Wyndare Pty Ltd v Department of Natural Resources and Mines
[2004] QLC 81
•28 September 2004
LAND COURT OF QUEENSLAND
CITATION: Wyndare Pty Ltd v Department of Natural Resources and Mines [2004] QLC 0081 PARTIES: Wyndare Pty Ltd
(applicant)v. Chief Executive, Department of Natural Resources and Mines
(respondent)FILE NO:
AV2003/0390
DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under Valuation of Land Act 1944 DELIVERED ON: 28 September 2004 DELIVERED AT: Brisbane HEARD AT: Proserpine MEMBER Dr NG Divett ORDER: The appeal is dismissed, and the unimproved value of Lot 2 on Plan S 9465 as determined by the Chief Executive in the sum of One Hundred and Twelve Thousand Dollars ($112,000) is affirmed. CATCHWORDS: Valuation – Sales – Analysis of Sales – Sale of subject land
Valuation – Sales – Analysis of sales – Impact of septic policy discussedAPPEARANCES: Mr Conroy for appellant
Mr Cradick for respondent
Background:
This matter relates to land at Bay Terrace, Shute Harbour, and described as Lot 2 on S 9465, Parish of Conway. The subject land is located about 11 kilometres from Airlie Beach, and has good access to Bay Terrace which is a cul-de-sac with a bitumen sealed roadway and concrete kerbing and channelling. Electricity, telephone, reticulated town water and a weekly garbage service are available. The subject land is zoned Urban Residential under the Whitsunday Shire Council town planning scheme effective at the date of valuation of 1 October 2002. There is no sewerage available to the subject land. The key issues are the impact of water views, comparison of sales and impact of the Council policy in respect of septic approvals.
On 27 February 2002 the Chief Executive issued a valuation of the subject land at $112,000. Following an objection the Chief Executive confirmed that figure on 17 June 2003. The appellant has now appealed claiming the unimproved value should more properly be $90,000.
Mr Bevan Conroy, a registered valuer appeared and gave evidence for the appellant. Mr A Cradick, Legal Officer with the Department of Natural Resources and Mines appeared for the respondent, calling evidence from Ross Malcolm Bein, the departmental registered senior valuer now accepting responsibility for determining the valuation. The original valuation was determined by another valuer who is no longer available to defend the valuation. With the agreement of both parties, a site visit was undertaken by the Court.
Nature of the Land -
The subject land is an irregular shaped parcel falling moderately from the road to the rear. There are ocean views of Shute Harbour to the east and north-east, including views of the Marina directly to the east of the subject land. There is no sewerage to the subject land and its small area would limit the installation of a septic system, which is restricted by the Council’s policy of rejecting septic installations, unless a “pump-out” facility can be provided, or a low cycle system requiring a transpiration area of 300 metres. The subject land is located on the fringe area of what is seen as the prestigious location in that area.
Comparison of Sales -
To support his valuation Mr Conroy relies upon the following sales of vacant lands:
· Sale 1 – (Neerim Crescent – Lot 5 on S 9463). This is a 564 square metre parcel located about 0.4 kilometres north-east of the subject land across the northern part of Shute Harbour. The sale is gently sloping towards the rear, with similar access and services to the subject land. The sale has ocean views to the south across Shute Harbour. Overall the sale is seen as marginally superior to the subject land. The sale sold in August 2002 for $100,000.
· Sale 2 – (Neerim Crescent – Lot 3 on S 9463). This is a 519 square metre parcel located near Sale 3, which has spectacular views to the east to Hamilton Island, and to the south across Shute Harbour. The sale is seen as significantly superior to the subject land and sold in September 2002 for $211,000.
· Sale 3 – (Neerim Crescent – Lot 7 on S 9463). This is a 716 square metre parcel located near Sales 1 and 2, with ocean views to the south over Shute Harbour, and limited ocean views to the north. The sale is seen as marginally superior to the subject land. There are similar features, services and access as Sales 1 and 2. The sale sold in December 2002 for $110,000.
To support his valuation, Mr Bein relies upon the following sales:
· Sale 1 – (Neerim Crescent – Lot 5 on S 9463). This is a common sale with Mr Conroy’s Sale 1. While the sale has frontage to Neerim Crescent and Harbour Avenue, there is no access to the latter. The sale is seen as having inferior access and views, and is smaller than the subject land, and is therefore inferior to the subject land. The sale sold in August 2002 for $100,000, was analysed at $95,000, and has been applied at $105,000.
· Sale 2 – (Neerim Crescent – Lot 7 on S 9463). This is a common sale with Mr Conroy’s Sale 3. The ocean views from this sale are to the west and are impacted by vegetation along the esplanade. Overall the sale is seen as having inferior views, and the sale also has an irregular shape. Overall the sale is seen as inferior to the subject land due to its inferior ocean views and inferior access due to its shape. The sale sold in December 2002 for $110,000, was analysed at $105,000, and applied at $96,000.
· Sale 3 – (Bay Terrace – Lot 2 on S 9465). This is the sale of the subject land, which sold in June 1999 for $127,500, was analysed at $127,500, and applied at $112,000. While an earlier sale Mr Bein argues that it supports his application of that property.
Mr Conroy argues that it is his opinion, based upon 20 years in the area, that the decision by the Whitsunday Shire Council (the Council) to implement the State Government policy of 1998 in respect of the refusal of septic systems upon small residential areas in that locality, did have an impact upon the market value of lands in Shute Harbour between 1998 and late 2002. He argues that uncertainty associated with the need to consider alternative sewerage disposal systems, such as “pump-out” systems, caused market levels to plateau for some time. He argues that until about 2003 the market needed to rethink methods of overcoming that disability with septic disposal. Mr Bein notes that estimates of additional recurring costs of about $200 per month for septic “pump-out” systems had been made, and were likely to continue until any future sewerage reticulation connections could be implemented by the Council.
In respect of the impact, if any, upon market levels as a consequence of the Council’s adopted policy on septic discharge, Mr Bein argues that has not impacted the values. He notes that matter was discussed before this Court in Zolgaze v Chief Executive, Department of Natural Resources (AV2000-453), 8 March 2002, unreported. Mr Bein rejects any impacts of those septic problems, but argues that the only difference between the parties really lies upon the impact of views on the sales and the subject land. It is also agreed that Mr Conroy’s Sale 2 is far superior to provide any real comparison to the subject lands.
Decision:
The evidence is that the property market in Airlie Beach between 1998 and late 2002 had initially remained steady, then rising about 20% to 30% in late 2002. Both valuers agree that during 2003 the market had then increased steeply. While Mr Conroy is of the view that the market had been influenced during that period by the Council’s policy on the septic effluence, he has no market evidence to demonstrate that understanding. Mr Conroy notes that the sale of the subject land occurred prior to the adoption of that policy by the Council. He also agrees that the subject land is more distant from the main Shute Harbour residential district, and is generally towards the fringe areas of that locality.
The key difference between the parties is their understanding of the impact of water views between Sales 1 and 2 and the subject land. Mr Conroy concedes that views are partly obscured from Sale 1 through vegetation on the adjoining Lot 4 to the south, but that in his opinion any difference between the views are not significant anyhow. The photographs of water views from the subject land supplied by Mr Bein (Exhibit 3), demonstrate the quality of views, although it is agreed those views would be enhanced from a second level upon the land. Mr Bein confirms that while he believes that Sale 1 (Lot 5) is superior to Sale 2 (Lot 7), the higher sale prices reflect the larger areas of the latter sale. While the matter of the quality of views is based upon the personal opinions of the two very experienced valuers, it is clear that the views from Sales 1 and 2 to the west across the esplanade in that location would have more obstructions, than views to the east from the subject land.
The Sale of the Subject Land –
Another factor in this matter I believe is the analysis of the sale of the subject land itself. Now unless there is something to discredit the reliability of that sale, it is generally held that the sale of a parcel should reflect its value in the market place. There was no suggestion that the sale of the subject land at $127,500 in June 1999 was other than a fair market price. Whether the later declaration of the Council’s septic policy caused a market rethink on values, would have occurred after that sale. The analysis and application of the sale of the subject land reflects the current unimproved value at $112,000.
I note that a sale of the subject land was considered by the High Court of Australia in Jowett v Federal Commissioner of Taxation (1926) 38 CLR 325, where Rich J said at 329:
"A sale of the subject land, or of comparable land, affords the best means of arriving at the fee simple value of any land … ."
The Land Appeal Court also considered the matter of the sale of the subject itself in The Chief Executive, Department of Lands v J and L Lorenzen (AV93-22) 1 June 1994, unreported, where the Land Appeal Court said at 4:
"Whilst we agree that a sale of the subject land should always be considered in assessing its value we hasten to stress that such a sale is only prima facie evidence of its value. The weight which will be given to the sale is dependent upon a number of factors, the most important of which is whether the sale is in reasonable conformity with the market as demonstrated by other sales of comparable land."
That matter was also examined by this Court in Determination of Rents and Unimproved Values for Conversion Purposes – Perpetual Lease Selections and Grazing Selections – Goondiwindi District (1974) 1 QLCR 45, where the President of the Court said at 48:
"... whilst a sale of a subject property around about the relevant date in normal circumstances is cogent evidence of its value, it is always necessary to check the analysed value against the standard reflected by other sales of comparable properties to ensure that it conforms to the 'norm' of the market. If the sale does not so conform caution must be used in its application and it may be even proper to reject it if it is shown to be a sale out of line with the market 'norm'. This check becomes vital, in my opinion, in times of a varying market be it rising or falling or in times of an erratic market. One cannot assume, ipso facto, that the analysed sale figure equates fair market value for the subject purposes."
In seeking support for the use of the sale of the subject land I note the findings of Inez Investments Pty Ltd v JL Dodd (1979) 26 The Valuer No. 6 and also "Land Valuation and Compensation in Australia" 3rd edition by Rost and Collins (1993) p.87. In that matter Carmichael J said at 505:
"… where a valuation of a piece of real estate is sought at a particular date the most relevant information for analysis is the sale of that very property, if there be one, at or close to that date. … A prime matter for investigation when a valuation is sought is to ascertain whether there is a contract for sale of the property and, if so, to make an analysis of that sale to see how it complies with the test of value which is laid down in Spencer's case. Failure to carry out these functions is to risk ignoring the best evidence of value."
It is important to note that Carmichael J was saying that the sales should be analysed and not merely adopted. In analysing the sale of a property the actual price of the land and improvements must be accepted and not adjusted by the valuer to bring it into line with a price which in his opinion that property should have realised. (Rost and Collins, 87). If the sale appears to be out of line with the market then the correct approach in the analysis is to reject the sale for comparison purposes (Collins & Ors v The Minister, 6 LGR 84.).
In assessing the sale price of the subject land within the market the approach to be taken was outlined in Best v Housing Commission of New South Wales (1949) 17 LGR (NSW) 129, where Sugerman J said at 130:
"At each end of this range there is a group of sales at a price which is uniform, or practically so, and disregards minor differences between blocks. The first question in the present case is where the subject land comes between these two extremes. When that question is answered, the evidence shows that the general approach of the defendant's valuer by way of fixing a basic price is the more correct one and that there is little room for such variations as are suggested by the plaintiff's valuers, particularly on the score of elevation and outlook.
However, I agree with Mr. MacFarlan that there is an error in the defendant's valuer's method in so far as he takes an average price derived from the comparable sales as a starting point. (see cf. McCathie v. Federal Commissioner of Taxation [1944] 69 CLR 1, at p.15). The correct approach is to assign the subject land by comparison to its proper place in the scale of values disclosed by the sales proved."
On that basis the sale of the subject land in the current matter is not challenged.
Impact of the Septic Policy –
If I turn to the matter of Zolgaze v Chief Executive, Department of Natural Resources (supra), I find that dealt with a residential parcel of 516 square metres (Lot 9 on S 9461), located in Passage Avenue, Shute Harbour about 150 metres to the north of the sales evidence in this matter. In the Zolgaze decision, the learned Member accepted the evidence of the valuer (Mr Bein) who had maintained an earlier allowance of $20,000 in the valuation for ongoing "pump-out" costs associated with the necessity to install a "pump-out facility" to service the septic system, as the small area of that parcel precluded adequate septic absorption trenches. The appellants accepted that an allowance for "pumping-out" for septic should be allowed, but argued that costs for such a disability should reflect $45,000 rather than the $20,000 allowed. The background to those allowances was explained in paragraphs [8] to [10] of the Zolgaze matter.
In respect of the quantum of the allowance of $20,000 made in that matter, the Member noted that there was "no particular science to determine the level of the allowance, nor any calculation that were presented. It merely represented an opinion as to what the market place would reflect based on the need to install a pump-out facility if the land was to be developed for its residential use prior to a sewerage system being put into place." (paragraph [28]). The Member further noted that purchasers in 1999 were probably unaware of the septic code and its implications. However later sales in 2000 and 2001 did not "indicate a downward trend in value as people presumably became aware of the code" (paragraph [31]). On that understanding the Zolgaze decision, while accepting Mr Bein's allowance of $20,000, supports his current conclusion that the market had adjusted to that code by October 2002 in the current matter.
Comparison of Sales –
If I look then at the comparisons of sales for vacant lands, I find both valuers have adopted a principle long upheld by courts at all levels as the most practicable method of determining unimproved values. I agree that Mr Conroy's Sale 2 (Lot 3) is far superior to the subject land, and provides little assistance, except to emphasise the premium that attaches to quality ocean views. In respect of the two common sales, I find the following comparisons:
SaleSale Price Applied Value Mr Conroy Mr Bein
Lot 5 $100,000 $105,000 marginally superior inferior
Lot 7 $110,000 $96,000 marginally superior inferior
While Mr Bein has made some allowance in his applications of those sales for their dates of execution, it is agreed that the difference of comparisons lies in the valuer's professional opinions of the ocean views available at each sale. Any moderation of those opinions, should be conditioned by the sale of the subject land itself.
If I look then at the sale of the subject land, I find that it has direct views across Shute Harbour to the east, while the views from the common sales are across timber on the esplanade to the west. On balance I believe that the subject land is slightly superior to both of the common sales. While the sale of the subject land occurred nearly 3½ years before the relevant date, it has been applied conservatively at only 88% in a steady market between 1999 and late 2002. On that basis that application supports the comparisons of Mr Bein with the two common sales.
Now Mr Cradick reminds me that the onus to prove their case lies with the appellant under s.45(4) of the Act, and that s.33 directs that unless the Chief Executive has followed a wrong principle, or made an error of fact or law, then the valuation of the Chief Executive must stand. That was directed by the High Court in Brisbane City Council v The Valuer-General (1977-78) 140 CLR 41, where Gibbs J found at 56:
"In my opinion once it is shown that in making the valuation the Valuer-General acted upon a wrong principle or made a serious error of fact, the presumption created by section 13(7) is rebutted."
(Section 13(7) as it then was is now section 33, which states that a valuation is deemed to be correct unless proved to the contrary.)
Conclusion:
Having considered the whole of the evidence I am not persuaded that the appellant has proved his case. The appeal is dismissed, and the unimproved value of Lot 2 on Plan S 9465 as determined by the Chief Executive in the sum of One Hundred and Twelve Thousand Dollars ($112,000) is affirmed.
NG DIVETT
MEMBER OF THE LAND COURT
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