Berry & Anor v Department of Natural Resources and Water [2007] QLC 93

LAND COURT OF QUEENSLAND CITATION: Berry & Anor v Department of Natural Resources and Water [2007] QLC 93 PARTIES: David N and Daphne M Berry (appellants) v. Chief Executive, Department of Natural Resources and Water (respondent) FILES NO.: AV2005/0689 and AV2007/0234 DIVISION: Land Court of Queensland PROCEEDING: Appeals against annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 31 October 2007 DELIVERED AT: Brisbane HEARD AT: Cairns MEMBER Mr RP Scott ORDER: Each of the appeals is dismissed and the valuation of the subject land by the Chief Executive as at each relevant date is affirmed. CATCHWORDS: Valuation – unimproved value – sales evidence preferred to relativities – change in relativities since earlier valuation APPEARANCES: Mr DN Berry for the appellants Mr G Smith (Senior Lawyer, Department of Natural Resources and Water) appeared on behalf of the respondent. [1] The Chief Executive has placed valuations on land owned by the appellants as at relevant dates of 1 October 2004 and 1 October 2006. For the 2004 valuation the Chief Executive -- 1 of 10 -- 2 has determined a figure of $200,000 while a figure of $260,000 has been applied to the 2006 valuation. Each valuation applies to the same block of land located in Bramston Beach, North Queensland, which has been improved by the construction of a dwelling which is occupied by the appellants. For their part the appellants contend that the valuation figure for 2004 should be $100,000 and for the 2006 valuation it should be $160,000. That appears to suggest that an increase by $60,000 between each valuation date would be appropriate. [2] Valuation evidence for the Chief Executive was provided by Shaun Howard Glover, a registered valuer employed in the Chief Executive's department. Mr David Berry gave evidence on behalf of the appellants. The grounds of appeal were sufficiently widely drawn to encompass the issues raised by the appellants before me. The primary concern for the appellants is the level of value and the consequent effect on local government rates. Mr Berry is a pensioner. It appeared to Mr Berry that there is an inconsistency in the relationship between valuations in different parts of Bramston Beach. Each of these valuations, as is the case in the subject appeals, was struck under the provisions of the Valuation of Land Act 1944. Many of the concerns raised by Mr Berry concerning the relativity in statutory valuations were allayed once he became aware of the reasons for certain valuation figures, however some concerns remained. [3] His concern about relativity arises from the percentage increase in values between 2002 and 2004, then between 2004 and 2006 not demonstrating a consistency in Mr Berry's opinion. He said that the value of his land as at 1 October 1999 was $60,000 and remained at that figure at the valuation date of 1 October 2002. He sees the increase from the 2002 figure to $200,000 in October 2004 to be excessive and not supported by other statutory valuations in the area. Mr Berry calculated proportionate increase in certain lots in Bramston Beach in the relevant periods and compared those proportional increases between different parts. It was that process that revealed to him the inconsistency that he complained of. For example, for the 2004 valuation, he noted that a property on the eastern side of Evans Road, Bramston Beach had had its statutory valuation increased from $90,000 to $310,000 – a factor of about 3.44. In the case of the subject land for the same period the increase from $60,000 to $200,000 demonstrates a factor of about 3.33. [4] Bramston Beach Village might roughly be divided into two sections. The southern section comprises properties along Evans Road, those on the eastern side of that road enjoying proximity to the beach and filtered views through vegetation between those lots and the beach proper. A northern section comprising Paperbark Street and Sassafras Street is set back somewhat further from the beach than the lots in Evans Road. Between -- 2 of 10 -- 3 the eastern lots in this northern section (where the subject land is to be found) lies some unallocated State land, a creek and what I would call a vegetated esplanade area before one comes to the beach proper. That creek which separates the northern section lots from the beach is to be found to the west of the lots on the western side of Evans Road. There was no dispute between the parties that lots on the eastern side of Evans Road comprise higher valued lots with good aspect and proximity to the beach, whilst those on the western side are comparatively inferior. In the northern section the lots to the east, which include the subject land, represent the more valuable in that section though less valuable than those on the eastern side of Evans Road. [5] It is with this view in mind that Mr Berry expressed the opinion that the proportionate increase in statutory valuations on the eastern side of 18 Evans Road and that of the subject property ought not to have been so similar. He noted that lots on the opposite sides of Paperbark Street to that of the subject properties increased by between $54,000 and $97,000 or a factor of about 1.8. I gather that it was his view that it was that rate of proportionate increase that ought to have applied to his land between the 2002 and 2004 valuations. Having said that, I calculate that an increase by a factor of 1.8 on the 2002 value of the subject at $60,000 would have calculated to a figure of $108,000 not the $100,000 estimate provided by the appellants. The appellants' estimate calculates to a factor of about 1.67. Notwithstanding that Mr Berry accepted that lots on the eastern side of Paperbark Street are superior to those on the western side. I should also mention that on the western side of Evans Road increases between $166,000 and $215,000 (a factor of 1.3) can be found. [6] The suggested inconsistency between the factor of increase between these four market segments in Bramston Beach was fairly complicated by what I would describe, with respect, as a confused understanding as to the nature of the task of determining unimproved values. Mr Berry seemed to be of the view that the adoption by the Chief Executive of a particular unimproved value for an unimproved lot in some way indicated the value in improvements such as a house on that lot. Now I do not intend lecturing Mr Berry about the law and practice of land valuation, first because that is not my duty and second because it is a large subject and involves great complexity, technicality and the need for substantial experience. Nevertheless, it might be useful if I set out some considerations relevant to these appeals. Section 13 of the Valuation of Land Act provides: "13 Chief executive to make valuation The chief executive must decide the unimproved value of the land to be valued for the Acts under which local authorities are established." (my emphasis) -- 3 of 10 -- 4 [7] As to what "unimproved value" means, reference should be made in the present case to s.3(1)(b) "3 Meaning of unimproved value (1) For the purposes of this Act— unimproved value of land means— (b) in relation to improved land—the capital sum which the fee simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that, at the time as at which the value is required to be ascertained for the purposes of this Act, the improvements did not exist." (my emphasis) [8] It is clear from the abovementioned statutory provisions that the task of the Chief Executive at the outset and that of this Court on appeal, is to establish the unimproved value, that is the value of the land as if the improvements did not exist. There is therefore no requirement to address the value of any improvements on the land. Useful guidance as to the manner in which values should be struck has been provided by this Court and the Land Appeal Court on many occasions and reference to one decision of the Land Appeal Court may be helpful. That decision is Clough v Valuer-General (1981-82) 8 QLCR 70 at 76: "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. 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." [9] So the method preferred is to obtain sales evidence and by a process of comparison, well recognised by valuers, to place a value on the subject land on the assumption that there are no improvements there. It will be noted that that process does not include a consideration of the values that might have been placed on other parcels of land by the Chief Executive or one of his valuers, largely because any such valuation is the outcome of an expression of an opinion by a valuer rather than a direct consideration of sales in the market place. That aspect is particularly important when considering changes in the market place. I refer to Mr Berry's evidence that there has been a change in relativity between the values of lots in the Bramston Beach area between the prior valuations in 1999 and 2002 and that in 2004. In Barnwell v Valuer-General (1990-91) 13 QLCR at 17, the Land Appeal Court said: "It has been well recognised over the years that previously established relativity in unimproved values can and does change from valuation to valuation. If there was no justification for change in relativity, the valuer's task would be very simple in that all that -- 4 of 10 -- 5 would be required to establish value would be accomplished by the use of an adjusting formula. This, of course, is undesirable." [10] Mr Glover said that market evidence to which he had referred indicated to him that there had been a substantial change in both the market level of properties in the Bramston Beach area leading up to the valuations in 2004 and 2006 and that the market had distinguished between the value of lots on the eastern side of Evans Road and the eastern side of the northern section of Bramston Beach and lots to the west of each respectively. Evidence of this change appeared in the form of the sales included in each of his valuation reports which I discuss below. All I can say at this point is that it is the sales evidence to which I will refer in forming an appreciation of the value of the subject not the relativities between statutory values that might have existed prior to the relevant dates presently under consideration. [11] Part of the appellants' relativity argument suggested that values placed on various lots were inconsistent. Mr Berry said that some lots nearby the subject property had values that were proportionately high when compared to that applied to the subject land at both relevant dates on the basis that the subject land enjoyed a superior aspect towards the beach. Whilst Mr Berry said that the valuations were generally too high he was concerned also to point out that the values to certain lots ought have been adjusted downwards because of differences between the various lots. In this regard he was going outside arguing an appeal with respect to his land and was presenting a more general argument in support of a reduced valuation throughout lots in the northern section of Bramston Beach. This issue has come up on more than one occasion in the past, one example being found in Gibson v Chief Executive, Department of Lands (V92-64 unreported Land Appeal Court 9 June 1995) at 6: "We reiterate what has been said often before – and what is Mr Tighe's chief concern – the importance of correct relativity in the equitable distribution of the rating burden cannot be overstated. However the question before this Court is the correct valuation of the subject land, not the correct valuation of an area. It would not advance the appellant's case to satisfy us that her neighbour's land was undervalued: … The appellant must show that the valuation of her land was incorrect." [12] A similar opinion is expressed by the Land Appeal Court in Bignell v Chief Executive, Department of Lands (AV92-65 unreported Land Appeal Court 4 March 1996) at 11: "What has to be decided in this case is the proper value of the subject land by reference to sales evidence about comparable unimproved properties. … If a proper valuation of the subject land makes it inconsistent with the relative values of neighbouring blocks then so be it. The question before this Court is 'the correct valuation of the subject land, not the correct valuation of the area'." [13] In accordance with what I have set out above I now turn to the valuations provided by Mr Glover. In his 2004 valuation report Mr Glover included a schedule of 11 sales which -- 5 of 10 -- 6 usefully includes sales from both sides of Evans Road and from the eastern and western sides of Paperbark Street in the northern section. The property at 24 Paperbark Street is one lot removed from the subject. Number 24 sold for $305,000 on 19 December 2003 for the land including dwelling and ancillary improvements. Mr Glover analysed the improvements such that the unimproved land component of the sale was calculated at $217,522. The statutory valuation placed on that property as at 1 October 2004 was $200,000, a figure which is about 92% of the unimproved analysed price of $217,522. In the language of valuers, the sale might be said to have been applied less than completely in arriving at the statutory unimproved value. [14] The sale which I have just discussed was listed as No. 4 in Mr Glover's valuation report. Whilst the value of improvements placed on that sale by Mr Glover was not directly challenged by expert evidence from the appellants' side, Mr Berry expressed the view that the improvements would be worth about $150,000. No basis for that was provided. Mr Glover, on the other hand, said that he had measured up the improvements and identified their nature; had prepared an estimate of their replacement cost and had depreciated that figure having regard to his appreciation of depreciation based on such factors as physical depreciation and obsolescence. In the circumstances I have no choice but to accept Mr Glover's evidence which is the sworn evidence of an expert who submitted himself to cross-examination. [15] Mr Berry said that the sale of 24 Paperbark Street took place without the purchaser having seen the property and that the purchaser felt that he paid too much for the property. I can understand that such a feeling could arise from either buyer's remorse or subsequent appreciation of the market. Since the purchaser was not called as a witness, I need to refer to other market evidence to see whether it supports the view that the Sale 4 price was excessive in the market place. [16] Sale 3 in Mr Glover's 2004 valuation took place on 5 November 2005 and involved a resale of the property at 24 Paperbark Street. The sale price was $425,000 – a price which indicates to me that the price paid for the property in 19 December 2003 cannot have been excessive. Mr Glover analysed the Sale 3 transaction to yield an unimproved land component of $317,090 but in his valuation report pointed out that the sale had not been applied in placing a value on the sale land as at 1 October 2004. That is apparent from the reference in Mr Glover's valuation report to the fact that the valuation of the sale land as at that date was $200,000 or only 63% of the analysed sale price figure. Interestingly that same sales transaction appears as Sale 6 in Mr Glover's 2006 valuation report where the analysed sale figure was applied at a rate of 82%. -- 6 of 10 -- 7 [17] The advantage of considering Sales 3 and 4 is that they indicate a very healthy market around the relevant date of 1 October 2004 and subsequently, and support Mr Glover's opinion that past relativities should be disregarded. Sale 5 in his 2004 valuation report at 26 Paperbark Street for $390,000 on 13 May 2005 supports that view. It is also supported by a comparison between Sales 1 and 2 which relate to a property at 51 Evans Road selling on 30 September 2004 for $250,000, then on 28 February 2006 for $360,000. The point as to the robustness of the market is also supported by the sale of 79 Evans Road first on 9 September 2003 for $295,000 then on 19 July 2004 for $327,500. I now come to the sharp point of the value of the subject land as at 1 October 2004. [18] Sale 10 in Mr Glover's valuation report involved a property at 13 Paperbark Street which sold on 21 October 2003 for $110,000. The only improvements on the land at the time of sale comprised clearing, so the sale has the advantage of meeting the test proferred by the Land Appeal Court in the Clough case which I have mentioned above. That is, it is an unimproved or lightly improved property. Mr Glover analysed the sale to an unimproved figure of $106,000 and its statutory valuation as at 1 October 2004 was $97,000. The Sale 10 land is located in the northern section of Bramston Beach but is located on the western side of Paperbark Street, therefore does not enjoy an aspect towards the ocean. It is clearly inferior to the subject land in that regard, though is similar in regard to such matters as shape, size, access and services. Sale 10 in effect provides a "floor" to the value of the subject property. [19] Sale 11 in Mr Glover's 2004 report took place on 24 March 2003 and involved the sale of 18 Evans Road for $330,000. There was a dwelling on the sale land at the time of sale, but that was demolished after the sale, so the purchase price related to an essentially unimproved parcel. Mr Glover analysed the sale price to an unimproved figure of $316,570 with the applied value being $310,000. The Sale 11 land is on the eastern side of Evans Road so is clearly superior to the subject property. It has the advantage of providing a "ceiling" value to the subject property. [20] I think that the best way to approach the valuation of the subject land as at 1 October 2004 is to employ Sale 10 as indicating the "floor" value and Sale 11 as the "ceiling" value with Sale 4 being relied upon as refining the level of value for the subject land between those two sales. [21] Mr Berry drew my attention to Sales 6 and 7 in Mr Glover's 2004 report comprising sales at 87 Evans Road and 89 Evans Road, respectively. These properties are located on the western side of Evans Road so are inferior to those towards the east. Nevertheless they each obtain restricted views of the ocean through the caravan park across the road – a -- 7 of 10 -- 8 view that would be inhibited during times when the caravan park is heavily occupied. The sale prices of those lots and their analysed values appear to support the statutory valuations of $215,000 placed on each of those properties by the Chief Executive and reveal a consistency between that level and the level of $200,000 applied to the subject property. [22] In his evidence Mr Berry said that to gain access to the beach from his house he has to walk down the road and then access the beach by Council access over a bridge which traverses the creek. I gather the walk would take about 20 minutes, though he said that if he were to take more than a cut lunch and a cup of tea, he would have to drive a kilometre. Nevertheless he acknowledged that from the subject land he can hear the waves from the ocean, enjoy the sea breeze and the filtered view available through the trees. He said that the unallocated State land towards the east of the subject land had been cleared at the time that he and his wife purchased the property and that they had maintained that area to their own benefit. It provided a better ambience than that part of the same strip of land abutting other properties on the eastern side of Paperbark Street where clearing had not taken place and substantial and large vegetation remains. He also said that the creek towards the front of the property, whilst vegetated and unattractive, is less attractive where it runs past other lots to the south. Mr Berry also said that feral pigs sometimes came from the area of the creek though there was no evidence to say they preferred to invade his property as against any other property in the Bramston Beach area. He also said that his property was "stuck up in a corner" but acknowledged that its location was such that was not subjected to the levels of traffic that would cause a nuisance to other properties, in particular to those on Evans Road. [23] One advantage of considering sales evidence particularly where the sales are comparable with the subject property in important respects is it features such as those discussed in the above paragraph need not be separately allowed for as they are already reflected in the sale price paid. Fortunately that proposition applies here in particular where we have the advantage of Sale 4 which is that of a lot one property removed from the subject land. [24] Mr Berry referred to a sale of Lot 22 Paperbark Street for $330,000 in 2003, a sale which included a dwelling. The Chief Executive suggested that the price was $335,000 and that the sale was contracted in October 2002. Mr Berry attempted to tender a builder's estimate of the cost of replacing the house on the sale property in 2007, but I disallowed that tender. The author was not called to give evidence and thus be submitted to cross- examination; the estimate was as at a date of 2007 rather than as at the date of sale whether it was 2002 or 2003; and there was no attempt to adjust the replacement cost to -- 8 of 10 -- 9 take into account depreciation. In addition to that Mr Glover said that there was an appreciable rise in the market place in the 6 months leading up to the valuation date in 2004 – evidence which is supported by the sales and which was not challenged by Mr Berry. [25] The outcome of my consideration of the evidence and submissions is that I find that the appellant has not demonstrated to me that the Chief Executive's valuation of the subject land as at 1 October 2004 ought to be reduced. Indeed the evidence provided supports the valuation provided by Mr Glover in the amount of $200,000. [26] It will be noted that the Chief Executive's valuation of the subject land as at 1 October 2006 was $60,000 more than that struck in 2004 and that the figure contended for by the appellant is similarly greater in 2006 than the appellant's 2004 estimate. Nevertheless I am assisted by Mr Glover's valuation report with regard to the 2006 valuation. In that report he included a total of 7 sales, one of which (Sale 3) in his 2004 report, I have already mentioned. That property is located one lot removed from the subject and is therefore comparable overall. The analysed sale price of $317,090 was used to support a value of $260,000 on the sale land and similarly supports a value of $260,000 on the subject property. That sale is supported by the sale of 26 Paperbark Street on 13 May 2005 for $390,000 analysed to an unimproved figure of $278,730. That appeared as Sale 5 in Mr Glover's 2004 valuation but it was applied in that earlier valuation at only 72%, but at 92% in the 2006 valuation. That is entirely appropriate. [27] Number 23 Sassafras Street is located to the west of Paperbark Street and it is therefore substantially inferior to the subject property. That Sassafras Street property sold on 8 November 2005 for $125,000 which included some clearing only, and was analysed to an unimproved figure of $123,000 by Mr Glover. Its statutory valuation as at 1 October 2006 was $107,000. Clearly the value of the subject land must be substantially more than that. [28] Sale 2 in Mr Glover's 2006 valuation report involved the sale of 35 Evans Road at $295,000 on 3 August 2006. There was a lowset chamfer board and fibro clad dwelling and ancillary improvements included in the sale which Mr Glover analysed to an unimproved figure of $246,478. Mr Glover said that the sale is inferior having a road between it and the beach and the lots on the eastern side of Evans Road which exclude ocean views and outlook. He said that, overall, the sale is inferior to the subject – an opinion which the overall evidence supports. Clearly the value of the subject land needs to be higher than $207,500, the statutory valuation placed on the Sale 2 land by the Chief Executive. -- 9 of 10 -- 10 [29] The appellants have failed to convince me that Mr Glover was either wrong in principle or substantially wrong in fact in concluding that the 2006 value of the subject property should be at $260,000. Accordingly, each of the appeals is dismissed and the valuation of the subject land by the Chief Executive as at each relevant date is affirmed. RP SCOTT MEMBER OF THE LAND COURT -- 10 of 10 --