BPI No 1 Pty Ltd v Valuer-General; BWP Management Ltd v Valuer-General [2021] QLC 2

LAND COURT OF QUEENSLAND CITATION: BPI No 1 Pty Ltd v Valuer-General; BWP Management Ltd v Valuer-General [2021] QLC 2 PARTIES: BPI No 1 Pty Ltd ACN 162 491 072 (appellant) v Valuer-General (respondent) FILE NO: LVA008-19 PARTIES: BWP Management Ltd ACN 082 856 424 (appellant) v Valuer-General (respondent) FILE NO: LVA020-19 DIVISION: General Division PROCEEDING: Appeal against valuation under the Land Valuation Act 2010 DELIVERED ON: 22 January 2021 DELIVERED AT: Brisbane HEARD ON: 17, 18 & 19 August 2020 Submissions closed 19 October 2020 HEARD AT: Brisbane MEMBER: JR McNamara ORDERS: 1. Appeal LVA008-19 is allowed. 2. The valuation as at 1 October 2017 of Lot 202 on SP262172 having an area of 39,860 m2 and located at -- 1 of 50 -- 2 1 Global Plaza Drive, Oxenford is Nine Million, Eight Hundred and Fifty Thousand Dollars ($9,850,000). 3. Appeal LVA020-19 is allowed. 4. The valuation as at 1 October 2017 of Lot 1 on SP108078 having an area of 35,270 m2 and located at 492 Olsen Avenue, Molendinar is Eight Million, Five Hundred and Fifty Thousand Dollars ($8,550,000). CATCHWORDS: REAL PROPERTY – VALUATION OF LAND – OBJECTIONS AND APPEALS – QUEENSLAND – where appellant objects to valuation – where the site value is the basis of valuation – where there was agreement between the parties the appeal should be allowed – where the Court was asked to decide the correct valuation – where no maintenance valuation was issued by the valuer general and where the valuation was agreed to be incorrect - where the onus was on the appellant to prove on the balance of probabilities that the valuation was in error. REAL PROPERTY – VALUATION OF LAND – OBJECTIONS AND APPEALS – QUEENSLAND – selection of sales – whether sales closer in location with different uses are to be preferred over sales with similar uses – whether market and buyer profile sales were to be preferred – whether adjustments were to be made to adjust for market movement over time – whether upper and lower parameters were to be established in the absence of sales evidence – where preferred approach is that with reduced scope for error – where sales with similar use were preferred – where large format retail (LFR) accepted as asset class – where the approach of the appellant’s valuer was preferred REAL PROPERTY – VALUATION OF LAND – OBJECTIONS AND APPEALS – QUEENSLAND – whether assumptions made by the quantity surveyors are assumed facts – whether the appellant’s valuer could rely on the quantity surveying evidence without investigating the actual site conditions – where evidence of purchaser to be preferred – whether preliminaries, margins, contingencies and professional fees ought to be taken into account – where they should depending on the circumstances of the sale. Land Valuation Act 2010 s 22, s 44, s 75(3)(a), s 95(1), s 149 Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925 [2018] QLAC 7 -- 2 of 50 -- 3 Valuer-General v Eastcote Pty Ltd [2019] QLAC 3 AMP Life Ltd & Ors v Department of Natural Resources and Mines [2002] QLC 99 Pfeffer v DNRM [2005] QLC 0059 Brisbane City Council v Bortoli [2012] QLAC 8 BWP Management Limited v Valuer-General [2014] QLC 3 Clough v Valuer-General (1981-82) 8 QLCR 70 Beedell Farms and Grazing Pty Ltd v Valuer-General (1979) 6 QLCR 322 BWP Management Limited v Valuer-General [2019] QLAC 4 APPEARANCES: DD Purcell (instructed by Colin Biggers & Paisley Lawyers) for the appellant JP Hastie (instructed by in-house legal, Department of Natural Resources Mines and Energy) for the respondent [1] These appeals concern the valuation of two properties with issued valuation dates of 1 October 2017. It was agreed that there are sufficient similarities between the parties, the properties, valuation approaches and principles, and evidence for the matters to be decided together. The sites are both occupied by Bunnings Warehouses, one at Oxenford, Queensland (the Oxenford site), the other at Molendinar, Queensland (the Molendinar site). [2] The appellant in each case objected to the issued valuation. The Valuer-General’s decisions on 28 November 2018 and 12 December 2018 in relation to each objection were that the valuation amounts were to remain unaltered. Notices of Appeal were filed for both matters in early 2019. [3] In the appeals the Court Managed Expert Evidence (CMEE) process facilitated the development of joint expert reports (JERs) by expert valuers. The appellants engaged registered valuer Mr Brett Schultz. The respondent engaged registered valuer Mr Derek Bale. JERs for both properties were produced in April 2020. [4] The qualifications and experience of Mr Schultz and Mr Bale are outlined in their respective curricula vitae.1 Neither the expertise of Mr Schultz nor Mr Bale was challenged. In my view both valuers are suitably qualified and experienced to provide expert evidence in this matter. The JERs served as the evidence-in-chief of the valuers. 1 Ex 5, Annexure A; Ex 6, Annexure A. -- 3 of 50 -- 4 [5] In each JER Mr Schultz assessed the valuation for each property at an amount higher than the appellant’s estimated valuation in the appeal notice. Mr Bale assessed a valuation for each property higher than the issued valuation. [6] The issued valuations, contended valuations and valuations analysed in the course of the JERs for the Oxenford and Molendinar sites respectively are as follows:2 Issued JER Appellant Respondent Oxenford $11,500,000 $9,850,000 ($250/m2) $14,200,000 ($360/m2) Molendinar $9,200,000 $8,550,000 ($285/m2) $12,000,000 ($400/m2) [7] In the list of matters not in dispute provided ahead of the hearing the parties agreed that the appeals should be allowed on the basis that the issued site valuations of 1 October 2017 are incorrect.3 There was agreement ahead of the hearing that although the site valuations are incorrect, the correct valuation approach and methodology was used. I understand this to mean that the parties agree the direct comparison method of valuation is the correct methodology. [8] In Trust Company v Valuer-General, which concerned three valuation appeals, Member Isdale recently said: “The Court also notes it has become common in relatively recent times for this respondent to abandon at hearing the values arrived at on objection and to contend for a higher value.”4 These appeals are yet further examples of this occurrence. [9] Both the appellants and the respondent submit that the evidence of the valuer engaged by them in the relevant JER be preferred over the other and that the site value be determined as assessed by that valuer in the JER. [10] The Land Court has said on a number of occasions that a valuation appeal is a two-step process.5 The first step is to determine whether there is an error, and the appellants bears that onus. If the onus is discharged the Court will proceed under s 170(b) of the Land Valuation Act 2010 (“the Act”) to change the valuation so that it is correct. As has been 2 Adjusted for easements as agreed. 3 List of Matters Not in Dispute [1], [3]. 4 [2020] QLC 39 [76]. 5 Valuer-General v Body Corporate for ‘Tennyson Reach’ Community Titles Scheme 39925 [2018] QLAC 7 [50]. -- 4 of 50 -- 5 often stated, the Court is not a third valuer and must look to the evidence of the witnesses to find the correct value. [11] Throughout these reasons I refer to the content of the JERs. The content of the JERs regarding many issues including the principles and approach to the exercise undertaken by the valuers is largely similar. As the respondent notes in written submissions: “Perhaps somewhat regrettably, there is a great deal of overlap between the two joint reports …”.6 Accordingly, a reference to information contained in one JER (for example a footnote reference to Exhibit 5) is not intended to distinguish between the JERs except where specifically mentioned. As two appeals are being considered together a reference to the appellant is a reference to both appellants. Ought the appeals be allowed? [12] In Pfeffer v DNRM,7 Member Jones was faced with a situation where the legal representative for the respondent Valuer-General conceded that there was no probative evidence to support the correctness of the original valuation appealed against. Member Jones said that as far as he could see there was no statutory prohibition which prevented the respondent from contending for a valuation figure higher or lower than the one originally assessed. Member Jones referred to AMP Life Limited & Ors v DNRM8 at [26] and [27] noting that once valuation evidence is given the Court must consider the factual issues and draw its own conclusion and in such circumstances the Court must consider the totality of the evidence.9 [13] In the circumstances I accept that the issued valuations are in error on the admission of the respondent that they are incorrect and after a consideration of the evidence of the expert valuers which is discussed in detail in these reasons. [14] Accordingly, the appeals are allowed. 6 Respondent’s submissions filed 6 October 2020 [9]. 7 [2005] QLC 0059. 8 [2002] QLC 099. 9 Note Both cases concerned the presumption of correctness (s 33 Valuation of Land Act) which is not repeated in the LVA – however under the LVA the onus remains on the objector to prove the objectors case per s 149. -- 5 of 50 -- 6 The Court’s approach [15] In the recent decision of this Court, Eumundi Group Hotels Pty Ltd v Valuer-General, a matter which had similar issues in dispute to these appeals, Member Isdale explained the Court’s approach at [16]-[24].10 I accept and adopt the content of those paragraphs. Common ground [16] Statements of valuation principles, citing well accepted passages from NR and PG Tow v Valuer-General,11 Spencer v The Commonwealth,12 Qualischefski v Valuer-General,13 and Macarthur Central Shopping Centre Pty Ltd as TTE v Valuer-General (No 2),14 amongst others, were common to the submissions of both parties and are acknowledged and accepted by the Court.15 [17] In the JERs it was noted that the subject properties are used for large format retail (LFR) as Bunnings Warehouses, and it is accepted by the parties that LFR of a generally existing nature is the highest and best use of the sites. Mr Bale in both JERs said the highest and best use is: “large format retail as currently utilised, though in accord with town planning parameters”.16 In the JERs Mr Schultz qualified the highest and best use of the Oxenford site in a similar way,17 although not specifically adding the qualifier in respect of the Molendinar site.18 [18] The valuers agreed on the direct comparison method of valuation as the appropriate methodology, the primary method being a direct comparison of rates of dollar cost per square metre ($/m2) of effective site area.19 The parties also agreed on the impact and relevance of encumbrances (easements).20 10 [2020] QLC 37 [16] – [24]. 11 (1978) 5 QLCR 378 (Stable SPJ, Smith and Carter MM). 12 (1907) 5 CLR 418. 13 (1979) 6 QLCR 167. 14 [2016] QLC 80 [11]. 15 Appellants Submissions filed 7 October 2020 [9]-[17]; Respondents Submissions filed 6 October 2020 [34]-[52]. 16 Ex 5 [38]; Ex 6 [46]. 17 Ex 5 para 31. 18 Ex 6 para 41. 19 T 1-20 lines 17-18. Counsel for the appellants, Mr Purcell stated: “In terms of the approach, you'll see that both adopt the direct comparison method on a rate per square metre of site area accounting for easements in effective area.” 20 The parties indicated they are in agreement regarding the easements and appropriate rates of diminution at T 3-177 lines 41-42 (per the respondent) T 3-177 line 32 (per the appellant). -- 6 of 50 -- 7 [19] The Court had the benefit of evidence from quantity surveyor Mr Malcolm Davidson (deceased). The quantity surveyor evidence was of itself not in dispute, although its use and application by the valuers in analysing sales was in issue. [20] In relation to the Oxenford site, the parties agreed as to the size and shape, encumbrances upon and access to the site. Access is limited to south-west bound traffic along Tamborine-Oxenford Road, but in both directions along Global Plaza. The site is subject to easements. The parties agreed upon the level of diminution in respect of the easements.21 [21] In relation to the Molendinar site the parties agreed as to the size and shape, encumbrances upon, and access to the site. Direct access is achieved to northbound traffic from Olsen Avenue, and southbound access is via the traffic signalled intersection at Crestwood Drive. The site is burdened by easements. The respondent expressed the view that the major easement is reconfigurable; the appellant asserted that reconfiguration is open to dispute. Nevertheless, the parties agreed the level of diminution in respect of the easements, consistent with an earlier decision of the Land Court.22 Subject sites - zoning [22] While it was agreed that the highest and best use of the subject sites is the current large format retail use, there was disagreement about whether sales of properties with other permitted uses offer valid comparisons. This disagreement is common to consideration of the comparable sales advanced by the respective valuers in relation to both the Oxenford and Molendinar sites. Oxenford site [23] Under the Gold Coast City Plan 2016 the Oxenford site is located in a District Centres Precinct of the Centre Zone.23 The hierarchy of Centre Zone mixed-use centres is: A. Key regional centres; B. Principal centres; C. Major centres; D. District centres. 21 Ibid. 22 T 3-177 lines 41-42; T 3-177 line 32. 23 Ex 5, page 8, para 25. -- 7 of 50 -- 8 [24] Services in District Centres include subregional retail facilities, full line supermarkets, secondary retailing including bulk retailing. Molendinar site [25] The Molendinar site is in a Fringe Business Precinct of Mixed Use Zone Gold Coast City Plan 2016, which provides for a maximum site coverage of 70% and a maximum height of two storeys or 14 metres.24 The Mixed Use Zone Code applies to assessing all development in the Mixed Use Zone. Land uses in a Fringe Business Precinct include high quality showrooms and bulky goods retail. Issues in the Appeal [26] The evidence established fundamental differences in approach taken by the expert valuers to the valuation of the subject sites. The primary issues which emerged, together with subsidiary issues, were as follows: Selection of comparable sales • Locality, use and time: The relative importance of a consistent LFR use and proximity of sales in time and place. The respondent’s sales were more recent and in localities closer to the subject sites, however purchased for alternative permissible uses or LFR. The appellants’ sales were LFR sites in a broader region and more expansive timeframe; • Use of sale: The relevance of markets and buyer profile in considering comparability. The respondent proceeded on the basis of a single overall property market while the appellants proceeded on the basis of a market influenced by buyer profile (including ‘owner-occupiers’ such as car showrooms versus investor sales) and price point considerations; • Market movement: The application of adjustments to comparative sales to account for market movement, if any, over time versus more recent sales not requiring adjustment. 24 Ex 6, page 9, para 33. -- 8 of 50 -- 9 Analysis of comparable sales • Parameters: The establishment of sales parameters to determine the proper place of the subject sites; • Evidence: Including the assessment of the cost of site works in the mind of a purchaser and the basis for adopting quantity surveyor evidence in determining the analysed sale price; and • Adjustments and allowances: Including the application of ‘on costs’, loadings, infrastructure credits, preliminaries, margins, contingencies, professional fees, and delay in determining the analysed sale price. The application of comparable sales evidence [27] What follows is my consideration of the issues regarding the selection and analysis of comparable sales followed by my conclusions, and discussion of the application of the comparable sales evidence. The selection of comparative sales [28] Despite agreement between the expert valuers as to methodology, the key differences in approach to the valuation of the subject sites dictated their selection of comparative sales. [29] The evidence of both the appellants and the respondent was largely focussed on challenging the approach taken by the other. [30] For example, Mr Bale, the valuer for the respondent, said that s 22 of the Act provides that the highest and best utility of a site “should not be considered to be restricting the site from any other alternative competing and legal uses available … by virtue of its zoning, location and site attributes”.25 He said that Mr Schultz: “has incorrectly considered only sales evidence of his determined highest and best use (existing use) and has thereby chosen not [to] consider more proximate and recent sales evidence reflective of other uses/purposes for which the subject land might be used”.26 [31] The appellants do not assert that a different highest and best use between a sale and the subject property renders the sale incapable of comparison, but say the preferable starting 25 Ex 5, page 12, para 35; Ex 6, page 11, para 43. 26 Ex 5, page 12, para 37. -- 9 of 50 -- 10 point is sales of the same highest and best use, and only where necessary, great care needs to be taken in any direct comparison between land of different highest and best uses.27 [32] The appellants submit that Mr Bale misused the planning scheme to regard sales as comparable merely because their use falls within similar permissive zones, which ignores “market fundamentals”.28 Localities (sales) [33] A feature of the sales chosen by the appellants is their regional spread. While all within South East Queensland, they extend from the northern reaches of the Gold Coast north to North Lakes and west to Springfield. The respondent’s sales are closer to the subject site locations, and the dates of sale generally more proximate to the issued valuation dates. [34] The appellant says that Mr Schultz adopted a conventional approach. Mr Schultz considered vacant land sales purchased for LFR uses or similar lots consistent with the highest and best use of the Molendinar and Oxenford properties. He valued those properties on a notionally vacant, site improved basis. [35] In contrast, the appellant says that Mr Bale selected sales within a more temporal and geographical range “but in doing so, is required to make significant compromise in comparability”.29 The appellant says Mr Bale adopts a mix of vacant and improved land sales which, other than the common sale, were purchased for: “either mixed use commercial/industrial or commercial/residential developments purchased on a mixed/blended rate and a commercial subdivision use dissimilar to the highest and best use of the Molendinar and Oxenford properties on both small and large lot sizes”.30 [36] The respondent valued those sales on a notionally vacant, site improved basis. [37] While the respondent accepts that sales in different localities can be used as part of the valuation exercise, it says that it necessitates a valuer turning his or her mind to differences between the localities, including any differences in underlying land values 27 Appellants Submissions filed 7 October 2020 [46], citing Aronis v Chief Executive, Department of Natural Resources and Mines [2002] QLC 46 [64]. 28 Ibid, para 47. 29 Ibid, para 32. 30 Ibid, para 24. -- 10 of 50 -- 11 and making necessary adjustments to account for those differences.31 The respondent says Mr Schultz did not properly turn his mind to this and failed to properly explain or set out the adjustments made to account for the differences in location. [38] The preferred approach is that which offers less scope for error. That is to be determined on the evidence. [39] The respondent in written submissions summarised evidence of Mr Schultz as follows:32 a) Mr Schultz accepted that the use of sales from a different locality introduced “a requirement for adjustment” and that there was “some need to make an adjustment or allowances for difference in locality”33; b) Mr Schultz agreed that it was not as simple as saying that any large format retail site in South East Queensland has the same value because localities do differ34; and c) before making use of a sale in a different locality, it was necessary for a valuer to satisfy themselves of the adjustment which needs to be made.35 [40] The respondent concludes that Mr Schultz failed to explain the factors which would inform the adjustment and failed to identify or quantify the adjustment said to be necessary.36 The respondent contends that Mr Schultz conceded this. Mr Shultz’s explanation was in fact: “I haven’t discussed it in detail, or I haven’t raised it, but I have considered it”.37 Mr Schultz did not accept the suggestion put to him that to make an informed assessment of the differences in underlying land value (of comparable sales in locations removed from the subject site) he needed to look at the body of sales evidence in those localities and determine variances. Mr Schultz said: “I don’t think it’s difficult. It’s our job. It’s a judgment. It’s experience. It’s knowing – now, we looked at, you know, household incomes and things like that. We had a look at that, just to make a judgment call, and some were a little bit higher, but typically there wasn’t a large variation in that, the subject locations, you know, because they're all in South East Queensland. So, you know, when we were having a look at, you know, the - and when I was looking at that, the subject locations, you know, you could form an opinion on, you know, the desirability of North Lakes or the desirability and the locational attributes of Underwood. You know, because they're - these markets where we've identified the sales, they have large format - you know, they're desirable for large format users because there's large format users in that, you know, locality; in that suburb. …”38 31 Respondent’s Submissions filed 6 October 2020 [102] – [104], citing Brewarrana v Commissioner of Highways (No 1) (1973) 32 LGRA 170, 550. 32 Ibid, para 106. 33 T 1 – 106, line 10-11, line 15-18. 34 T 1 –106, lines 20 – 24. 35 T 1– 106, lines 26 – 30. 36 Respondent’s Submissions filed 6 October 2020 [107]. 37 T 1 – 106 lines 37-38 38 T 1 – 107 line 23 - 33. -- 11 of 50 -- 12 [41] It was put to Mr Schultz by counsel for the respondent, with whom he agreed, that other factors which ‘feed into’ the purchase price of a large format retail site are the underlying value of the land, the locality, availability, the demographics of the catchment, and yield. Mr Schultz characterised these factors as ‘buyers’ feasibility’.39 The respondent accepts there was “some discussion about the demographics” but says there was no analysis or discussion by Mr Schultz regarding the availability of land and underlying land values in the localities of his sales evidence.40 [42] In evidence Mr Schultz said: “They know what they can buy land for in different locations, what transactions have occurred, and they turn their mind to that on a rate per square metre of site, which is essentially what we've done here.”41 [43] In context the ‘they’ Mr Schultz refers to are purchasers, not valuers. [44] The appellants in written submissions accept that as a matter of ordinary valuation principle, adjustments need to be made to reflect the differences between a subject properties and comparable sales in terms of the market, locality and economic contexts and say: “(however) that is the task which a valuer ordinarily and properly undertakes and expresses their opinion on, as Mr Schultz has done, where relevant”.42 Accordingly, they submit there is no basis for rejection of Mr Schultz’s sales evidence. [45] I note that Exhibit 7 is Mr Shultz’s annexure to both the JERs incorporating the supporting documents to his sales. The documents include a range of source material including census information, trade area profiles, Council Issues Register, plans of development and correspondence. [46] In Brisbane City Council v Bortoli the Land Appeal Court observed: “The nature of the valuation exercise does not require a point by point comparison of each characteristic of the sale properties and the property to be valued. What is called for is a weighing up of the effects of the similarities and differences, for the purpose of applying the evidence to the land to be valued. This is rarely a precise exercise.”43 [47] The respondent argues that Mr Schultz has identified sales which he regarded as inferior to the subject property without articulating to a sufficient degree the similarities and 39 T 1-108 lines 14 – 43. 40 Respondent’s Submissions filed 6 October 2020 [112]. 41 T 1-108 lines 43 – 45. 42 Appellants Submissions filed 7 October 2020 [36]. 43 Brisbane City Council v Bortoli [2012] QLAC 8 [54]. -- 12 of 50 -- 13 differences for the purpose of applying the evidence to the land to be valued. In submissions they cite Barker J in Australian Executor Trustees Ltd v Propell National Valuers (WA) Pty Ltd: “What is required of a valuer adopting this “weighted” comparative approach is that as far as possible the weighting be accounted for and explained in the valuation: see Western Australian Planning Commission v Arcus Shopfitters Pty Ltd (Arcus) [2003] WASCA295, McLure J at [70]. What a court does not expect a valuer to do is simply to list a number of property sales said to be broadly comparable to the subject property and then simply nominate the value that the subject property is said to carry. To do this has an air about it of speculation, something which good valuation practice is designed to avoid. As far as possible the detail of the reasoning behind the valuation ascribed to a subject property by way of comparison to broadly comparable properties which have been sold needs to be laid out in the valuation.”44 [48] The respondent contrasts this with Mr Bale’s sales evidence which concerns properties in comparatively close proximity to the subject sites and requires less dependence upon subjective judgment and assumption, rendering it safer and more reliable evidence.45 [49] That appellants contend that the sales advanced by Mr Bale, while being in closer proximity, do not permit a like for like comparison, and that reliance on underlying permissive zoning “is apt to mislead from the outset of the comparative exercise”.46 They say that while planning schemes provide for a wide range of uses in particular zones, subject to relevant assessment, a particular use might be more advantageous over others “having regard to the legal, physical and economic characteristics of the land (and its surrounds).”47 Mr Bale accepted in evidence that some sites are more suited to specific forms of development, and in those circumstance it is less likely that other potential users may compete directly to purchase that site,48 and that particular parcels of land are more attractive for one form of development than another.49 The appellant says that it is the market and not merely the permissive planning scheme which most influences development potential and price. On that basis the appellant contends that the respondent’s evidence therefore only informs the Court what a purchaser might pay for the alternative use in that particular location – and in the choice of comparative sales that includes residential use, or mixed commercial/industrial use. 44 Respondent’s Submissions filed 6 October 2020 para 109 citing Australian Executor Trustees Ltd v Propell National Valuers (WA) Pty Ltd [2011] FCA 522 [127]. 45 Respondent’s Submissions filed 6 October 2020 [114]. 46 Appellants Submissions filed 7 October 2020 [27]. 47 Ibid, [28]. 48 T 1 – 76 lines 1 – 10. 49 T 1 – 73 lines 20 – 34. -- 13 of 50 -- 14 Uses – markets conditions and buyer profile [50] Two ‘use of sales’ aspects were raised in the evidence. The first concerned market conditions, the other concerned buyer profile. [51] The appellant submits that Mr Bale’s approach fundamentally misconstrues and misuses the planning scheme to regard sales as necessarily comparable merely because the uses of those sales fall within similar permissive zoning under the planning scheme.50 They say this ignores ‘market fundamentals’ and necessarily assumes that commercial and economic drivers are equal. [52] The respondent accepts that, generally speaking, it is preferable to use sales which are bought for the same or similar use as the land being valued.51 The appellant says that the sales relied upon by Mr Bale, other than the common sale, reflect a use different to the highest and best use of the subject properties. [53] Mr Schultz expressed his view that buyers are dictated by end users (tenants) and therefore values do not fluctuate widely between metropolitan and greater metropolitan areas.52 He said: “Large format sites sales in outer metropolitan areas, analysed to a site improved state, may be expected to reflect not too wide a range of value. The level of rental on a like for like tenancy area basis would be similar, be it a national large format retailer or private businesses”.53 [54] Mr Schultz noted that Mr Bale selected two car sales yards as evidence which he (Schultz) did not consider comparable.54 He said further: “Cars are a major capital investment with customers in the market very infrequently, maybe one every 3 to 7 years. They offer no comparison between themselves let alone the subject.”55 [55] In written submissions the respondent says a car dealership is a form of large format retail use and it is too narrow an approach to exclude those sales because they involve a difficult type of good to some other large format retail uses such as hardware or furniture stores.56 50 Appellants Submissions filed 7 October 2020 [47]. 51 Respondents Submissions in Reply filed 20 October 2020 [11]. 52 Ex 6, page 80, para 376. 53 Ex 5, page 7,5 para 307. 54 Ex 6, page 81, para 379. 55 Ex 6, page 81, para 379. 56 Respondent’s Submissions filed 6 October 2020 [29]. -- 14 of 50 -- 15 [56] At the hearing this issue was the subject of some inquiry. Mr Bale declined to accept the proposition that a car yard customer was ‘infrequent’. It was put to Mr Bale in cross examination and the following exchange took place: MR PURCELL: Yeah. Sorry. And – but they operate in a different market because they look for different and particular site attributes dependent upon the particular use, they want to put the site to, i.e., a car retail showroom or a large-format retail bulky goods sale - - - MR BALE: No, I – sorry. No. I believe that a lot of the site attributes overlap with both large-format retail and vehicle showrooms, particularly with regard to exposure, main road exp - - - MR PURCELL: You’re suggesting exposure for a car retail showroom is the same as a – for instance, a Bunnings site. MR BALE: That would be essential to both uses in many cases. MR PURCELL: Mr Bale, there’s a – people – Mr Schultz explained his understanding of the difference between those markets. You would appreciate – or you accept on the first basis that a car yard or a car sale is a once-in-seven-years type of expenditure. You’d accept that. MR BALE: Not necessarily. MR PURCELL: And is one of – well, it’s the second-largest expenditure up behind house purchase for most of the average people – persons. MR BALE: It could be. MR PURCELL: It could be, whereas – and they – and they’re limited, I suggest to you, to a particular asset or an offering, cars; correct? Cars and related services; correct? MR BALE: That is correct, yes. MR PURCELL: Versus – other types of developments have a – large-format retailers have large types of offerings. For instance, Harvey Norman has white goods. They have electronics. They have furniture. They have all that kind of different – differential in offerings; correct? MR BALE: That’s one example. MR PURCELL: And so people - - - MR BALE: But the other examples, which are – offer a very limited range.57 [57] I found Mr Bale’s responses somewhat guarded. In my view the questioning was clear that in the context of what might be considered large format retail operators such as Bunnings or Harvey Norman, the customer was a more regular or frequent visitor than 57 T 3-70 lines 24 - T 3-71 line 18. -- 15 of 50 -- 16 the customer of a car yard retailer. I don’t think there can be any doubt that visitation to a large format retail outlet such as Bunnings or Harvey Norman is something the average customer would do more regularly than visit a car showroom. [58] In evidence there was questioning about service station sites. In relation to the sale of 501 Olsen Avenue, Southport, Mr Bale was questioned on whether its use as a service station placed it within the same market as large format retail: MR PURCELL: And so, again, are you suggesting that a service station and fast food outlet use is the same use as – or is the same market as a large format retail market? You’re not suggesting that, are you, Mr Bale, surely? MR BALE: The Molendinar property under its mixed-use fringe business zone permits, service station, fast food and other uses to which these sits were put. MR PURCELL: I’m not interested, Mr Bale, with respect, in the permissive uses. I’m talking about the markets. How the property market use these properties and how it works. Are you suggesting that a service station – a drive thru market is the same as a large format retail market? Is that your evidence to this court? MR BALE: Sorry, these resales and sales evidence have been reflective of a general locational and situational factors that relate also to the subject properties as much as they do to the sale properties. It’s independent of the use to which they are then put as such. MR PURCELL: Okay. I don’t think you quite answered my question though. You accept, do you not, that they are different markets. You accept that? MR BALE: They are a different use for which land – the market we’re talking about is a market for vacant land. And it comes with a given zoning. And it comes with given attributes. The attributes of these sites in this location are relevant to those uses and permittable on the subject site.58 [59] The appellants submit that the use of sales of differing uses introduces greater reliance on subjective judgment and that the price paid by a purchaser intending a particular use does not demonstrate what a would-be-purchaser intending for a different use would pay for the same site.59 The appellants submit that comparing the rate for a different use, including mixed use developments, to the subject properties does not provide a sound basis for comparison as it is not comparing like with like: “… it fails to consider the separate and distinct market and economic drivers for a particular use which drive price and which are particular to a site”.60 The appellant says that each of the sales relied upon 58 T 2-86 lines 18 – 41. 59 Appellants Submissions filed 7 October 2020 [52]. 60 Ibid, [54]; T 2-57 lines 5-46; T 2-56 lines 1-7. -- 16 of 50 -- 17 by Mr Bale, other than the common sale, reflect a use different to the highest and best use of the subject properties which they say is commercial/retail development. [60] Throughout, the appellant describes the highest and best use of the subject site as commercial/retail LFR, in contrast to the comparable sales advanced by the respondent (other than the common sale), which they say include other forms of LFR such as mixed commercial/industrial or mixed commercial/residential. They say that in those circumstances the manner of comparison needs to be explicit and must take into account all relevant factors61 – and that Mr Bale has not exposed his reasoning and seemingly assumes that those different and mixed uses are equivalent to the commercial/retail use of the subject properties “due to them being competing uses on the permissive underlying zoning of the subject properties”.62 [61] As the appellant rightly notes whether a sale is truly comparable is a question of fact, not law, and necessarily involves questions of judgment.63 Market movement [62] In the JERs, perspectives on market conditions included, for example, a comment by Mr Bale in relation to the Oxenford site that the location was considered to have continued residential growth through infill with decreasing commercial land sales, which meant that sites were tightly held. This, in his view, supports a preference for sales evidence “more proximate” to the date of valuation, for example, between two and six months, requiring nominal adjustment. The respondent says that because of Mr Bale’s choice of more proximate sales it was not necessary for him to consider market movement as part of his valuation. He did however opine that there had been movement in the market between 2013/14 and 2017. [63] Addressing the subject of market movement in evidence Mr Bale said: “Sorry, my position to the court was to avoid the unnecessary position where there was a vacuum. And this is my way of filling that vacuum – a statement made by Mr Schultz in saying that there’s been no market movement. Mr Schultz entered the JR process with no recent sales at all and no current – no local sales to great extent as well. So, yes, I did my duty to the court and trying to express a movement in the market utilising sales evidence, in this 61 Appellants Submissions filed 7 October 2020 [57] citing Macuga and Ors v Chief Executive, Department of Lands (V95-64), 8 August 1996, unreported [12]. 62 Appellants Submissions filed 7 October 2020 [59]. 63 Chief Executive, Department of Natural Resources and Mines v Kent Street Pty Ltd [2009] QCA 399 [154]. -- 17 of 50 -- 18 case paired sales evidence, in respect of lot 2 Old Pacific Highway resales evidence from a wider perspective to 65 Morayfield. And then in respect of 33 Hinkler Drive, which Mr Schultz sought to utilise to demonstrate no market movement between 10 and 17, I utilised to sale the subject property in respect of Oxenford to indicate, well, on that basis alone it should be a minimum of what it sold for on a gross site one and a half times its size, and within theory, site attributes and inferior competition. So, yes, that’s all I was trying to do.”64 [64] Mr Schultz made no allowance for market movement and contended that the market was stable and subdued from 2012 up until the date of valuation.65 Mr Schultz confirmed that the valuation figures in his report, relying on the 2013 and 2014 sales, were dependent on the Court concluding that there had been no market movement.66 Mr Schultz suggested that the Court could alter those valuations by a percentage in line with the degree of market movement found.67 [65] The respondent says the appellants’ case for there being no movement in the market is based on the observations of Mr Schultz in the JERs regarding the former Masters Home Improvement site at 33 Hinkler Drive, Highland Park. [66] Mr Schultz in the JERs referred to 33 Hinkler Drive Highland Park as a highly improved site which achieved a vacant possession sale price in December 2017 only slightly higher than the initial purchase price in January 2010.68 He said this does not support a rising large format site market. [67] In response, Mr Bale said Mr Schultz failed to take into account that the sale involved a financially distressed vendor, a failed business model, that the site was repurposed to a gym and church and ‘is hardly reflective’ of the LFR market.69 [68] When asked if he relied on the sale and resale of Hinkler Drive, Highland Park in support of his theses as to market movement Mr Schultz said it was “anecdotal” evidence of no market movement.70 When questioned, Mr Schultz agreed that the Court could disregard the relevance of Highland Park to the question of market movement.71 Mr Bale said that he didn’t believe the sale was relevant to the question of market movement.72 64 T 2-98 lines 11-23. 65 Appellants Submissions filed 7 October 2020 [84]. 66 T 2-58 lines 36-41. 67 T 2-58 lines 20-22. 68 Ex 5, page 22, para 79-80. 69 Ex 5, page 22, para 81. 70 T 2-59 line 46. 71 T 2 – 60 lines 28 – 31. 72 T 2-60 line 36. -- 18 of 50 -- 19 [69] The respondent says in written submissions that after Hinkler Drive was ‘jettisoned’ by Mr Schultz in cross-examination the appellant had no paired sales to support the proposition that there was no market movement in the relevant period and consequently the opinion of Mr Schultz in that regard is unreliable and unsafe.73 The respondent referred to the decision of Member Isdale in Sentinel Homemaker 2 Pty Ltd v Valuer- General74 where at [19] his Honour said: “To summarise, the sales Mr Ladewig chose were said by him to be comparable because there was one market with stable values in respect of the sort of land he was valuing. Mr Ladewig stated this market was stable throughout the entire period between the earliest sale, in November 2012 and 1 October 2016. According to Mr Ladewig, the market was also showing the same values throughout all of Queensland during that period. This was the fundamental starting platform for his valuation. Mr Ladewig did not perform any comparison studies of paired sales or do anything else which appeared in his valuation to attempt to show the objective existence of this precondition.”75 [70] I would note that the market the subject of discussion in that matter is not the same market the subject of consideration in these appeals. More recently, in Eumundi Group Hotels Pty Ltd v Valuer-General Member Isdale himself cited the same passage from Sentinel Homemaker saying “the same shortcoming was repeated”.76 In that case the market being considered was the Gold Coast market for retail and commercial properties. [71] In these appeals the sales and resales which were canvassed in evidence were the common sale (Lot 2, Old Pacific Highway); the 2010 sale of the Oxenford site; 265 Morayfield Road, Morayfield; and the sales of 501 Olsen Avenue and 383 Southport – Nerang Road. [72] While Mr Bale considered that the sale of Lot 2, Old Pacific Highway for $4,000,000 on 8 October 2014 and resale for $8,000,000 on 5 August 2017 “demonstrates an increasing Gold Coast large format retail market”,77 Mr Schultz said the increase was a direct result of construction commencing on the Coomera regional shopping centre in early 2017. The respondent says that there is no evidence which demonstrates that this was a significant factor and differential between the two sales. The appellant says that the ‘context’ of the two transactions was critically different. 73 Respondent’s Submissions filed 6 October 2020 [71]. 74 [2018] QLC 47. 75 [2018] QLC 47 (Ibid) [19]. 76 [2020] QLC 37. 77 Ex 6, page 20, para 92. -- 19 of 50 -- 20 [73] The context is described in terms of ‘ripeness for development’. The appellant points to the fact that at the date of re-sale the development of the Coomera Town Centre had commenced with the added certainty of that development proceeding, and notes recording conversations with the purchaser indicative of a consideration of the impact of the surrounding development in the purchase.78 The appellant notes that Mr Bale accepted that the development of the Coomera Town Centre would have an impact but “not to the extent it consumed all market movement”.79 [74] Another example was an earlier sale of the Oxenford site on 18 May 2010 for $14,500,000 of a larger area (5.313 hectares) in need of site works. Mr Bale said that the pro-rata value ($247/m2) determined by Mr Schultz was 10% less than the mortgagee- in-possession sale “in what was a softer market”. Mr Bale said this did not seem logical. [75] In cross examination, as noted in the appellants submissions, Mr Bale “resiled from placing any weight on that circumstance (a mortgagee in possession sale) and gave evidence that he had no reason to feel the sale was lower as a result of it and indeed reflected the large format retail market at that time”.80 [76] In the Molendinar JER Mr Bale said the retail and commercial market was increasing from the end of 2012 to the end of 2017, assisted by low interest rates, and even from mid-2010. He asserted that the sale and resale of 265 Morayfield Road, Morayfield demonstrated an increase in the LFR marketplace.81 The 2018 sale represented a 63% increase over the 2013 sale price. [77] Mr Bale said: “It is considered that the market for a variety of retail and commercial utilities (inclusive of large format retail) which are all permitted on the subject sites has increased from Mid 2010 through to 1/10/2017 being the date of valuation.”82 [78] In regard to the Morayfield sale, Mr Schultz said the increase is attributable to the circumstances of the 2013 sale rather than the proximate sale. The respondent in submissions says that in cross examination Mr Schultz said that the circumstances of the sale and resale related to the existence of pre-commitments of agreements for lease but 78 Appellants Submissions filed 7 October 2020 [94]. 79 T 2 – 117, lines 5 – 26. 80 Appellants Submissions filed 7 October 2020 [88]; T 2 – 122 lines 11 – 13. 81 Ex 5, page 21, para 73. 82 Ex 6, page 21, para 98. -- 20 of 50 -- 21 that there was no acceptance which supported the existence of the agreements and no suggestion that Mr Schultz had made enquiries with the purchaser to confirm those facts.83 The respondent notes that the tender of certain documents late in the hearing was refused. The respondent concludes that there was no evidence which established that the 63% increase in the Morayfield sale and re-sale was wholly explicable by reference to any pre-commitments or agreements for lease. [79] During the hearing Mr Bale was questioned about 501 Olsen Avenue and 383 Southport Nerang Road (sites accommodating some or all service station, fast food, and self- storage uses) in the context of market movement: MR PURCELL: Okay. Can I suggest to you on that basis, Mr Bale, that they provide no assistance to the court in delineating market movement for the large format retail market. MR BALE: Why I’ve included them is because they’re reflective of land values within that given location, within proximity of the subject property with similar attributes to the subject property. And potential uses that could be undertaken on the subject property. MR PURCELL: Mr Bale, all those sales do is tell you what someone in the market is willing to pay for that use in that location, that particular use in that location. Correct? MR BALE: And over a period of time. Correct.84 [80] The appellant in written submissions says that Mr Bale had gone to great lengths to allege various grounds for market movement but did not quantify it, and his allegations unfairly colour the evidence of Mr Schultz.85 The sales that might suggest market movement in the relevant period and the arguments that oppose that conclusion have been set out in these reasons. As noted in their submissions, Mr Bale relied on two paired sales – the 2017 sale of 2 Old Pacific Highway sale ($8 million) and the earlier sale of that land in 2014 ($4,000,000), and the 2013 and 2018 sale and resale of 265 Morayfield Road, Morayfield ($2.4 million and $3.9 million respectively) which they say provides cogent evidence of movement in the market during the period in question.86 The respondent says that Mr Schultz has not demonstrated the absence of market movement which is fundamental to the use of the comparable sales upon which he valued the subject sites. 83 Respondent’s submissions para 94. 84 T 2-91 line 43 – T 2-92 line 10. 85 Appellants Submissions filed 7 October 2020 [87]. 86 Respondent’s Submissions filed 6 October 2020 [84]. -- 21 of 50 -- 22 [81] Of course the sales relied upon by the respondent do not require any adjustment for market movement. In that regard it was not necessary for Mr Bale to quantify market movement between 2012 and 2017. [82] The evidence provides explanations for at least some of the increase in the sales discussed however, the evidence is not, in my view, sufficient to establish a trend. As noted by the appellants in reply submissions, even if the Court were to accept that an adjustment to the valuations is necessary to account for market movement, there is nothing before me which would enable me to make that adjustment.87 Analysis of sales Parameters [83] In the Oxenford JER Mr Bale said Mr Schultz relied on large format retail site sales to establish site value, and where an upper parameter could not be set, utilised supermarket site sales, which are considered superior yet still fundamentally retail.88 [84] In the Molendinar JER Mr Schultz said he was of the opinion the appellants’ selection of sales closely aligned with the agreed highest and best use, which is paramount for comparability.89 Mr Bale however said in relation to the appellants sales that neighbourhood shopping centres are not a permitted use under the fringe business zoning applicable to the Molendinar site.90 [85] In the hearing, Mr Schultz said that he preferred sales which had similar market drivers, market participants, scale, and metropolitan, south-East Queensland location as primary evidence,91 although he accepted that sales which were bought for a different use could be of some use as primary sales in the valuation exercise.92 [86] Mr Schultz accepted that where one was to use a sale bought for a different use from the highest and best use of the subject property, the zoning of the subject site ought to be permissive of the use of that sale.93 87 Appellants Submissions in Reply filed 20 October 2020 [8]. 88 Ex 5, page 75, para 306. 89 Ex 6, page 80, para 375. 90 Ex 6, page 82, para 389. 91 T 2-6 lines 14-17. 92 T 2-5 lines 12-20. 93 T 2-11 lines 34-38. -- 22 of 50 -- 23 [87] In written submissions the respondent comments that “there is clear tension in Mr Schultz rejecting of sales bought for a different use on one hand and then seeking to marshal those sales in support of an upper parameter for his valuation”.94 [88] In cross examination Mr Schultz disagreed that it was fundamental to the valuation exercise that valuers find within parameters set by an inferior and superior sale.95 Mr Schultz said that while having an upper parameter is ideal, “there are some instances where you are required to make a call without an upper parameter.”96 Mr Schultz accepted that it is subjective “how much more superior” a sale is where there is no upper parameter.97 [89] In evidence Mr Bale said that while it would generally be preferable if there was a superior sale and an inferior sale, there was some margin for subjectivity where there was no superior sale.98 Mr Bale said that any upward adjustment would need a sales basis or would be unreliable.99 [90] The parties agree that it is not the case that a valuer must, in all cases set an upper and lower parameter. They say it is desirable (appellant) or strongly preferable (respondent) for a valuer to do so.100 [91] The parties both cite the observations of Member PG Stilgoe OAM in YFG Shopping Centres Pty Ltd v Valuer-General adopting the approach of Sugerman J in Best v Housing Commission of New South Wales that: “The best approach to valuation is to assign the subject land, by comparison, to its proper place in the scale of values disclosed by sales proved. Using the market continuum method of valuation, the analysed sale rate for the subject site must be somewhere between the worst of the superior sites and the best of the inferior sites.”101 [92] The appellant says the respondent is attempting to suggest that the superior or inferior sales must be of the same use to be reliable – however Best is not authority for the proposition that the upper and lower parameters are to be set by sales of the same highest 94 Respondent’s Submissions filed 6 October 2020 [158]. 95 T 2-22 lines 7-10. 96 T 2-21 lines 12-13. 97 T 2-24 lines 38-39. 98 T 2-56 lines 7 – 28. 99 T 2-56 lines 41-42. 100 Respondents Submissions in Reply filed 20 October 2020 [31]. 101 [2020] QLC 10 citing Best v Housing Commission of New South Wales (1949) 17 LGR (NSW) 129, [12]. -- 23 of 50 -- 24 and best use. They say that Mr Schultz utilised both primary and secondary proved sales, and given there were no superior primary LFR sales, he utilised secondary sales of what he considered to be a higher use to set his upper parameters.102 [93] In cross examination Mr Schultz agreed that he had not identified any primary sales he considered superior to either the Oxenford or Molendinar subject property.103 He did accept that setting an upper parameter was … “good methodology and you should do it, and I believe I have done it in my report by use of secondary sales”.104 The respondent says that opinion cannot be accepted because: 1) Mr Schultz had accepted that the Court need not seriously concern itself with those (secondary) sales because his valuation is essentially based on primary sales;105 2) Mr Schultz’s view that sales bought for a different use were not reliable indicators of value; and 3) the secondary sales relied upon were in the nature of properties bought for neighbourhood shopping centre use which Mr Schultz had agreed was of no use in valuing the Molendinar land (as the Molendinar site did not permit shopping centre use).106 [94] The appellant says in reply:107 1) Mr Schultz relied on his primary sales in setting the value of the subject properties and the secondary sale provided the upper parameter; 2) Mr Schultz said sales bought for a different use could be used, he chose not to rely on the sales adopted by Mr Bale because his primary sales provided better evidence of value; 3) Mr Schultz did not rely on (secondary) sales as primary evidence of value but acknowledged their utility in setting an upper parameter. 102 Appellants Submissions filed 7 October 2020 [67]. 103 T 2-29 lines 25-30. 104 T 2 – 22 lines 7-8. 105 T 1-120 lines 3 – 25. 106 T 2 – 12 lines 30-34. 107 Appellants Submissions in Reply filed 20 October 2020 [22]. -- 24 of 50 -- 25 [95] In relation to the location of sales over a broader area Mr Schultz said that LFR is an asset class and buyers are ‘dictated’ by end users (tenants) “and therefore values do not fluctuate widely between metropolitan and greater metropolitan areas”.108 He went on to say: “It can be seen in the suburbs where large format site sales have occurred, the household incomes vary slightly over and under the state average. The socio-economic standing of a suburb does not dictate if a large format retailer could be attracted to the location, as proven at North Lakes, Springfield or Underwood”.109 [96] He concluded that those sales are therefore comparable. [97] In contrast, Mr Bale selected sales in closer proximity to the subject sites. He said he considered local sales evidence with similar site attributes and zoning suited to similar LFR uses or alternate uses legally permitted on the sites. He suggested that a “sales evidence based adjustment made by the market for (these) significantly different localities … are so significant that it renders the sales … of no utility in support of land values on the Gold Coast”.110 In support of this conclusion he compared and analysed111 the Molendinar site at $840/m2 relative to the Yarrabilba sale at $240/m2 and concluded that Mr Schultz’ adjustment for location remains unquantified and without a supporting sales basis, “yet remains necessarily inherent in establishing a value for the subject property in direct comparison with almost two thirds of the sales (Schultz) relies on.”112 [98] The appellant accepts that adjustments need to be made to reflect the differences in locality. They say it is a task the valuer ordinarily and properly undertakes and expresses their opinion on. They submit that Mr Schultz properly considered the issue of location and made an adjustment in his application of the sales evidence to the subject properties.113 The respondent says Mr Schultz failed to appreciate the differences or make any appropriate adjustment (if there was a difference).114 They say he failed to properly explain or set out any adjustments he made to account for the differences in location – although accepting that Mr Schultz said that location was not as important as selecting a sale bought for the same use as the property being valued.115 108 Ex 6, page 80, para 376. 109 Ex 6, page 80, para 376. 110 Ex 6, page 80, para 373. 111 Ex 6, page 80, para 372. 112 Ex 6, page 80, para 374. 113 Appellants Submissions in Reply filed 20 October 2020 [19]. 114 Respondents Submissions in Reply filed 20 October 2020 [23]. 115 Appellants Submissions filed 7 October 2020 [105]. -- 25 of 50 -- 26 [99] When the subject was canvassed in evidence the following was said:116 MR HASTIE: Now, where in your report do you set out your opinion about how the differences in the underlying value of land differ between - compare between, for instance, Molendinar and Oxenford on one hand and the locations of your various sales? MR SCHULTZ: I haven't discussed it in detail, or I haven't raised it, but I have considered it. I do consider the locations and I talk about superior locations and preferred locations. MR HASTIE: But it's the case, though, isn't it, Mr Schultz, that in order for you to form a concluded view about the differences in underlying land value, it would be necessary to look at sales evidence from each of those localities to see how that compares with sales evidence in the other locality you're concerned about? That's effectively what's required, isn't it? MR SCHULTZ: No, it's not required, because I've got a sale that I apply to the subject. I don't have to analyse other sales in that location to work out something that I'm not being asked to do here. MR HASTIE: But in order for you to make an informed assessment of the differences in underlying land value, which you've accepted you need to do in order to make use of sales from different localities, I would suggest to you that you need to look at a body of sales evidence in each of those localities and determine what those variances in underlying land value are. MR SCHULTZ: If that was the case - I disagree with that because vacant land sales in the location - like, you know, Molendinar, where, you know, there is a lack of sales evidence, essentially, of this nature and we've had to go further out. That same issue with vacant site sales, to establish a level of market in - with what you're suggesting, North Lakes or Underwood, those sales aren't there for me to establish that, that premise. MR HASTIE: No. And that rather demonstrates the point, though, doesn't it, Mr Schultz, that it's very difficult to make an informed quantifiable assessment of differences in underlying land value, in comparing a sale from a different locality? It's a very difficult exercise to do with certainty and with clear quantification, isn't it? MR SCHULTZ: I don't think it's difficult. It's our job. It's a judgment. It's experience. It's knowing - now, we looked at, you know, household incomes and things like that. We had a look at that, just to make a judgment call, and some were a little bit higher, but typically there wasn't a large variation in that, and that's, you know, because they're all in South East Queensland. So, you know, when we were having a look at, you know, the - and when I was looking at that, the subject locations, you know, you could form an opinion on, you know, the desirability of North Lakes or the desirability and the locational attributes of Underwood. You know, because they're - these markets where we've identified the sales, they have large format - you know, they're desirable for large format users because there's large format users in that, you know, locality; in that suburb. So - - - 116 T 1-106 line 32 to T 1-107 line 34. -- 26 of 50 -- 27 MR HASTIE: But, Mr Schultz, essentially though it is a subjective exercise in your judgment. What I'm suggesting - you agree with that proposition first? MR SCHULTZ: I am making a judgment, that's correct. MR HASTIE: Yes. And it's not a judgment which is capable of clear and quantifiable - I'll withdraw that. It's not the sort of judgment or adjustment that can be made in clearly quantifiable terms, is it? MR SCHULTZ: No, I don't think it is a quantifiable thing, that's correct. Evidence - Site works and quantity surveyor evidence [100] This issue concerns the assessment of site works in the mind of the purchaser as advised, or to place primary reliance on quantity surveyor costings calculated after the sale. [101] It appears to be agreed that as a matter of general principle a valuer should use information provided by a purchaser in preference to objectively sourced information. As noted by the respondent in submissions in reply, there will however be cases where it is not possible for a valuer to do that because there is no available information from the purchaser, or the information provided by the purchaser is of questionable reliability or is otherwise open to doubt.117 [102] Mr Schultz said that a purchaser’s advice should be considered where it can be established, and said that Mr Bale relied on ‘later recollections’ where hindsight is applied. Mr Bale accepted that hindsight is applied “subject to the veracity of the information given”118 and that acceptance of information provided by owners is usually also supported by the quantity surveyor expert evidence.119 [103] Mr Bale said where there had been multiple approaches to a purchaser for information and differing later recollections and contradictions, he sought to clarify those differences. Where there was no supporting evidence for the later recollections, he accepted the considerations of the purchaser closer to the date of sale. He said “in the absence of the purchaser’s actual feasibility, projections, costings, and/or multiple different accounts from purchasers, [he] has preferred the QS report”.120 He said that 117 Respondents Submissions in Reply filed 20 October 2020 [35]. 118 Ex 6, page 83, para 408. 119 Ex 6, page 83, para 409. 120 Ex 6, page 84, para 413. -- 27 of 50 -- 28 where some site works might have been unanticipated or unknown at the time he “has made adjustments accordingly”.121 [104] The making of adjustments, not made by the QS or the purchaser for things ‘unanticipated or unknown’ in this way in my view makes estimates questionable. [105] In evidence at the hearing Mr Schultz confirmed that the majority of the figures he adopted were from the quantity surveying report in relation to Lot 2 Old Pacific Highway, Coomera,122 and the Dreamworld Parkway site.123 [106] In relation to proposed site works, Mr Bale said in evidence when discussing 2 Old Pacific Highway, Coomera that he placed greater weight on the evidence of the quantity surveyor, having had regard to the purchaser statements which ‘correlated sufficiently’.124 [107] Mr Bale also said: ” I accept the evidence of the purchaser. However, I also had regard to the quantity surveyor. The evidence given by the purchaser was very broad brushed. I was not sure what it was inclusive of. However, the figures generally correlated with the QS costings, which were itemised and quantified in accordance with their plans. The purchaser still – at the stage in which I talked to him, still was not aware of the final costings, because that would be dependent upon the actual approvals.”125 [108] Mr Bale said that the purchaser had indicated he had undertaken his own feasibility studies. Mr Bale said in evidence: “Sorry. The purcha – the purchaser had indicated he’d undertaken feasibility studies in determining his purchase price for the property. And working on that basis, I figured that those 3.5 to 5 million dollars in rough estimates – and which he could provide with no degree of certainty – would have been built into a feasibility study, which would have considered additional things that the QS had considered and also a substantial profit and risk margin on top of that and also the holding cost.”126 [109] Where, according to Mr Bale, the evidence of the QS and the purchaser ‘correlated sufficiently’ it is unclear to me why the evidence of the purchaser would not be preferred. 121 Ex 6, page 84, para 414. 122 T 3-24 line 23. 123 T 3-58 line 34. 124 T 2-133 line 12-16. 125 T 2-134 lines 12-17. 126 T 2-134 lines 36 – 42. -- 28 of 50 -- 29 Adjustments and Allowances On-costs, loadings, preliminaries, margins, contingencies, professional fees [110] Mr Schultz said that ‘on costs’ are not in the mind of the purchaser at the time of sale.127 In regard to ‘more modern estates’ such as North Lakes, Pacific Pines and Hope Island, Mr Schultz said that developers do not produce benched ‘site improved’ sites because the additional cost is not recovered in the sale. In particular, Mr Schultz asserted that “there is no market for land which is acquired, then site improved and sold”.128 He expressed his opinion that the cost of site works plus ‘on costs’ doesn’t equal added value.129 He said he cannot identify a market for vacant land which is acquired unimproved then site improved in the manner analysed and then sold. The simple explanation he said is that owners would not recover every dollar spent on site works as calculated by Mr Bale, and as some of these costs are intangible, temporary and include contingencies, “it is not surprising that the market would not identify added value”.130 [111] Mr Bale considered that anticipated costs proffered by many purchasers are generally “upper order, unquantified and/or un-itemised enough to enable an accurate separation between site works and/or building works …”.131 Mr Bale accepted QS advice that these are necessary costs associated in undertaking the site works proposed by the purchaser and (only) assist in making a conservative direct comparison to the subject sites.132 [112] While Mr Bale said that in “excess of the site works (and construction costs) required, are the associated professional fees, preliminaries, margins, contingencies, holding and statutory costs; the developer requires a profit/risk margin commensurate with risk, scale, and length of exposure”,133 Mr Schultz said that excluding these items would align with LVA s 44.134 Mr Bale said this misconstrues s 44, which relates to reductions given to land holders for the cost of site works they have undertaken and paid for which remain in their ownership. 127 Ex 6, page 84, para 416-419; Ex 5, page 77, para 326-330. 128 Ex 6, page 84, para 418. 129 Ex 6, page 85, para 423. 130 Ex 6, page 85, para 423. 131 Ex 6, page 84, para 420. 132 Ex 6, page 85, para 422. 133 Ex 6, page 88, para 428. 134 Ex 6, page 88, para 431. -- 29 of 50 -- 30 [113] Mr Bale said Mr Schultz’s position is without sales basis and counter intuitive. He said the market includes both developed (retained and benched) level sites and unimproved sites still requiring site works.135 Mr Bale pointed to the purchaser provided feasibility for the Yarrabilba sale (and a similar process of feasibilities undertaken by purchasers at North Lakes, Coomera, Benowa and Pacific Pines) which he said provided for contingencies, professional fees, preliminaries, interest and outgoings including rates and taxes. [114] The following exchange occurred in the hearing: “MR PURCELL: Yes. And I’d suggest to you that, more broadly, as a matter of principle throughout your report, that you have taken the view that Section 44 of the Land Valuation Act precludes the making of such allowances. MR SCHULTZ: That is one of the considerations but it’s not my primary one. Beside that, my main reason for excluding them are the point that when these properties are developed – and I can go through – I’m happy to go through sale by sale – where they’re developed, they are developed with the building improvements as a greater project. So applying in isolation in this analysis, as Mr Bale has done, in my opinion, not the proper analysis. Because the setting up of the site is never done – and we can go through the sales and I will go through the sales – in isolation. The preliminary, you know, setting up the site – those costs involved are always done as part of a construction project. So to put them in to an analysis of the site where the market does not do that – and, again, Mr Bale refers to the market. So I’m looking at the market, and I’m happy to go through these properties. So Helensvale has been acquired. There’s been no site works – you know, no site works as envisaged by the analysis, completed on that property.”136 [115] The respondent in submissions says that Mr Schultz wrongly focussed on s 44 of the Act to justify the exclusion of those allowances saying s 44 is concerned with the methodology by which a person may apply to the Value-General for a deduction for the cost of certain site improvements. Conclusions [116] There is no real dispute between the parties as to any matter of law that would significantly affect or determine the outcome of these appeals. I am presented by the parties with two choices, only: to accept the approach, analysis and consequently the valuations of one valuer or the other. Neither valuer’s approach and analysis is perfect. It is also not the case that on all the points of disagreement a unanimous view is able to be formed in favour of one approach and analysis over the other. A conclusion in favour 135 Ex 6, page 88, para 427. 136 T 3-32 lines 1-18. -- 30 of 50 -- 31 of one party on any single issue will not be determinative – nor will a conclusion in favour of one party on all issues be required to determine the outcome in favour of that party. The best that can be achieved is to consider the issues canvassed in evidence and in weighing the merits reach an overall conclusion. That said I will express some views on each of the issues raised. Selection of comparable sales Localities [117] I accept that the valuer for the appellant undertook the required exercise of adjustment to reflect the differences between the subject properties and the sales (in terms of market, locality and economic context). Selecting sales in a more limited temporal and geographical range has the potential to reduce reliance on subjective judgment – subject to comparability and the extent of subjective judgment which might be required to achieve comparability for sales for different uses. The appellant’s analysis could have benefitted from a more detailed discussion explaining the adjustments made. The matters referred to by Mr Schultz which I addressed at [40] to [45] above could have been expressed in more detail in the JERs. I would observe that the localities of sales considered by the appellant are all in South East Queensland. They are not so disparate in locale to render that task more challenging than a capable and experienced valuer could complete. [118] I favour the view expressed by the appellant at [49] above that the sales advanced by Mr Bale, while being in closer proximity to the subject sites, are not ideally comparable. In that regard I note Mr Bales’ acceptance that some sites are more suited to specific forms of development. All the sales advanced by the respondent, but particularly the Southport Nerang Road sales and the Helensvale sale are in that category. As the appellant says, this only informs the court what a purchaser might pay for the alternative use. The level of adjustment made by the respondent to account for what amounts to a significant range of differences can be seen in the analysis of its sales discussed later in these reasons. In my view the level of adjustment necessary to the sales advanced by the respondent raise a greater risk of error, are less reliable, and should not be preferred. -- 31 of 50 -- 32 Uses [119] I accept that the visitation of a customer to an LFR site such as a Bunnings or Harvey Norman is likely to be more frequent than for some other legally permissible uses of the land such as a car retailer. However, that of itself does not render a sale unsuitable as a ‘comparable’ sale. It is well accepted that that ‘comparable sales’ need not be the same in every way as the site the subject of a valuation exercise. They should however be reasonably similar on a range of indicia which would minimise the need for adjustments which might otherwise render the sale unreliable. I accept the statement made by Mr Bale in evidence: “They are a different use for which land – the market we’re talking about is a market for vacant land. And it comes with a given zoning. And it comes with given attributes. The attributes of these sites in this location are relevant to those uses and permittable on the subject site.”137 [120] I repeat the summary of the appellants position at [59] to [60] above, with which I agree. [121] In my view the sales chosen by Mr Bale are not sufficiently similar on a range of indicia such that adjustments to achieve comparability risk greater unreliability than the sales selected and analysed by Mr Schultz. Market movement [122] It is well established that trends and conditions in the market at the date of valuation must be taken into account, but only to the extent that they were present or were reasonably foreseeable at the date of valuation.138 The valuation will take into account the fact, for example, of the market rising or falling so far as it would affect the price to be paid by a prudent purchaser at the date of valuation. [123] A marked increase in the sale of the same property over time is not of itself evidence of a particular trend or influence of a specific market driver. Sales in different markets for different uses also limits comparability. [124] While Mr Schultz, in selecting comparable sales over a 4.5 year timespan, should have as a matter of course presented the case for the absence of market movement rather than adopting a responsive stance, there is insufficient evidence before me to be satisfied that there was a trend to support a conclusion of market movement in the relevant period. I 137 T 2-86 lines 38-41. 138 Beedell Farms and Grazing Pty Ltd v Valuer-General (1979) 6 QLCR 322. -- 32 of 50 -- 33 repeat my observations at [82] above. There is no evidence and no basis for me to adjust the valuations to account for market movement. Analysis of sales Parameters [125] It stands to reason that there will be occasions, where a parameter (upper or lower) cannot be set by sales of the same highest and best use. The respondent accepted that there is some margin for subjectivity where there is no superior sale. The appellant submits that in those circumstances it must be necessary to turn to higher (or lower) order parameters or if none exist “reliance could be placed upon the comparative sales of the same use, even if they are either all inferior or superior, subject to the weight of evidence”.139 [126] While that might be the case, its acceptance in any particular situation is based on establishing the facts that make it necessary, and providing the process of reasoning for the Court to analyse140 and to allow the Court to ‘understand the thinking’ of the valuer in setting a range and then determining a valuation. [127] It is agreed that there were no LFR sales of the same use in the localities of Oxenford and Molendinar near to the issued valuation date. As noted by the respondent the secondary sales relied upon were in the nature of properties bought for neighbourhood shopping centre use (noting that the Molendinar site did not permit shopping centre use). The extent of superiority being accepted by the appellant as a matter of subjective judgment would have benefitted from greater explanation. As noted, the parameters set by the respondent, although primary sales, included a range of different uses. [128] The approaches of both experts were and are clearly arguable. The preferred approach however is that which reduces the scope for error – not necessarily that requiring the lesser allowances for improvements and adjustments. As noted by Member Isdale in BWP Management Limited v Valuer-General141 citing Clough v Valuer-General142 “reducing the scope for error in considering the amounts to be allowed is going to reduce the scope of error overall”. 139 Appellants Submissions filed 7 October 2020 [69]. 140 Valuer-General v Body Corporate for ‘Tennyson Reach’ [2018] QLAC 7, [11]-[12] per Dalton J. 141 [2014] QLC 3 [38]. 142 (1981-82) 8 QLCR 70, 76. -- 33 of 50 -- 34 [129] I accept the view of Mr Schultz that his primary sales provide better evidence of value and that he didn’t rely on secondary sales as evidence of value, rather, he acknowledged that secondary sales can have utility in setting an upper parameter. I also accept the view of Mr Schultz at [95] above that LFR (of a generally existing nature) as discussed in these appeals, is an asset class in which buyers are dictated by end users and therefore values do not fluctuate widely between metropolitan and greater metropolitan areas. As noted already I accept that some adjustment is necessary to reflect differences in locality which is the task the valuer ordinarily and properly undertakes. [130] As noted throughout these reasons the expert valuers assert fundamentally different approaches to determining the valuation of the sites the subject of the appeals. Accordingly, they provide a quite different selection of comparative sales. The JER process invited them to consider the sales and methodology of each other and to provide their view as to the adjustments necessary to achieve comparability. Based on the evidence in these appeals the approach that allows for the lower scope for error is, in my view, that advanced by Mr Schultz. Evidence – adjustments and allowances [131] Where the evidence of the QS and the purchaser ‘correlated sufficiently’ it remains unclear to me why the evidence of the purchaser would not be preferred. [132] As has been noted, it is a well-established principle that the value of an improvement is different in concept to its cost of construction, an approach reinforced by the Act in determining site value.143 A site improvement is only relevant if it increases the land’s value. So, simply adding on costs estimated by a quantity surveyor would not necessarily deliver a correct site valuation. The Court in BWP Management Limited v Valuer- General144 identified two questions. Firstly, whether there is a material difference between the comparable land when sold and the subject land in its assumed site-improve state, and secondly, whether that difference demands some adjustment in analysing the sale to account for the difference in value of the comparable land. [133] There appears to be a disconnect between the positions of Mr Schultz and Mr Bale, with both quite entrenched in their opinions. Removing some of the hyperbole in the JERs 143 Blue Mountains City Council v Mulcahy (1988) 100 LGERA 193, 200. 144 BWP Management Limited v Valuer-General [2019] QLAC 4 [59]. -- 34 of 50 -- 35 and in evidence in the hearing, it appears to me that the adjustments required to account for the feasibility as suggested by Mr Bale presents a greater margin for error or miscalculation. [134] In written submissions the respondent says that there was no proper basis for Mr Schultz to reject the making of allowances for preliminaries, margins and contingencies as they are an inseparable cost of undertaking site works. The respondent also says that the issue arose in BWP Management Ltd v Valuer-General (No 2) “(I)n a conclusion which was not overturned on appeal, Smith M concluded at [64]) there that the allowances should be included”.145 However, the cited paragraph in full reads: “I agree with Mr Elliott that the allowances should be taken into account. However, the extent to which they should be taken into account with respect to each sale depends, in each case, on the circumstances of that sale in the mind of a hypothetical prudent purchaser.”146 [135] The basis upon which they should be taken into account is that they add value to the sale property. The extent to which they should be taken into account is the added value, not simply the tally. While they might be an inseparable cost of undertaking site works, absent information concerning the circumstances of the sale (from the purchaser) to confirm the added value I am of the view that preliminaries, margins, contingencies and professional fees ought not as a matter of course be taken into account. The extent to which they should be taken into account requires consideration and will depend upon the circumstances of that sale. [136] Overall, I have determined that the conventional approach taken by Mr Schultz to be the appropriate basis for determining the valuations of the subject sites. That is, a preference for using sales which were bought for the same or similar uses as the land being valued. I don’t consider there was evidence to negate a conclusion that market fluctuation between metropolitan and greater metropolitan areas cannot and was not accounted for in the sales analysis, and market movement, if any, presented less risk of error than the alternative analysis. [137] As noted above I will discuss the common sale and sales advanced by the appellant and respondent which will assist in understanding my reasons for coming to the view that 145 Respondent’s Submissions filed 6 October 2020 [196]. 146 [2018] QLC 30 [64]. -- 35 of 50 -- 36 the adjustments necessary expose a great risk of error in determining the valuation of the subject properties. The application of comparable sales [138] The following table summarises the sales analysed and discussed in evidence at the hearing: Address Sale Date Purchase Price Analysed site value Unencumbered rate ($/m2) Common 1 Lot 2, Old Pacific Highway, Coomera Aug 2017 $8,000,000 $12,150,000 (appellant) $13,965,571 (respondent) $225 (appellant) $300 (respondent) 2 1 Marina Quays Boulevard, Hope Island Mar 2017 $14,300,000 $8,700,000 (appellant secondary sale) $16,272,439 (respondent primary sale) $360 (appellant) $672 (respondent) Appellant sales 3 111, 56 & 85 North Lakes Drive, North Lakes Mar 2014 $19,528,880 $15,750,000 $243 4 115 Compton Road, Underwood Jun 2014 $7,000,000 $7,450,000 $238 5 1 Main Street, Springfield Central Mid- 2013 $8,568,215 $8,050,000 $237 Respondent sales 6 Lot 415 Dreamworld Parkway, Helensvale Aug 2017 $17,750,000 $19,900,000 $408 7 19 Kristins Lane, Upper Coomera Jun 2017 $7,268,250 $9,633,066 $364 8 285 Southport Nerang Road, Southport Nov 2016 $4,100,000 $4,128,393 $797 9 383 Southport Nerang Road, Molendinar Jun 2016 $5,350,000 $6,567,182 $839 -- 36 of 50 -- 37 [139] In relation to the Oxenford site Mr Schultz says it is slightly superior to all the LFR site sales identified which range up to $243/m2 (unencumbered). He adopted $250/m2 finding above the inferior LFR sales and below the retail sales which he considered represented a sufficient premium over the primary LFR sales. [140] Mr Bale placed the Oxenford site as being superior to his analysis of the common sale (2 Old Pacific Highway, Coomera) but slightly inferior to Kristins Lane, and significantly inferior to Dreamworld Parkway and Hope Island. He adopted $360/m2 unencumbered. [141] In relation to the Molendinar site Mr Schultz says the subject site is superior to all the LFR site sales identified which range up to $243/m2. He adopted $285/m2 unencumbered again finding above the inferior LFR sales and below the retail sales which he considered represented a sufficient premium over the primary LFR sales. [142] Mr Bale placed the Molendinar site superior to his analysis of the common sale (2 Old Pacific Highway, Coomera) and Kristins Lane, slightly inferior to Dreamworld Parkway, and significantly inferior to both 285 and 383 Southport Nerang Road. He adopted an unencumbered rate of $400/m2. Common Sale – Lot 2, Old Pacific Highway, Coomera [143] Mr Bale said this property has a gross site area of 73,070 m2 and an effective usable site area (EUSA) of 46,599 m2. Mr Schultz said the EUSA is 51,937 m2. The 25 August 2017 sale price excluding GST was $8,000,000 or $110/m2.147 Mr Bale analysed the sale price to be $13,965,571 or $191/m2 and its effective usable site rate to be $300/m2.148 Mr Schultz analysed the sale to $225/m2 unencumbered: meaning differential valuation of $75/m2. Both valuers considered it inferior to the subject property. [144] Mr Bale described the site as being level and gently sloping, larger, of slightly superior shape with three road frontages offset by inferior frontage and exposure to lower order roads and of inferior topography. He further described the site as having exposure to the M1 restricted to northbound traffic, having access 8 km removed and from its point of 147 Ex 6, page 27, para 119. 148 Ex 6, page 27, para 119. -- 37 of 50 -- 38 main road exposure, being in an inferior north fringe Gold Coast location, having inferior immediately surrounding development and having inferior zoning.149 [145] Mr Schultz noted that this was an off-market direct sale, that the purchaser’s site works estimate is unknown, and that the quantity surveyor costings are based on drawings made well after acquisition.150 Mr Schultz said he adopted the purchaser’s estimate of site works and not the quantity surveyor costings.151 Mr Schultz said: “The purchaser estimate of $3,500,000 is not consistent at all with the QS costing of $3,892,627, when the further loading of 27% ($1,051,009) for Preliminary, Margin, Contingency and Professional Fees are added (by DB).”152 [146] In submissions advocating Mr Schultz’s approach the appellant says at [108] “adopting the purchaser’s evidence for site works and retaining the QS evidence for the balance of the site works totalling $4,212,100 is entirely consistent with the purchaser’s estimate”. [147] I agree. [148] In relation to the differential in EUSA the appellant says Mr Bale erroneously relied on approved plans of development which post-dated the sale and could not have been in the mind of the purchaser at the date of purchase.153 Mr Schultz said at the date of purchase there was an operational works approval of which the purchaser was aware which indicates a usable area of 52,022 m2. For reasons unknown Mr Schultz adopted a slightly smaller area of 51,937 m2. [149] I prefer the analysis of Mr Schultz to that of Mr Bale for the reasons outlined above and as expressed by the appellant in submissions. The sale is properly analysed at $225/m2. Respondent Sale – Lot 415 Dreamworld Parkway, Helensvale [150] Mr Bale said this property has a gross site area of 55,610 m2 and an effective usable site area of 48,805 m2. Its 28 September 2017 sale price excluding GST was $1,750,000 or $319/m2. The property is of an irregular shape with truncated corners and lies predominately below flood height. It has superior exposure to the M1 offset by access being 1.3 km removed and occupies a superior northern fringe Gold Coast location. Mr 149 Ex 6, page 28. 150 Ex 6, page 38, para 144. 151 Ex 6, page 38, para 147. 152 Ex 5, page 72, para 269. 153 Appellants Submissions filed 7 October 2020 [109]. -- 38 of 50 -- 39 Bale ‘partially analysed’ to a pro-rata effective usable site rate of $408/m2 over an area of 48,805 m2.154 [151] Mr Bale said he had follow up discussions in person with the purchaser on 10 April 2019 which indicated that the purchaser had originally considered the full commercial development of the site with a view to using it for multiple vehicle showrooms.155 Mr Bale wrote: “Following his purchase, Gerry Harvey expressed interest in establishing a large format retail showroom on the site”.156 [152] I find this last comment unhelpful. It appears to be information attributed to the purchaser. Whether it is factually correct is unable to be determined. Whether it is a reference to Mr Harvey personally, or to the business Mr Harvey is associated with is unclear. It is not clear if the expression of interest was formal, a casual comment, or merely anecdotal. I really cannot give any weight to material of this kind. [153] Mr Schultz noted that the property was acquired by a company with an associated car dealership principal, which is a different use from the highest and best use as there are different underlying market drivers. He said that car dealership purchasers tend to be owner-occupiers.157 Mr Schulz said that the site has excellent exposure, and due to its elongation could accommodate four brands158 and that the site was sold with a development approval in place so he added $200,000 value.159 Mr Schultz noted that Mr Bale’s analysis was based solely on the quantity surveyor report and that he would instead exclude items including preliminaries, margins, contingency and professional fees.160 [154] Apart from its large size, this site does appear to have attributes considerably different from the subject sites. In the hearing it was established that there was a development approval overriding the planning scheme which would allow the purchaser to develop for use as a car retail showroom and service centre and the residual for canal-frontage residential development. 154 Ex 5, page 60. 155 Ex 8, page 9. 156 Ex 8, page 9. 157 Ex 6, page 37, para 123. 158 Ex 6, page 37, para 124. 159 Ex 6, page 37, para 131. 160 Ex 6, page 38, para 140. -- 39 of 50 -- 40 [155] The appellants note that the respondent focusses on the purchaser’s business as the only or at least primary motivation for the purchase, but also notes that prior to the sale the purchaser obtained approval to extend the relevant period of the approval. For that reason the appellant submits that the purchaser saw benefit in the potential for the site beyond car showrooms. It is agreed that the purchaser bought the site as an investment – a term of wide import. The appellant says the respondent did not enquire as to the added value, or anticipated costs associated with the transaction, in the mind of the purchaser. [156] The appellant concludes: “… the site was purchased as a mixed rate for a mixed use with no differential made between commercial/residential components.”161 In that additional context, the sale cannot provide any reliable comparison to the subject properties as Large Format Retail uses absent evidence that the commercial and residential markets are comparable. [157] In addition to my reasons overall, in my view the differences between this sale and the subject properties, as noted above and as identified by the appellant is so great that it is unhelpful in the exercise required of the experts. Respondent Sale – 19 Kristins Lane, Upper Coomera [158] Mr Bale noted that this site has a gross site area of 26,430 m2 and a sale price excluding GST of $7,268,250, or $275/m2. The sale settled 24 October 2017. His analysed sale price was $9,633,066 or $364/m2. The site is of an irregular triangular shape, with a sloping site rising moderately about 12 m. It is, overall, smaller than the subject sites; of inferior topography and will be benched to form 6 levels. It is in a similar northern fringe Gold Coast location adjacent to inferior growth suburbs, has a Centre zoning with 27 m maximum height, which is considered superior to Mixed Use Fringe Business providing a wider variety of retail and commercial opportunities.162 [159] It is agreed that this sale was bought for a different use to the subject properties. The respondent maintains that the relevant principles and authorities do not stand as authority for the proposition that sales bought for a different use can never be used as part of the valuation exercise. What the appellant says is that it was purchased for an unknown use 161 Appellants Submissions filed 7 October 2020 [139]. 162 Ex 5, page 66. -- 40 of 50 -- 41 which means it could not be applied on a like for like basis as a large format retail highest and best use. [160] Mr Schultz noted that there are no file notes from the Department with regard to the acquisition and cost estimates;163 the property is smaller; the intended use is different, incorporating a service station (while the subject is not considered a subdivision opportunity); and that the analysis by Mr Bale is based solely on the QS report.164 In the hearing Mr Schultz clarified that information concerning a subdivision incorporating a service station was contained in application documents lodged after the sale. In my view that renders information from the purchaser even more relevant. [161] In the hearing the position put by Mr Bale on a number of occasions when questioned about the comparability of this sale was: “It is a sale of a property within a given location at a given time with a similar zoning, suited – with site attributes suitable for the considered subject site’s highest and best use”.165 Those attributes together with its zoning and location would, in Mr Bale’s view, be suited to a large format retail utility. There was discussion around plans for a commercial subdivision of that site and the ability, or not, for a commercial subdivision of the subject sites. The appellant noted the easements and Mr Bale was of the view that they are reconfigurable, which was disputed. Regardless, there was no information from the purchaser to better understand the basis upon which the purchase was made. There was some speculation by Mr Bale about interest in the site from Bunnings which the appellant quite rightly criticised as having no evidentiary basis. It was at best rumour and ought not to have been raised. [162] In the absence of purchaser information, the QS estimates were adopted by the respondent. It is not clear why purchaser information was not sourced although some speculation was expressed. In addition to the differences outlined at [157] – [158] I have concerns about the comparability of this sale. Respondent Sale (Appellant secondary sale) – 1 Marina Quays Boulevard, Hope Island [163] This is a sale advanced by the respondent, and a secondary sale advanced by the appellant in relation to the Oxenford site. 163 Ex 5, page 72, para 277. 164 Ex 5, page 73, para 280. 165 T 3 – 122 lines 34-36. -- 41 of 50 -- 42 [164] The appellant said this is a higher use site, in a superior location. The appellant noted that it is of an irregular shape, has larger capital value but is a double supermarket site. The appellant advanced this as a secondary sale at an analysed value of $360/m2.166 [165] Mr Bale notes that this site has a gross site area and effective usable site area of 24,200 m2. It achieved a sale price (ex-GST) of $14,300,000 ($576/m2). The analysed sale price (corrected at the hearing) is $16,272,439 ($656/m2 GSA; $672/m2 EUSA). It is of an irregular shape with four street frontages; a relatively gentle fall; a 315 m frontage to Broadwater Avenue ‘though no direct major thoroughfare site access’; is predominately flood prone with potential acid sulphate soils; and would require major site works and building cost penalties associated with basement parking.167 [166] The respondent said this was a mortgagee in possession sale, that the site is largely flood prone, that supermarket use is a permitted and competing use and that the site value does not reflect the completed site works. Mr Bale noted that the purchaser’s recollection two and a half years after the sale differs from his earlier version. The infrastructure benefits are not agreed as between the valuers. Mr Bale says that Mr Schultz erred in removing significant amounts from the sale price based on later recollections and not utilising quantity surveyor expert evidence.168 [167] Mr Schultz says the partially analysed sale undertaken by Mr Bale cannot reliably be applied ‘with any meaning given the difference’ arriving at $360/m2.169 [168] Clearly a differential of $312/m2 is indicative of major differences in approach from the valuers, in this case arising from contradictory information from the purchaser. The differences are so great that resolution is likely to only be achieved by having the purchaser give sworn evidence. This sale is relied on only as a secondary sale by Mr Schultz and according to the respondents submissions accepted by Mr Bale as “not one of his most reliable comparators”170 and submitted that it did not ‘actually influence Mr Bale’s assessment of the value of the Oxenford land”.171 [169] I agree that this sale is not a reliable primary comparable sale. 166 Ex 5, page 58, para 238. 167 Ex 5, page 68, para 253. 168 Ex 5, page 58, para 240 – 249. 169 Ex 5, page 72, para 284. 170 Respondents Submissions in Reply filed 20 October 2020 [52]. 171 Ibid [53]. -- 42 of 50 -- 43 Respondent Sale - 285 Southport-Nerang Road [170] Mr Bale noted in the JERs that this site has a gross site area and effective usable site area of 5,183 m2; is zoned low impact industry; and settled on 18 May 2017 at a sale price of $4,100,000 ($791/m2) with an analysed sale price of $4,128,393 ($797/m2).172 Further, the site has single street site access from Olney Court; has 100 m frontage and exposure to Southport Nerang Road, although between three and five meters below the road, so not likely to obtain direct main road access. The site rises between four and six meters above site access; is significantly smaller than the subject sites; has slightly superior shape but inferior frontage and exposure; inferior low impact industrial zoning; was ‘purchased with the intent (subject to impact assessable material change of use approval) to develop a vehicle showroom (LFR) and service facility (uses permitted under the (Molendinar) subject sites Mixed Use Fringe Business Zone)’. Mr Bale concluded that overall this sale would be considered superior on a pro rata basis, but inferior on an ‘overall quantum basis’, due mainly to its size. [171] Mr Schultz said in the JERs that the showroom and low impact industry intention of the buyer does not correlate with “the plans relied on by the quantity surveyor”.173 He said the original intention was a larger and more dense development. Accordingly analysis based on current quantity surveyor costings should not carry significant weight. He said that dealership use is a different use to the subject site with different underlying market drivers. He said they tend to be owner/occupiers and not impacted by lease incentives. Mr Schultz says the sale could not reasonably be considered as lightly improved with the retained buildings ($1,000,000) representing 24% of the sale price. He noted the land content is much smaller.174 [172] In written submissions the appellant says the sale fails to provide a sound basis to compare to the highest and best use of the Molendinar site. They say this is not a like for like comparison and argue that, in the absence of evidence, the LFR market is the same as the general commercial or industrial market, this sale can only inform the Court what rate/m2 a purchaser paid for a mixed-use commercial/industrial development in this location. The appellant again argues that sales limited in valuing land in the car-retail showroom market is different from the LFR market by the underlying nature of market 172 Ex 8, page 61. 173 Ex 6, page 41 para 166. 174 Ex 6, page 41 para 169; Appellants Submissions filed 7 October 2020 [152]. -- 43 of 50 -- 44 drivers.175 The appellant says in written submissions that the site appears to have been selected due to its high exposure and proximity to other vehicle sales premises along Southport-Nerang Road.176 They say the site is directly across Southport Nerang Road from a cluster of three to four established car show rooms, sales yards and car servicing repair facilities. [173] Finally the appellant says that were the Court to accept Mr Bale’s evidence, this sale is of little utility as a comparator to the subject sites on a like for like basis, noting the analysed sale price as $797/m2 to the Molendinar property at $400/m2. This, the appellant argues, is indicative of substantial subjective and uncertain adjustments required to allow any proper comparison to the Molendinar property. They say the differences are so great it does not provide a proper basis upon which the Court can properly asses the value of the subject properties. [174] The respondent maintains that a sale does not cease to be comparable or useful as part of the valuation exercise simply because it is bought for a different purpose, rather that is a difference to which the valuer can apply his or her judgment to resolve as part of the valuation exercise, citing Morris J in ISPT Pty Ltd v City of Melbourne.177 The respondent accepts that it is preferable to adopt sales which are as similar to the property being valued as possible – but where such sales evidence is not available or limited a valuer is, by necessity, forced to look for sales which are bought for a different use. [175] For the reasons enunciated earlier, and accepting the observations of the appellant outlined at [171] – [172] above, there are insufficient points of similarity to render this an acceptable comparable sale when compared to the appellants alternative methodology and comparative sales which present a lower risk of error. Respondent Sale – 383 Southport Nerang Road [176] Mr Bale noted that this site has a gross site area of 8,084 m2, and an effective useable site area of 7,828 m2. The sale settled on 23 May 2017 at a sale price (ex GST) of $5,350,000 ($662/m2) and Mr Bale analysed its sale price to be $6,567,182 ($812/m2) and based on effective useable site area $839/m2. Mr Bale noted the site is on a traffic 175 Appellants Submissions filed 7 October 2020 [152]-[154]. 176 Ibid [156]; Ex 8, page 58. 177 Respondent’s Submissions filed 6 October 2020 [125] citing ISPT Pty Ltd v City of Melbourne [2007] VCAT 652 [51]-[53]. -- 44 of 50 -- 45 signalled intersection with 60m of main thoroughfare frontage and is one metre above Southport Nerang Road with a western rear slope. He said that overall it is significantly smaller; of inferior shape, frontage and exposure; and of similar topography. Mr Bale said that upon completion of site works it would provide superior site situation in a similar Gold Coast location (to Molendinar); with inferior surrounding development and inferior low impact industrial zoning. Mr Bale noted that it was purchased subject to obtaining an impact assessable Material Change of Use authority to develop a service station, drive through fast-food outlet and self-storage facility, which are uses permitted under the subject sites Mixed Use Fringe Business Zone. [177] Mr Schultz said that the site was not lightly improved as it had a 2300 m2 existing industrial building on site. It was sold as an industrial zoned site in an established industrial zoned precinct “at a mixed commercial/industrial rate requiring an impact assessable development approval for a material change of use”.178 Mr Bale was of the view that the purchase subject to approvals rendered the on-site buildings of sacrificial value only. Mr Schultz said the proposed uses are different to the highest and best use of the subject sites, while Mr Bale said that service station and self-storage are alternate legal competing uses for the subject site. Mr Schultz said that his alternative analysis of this site would exclude items including Preliminaries, Margins, Contingency, and Professional Fees. [178] Again, the appellant maintained that Mr Bale has not made any adjustment in respect of differentials in market drivers or purchasers, or economic drivers.179 On that basis the appellant said this sale is ‘fraught with uncertainty and is not an otherwise reliable comparator to the Molendinar property’.180 They say that the sale is reflective of a mixed rate with no differential applied by the purchaser between the three uses where intensity of the industrial component (4 storey development) exceeded the retail/commercial element (service station and fast food outlet) such that the derived rate cannot be properly compared to the Molendinar site. The appellant says that failure to provide a sound basis to compare is self-evident from the determined site value of Molendinar at $400/m2 and the analysis of this sale at $839/m2.181 178 Appellants Submissions filed 7 October 2020 [162]. 179 T1 – 81 lined 3 – 7. 180 Appellants Submissions filed 7 October 2020 [163]. 181 Ibid, [163]-[164]. -- 45 of 50 -- 46 [179] The differences between this sale and the Molendinar site which are apparent in [175] – [177] above render this sale less comparable in my view than the sales advanced by the appellant. Appellant Sale – 111, 56 & 85 North Lakes Drive, North Lakes [180] The appellant noted that this sale constituted three sites in one line acquired for large format and ancillary retailing. It was noted that North Lakes is a well-regarded market, but Molendinar is preferred; that exposure is predominantly to locals within the estate; and that Bruce Highway access is close by. The appellant considered this a primary sale and used it to set a lower parameter at $243/m2.182 [181] The respondent highlighted that the sale took place 42 months prior, is in excess of 120 km north of the subject site and it is in an inferior large format retail market. As three sites separated by roads it is incapable of single large-scale large format retail use similar to the subject site. [182] The respondent said that the Oxenford site is in a superior catchment of a higher socioeconomic profile than this comparable sale. The respondent commented that the appellant failed to take into account cost penalties associated with development of one part of the sale property.183 [183] The respondent said advice from the purchaser proximate to the date of sale indicates that infrastructure benefits, while available, remained unquantified and did not influence the price paid. The respondent said that the infrastructure benefits calculated by the appellant are “contrary to the advice of the purchaser”.184 The respondent said that in the absence of further clarification from the purchaser the respondent is guided by the quantity surveyor’s itemised, quantified and costed site works as proposed and undertaken by the purchaser. [184] The respondent included in each JER copies of file notes and a series of email correspondence with the purchaser. A further request for clarification and supporting information was sent to the purchaser in the form of approximately two and a half A4 182 Ex 5, page 23, para 87. 183 Ex 5, page 31, para 117. 184 Ex 5, page 24, para 95. -- 46 of 50 -- 47 pages of text containing a considerable amount of information and with numerous questions interspersed. In the second paragraph it reads: “I am seeking clarification and supporting documents where available to assist in understanding your considerations and the information available to you as at the time of your negotiating a sale price”.185 [185] In response the purchaser said by email: “… we have been providing information on our purchase ad nauseam for an extended period of time and will not be providing anything further. Our team are too busy with new projects …”.186 [186] Having read the correspondence I am entirely sympathetic to the purchaser. The correspondence from the respondent is badgering and detailed but not well structured. It contains no headings to denote subject matter or to separate background information from information sought, and no bullet points or tables to make clear the question to be addressed. It seeks a response within ten days, which might be disproportionate to the nature and scale of the information requested. [187] I note the nature of the site as described at [179] above and in preferring the methodology and approach taken by Mr Schultz. I accept this as a comparable sale as analysed by the appellant. Appellant Sale – 115 Compton Road, Underwood [188] The appellant considered this site a primary sale, although inferior, and analysed it at a rate of $238/m2. It is a large format retail site acquired by an owner-occupier. The location is considered comparable, and it has unrestricted exposure to Compton Road in both directions. The site is of an irregular shape.187 [189] The respondent noted that the sale took place 39 months prior to the valuations in question. Based on the quantity surveyor estimates there were significant costs to develop the site, and rear roadworks were a likely cost to the purchaser “as extension of this road was a condition of the prior approval to Energex”.188 185 Ex 5, page 27. 186 Ex 5, page 26. 187 Ex 5, page 33, para 120. 188 Ex 5, page 33, para 122. -- 47 of 50 -- 48 [190] Mr Bale was of the view that the analysed sale price ought to be $287/m2, and suggested the sale is in a lower order surrounding development and a lower socioeconomic economic setting. [191] In the hearing the appellant maintained that the sale is ‘quite comparable’ noting, amongst other things, a Bunnings nearby. The respondent considered it significantly inferior taking into account the surrounding development (industrial shed and undeveloped land), socioeconomic factors, and the fact it was a ‘dated’ sale. [192] For the reason outlined earlier and my preference for the methodology and approach taken by Mr Schultz, I accept this as a comparable sale as analysed by the appellant. Appellant Sale – 1 Main Street, Springfield Central [193] The appellant said that this sale is in a slightly inferior location, has good exposure, and is of a regular shape and over three hectares in size.189 The appellant considered it a primary sale at a rate of $237/m2.190 [194] The respondent noted that the sale took place 54 months prior and that the site required significant costs to develop based on quantity surveyor estimates. Mr Bale analysed this sale at a rate of $287/m2. He said the purchaser articulated that no premium was paid for a delayed settlement and no account was made for the fact that no interest was paid on land, rates and taxes as the site was settled after site works were completed by the purchaser.191 [195] In questioning concerning the ‘premium’ and the advice from the purchaser Mr Schultz agreed that the purchaser did not pay any additional amount on account of the delayed settlement, but disagreed to the suggestion that it was inappropriate to make any allowance for the delayed settlement.192 [196] In written submissions the respondent says Mr Schutz made an allowance of $1,563,433 for the value he considered was added by the fact that the property was bought with a 189 Ex 5, page 34, para 128. 190 Ex 5, page 34, para 129. 191 Ex 5, page 34, para 133. 192 T 3 – 138 lines 3 – 8. -- 48 of 50 -- 49 delayed settlement date.193 The respondent says there was clear evidence that no additional amount was paid for the benefit of the delayed settlement.194 [197] The evidence the respondent points to is an email from a representative of the purchaser, Mr Somerville, to an employee of the State Valuation Service, Mr Carey, where Mr Somerville agreed with the assertion that: “As per our discussions relating to the Bunnings approval and the delayed settlement can you confirm a) the contract for sale as not subject to Bunnings obtaining Council approval; and b) Bunnings did not pay any premium for the delayed settlement.”195 [198] The appellant relied on a later email from Mr Somerville to another valuer in Mr Schultz’s office to conclude that there was a benefit. In response to the question: “You state no premium was paid for a delayed settlement, however did you see a benefit in having a delayed settlement?” Mr Somerville wrote: “No holding costs, rates, land tax is paid during this time, which is standard industry practice”.196 [199] The respondent argues the question asked whether the purchaser saw a benefit in the delayed settlement, not whether the purchase price was affected by the value associated with that benefit. The appellant in submissions in reply says there was a basis to conclude that the purchaser paid additional money for that benefit, and says there is a difference between paying a premium and the value of a benefit being factored into the purchase price.197 [200] On balance I agree with that interpretation place on the correspondence by the appellant. [201] For the reason outlined earlier I accept this as a comparable sale as analysed by the appellant. Determination [202] Having carefully considered all of the evidence in these appeals, having outlined my conclusions in relation to the issues raised by the parties in evidence, and having provided my analysis of the evidence relating to each of the sales, I accept the valuation 193 Respondent’s Submissions filed 6 October 2020 [177]. 194 Ibid [183]. 195 Ibid [182], ref Ex 6, page 55 para 243. 196 Ibid [184] ref Ex 7 page 44. 197 Appellants Submissions in Reply filed 20 October 2020 [35]. -- 49 of 50 -- 50 evidence and opinion of Mr Schultz as to the analysis of comparable sales in these matters. Orders 1. Appeal LVA008-19 is allowed. 2. The valuation as at 1 October 2017 of Lot 202 on SP262172 having an area of 39,860 m2 and located at 1 Global Plaza Drive, Oxenford is Nine Million Eight Hundred and Fifty Thousand Dollars ($9,850,000). 3. Appeal LVA020-19 is allowed. 4. The valuation as at 1 October 2017 of Lot 1 on SP108078 having an area of 35,270 m2 and located at 492 Olsen Avenue, Molendinar is Eight Million, Five Hundred and Fifty Thousand Dollars ($8,550,000). -- 50 of 50 --