Eastcote Pty Ltd v Valuer-General
[2018] QLC 11
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- Eastcote Pty Ltd v Valuer-General[2018] QLC 11
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Eastcote Pty Ltd v Valuer-General[2018] QLC 11
Eastcote Pty Ltd v Valuer-General[2018] QLC 11
LAND COURT OF QUEENSLAND
CITATION: | Eastcote Pty Ltd as Tte v Valuer-General [2018] QLC 11 |
PARTIES: | Eastcote Pty Ltd as Trustee (appellant) |
| v |
| Valuer-General (respondent) |
FILE NO: | LVA093-17 |
DIVISION: | General Division |
PROCEEDING: | Appeal against valuation under the Land Valuation Act 2010 |
DELIVERED ON: | 31 May 2018 |
DELIVERED AT: | Brisbane |
HEARD ON: | 12 & 13 February 2018; 6 March 2018 Submissions closed 24 April 2018 |
HEARD AT: | Brisbane |
MEMBER: | WA Isdale |
ORDERS: |
|
CATCHWORDS: | REAL PROPERTY – VALUATION OF LAND – OBJECTIONS AND APPEALS – QUEENSLAND – Where site value is the basis of valuation – Where expert evidence is relied on – Where duty of expert witness to the Court and independence of expert are considerations – Where both valuation experts lack independence – Where evidence of experts must be carefully scrutinised |
APPEARANCES: | DD Purcell (instructed by Holding Redlich) for the appellant JP Hastie (instructed by in-house legal, Department of Natural Resources, Mines and Energy) for the respondent |
Background
- [1]The respondent carried out a routine valuation of this land as at 1 October 2015. Routine valuations are used for the purposes of local authority rates and for State land tax. It was valued as a site, a term defined in Division 3 of the Land Valuation Act 2010, at $7,400,000.
- [2]The land owner appealed to this Court, contending for a valuation of $6,700,000.
- [3]At the commencement of the hearing, the Court was informed that a maintenance valuation had been issued in the amount of $9,200,000,[1] whereas what is before the Court is an appeal against the valuation of $7,400,000.
- [4]Since the appellant contended at the hearing for a value of $7,100,000, and the respondent’s valuer estimated the value at $10,300,000 there was really no support for the issued valuation of $7,400,000 from either party. The respondent’s valuer, Mr Elliott, despite his valuation of $10,300,000, wrote in his report that, in his opinion, the issued maintenance valuation of $9,200,000 “is considered appropriate in terms of immediate relativity and the application of the included sales evidence”.[2]
- [5]
The valuer, Mr Schultz – the first warning
- [6]Early into the cross-examination of Mr Schultz, it was necessary for the Court to caution him that he was not being directly responsive to questioning.[5]
Mr Schultz – the second warning
- [7]
Mr Schultz – the third warning
- [8]Despite the witness having been warned twice, it was necessary for the Court to issue a third warning in the most direct possible terms, to answer questions and not to argue with counsel. It was pointed out once more, that an expert witness, permitted to give an opinion, must be seen to be non-partisan, if they are to be able to fulfil their role. The witness was told clearly that if unable to fulfil the role of an expert, their usefulness to the Court would be at an end.[7]
Mr Elliott – the first warning
- [9]Early in cross-examination, Mr Elliott was admonished to answer the question asked of him and not to become an advocate. He was clearly told the importance to the Court of him being an independent expert.[8]
Mr Elliott – the second warning
- [10]It was soon necessary for the Court to repeat the warning on advocacy detracting from independence.[9]
Mr Elliott – the third warning
- [11]Five minutes later, the Court warned this witness once again.[10]
Mr Elliott – the fourth warning
- [12]
The valuation evidence
- [13]The Court is careful to avoid disadvantage to a litigant because of the qualities of a witness. The evidence must be judged, not the person delivering it.[12]
- [14]It is also the case that an expert witness should provide independent assistance to the Court and should never assume the role of advocate.[13]
- [15]The Act requires the Court to “correctly make the valuation” under the Act.[14] It is not an investigative body and must rely on the evidence which the parties choose to put before it.
The respondent’s valuer
- [16]In the case of Mr Elliott, the Court warned him four times about the behaviour which he was exhibiting. There were several other instances of argumentative and unresponsive conduct by him which might have properly been the subject of similar warnings. The overall result is, however, sufficiently demonstrated by the four instances to which the Court has referred. The lack of response to clear admonitions indicated the futility of more of them. The witness appeared to be unwilling, or unable, to improve his behaviour.
- [17]The Court can only conclude that Mr Elliott was argumentative and partisan. He did not qualify as an independent expert whose opinion the Court could place any reliance upon.
- [18]It was even difficult for the Court to get a word in to admonish this witness, while he conducted what amounted to a vigorous debate with cross-examining counsel.[15]
- [19]Although the Court is not able to be much assisted by this unduly partisan witness, it will look to the material which is contained in his evidence in order to attempt to ascertain whether it contains anything of a factual nature which assists the Court.
- [20]Although Mr Elliott values the land at $10,300,000, he has concluded in the joint report, that it is “appropriate” the site be valued as the respondent has, at $9,200,000.[16] The few words used in the joint report to explain this have already been quoted.
- [21]This does not provide any acceptable basis for supporting a valuation of $9,200,000, which the respondent contends for.
- [22]The $1,100,000 which has, in effect, been removed without a plausible explanation, is not a small amount. The words “immediate relativity” are vague and they are not able to be accepted as a useful explanation. The result is that the respondent’s contended valuation of $9,200,000 is not justified by the report of the valuer who was called to give evidence in support of it. The Court could not correctly make a valuation determination of $9,200,000 on the basis of a valuation of $10,300,000, so it must not.
- [23]Although the evidence called from the valuer for the respondent has been mentioned first, the Court must consider the question of whether the appellant has proved its case.[17] It is legitimate, in doing that, to ascertain whether anything in all of the evidence supports the appellant’s case. The unusual unhelpfulness of both valuers to the Court’s task, makes it appropriate to point out this aspect of the case at the outset.
- [24]For the reasons which have been given, no opinion of the respondent’s valuer or fact referred to in arriving at a valuation of $10,300,000 is able to be relied upon to support either the appellant’s or the respondent’s case. Accordingly, it is unnecessary to analyse the sales selected by the respondent’s valuer and used by him in coming to his opinion.
The appellant’s valuer
- [25]As has been discussed, the behaviour of Mr Schultz was unresponsive to questioning and argumentative. He was excessively partisan and an advocate rather than an independent expert.
- [26]The Court is unable to be much assisted by Mr Shultz’s opinions as he lacked the necessary quality of independence. The Court will endeavour to find assistance in the parts of his evidence which are predominantly factual.
The respondent’s position
- [27]At the commencement of the hearing, the Court noted that the respondent did not support the valuation being appealed, that being the $7,400,000 figure, and asked counsel for the respondent whether the appeal should be allowed with the dispute limited to the quantum of the valuation, either $6,950,000, as it then was before being changed to $7,100,000, or $9,200,000. Counsel for the respondent informed the Court that the appeal could not be allowed as the Court might not be satisfied by either body of evidence and, if that was so, ought to dismiss the appeal, leaving the valuation of $7,400,000 in place.[18]
- [28]This is consistent with the undoubtedly correct proposition that the valuation will remain in place unless the appellant proves its case.
The appellant’s case
- [29]The appellant relies on the evidence of Mr Schultz. His valuation, like that of Mr Elliott, is contained in the joint report prepared by them.
- [30]The subject land has an area of 32,737 m2 (3.2737 ha). It is located at Helensvale, an inland suburb of the Gold Coast. It is adjacent to, and east of, the Pacific Motorway and about 13 km northeast of Southport. There is good quality residential housing adjoining and immediately around the land. There are also commercial, showroom and professional offices around about the land, which fronts onto the Dreamworld Parkway, which acts as a service road parallel to the motorway. There is also a 12.55 m frontage to Hope Island Road.
- [31]The land has a 323 m frontage to Dreamworld Parkway and access to it by a formed dual crossover. The intersection of the Dreamworld Parkway and Hope Island Road is signalled and there is access to and from the motorway at Exit 57. Access to the land is good from the four cardinal directions. The property can be seen from the motorway by those moving in a southerly direction. The valuers agree that the exposure is very good to excellent.[19] Mr Schultz sees that there is limited exposure which is past the interchange for egress.[20] There is limited exposure to those on Hope Island Road. For persons northbound on the motorway, exposure is limited and essentially available only after having passed the exit, at highway speeds.
- [32]The land is on two adjoining titles and below, but close to, street level, slightly sloped, irregularly shaped and improved with building platforms. The shape of the land creates minor inefficiency, principally at the southern end. The land is used for large format retail stores, anchored by A-Mart Furniture. There is 32.2% site coverage at present, giving a gross floor area of 10,550 m2. A further extension of about 1,540 m2 has been approved, which will give 36.9% site cover. There are all usual services available and the ground, at the centre of the property, is about 650 mm above known flood levels, although there is a minor risk of flooding at the north boundary.
- [33]The land is zoned for development up to 2 storeys, 8.5 m overall height and with a maximum site coverage of 70%. It is in the Pacific Business Corridor of the Oxenford Local Area Plan. Building setback is up to 10 m on the Dreamworld Parkway side and 6 m otherwise.
- [34]The valuers note that a new city plan was released for public comment on 17 June 2014. The date of valuation was 1 October 2015 and its date of effect, 30 June 2016. The new city plan took effect on 2 February 2016. Both valuers saw the plan as relevant and there is no dispute about the potential acceptable uses of the land.[21] The new plan places this land in a Fringe Business Precinct with a permitted limit of 2 storeys, and a maximum height of 14 m. Maximum site coverage remains at 70%. The setback requirements in this location will be 10 m to the side and rear, with at least 3 m at the front.
- [35]The valuers agree that the highest and best use of the land is for large format retailing. Mr Elliott also notes the other uses that would be possible, such as warehouses, a service station or outdoor sales.[22]
The easements – some disagreement
- [36]There are burdening easements at the subject site. In their report, both valuers agreed on percentages which should be allowed in respect of two of the three easements, so there is no need to discuss them in detail.[23] There is one exception. In cross-examination Mr Schultz said that Easement E, or SP 116638 for sewerage purposes, having an area of 281 m2 within Lot 2 should not have the benefit of a 30% allowance which he had used, but that 20% would be reasonable.[24] This changed his valuation from $6,950,000 to $7,100,000. Mr Elliott allowed a 10% diminution for Easement E.[25]
The quantity surveyor’s report
- [37]Mr Malcolm Davidson, who also gave evidence, prepared the quantity surveyor’s report. He is a director of Turner and Townsend and has over 35 years of experience in the property and construction industry.[26] He provided evidence of the cost of site works which the valuers took into account.
Valuation methodology
- [38]The valuers both agreed that the direct comparison of the land with sales on a dollar rate per m2 is the appropriate methodology for valuation. As required by the Act, it was assumed that all non-site improvements had not been made.[27]
- [39]The valuers each used a number of sales. There was one sale that both used.
The appellant’s sales
- [40]I will consider the sales which Mr Schultz had regard to.
Appellant’s sale 1
- [41]111, 56 and 85 North Lakes Drive, North Lakes. With an area of 64,880 m2, this vacant sale was in March 2014. It is located 25 km north of the Brisbane CBD and 200 m from a Westfield Shopping Centre, a strong retail and commercial precinct. There is easy access to the Bruce Highway by traffic traveling south. It is zoned for large format showroom and retail use and was sold with benches built ready for the construction of buildings on them. Mr Schultz analysed the site value as $16,400,000, which is $253 per m2. The contract price was $19,528,880 and infrastructure credits $3,993,960.
- [42]Mr Schultz allowed 3.6% to adjust the site works costs back to the date of sale. This amounted to $236,022.[28]
- [43]By comparison, Mr Elliott, when considering this sale, which he did not use, allowed 12.3% which was his estimate of costs at $1,757,113, a much larger sum.[29]
- [44]Using his estimates of site development works and holding costs, the analysed site value is $18,269,515, which is $282 per m2 of land area. The large adjustment, an $864,000 building cost penalty for a suspended slab and higher allowances overall, results in a valuation $1,869,515 higher than that arrived at by Mr Schultz for this sale. Mr Elliott sees this sale as being in an inferior location and having a significantly larger area than the subject land. If fully ready for development, which he says it is not ripe for, his analysis shows a rate of $282 per m2.[30]
- [45]Mr Elliott notes that this is an older sale. The value of the infrastructure credits, in his view, cannot be accurately assessed as there was no complete development plan in the purchaser’s mind at the time the land was purchased. He did however, allow $3,490,460 for them. In view of his statement about proposed development, this is not an allowance which he could make with confidence.[31]
Appellant’s sale 2 – the common sale
- [46]This sale, in June 2014, is of 37,240 m2 of vacant land at 103-109 Compton Road, Underwood. It is 18 km south of the Brisbane CBD and zoned for large format retail and showroom use. It was purchased with knowledge that the zoning was going to be changed to mixed use. It is generally level with access from a signalised intersection that will need to be upgraded. There is rear access available.
- [47]
- [48]It is useful to explain how, in this sale, the land could be said to be valued at just over $9,000,000. This very large adjustment is to notionally make the sales, and the subject, as far as possible, the same. An example of how the site value was increased so greatly is Mr Elliott’s $742,000 allowance for a stormwater detention tank which, Mr Schultz says, was not in the purchaser’s contemplation at the time of the transaction.[34]
- [49]In view of what has been written already about the lack of independence of the valuers, it would be jejune to attempt to resolve the inconsistences in the two valuations; they are the result of opinions held by the valuers and the Court is unable to rely on their opinions. It is enough to note that sales should be representative of the market. Large adjustment made to the sale by Mr Elliott so as to make it represent a comparable site value, requires the exercise of professional judgement and the application of professional opinion. An element of uncertainty is introduced.[35] Unfortunately for the Court, Mr Elliott made it impossible to regard him as an independent expert and therefore qualified to provide such an opinion. The Court is deprived of a competing opinion to that provided to it by Mr Schultz, with its accompanying credit issues.
Appellant’s sale 3
- [50]This sale, at 13-15 Glasson Drive, Bethania, was in April 2014. It has an area of 37,950 m2 and sold for $4,000,000. Mr Schultz analysed the sale to $3,750,000 as a site.[36] It was vacant land 30 km south of the Brisbane CBD. It was bought for large format retail use. It has good exposure to southbound traffic on Logan River Road, a major local road. There is limited exposure to northbound traffic on that road. Access is indirect from Glasson Drive. The topography of the effective land area is favourable, with only a minor slope.
- [51]Mr Elliott’s contribution in relation to this sale[37] was argumentative and does not assist the Court.
Appellant’s sale 4
- [52]This sale, in March 2013, was of 30,520 m2 vacant land at Logandowns Road and Nestor Drive, Meadowbrook for $7,500,000. The analysed site value, on Mr Schultz’s analysis, is $7,850,000. It is 25 km south of the Brisbane CBD and is opposite the Logan Base Hospital, a large hospital with extensive facilities. It has good exposure to Loganlea Road from either direction of travel and three street frontages. It is irregular in shape, generally level and was an “off-market” sale to the property acquisition arm of Woolworths.
- [53]Mr Elliott would make different adjustments,[38] which are opinions the Court is unable to have regard to for the reasons already given.
Appellant’s sale 5
- [54]This sale, in November 2013, of 10,150 m2 land at 2 Norris Street, Pacific Pines was for $3,750,000. Mr Schultz analysed the site value to $3,850,000.[39] The land was vacant and in an established Gold Coast suburb. It was acquired as a supermarket site and is zoned for a “single shop”. It has exposure to a local connector road, Binstead Way, and convenient access to local streets. The land is slightly irregular in shape and has a moderate downward slope to the west.
- [55]Mr Elliott’s response reflects his opinions, which are not useful to the Court.
Appellant’s sale 6
- [56]This old sale took place in December 2012, it is of 28,240 m2 of land in Benowa Village, an established Gold Coast suburb. The sale price was $7,500,000. In Court, Mr Schultz changed his analysed site value figure from $9,600,000 to $9,987,280, which he rounded to $10,000,000.[40]
- [57]This land was acquired for a neighbourhood shopping centre. It is on two significant roadways, Ashmore Road and Ross Street, and has good exposure. It is sloped and irregular in shape.[41]
- [58]Mr Elliott disagrees with Mr Schultz’s analysis.[42]
Appellant’s sale 7
- [59]Located at 2-24 Waldron Street, Yarrabilba, this 21,200 m2 block sold in May 2015 for $5,287,700. Mr Schultz analysed this sale to an adopted figure of $4,900,000.
- [60]
Some observations on the appellant’s sales
- [61]The adjustments made by Mr Schultz in order to notionally make the sales comparable with the subject are clearly explained, defining the scope for the uncertainty inherent in making adjustments. As adjusted, the sales are acceptably comparable to the subject land and provide a valid and useful basis of comparison upon which to ascertain its value. The Court accepts Mr Schultz’s use of these sales and the validity of the valuation conclusion which he draws from them. The valuation conclusion remains sustainable when the evidence is scrutinised upon the basis of the restriction which the Court has found it necessary to place on accepting that evidence, minimising reliance on opinion as far as possible and focusing on the facts disclosed.
- [62]The choice of sales as being comparable is a matter of professional opinion for the expert valuers.
Other considerations
- [63]The appellant has the burden of proving its case.[45] The evidence of the valuer called on behalf of the appellant must be, at the least, scrutinised with great care as the witness cannot be considered an independent expert.
- [64]The existing valuation actually appealed against, in fact supported by no-one before the Court and disavowed specifically by the respondent’s case, would be left in place in the event that the appellant fails to prove its case.
- [65]In order to be successful, if the valuation of $9,200,000 is not accepted, the respondent would have the Court dismiss the appeal with the result being to confirm the valuation of $7,400,000, which the evidence called for the respondent does not support.
- [66]This Court is an expert Court with responsibility to use that expertise when necessary.
- [67]Section 170(b) requires the Court to “correctly make the valuation” under the Act, but it is limited to considering the evidence which is placed before it. This emphasises the reliance which the Court must have on expert witnesses.
Decision
- [68]In the very unsatisfactory situation which the parties have created in this case, it is open to the Court to accept the evidence of Mr Schultz, on the limited basis that has been explained, as sufficiently supporting the conclusion which he has ultimately drawn, namely that the valuation should be correctly made at $7,100,000.
- [69]As has been explained, the Court has endeavoured to scrutinise this evidence very closely and to rely, as far as possible, on factual statements and as little as possible on Mr Schultz’s opinions. The degree of satisfaction with this outcome may be described as the minimum necessary to allow it to occur. As has been described, this outcome gains nothing from and loses nothing to, the evidence from the respondent. It has been unnecessary to consider the evidence, professionally given, of Mr Davidson for the purposes of these reasons.
Orders
- The appeal is allowed.
- The valuation of Lots 1 and 2 on SP 116638 at 1 October 2015 is reduced to Seven Million, One Hundred Thousand Dollars ($7,100,000).
WA ISDALE
MEMBER OF THE LAND COURT
Footnotes
[1] T 1-12, lines 33 to 35; lines 45 to 47.
[2] Ex 1, document 6, page 124.
[3] T 1-12, line 34.
[4] T 1-6, lines 16 to 18.
[5] T 1-57, lines 29 to 33.
[6] T 2-18, lines 9 to 25.
[7] T 2-69, line 36; T2-70, line 8.
[8] T 3-25, lines 1 to 6.
[9] T 3-29, line 37 to T 3-30, line 8.
[10] T 3-31, line 44 to T 3-32, line 4.
[11] T 3-75, lines 23 to 37.
[12] Wiki v Atlantis Relocations (NSW) Pty Ltd [2004] NSWCA 174 [61]; Suncorp Metway Insurance Pty Ltd v Valuer-General (No 2) [2017] QLC 46 [61].
[13] Ge Cominos & Co Pty Ltd v Chief Executive, Department of Lands (1996-7) 16 QLCR 311, 338-9; Land Court Rules 2000 r 24C; Allianz Australia Insurance Limited v Mehrang Mashaghati [2017] QCA 127 [90]; GS Coal Pty Ltd & Ors v Cross [2017] QLC 40 [19].
[14] Land Valuation Act 2010 s 170.
[15] T 3-29, line 31 to T 3-30, line 6.
[16] Ex 1, document 6, page 124.
[17] Land Valuation Act 2010 s 169(3).
[18] T 1-13, line 18 to T1-14, line 2.
[19] Ex 1, document 6, page 6, para 25.
[20] Ibid para 26.
[21] Ibid page 9, para 57-8.
[22] Ibid page 12, para 69-70.
[23] Ibid para 80-1.
[24] T 2-91, line 44 to T 2-92, line 2.
[25] Ex 1, document 6, page 124.
[26] Ibid document 4, Appendix A.
[27] Ibid document 6, page 14, para 88-91; Land Valuation Act 2010 s 19(1).
[28] Ibid page 15-6.
[29] Ibid page 19.
[30] Ibid.
[31] Ex 1, document 6, page 23 paras 93-6.
[32] Ibid page 25.
[33] Ibid page 98.
[34] Ibid page 26.
[35] ISPT Pty Ltd v City of Melbourne (Land Valuation) [2007] VCAT 652 (3 May 2007) [50]–[54].
[36] Ex 1, document 6, page 37.
[37] Ibid page 39-43.
[38] Ibid page 47-53.
[39] Ibid page 56-9.
[40] T 2-81, line 35 to T 2-82, line 2.
[41] Ex 1, document 6, page 61.
[42] Ibid page 66.
[43] Ibid page 68.
[44] Ibid 69-70.
[45] Land Valuation Act 2010 s 169(3).