Heatham Pty Ltd v Valuer-General
[2017] QLC 26
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- Unreported Judgment
- Heatham Pty Ltd v Valuer-General[2017] QLC 26
- Add to List
Heatham Pty Ltd v Valuer-General[2017] QLC 26
Heatham Pty Ltd v Valuer-General[2017] QLC 26
LAND COURT OF QUEENSLAND
CITATION: | Heatham Pty Ltd as Trustee v Valuer-General [2017] QLC 26 |
PARTIES: | Heatham Pty Ltd as Trustee (appellant) |
| v |
| Valuer-General (respondent) |
FILE NO: | LVA014-16 |
DIVISION: | General Division |
PROCEEDING: | Appeal against valuation under the Land Valuation Act 2010 |
DELIVERED ON: | 1 June 2017 |
DELIVERED AT: | Brisbane |
HEARD ON: | 15 December 2016 Submissions closed 13 March 2017 |
HEARD AT: | Brisbane |
MEMBER: | WA Isdale |
ORDER/S: |
|
CATCHWORDS: | REAL PROPERTY – VALUATION OF LAND – OBJECTIONS AND APPEALS – QUEENSLAND – where appellant objects to valuation – where highest and best use of the land is in dispute – where site value is the basis of valuation. Land Court Act 2000 ss 4, 7, 17-24 Land Valuation Act 2010 ss 169, 170 Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1987-88) 65 LGRA Awad v Twin Creek Properties Pty Ltd [2011] NSWSC 920 Dr Yvonne Collen Pty Ltd v Valuer-General [2013] QLC 60 Edgarhead Pty Ltd v Valuer-General [2015] QLC 18 Fairfax v Department of Natural Resources and Mines [2005] QLC 11 ISPT Pty Ltd v Melbourne City Council & Anor 20 VR 447 JL and I Qualischefski & Others v Valuer-General (1979) 6 QLCR 167 Macarthur Central Shopping Centre Pty Ltd as TTE v Valuer-General (No. 2) [2016] QLC 80 Perpetual Trustee Company Limited v Department of Natural Resources, Mines and Water (2006) 27 QLCR 64 Surfers Paradise Resort Hotel Pty Limited v Department of Natural Resources and Mines (2007) 28 QLCR 313 NR and PG Tow v Valuer-General (1978) 5 QLCR 378 Westerman v Valuer-General [2013] QLC 65 |
APPEARANCES: | DD Purcell instructed by MinterEllison - Gold Coast for the appellant JP Hastie instructed by the Crown Solicitor for the respondent |
Background
- [1]Under the Land Valuation Act 2010 (the Act), the respondent has performed a routine annual valuation of the appellant’s property located at 429 Fairfield Road, Yeronga. The valuation is of the site as at 1 October 2014.
The dispute
- [2]The dispute was confined to a disagreement between the appellant’s valuer, Mr Neil Murphy, and the respondent’s valuer, Mr John Groenendyk. They were the only witnesses. Their disagreement was primarily about the highest and best potential use of the land.
- [3]The respondent valued the land at $3,800,000 and the appellant contended for a value of $3,000,000. The land, which is Lot 1 on SP 170619, County of Stanley, Parish of Yeerongpilly, has an area of 6,682 m2. It is in Brisbane City and, being non-rural land, is valued as a site rather than as unimproved.
The respondent’s position
- [4]The respondent’s valuation is based on what could be built on the site and be code accessable under the rules regulating development in the location. Code assessable means that such a development, conforming with the code, may be built as of right, without the need for a process of public advertising, rights of objection or Council approval being required with rights of appeal for objectors. A code accessable development is much more easily, quickly and reliably achieved. Since it could be built on the land the respondent has taken the view that this is the highest and best use of the land. Such a development would be a mixed use development. It could have commercial, retail and residential elements and be up to four storeys high, with underground car parking.
The appellant’s competing view
- [5]The appellant’s valuation is on the basis of the highest and best use of the land being for a four storey residential development with associated car parking. This is on the basis that, as at the date of valuation, the maximum allowable code assessable development is not the highest and best use of the land. The legal development intensity is higher than the practical limit.
The property
- [6]The land is located on the western side of Fairfield Road, Yeronga. Fairfield Road is a 4 lane, bitumen sealed road with a median strip and concrete kerbing and channelling. The median strip restricts access to vehicles coming from the north, requiring them to gain access by a signalised intersection at the corner of Kadumba Street, to the north of the land.
- [7]The land is irregularly shaped and falls to the west from about RL 12 to around RL 6. It has all major services available and is zoned DC1 for use as a district centre under the Moorooka – Stephens District Neighbourhood Plan made under the Brisbane City Plan 2014. There is an overland water flow path towards the western boundary, running north-south, where development would not be permitted in an area of about 750 m2.
- [8]At present the land is improved with a retail complex, child care centre and basement car park, consistent with the town planning applicable to the site. The structure is elevated on piers at the back to accommodate the contour.
The grounds of appeal
- [9]The appellant says that the value is not supported by comparable sales and is excessive when compared to them. It also does not properly reflect the characteristics of the land and the constraints on its use. Its value is said to be out of line with the valuations of comparable parcels.
The valuation methodology
- [10]Both valuers have valued the land by way of direct comparison with sales of comparable properties on a rate per m2 basis, allowing for the encumbrances which restrict development. The appellant’s valuer has, in addition, used a relativity analysis as a check method. There are no common sales between the valuers.
The appellant’s evidence
- [11]Mr Murphy, the appellant’s registered valuer, commenced his evidence by criticising the usefulness of the five sales relied upon by the respondent’s valuer, Mr Groenendyk. It is useful to consider them in turn.
- [12]Respondent’s Sale 1
Number 60 Shottery Street Yeronga. Its sale on 24 March 2015 was said to be significantly[1] after the 1 October 2014 valuation date. This was the primary deficiency.[2] It would otherwise be a good comparison.[3] It is only a fifth of the subject land’s size. It would be unreliable to make adjustments for movement in the market which took place early in 2015, when it rose quickly and substantially.[4] Mr Murphy was of the opinion that this smaller block has a different market to the subject land as smaller sites can be developed more quickly. Large developments have much higher construction costs.[5] It has the same zoning as the subject, is a corner site and is rectangular.[6] It was the respondent’s primary sale as it is close to the subject and has the same zoning and similar exposure and amenity.[7]
- [13]Respondent’s Sale 2
This is three houses located at 15, 17 and 21 Yeronga Road, Yeronga. They were bought together on 12 July 2013 for demolition to obtain an area of 1169 m2 zoned Low Medium Density 2. A 3 storey complex with car parking on the ground was developed there.[8] Mr Murphy was of the view that the early date, smaller area and different zoning, as well as location on a back street, made this sale unsuitable for comparison with the subject.[9] The land was improved with houses. The Valuer-General’s valuation does not refer to any allowance for the cost of demolition to achieve vacant land or for infrastructure credits associated with the existing buildings.[10] Dividing the sale price into the area, which appears to have been the intended operation, should show $1,779 per m2, rather than the $1,169 per m2 shown in the valuer’s report.[11]
- [14]Respondent’s Sale 3
This is a 2430 m2 parcel of land at 902-906 Logan Road, Holland Park West. The analysed per m2 rate has been arrived at by dividing the sale price by the area. No allowance was shown to have been made for demolition of the existing houses or for infrastructure credits.[12] There would also have been a need for site works, namely cut and fill, and retaining walls.[13] It has uninterrupted city views obtainable from ground floor units.[14] At 2.430m2, it is considerably smaller than the subject.[15] There are a number of vendors and it would be necessary to investigate whether a premium was paid to anyone in order to achieve the sale.[16]
- [15]Respondent’s Sale 4
This is 90 Waldheim Street, Annerley. The 5,147 m2 block sold for $4,200,000 on 13 May 2015. Although similar in size to the subject, the sale was agreed in 2014 with a very long settlement date. Mr Murphy said that the purchase price included GST.[17] The contract was subject to obtaining a development approval,[18] it was not an unconditional cash contract. There was no allowance made for demolition of the house and squash courts or for about $86,000 in infrastructure credits associated with the site.[19] This is a good corner site, next to a school, in a quiet area with easy access to bus transport and the M1 motorway.[20]
- [16]Respondent’s Sale 5
This lot is 8,331 m2 at 587 Barrack Road, Cannon Hill. It sold for $3,100,000 on 28 November 2011. It is zoned Emerging Community and is an old sale in a rising market. It was basically unimproved and would require a small amount of retaining structure and therefore an adjustment to account for that.[21] The respondent has not made such an allowance, simply dividing the sale price by area to arrive at a rate per m2. The respondent’s report notes that this land resold in 2016 for $3,225,000.[22] Mr Murphy did not find that useful.[23]
Cross-examination of Mr Murphy
- [17]In cross-examination, it was pointed out to Mr Murphy that the subject land is zoned for, and is used for, some commercial or retail use. It is a drive-in convenience centre.[24] He maintained that its highest and best use is residential.[25] A purchaser would not, he said, take advantage of the ability to establish commercial and retail uses on the land.[26]
- [18]
- [19]Mr Murphy’s best, most comparable, sale was his first one, at 295 Fairfield Road, Yeronga. It is located about 350 m north of the subject. With an area of 16,860 m2, it sold in August 2014 for $4,500,000. It was formerly occupied by the RSPCA and the vendor was the State of Queensland. It was valued by the Valuer-General at $3,800,000 as at 1 October 2014. Allowing costs of $600,000 for decontamination and $150,000 for flood mitigation, both amounts to be paid by the purchaser, and with a reduction of $150,450 for infrastructure credits, Mr Murphy values the site at $5,000,000. He assesses it as having superior location within walking distance of Fairfield Gardens neighbourhood shopping centre and the cricket club at a nearby park. It has superior exposure with 170 m of frontage to Fairfield Road. Access is comparable and the topography superior. The useable area is 13,421 m2 with 3,439 m2 as parkland. He has valued the useable area at $373 per m2. Mr Murphy sees economies of scale as relevant in view of the large size.[29] This may be contrasted with his comment about higher construction costs associated with larger developments when he was referring to the respondent’s Sale 1.[30] The community facilities (community purpose) zoning[31] is inferior to the subject. The figure of $373 per m2 was obtained by taking the sale price, allowing for the decontamination, flood mitigation and infrastructure credits and then dividing that into the total useable area.[32] The site value which he applied was $283 per m2, a figure obtainable by dividing the Valuer-General’s valuation of $3,800,000 by the useable area of 13,421 m2.[33] Mr Murphy stated that he relied on the $373 per m2 figure in his analysis.[34]
- [20]When cross-examined about the costs of obtaining development approval it was necessary for the Court to remind the witness of the need to answer the question asked and to avoid advocacy.[35] It was soon necessary to repeat the caution[36] when questioning moved to the development condition which required the developer to provide a community hall.[37] The cost of that was not considered in Mr Murphy’s analysis.[38]
- [21]The development approval is Exhibit 8. It includes condition number 18, that no vehicular access is permitted via Fairfield Road. The community hall is, by condition 11, allowed to be used as a temporary sales office until 30 September 2021. Condition 47 requires the granting of easements in favour of Brisbane City Council for drainage and access as well as for public thoroughfare and public access to the community hall’s designated parking areas.
- [22]Sale 2 used by Mr Murphy was of 810 m2 at 586 Sherwood Road, Sherwood. It sold for $510,000 in November, 2013.[39] Zoned for medium density residential use, it was improved with an older style residence.
- [23]Dividing the area into the sale price shows a rate per m2 of $630 but $654 per m2 was applied. Mr Murphy did not make any allowance for the age of this sale, about 11 months before the valuation date.[40] He said that the $654 per m2 was applied to the land “once it was in use with the … four-storey, 12 unit development”[41] that the purchaser applied for after the sale.[42] Mr Murphy agreed that he had simply taken the respondent’s site value as at 1 October 2014 and divided that by the land area to arrive at the $654 per m2.[43]
- [24]He has relied on that in his analysis[44] when it does not relate to the sale, so it could not be considered to be a figure derived from an analysis of the sale, the method claimed to have been employed.[45] Mr Murphy then appeared to accept this comparison was not a valid one.[46] The land is 8.25 times smaller than the subject.[47] Mr Murphy said that there was a paucity of comparably-sized sales in the area and that it presents difficulties as a comparison to the subject.[48] He appeared unwilling to surrender reliance on it although agreeing that it was hard to compare with the subject.[49] In January 2011, the entire site was flooded to at least a depth of 1 m. In some areas it was up to 2 m under water.[50] The redevelopment for units was subject to impact assessment.[51] The development approval, Exhibit 11, shows in condition 28 that 2.25 m along the whole frontage to Sherwood Road was required to be dedicated for road widening, and condition 30 required the granting of easements as required for drainage. Exhibit 12 shows the easement. It was on the title at the time that Mr Murphy prepared his report.[52] He did not locate it[53] and had no regard to it in his analysis.[54]
- [25]Sale 3 used by Mr Murphy was of 6,988 m2 which he reported as having been sold for $2,000,000 in May 2015. It is located at 1128 Cavendish Road, Mt Gravatt East and was zoned Emerging Community. It was sold partially improved with a residential dwelling. The actual sale price was revealed in cross-examination to have been $2,200,000.[55] Mr Murphy had used a rate per m2, obtained by dividing the sale price by the total land area, of $286 per m2. When calculated using the actual sale price, that figure should be $315 per m2.[56] The costs of clearing the vegetation on the site have not been allowed for.[57] There was a development approval for an impact-assessable 4 storey, 37 unit residential development with 2 levels of basement parking and 201 car parks. A 6 metre strip was required to be dedicated for road purposes.[58] The analysis, however, valued the land without allowing for this loss of area although Mr Murphy referred to it in his report.[59] The loss of area was from the entire 148 m frontage so the loss was 148 x 6 = 888 m2 from the 6,988 m2 parcel, which is a significant area. The sale price was agreed in 2013,[60] settlement was delayed until the higher use was obtained,[61] which removed the element of risk in achieving the approval.[62]
- [26]
- [27]
- [28]Mr Murphy did not realise that the sale price was not for the whole property but only for a 7/8 interest in it,[68] which made his analysis unreliable.[69] He used the respondent’s site value for the land for the purposes of his analysis. Dividing the sale price into the area is not a valid method of finding what was paid on a per m2 basis where the land is sold improved with a rental income so he used the respondent’s applied value.[70]
- [29]Mr Murphy analysed sale 4 on the basis of the respondent’s applied value. He analysed sale 3 on the basis of its price. Sale 2 was analysed on the basis of the respondent’s applied value. Sale 1 he analysed on the basis of its sale price. His approach was inconsistent.[71] Mr Murphy asserted his belief in the correctness of the rates he used and the adjustments he made,[72] but agreed that his methodology was not consistent with applying a direct comparison approach.[73] The only sales analysis that he did was in regard to his sale 1.[74]
- [30]Mr Murphy made a 20 percent allowance on the overland flow area of the subject land and no allowance for the overland flow path on his sale 4,[75] which is something that he should have done.
- [31]Mr Murphy reported[76] that a two or three storey residential mix was permitted on this site. In fact the maximum height for a code-assessable use on the site is two storeys.[77] He reported that the sale had a slightly inferior height limit compared to the subject[78] where the limit is four storeys. He agreed that it was more than slightly inferior in this regard.[79] Mr Murphy accepted that his analysis of this sale was unreliable.[80]
Mr Murphy’s check method of relativity analysis
- [32]This was described as a check method. It is noteworthy, as was pointed out in cross-examination, that all of Mr Murphy’s sales apart from Sale 1 were effectively a relativity exercise.[81]
- [33]It is clear that Mr Murphy did not put this method forward as a primary method of valuation, employing it only as a check. The limitations of this method of valuation have been considered by this Court in cases such as Dr Yvonne Collen Pty Ltd v Valuer-General[82] where no sales were put forward by the appellant but comparisons were made with the respondent’s valuations of some nearby land. The Court said:
“[13] The appellant’s case was based on how the value of its land compared to the values which the Valuer-General had placed on two nearby parcels of land. The present question before the Court however, is not how the value of the subject land compares to valuations placed on surrounding blocks, but rather what is the correct valuation of the subject land itself. Land Court Member Scott considered this issue in Thomson v Department of Natural Resources and Mines. The learned Member said that:
“[7] This issue has come up on more than one occasion in the past, one example being found in Gibson v Chief Executive, Department of Lands (V92-64 unreported Land Appeal Court 9 June 1995) at 6:
‘We reiterate what has been said often before – and what is Mr Tighe’s chief concern – the importance of correct relativity in the equitable distribution of the rating burden cannot be overstated. However the question before this Court is the correct valuation of the subject land, not the correct valuation of an area. It would not advance the appellant’s case to satisfy us that her neighbour’s land was undervalued: … The appellant must show that the valuation of her land was incorrect.’
[8] A similar opinion is expressed by the Land Appeal Court in Bignell v Chief Executive, Department of Lands (AV92-65 unreported Land Appeal Court 4 March 1996) at 11:
‘What has to be decided in this case is the proper value of the subject land by reference to sales evidence about comparable unimproved properties. … If a proper valuation of the subject land makes it inconsistent with the relative values of neighbouring blocks then so be it. The question before this Court is ‘the correct valuation of the subject land, not the correct valuation of the area’.”
[14] In Steinback v Valuer-General [2012] QLC 8, Member Smith considered this use of relativity of values. At [16] the learned Member said:
“As I pointed out in the case of Burnett v Department of Natural Resources and Water:
‘This is a difficulty often faced by appellants in VLA matters who rely on relativity as one of their grounds of appeal. It is not enough for an appellant to simply demonstrate that the value of the appeal block is out of kilter with other nearby blocks. They need to go further to demonstrate that the values of those other blocks are correct, and that the value of the appeal block is incorrect. This is because it is the primary function of the Court to determine the unimproved value of the land subject to appeal. Changing an issued valuation simply because other valuations may be wrong would only tend to exacerbate the error. Of course, this is a generalised statement, and each case must be determined on its own facts.’” [references omitted]
[15] The learned Member made this point again in Lawson v Valuer-General [2012] QLC 27 at [29]. The authorities of Burnett and Lawson were applied in Enright Hendy and Partners Investments Pty Ltd as Trustee v Valuer-General [2012] QLC 38.” (reference omitted)
- [34]The property at 4 Cowper Street, Yeronga, was valued on 1 October 2014 at $1,300,000. With an area of 1,427 m2 the site value rate is $911 per m2. Like the subject, it is affected by an overland flow path. It is not superior to the subject and is comparable.[83] It is close by the subject[84] and “getting up towards double the site value that was applied to the subject site.”[85] This is because it is significantly smaller.[86]
- [35]The property at 451 Fairfield Road, Yeronga was valued on 1 October 2014 at $1,150,000. With an area of 1,510 m2, its site value is $761 per m2. It is close to the subject and has the same zoning.[87]
- [36]It has a frontage of 31 metres to Fairfield Road. Its rate per m2 is well in excess of that applied to the subject.[88]
- [37]The property at 38 Brougham Street, Fairfield is more than 1 km north of the subject. It has the same zoning.[89] It has a significant history and future risk of flooding[90] but is in a superior location.[91] It has access to a quiet suburban street,[92] not to Fairfield Road, to which the subject has frontage as part of its three street access.[93] It is valued at $3,400,000 and has an area of 5014 m2. Its site value rate is $678 per m2.
- [38]The property at 36 Fairfield Road, Yeronga has a significant history, and future risk, of flooding.[94] It is valued at $2,100,000 and has a site area of 4,059 m2, giving a site value rate of $517 per m2.
- [39]Mr Murphy was not cross-examined about his remaining comparison. It is at 391 Fairfield Road, Yeronga. Valued at $3,100,000 it has an area of 4,890 m2 and a site value rate of $634 per m2. It is described in Mr Murphy’s report[95]as having comparable location, access and exposure. It is located directly opposite to the subject and has a 72.7 m frontage to Fairfield Road and a 55.7 m frontage to Kadumba Street. It is not subject to overland flow and has superior topography. The maximum building height is four storeys.
- [40]In re-examination, Mr Murphy said that he had not made any allowances for conditions in development approvals in any of the sales he used. He said it was not common practice to do so.[96]
The respondent’s evidence
- [41]The respondent’s witness was Mr John Groenendyk, a registered valuer. He confirmed his report.[97] In Mr Groenendyk’s opinion, the sale relied on by Mr Murphy at 295 Fairfield Road, Yeronga was not an appropriate comparative in view of its size, flooding and contamination, and its largely unimproved state.[98] He did not know the costs required to build it up to a state where it would be comparable to the subject.[99] It was formerly a rubbish dump.[100]
- [42]In cross-examination, the valuer’s sales evidence matrix[101] was examined and it was pointed out that matters such as demolition costs and infrastructure credits which should have been taken into account were not expressed and accounted for. There was, in the document, no evidence that the valuation had been carried out correctly.[102] To the challenge that the absence of evidence as to analysis meant that his report could not be relied on,[103] Mr Groenendyk replied that he had selected sales which needed little in the way of site works and adjustments.[104] It is nevertheless the case that adjustments for such items as demolition costs and infrastructure credits should have been shown so that the valuation report is a proper “speaking” report which is reflective of the actual analysis made and proves that it did take place.
- [43]The sale at 60 Shottery Street, Yeronga, is Mr Groenendyk’s “best comparison”.[105] With an area of 1,383 m2, it sold on 24 March 2015 for $1,776,000. It is zoned the same as the subject. There is no adjustment for demolition of the house or realignment of the stormwater pipe.[106] The witness was taken through costs not taken into account and responded that he had not been able to obtain the actual costs.[107] He had not allowed for demolition costs of three houses on “the assumption” that infrastructure credits cancelled out the demolition costs.[108] He agreed that the Court had only his word that he had undertaken an analysis in respect of the demolition costs being equalled by the infrastructure credits.[109]The Court, in performing its task, must be guided by the evidence before it and where the report does not show evidence of an analysis it is deficient in that respect. There is no evidence before the Court in respect of any investigation of any of the sales relied on by Mr Groenendyk.[110] Where there was development risk associated with impact assessable development on a low-medium density residential site it was not taken into account[111] as Mr Groenendyk did not feel that it needed to be considered.[112] Rather than analysing sales in a way which documents the process, the valuer has internalised the exercise, no doubt applying his expertise. Not documenting an analysis makes it impossible for the Court to see what has been done so that it could be satisfied as to what was done.
- [44]In re-examination, Mr Groenendyk expressed the view that mixed use centres are successful.[113]
The appellant’s submissions
- [45]The appellant contends that the highest and best use of the subject land is as a residential unit development over four levels with basement car parking. The respondent has proceeded on the basis that the highest and best use is what could be built there and be code assessable. This means, in practice, a mixed use development with the same four storey height limit.
- [46]The appellant is critical of what it says is the inconsistency of the respondent’s approach between the present case and another case heard before this Court only two days before. The respondent was represented by different counsel in that case. The Court must consider each case on its own merits and will not be influenced by what has occurred in the other case.
- [47]It is fairly conceded by the appellant that its valuer has only analysed one sale, the one at 295 Fairfield Road, Yeronga. The appellant points out that Mr Groenendyk claims to have analysed all of the sales he used even though there is no evidence which can be looked at to show the analysis. It submits that there is no presumption of correctness of the valuation appealed against and that Mr Murphy’s evidence ought to be preferred.
- [48]The Court notes that s 169(3) of the Act provides that “the appellant has the onus of proof for each of the grounds of appeal”. Section 170 of the Act provides that the Court may confirm the valuation or reduce or increase it to the amount it considers necessary to correctly make the valuation under the Act.
- [49]Section 169 and 170 of the Act are in the following form:
169 Nature of hearing
(1) The hearing must be limited to the grounds stated in the valuation appeal notice.
(2) The appeal must be by way of a rehearing.
Note—
See also section 256 (Particular evidentiary provisions for valuation appeals).
(3) However, the appellant has the onus of proof for each of the grounds of appeal.
170 Order on valuation appeal
The Land Court may—
(a) confirm the valuation appealed against; or
(b) reduce or increase the valuation to the amount it considers necessary to correctly make the valuation under this Act.
Note—
The Land Court Act 2000 and the rules under that Act apply for valuation appeals and further appeals to the Land Appeal Court—see sections 5 and 21 of that Act.
- [50]The appellant submits that, in ascertaining what the hypothetical prudent purchaser would pay for the land on the valuation date, it is not correct to have regard to facts such as the details of development approvals and the costs associated with them when those facts were not known at the relevant date.
The respondent’s submissions
- [51]The respondent submits that the appellant has failed to discharge the onus which is imposed by s 169(3) of the Act. This is so, it is argued, due to the valuation evidence relied on by it. It is submitted that there was only one sale analysed, the other sales having been analysed only by reference to the respondent’s applied value, not the sale value. Accordingly, the failure to follow the method claimed to have been applied has rendered useless the reliance on sales which were not in fact analysed.
- [52]Attention was drawn to the inconsistencies in Mr Murphy’s methodology which resulted in only one sale actually being analysed.
The appellant’s reply submissions
- [53]The appellant submits that the current legislative scheme, where there is no presumption of correctness of a valuation, and where the appellant has the onus of proof for each of its grounds of appeal, has the corollary that the respondent must lead positive evidence to substantiate the issued site value.
The respondent’s reply submissions
- [54]The respondent focused attention on the Court’s task as being to determine whether the appellant has discharged its onus. It submits that should the Court not be satisfied that the valuation should be some figure on the basis of the evidence presented, then the valuation as issued should stand since the appellant would not have satisfied its onus of proof.
The legal framework
- [55]It is uncontroversial that the land is required by the Act to be valued on the basis of its site value, and there is no issue as to the meaning of that expression. The valuers both proceeded on the same, correct basis, which the Act requires, at least at this fundamental level. The Act has, by sections 17 to 24, in effect codified the long standing principles of valuation applicable in this area. What must be determined is the “expected realisation”[114] of the land if it was held as unencumbered in fee simple and it was “negotiated for sale as a bona fide sale.”[115] Section 18 of the Act defines a “bona fide sale” in a way which reflects the meaning which the Courts have long applied to the concept. There must be willing, but not anxious, parties, a reasonable period allowed within which to negotiate the sale, and the property was reasonably exposed to the market.[116] The valuation must assume that there is a fair market transaction, not a forced sale. For instance, section 23 lists site improvements, such as clearing, which formerly had to be allowed for in valuations when the statutory requirement was to find unimproved value. This is no longer the case for land such as is being considered here. The valuation process is somewhat simplified by this change. In the present case there is no difference between the parties relating to this aspect of the valuation process.
The use of sales
- [56]It is well established that the best test of value is to be found in the sales of comparable properties. In NR and PG Tow v Valuer-General (1978) 5 QLCR 378, the Land Appeal Court constituted by Stable SPJ, Mr Smith and Mr Carter said at page 381:
“Courts of the highest authority have laid down that the best test of value is to be found in the sales of comparable properties, preferably unimproved, on the open market round about the relevant date of valuation and between prudent and willing, but not over-anxious parties.”
The Court’s approach
- [57]This Court is not an investigating tribunal and must rely on the evidence put before it by the parties. In JL and I Qualischefski & Others v Valuer-General (1979) 6 QLCR 167, the Land Appeal Court in its judgment said, at page 172:
“Neither this Court nor the Land Court in the subject jurisdiction may assume the role of an investigating tribunal requiring the Valuer-General to substantiate his case. This is in contradistinction to jurisdiction conferred under the Land Act.”
- [58]Although a specialised judicial tribunal[117] not bound by the rules of evidence,[118] this Court must consider the evidence put before it by the parties and is not able to substitute its opinion for that of an expert or to comminute the expert evidence and construct its own opinion from fragments of the expert’s views.[119]
- [59]The valuation is required by the Act to be made on a particular day, in this case 1 October 2014. The notional sale price on that day is assumed to be arrived at with the parties in possession of all of the relevant information then available. As then President Trickett said in Fairfax v Department of Natural Resources and Mines[120]
“[11] The principles for determination of the "market value" of land were established by the High Court in Spencer v The Commonwealth (1907) 5 CLR 418. In that case, the High Court found that the value of land is determined by the price that a willing but not over-anxious buyer would pay to a willing but not over-anxious seller, both of whom are aware of all the circumstances which might affect the value of the land, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding facilities, the then present demand for land and the likelihood of a rise or fall in the value of the property. (See Griffith CJ at 432 and Isaacs J at 441).
[12] It has been well established that the unimproved value of land is ascertained by reference to prices that have been paid for similar parcels of land. In Waterhouse v The Valuer-General (1927) 8 LGR (NSW) 137 at 139, Pike J said that:
"Land in my opinion differs in no way from any other commodity. It certainly is more difficult to ascertain the market value of it but - as with other commodities - the best way to ascertain the market value is by finding what lands comparable to the subject land were bringing in the market on the relevant date - and that is evidenced by sales.""
Expert evidence
- [60]Both witnesses are experts in a relevant and recognised field of specialised knowledge. They are qualified to have a privilege that is not generally given to witnesses, to give evidence of their opinions. The witnesses must in return explain how they have arrived at their opinion, and justify their methodology.[121] This may be described as a speaking valuation. It is necessary for the valuer to sufficiently disclose the reasoning to permit it to be tested.[122]
Mr Murphy’s valuation approach
- [61]Mr Murphy was of the view that the highest and best use of the land is for a residential unit development over four levels with basement car parking. This is despite the planning scheme allowing for a code-assessable District Centre of up to 4 storeys with associated underground car parking. The zoning allows for “a mix of uses and activities and includes a concentration of land uses including retail, commercial, residential, offices, administrative and health services, community, small-scale entertainment and recreational facilities capable of servicing a district.”[123] The photographs on pages 1 and 6 of Mr Groenendyk’ s report[124] show the retail centre which is presently in place. It includes shopping, a child care centre and associated basement car parking.[125] It is a successful development.[126]
- [62]Early in his cross-examination, Mr Murphy revealed the assumption upon which he made his valuation. The passage is sufficiently important to be reproduced.
“MR HASTIE: Thank you, your Honour.
And, Mr Murphy, whilst again accepting that you’re not a town planner, but drawing on your general experience as a valuer and as an individual with a familiarity with the processes involved in the development of land, you’d accept that a development application that complies with the relevant codes, where it’s subject to code assessment, is, generally speaking, required to be approved by the council?‑‑‑Correct.
All right. Well, having regard to the provisions of the planning scheme which we’ve just discussed, and the fact that there’s a long, established commercial use on the subject land, would you not accept that the highest and best use of the subject land is something more than a purely residential use?‑‑‑No.
So it’s your evidence to this court that notwithstanding the subject land is not only capable, but has a history and is intended to continue to be used by the planning scheme for some commercial or retail use, the highest and best use is purely residential?‑‑‑Correct.
All right. Would you agree with me that mixed use developments including – which incorporate commercial and retail space, with residential units above, have become very commonplace and are popular in Brisbane over the past few years, certainly at the date of the sale? Agree with that?‑‑‑Oh, there’s – there’s – there’s a number of them, but not – not on large sites in these locations, no.
It – no, that’s not what I’m asking. I’m simply asking you to agree with the proposition that mixed use development has become a popular form of infill development in the inner suburbs of Brisbane in recent years. You’d agree with that?‑‑‑There’s a – yes.
And do you accept that there was, as at the date of the sale, a clear demand for residential living which is collocated with commercial and retail services? Agree with that?‑‑‑For the – for the residential living, yes.
No. What – no. My question was ‑ ‑ ‑?‑‑‑So there’s not – there’s not a demand for the – for the retail, no. I disagree.
Right. So it’s your evidence to this court that there was no demand in Brisbane, as at the date of the relevant sale, for residential units collocated with commercial and retail uses?‑‑‑There’s limited. Not – no. Limited demand.
Limited demand only?‑‑‑Correct.
Notwithstanding you’ve just given the evidence to the court that these developments have sprung up all over Brisbane during that relevant period?
MR PURCELL: Well, objection, your Honour, that’s not quite the evidence that was given by Mr Murphy.
HIS HONOUR: The objection is allowed. That’s not exactly what he said, but I’m sure you’ll develop that.
MR HASTIE: Yes. I’ll withdraw that, your Honour.
Mr Murphy, it was your evidence to the court that you accepted that they’d been a popular form of development in Brisbane over recent years. That was your evidence, wasn’t it?‑‑‑There – there’s been many of those development types throughout Brisbane, yes.
Yes. And now you’re also asking the court to accept that there was only limited demand for those sorts of developments?‑‑‑In this location, correct.
In this location?‑‑‑Correct.
All right. Moving on. And as a matter of logic, that demand, which we’ve just discussed, whatever your views on that demand may be, you would accept that, as a matter of logic, that demand can only be met on sites on which the council will permit the establishment of commercial and retail uses, correct?‑‑‑Correct.
And it’s your evidence to this court that the purchaser of the subject land would not take advantage of that ability to establish commercial and retail uses on that land?‑‑‑Correct”.[127]
- [63]Although Mr Murphy’s evidence, when he was cross-examined, was that there was “limited demand” for mixed use development on land of this size, “in this location”, his evidence was that there is in fact such demand, albeit limited. This “limited” demand can be understood in the context of his evidence that “there’s been many of those development types throughout Brisbane, yes.”
- [64]Despite acknowledging that there was a demand for the sort of development able to be built on the land as of right, in that it is code-assessable and, if compliant with the development code, does not carry the risk of being successfully objected to, Mr Murphy imposed on himself and his valuation process the handicap of an assumption, set out in the last three lines quoted above and not supported by evidence, which reduced the land’s highest and best use below that permitted by the planning scheme.
- [65]No satisfactory basis for that handicap exists in the evidence. It has occurred at the outset and affects everything that follows it in the valuation process.
- [66]In Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources, a case concerning the resumption of land, the resuming authority provided two valuations. One was based on the assumption that the highest and best use of the land was residential and the other on the basis that it was commercial. At p 415, Jacobs J, said:[128]
"It may be that Mr Goodwin was influenced in his general approach by the absurdly low amount paid into court by way of an offer of compensation, but for whatever reason I am satisfied that his approach is tainted by error and I am unable to rely upon his evidence. In the first place, it is my view, wrong in principle to determine the highest and best use by comparison of the notional market for commercial development on the one hand, and residential development on the other. Common experience shows that land ideally suited for commercial development will fetch a higher price per unit of area than residential land, but it does not follow that the highest and best use of all land is a commercial use, for the highest and best use means exactly what it says – the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential. The first task of the valuer is to determine what that use is and then to value the land on the basis. It is not appropriate to determine the highest and best use by reference only to value."
- [67]The Court could not make the finding sought in this case, that the highest and best use is limited to the residential possibility offered by Mr Murphy, in the presence of his evidence that there is a demand for the mixed use development allowed under the planning scheme.
- [68]The appellant submits that the Court has a duty to determine the site value of the subject land but acknowledges that this is subject to the grounds of appeal and the appellant’s onus of proof.
- [69]It is not the case, however, that the Court is limited to the orders referred to in s 170 of the Act and could only confirm the valuation appealed against or change the valuation to the correct figure. The Court has the powers conferred under s 7A of the Land Court Act 2000, which provides:
7A Land Court has power of the Supreme Court
- (1)The Land Court has, for exercising jurisdiction conferred under this Act or another Act, all the powers of the Supreme Court, and may in a proceeding before the Land Court, in the same way and to the same extent as may be done by the Supreme Court in a similar proceeding—
- (a)grant any relief or remedy; and
- (b)make any order, including an order for attachment or committal because of disobedience to an order; and
- (c)give effect to every ground of defence or matter of set-off, whether equitable or legal.
- (2)Without limiting subsection (2), the Land Court has, in a proceeding before it, power to grant relief—
- (a)under a declaration of rights of the parties; or
- (b)under an injunction, whether interim, interlocutory or final, in the proceeding; or
- (c)by staying the proceeding or a part of the proceeding; or
- (d)by appointing a receiver including an interim receiver.
- (3)The Land Court may order that a record of, or information about, a proceeding before the Land Court must not be made available to the public.
- (4)Without limiting the things the Land Court may have regard to in deciding whether to make an order under subsection (4), the Land Court may have regard to Aboriginal tradition and Island custom.
- (5)Subsection (1) has effect subject to—
- (a)another provision of this Act; and
- (b)a provision of another Act under which jurisdiction is conferred on the Land Court.
- [70]Subsection 5 of section 7A makes subsection 1 subject to, for present purposes, section 170 of the Act. That section uses the words “The Land Court may” do one of the things which have previously been referred to. It does not purport to include the concept of that being all that the Court could do when exercising its jurisdiction in a case such as the present. Where there is no conflict, it appears that s 170 of the Act does not restrict the exercise of a power conferred by s 7A of the Land Court Act. This would include a power to simply dismiss an appeal where the onus of proof was not satisfied.
- [71]The approach of simply dismissing the appeal was adopted by the learned President in Macarthur Central Shopping Centre Pty Ltd as TTE v Valuer-General (No. 2).[129]
- [72]Since the valuation evidence put forward in support of the appeal is tainted by the adoption of an assumption shown, on the valuer’s own evidence, to be incorrect, it cannot be accepted by the Court. The result is that the appellant has failed to discharge its onus of proof of any of its grounds of appeal. The appeal must therefore be dismissed.
- [73]If it were the case that s 170 of the Act contains the only orders that the Court is able to make in this case, then the order of the Court will be that the valuation appealed against is confirmed.
A separate basis for decision
- [74]Mr Murphy stated that his primary method of valuation was by analysis of sales. Much has already been said about that. It is noted in addition that only one sale of his, Sale 1, was actually shown to have been properly analysed. His valuation is therefore, in effect, based on a sample of one sale only. This is an insufficient basis for a decision in favour of the appellant. The Court is left in the position described by the learned then President in Edgarhead Pty Ltd v Valuer-General [2015] QLC 18.[130] Her Honour said:
“[46] I am left in the position, therefore, where there are insufficient sales of vacant or lightly improved properties to support the value applied to the subject land. As the High Court said in Maurici v Chief Commissioner of State Revenue:
“A fair estimate [of the value of the subject land] could only be made here on the basis of a fair, that is to say, a reasonably representative group of comparable sales. A group of comparable sales cannot be representative if it does not go beyond sales of scarce vacant land.”” (reference omitted)
The respondent’s evidence
- [75]The respondent elected to lead evidence in support of the valuation appealed against. The grounds of appeal are wide enough to make that evidence relevant. The weaknesses in that evidence have been considered already at some length. The most serious weakness is the lack of disclosure in the report relied on by the respondent, Mr Groenendyk’s report, of the analysis claimed to have been performed. The Court is able to consider the evidence led by either party as evidence tending to support or contradict the valuation contended for by either party.[131]
- [76]It is legitimate to consider whether any of Mr Groenendyk’s sales support the case for the appellant. His best sale, at 60 Shottery Street, Yeronga, is for a much smaller area. It took place on 24 March 2015 but there was no adjustment made to reflect any market movement since the valuation date of 11 October 2014. There was no allowance for the cost of demolition of the three houses on the assumption that this would be neatly cancelled out by infrastructure credits. The large difference in allotment size compared to the subject, and the deficient analysis, does not allow the Court to make any use of this sale, either in support of the appellant’s case or that of the respondent.
- [77]The inadequate or non-existent analysis of the other sales renders them of no assistance to the Court. Equally, they are of no comfort to the respondent.
- [78]A consideration of all of the evidence before the Court leads only to the conclusion that there is nothing which would allow the Court to be satisfied that any of the grounds of appeal have been made out. Equally, there is not sufficient evidence to support the valuation as issued, but that is not the question before the Court. The appellant’s case has not been made out so its appeal must be dismissed. If this Court could only order, in such a case, that the valuation appealed against is confirmed, then it will do so.
Order
- The appeal is dismissed.
- The valuation appealed against is confirmed.
WA ISDALE
MEMBER OF THE LAND COURT
Footnotes
[1] T 1 – 8 L 20.
[2] T 1 – 8 L 19.
[3] T 1 – 8 L 27 – 28.
[4] T 1 – 8 L 22 – 24.
[5] T 1 – 8 L 36 – 40.
[6] T 1 – 8 L 27.
[7] Ex 1 Tab 6 p 13.
[8] Ex 1 Tab 6 p 15.
[9] T 1 – 9 L 1 – 10.
[10] T 1 – 9 L 27 – 28.
[11] T 1 – 9 L 12 – 19, ex 1 Tab 6 p 12.
[12] T 1 – 10 L 9.
[13] T 1 – 10 L 10.
[14] T 1 – 10 L 12 – 14.
[15] T 1 – 10 L 16 – 18.
[16] T 1 – 10 L 27 – 28.
[17] T 1 – 10 L 35 – 36.
[18] T 1 – 10 L 40.
[19] T 1 – 10 L 43 – 45.
[20] T 1 – 11 L 19 – 23.
[21] T 1 – 11 L 45 – 46.
[22] Ex 1 Tab 6 p 12.
[23] T 1 – 12 L 17.
[24] Ex 1 Tab 6 p 10.
[25] T 1 – 19 L 31 – 32, 34 – 37.
[26] T 1 – 20 L 43 – 45.
[27] T 1 – 23 L 7 – 11.
[28] T 1 – 23 L 36 – 43, Ex 1 Tab 6 p 5.
[29] Ex 1 Tab 5 p 7.
[30] T 1 – 8 L 36 – 40.
[31] Ex 1 Tab 5 p 6.
[32] T 1 – 26 L 1 – 6.
[33] T 1 – 26 L 15 – 16.
[34] T 1 – 26 L 20.
[35] T 1 – 39 L 21 – 36.
[36] T 1 – 41 L 11 – 13.
[37] T 1 – 40 L 35 – 45.
[38] T 1 – 41 L 6 – 7.
[39] Ex 1 Tab 5 p 8.
[40] T 1 – 50 L 43.
[41] T 1 – 51 L 25 – 26.
[42] Ex 1 Tab 5 p 8.
[43] T 1 – 52 L 13 – 18.
[44] T 1 – 52 L 31.
[45] T 1 – 52 L 25 – 27.
[46] T 1 – 52 L 35 – 36.
[47] T 1 – 52 L 45 – 46.
[48] T 1 – 53 L 12 – 14.
[49] T 1 – 53 L 20 – 23.
[50] T 1 – 53 L 42 – 47.
[51] T 1 – 55 L 20 – 22.
[52] T 1 – 60 L 23 – 24.
[53] T 1 – 60 L 26.
[54] T 1 – 60 L 28 – 29.
[55] T 1 – 62 L 41 – 46.
[56] T 1 – 63 L 15 – 16 and Ex 13.
[57] T 1 – 65 L 33 – 34.
[58] T 1 – 66 L 6 – 9.
[59] Ex 1 Tab 5 p 9, T 1 – 66 L 31 – 32.
[60] T 1 – 68 L 14 – 15.
[61] T 1 – 67 L 24 – 31.
[62] T 1 – 67 L 29.
[63] T 1 – 69 L 13 – 15, Ex 15.
[64] T 1 – 69 L 20 – 21.
[65] T 1 – 69 L 37 – 40.
[66] T 1 – 70 L 40.
[67] T 1 – 71 L 3.
[68] Ex 16, T 1 – 70 L 29 – 30.
[69] T 1 – 70 L 32 – 34.
[70] T 1 – 71 L 5 – 13.
[71] T 1 – 71 L 27 – 45.
[72] T 1 – 72 L 1 – 4.
[73] T 1 – 72 L 8 – 18, L 43 – 45.
[74] T 1 – 73 L 20.
[75] Ex 17, T 1 – 74 L 4 – T 1 – 75 L 4.
[76] Ex 1 Tab 5 p 10.
[77] Ex 18, T 1 – 76 L 25 – 26.
[78] Ex 1 Tab 5 p 10 iii.
[79] T 1 – 77 L 23 – 31.
[80] T 1 – 77 L 38.
[81] T 1 – 78 L 25 – 38.
[82] [2013] QLC 60. See also Westerman v Valuer-General [2013] QLC 65, [26]-[33].
[83] T 1 – 79 L 13 – 16.
[84] T 1 – 78 L 44 – 45.
[85] T 1 – 79 L 21 – 22.
[86] T 1 – 79 L 22.
[87] T 1 – 79 L 27 – 30.
[88] T 1 – 80 L 31.
[89] T 1 – 80 L 40 – 46.
[90] Ex 19, T 1 – 81 L 28 – 31.
[91] T 1 – 81 L 42.
[92] T 1 – 81, L 45.
[93] T 1 – 82 L 1 – 6.
[94] T 1 – 82 L 34 – 42.
[95] Ex 1 Tab 5 p 11.
[96] T 1 – 86 L 34 – 41.
[97] Ex 1 Tab 6.
[98] T 1 – 89 L 29 – 36.
[99] T 1 – 89 L 35 – 36.
[100] T 1 – 89 L 40 – 42.
[101] Ex 1 Tab 6 p 12.
[102] T 1 – 93 L 14 – L 40.
[103] T 1 – 95 L 43 – 47.
[104] T 1 – 96 L 1 – 2.
[105] Ex 1 Tab 6 p 12.
[106] T 1 – 108 L 40 – 47.
[107] T 1 – 109 L 10.
[108] T 1 – 115 L 7 – 9.
[109] T 1 – 115 L 22 – 26.
[110] T 1 – 115 L 41 – 44, T 1 – 117 L 9 – 15.
[111] T 1 – 119 L 5 – 7.
[112] T 1 – 119 L 9 – 10.
[113] T 1 – 126 L 11.
[114] Land Valuation Act 2010 s 17.
[115] Land Valuation Act 2010 s 17(1).
[116] Land Valuation Act 2010 s 18.
[117] Land Court Act 2000, s 4(1).
[118] Land Court Act 2000, s 7.
[119] ISPT Pty Ltd v Melbourne City Council & Anor 20 VR 447, [124].
[120] [2005] QLC 11, [11]-[12].
[121] Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, 743-744.
[122] Awad v Twin Creek Properties Pty Ltd [2011] NSWSC 920, per Brereton J, [10]–[12].
[123] Ex 1 Tab 5 p 3. Ex 1 Tab 6 p 10 para 21.
[124] Ex 1 Tab 6.
[125] T 1 – 16 L 9 – 11.
[126] T 1 – 16 L 13 – 14.
[127] T 1 – 19 L 20 – T 1 – 20 L 45.
[128] (1987-86) 65 LGRA 410. Applied in Surfers Paradise Resort Hotel Pty Limited v Department of Natural Resources and Mines (2007) 28 QLCR 313, [21].
[129] [2016] QLC 80.
[130] [2015] QLC 18, [46]. The reference was to Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111, [18].
[131] Perpetual Trustee Company Limited v Department of Natural Resources, Mines and Water (2006) 27 QLCR 64, [59]-[60].