by Mr McDougall as involving a “desktop” development of the property based on the expected realisation from the sale of the optimum subdivision design less all costs.
Mr McDougall acknowledged that while the land had not been precisely identified as contaminated so as to be placed on the contaminated land register it was included on the Environmental Management Register with mineral processing as in the notifiable activity.[28]
[28] Exhibit 6, page 3.
He observed:
“Advice on the lease file dated 26 June 1996 from the then Department of Mines and Energy did not confirm that the presence of contamination but confirmed the lease was the site of the fair Rosamond Mill as well as Machinery Area Numbers 1, 4, 14, tailings area 105 and a cyanide plant. Further research it was also the site of tailings area 104.”[29]
[29] Ibid.
I find it nearly impossible to accept that land on which a cyanide and mine tailings areas were located in the late 1800’s would not, upon proper investigation, require placement on the contaminated land register.
My view in that respect is strengthened by the evidence of both Carolyn West and Robert West that the area where the cyanide plant was located has not born vegetation for some years.
With respect to the cyanide plant site Mr McDougall observed as follows:[30]
“The applicant would most likely be required to engage a consultant to undertake a site investigation report in relation to the existence and location of any contamination. For residential use, there are probably two options. One would be to completely remediate the site by removing the contaminated material. The second would be to exclude the contaminated area and a reasonable buffer from any proposed residential use and reconfigure the balance. The site investigation report would still have to cover the whole parcel and clear all proposed new lots of any contamination. Advice from the Contaminated Land Unit suggested that the initial site investigation report would cost tens of thousands of dollars.
In this instance, a prudent developer looking to re-configure this particular site would probably take the second option and I have approached the hypothetical subdivision on that basis. I have designed an eleven lot subdivision (See Attachment C) in the northern half of the parcel, with the southern section retained as balance land. The exercise assumes the entire length of Palmer Road and any new road would have to be upgraded to a 6m seal and all lots would have to be provided with reticulated water and power. Development works and associated fees have been calculated at $458,000 based on actual costs from recent subdivisions. Given the relatively small number of lots involved I have adopted a "Profit and Risk" of 25%. Due to the potential issues with the contamination, I have extended the approval period to twelve months. A six month development period has been adopted, with a twenty four month selling period.”
[30] Exhibit 6, page 6.
The details of Mr McDougall’s hypothetical subdivision exercise are set out at Appendix B to his report.
He contemplates the development of twelve lots of which five have a direct frontage to Palmer Road with six other lots having access of a short cul de sac running off Palmer Road. The balance area which lies to the south of the developed sites contains, amongst other things, the cyanide plant site.
Mr McDougall opines that each of the lots would sell for $88,666 yielding a total realisation of $1,039,992.
I immediately see a flaw in that calculation because Mr McDougall acknowledged in response to some questions from me that the southern portion or
Lot 12 would be difficult if not impossible to sell and he believed that, notionally, a price of $50,000 should be applied to that lot.
Mr McDougall also acknowledged in response to a question from me that contemplating a developer retaining the balance area with a potentially contaminated site on it would represent a substantial burden and one which carried with it a potential burden of tens of thousands of dollars for remediation costs together with holding costs.[31]
[31] T1-75 L 10-20 and Exhibit 6 page 6.
In his report Mr McDougall conceded that any site investigation report would have to cover the whole parcel of land and clear all proposed new lots of any contamination. He said:
“Advice from the Contaminated Land Unit suggested that the initial site investigation report would cost tens of thousands of dollars.”
Mr McDougall acknowledged that the balance land would not be acceptable to either the local government or the state government for parkland.[32]
[32] T1-76 L 32.
The passages of evidence-in-chief elicited by the solicitor representing the Respondent convinced me that Mr McDougall had no clear view as to what would happen with the balance land. Amongst the options which he canvassed were selling it for $50,000 for a horse paddock, which transaction he described as “a punt”[33] he also contemplated that it might be able to be opened as a road[34], he also contemplated that a prudent developer purchasing the englobo parcel would simply hold on to the balance land.[35]
[33] T1-76 L 12.
[34] T1-76 L42.
[35] T1-73 L46. Exhibit 6, page 6.
Significantly, the Appendix B articulation of Mr McDougall’s hypothetical subdivision exercise does not contain any costs for site remediation and the small amount of $25,000 for a site investigation report which figure must be viewed in the light of Mr McDougall’s earlier assertion that the cost would be “tens of thousands of dollars”.
Mr McDougall was also asked about the cost of roadworks to get access to the developed lots.
The Court was not informed as to the nature of the development which Mr McDougall relied upon (one at Fegan Road) but acknowledged that the road construction costs he had relied upon were not for land which was as stony and rough as the subject site. Similarly he made no allowance in his costs for any blasting and drilling which one might anticipate would be necessary to develop a road and services in land as rough as stony as the subject.[36]
[36] T1-71 L 30-40.
Mr McDougall in his evidence-in-chief informed the Court that he contacted the same Mr Alan Gulbransen from Ergon Energy to whom Mr West had spoken. Mr McDougall confirmed that the figures referred to by Mr West of $150,000 to $200,000 had been provided by him but indicated that they were the current estimates as at April 2013.
That date is of course some 23 months later than the relevant date of 5 May 2011. Mr McDougall’s figure for electricity connection was a sum of $82,500.
Even applying inflation at a rate of 10% per year which would be higher than the actual figure for each of the two years from May 2011 to Mr McDougall’s figure only gets to a figure slightly under $100,000.
I am comfortable in concluding that Mr McDougall has understated both the costs of road construction and the costs of electricity construction in his hypothetical subdivision exercise.
Even if a figure of only an additional $100,000 was imputed to those two items the total development costs would rise by that $100,000 so that similarly, assuming that the realisation figures contended for by Mr McDougall were achieved, the land/purchase costs and holding interest costs in Mr McDougall’s hypothetical exercise would change from $284,391 to $184,391 so that, applying that figure and using Mr McDougall’s other costs including purchase costs (stamp duty, rates and tax, legal’s on purchase), the englobo land value would be reduced to $140,000.
That figure is easily achieved without any attack on any of the other figures contended for by Mr McDougall.
I note, in passing, that Mr McDougall appears not to have allowed any reduction in price for the lots (probably Lot 1 and 2 an possibly Lot 4) which would be traversed by the required electricity easement.[37]
[37] Exhibit 6, page 16.
If it were recognised that the balance lot to which Mr McDougall ascribes a figure of $50,000 was, as I would be inclined to find, valued at vastly less than that say $30,000 then the value of the englobo parcel goes even lower.
Perhaps the salvation, in my analysis, of the hypothetical subdivision exercise done by Mr McDougall is that he contended that it was merely a check valuation exercise and he relied more particularly on a direct comparison.
I should also note however that I accept the evidence of Mr Schy that the plan of layout of the proposed subdivision placed some lots over capped shafts.[38]
[38] T1-36 L 20-30.
With respect to the prospect of the proposed subdivision Mr Schy also pointed to the difficultly of providing underground services such as electricity, drainage and water supply through rock and he could not glean from the McDougall report the basis for Mr McDougall’s costings.[39]
[39] T1-42 L 40.
For all the reasons set out above I do not find that Mr McDougall’s hypothetical subdivision exercise has any real probative value to me in determining the value of the land save that it - together with the evidence - of Mr Schy, convinces me that the highest and best use of the land would be as a single rural residential lot because the numerous constraints to further development of the subject land would make it unviable.[40]
[40] See the evidence of Mr Schy at T1-43.
It then requires me to turn to Mr McDougall’s direct comparison sales. Unlike Mr Schy, Mr McDougall values the land in its highest and best use as an englobo rural residential lot able to be reconfigured. Accordingly, the comparable sales on which he has relied are of land sold as an englobo parcel.
For the purposes of his direct comparison approach to valuation of the subject land Mr McDougall identified eight sales that he asserted were relevant to my determination.
The identification and selection of those comparable sales was premised upon Mr McDougall’s view that the highest and best use of the subject land was considered to be englobo rural residential land.[41]
[41] Exhibit 6, page 4.
That view was maintained by Mr McDougall notwithstanding his earlier concession that[42]:
“As detailed in the body of this report, the subject land does suffer for (sic) a number of detrimental attributes including worsement in the form of possible contamination and old mine shafts and the impact of overhead power lines.”
[42] Exhibit 6, page 5.
The sales relied upon by Mr McDougall in support of his contention included two sales which occurred three or four years prior to the relevant date.
The first sale relied upon by was land located in Axford Road Charters Towers described as Lot 1 on MPH 1298 with an area of 8.094 hectares. It sold on 26 October 2007 for $500,000 which Mr McDougall, for reasons that nowhere appear in his report, analysed down to $480,000 or $59.303/hectare. Mr McDougall told the Court in his report[43] that the land was an elevated near regular shaped parcel with frontage to two roads.
[43] Exhibit 6, page 7.
That site was cleared and grassed with good rural aspect and soils and subsequently subdivided into sixteen 5,000 m² rural residential allotments.
In coming to the view that it was “markedly superior” to the subject land Mr McDougall referred to it having:
(a)Good rural aspects;
(b)Existing bitumen road frontage;
(c)Town water supply being close by; and
(d)Superior access location services soil and aspect.
Mr McDougall expressed the view that land and its sale price represented the upper limit for the development sites in the Charters Towers market for englobo rural residential land.
His second sale was a property located at Read Road Charters Towers described as Lot 2 on MPH 21097 with an area of 5.921 hectares. That land sold in January 2008 for $520,000 which Mr McDougall analyses down to a value of $500,000 or $84.445/hectare. Again there is no explanation of the basis for the analysis.
Again he identifies that land as being superior to the subject.
Like sale one it was regularly shaped, cleared and grassed at the time of sale. Since the sale it has been subdivided, in a staged subdivision, into three 4,500 m² rural residential lots with another four planned in the next stage.
That reconfiguration would account for 3.15 hectares (assuming that each lot was 4,500 m²). No explanation has been provided as to what happens to the balance of the land and there is no indication as to whether any of that land was contributed by way of park contributions.
As with sale one Mr McDougall acknowledges that it is a superior site with superior access location services and soils.
He relies upon it to demonstrate the premium paid for large parcels of vacant land in the rural zone of Charters Towers Planning Scheme area.[44]
[44] Exhibit 6, page 8.
Mr McDougall’s third sale was of land located at Coane Street Charters Towers and otherwise described as Lot 10 on DV 804374.
Sale three had an area of 4,907 m² and sold on 15 February 2012 (ten months after the relevant date in this case) for $200,000.
Again, in an unexplained way, that sale price is analysed down to a figure of $189,560.
The subject land in sale three had a frontage to two streets, both of which had bitumen carriageways, and was improved with an old timber garage at the time of sale.
Sale three was zoned “residential” in the Charters Towers Planning Scheme and Mr McDougall says it can potentially be reconfigured into four lots. Presumably those lots would be residential lots with an area of approximately 1,000 metres per lot so that they bear little relation to the likely size of lots which might be created, on Mr McDougall’s scenario, on the subject land.[45]
[45] Exhibit 6, page 8.
Of sale three Mr McDougall says:
“The sale represents the lower end of the market for small englobo sites in the Charters Towers market. It does not possess the potential of the subject land and is considered inferior to the subject property.”
With respect to sale three I am somewhat at a loss to comprehend how the sale of a 4,9207 m² block of residential zoned land 1.4 km south of the Charters Towers Post Office provides any guidance at all to the development potential or the price of 10.78 hectares of rural zoned land 4½ kms south of the Charters Towers Post Office.
I give sale three no weight at all in my analysis in this case.
Mr McDougall’s sale four was of land located at Broughton Road Charters Towers otherwise described as Lot 4 on SP 238123.
The sale four land had an area of 8.537 hectares and was sold for a price of $220,000 which Mr McDougall (again in an unexplained way) analyses down to $195,025.
The sale four land was a rural homesite located 6 kms east of the Charters Towers Post Office.
Sale four was described by Mr McDougall as being located in “environs” in the Planning Scheme for Dalrymple Shire and having no reconfiguration potential.
Presumably relying upon his assessment that the subject property has little potential for reconfiguration Mr McDougall describes sale four as not possessing the potential of the subject land and thereby considers it to be inferior to the subject property. That is notwithstanding that he earlier describes the site as having superior access and country and similar services.
He points to its alleged inferiority in size and zoning.
Again, as with sale three, I find sale four to be of little probative worth to me in carrying out the assessment I must carry out.
Mr McDougall’s sale five was in respect of land located at 101 Fegan Road Charters Towers and described as Lot 19 on SP 226398.
Sale five has an area of 9.411 hectares and sold on 12 July 2011 for $205,000 which (again for unexplained reasons) Mr McDougall analyses down to a selling price of $179,114.
Sale five is also, as with sale four, zoned “environs” in the Planning Scheme for Dalrymple Shire and as such has no reconfiguration potential.
Mr McDougall describes it as having superior access, similar services and country but being inferior in location, size, zoning and therefore potential.
The inferiority in size sale five being 9.411 hectares and the subject having an area of 10.78 hectares is somewhat puzzling.
Again Mr McDougall says that sale five lacks the potential of the subject land and is therefore inferior.
Mr McDougall’s sale six is in respect of land located at Broughton Road Charters Towers and described as Lot 6 on SP 128123. It has an area of 8.010 hectares and was sold on 13 August 2011 for $220,000 which Mc McDougall analyses down to $194,475. It might be inferred, but it is not made clear, that sale six is part of the same development from which sale four emerged.
Mr McDougall describes it in almost identical terms to sale four and my reservations with respect to that sale also apply to sale six.
Mr McDougall’s sale seven is land located at 23 Fegan Road, Charters Towers otherwise described as Lot 3 on SP 226398.
That land contains an area of 8.32 hectares and sold on 9 September 2010 for $165,000 which Mr McDougall analyses to a price of $142,895. He says that land is inferior to the subject land although it has bitumen access, town water and power available. Topographically it is elevated falling to broken country at the rear but has no reconfiguration potential because it is contained within the “environs” zone in the Planning Scheme for Dalrymple Shire.
Mr McDougall’s sale eight is in respect of land located at 14 Woodchopper Road Charters Towers and is otherwise described as Lot 14 on SP 226367.
Sale eight has an area of 20 hectares and sold on 23 June 2010 for $220,000 which Mr McDougall analyses (without explanation) to $191,400.
Sale eight has bitumen access and power is available with a water supply generated by a bore. It is zoned “rural” in the Planning Scheme for the Dalrymple Shire and Mr McDougall says is has no potential for reconfiguration. He acknowledges that site has superior access and has superior country but he says it is inferior in location, services, zoning and therefore potential.
In his report Mr McDougall expresses a preference for relying upon sale one and two as land having a similar zoning and being comparable properties that would appeal to the most probable purchaser of the subject land.
Having had the benefit of an inspection and having heard both of the valuers I am not inclined to accept that the highest and best use of the land ought be contemplated as englobo block suitable for further development.
The presence of potential contamination, the actual presence of capped and uncapped mine shafts and the rocky nature of the country satisfy me that without any proper investigations of likely remediation costs - including capping and remediation of contaminated land and a proper investigation of the cost of road construction and provision of underground services including water through the rocky terrain, there is no proper basis for accepting that the land is a redevelopment lot.
Accordingly, I prefer the view expressed by Mr Schy who assesses the highest and best use of the subject land as being for a rural residential purpose.
Having accepted Mr Schy’s characterisation of the highest and best use of the land does not necessarily oblige me to accept the valuation he imposes upon it.
Having regard to the evidence I am required to reach a reasoned decision as to what the appropriate value of the property should be as at 5 May 2011.
On the one hand, I am confronted by the evidence of Mr McDougall who proceeded on the basis of both a hypothetical subdivision and, he said, having regard to comparable sales.
All of Mr McDougall’s evidence premised upon, as observed above, the notion that the subject land had a highest and best use for redevelopment into rural residential lots.
Mr Schy on the other hand, again as referred to above, approached the valuation exercise on the basis that the highest and best use of the land was its current use as a rural residential lot with the potential for one house on it.
There is ample long-standing authority with respect to the usefulness of the hypothetical development method of valuation.
In Thirty-Fourth Philgram Pty Ltd[46] Member Trickett observed:
“I have analysed the judgments in the Merivale and Neray/Blocksidge and Badgery cases in some detail[47] to demonstrate the attitude of the Land Court and the Land Appeal Court to the notional development method of valuation. On the authority of those cases I consider that the hypothetical or notional development method of valuation (sometimes referred to as the residual value method) is inappropriate as a primary method of valuation, although it may be useful as a check upon the valuation ascertained by a direct comparison with sales and/or, in appropriate circumstances, previous determinations by the Courts. It is essentially a method used by property developers to enable them to ascertain the highest price they can pay for a parcel of land in a development project, having regard to the circumstances of that project. Those circumstances, however, are too diverse and subjective to accurately reflect the market value of land.
Components in the process, such as capitalisation rates, profit and risk factors, comparable rentals for developments not yet built, construction and other development costs for projects not yet approved, plot ratios, interest rates, holding and letting up periods and so forth, must be taken account of by the prudent developer. However, when these are introduced into a valuation exercise, uncertainty is added to uncertainty, small errors or miscalculations are carried through and magnified in a mathematical progression, which leaves the resulting land ‘value’, or ‘residue’, as a figure in which one could have little confidence. The whole process is inwardly focused and may bear little relation to an objective assessment of what similar lands are selling for in the market place. Market value is best assessed by reference to sales of comparable land.”
[46]Thirty-Fourth Philgram Pty Ltd v The Crown (Brisbane Exposition and South Bank Redevelopment Authority) 1992-93 14 QLCR 13 (at 28).
[47]Merivale Motel Investments Pty Ltd v Brisbane Exposition and South Bank Redevelopment Authority (1984-85) 10 QLCR 175 (Land Court); 268 (Land Appeal Court) and 1986-87 (11 QLCR 235) Full Court; Neray Holdings Pty Ltd and Blocksidge and Badgery v Brisbane Exposition and South Bank Redevelopment Authority - Land Court - 13 May 1988 (not reported) Land Appeal Court – 26 April 1989 (not reported); Full Court (1991) 1 QdR 1.
I have already commented above about the problematic nature of a hypothetical subdivision of the subject land when issues such as the existence of rock, the cost of electricity, the cost of road construction and the rocky landscape, the risk of contamination from cyanide and the safety factors occasioned by the presence of identified and potentially unidentified mine shafts.
I am also critical of Mr McDougall’s failure to produce “a speaking report” which permits the reader to look in detail at the calculations and assumptions which must be made to carry out valuation analyses. In the case of Mr McDougall’s report it was impossible to identify what factors had been taken into account in his analysis process in moving from the selling price to what he contended was the value of the properties.
The question then arises as to what use I am to make of the various comparable sales relied upon by the two valuers.
On the one hand Mr McDougall has identified eight properties of which two he says were superior in his framework of valuation - namely sale one and two.
Unfortunately both of those sales occurred in either 2007 or 2008 and were prior to the global financial crisis.
Notwithstanding that those two properties yielded up by Mr McDougall’s analysis the valuations of $59,303 per hectare and $84,445 per hectare, neither of which per hectare prices seem appropriate to be applied to the subject land.
Mr McDougall’s sale three in Coane Street for a 4,907 m² residential block produced a figure of $200,000 but that was residential land. Nonetheless that seems to me to provide something of a “high water mark” for residential use for a relatively large lot of land.
Against that must be considered evidence adduced by Mr McDougall in respect of Lots 4, 5, 6, 7 and 8 all of those were for lots in excess of 8 hectares and therefore, in my opinion, comparable to the subject land and were all used for rural residential purposes - although three of the five, being in the “environs” of the Dalrymple Shire Planning Scheme, were unsuitable for further development.
I am of the view that those sales provide some guide as to the development for englobo sites suitable for redevelopment but, as I have found above, I do not accept that the highest and best use of the subject site is for redevelopment into rural residential uses.
Accordingly, I must then turn to the report of Mr Schy which again has some limits in its probative use to me. Mr Schy proceeded on the basis of an incorrect date for the valuation but resorted to contending the prices had not changed between the valuation date which he applied namely 8 April 2010 and the real valuation date of May 2011.
Mr Schy had no sales in and around the relevant time for rural residential lots in the Charters Towers area.
As I indicate above, Mr Schy, in his report, contends that of the many sales he identified in his report, the Picnic Creek Road and Kings Gully Road sites were the most relevant for comparison purposes.
In respect of those he says[48]:
“These sales are reasonably close to the subject and are considered to be located in a superior locality to that of the subject which is found amidst old established mine shafts and unknown shafts where constantly safety is an issue as most shafts have now been misused for over a hundred years and whatever the shafts were originally capped with is now deteriorating and caving in. None of the sales in Picnic Creek Road or in Kings Gully Road were close to the relevant valuation date although Kings Gully Road property sold in April 2010 for $198,000 with an area of 16.63 hectares.
[48] Exhibit 5, page 16.
In Biggin v Permanite[49]:
Devlin J made the observation that:
“Where precise evidence is obtainable, the court naturally expects to have it, but where it is not, the court must do the best it can.”
[49] Biggin v Permanite (1951) 1 KB 422 (at 438).
In the present case accepting the proposition that the best evidence of value would be comparable sales of comparable land at or about the time at which the valuation is required to be made, I am left in a position where neither valuer has been able to point me to properties which I accept as being directly comparable.
In Brisbane City Council v Bortoli[50] the Land Appeal Court observed:
“The nature of the valuation exercise does not require a point by point comparison of each characteristic of the sale properties and the property to be valued. What is called for is a weighing up of the effects of the similarities and differences, for the purpose of applying the evidence to the land to be valued. This is rarely a precise exercise. As Hope JA observed in Leichhardt[51], sometimes the result will be ‘nothing more than the best guess that can be made’.”
[50] Brisbane City Council v Bortoli [2012] QLAC 8 at (54).
[51] Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409.
The valuation exercise itself is, of course, not one that attended by exact precision but is the expression of an opinion based upon the available evidence.
Doing the best I can on the evidence available to me I propose to take the Kings Gully Road sale - it being 16.63 hectares compared with the subject site area of 10.78 hectares - as a guide.
I accept the evidence from Mr Schy that the Kings Gully Road has a bitumen road access, no power line easement and no historical mining activities or shafts on the property.
In my view some discount must be allowed for the presence of those features on the subject land - although the easement seems to be of relatively minor consideration, passing as it does through the north west corner of the subject property.
I am of the view that the fact that the Kings Gully Road is 6 hectares larger than the subject land is not a major influence in developing a comparable price for the subject land. It is a matter of notorious knowledge within Land Court cases that the actual size of rural residential land within a few hectares does not appear to have a significant impact upon value in most cases where there is no development potential.
I am disinclined to unreservedly accept the valuation of Mr Schy because, as he conceded, his valuation exercise was carried out for a date just over a year prior to the relevant date and he was caused to take refuge in the notion that values had not changed much in that period.
The Kings Gully sale, compared to other sales in Picnic Creek Road (which Mr Schy contended were the most relevant sales), appears to show some potential upward movement between 2009 and 2010.
I note the observation by Mr McDougall that:[52]
“The rural residential sector which effectively drives this market was relatively active prior to the date of valuation. In the twelve month period from May 2010 to May 2011 there were 13 vacant rural homesites sales in the 2,500 m² to 5 hectare size range in Charters Towers with a median price of $102,000. In the period from May 2009 to May 2010 there were twenty-two (22) vacant sales in the same size range with the median sale price being $100,000. These statistics indicate both a continued demand for rural residential land and relatively stable sale prices as of the date of valuation.”
[52] Exhibit 6, page 4-5.
I propose to accept the Kings Gully Road as representing a price of, rounded up, $200,000 but apply a discount factor to it of 30% to allow for the blight to the subject property caused by all of the features which have been repeatedly referred to above.
Applying that discount factor, I find that the appropriate conversion price for the subject property is $140,000.
Accordingly, the orders I make are as follows:
1.The appeal is allowed.
2.The Chief Executive’s review decision is set aside.
3.The purchase price of Special Lease Lot 23 on Crown Plan 855246 (Title Reference 17744203) County of Davenport Parish of Millchester is determined at One Hundred and Forty Thousand Dollars ($140,000).
HIS HONOUR, WL COCHRANE
MEMBER OF THE LAND COURT