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ISPT Pty Ltd v Valuer-General (No 3)[2019] QLC 40

ISPT Pty Ltd v Valuer-General (No 3)[2019] QLC 40

LAND COURT OF QUEENSLAND

CITATION:

ISPT Pty Ltd  v Valuer-General (No 3) [2019] QLC 40

PARTIES:

ISPT Pty Ltd

ACN 064 041 283

(appellant)

v

Valuer-General

(respondent)

FILE NO:

LVA024-17

DIVISION:

General Division

PROCEEDING:

Appeals under s 155 of the Land Valuation Act 2010 against objection decision

DELIVERED ON:

4 October 2019

DELIVERED AT:

Brisbane

HEARD ON:

30 April 2019; 1, 2 & 3 May 2019

Submissions closed 5 July 2019

HEARD AT:

Brisbane

ACTING PRESIDENT:

WA Isdale

ORDER/S:

  1. Appeal LVA024-17 is allowed.
  2. The valuation as at 1 October 2015 of Lot 4 on RP 221710 County of Stanley Parish of North Brisbane with an area of 3,365 m2, Property ID 1226734 is Thirty-Five Million One Hundred and Ninety-Five Thousand Dollars ($35,195,000).

CATCHWORDS:

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 in dispute – direct comparison of sales is the best method of valuation – usefulness of sales used by valuers

Land Valuation Act 2010 s 7, s 19, s 33, s 155, s 169, s 170

Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410, applied

Ballow Chambers Limited v Valuer-General (1992–93) 14 QLCR 422, cited

Barber & Ors v Valuer-General (1968–69) 17 LGRA 409, applied

Burnett v Department of Natural Resources and Water [2010] QLC 57, cited

Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, applied

Clough v Valuer-General (1981–82) 8 QLCR 70, applied

Enright Hendy and Partners Investments Pty Ltd as trustee v Valuer-General [2012] QLC 38, cited

Fairfax v Department of Natural Resources and Mines [2005] QLC 11, applied

Finlayson & Anor v Valuer-General (2013) 34 QLCR 101; [2013] QLC 23, applied

Hans and Else Grahn v Valuer-General (1992-93) 14 QLCR 327, applied

In Adam Pty Ltd v Valuer-General [2011] NSWLEC 55, cited

ISPT Pty Ltd v Melbourne City Council [2008] VSCA 180, applied

ISPT Pty Ltd v Valuer-General [2019] QLC 30, cited

ISPT Pty Ltd v Valuer-General (No 2) [2019] QLC 31, cited

Kathryn M & Kenneth E Bullen v Chief Executive, Department of Natural Resources [1998] QLC 12, cited

Kiddle & Anor v Deputy Federal Commissioner of Land Tax (1919–1920) 27 CLR 316, 320; [1920] HCA 170, applied

Lawson v Valuer-General [2012] QLC 27, cited

NR and PG Tow v Valuer-General (1978) 5 QLCR 378, applied

Stubberfield v The Valuer-General (1988-89) 12 QLCR 328, applied

Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925 [2018] QLAC 7, applied

Valuer-General v In Adam Pty Ltd (2012) 211 LGERA 75; [2012] NSWCA 20, cited

Valuer-General v Queensland Club (1990–91) 13 QLCR 207, cited

APPEARANCES:

RJ Anderson QC (instructed by Otto Martiens) for the appellant

SP Fynes-Clinton, with JP Hastie (instructed by Clayton Utz) for the respondent

Background

  1. [1]
    The respondent routinely valued this land as at 1 October 2015. The basis of valuation is for its site value,[1] a term defined in the Land Valuation Act 2010 (“the Act”). That aspect is not in dispute and does not need to be examined.
  1. [2]
    The land has an area of 3,365 m2 and is located at 170 Queen Street, Brisbane. It also has a frontage to Adelaide Street. The site valuation at 1 October 2014 was $39,000,000. The respondent valued it at 1 October 2015 in the amount of $59,500,000.[2]
  1. [3]
    Dissatisfied with the respondent’s advice that the appellant’s site value had increased by over 50% in one year, the appellant objected, following the procedure in the Act, and contended for a valuation amount of $40,380,000.[3]
  1. [4]
    On 14 December 2016, the decision on objection was issued by the respondent. The valuation amount was reduced to $53,000,000.
  1. [5]
    In accordance with s 155(l) the objector appealed to the Court “against the objection decision”.[4] On 1 February 2017, the objector became the appellant and filed the present appeal. It contended for a site valuation of $39,000,000, which was not an increase on the 2014 valuation.
  1. [6]
    On 16 April 2019, the solicitors for the respondent wrote to the solicitors for the appellant and informed them that the respondent had, as permitted by the Act, amended the site valuation to $52,500,000.[5]
  1. [7]
    The Court was case managing the appeal and the valuers’ joint expert report (JER) had been prepared. The value assessed by the respondent’s expert valuer was $52,500,000.

Disputes resolved during the hearing

  1. [8]
    There was agreement that the parties’ town planning experts, Mr David Perkins, nominated by the appellant, and Mr Greg Ovenden, nominated by the respondent, would give their evidence concurrently. This they did.
  1. [9]
    There was also agreement that the engineering experts, Mr Ian Ainsworth, nominated by the appellant, and Mr Mike Gould, nominated by the respondent, would give their evidence concurrently. This also occurred.
  1. [10]
    The appellant sought to have the evidence of the expert valuers given concurrently. The respondent opposed this. For reasons given ex tempore, the Court heard the evidence of the valuers concurrently also.
  1. [11]
    Late in the afternoon of 29 April 2019, the day before the hearing commenced, the appellant filed a General Application seeking to set aside a subpoena, dated 22 March 2019, for Mr Stephen Cross to attend and give evidence. It was said that any evidence that Mr Cross could give would be irrelevant to any issue in dispute and/or be inadmissible. This matter was pursued on the first day of the hearing.
  1. [12]
    Mr Cross, an expert valuer employed by the respondent, was responsible for the objection decision given on the appellant’s objection to the valuation. The appeal before this Court considers the matter de novo and is not a judicial review of the objection decision; section 155(1) of the Act makes it clear that the appeal is against the objection decision. For reasons given ex tempore, the Court found that, as the appellant had not complied with Rule 24J,[6] which makes it necessary to provide a statement of what evidence the witness can give at least 21 days before the hearing, the witness could not be called without leave of the Court.[7] As there was no application made for the necessary leave, the Court adjourned the General Application and proceeded with the hearing.
  1. [13]
    When the application for leave was made on the second day of the hearing, the Court decided, for reasons given ex tempore, that it would give leave for Mr Cross to be called. It was noted that the wording of s 155(1) of the Act, that the appeal was “against the objection decision”, was a relevant consideration.
  1. [14]
    Counsel agreed that, in effect, the decision on the question of leave to call Mr Cross would usefully be determined along with the General Application. After finding that, on the basis of the position as it then appeared, leave would be given to call Mr Cross, the Court then decided that the General Application to set aside the subpoena issued to him would be dismissed.[8]

The appeal

  1. [15]
    The nature of the hearing is set out in s 169 of the Act. The hearing must be limited to the grounds stated in the notice of appeal.[9] The appeal is by way of a rehearing.[10] The appellant has the onus of proof for each of the grounds of appeal.[11]

Onus of proof

  1. [16]
    The requirement in s 169(3) that “the appellant has the onus of proof for each of the grounds of appeal” will be borne constantly in mind in these reasons. It is for the appellant to prove its case.[12]

The two-step process

  1. [17]
    As Member Smith has pointed out:

“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”[13]

The applicable law

  1. [18]
    The Court is not an inquisitorial body. It is a Court which must consider the evidence put before it by the parties.[14] The appellant must prove their case, a task often facilitated by the assistance of registered valuers.[15]
  1. [19]
    This Court is bound by the decisions of the Land Appeal Court. That Court said in NR and PG Tow v Valuer-General that:

“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.

It follows that a large increase over and above a previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation.”[16]

  1. [20]
    This Court has said:

“A valuation deduced from relativities with other valuations made by the Valuer-General and that were not themselves tested in the present proceedings by reference to sales evidence cannot safely to be relied upon. Where, as in the present case, the subject valuation is said to be incorrect, it would not be safe to rely on other valuations and to assume that they are correct so as to draw a conclusion about the valuation of the subject land.”[17]

  1. [21]
    In Hans and Else Grahn v Valuer-General, the Land Appeal Court considered the previous Act. The Court’s comments in that case are equally applicable to the matters considered under the current Act. The Court said:

“The decision of the High Court of Australia in Brisbane City Council v The Valuer-General ((1978) 140 CLR 41, 5 QLCR 283) and the decisions of the Land Appeal Court in cases such as WM and TJ Fischer v The Valuer-General ((1983) 9 QLCR 44) and R and MM Barnwell v The Valuer-General ((1989) 13 QLCR 13) are authority for the following propositions:

  1. (a)
    It is desirable that valuations made for the purposes of the Valuation of Land Act 1944 of comparable lands should bear proper relativity, one to the other, so long as the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis (R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at p. 16 and cases cited in it).
  1. (b)
    The best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels of land (WM and TJ Fischer v The Valuer-General (1983) 9 QLCR 44, at p. 46; R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at p. 17).

  1. (e)
    Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence (WM and TJ Fischer v The Valuer-General (1983) 9 QLCR 44, at p. 46).
  1. (f)
    If possible, the Valuer-General should obtain uniformity between different blocks in the same land category or type, but should do so (preferably by reference to sales of comparable land) by correcting inaccuracies rather than by making an inaccurate assessment in order to secure uniform error (R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at pp. 16-17 and cases cited in it).”[18] (citations in original)
  1. [22]
    The superiority of sales evidence when valuing land is illustrated by the words of the learned President in Fairfax v Department of Natural Resources and Mines:

“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).

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.'”[19]

The grounds of appeal

  1. [23]
    The appellant’s grounds of appeal are in the following form:

1. The land is located in the Queen St Mall, being the premier retail location in the Brisbane CBD.   Therefore, the highest and best use of the land is for retail development.

2. Development of the land for student or residential accommodation purposes does not represent its highest and best use.

3. The Appellant’s assessment of the site value of the land at $39,000,000 (the Appellant’s assessment of site value) has been made in accordance with the Land Valuation Act 2010 (Qld) (LVA), ordinary valuation principles, and otherwise according to law.

4. The following matters do not support the issued valuation, and instead support the Appellant’s assessment of site value:

  1. (a)
    the constraint on the use of the land due to its irregular shape and location on the northern side of the Queen Street Mall with rear frontage to Adelaide Street;
  2. (b)
    the fact that the Queen Street frontage to the land is limited to pedestrian use only;
  3. (c)
    the fact that development, and use of, the land is constrained by the severely limited vehicle access to the land, which consists only of a narrow laneway off Adelaide Street;
  4. (d)
    the fact that development on the land will require the consent and/or co-operation of the owner of the neighbouring Queens Plaza site;
  5. (e)
    the constraint on the use of the land due to the fact that the façade of the building fronting Adelaide Street is heritage listed and is required to be retained in the development of the land;
  6. (f)
    the constraint on the use of the land due to its situation on the Queen Street Mall and consequent specific height restrictions;
  7. (g)
    the fact that the above access constraints to the land will result in additional construction costs;
  8. (h)
    the fact that car parking availability on the land:
  1. (i)
    is limited and restricted by town planning constraints; and
  2. (ii)
    is unsuitable for viable residential development;
  1. (i)
    the Queensland economy was experiencing recessionary conditions as at the valuation date, and the Appellant’s assessment of site value has regard to the prevailing market conditions as at the date of valuation.

5. The Appellant’s assessment of site value reflects the legal constraints on the use of the land, including the constraints imposed by the Brisbane City Council Planning Scheme (City Plan), including:

  1. (a)
    easements;
  2. (b)
    special requirements that apply to building work fronting the Queen Street Mall;
  3. (c)
    restrictions that apply to the use of land fronting the Queen Street Mall;
  4. (d)
    building height limits that apply to the land;
  5. (e)
    building setback requirements that apply to developments fronting the Queen Street Mall; and
  6. (f)
    the fact that the Adelaide Street façade is listed in the Heritage Register of the City Plan.

6. The following sales do not support the issued valuation, and instead support the Appellant’s assessment of site value:

  1. Broadway on the Mall,

170 Queen Street, Brisbane             July 2011           $ 62,500,000

  1. 76 Queen Street, Brisbane              February 2015   $ 133,000,000
  2. 180 Queen Street, Brisbane             May 2012          $ 29,500,000
  3. 97 Elizabeth Street, Brisbane          July 2015           $ 28,000,000
  4. 55 Elizabeth Street, Brisbane          February 2011   $ 24,000,000
  5. 304 George Street, Brisbane           May 2013          $ 63,000,000
  6. Vision site, 111 Mary Street

              and 222 Margaret Street, Brisbane  July 2010          $ 38,000,000

7. The Respondent’s assessment of site value of the land value does not adequately reflect the discount for size and quantum of money for such a large land holding.

8. The Respondent’s assessment of the site value of the land is excessive, is not in accordance with the LVA, and is thereby contrary to law and erroneous.

9. Further, the Respondent’s assessment of site value of the land and each individual site in the Brisbane CBD reached using the following valuation methodology (the solely residential approach):

  1. (a)
    development of a residential tower or towers on each individual site represents the highest and best use of each site;
  2. (b)
    the only relevant comparable sales are residential sales; and
  3. (c)
    only a small number of selective residential sales have been used for the purpose of ‘comparable sales’,

 is not in accordance with the LVA, and is thereby contrary to law and erroneous.

10. The solely residential approach is not in accordance with the LVA, and is thereby contrary to law and erroneous for the following reasons:

  1. (a)
    the solely residential approach is not a rational way of proceeding: the hypothetical valuation of all Brisbane CBD sites as residential use does not recognise that the Brisbane CBD contains a mixture of uses including commercial, residential, retail, judicial and government uses, with employment uses intended to dominate;
  2. (b)
    the solely residential approach ignores the paradox that as more land is developed for residential purposes there would be less demand for residential land sites;
  3. (c)
    the solely residential approach ignores the fact that whilst section 19 of the LVA is intended to apply to each valuation made under LVA, section 19 also has statutory operation in relation to all valuations (that is, all pieces of land to be valued);
  4. (d)
    it is considered that the solely residential approach has proceeded on the basis of only a selective number of residential sales being used for the purpose of comparable sales, and the comparable sales used are for a different use to that considered to be the highest and best use of the land;
  5. (e)
    the solely residential approach is inconsistent with the principles set out by the High Court in Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111.” (citation in original)

The issues

  1. [24]
    As part of the case management before the hearing, the parties filed, on 26 April 2019, an agreed list of issues of fact and law which are in dispute. It is in the following form:

“The following is a list of the real and substantial issues of fact in dispute between the parties in this matter.

Specific to the Subject

  1.   What is the site value of the subject as at 1 October 2015?
  2.   Is the highest and best use of the subject as at 1 October 2015:
  1. the level and scale of retail development similar to that which      presently exists on the land, or
  2. a mixed use retail with a commercial tower above?
  1. Would there be a need to provide car parking as part of any hypothetical development incorporating a commercial tower in order to make such a development commercially viable? If so, how many car parking spaces would be required?
  2. What are the impacts of the easements on development?   In particular, do     the easements or other constraints on or applicable to the site enable any     increase in the amount of car parking provided for on the subject as 1     October 2015?
  3. How, if at all, is the heritage façade to be brought to account?
  4. In deciding the value of the land, what allowance should be made for the heritage restriction related to the heritage façade on Adelaide Street?
  5. In considering the heritage restriction, is there a requirement to allow for the cost of reinstatement of the façade in the valuation exercise?

As to the sales

  1. What is the proper treatment (by way of adjustment, if any) to be given to the potential reduction in infrastructure charges owing to the development of 38 Wharf Street and 97 Elizabeth Street for student accommodation?
  2. Whether the three residential sales at 240 Margaret Street, 30 Albert Street and 443 Queen Street have a useful comparability to the subject.
  3. As to the 2011 sale of the subject, whether it has useful comparability and whether it is appropriate to depreciate holding costs and interest.”
  1. [25]
    The parties were required to file a list of matters not in dispute. On 26 April 2019, each party filed its own list of what is not in dispute. The appellant provided the following list:

“1. The matters expressly agreed in the Joint Expert Planning Report by Mr
     David Perkins and Mr Greg Ovenden dated 1 June 2018.

  1. The matters expressly agreed in the Joint Expert Engineering Report by Mr Ian Ainsworth and Mr Mike Gould dated 6 November 2018.
  2. The matter expressly agreed in the Joint Expert Quantity Surveying Report by Mr Alan Bradley and Mr Malcolm Davidson dated 4 February 2019.
  3. The matters set out in the Updated Supplementary Report of Mr Alan Bradley dated 3 April 2019.
  4. The matters expressly agreed in the Joint Expert Valuation Report by Mr Grant Jackson and Mr Benjamin Hart dated 3 April 2019.”
  1. [26]
    The respondent’s list differs only in that “except for paragraph 6.3” is added at the end of item 2.
  1. [27]
    Counsel also provided a document listing the “core issues for valuers”. This was an aid rather than a formal exhibit. It proved to be useful and will assist in an orderly consideration of the valuation evidence. It sets out the issues as follows:

1. Highest and best use of the subject land

2. Relevance of CBD sales (residential use intent) relied upon by Mr Hart     but rejected by Mr Jackson

3. Infrastructure credits issues (though it is really not a big deal in this case sense [sic] Mr Hart has been content to adopt the statutory valuation which is very close to Mr Jackson's analysis – however, the issue still needs to be canvassed)

4. Basis and validity of Mr Jackson's analysis of the improved sale in July

    2011 to derive an (implied as we say) site value for the land

5. Extent to which Mr Jackson's opinion is based primarily on his analysis     of the improved sale rather than comparable sales, recognising that Mr     Hart does not rely upon the improved sale at all.

6. Evidentiary or valuation principle basis for Mr Jackson's 10% adjustment     to his analysis of the 2011 sale

7. Allowance for heritage and easements in Mr Jackson's final analysis     where the valuers are significantly apart.”

  1. [28]
    Item 3 did not, in the event, present as an issue of difficulty in the case, as the wording of that paragraph foreshadowed.

The appellant’s case  

  1. [29]
    The valuer called on behalf of the appellant, Mr Jackson, considered that the land should be valued at either $31,485,000[20] or $35,195,000,[21] depending on how the costs relating to the existence of the heritage façade on the site should be allowed for in the valuation. In the event that they are not to be allowed for at all, the value contended for by the appellant would be $39,267,360.[22]
  1. [30]
    The figure of $39,267,360 was arrived at by applying $12,000 per ISPT Pty Ltd v Valuer-General (No 3) [2019] QLC 40 to the developable area of 3,241 ISPT Pty Ltd v Valuer-General (No 3) [2019] QLC 40 and $3,000 per ISPT Pty Ltd v Valuer-General (No 3) [2019] QLC 40 to the 124 ISPT Pty Ltd v Valuer-General (No 3) [2019] QLC 40 affected by the building easement A on RP 701 on the boundary with the Brisbane Arcade.[23]
  1. [31]
    In their joint expert report, the valuers have set out the matters on which they agree. Mr Jackson and Mr Hart, the respondent’s valuer, agree, significantly, that the subject land is situated within Brisbane’s premium retail precinct.[24] They observe that the surrounding developments include a mix of retail and commercial office as well as short-term accommodation developments.[25] This is consistent with the evidence of the town planning experts. In their joint report, Mr Perkins and Mr Ovenden, state:

“18. The site is within the Principal Centre zone of the local planning scheme which makes clear that the focus of the mall and retail heart of the CBD provide retain facilities and is the central hub for retain focused uses. The block within which the site is situated, comprising Adelaide, Albert, Queen and Edward Streets, generally includes mid-rise commercial office towers. Both frontages are highly trafficked cross-city pedestrian links, providing access to and from employment centres, major transport accesses such as central station and King George Square bus station and the shopping district of the city heart, Queen Street Mall.

  1. The land immediately surrounding the site is characterised primarily by a range of retail land uses which reflect the location of the site within the retail heart of the Brisbane CBD. Specifically, the nearby uses include the following:

ISPT Pty Ltd v Valuer-General (No 3) [2019] QLC 40  

 

 

 

                                                                                                                                            ”.[26]

Highest and best use

  1. [32]
    The appellant points out that in arriving at the issued valuation, Mr Hart did not attribute a highest and best use for the land.[27] He said that it would have been valued with the highest and best use “in mind”, but he did not know what it was.[28] Mr Hart was of the opinion that highest and best use is established by the sales evidence.[29]
  1. [33]
    It is a well-recognised principle that land is to be valued for its highest and best use.[30] That is the most profitable use having regard to the physical, economic and legal restrictions on the use of the land.[31]
  1. [34]
    The first task of the valuer is to determine the highest and best use of the land and then to value it on that basis. It is not appropriate to determine the highest and best use by reference only to value.[32] What constitutes the highest and best use is a question of fact to be resolved on the whole of the evidence, as is whether it may comprise potential alternatives.[33]
  1. [35]
    Mr Jackson valued the land on the basis that the highest and best use of the land on the date of valuation, 1 October 2015, was for retail development on a scale similar to that then existing on it.[34]

The issued valuation

  1. [36]
    The issued valuation was made without Mr Hart, who is responsible for it,[35] knowing what its highest and best use was.[36]

Finding of error in the issued valuation

  1. [37]
    This was an error since the highest and best use must be identified before embarking on the process of ascertaining and considering comparable sales, from which the value may be determined.
  1. [38]
    For present purposes, it is not necessary to consider this further as the appeal to this Court is from the objection decision,[37] which came later.

The decision on the objection

  1. [39]
    Mr Stephen Cross was called by the appellant following the giving of ex tempore reasons for the dismissal of a General Application filed on 29 April 2019 by the respondent seeking to set aside a subpoena directed to Mr Cross.
  1. [40]
    Mr Cross was the respondent’s delegate for the objection decision.[38] In making his determination, Mr Cross looked at the land as having commercial tower potential.[39] He did not make a determination about the highest and best use of the land.[40] The decision which he made was his own, made on the basis of the recommendation made to him by Mr Wall, who represented the Valuer-General in that process.[41]

Finding of error in the objection decision process

  1. [41]
    In arriving at a value without first deciding the highest and best use of the land, the objections decision process has suffered from the same error as the process which led to the issued valuation.

The consequences of these errors

  1. [42]
    Section 169(2) of the Act provides that the appeal to this Court must be by way of a rehearing and s 169(3) places the onus of proof on the appellant.
  1. [43]
    It was submitted these errors have demonstrated that the appellant has discharged its onus of proving that the decision on objection is wrong.[42]
  1. [44]
    This is not correct. As Member Smith has pointed out, the Court’s first step must be to determine whether or not “the evidence in its totality” shows that the onus of proof has been discharged.[43]
  1. [45]
    It is not enough to show that the issued valuation and objection decision process were conducted erroneously; all of the evidence must be considered before deciding whether the onus of proof of any of the grounds of appeal has been discharged.
  1. [46]
    The appellant also submitted that ground 8 of the grounds of appeal, that the value is excessive, is satisfied by the letter dated 16 April 2019 from the respondent’s solicitors to the appellant’s solicitors.[44] Relying on s 163 of the Act, the letter advises that the site valuation has been amended from $53,000,000 to $52,500,000.
  1. [47]
    The appellant submits that it has therefore been established that the $53,000,000 was excessive so it has successfully passed the point of establishing that the objection decision was wrong.
  1. [48]
    This overlooks the wording of s 163(4) of the Act which provides that, in circumstances such as the present where the appellant does not accept the amended valuation –

…the valuation as amended is taken to be the valuation appealed against.[45]

The consequences of this action by the respondent

  1. [49]
    The effect of the provision is to make $52,500,000 the valuation appealed against. This aligns with the opinion expressed by Mr Hart in the joint expert report.[46] The result is that the respondent’s action under s 163 does not assist the appellant in the manner claimed.

Summary so far

  1. [50]
    The question of what is the highest and best use of the land is to be answered first; it is a question of fact to be resolved on the whole of the evidence before the Court. As the respondent chose to lead evidence, that forms part of what the Court will consider.
  1. [51]
    Mr Jackson was of the opinion that the highest and best use was for retail development, similar in scale to what is presently on the land.[47] Mr Hart differed; he proceeded to arrive at his opinion on valuation on the basis that town planning made it legally possible for a building on this site to be constructed with a commercial office space tower above a retail podium. He then used sales, none of them being sales for commercial office space use, to arrive at his valuation. In doing this he proceeded as if the fact that such a building could legally be constructed on the land answered the question of what was its highest and best use on 1 October 2015.
  1. [52]
    While that may in some cases be correct, it is incomplete and therefore misleading. An illustration is found in the decision of Jacobs J in the Adelaide Clinic case.[48] Discussing the approach of the experienced[49] valuer for the resuming authority, his Honour said:

“On a comparison of these two calculations he concluded that ‘it is apparent that the highest and best use of the property would be if developed for commercial purposes if approved and it is therefore considered appropriate if compensation be based to that use’. He accordingly settled upon a figure of $65,000 plus a possible modest allowance for disturbance as fair compensation.

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 in my view, wrong in principle to determine the highest and best use by comparison of the notional market value for commercial development on the one hand, and residential development on the other. Common experience shows that land ideally situated 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 that basis. It is not appropriate to determine the highest and best use by reference to only value”.[50] (emphasis added)

  1. [53]
    Mr Hart proceeded this way:

  Mr Hart’s Opinion

  1. The Highest and Best Use (HBU) of the subject is a mixed use development with basement car-parking, retail and commercial uses in the lower ground, ground, podium, and tower levels.
  2. I do not agree with the HBU adopted by Mr Jackson as the subject is capable of developing a tower above the podium.”[51]              

 He then applied those considerations to come to the view that commercial office space was part of the highest and best use:

  Market demand for office development

  1. I disagree with Mr Jackson [sic] opinion about the limited, if any demand for commercial office development.
  2. A lack of sales in 2015 purchased for commercial office development does not necessarily translate to a lack of commercial office demand.
  3. The examples provided by Mr Jackson indicate that a demand for commercial office development in the CBD.
  4. The examples demonstrate that there was a demand as three out of the four developments were under construction and two of them were almost fully pre-committed. The remaining office tower under construction was 50% committed with only 28,000 ISPT Pty Ltd v Valuer-General (No 3) [2019] QLC 40 available. Two of the four projects were subject to a land sales in 2012 and 2013.
  5. As at the date of valuation, 300 George Street development was still at DA stage and was reported to be completed in 2018-2019, four years after the date of valuation and 6 years since it was purchased. This tower is part of the Brisbane Quarter development incorporating three towers and 7 levels of basement car parking. As date [sic] of the valuation, the basement was under construction. Prudent purchasers would know that this size of development would take a significant amount of time to enter the market, much longer than would be expected if the office development was developed on a standalone basis.
  6. The only other new office space to enter the market in 2015 was 2000m2 of office space in the QSM at 155 Queen St and approximately 3000m2 of office space as part of the refurbishment of 170 Queen Street (subject). Both of these sites are owned and developed by ISPT. The lack of new office entering the market in 2015 could indicate a shortage of supply and present an opportunity to develop commercial office space in the QSM.
  7. The prudent purchaser would consider and seek advice to get a thorough understanding of the key trends driving tenant demand in the CBD. As at the date of valuation, the key drivers were recentralisation, firms opening Brisbane offices, and flight to quality as outlined in m3property Brisbane CBD Office Market Report dated Spring 2015.
  8. Evidence of demand for office space include a demand from firms located in the CBD fringe and suburban wanting to relocate to the CBD. There have been a number of firms, largely from legal and education sectors, who have previously not had a Brisbane presence, opening office/looking for space in the Brisbane CBD.
  9. There was a demand from firms who were recognising that now is a good time to upgrade to higher quality premises. A number of firms had relocated from secondary to prime accommodation as well as A-grade to premium accommodation in the CBD.”[52] (emphasis added)
  1. [54]
    Paragraph 140 is the starting point which leads to the conclusion that there was demand for commercial office space in the relevant location on 1 October 2015. The expression used in [140] is an instance of the traditional aphorism “absence of evidence is not evidence of absence”.[53] The formulation in [140] inverts, and diminishes, the reality that is being referred to, that there is no sales evidence in 2015 of land purchased for commercial office development. There is no sales evidence to support the proposition. Instead, recourse is had to argument and to sales in 2012 and 2013 in an attempt to explain away the absence of evidence and to urge the existence of demand when sales evidence does not exist.                                                                                                                                                                                                                                                                                                                                                                               
  1. [55]
    This approach is unconvincing and the Court does not accept it. The correct approach is:

“…that careful consideration must be given to all available facts and sources of information in the formation of an opinion relative to the highest and best use of land…”[54]

  1. [56]
    The concept of highest and best use is a fundamental principle of valuation.[55] Mr Hart has departed from the fundamental principle at the outset of his valuation exercise. The result is that the error influences much of what follows so that nothing useful is able to be gained from his opinion so far as it depends on that error.
  1. [57]
    In considering all of the evidence in order to ascertain whether the appellant has satisfied the onus upon it, Mr Hart’s evidence is able to be relied upon where not tainted by this error, in the analysis of the sale of the subject in 2011, for instance.
  1. [58]
    There is no need for the Court to resolve the dispute, which occupied considerable time at the hearing, concerning the number of car parking spaces that might be available in the case of a tower as envisaged by Mr Hart being developed. That is now moot.

Mr Jackson’s evidence

  1. [59]
    Mr Jackson, a registered valuer, is chief executive of m3property.[56] He contributed to the joint valuation report and gave evidence. The valuers gave their evidence concurrently. A copy of a commentary prepared by m3property which discusses the “Brisbane CBD office market” became Exhibit 9. It is dated “Spring 2015”. The appellant points to it as useful evidence. The Court is unwilling to place any reliance on it in view of the disclaimer at the end. It states:

“This report has been derived, in part, from sources other than m3property. In passing on this information, m3property makes no representation that any information or assumption contained in this material is accurate or complete.

To the extent that this material contains any statement as to the future, it is simply an estimate or opinion based on information currently available to m3property and contains assumptions which may be incorrect. m3property makes no representation that any such statements are, or will be, accurate.”[57]

  1. [60]
    The sworn evidence is more likely to be reliable.
  1. [61]
    Mr Jackson’s evidence is that, at the relevant time, there was not sufficient demand for office space that commercial development on the subject land would be contemplated.
  1. [62]
    The evidence is usefully summarised in the following passage of the transcript:

“MR FYNES-CLINTON:   All right.  Now, you said a moment ago that concerns about access and parking were not your primary reason for considering that a commercial tower would not constitute part of the highest and best use.  Can you just articulate clearly what your other reasons are.

MR JACKSON:   The – the main reason is – is the market conditions as at 1 October 2015.  It – it could not be seriously contemplated, in my opinion, that anyone would consider a commercial office development on the subject land even if height, design and car parking issues were overcome.  The market is in such a poor state, record vacancy levels, decreasing rents, record incentive levels, subdued tenant demand and months and months of negative net absorption.  Negative net absorption means the market is actually contracting.  There is less tenant demand in the market.  It’s going backwards. 

Now, if at that stage a potential purchaser hadn’t completely dismissed the notion of a commercial tower, I would then tell them that it’s about to get substantially worse.  There’s 190,000 square metres of space under construction and about to come into the market within the next 12 months.  That 190,000 square metres of space represents about 9 per cent of the entire CBD stock.  There’s a tidal wave of space coming in a market that’s reached its highest vacancy rate on record.  There is nothing in all of that information that could possibly excite anyone about undertaking a development of office space on the property.  And then you need to overlay that –  if you hadn’t completely dismissed the notion by then, you’d have to overlay that by saying the location of the subject property for office accommodation is quite secondary.  It’s not a prime location.  It’s not in Eagle Street or in Queen Street or in George Street.  It’s – it’s a secondary part of Adelaide Street for office, not – not a recognised office locality.  We’ve recognised there’s not one office development in the block on which it sits.  So it’s secondary. 

And then on top of that it then sits above a retail development behind a heritage facade.  So its entry statement to the office is severely compromised and it’s – it’s sitting above a retail development.  And then just to make it a little bit worse – and I don’t want to overplay it, but by putting an office development in, you’re then impacting your retail.  You’ve taken out a whole section of retail because you’re going to have to put lift cores in to get up to the space. You’re going to have an entry foyer of some sort, even if it’s modest and small or whatever design it might be – and I make no mistake about designing it.  So you’re then going to take away some of your prime ground floor retail potential.  You’re going to lose that to try and get this relatively modest office building up above the – the retail.  It just wouldn’t be – there’s no prospect of it being financially feasible at the date, none whatsoever, in my opinion.  It just wouldn’t be contemplated.”[58]

  1. [63]
    Mr Hart proceeds to answer these points.[59] The part of his response to which attention must be directed appears towards the end of this exchange. It is the following:

“MR HART:   Sorry, I was trying to write the points down.  So we talked about pedestrians, we talked about crossovers, the secondary office type location – well, it’s the core location, the financial feasibility aspect.  I haven’t seen any evidence of the financial feasibility exercise that’s been undertaken, so I can’t really comment about whether or not it would be financially feasible because I haven’t seen any financial feasibility models or attempts to undertake that type of exercise.  So I think I’ve covered as many things as I can in response to Mr Jackson’s answer.

MR JACKSON:   Could I just touch on – it was the last actual bit so that’s to Mr Hart – is that – it’s – Mr Hart’s proposing that you would build an office tower, which implies, obviously, under the definition of highest and best use that it is financially feasible.  It’s the international evaluation [sic] standards definition of highest and best use but he’s just said that he would have no idea whether it’s financially feasible.

And then, all the discussion there about the site being near a train station and the other buildings like that, none of it went to the financial heart, that is, what are the rents?  What are the incentives?  What’s the tenant demand?  They’re the real questions.  I mean, whether you’re close to a train station, you got to walk to Eagle Street or Queen Street, so what?  They do it every day and you get better rents down in Eagle Street.  So it’s just not an issue.  But the real issue’s not answered.  Rents – all the material that’s been put in these proceedings say that rents are poor.  They’re subdued.  Tenant demand’s down.  Incentives are at record high levels.  Surely, they’re the key focus you’d be looking at in determining whether something is financially feasible.

MR FYNES-CLINTON:   As at the date of the purchase, of course, any development would be to two to three years away, in terms of completion, so can I put this question to both of you.  How significant, really, is the question of vacancy rates and rental levels at the date of purchase, in respect of a project that would take two or three years to complete?

MR JACKSON:   In my experience, in Brisbane and every other capital city, imperative.  You look at the current vacancy rate, you look at future supply, you look at likely take-up.  They’re all – they’re the critical elements in looking ahead.  But the actual vacancy rate at the time is of paramount importance.  I know I can say that from advising some [sic] Australia’s largest corporations and trusts that develop office buildings in our capital cities.  It’s imperative.

MR HART:   I would certainly, you know, I’d agree with that but I would be prefacing that with that you would be looking at a vacancy rate specific to what you’re going to be doing.  Office rents specific to what you’re doing, incentives specific to what you’re hypothetically doing, you know, in terms of the rate, in terms of your location.  Again, vacancy rates, across the whole market, there are certain areas where – that vacancy is more prominent than in other areas.  So again, it’s all specific to what the property is and where the property is and what you’re potentially or hypothetically developing.”[60] (emphasis added)

  1. [64]
    The transcript illustrates that Mr Hart is aware of the importance of the feasibility of a proposed highest and best use. He is critical of the absence of a study of feasibility for Mr Jackson’s proposed highest and best use. Mr Jackson’s opinion is that the retail use along the lines of what is actually there is the highest and best use. There is no evidence that it is not feasible and the Court accepts Mr Jackson’s opinion.

Finding – highest and best use

  1. [65]
    The Court finds that the highest and best use of the land on 1 October 2015 was for retail development on a scale similar to that which presently exists on the land. There is nothing in the evidence of Mr Perkins and Mr Ovenden, the town planning experts, which requires consideration in order to reach this conclusion. The same may be said of the evidence of the engineering experts, Mr Ainsworth and Mr Gould.

The first step

  1. [66]
    The evidence in its totality demonstrates that, on the balance of probabilities, the valuation is in error. The onus of proof on the appellant has been discharged.

The second step – what is the correct valuation?

  1. [67]
    Section 170(b) of the Act provides that the Court may:

reduce or increase the valuation to the amount it considers necessary to correctly make the valuation under this Act.

  1. [68]
    In the present case, there is only scope for a reduction. The Court must now decide the correct valuation on the evidence before it.
  1. [69]
    Mr Jackson has relied primarily on the 2011 sale of the subject land. It is a heavily improved sale so presents the well-recognised difficulty of analysing the sale to attempt to ascertain the value of the site. After that, an allowance must be made to take into account the effect of the time between the sale date and 1 October 2015 so as to arrive at the site value on that day.
  1. [70]
    This is one method available to a valuer, but it has been powerfully criticised. In Clough v Valuer-General the Land Court said:

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

Because there is less room for difference of opinion as to value of the various items of improvement and comparison is thus simpler, it has be̊en held that highly improved sales should be avoided in preference to sales comprising a lesser degree of improvement.

In Tooheys’ case and Jowett’s case the method of ascertaining the improved value of the subject property and deducting the value of the improvements therefrom was adversely criticized. Whilst in some cases it may be appropriate to adopt the method, it seems to us that in the majority of cases it introduces additional items to value each of which can be the subject of a difference of opinion and thus increase not only the work load of the valuer and the Courts but also the difficulties and uncertainties of arriving at a reasonably correct unimproved value.”[61]

  1. [71]
    Here, there were no suitable sales of sites for retail or commercial use, in the opinion of the valuers, so an analysis of the 2011 sale of the subject was conducted. It has the advantage of being perfectly comparable in regard to its attributes, of course.
  1. [72]
    The valuers analyse this sale very similarly. They disagree only in regard to some minor matters. Mr Hart would depreciate holding costs and loss of interest for half of the development period at the rate of 75%.[62]
  1. [73]
    Although the Court has found an error in Mr Hart’s valuation that has made it impossible to accept what flows from that error, this has done nothing to diminish the usefulness of his evidence in areas not affected by that error. His analysis of the sale of the subject is useful and the point of departure from the analysis performed by Mr Jackson must be scrutinised without any influence from the earlier decision regarding his approach to highest and best use. Mr Fynes-Clinton pointed out that the parties to the 2011 unimproved sale never had a meeting of minds on the matter of the land (site) value. This is not significant. It would apply to most, if not nearly all improved sales. It is for the valuers to exercise their skill and deduce the land value from the improved sale.
  1. [74]
    Mr Hart’s approach was explained in the following way:

“Now, what I’ve sought to do is that determine [sic] of depreciation allowance and what the valuers have sought to do is – and that appreciation allowance should apply to all these costs, to reflect their age and obsolescence.  And I’ve taken – that’s the sort of standard approach to assessing the added value, because in this particular case, cost doesn’t equal value, because you know, what the purchaser intended to do at the time, from the evidence that we’re able to glean, we’ve agreed to a depreciation allowance of 75 per cent, so you know, that’s a very large discount on all those costs.  I seek to depreciate all those costs.  Mr Jackson hasn’t depreciated all of them.  He has only depreciated, I think, the building works and the professional fees, and the interest on those construction fees.  And has left the holding costs and the interests, and not depreciated those amounts.  So that’s the difference between the valuers:  I’ve sought to depreciate the whole costs and Mr Jackson has sought to depreciate just part of those costs of the improvements that are on the site.”[63]

  1. [75]
    Mr Jackson’s explanation for his treatment of these areas was:

WITNESS JACKSON:   The approach that I’ve adopted is the conventional approach of analysing improved sale, of applying a depreciation rate to the physical built improvements that are on the land, that are not new, and have been depreciated to an extent.  And all costs associated with affecting those improvements on the land likewise depreciated, such as professional fees and so on.  But the other part that Mr Hart refers to are actually costs associated with holding the land, which is nothing to do with the physical built improvements.

When you buy a parcel of vacant land, there is a period of time in which you have to hold the land as you undertake the planning and construction process, to ultimately develop your improvements on the site.  It’s well-recognised in valuation, therefore, that inherent in the added value of the improvements is the time and costs saved in not having to hold the land, because the improvements already exist.  And when you have to hold land, you also have to pay holding costs, called rates and taxes, because they are just assessed annually by the local and state government authorities.  And they’re hard costs; they’re actual costs.  They can never be depreciated.  You can’t get a depreciated land tax amount for your property.  It’s a hard cost.

So – and it’s well-recognised in the law, that there is an allowance to be made in the time it takes to hold the land whilst you set about establishing the improvements on the land.  And it’s a principle in valuation followed by all valuers around the country, and I’ve never seen it approach where one depreciates the costs associated with holding the land and the interests costs of the land.  And that’s the fundamental difference.  One’s dealing with the physical improvements; one’s dealing with the land.  They’re not the same.

MR FYNES-CLINTON:   Can I suggest to you that at the time of purchase, the costs, whether of construction of the building or the other costs that we’re talking about here and are in dispute about, they’re all some costs that have been occurred [sic] in the past?

WITNESS JACKSON:   No.  No, that’s not quite right.  The cost of the building is quite right, that the building was constructed whenever it was and that cost has been expended and likewise, the professional fees.  But the element of holding the land to affect improvements is another element of added value that has to be brought to account.  The fact that the improvements already exist on the land is a benefit over and above the value of what’s sitting there.  There’s an additional element.  That’s a fundamental in the analysis of improved sales in the valuation profession.  Nothing I’m saying – that’s nothing but textbook conventional.  And you can’t depreciate – you go and borrow money from a financial institution to buy the land, which you have to hold whilst you get your planning approval, and you construct on the land what it is you want.  You can’t say to the financial institution, ‘I want a depreciated interest rate, please.’  It’s a hard cost.  It is what it is.  You can’t depreciate a holding cost on land.  It just – it’s just an unheard of.

MR FYNES-CLINTON:   I’ll just put the proposition to you that just as the costs for construction of the building were previously incurred and have now been depreciated, what you call the hard costs, so the interests, the rates and the loan tax [sic], were also previously incurred.  They’re sunk costs into the development and ought, logically, to be treated in the same way as the phsycial [sic] cost of consctruction [sic].

WITNESS JACKSON:   I disagree with that.  There – and I’ve explained why.”[64]

  1. [76]
    Mr Hart’s reply summarised his approach and his intention to act consistently with a work instruction:

“WITNESS HART:   I – for the term ‘hard costs’, I’m not too familiar with that.  I mean, the opportunity costs isn’t a hard cost.  It is an estimate of the loss and opportunity that they would have otherwise been able to move their money into other areas, but they did have to hold the site whilst they were construction, and that represents some value.  Now, it doesn’t represent, in my submission, in my evidence, that it’s – that should that be the whole value, because they didn’t keep the improvements in its full extent, and that depreciation rate – you know, applying a depreciation reflects exactly what the purchaser saw in the value of those improvements, including the time it took to erect those improvements.

And what you can see after the date of valuation is the time that they had to spend to do the refurb.  And I think I’ve outlined that in my report, about – they had to spend another two years, an equal amount of time, to refurb the site.  So again, they didn’t gain any – they didn’t gain the whole advantage of the existing improvements, because they still had to go through a development approval process, as well as refurbing the new existing building – the new improvements.  So to say that they gained all that benefit when they purchased the site, again, I don’t think is the correct way to do it.  And I believe I’ve followed the work instruction that – that’s available to me and to the public, in terms of how to conduct or how to assess the value of these improvements.  And I’ve outlined that in my report as well, in the JER.”[65]

  1. [77]
    The question was addressed by Knox CJ in Kiddle & Anor v Deputy Federal Commissioner of Land Tax, where his Honour the Chief Justice said:

“The question to be solved in ascertaining the value of improvements for the purpose of arriving at the unimproved value is what part of the improved value of the land is attributable to the improvements to be valued.   Presumably, a purchaser of the land, if he considered this question at all, would determine that the amount to be attributed to value of improvements would be equal to the amount which he gained or saved by reason of the improvements having been made, he being thereby relieved from the necessity of making them.   This amount would be found by ascertaining the amount which it would cost to make the improvements in question at the relevant date, including a proper allowance for loss of interest on all outlay during the period which must elapse before such outlay became fully productive, and by deducting from the sum so ascertained a proper allowance for depreciation or partial exhaustion of the improvements.”[66]

  1. [78]
    Mr Hart explained that he followed a procedure, a copy of which became Exhibit 15. A dot-point in Part 3.6 of that procedure states:

.depreciation allowance (should apply to all costs)”[67]

This is in a chapter dealing with the value of improvements. Mr Hart has followed this and said “… all those costs should be depreciated in one line, 75 per cent…”[68]

  1. [79]
    Mr Jackson did not accept Mr Hart’s view that rates and land tax are “all part of…the bundle”.[69] Mr Jackson made the distinction that they “…go on each year. They don’t stop after construction.”[70]
  1. [80]
    The purpose of the deductions which the valuers have made is to find the value of the land in an unimproved state,[71] by allowing for the reduction in value of improvements.[72] The Court accepts Mr Jackson’s evidence, as it is in accord with principle, and will not allow for depreciation of rates, land tax or interest.

Adjusting for time

  1. [81]
    In attempting to account for the influence on value of the time between the June 2011 sale and the October 2015 valuation date, Mr Jackson explains his analysis from page 57 to 62 of the joint report. He concludes that a 10% increase should be allowed.[73]
  1. [82]
    Mr Hart is not satisfied that an adjustment can be reliably achieved in view of the limited evidence of re-sales in that period.[74] He does, however, apply it to support his own valuation.[75] Although not accepting the reliability of Mr Jackson’s allowance, Mr Hart has, by applying it in support of his own opinion, indicated at least some support for it which is not consistent with outright opposition to it.

Finding on the adjustment for time

  1. [83]
    On the evidence available there is, on balance, a sufficient basis for the Court to accept Mr Jackson’s allowance for time, and the Court does accept it.

Allowing for the effect of the easements

  1. [84]
    Mr Jackson has reduced the rate applied to the unaffected land area by 75% to allow for the burdening effect.[76] Mr Hart has allowed a discount of 10%.[77]
  1. [85]
    Both valuers have explained their basis for the allowance which they have made. It is very much a matter for their professional judgment. Since the Court needs to resolve the impasse, it finds assistance in doing so in Mr Hart’s reasons, which are the more extensive on this point. Mr Hart points out that Easement A prevents the subject land from using this area for access, goods delivery or garbage collection.[78] This is “somewhat offset” by benefiting Easement A, which is on the adjoining Brisbane Arcade land, and which allows for pedestrian and fire escape egress.[79]
  1. [86]
    Mr Hart’s attention to detail here allows the Court to find that the important aspects of access and egress should be balanced so as to recognise that the loss of availability of this area for access, goods delivery and garbage collection should be seen as quite significant in the commercial environment. In the result, the overall allowance should properly be considerably greater than 10%. In the event, the Court accepts Mr Jackson’s 75% allowance as appropriate, while recognising that properly informed experts may differ on such judgments.

The heritage-listed façade

  1. [87]
    How the heritage-listed façade should be allowed for was also in dispute. Section 19 of the Act provides:

19 What is the site value of improved land

  1. If land is improved, its site value is its expected realisation under a bona fide sale assuming all non-site improvements for the land had not been made.
  2. However, the land’s site value is affected by any other relevant provisions of this chapter.
  1. [88]
    Further into that chapter is s 33 which, relevantly, provides:

33 Land subject to particular rights

  1. This section applies to land to which any of the following (the right) applies, relates, is in force or to which the land is subject—

 

  1. a heritage restriction under a local planning instrument under the Planning Act or a relevant Commonwealth Act;

 

  1. In deciding the value of the land—
  1. the right must be considered; and
  2. an allowance must be made for any limitation or restriction of use relating to the right.
  1. In making the allowance—
  1. the purpose and conditions of the right must be considered;…
  1. [89]
    Mr Jackson’s site value, up to this point, is $39,267,360.[80] The quantity surveyors, Mr Bradley and Mr Davidson, have provided a joint report, Exhibit 12. Mr Bradley has also provided a supplementary report, Exhibit 13, and an updated supplementary report, Exhibit 14.
  1. [90]
    Drawing on the quantity surveying evidence, Mr Jackson has provided resulting values which depend on the scenario that the Court decides to accept. One option is to deduct the cost of reconstructing the façade using traditional methods and materials, $2,922,658,[81] and the additional cost of constructing the hypothetical development, $4,858,991. The last figure is the agreed figure of $4,073,991,[82] increased by $785,000 to allow for delayed commencement of works.[83] The adjustment is $7,781,649 when calculated this way.[84]
  1. [91]
    The other option that Mr Jackson calculates is on the basis that the agreed figure of $4,073,991 is used unadjusted. This deduction is to allow for the additional cost of construction involved in working around the presence of the façade.[85]
  1. [92]
    Mr Hart considers that an allowance of 5% should be made for the heritage restriction.[86] He does not use the quantity surveyor’s estimates on the basis that they do not reflect reality[87] since the façade is actually in place. Reality would suggest that the façade is not going to be demolished and rebuilt if it is possible to work around it, an option which has been costed.
  1. [93]
    The requirement to allow for the limitation or restriction referred to in s 33(2)(b) will fall for consideration within the totality of ss 33(2) and (3) of the Act. The evidence before the Court, however, brings the issue into focus at the point occupied by s 33(2)(b). An allowance must be made for the fact of the heritage restriction relating to the façade. In considering the approaches of the valuers, it must be noted that it is not explained why a global allowance of 5%, which, on Mr Hart’s basis of assessment of value, would be $2,765,895, would be correct. This makes it difficult for the Court to accept this figure.
  1. [94]
    Mr Jackson’s use of the figure which allows for reconstruction of the façade is in keeping with the theme of the Act, that property is considered without most improvements. That would be an unmeritorious option, however, as s 19, which otherwise points in that direction, itself directs attention to, in this case, s 33. The correct course, as directed by that provision, is to allow for the heritage aspect. It is not necessary to notionally remove it in order to do this.
  1. [95]
    It was submitted by Mr Fynes-Clinton that Mr Jackson had incorrectly “doubled-up” in his allowances for the easement and the heritage restriction as the purchase price would have taken those things into account. The evidence does not show that this was so; rather, it is submitted that it must have been so. It was specifically addressed in the evidence of Mr Jackson that the property was not purchased for redevelopment[88] so it does not follow that what is now required by s 33 to be addressed was incorporated into the sale. The Court is therefore not able to accept that there has been a double counting concerning the heritage aspect; that is contrary to the evidence. In relation to the easement, there is no evidence to support the suggestion that there has been double-counting, and the Court is not satisfied that it ought to be inferred that such has necessarily occurred.

Finding on the allowance for the heritage façade

  1. [96]
    In the circumstances of this case, where the global 5% allowance proposed by Mr Hart is not explained sufficiently for the Court to be able to accept it, the best option on the available evidence is the costing of $4,073,911, being the additional cost of construction which its preservation will demand. That allows for the limitation or restriction of use.
  1. [97]
    On behalf of the appellant, reference was made to a number of authorities in order to offer assistance on this point.[89] It has been sufficient to resolve the question by the application of the plain words of the statute: the cases referred to were decided before the current provision was enacted or under other legislation, and they have not been useful.

Conclusion on valuation

  1. [98]
    For the reasons that have been given, the valuation of the subject property on 1 October 2015 will be $35,195,000,[90] which is Mr Jackson’s rounded figure.
  1. [99]
    Mr Hart’s alternative assessment was made on the basis that there was no potential for a tower.[91] On the basis of his brief consideration of that alternative, he contends for a site value, in the circumstances which the Court has found to exist, of between $39,000,000 and $42,500,000. It is a range reached in reliance on the assumed correctness of a previous valuation and is not of assistance.
  1. [100]
    The appeal must be allowed. The valuation as at 1 October 2015 of Lot 4 on RP 221710 County of Stanley Parish of North Brisbane with an area of 3,365 ISPT Pty Ltd v Valuer-General (No 3) [2019] QLC 40, Property ID 1226734 is $35,195,000.

Orders

  1. The appeal is allowed.
  2. The valuation as at 1 October 2015 of Lot 4 on RP 221710 County of Stanley Parish of North Brisbane with an area of 3,365 ISPT Pty Ltd v Valuer-General (No 3) [2019] QLC 40, Property ID 1226734 is Thirty-Five Million and One Hundred and Ninety-Five Thousand Dollars ($35,195,000).

WA ISDALE

ACTING PRESIDENT OF THE LAND COURT

Footnotes

[1]Land Valuation Act 2010 s 7.

[2]  Ex 1, document 7.

[3]  Ibid document 8.

[4] Land Valuation Act 2010 s 155(1).

[5]  Ex 3.

[6] Land Court Rules 2000. For ex tempore reasons see ISPT Pty Ltd v Valuer-General [2019] QLC 30.

[7] Land Court Rules 2000 r 24L.

[8]ISPT Pty Ltd v Valuer-General (No 2) [2019] QLC 31.

[9]Land Valuation Act 2010 s 169(1).

[10]  Ibid s 169(2).

[11]  Ibid s 169(3).

[12] Finlayson & Anor v Valuer-General (2013) 34 QLCR 101; [2013] QLC 23; Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925 [2018] QLAC 7.

[13]Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925 [2018] QLAC 7 [50].

[14]Finlayson & Anor v Valuer-General (2013) 34 QLCR 101 [28].

[15]JL & I Qualischefski & Ors v Valuer-General (1979) 6 QLCR 167, 172.

[16]  (1978) 5 QLCR 378, 381.

[17] Finlayson & Anor v Valuer-General (2013) 34 QLCR 101 [30]; [2013] QLC 23. The hazard in this approach was discussed by Member Smith in Burnett v Department of Natural Resources and Water [2010] QLC 57 at [18] and again in Lawson v Valuer-General [2012] QLC 27 at [29]. These authorities were applied in Enright Hendy and Partners Investments Pty Ltd as trustee v Valuer-General [2012] QLC 38.

[18] (1992-93) 14 QLCR 327, 328–9.

[19]  [2005] QLC 11 [11]–[12].

[20]  Appellants’ submissions [5].

[21]  Ibid.

[22]  Ibid [6].

[23]  Ex 1, vol. 3, tab 15. Valuers’ joint expert report p.65 [572].

[24]  Valuers’ joint expert report [36].

[25]  Ibid.

[26]  Ex 1, Vol 1, tab 10.

[27]  T 3-98, lines 1 to 5; T 3-101, lines 23 to 27.

[28]  T 3-101, lines 16 to 27.

[29]  T 3-99, lines 25 to 27. The word “sales” is incorrectly recorded as “sale’s” in the transcript. 

[30] Stubberfield v The Valuer-General (1988-89) 12 QLCR 328, 331 (paragraph 2).

[31]Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410, 415.

[32]  Ibid. ISPT Pty Ltd v Melbourne City Council [2008] VSCA 180, [37]-[43].

[33] ISPT Pty Ltd v Melbourne City Council [2008] VSCA 180 [57]–[62].

[34]  Ex 1, tab 15 [54].

[35]  T 3-100, line 39.

[36]  T 3-101, lines 6 to 27.

[37]Land Valuation Act 2010 s 155(1).

[38]  T 2-70, lines 36 to 37.

[39]  T 2-74, lines 2 to 3.

[40]  T 2-74, lines 23 to 24.

[41]  T 2-75, lines 15 to 17.

[42]  Appellant’s submissions [17].

[43] Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925 [2018] QLAC 7 [50].

[44]  Ex 3.

[45] Land Valuation Act 2010 s 163(4).

[46]  Ex 1, Vol 3, tab 15, page 66 [577].

[47]  Ex 1, Vol 3, tab 15, page 13 [53], [54].

[48] Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410.

[49]  Ibid 414.

[50]  Ibid 415.

[51]  Ex 1, Vol 3, tab 15, page 17.

[52]  Ibid page 21.

[53]  Martin Rees; Carl Sagan.

[54]  R. O. Rost and H. G. Collins, Land Valuation and Compensation in Australia (Australian Institute of Valuers and Land Economists (Incorporated), 3rd ed, 1993) 586.

[55] Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184 [43].

[56]  T 2-77, lines 1 to 7.

[57]  Ex 9.

[58]  T 3-50, line 26 to T 3-51, line 19.

[59]  T 3-51, line 25 to T 3-53, line 7.

[60]  T 3-53, lines 1 to 47.

[61]  (1981–82) 8 QLCR 70, 76; Kathryn M & Kenneth E Bullen v Chief Executive, Department of Natural Resources [1998] QLC 12.

[62]  Ex 1, Vol 3, page 56 [516]–[250].

[63]  T 4-15, lines 7 to 19.

[64]  T 4-15, line 25 to T 4-16, line 29.

[65]  T 4-16, line 33 to T 4-17, line 5.

[66]  (1919–1920) 27 CLR 316, 320; [1920] HCA 170.

[67]  Ex 15, page 14.

[68]  T 4-23, lines 34 to 35.

[69]  T 4-25, line 25.

[70]  T 4-25, line 16.

[71] Barber & Ors v Valuer-General (1968–69) 17 LGRA 409, 410. 

[72]  Ibid 411.

[73]  Ex 1, Vol 3, tab 15, page 62 [538].

[74]  Ibid page 64 [566].

[75]  Ibid page 74 [654]–[655].

[76]  Ibid page 65 [571].

[77]  Ibid page 66 [578]–page 67 [588].

[78]  Ibid page 66 [582].

[79]  Ibid [583].

[80]  Ex 1, Vol 3, tab 15, page 65 [572]. 

[81]  Ex 1, Vol 2, tab 14, page 9 [35].

[82]  Ex 1, Vol 2, tab 12, page 6 [6.1].

[83]  Ex 1, Vol 2, tab 14, page 6 [19].

[84]  Ex 1, Vol 3, tab 15, page 65 [572].

[85]  Ex 1, Vol 3, tab 15, page 65 [572].

[86]  Ibid page 66 [577] and page 68 [617]–[620].

[87]  Ibid [619].

[88]  T 3-68, line 44 to T 3-69, line 26.

[89] Valuer-General v Queensland Club (1990–91) 13 QLCR 207; Ballow Chambers Limited v Valuer-General (1992–93) 14 QLCR 422; In Adam Pty Ltd v Valuer-General [2011] NSWLEC 55; and on appeal Valuer-General v In Adam Pty Ltd (2012) 211 LGERA 75; [2012] NSWCA 20.

[90]  Ex 1, Vol 3, page 65 [572].

[91]  Ibid page 73–4 [643]–[655].

Close

Editorial Notes

  • Published Case Name:

    ISPT Pty Ltd v Valuer-General (No 3)

  • Shortened Case Name:

    ISPT Pty Ltd v Valuer-General (No 3)

  • MNC:

    [2019] QLC 40

  • Court:

    QLC

  • Judge(s):

    WA Isdale P

  • Date:

    04 Oct 2019

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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