Cupo v Department of Natural Resources, Mines and Water [2007] QLC 22

LAND COURT OF QUEENSLAND CITATION: Cupo v Department of Natural Resources, Mines and Water [2007] QLC 22 PARTIES: Lino and Maria Cupo (appellants) v. Chief Executive, Department of Natural Resources, Mines and Water (respondent) FILE NO: AV2006/0109; AV2006/0110 DIVISION: Land Court of Queensland PROCEEDING: Appeals against annual valuations of land under the Valuation of Land Act 1944. DELIVERED ON: 3 April 2007 HEARD AT: Brisbane DELIVERED AT: Brisbane MEMBER: Mr RS Jones ORDERS: 1. Appeal AV 2006/0109 is dismissed. 2. Appeal AV 2006/0110 is dismissed. CATCHWORDS: Valuation of Land Act 1944 – s.33 VLA – onus of proof – best evidence of unimproved value – relativity of unimproved values - reliability of only limited sales evidence APPEARANCES: Mr L Cupo for the appellants. Ms L Marshall, Senior Lawyer of the Department of Natural Resources, Mines and Water for the respondent. Background [1] Mr L and Mrs M Cupo, the appellants, have appealed against the assessment of the unimproved value attributed to their land by the respondent, the Chief Executive, Department of Natural Resources, Mines and Water. [2] The appellants are the registered proprietors of two parcels of land described as lots 1 and 2 on Survey Plan 180826 parish of North Brisbane. Lot 1 is located at 30 Mark -- 1 of 7 -- 2 Street, New Farm and contains an area of 314 m². Lot 2, which has a common boundary with lot 1, is located at 71A Sydney Street, New Farm and contains an area of 293 m². Both lots are classified "Low – Medium Density Residential" and lie within a "Demolition Control Precinct" under the town plan for the City of Brisbane. Additionally, both lots are subject to the "New Farm Local Area Plan" under Brisbane City Plan 2000. All of the usual urban services and amenities were and are available to both lots which, at the relevant date of valuation 1 October 2004, were both being used for single unit residential dwelling purposes. [3] The unimproved value determined by the respondent as at 1 October 2004 for Lot 1 is $360,000 and for Lot 2 $350,000. In their notices of appeal the appellants' estimate of the unimproved value is $270,000 and $260,000 respectively. At the hearing of these appeals the appellants were represented by Mr L Cupo. Mr Cupo has no real estate valuation qualifications. The respondent was legally represented by Ms L Marshall a senior lawyer employed by the respondent and relied on the evidence of Mr R Rainbow a registered real estate valuer also employed by the respondent. Issues in the Appeal [4] Given the degree of commonality involved in both appeals including the relevant date of valuation, the grounds of appeal and the evidence relied on by the parties, both appeals were heard together. [5] In both notices of appeal the grounds of appeal are: "Unimproved land value is overpriced compared to others in area (see attached sheets). No concession for non-conforming use of land." As the proceedings progressed, it became tolerably clear that the real issues in both appeals were; first, the unimproved value attributed to other lots in the area relative to those attributed to the subject lots. Second, what I will refer to as the "non conforming use" issue. Third, the impact on value resulting from the susceptibility of the lots to flooding. Fourth, when all relevant matters were taken into account, which sales evidence provided the best evidence of the unimproved value of the subject lots. [6] In appeals such as this it is necessary to bear in mind that pursuant to s.33 of the Valuation of Land Act 1944 (VLA) the valuation appealed against is deemed to be correct and it is the appellants who bear the burden of proving that it is wrong. In Brisbane City Council v Valuer General1 the High Court considered that the statutory presumption in favour of the correctness of the valuation appealed against may be rebutted when it can be shown that it was based on a wrong principle and/or involved a 1 (1977 – 78) 140 CLR 41 at 56 - 57. -- 2 of 7 -- 3 significant error of fact and/or was made by a fundamentally erroneous method. Pursuant to s.45(4) of the VLA the appellants are also limited to the grounds stated in their notice of appeal and bear the burden of proving each and every ground relied on. The "Relativity" Issue [7] It is now well accepted that, generally speaking, the best evidence for determining a basis for the assessment of unimproved value will usually be evidence of sales of vacant or lightly improved comparable lands which occurred at a date reasonably close to the relevant date of valuation. In this context, it has been recognised that large increases in the unimproved values attributed to land may not of themselves be relevant provided that bona fide sales evidence exists to support the new levels of statutory valuation. Also, while as a matter of policy reasonable statutory valuation relativity within a district may be desirable to ensure an equitable distribution of the incidents of rating it needs to be recognised that the relativity of unimproved values between properties is not fixed but fluid2 and there can be "… any numbers of reasons why blocks in the same valuation area should increase at different rates…"3 In Tow v Valuer General,4 the Land Appeal Court at 381 said: "It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation." In my opinion, similar principles apply concerning the issue of relativity of unimproved values. That is, variations in the relativity of unimproved values are not in themselves highly relevant in circumstances where bona fide comparable sales evidence supports the valuations appealed against. [8] I agree with the submissions of Mr Cupo to the effect that the evidence reveals a number of apparent discrepancies and inconsistencies in the unimproved values applied to some lots relative to those applied to other lots in New Farm including the subjects. However, in my opinion, when regard is had to the totality of the evidence these inconsistencies and discrepancies do not support a conclusion or finding that the valuations appealed against are wrong and ought be reduced. The Non Conforming Use Issue [9] In respect of this issue it was not being suggested on behalf of the appellants that the improvements on lots 1 and 2 were in some way unlawful or inconsistent with the land use designation or classification assigned to the land under the town plan for the City of 2 Lindenmayer v Valuer General (1974) 1 QLCR 273 at 276; Barnwell v Valuer General (1990-91) 13 QLCR 13 at 17 (LAC). 3 Henricks v Valuer General (1983) 9 QLCR 59 at 63 (FC). 4 Tow v Valuer-General (1978) 5 QLCR 378 at 381 (LAC). -- 3 of 7 -- 4 Brisbane. Rather, the case for the appellants as finally argued was that s.17 of the VLA required the respondent, when valuing the land for the purposes of the Act, to ignore the subdivision creating the subject lots and to value the parent parcel as it existed in its pre-subdivision state. In practical terms Mr Cupo's argument was that s.17 required lots 1 and 2 to be valued as if they effectively were still a single 607 m² parcel of land rather than one 314 m² lot and a separate 293 m² lot. [10] Section 17(1) of the VLA relevantly provides: "In making a valuation of the unimproved value of land exclusively used for purposes of a single dwelling house … any enhancement in value because the land has been subdivided by survey or has a potential use for industrial, subdivisional or any other purposes shall be disregarded irrespective of whether or not, in case of potential use as aforesaid, that potential use is lawful when the valuation is made. In these appeals it is not disputed that the houses on each of the lots satisfy the definition of "single dwelling house" for the purposes of the Act. [11] At page 2.9 of his valuation reports (exhibits 4 and 5) Mr Rainbow states that "The property is used for the purposes of a single residential dwelling and considered to be the highest and best use of the land". In this context, at page 3 of his reports it is also noted that "The subject land is valued under s.17(1) … as a site for use as a single dwelling house". [12] Mr Rainbow's valuation approach was to value each of the subject lots as separate legal entities but ignoring any higher potential use the lots might have under the "Low – Medium Density Residential" classification. As identified by Mr Rainbow, the area surrounding the subject lots is comprised of a mixture of development types including single residential dwellings and multi unit developments. On the approach of Mr Rainbow the potential the lots might have for multi unit development is ignored. [13] In my opinion, Mr Rainbow's approach is correct. Section 17(1) of the VLA, in circumstances where it is operative, requires any increase in value resulting from the potential the subject land has for a higher and better use, including for subdivision, to be disregarded. Section 17(1) does not, as was contended for on behalf of the appellants, require the subdivision and creation of new lots which had occurred prior to the relevant date of valuation to be disregarded. The Flooding Issue [14] I accept that both lots 1 and 2 are subject to periodic flooding. I also accept that the impact of such flooding is as reported in the water assessment report of Storm Water Consulting dated 30 May 2003.5 At page 2 of that report the author concludes: 5 Exhibit 2, Attachment 20 -- 4 of 7 -- 5 " • The Q50 overland flow, (flows in excess of pipe capacity), at 30 Mark Street, New Farm is 3.2m³/s. • The Q50 inundation across the developed site is shown on Figure 4. • The maximum Q50 overland flow level across the site is 3.25m AHD. • The minimum habitable floor level should be at 3.75m AHD. The minimum non-habitable floor level (garage, laundry, storage rooms) should be at 3.55m AHD. • An open car parking area under the house, that does not constitute a garage, is not subject to a minimum floor level requirement." [15] The evidence of Mr Rainbow about this issue was somewhat confusing. As I understand his evidence, his investigations led him to conclude that as a matter of fact the subject land was probably not flood affected. However, given that the land lay within an area identified by the Brisbane City Council as a "Flood Report Search Area" Mr Rainbow actually valued the land on the basis that it was flood affected. At page 4 of his reports Mr Rainbow in part stated: "At the time of carrying out the valuation, a search via Brisbane City Councils' E-Bimap program highlighted the subject property as being located in a 'Flood Report Search Area'. Based on this information an allowance was made for flooding when arriving at our valuation figure." [16] In his evidence in chief Mr Rainbow, on more than one occasion confirmed that he had, in valuing both lots, made an allowance for the impact on flooding. In this context, Mr Rainbow pointed out that his main comparable sale (Sale 1) at 16 Fuljames Street, New Farm was also flood affected. [17] On balance, while I have some reservations about the evidence of Mr Rainbow, I have not been convinced that he failed, in carrying out his valuations, to adequately take into account the risk of flooding and that it is necessary to make some adjustments to the valuations appealed against. Best Evidence [18] In carrying out his valuations Mr Rainbow had particular regard to three lightly improved sales, two of which occurred in New Farm and one in Newstead. The expert opinion of Mr Rainbow was to the effect that Newstead was sufficiently close both in terms of distance and character to provide a sensible comparison with the New Farm real estate market. These three sales were ranked in order of comparability with the subject lots. [19] Mr Rainbow also had regard to a sale at 6 Amity Street, New Farm (Sale 4) and one at 27 Clay Street, New Farm, described as a "Supplementary Sale". It is clear that Mr Rainbow had little regard to either of these sales in carrying out his valuations. The first -- 5 of 7 -- 6 was used as evidence of a "continuing upward trend" of prices in New Farm through to January 2005. I cannot accept that a trend of any sort can be established by reference to a sample consisting of one sale. [20] The "Supplementary Sale", which occurred in August 2002, was used for establishing a "floor" price for land in New Farm. Mr Cupo challenged this proposition and referred to a sale at 136 Annie Street in March 2003 (settlement in April 2004) for only $150,000. It was Mr Rainbow's opinion that this sale was "out of line" and unreliable evidence of value despite there being no evidence to indicate that the parties to the sale might be related. On balance, I consider that neither of these sales are of any assistance in determining these appeals. Mr Rainbow's sale is too old in my opinion to be of any real assistance. On the other hand, the sale at 136 Annie Street for $150,000 on all the evidence appears to be a very low sale and out of line with the rest of the New Farm real estate market. [21] As discussed in paragraph 7 above, usually the best evidence of unimproved value will be sales of comparable lands which are vacant or lightly improved and which occurred reasonably proximate to the relevant date of valuation. However, as was recently recognised by the High Court, a group of sales of comparable vacant land may not be capable of providing a basis for a fair assessment of unimproved value in circumstances where such sales are scarce or very scarce. As was said by the High Court in Maurici v Chief Commissioner of State Revenue6 "… A fair estimate could only be made … on the basis of a fair, that is to say, a reasonably representative group of comparable sales. A group of comparable sales cannot be representative if it does not go beyond sales of scarce vacant land." [22] In final submissions, Ms Marshall referred to a number of decisions of the Land Appeal Court in support of the proposition of that the best basis for determining the unimproved value for a parcel of land is evidence of sales of comparable lands that occurred at or about the relevant date of valuation.7 In my opinion, while those observations of the Land Appeal Court will be entirely appropriate in many cases, they must now be read in the light of the decision of the High Court in Maurici and of the Land Appeal Court in Department of Natural Resources and Mines v Spender8 where, at paragraph 84 that Court said: " … The High Court reasoning, as we interpret it, was a recognition that the market for land in a predominantly built-up area was not exclusively of scarce vacant land but inclusive of land with improvements thereon. As each parcel of land in that 6 (2003) 212 CLR 111 at [18]: See also unreported decision of Land Appeal Court in Department of Natural Resources v Spender [2003[QLC 0086 at [54] 7 Eg. Fischer v Valuer General (1983) 9 QLCR 44 at 46; Grahn v Valuer General (1993) 14 QLCR 327 8 [2003] QLAC 0086 (unreported) -- 6 of 7 -- 7 environment, vacant or improved, was required to be valued in the statutory process, on the basis of relative value at the same date, albeit notionally as unimproved, it was wrong to adopt a basis of valuation selected exclusively from one segment of the market which in itself was not proved to be representative of the overall market for land." [23] That is, in some cases it will be necessary for the respondent to be more vigilant to ensure that the sales relied on by it to set its statutory valuations form or are part of a group of sales which is reasonably representative of the overall market for land in the relevant area. As recognised by the High Court in Maurici, sales from a scarce segment of the market may not be sufficiently representative to provide the basis for a fair assessment of unimproved value. [24] In these appeals, the evidence of Mr Rainbow was that vacant land sales in New Farm and Newstead were few in number. However, his evidence was also to the effect that the three primary sales relied on by him in his valuation exercise were chosen from a larger group of sales including of improved land and that they were sufficiently representative of the real estate market in New Farm to provide a fair basis for assessing the unimproved value of the subject lots. [25] In my opinion, the appellant's produced no reliable evidence to either support the levels of value contended for by them or to challenge the reliability of the sales evidence relied on by the respondent. On the evidence before me I am satisfied that, in reaching his expert opinion, Mr Rainbow had regard to sufficiently reliable sales evidence which was properly analysed and applied. [26] For the reasons expressed above I have reached the conclusion and so find that the appellants have failed to prove that the valuations appealed against are wrong and ought be varied. Accordingly, the order the Court will be that both appeals are dismissed. Orders: 1. Appeal AV 2006/0109 is dismissed. 2. Appeal AV 2006/0110 is dismissed. RS JONES MEMBER OF THE LAND COURT -- 7 of 7 --