Cooper v Department of Natural Resources and Water [2009] QLC 50

LAND COURT OF QUEENSLAND CITATION: Cooper v Department of Natural Resources and Water [2009] QLC 50 PARTIES: Doris Cooper (appellant) v. Chief Executive, Department of Natural Resources and Water (respondent) FILE NO: RV2008/0825, AV2008/0826 DIVISION: Land Court of Queensland PROCEEDING: Appeals against an annual valuation of land and a valuation for rental purposes under the Valuation of Land Act 1944 DELIVERED ON: 9 April 2009 DELIVERED AT: Brisbane HEARD AT: Mareeba MEMBER: Mr RP Scott ORDER: The appeals are dismissed. CATCHWORDS: Valuation of Land Act – s.14(5) – restrictions relevant to use – general restrictions irrelevant – conditions do not operate as restrictions if they do not impair highest and best use – condition need not be relied on if the terms of the condition are reflected in the fee-simple value Valuation – cost of establishing services – not mathematically relevant to value – disabilities to be considered in determining value APPEARANCES: The appellant in person Mr GJ Smith, Principal Legal Officer, for the respondent Background [1] The Chief Executive has valued the appellant’s land pursuant to the provisions of the Valuation of Land Act 1944 as at a relevant date of 1 October 2007 placing a value of $100,000 on the subject land both as an annual valuation (s.13) and as a valuation for rental purposes (s.15). The appellant has appealed against those valuations contending to -- 1 of 9 -- 2 a value of $50,000 in each case. A rental valuation is governed by s.14(1) of the Valuation of Land Act which provides as follows: “(1) For the purpose of deciding the unimproved value of land that is not granted in fee simple, the land is taken to be land granted in fee simple.” [2] Accordingly, and subject to the further provision which I mention below, each of the valuations appealed against is carried out in a similar manner and employing the same methodology. I will therefore in these reasons refer to that single methodology only which is repeated in two valuation reports prepared by David Frank Paton, registered valuer, called on behalf of the Chief Executive. The appellant appeared in person and gave evidence. [3] In the case of a rental valuation there can be occasion for a fee-simple valuation to be reduced on account of the limited use of the land. Section 14(5)(b) of the Valuation of Land Act provides: “(5) In making, under this part, the valuation of the unimproved value of any land— … the unimproved value of that land shall be determined having regard to and making proper allowance for any restriction or limitation of use having regard to the purpose and conditions to which that permit, lease, licence permission to occupy, agreement or determination is subject.” [4] In this case the relevant lease is subject to a condition that the lessee shall use the leased land for rural residential purposes only. That limitation has no effect on the value of the land as Mr Paton has valued the land on the basis that rural residential is considered to be the highest and best use – the current use of the land. Ms Cooper did not challenge that highest and best use. [5] The subject land has an area of about 9.61 ha and is a Special Lease under the Land Act 1994. The land is located on the non-dedicated extension of Walsh River Road adjacent to the southern bank of the Walsh River in the Watsonville locality. Radially, the land is about 5.2 km north-east of the township of Watsonville about 5.5 km north-west of the town of Herberton and about 15.5 km south-west of the town of Atherton a major commercial centre on the Tablelands. [6] Access to the subject land from the south is from the bitumen Herberton-Petford Road at Wastonville, along a short distance of bitumen then about 5 km of dedicated gravel and dirt access to Surveyors Creek. After Surveyors Creek there is a non-dedicated dirt track of about 1.7 km over an Occupation Licence area. That non-dedicated road is, as one would expect, not maintained by the local council but is irregularly maintained at landowner expense and whilst it provides fair access for the larger part of the year, access is poor in the wet season when water levels rise in fords on Toy Creek and Surveyors Creek. The road surface on the non-dedicated track is generally inferior to the -- 2 of 9 -- 3 maintained section of the dedicated gravel and dirt road. Alternative access via another non-dedicated track of 7.2 km is available to Herberton, however four-wheel drive vehicles only can use that route. Unsurprisingly, the issue of access to the subject land is a matter of concern to the appellant. [7] The nearest grid electricity is too far distant from the subject land to afford a viable connection. Ms Cooper said that generators are used as an alternative to mains power, however they are costly to run and are noisy and cannot be used at night. Supplementary power from solar devices is also used, but allows one appliance at a time only to be operated. She said that the lack of power is a significant issue as the subject land has an agreed highest and best use as rural residential and the absence of mains electricity denies occupants of the land the normal modern residential facility that one might expect. Notwithstanding that view point, it appears to me that the absence of electricity is a cost of the isolation and privacy in lots in the subject area that landholders are willing to bear. Telephone is connected to the land but there is no Council rubbish collection and the nearest school bus stop is at Watsonville for access to the closest primary and secondary schools in Herberton. [8] The subject land has a frontage along the northern boundary to the Walsh River of about 204.5 metres. From the southern corner of the land near the access track, the contour permits an easy walk to the southern side of the river. The vegetation on the land comprises open forest ironbark, bloodwood, quinine and wattle varieties with a grass tree understorey. Soils are generally shallow decomposed granite loams or sand with some rock outcrops. The land is not suited to any commercial rural pursuit but is limited to being a rural residential site. [9] It will be convenient at this stage to mention that Ms Cooper said that she had been refused an application to freehold the subject land in November 1999. Section 14(5)(b) of the Valuation of Land Act provides for limitations on use to be taken into account however a refusal to freehold is not an issue relevant to use so does not afford an opportunity to discount the valuation carried out on the basis that the land is freehold. [10] Ms Cooper provided evidence in the form of a newspaper clipping in which the State Treasurer is reported to have “… refused to rule out tax increases to boost government income”. Ms Cooper said, having regard to that statement, that she was concerned that her lease fee would double in the future. That is not a relevant consideration for a number of reasons. The main reason is that the matters before me arise pursuant to a valuation of the subject land as at 1 October 2007 on the basis that land is freehold. Accordingly, no suggested threat of rental increases in the future, if the newspaper article -- 3 of 9 -- 4 could be understood as saying that, is relevant to the question of value. Freehold value carries with it the implication that the landholder is not required to pay rent. [11] In her evidence Ms Cooper referred to the “recent downturn of the global economy”. It will be apparent from a reading of this judgment that a valuation of the subject land as at 1 October 2007 prior to the onslaught of the global financial crisis would be undertaken on the basis of the circumstances that prevailed as at the date of valuation. [12] Mr Paton valued the subject land using four sales saying that each sale is superior to the subject with regard to access and services. Mr Paton noted that at the time of 2005 valuation of the subject land, the value was reduced from $56,000 to $50,000 to make further allowance for access deficiencies. He said that that reduction is still inherent in the current valuation of $100,000 which was carried out using the mass appraisal process. [13] Ms Cooper said that the maintenance of the non-dedicated access track costs about $2,000 to $3,000 after each wet season and that that figure cannot be adequately represented in a reduction of the order of that made in 2005. She said that a $6,000 reduction in the value led to a reduction of $180 in the rent payable. Ms Cooper also said that in the early 1990s it would have cost $30,000 to connect to mains electricity suggesting that this figure also ought to be reflected in the land value. [14] Whilst cost is relevant in considering value, there is high legal authority saying that cost and value. The fact that a landholder may be required to pay many thousands of dollars for mains electricity and for road maintenance does not mean that the value of the land must be adjusted to cater for those potential expenditures. The notion of value was dealt with by the High Court in Spencer v The Commonwealth (1907) 5 CLR 418. I take the following question from the judgment of Mr Justice Isaacs at 441: “To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.” [15] The correct approach therefore is to take such disabilities as access and services into account in a similar manner to that which would occur in the marketplace. Mr Paton has attempted to do this and therefore his approach is correct in principle. [16] Ms Cooper said that she did not believe that there was a similar piece of bushland such as hers, namely 9.6 ha on an ungazetted road without access to electricity that was sold at an unimproved price of $100,000 in the last two years. That is undoubtedly the case having -- 4 of 9 -- 5 regard to the sales evidence presented by Mr Paton. Valuers must, however, employ such evidence as is available in carrying out their valuations. The task of the valuer who is appropriately trained and experienced is to compare the subject land with such sales as are available and in that process to make adjustments having regard to the relevant differences in features and in so doing reflect the view that would be taken in the marketplace as to the impact of those features on value. (see Waalt Homes Pty Ltd v Road Construction Authority (1987) 64 LGRA 346). [17] One of Ms Cooper’s neighbours is a squatter and there are other squatters in the Walsh River area. She said that whilst they are, at least in the case of her neighbours, “good people” she agreed with Mr Paton’s comment that the presence of squatters was a stigma to the area. She drew my attention to a decision of this Court1 in which the learned Member described the “ad hoc development of the area” and referred to the evidence of a Crown valuer who indicated that a special team had been set up to try to resolve the problem of settlement in the area. According to Ms Cooper, no progress has been made. She said that the lack of progress might indicate that the current Department of Natural Resources considers the squatters’ land to be of no value – a proposition that she appeared to not fully embrace. She considered it to be unjust that squatters occupy land on a rates and rent free basis whilst she must pay both. [18] Ms Cooper said that a potential purchaser of her land may see squatting as cheaper than buying. Perhaps, but there was evidence that some squatters were attempting to gain title to “their” land so it seems that squatting is not a cost free option. Ms Cooper also said that potential buyers seeing squatters nearby might be lead to the view that land in the area must be of low value. I accept the suggestion that the area may be stigmatised by the presence of a noticeable squatter community. Squatters were not mentioned in Mr Paton’s valuation report but I accept his sworn evidence that he took the “stigma” (his word) into account in his valuation. [19] The appellant provided us with a copy of the 1994 decision of this Court referred to above and drew my attention to the conclusion of the learned Member that a bona fide person would not be prepared to pay rent at more than $500 per annum. That decision was based on the now repealed s.204(5B)(c) of the Land Act 1962: “The Court shall determine the annual rent at such sum as it considers an experienced and bona fide person would be willing to pay as annual rent for the land comprised in the lease during the rental period in question, having regard to the use to which the land may be put in accordance with the purpose for which the lease was granted and under the terms and conditions of the lease”. 1 RL and D Cooper v The Crown, Land Court 20 May 1994. -- 5 of 9 -- 6 The duty of the Court in the present matters is not to determine rent, but to consider the issue of unimproved land value.2 It follows that the 1994 decision of this Court is not relevant to the present proceedings. I will now turn to consider the sales evidence. [20] Sale 1 in Mr Paton’s valuation involved the sale of a property of 2.162 ha in July 2006 for a price of $150,000, including a building. Mr Paton placed a value of $20,000 on the building leading to an analysed unimproved sale price of $130,000. Ms Cooper’s main challenge to this sale centred on the value placed on the building which comprised a small stone cottage which she said was built by a stone-mason and that it took a year to build. She said that it would have taken thousands of hours to select the stones and build the cottage in the manner that it had been and that labour costs of about $60/hour were not taken into account in Mr Paton’s valuation. Mr Paton said that the cottage was very small, that there was no internal kitchen nor a bathroom, that the roof iron was very low (measured at his forehead level) and that the structure did not have the benefit of a building permit. Ms Cooper said that the Council had granted an amnesty with respect to structures built without permit, however the terms of the amnesty were not provided in evidence. Mr Paton said that a prudent purchaser of the sale land would have needed a much larger house with the usual inclusions of kitchen and bathroom and constructed to a suitable height. Accordingly, the cottage would not be seen as affording an opportunity for permanent accommodation but would comprise an adjunct building only. Mr Paton’s approach accords with valuation principle representing the “added value” approach to the value of improvements acknowledged by this Court on numerous occasions as being appropriate. [21] In Collins v Livingstone Shire Council (1972) 127 CLR 477 at 500 the High Court said: “Some improvements increase the value of land to a greater extent than the cost, but in other circumstances the cost of an improvement may greatly exceed its value, e.g., because its wasteful design renders it unnecessarily expensive to construct, or because it is redundant or out of place and cannot be put to profitable use having regard to its situation.” The question of the value of improvements is how much their presence adds to the value of the land, not how much did they cost. Ms Cooper’s evidence does not lead me to conclude that Mr Paton’s allowance of $20,000 ought to be rejected or adjusted. [22] In his comparison between sale 1 and the subject property (and indeed in the case of each sale) Mr Paton referred to the advantage of the size in the case of the subject land in comparison with the sales. Ms Cooper said that size is no advantage in the case of the 2 S.3(1)(b) Valuation of Land Act. -- 6 of 9 -- 7 subject land as the land is leasehold and is conditioned such that it cannot be used for rural pursuits. That means, she said, that the additional area of the subject property had no value. All that she can do is live on the land and not make a living or an income out of it. [23] It is clear that the sale property is a rural residential site, not farming land. Whilst size would be of benefit in the case of land suitable to farming it is also a benefit in the case of a rural residential site as size both affords privacy and the advantage of living in a natural environment. I have considered the points of comparison between the sale land and the subject in Mr Paton’s report and his conclusion that the subject land is superior to the sale property appears to be sustainable. If, however, I were to adjust his comparisons such that I concluded that the sale property was equivalent to the subject or even superior, that would not lead me to conclude that a value on the subject land of $100,000 is not supported by this sale. Clearly, the sale does not point to a value of $50,000 on the subject land as contended for by the appellant. [24] Mr Paton’s sale 2 comprised an area of 2.979 ha which sold in September 2006 for $210,000. He placed a value of $48,000 on improvements on the land, including a dwelling, leading to an analysed unimproved sale price of $162,000. Ms Cooper provided evidence that the unimproved value of the sale 2 land at 1 October 2007 was $85,000. She observed that the sale 2 access is superior to that of the subject land and contended that the value of her land ought to be made in comparison to the $85,000 figure which he described as the “actual value”. [25] In Grahn v Valuer-General [1992] 14 QLCR 327 the Land Appeal Court said at 328: “(a) It is desirable that valuations made for the purposes of the Valuation of Land Act 1944 of comparable lands should bear proper relativity, one to the other, so long as the valuations are soundly based. It is, however, untenable to adopt a value for one parcel on relativity with another which has no sound basis. (R and MM Barnwell v The Valuer-General (1989) 13 QLCR 13, at p. 16). … (e) Whilst maintenance of correct relativity is of considerable importance for rating valuations, the use of the principle of relativity should not be preferred to the exclusion of relevant (even if not ideal) sales evidence (WM and TJ Fischer v The Valuer-General (1983) 9 QLCR 44, at p. 46).” [26] Statutory valuations placed on comparable lands by the Chief Executive are not a preferred basis of valuation to sales evidence which, though imperfect, can be compared with the land. I have considered Mr Paton’s comparison between the sale land and the subject property and repeat the relevant comments that I made above with respect to his sale no. 1. [27] Sale 3 in Mr Paton’s report comprised a sale in May 2007 for a 11.21 ha property at a price of $210,000. Mr Paton placed a value of $4,000 on a dam and fencing on the land -- 7 of 9 -- 8 deducing that the analysed unimproved sale price was $206,000. Ms Cooper was critical of the value placed on the dam and fencing leading evidence to the cost of such things though without presenting a view as to the final value. Mr Paton employed appropriate valuation methodology in valuing those improvements. In particular, he referred to the depreciation in value of the improvements under consideration noting that the dam was not very effective, that the fencing is aged and that he had regard to the fact that the fencing was on the property boundary and therefore its ownership was shared with that of neighbours. It is not relevant as to whether neighbours actually contributed to the cost of construction of the fencing when the issue of ownership is taken into account. I have no basis upon which I could conclude that Mr Paton’s value of improvements on sale 3 ought to be disturbed. [28] Ms Cooper mentioned that the sale property is freehold and suggested that should be a matter for consideration in the comparison. I have already mentioned s.14(1) of the Valuation of Land Act which requires that the value of the subject land be carried out as if it were freehold. I have considered Mr Paton’s comparison between the sale property and the subject land, having particular regard to the point that the sale property lacks river frontage, and conclude that his opinion that the subject land is superior to the sale is sustainable. [29] Sale 4 has an area of 47.753 ha and sold in June 2007 for $385,000. Mr Paton assessed sheds, fencing and yards and clearing on the sale land at $80,000 concluding an analysed unimproved sale price of $305,000. This sale was challenged by Ms Cooper, particularly on the basis of its location and its size noting that it had sufficient area to permit rural pursuits. Whilst this sale usefully indicates the level of value that might apply in the case of a better situated property, I see no need to take this sale into consideration in dealing with these appeals. [30] In her evidence, Ms Cooper noted her suggested value of $50,000 and the Chief Executive’s value of $100,000 and proposed that a compromise figure of $75,000 would be appropriate. If it had been the case that the parties had independently negotiated a figure of $75,000 and came before the Court seeking a consent judgment in that figure, I would accede to their wishes. In circumstances where the appellant has invoked the jurisdiction of the Court by way of an appeal, the obligation lies on me to deal with the issue in accordance with the relevant statutory provisions. Those provisions, in summary, require me to first decide whether the valuation of the Chief Executive ought to be set aside and second, if that valuation is set aside, to determine an appropriate valuation figure in accordance with valuation principle, the law and the evidence that is -- 8 of 9 -- 9 presented. In this case, the value of $100,000 placed on the subject land was arrived at by employment of the mass appraisal method. Before me the Chief Executive has led valuation evidence prepared in the usual manner and in accordance with valuation practice. When I consider all of the evidence and the comparisons between sales 1, 2 and 3 in Mr Paton’s valuation and the subject property, I cannot conclude that the value of $100,000 is excessive. It is more than supported by the sales evidence. Accordingly, the appeal in each matter is dismissed and the valuations of the Chief Executive are affirmed. RP SCOTT MEMBER OF THE LAND COURT -- 9 of 9 --