Woch v Chief Executive, Department of Natural Resources

[1997] QLC 109

[1997] QLC 109

 

  LAND COURT

BRISBANE

21 July 1997

Re:                Appeal against Valuation
Valuation of Land Act 1944
  Valuation Roll No 600-10208
  Local Government:  Rockhampton City
  (AV96-297).

Marilyn T and Kajetan S Woch
  v.
  Chief Executive, Department of Natural Resources

(Heard at Rockhampton)

D E C I S I O N

Background:

This matter relates to a property at 72 High Street, corner of Ford Street, North Rockhampton, located about 2.45 kms north of the Rockhampton General Post Office.  The key issues relate to the percentage increase in valuations and the comparison of comparable sales.  The subject has an area of 650 square metres, is described as Lot 2 on RP 605539, and is zoned as "Local Business" under the Town Planning Scheme of the Rockhampton City Council of 8 March 1986, and effective at the date of valuation of 1 January 1996.  Development and other controls are exercised through Council By-Laws effective from 20 February 1931.  The property is improved with a modern single level office and retail development into seven separate tenanted areas.  It is agreed by the parties that the highest and best use is for its present use.
           The Chief Executive, Department of Natural Resources, on 12 February 1996, issued a valuation of $50,000.  Following objections, the Chief Executive on 26 June 1996, confirmed the valuation at $50,000.  The appellants have appealed that value claiming that the value should more properly be $33,000.

Mr KS Woch appeared and gave evidence for the appellants, and Mr BT Coe, Valuer, appeared for the respondent, calling evidence from Mr AW White, a Department registered valuer responsible for the determination of the valuation.

Evidence:
           Mr Woch argues that the basis of his appeal related to the abnormally high percentage increase in the valuation of the subject since 1996 at 290%.  This, he claims, could not be supported either by comparison of sales of comparable vacant sites or by a comparison of commercial rents over recent years.  The appellants acquired the property in 1989 at which time the shops in the subject had been rented at $650 per calendar month.  A recent new lease of a shop in the subject had been arranged at $640 per calendar month, suggesting that over the last eight years the commercial rents had either not increased, or marginally had declined.
           Mr Woch claimed that the unimproved value for the subject had increased steadily from $7,720 (1984) to $17,200 (1995).  The recent revaluation at 1 January 1996, had increased to $50,000, and this large increase he claims could not be supported by market evidence.  Mr Woch provided no written statement to support his case, but mentioned the sale about three years ago (1994) of three parcels (Lots 7,8 and 9 on RP 603411) at the corner of Seigle and Ford Streets, about 100 metres north of the subject.
           That sale was zoned as "Local Business" and sold for $29,000.  He acknowledged that it was difficult to find many comparable sales of vacant "Local Business" parcels.  Mr Coe confirmed that the above sale was subsequently developed as the Rocky Car Sound building which confirmed its commercial zoning and land use.  Mr Woch claimed there were no unusual circumstances surrounding the sale, which was sold after an unsuccessful auction to a private bidder. 
           In supporting his comparison of sales of comparable properties, Mr White supplied four sales:

•Sale 1 - (Vallis Street, Rockhampton - Lot 3 on RP 606660).

This sale is an 807m² parcel which is zoned "Local Business", and is located about 1.8 kms north-east of the subject.  It is an inside, regular shaped lot, cleared and level with all town services.  It has similar access, services and topography, but inferior location and exposure to the subject.  It is superior in size and has subsequently been improved as a physiotherapist centre.  It was agreed by the parties that overall the sale was inferior to the subject.  Mr Woch agreed that Sale 1 was surrounded by other commercial developments, while the subject had a residential lot either side of it, but the general area of the subject was superior in view of the better "passing traffic" for retail purposes.  The sale sold for $62,000 on 2 February 1996, and after allowing for improvements was analysed at $60,500, or $75 per square metre.  This was applied at an unimproved value at $52,000 or $64.50 per square metre.

•Sale 2 - (Burnett Street, Rockhampton - Lots 1 and 2 on RP 603431).

This is an 810m² parcel, zoned as "Local Business" and located about 640 metres north-west of the subject.  The parcel comprises two inside regular lots, with level topography and good building area, fully cleared and fenced, with all town services.  The sale was purchased by Australian Postal Corporation (APO) for future expansion of the adjoining Rockhampton Mail Centre.  It has similar access, services and topography, but inferior location and exposure.  It is superior in size, and is considered by Mr White as inferior to the subject because of its lesser exposure to passing traffic.  The sale sold in March 1995, for $65,000 which, after allowing for improvements, was analysed at $62,250, or $77 per square metre.  Allowing for the impact of a sale to an adjoining owner (APO), Mr White suggested he provided a conservative applied value of $48,500 or $60 per square metre.

•Sale 3 - (Blanchard Street and Victoria Place, Rockhampton - Lot 1 on RP 608065 and Lot 2 on RP 11684). 

This is a 1,282m², zoned as "Local Business" and located about 280 metres west of the subject.  These are two corner lots, fully cleared, with a moderate slope and a poor building contour, and with all town services.  The sale has been subsequently developed as a Blockbuster Video and Subway centre by Peso Pty Ltd.  The sale has similar services, and inferior topography, but superior size, access, location and exposure, and is seen by both parties as far superior to the subject.  It sold in July 1995 for $169,000 which, after allowing for improvements, was analysed at $167,000 or $110 per square metre plus 10% for corner and rear access.  The sale had a 3-bay ten year old besser block mechanical workshop improvement, which was subsequently demolished to make way for the new development.  After allowing for any special value placed upon the sale by the purchaser for that specific site, the sale was applied at $155,000 or $110 per square metre plus 10% corner and rear access enhancements.

•Sale 4 - (Armstrong Street, Rockhampton - Lot 2 on RP 609056). 

This is a 453m² parcel, zoned as "Local Business" and located about 900 metres south of the subject.  The sale is an inside regularly shaped lot, with level topography and a good building site. Fully cleared, partly fenced and with an old dwelling on the site, the sale has all town services.  It is seen as similar in access, services and topography, but inferior in size, location and exposure to the subject.  Overall the sale is seen as considerably inferior to the subject, and the dwelling has subsequently been demolished to make way for a single storey office development.  The sale sold in July 1996 for $69,000, which after allowing for improvements, was analysed at $58,250, or $128 per square metre.  After allowing for demolition of the building, at a considered conservative value, an applied value of $29,500 or $65 per square metre was adopted.

In comparing the subject with the sales it is noted that the subject is a well located commercial property on a corner and nearby to a major shopping centre complex and other commercial retail activities along High Street.  The subject is also located in close proximity to the three major shopping complexes of Shopping Fair, K Mart Plaza and North Plaza.

Decision:
           In examining the matter of the percentage increase in the valuation, I note that Mr Coe argues that, because of a paucity of sales evidence for "Local Business" properties in the vicinity, previous valuations from the 1990 valuation to the current valuation had opted to avoid increasing the "Local Business" values.  However, during this period residential sales had supported increases in that land use type.  As a result of this Departmental strategy the relativity between "Local Business" and "Residential" properties had become distorted, such that "Residential" values had even become greater than "Local Business" values.  While Mr Woch argued that such a relationship was not uncommon in the Rockhampton area, I find that is not a normal relationship in urban areas, except perhaps where the residential properties are very up-market.  I also note the advice of Mr Coe that pauses had occurred in the annual valuation process, such that valuations did not occur in 1993, and possibly 1991.
           In comparing therefore the percentage change in valuations, I note that there had been a steady growth between 1984 ($7,720) and 1990 ($17,200), which was seen as reasonable by Mr Woch.  The lack of any variation in the subsequent valuations from 1990 to 1996 (at $17,200) has been accepted by Mr Woch as an indication of the status of the market during that period.  However Mr Coe argues that other sales evidence for residential property had shown growth during that period, and the lack of growth in "Local Business" values merely reflected a Departmental reluctance to increase those values because of a paucity of "Local Business" sales.
However, in the matter of whether any large percentage increase in valuations is a relevant argument, I note the decision in NR and PJ Tow v. The Valuer-General (1978) 5 QLCR, 378, where the Land Appeal Court said at p. 381:

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

Clearly what is relevant is not any change in percentage increases, but really what is the comparison of the subject with sales of comparable properties in the vicinity. 
           Both parties agree that the preferred method to determine unimproved value is to compare the subject to sales of vacant, or near-vacant land, within the relevant period.  This principle has long been established by the Court, and was well-defined in PH Clough v. The Valuer-General (1981-82) 8 QLCR 70 (LAC) at p.76:

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

I turn therefore to the sales supplied by Mr White, and note first that Sale 4 did in fact not occur until five months after the date of issue of the valuation on 12 February 1996.  In respect of whether that sale is relevant to the valuation at 1 January 1996, I seek guidance in RG Murray v. The Valuer-General (1983) 9 QLCR 35 where the Court found at p.36:

"As is stated in the decision handed down by the learned President, the Land Court, and on appeal the Land Appeal Court, can only consider the primary production activities carried on on the land between the date of the valuation (31 March 1980) and the date of the issue of the valuation (12 February 1981).   "

As Sale 4 occurred after the relevant period, it is not to be afforded serious consideration in determining the current value of the subject.  Added to this disability, is the matter of whether an appropriate allowance has been made for the old building subsequently demolished on Sale 4.  For these reasons I find that Sale 4 provides little assistance in my considerations, noting also that Mr White only sought information from the vendor of Sale 4 on the conditions of the sale.  In this matter I note also that in assessing the value to be applied to an existing dwelling it should not be concluded that any reduction in the value of the improved property occurs only in the value of the land. As noted in O'Brien Nominees Pty Ltd v. The Valuer-General (1979)(LAC) 6 QLCR 280 at p.284:

"In such circumstances it is unrealistic to conclude that land, the commodity basic to the enterprise, has a minus or nominal value.  It is logical to assume that in times of adversity and depression, when purchasers pay less for properties as a going concern, that the lesser price attaches not only to the land component but also to the improvements.  The question facing valuers in analysing improved sales in these circumstances is what value is fairly to be attributed to the improvements?  "

I turn then to Sale 3, which is agreed by both parties as far superior to the subject.  In any comparison this clearly sets the upper limit at $110 per square metre plus 10% allowance for corner and rear access. 
           In examining Sale 2 I note that this occurred to an adjoining owner who had a special reason for acquiring the property in order to expand the existing mail centre and possibly paid an additional premium.  While Mr White has allowed for this in his applied value at $48,500 or $60 per square metre, for an agreed inferior sale, there is room for some latitude in that comparison.
           I turn then to Sale 1 which Mr White believes provides the clearest guide to the value of the subject.  Mr Woch argues that it is more relevant to compare the subject with the 1994 sale of Lots 7, 8 and 9 on RP 603411 at the corner of Seigle and Ford Streets, at $29,000, than to use Sale 1 which is nearly 2 kms from the subject.  I note that both parties agree that the subject is superior to Sale 1 because of the increasing passing traffic for retail properties.  Based upon the applied value of Sale 1 at $64.50 per square metre, the value of the subject should be greater than 650m² x $64.50 or $41,925.  The question then is by how much is the subject superior to Sale 1.
           I note also that Mr Woch believes the Chief Executive has a moral obligation to be conservative in determining valuations which are then used to raise revenue either through Land Tax or Local Government General Rates.  This accords with direction given to the courts by the High Court in Commissioner of Succession (SA) v. Executor Trustee and Agency Company of South Australia Limited and Others (High Court) (1946-47) 74 CLR 358 where Dixon J. at p.373 said:

"I have had the advantage of reading the judgment prepared by Williams J and agree in it.  I should like, however, to add for myself that there is some difference of purpose in valuing property for revenue cases and in compensation cases.  In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax.  While this difference cannot change the test of value, it is not without effect upon a court's attitude in the application of the test.  In a case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate.  "

In examining this matter, I note that Mr Woch has no objection to an increase over the former $17,200, but doubts the relevance of the large rise to $50,000. However it has been shown that the $17,200 for the previous valuation was in fact the result of a failure by the Chief Executive to review the "Local Business" properties over a period of six years. In questioning the value determined by the Chief Executive the onus of proof rests upon the appellant under section 33 of the Valuation of Land Act 1944:

"33.Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered.  "

In summary I believe the appellants have not adequately demonstrated that the Chief Executive has in fact made an error in his determination.

Conclusion:
           After having considered the whole of the evidence, I am not persuaded that the appellants have proved their case.  The appeal is dismissed and the valuation of Lot 2 on RP 605539 as determined by the Chief Executive at Fifty thousand dollars ($50,000) is affirmed.

(NG Divett)    
  Member of the Land Court