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Sentinel Homemaker 2 Pty Ltd v Valuer-General QLC 47
LAND COURT OF QUEENSLAND
Sentinel Homemaker 2 Pty Ltd as Tte v Valuer-General  QLC 47
Sentinel Homemaker 2 Pty Ltd as Tte
Appeals under s 155 of the Land Valuation Act 2010 against objection decision
12 December 2018
11 & 12 October 2018. Submissions closed 19 November 2018
REAL PROPERTY – VALUATION OF LAND – OBJECTIONS AND APPEALS – QUEENSLAND - where site value is the basis of valuation – where highest and best use of the land is not in dispute – direct comparison of sales is the best method of valuation – onus of proof on the appellant – expert evidence – acceptable basis of expert opinion – where assumed facts not established – expert’s opinion cannot be based on conjecture – factual basis not accepted or established – weight of expert’s opinion
Land Court Act 2000 s 7(a)
Land Valuation Act 2010 s 7, s 169(3), s 170(b)
Automasters Australia Pty Ltd v Bruness Pty Ltd & Anor  WASCA 229, applied
Beydoun v Valuer-General  QLAC 1, applied
Fairfax v Department of Natural Resources and Mines  QLC 11, applied
Finlayson & Anor v Valuer-General (2013) 34 QLCR 101, applied
Hans and Else Grahn v Valuer-General (1992-1993) 14 QLCR 327, applied
J L and I Qualischefsi v Valuer-General (1979) 6 QLCR 167, applied
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, applied
National Australia Bank Ltd v Troiani & Anor  QCA 196, applied
NR and PG Tow v Valuer-General (1978) 5 QLCR 378, applied
Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925  QLAC 7, followed
State Government Insurance Office (Queensland) v Valuer-General (1980-1981) 7 QLCR 171, applied
SD McCarthy of Counsel instructed by Colin Biggers & Paisley Pty Ltd for the appellant
JP Hastie of Counsel instructed by In-House Legal, Department of Natural Resources, Mines and Energy for the respondent
- There are three appeals in this matter that were heard together by agreement of the parties. Each of the parcels of land, the subjects of the appeals, forms part of a shopping centre at Mount Pleasant, a suburb of Mackay, which is a regional city located on the coast of Queensland about 1,000 km to the north of Brisbane.
- The respondent Valuer-General routinely valued the subject parcels for rating purposes. The appellant (Sentinel Homemaker 2 Pty Ltd) disagrees with the respondent’s valuation and has appealed against the objection decision made by the Valuer-General in regard to the appellant’s objections. It is not in dispute that the basis of valuation is site value as stated in the Land Valuation Act 2010 s 7.
- The descriptions of the properties and the valuations applied to the subject parcels by the respondent and contended for by the appellant, can be expressed in tabulated form.
Respondent’s valuation decision on objection
Lot 2 on SP152599
1 October 2016
Lot 3 on SP152599
1 October 2016
Lot 1 on SP123984
1 October 2016
- For convenience, the subject parcels are referred to as Lots 1, 2 and 3, while remembering that they are on two survey plans.
- All of the appeals were brought on identical grounds, with particulars adjusted to suit each parcel. In essence, the complaint in each case is that the valuation is excessive having regard to the land in question and to the sales of comparable properties.
A delay by the parties
- Although listed for hearing over four months prior to the two days set aside for that purpose, the parties were not ready, and at the request of the parties, the hearing had to be postponed. The awaited Joint Expert Report (JER) of the valuers, once filed, allowed the appeals to be heard.
Nature of the appeal hearing
- By s 169(3) of the Land Valuation Act 2010, the appellant has the onus of proof for each of the grounds of appeal. As his Honour Member Smith, with whose reasons his Honour Member Cochrane concurred said:
“…As I understand the operation of the LVA, the Court has a duty to undertake a two-step process in considering an appeal. The first step is to determine whether or not the evidence in its totality supports the case put by an appellant that the issued valuation is in error, on the balance of probabilities, so that the onus of proof is discharged. If the onus of proof is discharged, the second phase of the evaluation to be undertaken by the Court comes into play. That is, what is the correct valuation of the subject land? The Court can only get to a consideration as to the correct valuation of the subject land and thus, s 170(b) of the LVA, in circumstances where the onus of proof has been discharged.”
- There were three witnesses who gave evidence. By agreement, the respondent called Mr Malcolm Davidson first. Mr Davidson is a quantity surveyor. Next the appellant called its valuation expert, Mr Coen Ladewig, a certified practising valuer and registered valuer. The last witness was Mr Benjamin Illot, a registered valuer with the State Valuation Service, who was the respondent’s expert valuer.
The joint expert valuation report
- The valuers provided a JER which was contained within an agreed bundle of documents which became Exhibit 1. The valuers agreed that the valuation methodology to be adopted would be by direct comparison on a dollar rate per square metre of site area with vacant and lightly improved sales, in fee simple, but with existing use rights and allowing for any encumbrances.
- The date of valuation for the lots is 1 October, 2016. The valuers differed on which sales should be used for the purposes of comparison. Mr Ladewig used three sales, all of which were land suitable for shopping centres. These comparison sales are described below.
Sale 1 - 115 Compton Road, Underwood
- This 37,240 m² parcel sold for $7,000,000 in June 2014. It is necessary to note the period between the date of sale and the valuation date, and the distance of over 1,000 km between this sale and the subject land. There are many other features of the land that were noted by Mr Ladewig, but for the present, the features noted above are sufficient and are significant for reasons which will be developed below. Mr Illot refers to the features noted above in paragraphs 87 and 88 of the JER. Mr Illot also refers at paragraph 89 to the size of this sale being significantly larger than the subject lots, thereby making comparison on a like-for-like basis difficult.
Sale 2 - 13-15 Glasson Drive, Bethania
- This 37,950 m² parcel sold for $4,000,000 in April 2014. This sale is also about 1,000 km from the subject land, and the sale of this property occurred more than two years prior to the date of valuation. Mr Illot makes these points at paragraphs 114 and 116 of the JER and, at paragraph 117, notes that this sale is significantly larger than the subject lands, making its use for comparison on a like-for-like basis difficult. Here too, there are many other features of comparison to which it is not necessary presently to refer.
Sale 3 - 810 Yaamba Road, Parkhurst
- This comparison sale is in Rockhampton. It sold in November 2012 for $3,550,000 and has an area of 30,920 m². Mr Illot notes at paragraph 143 of the JER that the location of this sale is in Rockhampton, whereas the subject land is in Mackay. At paragraph 146 Mr Illot points out that the sale is “more than” four years before the date of valuation. Actually the sale occurred just under four years prior to the valuation date but this is not a significant error. In paragraph 147 of the JER, Mr Illot points out that the area of this sale is significantly larger than any of the subject allotments, making comparison on a lot-for-lot basis difficult. Once again, there are many other features of the land which were alluded to in the evidence but which, for present purposes, are not necessary to discuss.
The appellant’s valuer’s evidence
- As an expert witness called for the appellant, Mr Ladewig confirmed his opinions as expressed in the JER. When cross-examined, he confirmed that the blocks the subject of the appeals all have their highest and best use as places for large-format bulky goods retail stores. Mr Ladewig stated his opinion that the market for this sort of land was stable throughout the whole of Queensland in the four-year period from the date of the first sale he used, up to the date of valuation of the subject lots. I will refer to this as the precondition. He agreed that sales in the same locality are the best evidence of value if they have a comparable use. He stated that a lack of sales in the locality required that he look elsewhere. He also stated that the land in another locality should otherwise be highly comparable.
- Significantly, Mr Ladewig started off saying the market for this type of land in Mackay was stable during the period between the date of the comparison sale and the date of valuation. He then immediately revised this to comprise South-East Queensland, and just as rapidly expanded it again to encompass the whole of Queensland. In the space of only a few seconds, the area of claimed application of the stable market for this sort of land over the identified four-year period had been increased immensely.
- It is obvious why this needed to be said. The application of a stable market for this type of land was a necessary precondition to the use of the three sales which Mr Ladewig chose to rely on to value the subject lots. If the sales were not comparable in this regard then they would not have been able to be used for the purpose of comparison. So before getting to matters such as their relative sizes and other aspects of comparability, the comparison sales must first be able to be said to be, despite their geographical distance and the time periods between their respective dates of sale and the valuation date, in a comparable market. Indeed, according to Mr Ladewig they were said to be so.
- There is nothing in the JER which explains how it is that this precondition which forms a necessary basis for Mr Ladewig’s valuation can be shown to have been established. Indeed, it was clear from Mr Ladewig’s answers in cross-examination that he understood the need for the precondition to be satisfied in order to provide the necessary basis for the use of the three sales which he chose for the purpose of his comparison.
- Mr Ladewig was cross-examined specifically to highlight the absence of, for instance, any use of paired sales to illustrate that the markets in the widely separated areas where the sales and subject are located were not moving in the approximately four year period in question. Mr Ladewig did not include such evidence or anything like it in his report, and he did not provide an analysis to establish the stability of the markets. He said he had reviewed sales all throughout Queensland but there is no evidence of that is in his report.
- To summarise, the sales Mr Ladewig chose were said by him to be comparable because there was one market with stable values in respect of the sort of land he was valuing. Mr Ladewig stated this market was stable throughout the entire period between the earliest sale, in November 2012 and 1 October 2016. According to Mr Ladewig, the market was also showing the same values throughout all of Queensland during that period. This was the fundamental starting platform for his valuation.
Mr Ladewig did not perform any comparison studies of paired sales or do anything else which appeared in his valuation to attempt to show the objective existence of this precondition.
- This starting position, containing the unproven precondition, is what the rest of the appellant’s valuation is built upon. The three sales were selected and used by Mr Ladewig because it was assumed by him that they met the precondition. It was not demonstrated by Mr Ladewig or the appellant that the three sales did so. This aspect of Mr Ladewig’s evidence was directly challenged by the respondent in cross-examination. It was also contradicted by Mr Illot in the joint report where he did not accept the sales used by Mr Ladewig as being comparable. Mr Illot subsequently chose to use other sales.
Basis of the expert opinion
- An expert providing opinion evidence must provide the Court with sufficient information to allow the Court to be able to evaluate the validity of the opinions expressed. This requires that all material facts and assumptions on which the opinion is based be disclosed. In this case the factual existence of the essential assumption, the precondition, needed to validate the choice of the comparison sales relied on by the appellant was not demonstrated in the JER. This deficiency was illustrated in the cross-examination of Mr Ladewig. The cross-examination also revealed that Mr Ladewig’s assumption had not been verified.
- This Court is not bound by the rules of evidence. As no part of the JER was objected to on the ground of lacking an acceptable basis, no issue of admitting Mr Ladewig’s opinion into evidence arises. However, the evidence will need to be given the weight that it deserves, as will be discussed further below.
- Each case will depend on its own facts of course, and in the present case the unproven assumption, as discussed above, which is at the starting point of the appellant’s valuation opinion, was not accepted by the respondent and was challenged by him.
As the assumption relied on remained unproved at the conclusion of the evidence, the Court must consider what, if any, weight can be given to the valuation opinion that was made by Mr Ladewig in reliance on the correctness of that assumption.
- The valuation opinion relied upon by the appellant wholly depends on the use of the three sales chosen for comparison. Nothing can be gained from a detailed analysis of the three sales for present purposes unless their usefulness is accepted.
- Since the choice of sales relied upon on behalf of the appellant has not been shown to have been made on a sound basis, no reliable conclusion could possibly be drawn from using them.
- In the circumstances, the Court is unable to give any weight at all to the valuation evidence presented on behalf of the appellant.
- Since the respondent chose to put evidence before the Court, the respondent’s evidence also falls for consideration in determining whether the appellant has satisfied the burden of proof placed upon it by s 169(3) of the Act. It is for the appellant to prove that the valuation for which it contends is correct. The Court will consider all of the evidence put before it in order to determine whether the appellant has satisfied the onus of proof on any of its grounds of appeal.
- The grounds of appeal were the same in each case. They were:
- The site value as assessed is not supported by property sales and is excessive having regard to comparable property sales.
- The site value does not reflect the physical and legal characteristics of the land and/or constraints on the use of the land.
- The assessed site value does not achieve or preserve uniformity of value between the assessed site value and valuations of other comparable parcels.
- The Valuer-General’s valuation:
- a.is excessive;
- b.is not supported by sales evidence;
- c.is based on fundamentally erroneous methodology; and
- d.fails to take account of factors which ought to be taken account of, including but not limited to those factors identified in grounds 2 and 4.
- For present purposes, it is not necessary to consider the particulars which tailored the generic appeal grounds to each case.
- In the case of each of the three appeals, the valuation evidence of the appellant called in support of their appeals can be given no weight due to the deficiencies which have been explained. The appellant points out in its submissions that the submissions were prepared without the benefit of a transcript. There is a transcript, and the Court has had the benefit of it. The Court will not speculate as to why the appellant did not avail itself of a transcript.
- In the cross-examination of Mr Illot, it was pointed out that, in another case, he had used sales in South-East Queensland in order to value land in Mackay that was used as a Bunnings Warehouse, a large-format retail and warehouse premises; which was its highest and best use. This does not affect in any way the shortcomings of the valuation relied upon by the appellant in this case.
Appeal LVA617-17 (Lot 2)
- Nothing in the respondent’s evidence was submitted, on behalf of the appellant, to support the appellant’s contentions listed in the grounds of appeal in respect of Lot 2. The evidence of Mr Illot is that the site value would be $1,500,000. He considers the respondent’s site value of $1,450,000 is within acceptable parameters. Looking at the whole of the evidence, the appellant has not discharged the onus of proof upon it to show on the civil standard of proof that any of its grounds of appeal have been satisfied in respect of this appeal. This appeal must be dismissed.
Appeal LVA627-17 (Lot 3)
- The situation in this appeal is identical to the appeal in Lot 2. The evidence introduced on behalf of the respondent supports a valuation of $1,400,000. Mr Illot states at paragraph 330 of the JER that the respondent’s site valuation was $1,200,000. The respondent’s decision on objection shows that this is correct. However, this valuation amount is not what was actually appealed to this Court. The decision on objection dated 5 July 2017, shows that the valuation amount was altered on objection. It was increased to $1,250,000, that is, the amount to which the subsequent appeal relates was increased. Mr Illot makes clear that he does not intend to lead the Court to a higher figure, only to support the $1,200,000. This does not cause any change in the result that there is no support for a conclusion that any of the grounds of appeal have been proven in relation to Lot 3. This appeal must be dismissed. The Notice of Appeal shows the respondent’s valuation as $1,200,000. This does not alter the reality of the change to $1,250,000 in the decision on objection, which s 155(1) of the Act allows the appeal from.
- The respondent, as a model litigant, has quite properly not suggested that the evidence should be found to support, in this appeal and the one discussed prior to it, findings that the valuations should be increased.
Appeal LVA631-17 (Lot 1)
- This appeal is a little different. The decision on objection states the valuation to be $1,700,000. The evidence called by the respondent, however, causes Mr Illot to conclude that it should be $1,600,000. Mr Illot notes the difference and concludes that the $1,700,000 figure is “within acceptable parameters”.
- This Court notes that $100,000 is not a small sum and that the valuation is used for rating purposes. In a matter relating to a financial burden on the appellant, it is proper to approach the matter of valuation conservatively and to give the appellant the benefit of the lower figure which the respondent’s valuer has arrived at.
- On the basis of the whole of the evidence, the Court is satisfied that the respondent’s valuation is excessive. The appellant therefore satisfies the onus of proof of its grounds of appeal numbers 1 and 4(a), on the balance of probabilities, in relation to Lot 1. This appeal must be allowed. The next question is, what is the correct valuation of this land? Section 170(b) provides that the Court may reduce the valuation to the amount it considers necessary to correctly make the valuation. On the basis of Mr Illot’s evidence, this valuation must be reduced to $1,600,000. This action, sufficiently supported by s 170(b) of the Land Valuation Act 2010, is also consistent with s 7 of the Land Court Act 2000 as it accords with equity, good conscience and the substantial merits of the case.
- Appeal LVA617-17 is dismissed.
- The valuation as at 1 October 2016 of Lot 2 on SP152599 Property ID 40322844 in the amount of $1,450,000 is confirmed.
- Appeal LVA627-17 is dismissed.
- The valuation as at 1 October 2016 of Lot 3 on SP152599 Property ID 40322845 in the amount of $1,250,000 is confirmed.
- Appeal LVA631-17 is allowed.
- The valuation as at 1 October 2016 of Lot 1 on SP123984 Property ID 40222245 is reduced to $1,600,000 in order to correctly make the valuation.
MEMBER OF THE LAND COURT
Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925  QLAC 7, .
 T1-23, lines 7-8, lines 43-45.
 T1-24, lines 28-32.
 T1-24, line 44; T1-25, line 2.
 T1-25, lines 15-25.
 T1-22, lines 16-19.
 T1- 22, lines 45; T1-23, line 5.
Hans and Else Grahn v Valuer-General (1992-1993) 14 QLCR 327, 328-329; Fairfax v Department of Natural Resources and Mines  QLC 11, -; J L and I Qualischefsi v Valuer-General (1979) 6 QLCR 167, 172; N R and PG Tow v Valuer-General (1978) 5 QLCR 378, 381; Beydoun v Valuer-General  QLAC 1, , -, -.
 T1-22, lines 17 to T1-24, line 20.
 T1-24, lines 4-20.
Automasters Australia Pty Ltd v Bruness Pty Ltd & Anor  WASCA 229 per Steytler J, , .
Automasters Australia Pty Ltd v Bruness Pty Ltd & Anor  WASCA 229 per Steytler J, , .
Land Court Act 2000 s 7(a).
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, 743-744.
National Australia Bank Ltd v Troiani & Anor  QCA 196.
State Government Insurance Office (Queensland) v Valuer-General (1980-1981) 7 QLCR 171, 193-194.
Finlayson & Anor v Valuer-General (2013) 34 QLCR 101; Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925  QLAC 7.
 Exhibit 16.
 Exhibit 1, Tab 17, p 94.
 Exhibit 1, Tab 17, para 288.
 Exhibit 1, Tab 17, p 95 para 330.
 Exhibit 1, Tab 17, p 94.
 Exhibit 1, Tab 17, p 94, para 251.
Land Valuation Act 2010 s 170(b).
 The “first step” see Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925  QLAC 7, .
- Published Case Name:
Sentinel Homemaker 2 Pty Ltd as Tte v Valuer-General
- Shortened Case Name:
Sentinel Homemaker 2 Pty Ltd v Valuer-General
 QLC 47
12 Dec 2018