BWP Management Limited v Valuer-General [2014] QLC 3 (2014) 35 QLCR 9

LAND COURT OF QUEENSLAND CITATION: BWP Management Limited v Valuer-General [2014] QLC 3 PARTIES: BWP Management Limited (appellant) v. Valuer-General (respondent) FILE NO: LVA052-13 LVA055-13 DIVISION: General Division PROCEEDING: Appeals against annual valuations under the Land Valuation Act 2010 DELIVERED ON: 3 February 2014 DELIVERED AT: Brisbane HEARD ON: 23, 24, 25 September 2013 Submissions finalised and decision reserved 20 November 2013. HEARD AT: Brisbane MEMBER: WA Isdale ORDERS: 1. Appeal LVA052-13 relating to 492 Olsen Avenue, Molendinar is allowed. The site value of this land on 1 October 2011 is determined to be $8,400,000. 2. Appeal LVA055-13 relating to 197 Reedy Creek Road, Burleigh Waters is allowed. The site value of this land on 1 October 2011 is determined to be $8,283,120. CATCHWORDS: Land Valuation Act 2010, ss 163, 169 Valuation ― direct comparison of sales ― easement Boland v Yates (1999) 167 ALR 575 Chief Executive, Department of Natural Resources v Radlett Enterprises Pty Ltd (1997-98) 18 QLCR 397 Clough v Valuer-General (1981-82) 8 QLCR 70 -- 1 of 18 -- 2 Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co. of South Australia (1947) 74 CLR 358 Dunning v Valuer-General [2012] QLC 66 Federal Commissioner of Taxation v St Helen’s Farm (ACT) Pty Ltd (1980-81) 146 CLR 336 Fischer v Valuer-General (1983) 9 QLCR 44 GPT RE Limited (As Responsible Entity) & Anor v Department of Natural Resources and Water (2009) 30 QLCR 100 Leichardt Municipal Council v Seatainer Terminals Pty Ltd & Anor (1981) 48 LGRA 409 Tow v Valuer-General (1978) 5 QLCR 378 Perpetual Trustee Company Limited v Department of Natural Resources, Mines and Water (2006) 27 QLCR 64 PT Limited & Anor v Department of Natural Resources and Mines [2007] QLAC 77 Secretary of State of Foreign Affairs v Charlesworth, Pilling & Co. (1901) AC 373 Valuer-General v Marano (1978) 5 QLCR 194 APPEARANCES: Mr AR Lonergan instructed by Clayton Utz for the appellant Mr SA McLeod, instructed by the Department of Natural Resources and Mines for the respondent Background [1] The Valuer-General, in accordance with that officer’s duty under the Land Valuation Act 2010 (the Act), routinely valued the land the subject of each of these two appeals, which were heard together. The date of this valuation is 1 October 2011. The appellant is dissatisfied with the valuations and has appealed to this Court. The valuations [2] Appeal LVA052-13 relates to 492 Olsen Avenue, Molendinar. It is Lot 1 on Survey Plan 108078 County of Ward, Parish of Nerang, has an area of 35,270 m² and was valued at $9,900,000.1 The appellant initially contended that the correct valuation for this land on the 1 October 2011 valuation date is $8,220,000,2 a figure that was amended in the course of the hearing to $8,400,000. [3] Appeal LVA055-13 concerns 197 Reedy Creek Road, Burleigh Waters. It is Lot 4 on Survey Plan 116892 County of Ward, Parish of Mudgeeraba, has an area of 32,850 m² and was valued at $9,700,000.3 The appellant contended that the correct valuation for this land on the 1 October 2011 valuation date is $8,280,000.4 1 Exhibit 8 page 17. 2 Exhibit 6 page 39. 3 Exhibit 7 page 3. 4 Exhibit 5, page 39. -- 2 of 18 -- 3 The opposing cases [4] The appellant and respondent both conducted their cases in the same way, each relying upon a single witness, a valuer. The appellant’s case regarding 492 Olsen Avenue, Molendinar [5] The appellant’s valuation was carried out by Mr Brett Schultz, a Registered Valuer and Certified Practising Valuer. Mr Schultz is an Associate Director of Savills Valuations Pty Ltd. Mr Schultz provided his valuation report, Exhibit 6, his contribution to the valuer’s joint report, Exhibit 4, and gave sworn evidence. Location of the land [6] The land is located at the south western corner of Olsen Avenue and Crestwood Drive, Molendinar, which is 3.5 km west of Southport. It adjoins a bulky goods development and the Crestwood Plaza neighbourhood shopping centre is opposite. The land is described as an irregular shaped corner site which is below its primary frontage to Olsen Avenue and partly below and partly above its secondary frontage to Crestwood Drive. All urban services are available. Olsen Avenue is a four lane arterial road carrying a high volume of traffic and Crestwood Drive is a four lane road. Both roads are two way. There is 320 m of frontage to Olsen Avenue, which is higher than the land. When approaching from the north along Olsen Avenue the property becomes apparent only 65 m from the intersection with Crestwood Drive. There is no known environmental or contamination problem. The property is burdened by easements and is 35,270 m² in area. Easements [7] The valuers disagree on the impact of the easements on the value of the land. The largest easement, Easement B, has an area of 18,080 m². Within it is an area of 4,050 m² which is described as being “utilised significantly by the adjoining property”.5 The aerial photograph6 shows that it is used for car parking. A perusal of Easement B discloses that the grantor and the grantee are one and the same, Bunnings Properties Pty Ltd. The consideration for the easement was the sum of one dollar and it was given on 1 September 1998. Mr Schultz made a 20% allowance in the value of the subject land for this easement7 and the valuer engaged by the respondent, Mr Bale, allowed 10%.8 The valuers are agreed that the 4,050 m² part of Easement B that is close to Lot 2 on Survey Plan 108078 should be assessed as being 100% diminished in value, another 5 Exhibit 6 page 7. 6 Exhibit 6 page 7. 7 Exhibit 6 page 9. 8 Exhibit 4 page 3. -- 3 of 18 -- 4 way of saying it is of no value as part of the subject land. The remaining area of Easement B, 14,030 m² is, in Mr Schultz’s view, so affected by the easement that it is diminished in value by 20%. Even if the easement were to be reconfigured by the grantor there is “the likely risk, costs and time matters pertaining to changing the easement”.9 Mr Schultz has assessed the unencumbered land rate at $280/m². Allowing his 20% deduction, results in a rate of $224/m², a reduction of $56/m². Over the relevant affected area of the easement, 14,030 m², this will be a reduction in value of 14,030 m² x $56 = $785,680. [8] Easements C and D are for sewerage and both valuers agree on a 10% allowance for them. Highest and best use [9] The valuers agree that the highest and best use of the land is for the existing Bunnings Warehouse or similar retail or commercial uses.10 Mr Schultz’s valuation methodology [10] Mr Schultz has assessed the site value using direct comparison on a rate per m² of site area. As a check method, he has considered relativity with properties which he viewed as comparable. Those properties are on the Gold Coast and in suburban locations “outside of Brisbane”.11 He has divided the sales he considered into primary and secondary sales evidence. For convenience of consideration, I have numbered them in the order in which they appear in his report, Exhibit 6. Mr Schultz’s sales - the primary sales [11] Sale 1, at 175-179 Ferry Road, Southport, was of 4,576 m² in June 2011 for $3,100,000. This is the Ferry Road Plaza, a neighbourhood shopping centre. It is an irregular shaped corner block with 127.9 m of frontage to Ferry Road. Tenants included beauty and hairdressing salons, restaurants and a legal business. The income was reported to be $244,300 per annum. It was sold to the adjoining owner. It adjoins Southport Park shopping centre. Mr Schultz considered it lightly improved and acknowledged in cross- examination that it was significantly improved. He assessed the added value of the improvements at $1,527,850 giving an analysed site value of $1,530,000 and accordingly valued the land at $344/m². Given a lack of comparable sales, he considered this sale “sufficiently comparable”.12 He considered it to be a more efficient shape than the subject and far superior to the subject on a per m² rate.13 9 Exhibit 6 page 9. 10 Exhibit 6 page 10, Exhibit 8 page 7. 11 Exhibit 6 page 11. 12 Exhibit 6 page 12. 13 Exhibit 6 page 13. -- 4 of 18 -- 5 [12] Sale 2, at 195 Old Coach Road, Upper Coomera, was of 4,040 m² in March 2011 for $650,000. This land was sold with approval for a service station and fast food restaurant with a gross floor area (GFA) of 425 m². A regular proportioned rectangular block, it has good frontage to Old Coach Road, Upper Coomera. It is close to a Woolworths supermarket and a Masters home improvement store. Easements for shared access were considered to justify a 12.5% discount to the value of the encumbered land. Allowing for the development approval already obtained, the site works and easement, an analysed site value of $172/m² for the unencumbered land and $150/m² for the encumbered land was obtained.14 It was seen as inferior to the subject at $172/m² for unencumbered land. [13] Sale 3, at 312-320 Roghan Road, Taigum, was of 13,646 m² of land for $4,125,000 in February 2012. It was sold with an approval in place for a retail convenience centre of 4,366 m² GFA. A regular shaped parcel, it was placed under a put and call option at the beginning of 2009. While awaiting settlement the development approval was obtained as was a pre-commitment from Coles to occupy 3,587 m² of the GFA. The 12,444 m² of unencumbered land has been analysed to $247/m² after allowing for the development approval, the pre-commitment and site works. The 1,202 m² that was encumbered has been discounted 20% to a rate of $198/m². This site is in Brisbane with a slightly inferior location to the subject land, inferior exposure, superior shape, comparable access and contour and, as a smaller block, in a more occupied part of the market below the $5,000,000 mark. It was considered slightly inferior overall at $247/m² for unencumbered land. [14] Sale 4, at 761-763 Deception Bay Road, Rothwell, was of 20,124 m² for $2,500,000 in November 2011. It was sold with an approval for a showroom and superstore development of 6,690 m². A material change of use to shop and food service uses has subsequently been applied for. There are easements over 2,642 m² for which a 20% reduction in value of the affected area has been made. About 5,000 m² is low-lying. The land consists of two lots in a broadly “L” shape. The purchase was made on condition that Woolworths also purchased an adjoining parcel which had the effect of providing a regular shape to the resulting acquired total area as well as greatly improved frontage to Deception Bay Road. Allowing for the approval, a lease covenant, fill and retaining of the land, an analysed site value of $2,380,000 was produced which is $121/m² for the unencumbered land and $97/m² for the area affected by easement. The location is inferior to that of the subject, it has a superior shape but with inferior access. Mr Schultz 14 Exhibit 6 page 14. -- 5 of 18 -- 6 assessed the sale, in his report, as having slightly superior exposure to the subject but in cross-examination agreed it was on a par with it. At a rate of $121/m² unencumbered area, it was assessed as well inferior to the subject. [15] Sale 5, at 82-98 Anzac Avenue, Redcliffe, was of 7,381 m² for $1,650,000 in April 2012. Located close to the Redcliffe Hospital, it is a slightly irregularly shaped corner allotment. A development application has been lodged for a supermarket/specialist retail/food service and commercial office development with a GFA around 4,800 m². Allowing for the development application and site works resulted in an analysed site value of $1,830,000 which equates to a rate of $248/m². This is an inferior location to the subject with a comparable corner position and a better shaped block with comparable access and topography but with superior exposure. It is in the market below $5 million where there are more buyers than for more expensive land. It demonstrates a rate of $248/m². Mr Schultz’ secondary sales evidence [16] Sale 6, at Lot 901, Old Coach Road, Upper Coomera, was of 9,316 m² for $1,400,000 in October 2012. It was sold with an approval for retail showrooms and a fast food restaurant with a 1,600 m² GFA. It is near a Woolworths shopping centre and a Masters home improvement business and in a mixed retail and commercial development. Access easements over an area of 2,190 m² impair the access to the site and a 20% allowance was made for that. The analysed unimproved value is $1,270,000 and the rate for the unencumbered land is $143/m² and $114/m² for the land encumbered by the access easements. Assessed as an inferior location with irregular shape, inferior exposure and good access and contour this smaller site was seen as inferior to the subject. It is in the price segment of the market where there are more buyers. The only common sale [17] Sale 7, at 3509-3515 Pacific Highway, Slacks Creek, is the only sale considered by both valuers. With an area of 38,144 m², it sold for $7,500,000 in July 2010. Purchased by IKEA, it is three lots from the IKEA homeware centre in conjunction with which it is used. A large area at the rear of the land is affected by flooding and to which no value is attributed. Allowing for a lapsed development approval, costs of demolition and site works, the analysed site value was $7,310,000. This indicated a rate of $351/m² for the front 16,000 m², $211/m² for the middle 8,000 m² and nothing at all for the rear 14,144 m² of flood affected land. A superior position with high exposure compared to the subject, it has a more regular shape and inferior access, by a service road. Mr Schultz -- 6 of 18 -- 7 considered that IKEA paid a premium in order to acquire this land close to its large retail facility. He saw it as “well superior to the subject property”.15 [18] Sale 8, at 2-12 Riverview Road, Nerang, has an area of 21,248 m² and sold for $2,500,000 in March 2012. It was bought for medium density residential use. The land consists of two adjoining vacant allotments which together are an irregular shape and are situated on the western side of the Pacific Motorway. It is sloping and below street level. The northern part of the land is in a designated flood affected area. The useable land is 14,870 m², which is 70% of the site. Compared to the subject it is inferior in location, contour, exposure to the roadway, access and potential use. It is assessed as well inferior to the subject and valued at $168/m². [19] Sale 9, at 44 Gilston Road, Nerang, has a site area of 116,300 m² and sold for $11,500,000 in August 2011. This is an irregularly shaped, heavily timbered allotment with approximately 280 m of frontage to Gilston Road. The Nerang River is behind it and the eastern boundary adjoins a neighbourhood shopping centre. A development application was submitted on 28 February 2011 for a material change of use to shopping centre, cinema, apartments and office uses. Allowing $1,001,852 for the development opportunity saving and a notable $7,000,000 for site works, the site value was analysed to $17,500,000. This is a sale to an adjoining owner of land in an inferior position to the subject land. Its potential use is inferior also. The property is inferior overall to the subject land and is valued at $176/m². [20] Sale 10, at 560 Olsen Avenue, Molendinar, has an area of 11,920 m² and sold for $3,250,000 in May 2013. An irregularly shaped block with an extended frontage to Olsen Avenue, it also has a frontage, without current access, to Enterprise Street. It was bought by Zupps for a proposed car showroom. Mr Schultz is not aware of the status of any authorities to display any marque of motor vehicle here so is cautious about this use. The land has good exposure and is in the more populous market that lies below $5 million. It has inferior zoning and access compared to the subject. Site coverage and height allowances are comparable to the subject. The rate shown for this sale is $273/m² which Mr Schultz says supports his $280 m² for the subject. [21] Sale 11, at 27-29 Industrial Avenue, Molendinar, is close to the subject land.16 It has an area of 33,600 m² and sold for $6,050,000 in May 2013. It is zoned for improved industry which is an inferior zoning. There is a narrow easement for water and stormwater drainage that traverses the land. It has access from both directions on Olsen 15 Exhibit 6 page 23. 16 Exhibit 6 page 27 - the photo shows this sale and the subject land. -- 7 of 18 -- 8 Avenue. The easement area of 1,688 m² is valued at the rate of $138/m² and the unencumbered land of 31,912 m² at $182/m². Mr Schultz states that the broadly stable market conditions from the date of valuation to the time of this sale supports the rate of $280/m² applied to the subject. Although zoning and exposure are inferior, site coverage and height allowances are comparable to the subject. Criticism of the Valuer-General’s valuation [22] Mr Schultz has had the opportunity to examine the competing valuation put forward by the Valuer-General and makes the following criticisms of it: (a) In his opinion, the sales are not properly analysed, to account for added value and decreased risk when the buyer is a large company such as Bunnings. (b) The sales are not applied consistently. In this he refers to Chief Executive, Department of Natural Resources v Radlett Enterprises Pty Ltd,17 a decision of the Land Appeal Court. (c) The sales are not bona fide sales.18 The respondent’s case regarding 492 Olsen Avenue, Molendinar [23] The respondent’s valuation was carried out by Mr Derek Bale, a registered valuer who carried out the valuation on behalf of the respondent and prepared his report, which became Exhibit 8. Mr Bale gave sworn evidence and was present in Court during the evidence given by Mr Schultz. Mr Bale was of the opinion that, save for the single common sale, none of the sales used by Mr Schultz was comparable to the subject land. Mr Bale’s valuation methodology [24] Mr Bale has used the primary valuation method of direct comparison of sales. He has predominantly used sales on the Gold Coast that were purchased for bulky goods retail/showroom outlets which is directly comparable to the highest and best use of the subject land. He has used sales between November 2009 and November 2011. Mr Bale’s secondary approach was to, compare the analysed sales on an achieved GFA basis back to the available GFA on the subject site, in order to allow for the impact of easements on the subject land.19 Mr Bale’s conclusions on 492 Olsen Avenue, Molendinar [25] Mr Bale valued the unencumbered area of 16,860 m² at $330/m² and allowed a 10% diminution in value for the 14,030 m² area of Easement B. This would be 14,030 m² x $33 = $462,990. 17 (1997-98) 18 QLCR 397. There must be a limit to the difference between analysed value of a sale and the value applied on the basis of that sale; see 404. 18 Exhibit 6 pages 28-38. 19 Exhibit 8 page 11. -- 8 of 18 -- 9 Mr Bale’s sales [26] Sale 1, at 285 Burleigh Connection Road, Burleigh Waters, has an area of 28,560 m² and sold for $8,850,000 on 29 November 2011. The property is affected adversely by easements over 9% of its area and is an irregular, low lying, flood-prone vacant site with no practical access. Site works, including a bridge, with an estimated cost of $3,000,000 would be required and a further $3,000,000 in building costs above standard costs will be required because the site will require a suspended slab construction with a warehouse on top and parking underneath. This is in an environment where the preferred construction outcome is for car parking on the same level as the warehouse so that people can easily move the bulky goods they have purchased to their vehicle. Adding this amount of $6,000,000 to the sale price of $8,850,000 results in an analysed sale price of $14,850,000. This equates to a value of $571/m² on the land area and a value of $920/m² on the GFA basis. The $6,000,000 adjustment of the sale price does direct attention to the gap between the sale and how it is being interpreted, placing strain on the ability of an expert to draw reliable conclusions from the sale when the adjustment is so large in comparison to the actual sale. On the basis of his analysis, Mr Bale considered the sale superior to the subject on both measures used. [27] Sale 2, at 92, 98, 100 Bundall Road and 65 Upton Street, Bundall, has an area of 16,449 m². It sold for $16,260,000 on 21 September 2011. This was a “mortgagee in possession” sale of seven contiguous allotments in two tranches. It is zoned for fringe business and there is a two storey height limit. There is good exposure and frontage with good access to Upton Street and limited access to Bundall Road. With easements, the effective net site area is 16,324 m² more or less. Mr Bale has made an adjustment of $1,670,000 to allow for the existing structures, leasing costs and demolition costs so as to notionally bring the sale to fully useable vacant land for comparison to the subject land. This results in an analysed sale price of $14,590,000 and a rate of $894/m². The proposed Masters Hardware development was for a suspended slab construction with parking underneath, designed to achieve 74% site coverage and 12,209 m² GFA. This will increase building costs above the standard slab on ground style by, Mr Bale estimates, an amount of $2,500,000. The result is an analysed sale price of $17,090,000 which is a rate of $1,045/m² for the site and $1,400/m² of GFA. These rates show this sale, with the land’s superior attributes, to be superior to the subject. The overall impact of easements is less than 1% of the site area. There is a substantial allowance for the improvements and for the cost of the construction method envisaged. -- 9 of 18 -- 10 [28] Sale 3, at Lot 102, Tamborine-Oxenford Road, Oxenford, has an area of 53,130 m². It sold for $14,500,000 on 28 May 2010. It is a “mortgagee in possession” sale, is an irregular shape with easements and drainage culverts. It has frontage to a shopping centre, the Old Pacific Highway and the Tamborine-Oxenford Road. A bulky goods development was proposed. Easements reduce the effective net site area to about 52,501 m². Site works necessary after purchase included road realignments, cut and fill, construction of retaining structures and relocation of easements. The added value of the site works was determined by relativity with surrounding levels of site value. This is a cause for concern as this assumes the correctness of those values used as an index. The differential determined using this method was $1,375,000. Relocating the easements improved the efficiency of the use of the land and reduced the area encumbered by the easements from 4,770 m² to 2,515 m². It must be borne in mind that the exercise of the valuer’s professional judgment is made more challenging by the compounding nature of this process. First there are substantial adjustments made to the sale and then the adjusted sale is compared to the subject. The process is open to the criticism, made by Mr Schultz that, in effect the content of the sale used for comparison is riskily diminished by the adjustment process, perhaps to the point, wherever that point may be, that there is no longer a comparable sale but really an unsupported valuation opinion. As the Land Appeal Court said in Chief Executive, Department of Natural Resources v Radlett Enterprises Pty Ltd: “It would be a different matter if the overall sales evidence had been disregarded and supplanted by unsupported valuation opinion. Clearly there must be a limit to the degree of variance between the analysed value of a particular sale property and the value applied to that property, beyond which it could be fairly said that the sale had been disregarded. There can be no arbitrary limit to such variance: each case must be decided on its merits.”20 On the basis of an analysed sale price of $15,875,000 the land shows a value of $300/m² and $730/m² of GFA. On the basis of those rates and taking into account the land’s attributes, it is assessed to be inferior to the subject. [29] Sale 4, at 33 Hinkler Drive, Highland Park, has an area of 34,120 m² and sold on 15 January 2010 for $11,942,000. It is an irregular shaped corner site with nominal exposure to the M1 Motorway. Access is from the service road, Hinkler Drive and from McKenzie Drive by shared easements to adjoining lots. There was a development approval in place for a showroom and catering business. Easements over the land reduce the effective site area to around 33,530 m². An adjustment for infrastructure credits of $296,000 shows a land value of $11,646,000 for this proposed Masters home 20 Chief Executive, Department of Natural Resources v Radlett Enterprises Pty Ltd (1997-98) 18 QLCR 397, 404. -- 10 of 18 -- 11 improvement store site. Masters is a direct competitor to Bunnings. The analysed sale price is $347/m² and $850/m² GFA. On the basis of these rates and the land’s attributes, this sale is considered inferior to the subject. [30] Sale 5, at 292 Brisbane Road, Arundel, has an area of 37,260 m² and sold on 23 November 2009 for $16,000,000. It is an irregular shaped lot with moderate exposure to Brisbane Road and primary access from a service road. Improvements consisting of several older sheds have been demolished for the construction of a Bunnings warehouse by slab-on-ground construction. An adjustment of $1,367,000 was made for the leases on the sheds and the cost of demolition to create a notional vacant site. This also required earthworks and retaining wall works to create a building platform. An amount of $500,000 was allowed for this. After these allowances, the analysed land value was $15,132,397, which is $406/m² and $965/m² GFA. The sale is considered inferior to the subject on the basis of those rates and the attributes of the site. [31] Sale 6, at 44 Brabham Drive, Robina has an area of 15,000 m² and sold on 26 March 2010 for $8,700,000. It is an irregular shaped site and mostly at street level with a large street frontage at the point where Christine Avenue and Scottsdale Drive intersect at a roundabout. It is intended to be used for three car sales showrooms. Easements reduce the effective net area to about 14,623 m². The easements cover 2.5% of the area. The sale is analysed at $8,700,000, the purchase price, and equates to a rate of $595/m². It is noted that there has been no adjustment of the sale price to arrive at the analysed value. Taking into account the land’s attributes, Mr Bale assesses it as superior on a rate per m² basis to the subject. [32] Sale 7, the common sale, at 3509-3515 Pacific Highway, Slacks Creek, has an area of 38,164 m² and sold on 13 July 2010 for $7,500,000. This is an irregular shaped lot which falls below street level and requires extensive cut, fill and retaining works to produce a single level platform for building. This platform would be significantly below road level and require access by long and fairly steep access ramps. After the sale an IKEA warehouse was constructed on about 35% of the site. It is accessed by a service road from the Pacific Highway. Around 37% of the site is flood prone. The site was lightly improved at sale and it was Mr Bale’s opinion that demolition costs would be partly offset by infrastructure credits. Extensive site works were required after purchase and bulk earthworks, extensive retaining walls and a ramp for access were constructed at a reported cost of $1,750,000 to establish a 13,100 m² developable area. The analysed sale price of $9,250,000 shows a rate of $706/m² as developed. Taking into account the land’s attributes, it was considered that this sale is superior to the subject on a rate per -- 11 of 18 -- 12 m² developable area basis. In Mr Bale’s view this sale is very much at the northern edge of the Gold Coast market. The allowance for Easement B [33] Mr Schultz allowed 20% for Easement B due to the likely risk, cost and time involved in changing it. Mr Bale pointed out that “Easement B is totally reconfigurable on the basis that similar access is granted onto lot 2, and sufficient car parking in respect of town planning”21 and allowed 10%.22 Easement B is reproduced in Exhibit 6.23 Clause 7 of the easement provides conditions for reconfiguration, which include the provision of access of no less quality and width of construction to that which existed prior to the reconfiguration and a sufficient number of carparks to meet local authority requirements. The Grantor must give 30 days notice of its intentions to reconfigure the easement and consider any objection from the Grantee. The reconfiguration, at the Grantor’s expense, must be carried out so that reasonable access and services are available to the Grantee during normal trading hours. Disruption of the Grantor’s business is to be minimised as far as reasonably practical. This extends to the persons authorised by the Grantee. I conclude that the easement is more than a mere blot on title and that Mr Schultz correctly considered there to be likely risk, costs and time associated with changing it. The valuers have differed on the extent of the allowance to be made for Easement B. In GPT RE Limited (As Responsible Entity) & Anor v Department of Natural Resources and Water24 (GPT) this Court considered that, in that case, an allowance of 10% for an easement would be “little more than a nominal discount for ‘blot on title’”.25 The terms of clause 7 of the easement separate it from what could properly be characterised as a mere “blot on title” and are of sufficient significance that a greater discount than suitable for such an imperfection would be necessary. Guided by the comments of the Land Court in GPT, I am satisfied that the 20% allowance made by Mr Schultz appropriately recognises the burden imposed by Easement B on this land. Legal considerations about the valuers’ methods [34] In Chief Executive, Department of Natural Resources v Radlett Enterprises Pty Ltd the Land Appeal Court said: “As Mason J. said in Federal Commissioner of Taxation v. St. Helen’s Farm (ACT) Pty Ltd (1980-81) 146 CLR 336 at page 381: 21 T 2-35 L 45 - T 2-36 L 5. 22 Exhibit 8 p 17. 23 Exhibit 6 p 49 and following. 24 [2009] 30 QLCR 100. 25 [2009] 30 QLCR 100, 112 [67]. -- 12 of 18 -- 13 ‘Valuation is a matter of estimation, not a precise mathematical calculation.’ Valuation is intended to be an interpretation of a market, which in itself is imprecise, even when it is created by vendors and purchasers who satisfy the often quoted qualifications necessary to meet the test explained in Spencer v. The Commonwealth of Australia (1907) 5 CLR 418.”26 The Court went on to say: “As was observed in Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co. (1901) AC 373, at 391: ‘It is quite true that in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity.’”27 Recognising the inherent difficulty in the valuer’s task, the Courts have attempted to reduce, as far as possible, the scope for uncertainty. In Valuer-General v Marano the Land Appeal Court said: “It is well established that the best way to ascertain the unimproved value of land is by applying to it sales of unimproved, comparable, lands which took place reasonably close to the date at which the valuation is to be made. But in many districts it is impossible to obtain sufficient unimproved sales to form a sound foundation, and it therefore becomes necessary to analyse sales of improved lands for the purpose of ascertaining, as far as is possible, what part of the purchase price of the sale property relates to improvements and what part is attributable to the land itself. This latter approach is now, of necessity, more frequently adopted before this Court and the Land Court.”28 [35] Dealing with the challenge of finding the correct allowances for the added value of improvements has been something which has received considerable attention from the Land Appeal Court. In Tow v Valuer-General29 the Land Appeal Court said: “Courts of the highest authority have laid down that the best test of value is to be found in the sales of comparable properties, preferably unimproved, on the open market round about the relevant date of valuation and between prudent and willing, but not over- anxious parties.” The same Court said in Clough v Valuer-General:30 “It has been judicially laid down many times and in many jurisdictions that in ascertaining unimproved value, sales of unimproved land of comparable quality, situation, etc., to the subject parcel, if they are available, are to be preferred as the best guide for arriving at unimproved value. The reason is obvious. In applying such sales there is no room for error in analyzing the value of improvements. 26 (1997-98) 18 QLCR 397, 404. 27 (1997-98) 18 QLCR 397, 406. 28 (1978) 5 QLCR 194, 200-201. 29 (1978) 5 QLCR 378, 381. 30 (1981-82) 8 QLCR 70, 76. -- 13 of 18 -- 14 Because there is less room for difference of opinion as to value of the various items of improvement and comparison is thus simpler, it has been held that highly improved sales should be avoided in preference to sales comprising a lesser degree of improvement. In Tooheys’ case and Jowett’s case the method of ascertaining the improved value of the subject property and deducting the value of the improvements therefrom was adversely criticized. Whilst in some cases it may be appropriate to adopt the method, it seems to us that in the majority of cases it introduces additional items to value each of which can be the subject of a difference of opinion and thus increase not only the work load of the valuer and the Courts but also the difficulties and uncertainties of arriving at a reasonably correct unimproved value.” The Land Appeal Court also said in Fischer v Valuer-General:31 “It is indeed a fundamental principle of valuation that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels.” [36] These authorities were applied by this Court in Dunning v Valuer-General.32 The consistent line of authorities makes it clear that the Court will prefer the guidance of sales of unimproved or lightly improved land where such sales are available. The common sale [37] Mr Schultz analysed the common sale’s value as $7,310,000 and Mr Bale contended for $9,250,000. The sale price was $7,500,000. Mr Schultz assessed the front 16,000 m² as valued at $351/m² whereas Mr Bale arrived at a rate of $706/m² as developed. The difference between the valuers, on the only sale which they have both considered, is illustrative of the variance caused by the different approaches adopted. The bulk of the variance is due to Mr Bale adding the $1,750,000 reported cost of the works performed after purchase to establish the developable area. Mr Schultz arrived at his analysed value by allowing for the lapsed development approval and the cost of demolition and site works. Specifically, he allowed for 1,675 m² of demolition at $55/m² and site works of $50,000. [38] The treatment of this sale is a point, the only point, at which the disparity of results occasioned by the choice of valuation method can be observed. The authorities to which I have referred make clear that both valuers have used an acceptable method of valuation. However they stress that the method to be preferred is that which least requires allowances for improvements. The reason, the Land Appeal Court said in Clough v Valuer-General,33 is obvious. Reducing the scope for error in considering the amounts to be allowed is going to reduce the scope for error overall. Mr Bale’s sale 1 is 31 (1983) 9 QLCR 44, 46. 32 [2012] QLC 66. 33 (1981-82) 8 QLCR 70, 76. -- 14 of 18 -- 15 illustrative, where a sale for $8,850,000 is analysed to $14,850,000 and $3,000,000 of that is for “estimated”34 increased building costs. Decision on the valuation of 492 Olsen Avenue, Molendinar [39] For the reasons I have given, I prefer the analysis used by Mr Schultz, which is not without its imperfections. The choice of sales by each valuer was unacceptable to the other. Some of the sales used by Mr Schultz were relatively far from the subject land, but the reduced need to make large allowances for improvements is the decisive factor in this Court’s decision. [40] Accepting the analysis contended for by the appellant, the result is that the valuation of 492 Olsen Avenue, Molendinar at the relevant date will be $8,400,000. The appeal is allowed and the value is determined at this figure. The appeal concerning 197 Reedy Creek Road, Burleigh Waters [41] In this appeal the appellant contends for a valuation of $8,280,000 and the respondent values the land at $9,700,000. The opposing analyses [42] The valuers have used the same methods as in the other appeal. Mr Bale has used the same sales in Exhibit 7 and analysed them identically. Mr Schultz has not used sales 10 and 11 from the other appeal in Exhibit 5 and has introduced a new sale in secondary sales evidence, 34-38 Kortum Drive, Burleigh Heads in November 2012. The choice of method [43] In this appeal as in the last, authority compels the choice of method as the valuation method employed by Mr Schultz is likely to yield the more accurate result. A consideration of the sale used only in this valuation is nonetheless indicated. [44] Sale 7 in Exhibit 5 is at 34-38 Kortum Drive, Burleigh Heads. It has an area of 6,978 m² and sold in November 2012 for $3,075,000. It was improved with an older style retail showroom and warehouse building of 4,424 m² with multiple tenancies. It was sold with the existing tenancies. It is located on Kortum Drive, a service road of Reedy Creek Road. It has good exposure to passing traffic and access is good for west-bound traffic and moderate when east-bound. The substantial improvements were valued at $1,106,000 added value and after allowing for the tenants, car park and fees the analysed site value was $1,740,000 which is $249/m² for the land. The difficulties occasioned by attempting to find the added value of improvements have already been referred to so this sale, used as secondary sales evidence, is appropriately relied on only to that secondary extent. 34 Exhibit 8 page 13. -- 15 of 18 -- 16 [45] It is unnecessary to repeat the consideration of the opposing evidence. Aside from the differences which have been identified, Mr Schultz applies the rest of the sales evidence after analysing it identically to his analysis in the other appeal. The land in its environment [46] This 32,850 m² site is irregular in shape with parallel sides. It has a frontage of about 48 m to Billabong Place, is at road level with a fall to the west which assists drainage. It has all urban services and access from the adjoining Stockland Burleigh Heads shopping centre is by reciprocal easements. Reedy Creek Road is a major road which carries a large volume of traffic. It has moderate exposure to vehicles travelling east along Reedy Creek Road and is apparent to west-bound traffic for about 100 m. It is exposed to the traffic drawn to the Stockland centre. There are no known flooding, environmental or contamination problems. The allotment has been cut and filled to achieve a predominantly level site. Both valuers agree that the land’s highest and best use is consistent with its current use as a Bunnings Warehouse or for similar retail or commercial uses such as bulky goods and showrooms.35 Easement K [47] The valuers disagree in relation to their treatment of Easement K. In favour of the South East Queensland Electricity Board, it has an area of about 2,890 m² and extends along the western and north-western boundary of the land. It varies in width between 11.617 m and 12.146 m. It is for overhead power lines and is used currently for part of the required landscaping on the site and as access for service delivery to the warehouse. Within this easement is another easement to the same Electricity Board. It does not add to the impairment36 so need not be further considered. [48] Mr Bale has allowed for a 10% reduction in value of the area of Easement K, reducing it from the unencumbered land value from the $318/m² for which the respondent contends to $286.2/m².37 Mr Schultz has allowed a 20% reduction which reduces the rate per m² from the unencumbered rate for which the appellant contends, $275/m², to $220/m².38 In their calculations, Mr Bale has assessed the value of the land subject to this easement as 1,990 (sic) x 286.2 = $569,53839 and Mr Schultz has calculated it as 2,890 x 220 = $635,800. Mr Bale states in his report that the area of Easement K is 2,890 m² more or less40 so I accept that figure. 35 Exhibit 7 page 8, Exhibit 5 page 9. 36 Exhibit 7 page 6. 37 Exhibit 7 page 17. 38 Exhibit 5 page 38. 39 Exhibit 7 page 17. 40 Exhibit 7 page 6. -- 16 of 18 -- 17 The effect of Easement K [49] Mr Schultz states that Easement K limits the building area. The building is 10 m from the boundary and would otherwise be closer. It also restricts building positioning and site flexibility. It is a blight on the title and there are no reciprocal benefits. In coming to his view of the discount to be applied for Easement K he has had regard to the following decisions:  GPT RE Limited (As Responsible Entity) & Anor v Department of Natural Resources and Water (2009) 30 QLCR 100 (GPT)  Perpetual Trustee Company Limited v Department of Natural Resources, Mines and Water (2006) 27 QLCR 64 (Perpetual) [50] In GPT this Court considered an easement, coincidentally Easement K.41 The appellants’ valuer had adopted a 70% discount rate in respect of it and the respondent’s valuer 60%, later reduced to 10%.42 In this case, the learned member referred to the 10% as “little more than a nominal discount for ‘blot on title’”.43 He considered that the easement limited development flexibility44 and that while the evidence did not allow for precision a 30% discount was justified.45 The learned member acknowledged that there was an element of “best guess” referring in that regard to Leichardt Municipal Council v Seatainer Terminals Pty Ltd & Anor (1981) 48 LGRA 409 at 434 per Hope J which was cited with approval by the Land Appeal Court in PT Limited & Anor v Department of Natural Resources and Mines [2007] QLAC 77 at [104]. I particularly note that the easement in that case limited development flexibility. [51] In Perpetual the evidence was that the easement in one case prevented development and in two other cases, restricted development.46 [52] When considering the varying estimates of site works in this case, which varied from $2,100,000 to $3,610,000, the learned member said: “Without resorting to some artificial manipulation of these estimates there is no sensible way of resolving the differences between them. Doing what I can with the evidence before me I intend to resolve doubts concerning this issue in favour of the appellant and adopt a figure tending towards the higher end of the estimates being $3,500,000. In this context I rely at least in part on what was said by Dixon J in Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co. of South Australia (1947) 74 CLR 358 where at pages 373 - 374 His Honour said: ‘There is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full monetary equivalent of his loss, 41 (2009) 30 QLCR 100, 111-113. 42 (2009) 30 QLCR 100, 112 [66]. 43 (2009) 30 QLCR 100, 112 [67]. 44 (2009) 30 QLCR 100, 113 [73]. 45 (2009) 30 QLCR 100, 113 [74]. 46 (2006) 27 QLCR 64, 88 [132]. -- 17 of 18 -- 18 while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a Court’s attitude in the application of the test. In a case of compensation doubts are resolved in favour of a more liberal estimate in a revenue case, of a more conservative estimate.’ This passage was cited with approval by Callinan J in Boland v Yates (1999) 167 ALR 575 at 669 [356].”47 [53] Proceeding in view of those authorities, I accept Mr Schultz’s 20% reduction for Easement K. In cross-examination, Mr Bale agreed that the adjustment for this easement should be 20%.48 Easement A [54] The valuers agree that Easement A should be considered to have a 12.5% reduced value compared to the unencumbered rate. Easement A has an area of 17,200 m².49 In Mr Bale’s view, this area should be valued at $278.30/m².50 Mr Schultz values it at $240.60/m². [55] Accordingly, the valuation of this land may be calculated as follows: Area Rate Value Unencumbered 12,760 m² $275/m² $3,509,000 Easement A 17,200 m² $240.6/m² $4,138,320 Easement K 2,890 m² $220/m² $ 635,800 Total Area 32,850 m² Total Value $8,283,120 The appeal is allowed and the value is determined at $8,283,120. Orders 1. Appeal LVA052-13 relating to 492 Olsen Avenue, Molendinar is allowed. The site value of this land on 1 October 2011 is determined to be $8,400,000. 2. Appeal LVA055-13 relating to 197 Reedy Creek Road, Burleigh Waters is allowed. The site value of this land on 1 October 2011 is determined to be $8,283,120. WA ISDALE MEMBER OF THE LAND COURT 47 (2006) 27 QLCR 64, 93 [169], [170]. 48 T 2-42 L 25-L 26. 49 Exhibit 3 page 4. 50 Exhibit 7 page 17. -- 18 of 18 --