Cost Pty Ltd v Valuer-General; Denbeach Pty Ltd v Valuer-General; Allen v Valuer-General [2025] QLC 2

LAND COURT OF QUEENSLAND CITATION: Cost Pty Ltd v Valuer-General; Denbeach Pty Ltd v Valuer- General; Allen v Valuer-General [2025] QLC 2 PARTIES: Cost Pty Ltd (appellant) v Valuer-General (respondent) FILE NOs: LVA531-23 LVA532-23 LVA533-23 PARTIES: Denbeach Pty Ltd (appellant) v Valuer-General (respondent) FILE NO: LVA538-23 PARTIES: Reece Justin Allen (appellant) v Valuer-General (respondent) FILE NO: LVA539-23 PROCEEDING: Appeals against objection decisions on valuations under the Land Valuation Act 2010 DELIVERED ON: 17 January 2025 DELIVERED AT: Brisbane HEARD ON: 13 & 14 November 2024 Submissions closed on 13 December 2024 HEARD AT: Brisbane -- 1 of 12 -- 2 PRESIDENT: PG Stilgoe OAM ORDERS: 1. The appeals are dismissed. 2. Any application for costs is to be filed and served within 14 days of the publication of these reasons. CATCHWORDS: REAL PROPERTY – VALUATION OF LAND – OBJECTION AND APPEALS – QUEENSLAND – EVIDENCE – where the Valuer-General issued valuations of the appellants’ land – where the appellants adduced expert valuation evidence – where the appellants’ expert acted as an agent in lodging initial notices of objection and notices of appeal – where the appellants’ expert had previously written comprehensive submissions on the appellants’ behalf – whether the appellants’ expert acted as an advocate – where the appellants’ expert did not comply with the Court’s requirements and guidelines on expert evidence – whether the Court could accept the appellants’ expert’s evidence Land Court Rules 2022 r 20, r 21 Land Valuation Act 2010 s 18 Uniform Civil Procedure Rules 1999 sch 1C BWP Management Ltd v Valuer-General [2019] QLAC 4 Blue Mountains City Council v Mulcahy (1998) 100 LGERA 193 Chief Executive, Department of Natural Resources and Mines v Kent Street P/L [2009] QCA 399 Minister of Environment v Petroccia (1982) 30 SASR 333 Queensland Club v The Valuer-General (1991) 13 QLCR 195 Singer & Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 84 APPEARANCES: RJ Allen (solicitor), Project Legal for the first, second, third, and fourth appellant, and the fifth appellant (self-represented) W Isdale (instructed by In-house Legal) for the Valuer- General -- 2 of 12 -- 3 [1] The appellants own industrial properties in and around Gladstone. [2] It is uncontroversial that the appellant bears the onus of proof in a land valuation appeal. Usually, an appellant seeks to discharge that onus by engaging an expert valuer to give evidence. [3] The appellants engaged Michael Sheehan, a valuer with over 50 years’ experience. Unfortunately, as I could not accept Mr Sheehan’s evidence, the appellants have not discharged their onus. Mr Sheehan [4] Rule 20(3)(a) of the Land Court Rules 2022 states that an expert must be independent and impartial. Paragraphs 10 and 11 of Practice Direction 6 of 2020 – Expert Evidence in the Land Court reinforce that duty and require an expert to comply with the Code of Conduct in the Uniform Civil Procedure Rules 1999 (UCPR), schedule 1C. The Code of Conduct includes an obligation to be impartial and independent. An expert’s independence is obviously something the Court takes very seriously. [5] The Australian Property Institute’s Rules of Professional Conduct governs the professional conduct of registered valuers in Queensland. Rule 4.1 states that members must maintain the strictest independence and impartiality when providing professional services and/or where the exercise of objective professional judgement is required. A registered valuer must not act as an advocate and an expert in the same matter and must also not act in any way inconsistent with displaying independence and impartiality. [6] Mr Sheehan candidly admitted he had not read the Rules of Professional Conduct.1 In the joint expert reports (JERs) he certified that he had read rule 20 of the Land Court Rules. I do not know whether he read Practice Direction 6 of 2020 or the UCPR Code of Conduct. [7] Mr Sheehan acted as the appellants’ agent in lodging notices of objection. He acted as their agent in filing the notices of appeal. He attended two preliminary conferences to assist the appellants. These acts are clear evidence that Mr Sheehan acted as both 1 T1-20, line 44. -- 3 of 12 -- 4 advocate and expert in the same matter. These acts are evidence that Mr Sheehan was not acting impartially. [8] When questioned about his role, Mr Sheehan stated that: I just filled out the for– the objection form. That’s all I did. And I filled out the appeal form. That’s all I did. And I filled out the appeal form. That’s all I did.2 [9] The notices of appeal consist of comprehensive submissions on Mr Sheehan’s letterhead, running to some 20 pages of comparable sales analyses. On any view, these documents are not the result of “just” filling out the appeal form. [10] Mr Sheehan’s evidence before the Court also had difficulties. He analysed the value of minor improvements on the comparable sales by reference to the cost of construction/installation. The first problem is that the cost of constructing an improvement rarely reflects its value to a purchaser.3 The second problem is that Mr Sheehan provided no source material, or objective evidence, to justify his costs. He added an interest rate – presumably to reflect holding costs – but he did not explain where that interest rate came from. [11] Mr Sheehan relied on conversations with the purchasers of comparable sales but did not have any details of those conversations beyond the summaries in his evidence. Robert Ferrando, the valuer for the Valuer-General, took file notes, gave copies to Mr Sheehan, and annexed those documents to the JERs. Mr Sheehan did none of those things. [12] Mr Sheehan did not comply with the requirements of Practice Direction 6 of 2020 despite him certifying that he did. Mr Sheehan’s response to that failing was words to the effect that he had been a valuer for 50 years and he didn’t think it was necessary because he knew what the purchaser had said. [13] Practice Direction 6 of 2020 has a purpose. That purpose is to make sure that the parties, experts, and the Court are fully informed, and no one is taken by surprise at trial. It enables a party to call a purchaser to give direct evidence if that is necessary. 2 T1-21, line 24 to line 26. 3 BWP Management Ltd v Valuer-General [2019] QLAC 4, [59]; Blue Mountains City Council v Mulcahy (1998) 100 LGERA 193, 200. -- 4 of 12 -- 5 [14] These appeals had four common sales. Mr Sheehan rejected two comparable sales because, he says, at that sale price it would have been uneconomical to build on the land and secure a reasonable return on investment. He, therefore, took the view that the sales could not have been at market value. [15] In coming to that conclusion, Mr Sheehan relied on a table of investment returns without saying why it was relevant to the site value or identifying the source of the table’s information. [16] He also analysed the sales in an unusual way. Instead of starting with the sale price of the land and deducting the value of improvements to arrive at a land value as a price/m 2 , Mr Sheehan worked backwards. He started with a notional site value/m 2 based on the sale price. He added 3.5% for holding costs to arrive at the total land value. He then deducted minor improvements and council charges. He assigned the difference between the total land value and the minor improvements as the building value. He added the building value and the minor improvements’ value back to the land value, deducted the interest he had earlier added, and then arrived at a rate/m 2 . Unsurprisingly, that final rate closely mirrored his initial rate. [17] The analysis is circular, contrary to conventional valuation methods, and of no utility to the Court. [18] Mr Sheehan rejected the 6 and 8 Warne Street sales as comparable because, in his view, they were not sales at market value. He stated that the purchaser of 6 Warne Street was an anxious purchaser because they had run out of room at their existing premises. There was evidence that the purchaser had run out of room. There was no evidence that the purchaser was anxious about that or facing any pressure from external entities, such as the Council, to move operations in a hurry. [19] The purchaser of 6 Warne Street also bought 8 Warne Street, an adjoining property. Mr Sheehan did not consider this sale to be at market value either, because he thought that 8 Warne Street would have a special value to the owner of 6 Warne Street. The evidence does not support that view. The purchaser saw 8 Warne Street as an opportunity. They took interest in the property when the agent put it on the market – they did not seek the vendor out. They negotiated the price down because the existing development approval to subdivide the block was of no interest to them. -- 5 of 12 -- 6 [20] In relation to one comparable sale – 12 Helen Street – Mr Sheehan took account of a sale in 2021 but not a sale in 2022. Even though the sale price in 2022 was higher, Mr Sheehan did not accept that this demonstrated an increase in the value of industrial properties in Gladstone. [21] Mr Sheehan’s deliberate actions to exclude relevant comparable sales, and his dubious reasons for doing so, leave me no option but to reject his evidence in its entirety. [22] The appellants submit that the Valuer-General’s concerns about Mr Sheehan should have been raised in the list of issues prior to the hearing. They say that, had they been given notice of this, further directions could have been made, or there could have been a hearing on the preliminary issue, saving the costs of a full hearing. [23] The purpose of articulating the issues in dispute is to define the scope of the evidence to be given at the hearing, not the reliability of the witnesses. Whether or not a witness’s evidence will be accepted is often determined by their demeanour in giving evidence. Mr Sheehan’s responses when giving his evidence were material factors in my finding that he was not sufficiently independent. Mr Sheehan’s responses, and his position, would not necessarily have been identified even if the Valuer-General had given notice of her concerns earlier unless and until he gave sworn evidence. [24] Rule 21 of the Land Court Rules sets out the obligations of a party who engages an expert witness. The rule specifically refers to the duties of an expert contained in r 20, which includes the duty to be independent and impartial. While r 21 speaks of what a party must not do to impede an expert’s compliance with their duty to the Court, it is implicit that a party should also take all reasonable steps to ensure that their expert does comply with their duty. The appellants knew that Mr Sheehan acted as an advocate in the objection proceedings. It is not for the Valuer-General to point out that if the appellants choose to continue Mr Sheehan’s engagement for the hearing he may be in breach of his obligation to the Court. [25] The appellants submit that Mr Sheehan’s role as an advocate ceased before the proceedings commenced and that there was a break of about 6 months between his work as an advocate and his work as an expert. The Australian Property Institute’s Rules of Professional Conduct prohibit acting as an advocate and an expert in the -- 6 of 12 -- 7 same matter. The objections, the notices of appeal, and the hearing were all related to the same matter. A hiatus of a few months between events does not change that character. [26] The appellants are correct that there is nothing at law preventing Mr Sheehan from giving evidence. It is a question of weight and for the reasons above, I give Mr Sheehan’s evidence no weight. [27] That is not to say that Mr Ferrando’s evidence was unassailable. Mr Allen, for the appellants, did secure minor concessions from Mr Ferrando. However, I accept that those errors were inadvertent and had little impact on Mr Ferrando's final valuation opinion. In the most part, the difference in the valuation once Mr Ferrando corrected his error was well within the acceptable margin where reasonable valuers may differ.4 [28] This Court has previously commented on the difficulty of a valuer employed by the Valuer-General giving independent expert evidence in a land valuation appeal. Counsel for the Valuer-General addressed this point in submissions, stating that Mr Ferrando: (a) has not previously adopted the role of an advocate on behalf of the Valuer- General or acted in a role other than as an expert; and (b) has demonstrated his independence and impartiality. in that the valuations he has arrived at are lower than those which were previously reached by the Valuer- General and which were initially appealed against. [29] I prefer Mr Ferrando’s evidence, and I am satisfied that he is, relevantly, independent and impartial. Mr Ferrando [30] Even though I reject Mr Sheehan’s evidence, I will comment on the appellants’ specific criticisms of Mr Ferrando’s evidence. Corner influence [31] The appellants have referred me to the decision of President Barry in Queensland Club v The Valuer-General in which he stated that a purchaser will pay something extra for the benefit of a corner influence.5 The parties in that case had agreed on the 4 Usually 10%, see Singer & Friedlander Ltd v John D Wood & Co [1977] 2 EGLR 84, 85. 5 (1991) 13 QLCR 195, 205. -- 7 of 12 -- 8 appropriate value of the land dependent upon the Court’s decision about whether the heritage building restrictions imposed by the Brisbane City Council should be taken into account. The Court found that the heritage building restrictions were relevant and then adopted the parties’ agreed valuation. The “corner influence” was not, therefore, a relevant consideration and the President’s comments were obiter. [32] Even if the observations in Queensland Club were compelling, Mr Sheehan made no mention of it in the JER but first raised it in evidence before the Court. If the “corner influence” was an important issue, I would have expected Mr Sheehan to refer to it in the JER and given Mr Ferrando the opportunity to respond. Anxious buyer [33] The appellants point out that the definition of a bona fide sale assumes a “willing, but not anxious, buyer and seller”.6 [34] If there was evidence of a comparable sale not meeting that definition then, obviously, it should be excluded from consideration. However, I have already commented on the absence of any evidence that the purchaser of 6 Warne Street and 8 Warne Street was an anxious buyer. [35] The appellants urge me to accept Mr Sheehan’s oral evidence of his conversation with the purchaser of Warne Street. Even if I did accept that evidence, I am not persuaded that those comments justify a finding that the purchaser was “anxious”. Certainly, the purchaser was motivated because they had outgrown their existing premises. And it is not unusual for purchasers, in hindsight, to think they paid too much for a property, but it must be noted that the purchaser could, and did, negotiate a lower purchase price. Those two factors point to a conclusion that the purchaser was not anxious. [36] As the Valuer-General points out, there is evidence to contradict a finding that the purchaser of the Warne Street properties was an anxious buyer. The agent involved in the sale of 8 Warne Street considered "it was sold at market level, it was listed for higher ($435,000) as it did have a DA on the block to split it into 2, However, purchaser moved quickly and negotiated the price down. [The agent] does not believe a premium paid”.7 6 Land Valuation Act 2010 s 18(1)(a). 7 Joint Valuation Expert Reports dated 13 September 2024, Annexure 9. -- 8 of 12 -- 9 [37] The appellants also urge me to exclude the sales because the purchaser was compelled to buy. They point to the purchaser's comment that “he had paid a lot more (double) than what land had previously sold for in previous years” and “he needed the extra room”. The purchaser did need additional land; that does not amount to a compulsion. There is no evidence that the Council was taking enforcement action or otherwise pushing the purchaser to move. [38] The appellants submit that the evidence shows the purchaser felt compelled to purchase because of his own special circumstances; in that Warne Street was convenient to their existing location. Once again, I can find no evidence of compulsion. Adjoining owner purchase [39] The appellants have referred me to Minister of Environment v Petroccia8 in which Wells J stated that one indicia of special circumstances is “the farmer who purchases an adjoining parcel of land in order to expand and diversify”.9 [40] The appellants submit that the sale of 8 Warne Street, because it was purchased by the owner of 6 Warne Street, needs to be carefully analysed. I agree. [41] They also submit that Mr Ferrando’s analysis of the sale was insufficient because he made no adjustment for the premium an adjoining owner will pay for a property. Mr Ferrando acknowledged that 8 Warne Street was a sale to an adjoining owner but the information he obtained from the purchaser as to the motivation for the purchase was materially different from that provided by Mr Sheehan. Unlike Mr Sheehan, Mr Ferrando provided a copy of his interview notes. He also asked the relevant real estate agents what they thought of the sales, and he provided copies of their responses. I do not agree that Mr Ferrando’s analysis of the sale was insufficient. [42] The appellants point to the fact that the owner of 6 Warne Street and 8 Warne Street has now built a conveyor belt that straddles the two blocks as evidence of the special value of 8 Warne St. However, as Mr Ferrando’s notes explain, the purchaser’s decision to develop 8 Warne Street in that way was not in their mind at the time of purchase. 8 (1982) 30 SASR 333. 9 Ibid 342. -- 9 of 12 -- 10 [43] The appellants also submit that, when comparing the Warne Street sales to other sales in the basket, it is obvious that Warne Street sold at a premium because the combined purchase price is $295,000 more than the price paid for a property with a similar area in Helen Street. [44] This is a novel argument that was not the subject of evidence from either valuer. While the submission might be mathematically correct, I am not inclined to rely on it as evidence of special value without the valuers conducting a proper comparison of the two properties. 12 Helen Street sale [45] The appellants submit that Mr Ferrando did not properly account for the value of the improvements on 12 Helen Street. Mr Ferrando used Rawlinson’s Costs Guide to value the building as a shed. He also depreciated the value of the shed. The appellants submit that Mr Ferrando failed to value the internal fit out which included a bathroom, kitchen, three-phase power, and air conditioning. The appellants also submit that industrial buildings appreciate over time so that it is implausible that the building on 12 Helen Street would depreciate over time, even as building costs were rising. [46] I have already pointed out the difficulties with Mr Sheehan’s analysis of the value of improvements. At the hearing, there was some attempt to suggest an alternative proposition. Mr Allen, for the appellants, suggested that Mr Ferrando had used the wrong designation in the Rawlinson's Guide when valuing the building as a shed, instead of valuing it as a warehouse with an office. [47] I inspected the building at 12 Helen Street. It is an older building in poor condition. The fit out is tired. Mr Ferrando told the Court that there was not any matching description for the improvements on 12 Helen Street, and I agree. I also agree that, given the age and condition of the improvements, Mr Ferrando’s assessment that the building is a shed is more accurate. Secondary sales [48] Mr Sheehan referred to a number of secondary sales to establish that, in his opinion, Mr Ferrando’s valuations were wrong because it would be uneconomical to build on those properties. -- 10 of 12 -- 11 [49] The appellants refer me to the decision of the Court of Appeal in Chief Executive, Department of Natural Resources and Mines v Kent Street P/L10 as a reminder that “more than one means may be adopted for the purpose of checking the value arrived at by any other means”.11 That proposition is unexceptional, but valuers usually employ a different methodology to test their assessment; for example, using the piecemeal method, or the discounted cash flow method. [50] Kent Street is also authority for the proposition that there is no statutory instruction on whether a comparative sale should be included or excluded: that is a matter for the valuers and, ultimately, the Court.12 I accept that Mr Sheehan was entitled to test his valuation by an alternative means. I do not accept that he sufficiently demonstrated the factual basis for a conclusion that it would be uneconomical to build on these properties, given he primarily relied upon conversations that were not the subject of file notes, and did not, apparently, conduct his own independent investigations. If the factual basis for a conclusion is missing, the secondary sales analysis is of little assistance. [51] The Valuer-General also points out that Mr Sheehan’s secondary sales are only relevant to the analysis he undertook in Annexures 15-17 of the JER, that these annexures were the subject of an objection, struck out and, therefore, no longer part of the evidence. Town planning considerations [52] Both Chapple Street properties, 20 Blain Drive and 10 Morgan Street are all subject to flooding and/or coastal hazard overlays in the planning scheme. The appellants submit that these overlays should be taken into account. I agree. They say that Mr Sheehan took those factors into account. I agree. They say that Mr Ferando did not take it into account. Again, I agree that Mr Ferrando does not specifically refer to these factors when making his assessment.. The appellants say that is why Mr Sheehan’s figures are generally lower than Mr Ferrando’s figures. 10 [2009] QCA 399. 11 Ibid [15] quoting Commonwealth Custodial Services Ltd v Valuer-General (2007) 156 LGERA 186, 189. 12 Ibid [17]. -- 11 of 12 -- 12 [53] I do not necessarily agree. Although Mr Sheehan specifically refers to the overlay, his analyses of the comparable sales refer to many other considerations. He does not ascribe a particular diminution, whether as a dollar figure or a percentage, to the presence of the overlay. Instead, the overlay is a factor in whether a comparable property is inferior or superior to the subject site. Mr Ferando conceded that he should have referred to the presence of the overlays when assessing the value of the subject sites, but he did take those factors into account, and he does not concede that they would have made any difference to his valuations. [54] Both valuers acknowledge that Chapple Street is opposite a residential area. It appears that both valuers have considered that fact when assessing the value of the properties. Conclusion [55] For the reasons above, I prefer the evidence of Mr Ferrando. The appellants have not discharged their onus and, accordingly, the appeals should be dismissed. Orders 1. The appeals are dismissed. 2. Any application for costs is to be filed and served within 14 days of the publication of these reasons. -- 12 of 12 --