Brockgold Pty Ltd v Department of Natural Resources, Mines and Water [2008] QLC 187

LAND COURT OF QUEENSLAND CITATION: Brockgold Pty Ltd v Department of Natural Resources, Mines and Water [2008] QLC 187 PARTIES: Brockgold Pty Ltd (appellant) v. Chief Executive, Department of Natural Resources, Mines and Water (respondent) FILE NOS.: AV2007/0008 and AV2007/0676 DIVISION: Land Court of Queensland PROCEEDING: Appeals against annual valuations of land under the Valuation of Land Act 1944. DELIVERED ON: 21 October 2008 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Mr RS Jones ORDERS: 1. The appeals are allowed. 2. The unimproved value of Lot 901 on Survey Plan 172778, Parish of Barrow, as at 1 October 2004 is determined in the amount of One Million Four Hundred and Fifty-four Thousand Dollars ($1,454,000). 3. The unimproved value of Lot 901 on Survey Plan 172778, Parish of Barrow, as at 1 October 2006 is determined in the amount of One Million Five Hundred and Twenty-seven Thousand Dollars ($1,527,000). CATCHWORDS: Section 45(4) Valuation of Land Act 1944 – grounds of appeal, s.33 VLA – rebuttal of presumption of correctness of statutory valuation – flood affected land – most comparable sales evidence – extremely limited commercial use of flood affected land. APPEARANCES: Mr R Jackson of counsel, instructed by Brian Bartley and Associates, solicitors, for the appellant. Mr W Isdale of counsel, Crown Law for the respondent. -- 1 of 10 -- 2 Background: [1] These appeals concern land located at Tee Trees Boulevard, Arundel on the Gold Coast, more properly described as Lot 901 on Survey Plan 172778, Parish of Barrow, County of Ward. The land is located approximately 7 kilometres northwest of the Southport Post Office and contains an area of 61.6057 hectares. The land is of irregular shape. However, its most significant physical characteristic is its low lying topography. In excess of 85 per cent of the land lies between 1 and 2 metres Australian Height Datum (AHD), is flood prone and bisected by water courses. [2] The land is surrounded by residential development to the east. Further to the east is the Arundel Hills Country Club and Golf Course and to the west the Gold Coast Country Club Golf Course. The land is itself presently being developed for golf course purposes in connection with the residential development known as “Tee Trees”. [3] Notwithstanding the proposed final use of the land for golf course purposes the respective valuers for the parties agreed that when valuing the land under the Valuation of Land Act 1944 (VLA), that is looking at the land in isolation or otherwise disconnected from the surrounding residential development, its highest and best use was for “open space parkland”. [4] Dissatisfied with the respondent’s assessment of the unimproved values of its land the appellant has appealed to this Court for relief. The unimproved value determined by the respondent, as at 1 October 2004, is $2,450,000 and, as at 1 October 2006 is $2,600,000. In its notices of appeal the appellant’s estimate of the unimproved value was $1. However, based on professional valuation advice, at the hearing of the appeals the appellant contended for unimproved values of $620,000 as at 1 October 2004 and $650,000 as at 1 October 2006. Proposed Amendments to the Grounds of Appeal [5] On 16 February 2007 the appellant filed its notice of appeal against the 1 October 2004 valuation and on 14 October 2007 filed its notice of appeal concerning the 1 October 2006 valuation. The grounds of appeal in both notices are identical. At the commencement of the hearing Mr Jackson, counsel for the appellant, sought to amend his client’s grounds of appeal. However, after being referred to s.45(4) of the VLA which relevantly provides: “(The notice of appeal) shall state the grounds of appeal and the appeal shall be limited to the grounds so stated and the burden of proving any and every such ground shall be upon the owner.” Mr Jackson, without expressly conceding that s.45(4) denied his client the right to amend its grounds of appeal, nonetheless elected to proceed with the hearing of the appeals as -- 2 of 10 -- 3 defined by the grounds identified in the original notices of appeal. There is no dispute that the original grounds of appeal, and, in particular, ground 1, were sufficient to allow the appellant’s case to be fully ventilated.1 The Presumption of Correctness [6] Section 33 of the VLA deems the valuations appealed against to be correct until proved otherwise. This presumption makes it clear that the onus is on the appellant to prove that the valuations appealed against are wrong. In Brisbane City Council v Valuer General2 the High Court considered that the presumption in favour of the correctness of the statutory valuation may be rebutted where it can be shown that the valuation was based on a wrong principle and/or involved a significant error of fact and/or was made by a fundamentally erroneous method. The Sales Evidence [7] Mr Kendall, the valuer relied on by the appellant, had regard to seven sales in reaching his determination of the unimproved values of the subject land. Mr Bale, the valuer relied on by the respondent, had regard to five sales. Mr Kendall’s first two sales are located at Merrimac. Mr Bale also had regard to these sales and another sale at Merrimac which occurred on 19 March 2008 (Mr Bale’s sale 3). In my opinion these are the only three sales which are truly able to be sensibly compared to the subject land. I am greatly comforted in reaching this conclusion by the fact that counsel for both parties shared my point of view. [8] Notwithstanding the apparent unanimous view about the reliability of the sales evidence I feel I should give at least some brief reasons for my rejection of the balance of the sales evidence. [9] All of the other sales, to a greater or lesser extent, involve the potential for some form of commercial development or at least the potential to help facilitate such development. In some instances that potential may be somewhat obscure and long term (for example the Foxwell Road sale at Coomera)3 or even speculative (the Carrara sale)4 but nonetheless such potential does exist. Further, and perhaps more importantly, it is clear that the valuers themselves placed most reliance on the Merrimac sales in determining their respective values. In the case of Mr Kendall, he makes this clear in his valuation5 where he refers to the Merrimac sales as establishing his “benchmark to value the Site”. It is 1 Ground 4 (b) was abandoned by Mr Jackson. 2 (1977-78) 140 CLR 41 at 56-57 (per Gibbs J) see also G Cominos & Co v Chief Executive, Department of Lands (1996-97) 16 QLCR 311 at 331 – 332 LAC. 3 Mr Kendall’s sale 3 and Mr Bale’s sale 4. 4 Mr Kendall’s sale 4 and Mr Bale’s sale 5. 5 Ex 2 at p 21. -- 3 of 10 -- 4 equally clear that Mr Bale in arriving at his valuations considered the Merrimac sales to be of primary importance. In this context, in dealing with the later sale at Merrimac in 2008, Mr Bale states: “The date of sale is considerably after the dates of valuation, the subject of this report, though I consider the market place for land of an open space utility to be relatively stable, and consider it useful in conjunction with Sales 1 & 2 above in isolating the value attached to land ‘suitable only to an open space use’. …”6 [10] Mr Bale’s sales 1 and 2 are Mr Kendall’s Merrimac sales 2 and 1 respectively. Both lie within the Merrimac flood plain and, like the subject land, are low lying and predominantly flood prone. Application of the Sales Evidence [11] Mr Kendall analysed his sale 1 to a rate of about $65,000 per hectare and his sale 2 to a rate of about $68,800 per hectare.7 Applying these sales to the subject land Mr Kendall adopted his “benchmark value” for that land of $70,000 per hectare. Both sales 1 and 2 were purchased by the Gold Coast City Council. [12] Relying on the two common sales at Merrimac and his sale 3, Mr Bale applied a rate of $39,770 per hectare for the subject land as at 1 October 2004 and $42,204 per hectare as at 1 October 2006. Mr Bale, unlike Mr Kendall, did not adopt a straightforward analysis of the two common sales (i.e. dividing the sale price by the area to reveal a rate per hectare) but adopted the “valuation" figures applied to each of those parcels of land by the Council. [13] Each of the two common sales had some potential for development as indicated by the Council’s town planning scheme. Mr Kendall’s sale 1 contained an area of 7.5 hectares identified for residential and tourism use under the Council’s Local Area Plan (Guragunbah). The Council’s breakup of the purchase of this land was $140,000 per hectare for the developable land and $55,000 per hectare for the balance land. In a similar vein, in respect of Mr Kendall’s sale 2, the council attributed a rate of $200,000 per hectare to 4.5 hectares of the land with residential potential and $100,000 per hectare to 7 hectares of the land with tourism potential. A rate of $54,340 per hectare was attributed to the balance land.8 [14] The Council, relying on its approach to the two earlier Merrimac sales, sought to acquire adjoining land at a rate of $55,000 per hectare.9 This land, unlike the adjoining land making up sales 1 and 2, had no development potential. The vendors did not accept the 6 Ex 5 at p 13. 7 Mr Kendall initially analysed his sale 2 to a rate of $75,700 but this analysis was incorrect: See Ex 4, p2. 8 See Ex 5, Anx 5. 9 Ex 5, Anx 5. -- 4 of 10 -- 5 Council’s initial offer but eventually sold to the Council at a price reflecting a rate of about $59,000 per hectare. This sale is Mr Bale’s sale 3. [15] Mr Jackson was critical of Mr Bale’s adoption of the Council’s breakup of the two common sales on the basis that he had not carried out any independent investigation to confirm that the various values attributed to the different land use categories were reasonable. I agree. The adoption of the Council's values without any critical investigation may or may not reveal the true value of “open space” land or, for that matter, the value of the developable land. [16] On balance, I consider it more reliable to proceed on the basis that sales 1 and 2 indicate that predominantly low lying flood affected land in the Merrimac area with some potential for higher order development (residential/tourism) was worth, on an overall basis, in the order of $65,000 to $70,000 per hectare as at the relevant dates. [17] Mr Bale’s sale 3 of course tends to support a rate of about $59,000 per hectare for low lying, flood affected, undevelopable land in the Merrimac area. However, in this regard, this sale reflects something akin to a self-fulfilling prophecy as it was influenced by the Council’s own breakup of its purchases of the sale 1 and sale 2 lands. Notwithstanding these concerns I still consider that, subject to the matters discussed below, this sale provides the best indication of the value of the subject land. [18] Mr Bale's sale 3 involves a parcel of land of about 40.6 hectares. It was purchased by the Council from an entity that specialised in weddings for Japanese visitors to Australia. That entity retained the more elevated balance land, which, as I understand it, accommodated the improvements necessary to run the business of weddings. [19] At face value this sale would be expected to provide the best evidence of value for the subject land. It has most of the physical characteristics of the subject. It is flood prone, low lying land with acid sulphate soil problems and, like the subject, has no potential for higher order land uses. The potential of both parcels of land is limited to more passive open space and/or conservation uses. [20] However, there are a number of matters which need to be addressed before this sale can sensibly be compared to the subject. [21] First, it occurred in March 2008, some years after the relevant valuation dates. However, in this context, the evidence of the values is that between 2004 and 2008 there would have been very little movement in the market for this type of land. [22] The flatness of the market between 2004 and 2006 is reflected in the variation in the values attributed to the land in those years by both valuers. An increase of only about 5 per cent, or about 2½ per cent per annum. On the material before me it is considered -- 5 of 10 -- 6 appropriate to adjust this sale by 10 per cent to bring it back to 2004 dollars and by 5 per cent to 2006 dollars. [23] Second, the evidence makes it tolerably clear to me that there is a degree of synergy between the value of low lying open space land and adjacent developable land under one ownership and vice versa. Developable land with views over areas of open space will tend to attract a premium which in turn must tend to give or place some premium on the associated open space land when compared to similar land standing in isolation. The three Merrimac sales contain elements of the former while the subject land falls into the latter category.10 [24] There is simply not enough evidence to allow me to place any quantitive value or figure on what this “synergy” element might be worth. However, notwithstanding this, when comparing the Merrimac sales to the subject land I will adopt a conservative approach. [25] The third and perhaps most important matter concerns the background and history of all three sales. All of these parcels of land were purchased by the Council as part of its “Green Heart Vision”. According to the Green Heart Vision publication tendered during the course of this appeal,11 it “… marks a key stage in the development of an exciting vision for the future of the Carrara Merrimac floodplain …”.12 The Council’s vision is to have a series of linked parkland cells which, among other things, will form part of its “premier central park”.13 [26] Sale 3 was the last of the Council’s three purchases of adjoining lands in the Merrimac area. Both valuers acknowledged that some premium or element of an over-anxious purchaser is associated with this sale. To some extent this is borne out by the Council’s own approach in increasing its offer from $55,000 per hectare to $59,000 per hectare for what is essentially undevelopable land, an increase of just under 10 per cent. In this context I also accept Mr Kendall's evidence that, in respect of his sales 1 and 2 the Council was probably a "motivated if not anxious purchaser". However, no probative evidence was put before me (probably because none existed) indicating what the level (if any) of any premium associated with these sales might have been. [27] Mr Kendall also referred to the shape of these sales being superior to the subject. The three sales are more regular in shape whereas the subject is very irregular. However, there is no evidence of any relationship between value and shape for flood affected land 10 The town planning report of Mr Bell (Ex 1) identified that while the subject land had some potential to accommodate "at most" four residential lots any application for such development would probably not be approved by the Council, meet strenuous local opposition and end up in litigation. In any event both valuers agreed that the highest and best use of the land was "open space parkland". (Ex 4 p2) 11 Ex 10. 12 Ex 10, p 6. 13 Valuers statement of agreed facts; Ex 4, p 3: Ex 10, p 14. -- 6 of 10 -- 7 and, in any event, insofar as sale 3 is concerned, I consider that any advantages it might have regarding shape would tend to be offset by its proximity to the nearby sewerage plant. In this context I note that many of the physical characteristics of the subject land to which Mr Kendall drew my attention14 are common to each of the Merrimac sales. [28] Having particular regard to the matters referred to in paragraphs 19 to 26 above, the evidence leads me to conclude that if the subject land lay within the Merrimac or Carrara-Merrimac floodplain and in reasonable proximity to the Merrimac sales (but not adjoining) its value would have been in the order of $47,200 per hectare15 as at 1 October 2004. The most likely purchaser being the Council. [29] However, on the evidence before me, the subject land does not appear to lie within those floodplains nor the boundaries of the Council’s Green Heart Vision.16 The subject is about 7 kilometres north-west of the Southport Post Office while the Merrimac sales are about 10 kilometres south-west of it. [30] In cross-examination, Mr Bale said that likely purchasers might include the Council or clubs such as a pony club or polo club. Unfortunately, Mr Bale was not able to give any examples of transactions involving such clubs. In this context I tend to agree with Mr Isdale that the most likely purchaser would be a public authority such as some government body or, more likely, the Council. [31] The difficulty here is that while there is clear evidence of the Council's interest in the Carrara-Merrimac floodplains, no evidence was put before me that the Council has any such interest in land in the vicinity of the subject. [32] In my opinion, the lack of any readily identifiable market for the subject land would place the vendor of it in an extremely weak position and any potential purchaser in an extremely strong one. The vendor would certainly not give the land away; even Mr Kendall places its value in excess of $600,000 as at the relevant dates, however he would have to recognise and accept that buyers would be scarce and tend to drive a hard bargain. [33] When comparing the Merrimac sales to the subject land Mr Bale considered that the subject was superior on a “pro rata” basis because of its superior “topography, site access and general parkland appeal.”17 When asked why, despite this superiority, he applied a lower rate per hectare to the subject land, Mr Bale said that he adopted a “conservative” approach. In comparison to the rate per hectare yielded from his analysis of his first two 14 eg Ex 2 pp 11 to 13 and 20 to 22. 15 The rate of $47,200 per hectare is arrived at by discounting the rate of $59,000 per hectare by 20% to bring into account the matters addressed in paragraphs 19 to 26 above. 16 See for e.g. Ex 10, Figure 4, the “Framework Plan”. 17 Ex 5, pp 11, 12 and 13. -- 7 of 10 -- 8 Merrimac sales for the undevelopable land, Mr Bale’s discount on a rate per hectare basis for the subject land is in the order of 25 per cent. [34] Consistent with Mr Bale’s approach of applying a lesser rate per hectare to the subject land than that yielded from the Merrimac sales, Mr Kendall applied an 85 per cent discount to his analysis of those sales on a rate per hectare basis. As I understand Mr Kendall’s evidence about this, he considered that if the subject land was truly comparable to the Merrimac sales it would have been worth about $70,000 per hectare. This became his “benchmark value”. This rate per hectare was based on his analysis of the first two Merrimac sales and took no account of the later sale which occurred in 2008. [35] It is clear however that Mr Kendall did not consider the subject comparable to the Merrimac sales. In his opinion it was manifestly inferior for reasons including: shape, drainage and land use potential.18 During cross-examination Mr Kendall agreed with Mr Isdale that the 85 per cent was an arbitrary figure. While I accept that there is a degree of arbitrariness in Mr Kendall’s approach, that is, why 85 per cent and not 75 or 95 per cent? I also accept that Mr Kendall's valuation exercise was not based solely on guesswork and that he genuinely attempted to apply his experience and expertise as a valuer to the problems confronting him. [36] On balance however I find that I am unable to accept either Mr Kendall’s starting point of $70,000 per hectare or his discount rate of 85 per cent. The reasons for my not accepting his rate per hectare are dealt with above. As to the discount rate, the figure was arrived at by trying to gauge a rate of discount applicable to land on a sliding scale from land with significant potential for development through to land with longer term or more limited potential down to land with little development potential.19 An example of the first land category is Mr Kendall’s sale at Napper Road, Arundel which yielded a rate of $1,355,400 per hectare. An example of the second is his sale at Shipper Drive at $500,400 per hectare and of the third his Merrimac sales at about $70,000 per hectare. I cannot accept this approach for two reasons. First, to my mind it is simply inappropriate to try and apply sales of what are clearly vastly superior parcels of land to the subject absent some sound justification for so doing. No such justification exists here. Second, and associated with the first objection is that there is no probative evidence of there being any meaningful proportional relationship between the price being paid for one category of land when compared to that being paid for another. [37] Notwithstanding my rejection of Mr Kendall’s methodology I do agree, primarily for the reasons set out at paragraphs 28 to 32 above, with his conclusion that “… it is unlikely 18 Ex 2, p 20.9 to 22. 19 Ex 2, pp 20-21. -- 8 of 10 -- 9 that a prospective purchaser would be willing to acquire (the land) for more than a relatively low amount. …”20 [38] As I have already mentioned, Mr Bale, adopting a conservative approach, applied a rate per hectare to the subject which reflected a discount on the rate per hectare yielded from his Merrimac sales of in the order of 25 per cent. On balance, I consider this level of discount too low to adequately take into account the extremely limited market for the subject land. On the other hand I consider the discount rate of 85 per cent adopted by Mr Kendall to be too high and otherwise unjustifiable. [39] On the material before me I consider that the correct level of discount is probably between that reflected or applied by both valuers in this case. On this basis I intend to discount the rate of $47,200 per hectare adopted by me in paragraph 28 above by 50 per cent. This yields a figure of $23,600 per hectare as at 1 October 2004. Consistent with the approach adopted by both valuers I will increase this figure by about 5 per cent to $24,780 per hectare for the 1 October 2006 valuation date. In my opinion, these rates not only more realistically recognise the limitations associated with the land compared to Mr Bale’s sale 3 but also sit more comfortably on an overall rate per hectare basis with the two common sales which had some potential for residential and/or tourism development. Conclusions [40] For the reasons set out above I have concluded that the statutory presumption in favour of the correctness of the valuations has been rebutted. That is so, in my opinion, because Mr Bale significantly underestimated the impact of the locational difference between the subject land and the Merrimac sales on the already limited pool of likely purchasers. [41] Accordingly the value of the subject land is determined in the following amounts:  1 October 2004 = $1,454,000 (61.606 ha x $23,600/ha)  1 October 2006 = $1,527,000 (61.606 ha x $24,780/ha). Orders: 1. The appeals are allowed. 2. The unimproved value of Lot 901 on Survey Plan 172778, Parish of Barrow, as at 1 October 2004 is determined in the amount of One Million Four Hundred and Fifty- four Thousand Dollars ($1,454,000). 20 Ex 2, p 23. -- 9 of 10 -- 10 3. The unimproved value of Lot 901 on Survey Plan 172778, Parish of Barrow, as at 1 October 2006 is determined in the amount of One Million Five Hundred and Twenty-seven Thousand Dollars ($1,527,000). RS JONES MEMBER OF THE LAND COURT -- 10 of 10 --