Churven & Anor v Department of Natural Resources and Mines [2004] QLC 109

LAND COURT OF QUEENSLAND CITATION: Churven & Anor v Department of Natural Resources and Mines [2004] QLC 109 PARTIES: Philip Stuart Churven and Ylva Maria Kjellberg (applicants) v. Chief Executive, Department of Natural Resources and Mines (respondent) FILE NOS.: AV2003/0468 and AV2002/0370 DIVISION: Land Court of Queensland PROCEEDING: Appeals against annual valuations under Valuation of Land Act 1944 DELIVERED ON: 6 December 2004 DELIVERED AT: Brisbane HEARD AT: Redcliffe and Brisbane MEMBER Dr NG Divett ORDER: The appeals are dismissed, and the unimproved values of Lot 96 on RP 30443 as determined by the Chief Executive in the sums of Six Hundred and Seventy-Five Thousand Dollars ($675,000) (AV2002/0370) and Eight Hundred and Eighty Thousand Dollars ($880,000) (AV2003/0468) are affirmed. CATCHWORDS: Valuation – Comparison of sales – Scarcity of sales – Class of buyers – Restricted market – Merge of market sectors. Valuation – Sales – Sale of the subject land – Reasons for rejection not accepted. Valuation – Sales – Changes in the market. APPEARANCES: Mr PS Churven appeared for the appellants. Mr GJ Smith, Senior Legal Officer, for the respondent. -- 1 of 19 -- 2 Background: [1] These two matters relate to land at 100 Prince Edward Parade, Scarborough and described as Lot 96 on RP 30443, Parish of Redcliffe. The subject land has an area of 1,229 square metres, and is located about 1 kilometre north of Central Redcliffe Shopping Centre. The subject land has good access to Prince Edward Parade, which is bitumen sealed with concrete kerbing and channelling. The land is zoned Residential C under the Redcliffe City Town Plan of 19 April 1986, current at the respective dates of valuation of 1 October 2001 (AV2002/0370) and 1 October 2002 (AV2003/0468). The key issues are comparison of sales, scarcity of sales and the sale of the subject land. [2] On 24 February 2002 the Chief Executive issued a valuation of the subject land at 1 October 2001 at $715,000. Following an objection the Chief Executive revised that unimproved value under s.68 of the Act to $675,000, which is the value now appealed against. The appellants have now appealed claiming the unimproved value should more properly be $400,000 (AV2002/0370). [3] On 24 February 2003 the Chief Executive issued a further valuation of the subject land at 1 October 2002 at $930,000. Following an objection the Chief Executive revised that figure under s.68 of the Act to $880,000 on 29 March 2004. The appellants have further appealed that figure claiming the unimproved value should more properly be $500,000. [4] Mr Philip Stuart Churven appeared and gave evidence for the appellants in both matters. Mr GJ Smith, Senior Legal Officer appeared for the respondent in both matters, calling evidence from the two departmental registered valuers, Philip Christopher Smith (AV2002/0370), and James Francis Corder (AV2003/0468), who were responsible for determining the valuations. With the consent of the parties both matters were heard consecutively, and the Court undertook an inspection of the property and all sales. Nature of the land – [5] The subject land is a near rectangular parcel and is level with Prince Edward Parade on its western frontage of 21 metres. The land is level for about two-thirds of its area (760 square metres) and then falls 9 metres towards the Esplanade frontage at its eastern boundary. The land has a depth of about 61 metres. There are uninterrupted 180 degree views of Moreton Bay and the offshore Islands. There is a pedestrian pathway along the Esplanade area of Queens Beach. The subject land is located in the heart of what is seen as a prestigious area of Redcliffe, having direct beach front access to Queens Beach from its rear, and street frontage to an elevated part of Prince Edward Parade. Both parties agree with that description. -- 2 of 19 -- 3 History of the valuations – [6] Mr Smith advises that departmental records record that the previous valuation of the subject land had been $550,000 at 1 October 1999. He advises that because of a lack of change in the market, there had been no revaluation from 1999 until the current valuation at 1 October 2001. During that period he advises that some parts of Redcliffe had increased by up to 80%, while the overall average increase had been 38% in the City. The subject land had been increased by 23% to $675,000. [7] The locality of the subject land is agreed to be an area of significant redevelopment potential for both single residential uses and multi unit residential uses, flowing from the land uses of Residential C and D zonings. Both valuers now argue that as a result of market demands for those prestigious waterfront properties, the separate submarket sectors for residential and multi-residential purposes have now merged into a single market at the top end of the residential scale. Mr Churven challenges that conclusion as discussed later. [8] Mr Smith provides evidence that during the objection process in respect of AV2002/0370, his understanding was that the appellants appeared to agree to the revised figure of $675,000 now appealed against. However Mr Churven disagrees with that statement, advising that any potential agreement by him would have been conditional upon his having to agree to the later valuation of $880,000 for the 1 October 2002 valuation. He argues that he could not agree with those conditions, hence the current appeals. Comparison of sales – [9] Mr Churven rejects the comparable sales provided by both Mr Smith and Mr Corder, arguing that they reflect major redevelopment sites, or sites which were made vacant for redevelopment purposes,. He argues that it would have been better to have used sales where the intended purpose was to continue for residential purposes. In order to understand the respective evidence I will consider two separate valuations. 1 October 2001 – AV2002/0370 - [10] To support his estimate of the valuation Mr Churven relies upon the following sales:  Sale 1 – (121 Margate Parade, Margate – Lot 2 on RP 96220 – Bullivant to Bundy). This is a 551 square metre parcel located in the Margate area about 3 kilometres south of the subject land (Exhibit 5). The sale has Margate Parade between it and the waterfront. The sale was developed with a large two-storey dwelling of about 400 square metres footprint, or about 600 square metres to 800 square metres floor area. The dwelling occupies most of the site, and was fully furnished at the sale date. The dwelling was in superior condition to the subject property at their respective sales. The sale sold for $700,000 in August 2001. Mr Churven knows the purchaser (Bundy), and advises that the sale was predominantly refurbished sometime prior to that sale, and no further major refurbishment has proceeded since September 2002 when he had inspected that -- 3 of 19 -- 4 property. However Mr Churven would not estimate the added value of those improvements on that sale. [11]  Sale 2 – (18 to 28 Prince Edward Parade – Piper to Seymour). That sale occupies four parcels (3,616 square metres) and is located about 0.7 kilometres south of the subject land. The sale was developed with a very substantial home, maids' quarters and a tennis court. However Mr Churven could provide no estimate of the added value of improvements on that property. The sale sold in March 2000 for $2,000,000. [12]  Sale 3- (18 Gayndah Esplanade, Woody Points). Mr Churven advises that there were two sales of residences in that area, one for $500,000 and the other for $400,000, although he was uncertain about the exact details of those sales. The 18 Gayndah Esplanade sale was adjacent to the hotel site on the street corner, and has two dwellings upon the site. [13] Mr Smith was familiar with both Sale 1 (121 Margate Parade) and Sale 2 (18 to 28 Prince Edward Parade). While he had not analysed those improved sales, he considered those sales in his overall analysis of improved sales in that area. Mr Smith had spoken to the buyer of Sale 2 (Seymour) and been advised that it was purchased as a development site, but the existing dwelling had subsequently been retained. Mr Smith feels that location is inferior to the subject location, but agrees because of its brick and rendered dwelling, if development subsequently occurs, then the existing dwelling will need to be demolished. [14] In respect of Sale 1 (121 Margate Parade) Mr Smith offers an opinion that perhaps the added value of improvements on that sale might have reflected say $200,000, leaving an unimproved value of $500,000 for that parcel of area 551 square metres in an inferior locality. He argues that rough comparison would at least support his valuation of $675,000 for the subject land. Mr Smith adopts that estimate based upon his memory of the Rawlissons Guide on Building Costs for 2000 of about $600 to $700 per square metre, less major depreciation due to the age of the dwelling. Mr Churven challenges those added values, although neither party supplies any detailed analysis of that sale. Mr Smith confirms that a two-storey dwelling with a footprint of say 300 square metres to 400 square metres would have cost about $300,000 at that time, less the depreciation rate. Mr Churven provides no detailed costs estimates to refute that estimate by Mr Smith. [15] Mr Churven argues that considerations of his residential Sales 1 to 3 indicate a general level of value which is different to those sales which clearly are for redevelopment purposes. Mr Smith rejects that conclusion, arguing that there is now one market for waterfront lands, whether they are to be demolished for units, demolished for a new single residence, or refurbishes as had occurred on the subject land. He argues each type of buyer must now compete in the same market, as demonstrated by about 20 waterfront -- 4 of 19 -- 5 sales in that period from the Hornibrook Highway to Scarborough. Mr Smith argues that because of the premium location of the subject land, comparable size lots at Margate would be less than those near the subject land. [16] To support his valuation Mr Smith provides the following sales:  Sale 1 – (36 Prince Edward Parade – Lot 1 on RP 18240). This is a 1,171 square metre Residential D parcel located about 0.6 kilometres south of the subject land, and at the corner of Prince Edward Parade and Steven Street. The sale is lower in elevation, but is overall a level site, and is a corner site, and therefore has superior access. However the sale is in a less prestigious location than the subject land, and overall is seen as inferior to the subject land. The sale is an older sale prior to the change in the market which brought increased levels of value. The sale sold in March 2000 for $665,000, was analysed at $665,000 after allowing for demolition cost of the old dwelling, and was applied at $630,000 (95%). The property has been developed as units. [17]  Sale 2 – (42 Prince Edward Parade – Lot 96 on RP 74531). This is a 946 square metre Residential C parcel located about 0.5 kilometres south of the subject land. The sale is at a lower elevation, with a gentle slope to the rear, and similar access to the subject land. The sale is overall inferior to the subject land due to its less prestigious location and its smaller size. The sale is an older sale prior to the change in market conditions. The sale sold in June 1995 for $515,000, was analysed at $515,000 after allowing for demolition of the old dwelling, and was applied at $510,000 (98%). The property has been redeveloped as a single residence. [18  Sale 3 – (142 Prince Edward Parade – Lot 1 on RP 227356). This is a 5,671 square metre Special Purpose parcel located about 0.4 kilometres north of the subject land, with access to Prince Edward Parade and Osborne Street, and pedestrian access to the Esplanade. The sale was the old Queensland Bush Children's Health Scheme, and is level, with excellent views of Moreton Bay, and is slightly more elevated. The sale has superior access, is larger in size and is overall superior. The sale was an older sale prior to change in the market conditions. The sale sold in September 1999 for $3,000,000, was analysed at $2,980,000, and applied at $3,300,000, after allowing for the increased amalgamation areas including Sales 4 and 5. [19  Sale 4 – (13 Flinders Parade – Lot 280 on RP 30459). This is a 435 square metre Residential C parcel located adjoining Sale 3, which was then amalgamated with Sales 3 and 5. This is a smaller, level lot with frontage to the Esplanade, and with good views of Moreton Bay. To obtain the parcel for amalgamation purposes the purchaser paid a $100,000 premium above the real estate determined value of $400,000. The sale sold for $500,00 in August 1999, was analysed after allowing for the premium at $400,000, and applied as part of the amalgamated value of $3,300,000 for Sale 3. [20]  Sale 5 – (15 Flinders Parade – Lot 281 on RP 30459). This parcel adjoins Sale 4, and sold in October 1999 for $500,000, with a similar premium of $100,000. The sale was analysed at $400,000, and also applied as part of the amalgamated Sale 3. -- 5 of 19 -- 6 [21]  Sale 6 – (111 Flinders Parade – Lots 192 and 193 on RP 30468). This is a 810 square metre Residential C parcel located about 1 kilometre north of the subject land. The sale is a later sale after the revaluation period, which demonstrates the value of smaller Lots without direct beachfront access. The sale is two elevated parcels which are being redeveloped as two single unit dwellings. Access is via a divided level carriageway in Flinders Parade, with access to the property from the higher level, and access to the beach from the lower level. There is an access easement across the rear of the two separate lots which provide access to the adjoining lot to the north (Lot 191). Overall the sale is smaller, with no direct access to the beach, and in an inferior location. The sale sold in April 2002 for $800,000, was analysed at $794,000, and applied at $510,000. [22]  Sale 7 – (39 Thurecht Parade, Scarborough – Lot 1 on RP 105834). This is a 405 square metre vacant Residential B parcel located about 2.6 kilometres north of the subject land. The sale is steeply sloping from the rear, with potential elevated views of Scarborough Boat Harbour. The sale is seen as reflecting the lowest level of value of lands with potential water views. Overall the sale is far inferior due to its steep terrain and far inferior location, outlook and views. The sale sold in December 2000 for $220,000, was analysed at $217,000, and applied at $207,500 (96%). The sale is a single dwelling site. [23]  Sale 8 – (90 Prince Edward Parade – Lot 91 on RP 30443). This is a 1,229 square metre Residential C parcel located about 100 metres south of the subject land. This improved property includes old flats and other improvements estimated at a total added value of $160,000. The land is similar in elevation, access and frontage to Queens Beach as the subject land, and as it is in the same location is seen as directly comparable to the subject land. The older improvements on the sale are inferior to the three-storey dwelling on the subject land. The sale sold in July 2001 for $1,100,000, was analysed at $932,500, and applied at $730,000. The sale has continued to be used as flats, but Mr Smith advises that it is likely to be redeveloped in the short to medium term as a single house site by the purchaser for his own residence. [24] Mr Smith argues that because of the limited number of waterfront parcels in that area of the subject land, the overall market now reflects the single merged opportunity for any persons wishing to locate there, irrespective of their final proposed type of development, as noted in paragraph [7]. He argues his Sales 2 and 8 demonstrate that point. Mr Smith further notes that as his Sale 8 is in very close proximity to the subject land, it reflects the increase in the market level that has occurred since the sale of the subject land in January 2001. However he agrees that his Sale 3 is a redevelopment site, and while Sales 4 and 5 were seen as including a premium because of their influence upon the redevelopment of Sale 3, the settled price of $500,000 was still less than the asking prices. That perhaps explains why Sales 4 and 5 were on the market for 12 months prior to their sales to the new owner of Sale 3. -- 6 of 19 -- 7 [25] Mr Churven questions whether the $135,000 allowed for the added value of the existing flats on Sale 8 appears unreasonably low. Mr Smith advises that due to the likely early redevelopment of that parcel, he feels that the large depreciation rate allowed on that building is generous. Mr Smith further advises that while he has not relied upon Mr Churven's highly improved Sale 1 (121 Margate Parade) and Sale 2 (18 to 28 Prince Edward Parade), he had looked at them during his valuation, but elected not to use such highly improved sales, relying more upon lightly improved sales in his Sales 1, 2, 3, 6 and 8. 1 October 2002 valuation – [26] Mr Churven provides no further sales to those argued for the 1 October 2001 valuation. Mr Corder provides the following sales to support his valuation at 1 October 2002:  Sale 1 – (141 Flinders Parade, Scarborough – Lot 1 on RP 64257). This is a 779 square metre Residential C parcel located about 1.2 kilometres north of the subject land. The sale was improved with an old dwelling which was demolished at a cost of $12,000. The land is level, with good Moreton Bay views over a road and landscaped park. Overall the sale is seen as inferior to the subject land in size, location, frontage and Bay views which are over the roadway. The sale sold in June 2000 for $470,000, was analysed at $480,000, and applied at $475,000 (99%). [27]  Sale 2 – (111 Flinders Parade, Scarborough – Lots 192 and 193 on RP 30468). This is the same sale as Mr Smith's Sale 6. This is an 809 square metre Residential C vacant parcel located about 1 kilometre north of the subject land. The sale comprises two level 400 square metre parcels with good Bay views over a double roadway and landscaped park. A single dwelling has since been constructed on Lot 193. The sale is seen as inferior to the subject land in size, location, Bay outlook across the road and park, and narrower frontage. The sale sold in April 2002 for $800,000, was analysed at $798,000, and applied at $660,000 (82%). [28]  Sale 3 – (55 Landsborough Avenue, Scarborough – Lot 712 and 713 on RP 30470). This is a 1,275 square metre Residential B improved parcel with old units located about 1.5 kilometres north of the subject land. The land is two elevated level lots with good Bay views across a roadway and park. The sale is inferior to the subject land due to its inferior location, inferior Bay outlook, zoning and lesser frontage. The sale sold in April 2002 for $857,000, was analysed at $875,000 after allowing for $20,000 to demolish the old units, and applied at $790,000 (90%). [29]  Sale 4 – (100 Prince Edward Parade, Scarborough – Lot 96 on RP 30443). This is the sale of the subject land itself, and is discussed later. The sale sold in January 2001 for $850,000, was analysed at $848,000, and applied at $880,000 (104%). [30]  Sale 5 – (2a Shield Street, Redcliffe – Lot 2 on RP 48118 and Lot 4 on RP 48541). This is a 551 square metre Residential C improved parcel located about 0.3 -- 7 of 19 -- 8 kilometres south of the subject land, and with direct pedestrian access to the Esplanade. The sale is level with vehicle access to the south across the rear of the adjoining lot to Shield Street. The sale has good views to the Bay. The sale sold in August 2002 for $696,000, was analysed at $644,000, and applied at $475,000 (74%). [31] Mr Corder supports Mr Smith's conclusion that once lands are on the actual waterfront in that area, they merge into a single market for all types of purchases. He further notes that under those conditions, where lands are in high demand for redevelopment for whatever purpose, then a higher level of depreciation than normal tends to apply to the old existing dwellings. Mr Corder also notes that he had considered Mr Churven's highly improved sales, and rejected those for the lesser improved sales in his report. Mr Corder agrees that because of uncertainties with his Sale 4 (the subject land), and also its older age, he had placed little reliance upon that sale as noted by his 104% application of that sale. He also notes that while it is the personal decision of each purchaser whether to refurbish an old dwelling, or remove it and start again, the costs of the former are often greater than first anticipated. Impact of scarcity – [32] Mr Churven argues that the very limited number of waterfront properties in that locality means that the limited sales of such land must contain a scarcity factor which should be addressed in the valuations. To support that conclusion he refers to the findings of the High Court of Australia in Maurici v Chief Commissioner of State Revenue and Anor [2002] 212 CLR 111. Mr Churven argues that, in his opinion, as the sales selected by Mr Smith generally represent redevelopment sites, rather than sales of existing dwellings which are to be retained, and perhaps refurbished, then it was very important for the respondent to seek clarification by analysing improved sales such as his Sales 1 to 3, and also the actual subject land itself. [33] Mr Smith rejects that there is a scarcity factor in existence in that area, as he argues that the total of 20 waterfront sales in that locality demonstrate that market forces are operating in the area. However Mr Churven argues that because of the unreasonably selective limited sales, most of the properties purchased for redevelopment purposes are being acquired by a different class of buyer as directed in Maurici (supra) at paragraph [18], where the High Court said: "… So too, sales relied on, such as of scarce vacant land, are likely to be to a special and different class of buyer from buyers of improved land. As Waddell J said in Sher v The Commissioner for Main Roads (1975) 24 The Valuer 150 at 151, sales of properties of a different character are likely to attract a different class of buyer and are unlikely to provide a reliable indication of value." (p.121). -- 8 of 19 -- 9 [34] To demonstrate that point Mr Churven notes that all of the purchasers of Mr Smith's Sales 1, 3, 4, 5 and 6 and Mr Corder's Sales 1, 2, 3 and 5, are body corporate commercial structures, quite different to the purchasers of Mr Smith's Sales 2, 7 and 8 or Mr Churven's Sales 1, 2 and 3 and the sale of the subject land itself. [35] In seeking clarification about the role of a valuer in such circumstances, where there is a scarcity of comparable sales evidence, Mr Churven notes that the High Court went on to say that the directions of Lord Keith of Avonholm in Tetzner v. Colonial Sugar Refining Company Limited [1958] AC 50 (and also 14 The Valuer 477), could not be interpreted as directing a valuer how to go about the task of selecting comparable sales, which would then ignore any impact of scarcity of sales. Indeed the High Court in Maurici said at 122: [21] "Nothing that was said by His Lordship in Tetzner bears upon the way in which a valuer should go about the task of selecting and applying comparable sales under the applicable legislation. The appellant does not suggest, to borrow his Lordship's words, that the valuer should close his eyes to any relevant fact. Indeed the contrary is the case. It is, the appellant submits, the respondent's valuer who closed his eyes to relevant matters. He should have had regard to all of the relevant facts including the scarcity of vacant land, the possibility of a particular and limited class of persons in the market for it, the scarcity or otherwise of improved land, the added value of the improvements to comparable lands, and in particular, truly comparable sales, which ideally would include like land similarly improved to the subject land. And whilst it is true that s.6A is intended to apply to each valuation made under it, its statutory operation in relation to all valuations, that is, all pieces of land to be valued, is another factor which cannot be ignored, and required that a scarcity of vacant sites not be the determinant factor in valuations made under the Act." The sale of the subject land – [36] A key part of Mr Churven's case rests upon the analysis and adoption of the sale of the subject land itself. While Mr Corder has included that at Sale 4 in his report (Exhibit 7), both he and Mr Smith have rejected its adoption in view of certain matters associated with that sale. Apparently inquiries to the appellant in respect of providing further details of special conditions of that sale have been so far not forthcoming from Mr Churven. [37] Mr Smith advises that as a result of his investigation to the agent who handled the sale of the subject land for $850,000 in January 2001, Mr Smith had become aware that the original asking price for that property had been between $1,100,000 and $1,200,000 in late 2000. He was also advised that the sale had been the subject of some special conditions of the contract (Clause 1), which the valuer should become aware of in analysing that sale. The property had apparently been on the market for some time, and was finally purchased by the appellants after it had been unable to get a successful bid at -- 9 of 19 -- 10 public auction. Mr Smith had no knowledge of the contents of Clause 1 in the contractor of the sale. However he understood that it had included reference to the sale of another property, which Mr Smith's search of departmental records indicated might be a sale of a house/home unit at 108 Ferny Avenue, Surfers Paradise. [38] While he could not locate the contract details of Clause 1 from his records, Mr Churven offered advice in respect of that other property, which eventually was agreed was not the property concluded by Mr Smith. Mr Churven advises that the other property involved in Clause 1 was another unit owned by his mother at 3317 Gold Coast Highway, Surfers Paradise. A subsequent copy of a departmental record of that sale (Exhibit 6), confirmed that sale occurred between Mr Churven's mother and Macaboysj on 18 January 2001 for $122,000. Mr Churven advises further that communications with the Commissioner of Stamp Duties in respect of the sale of both the subject land and the unit at 3317 Gold Coast Highway, confirmed the reliability of those sales as both bona fide commercial separate transactions. He advises that the connection between the two sales was a normal requirement of a sale subject to the sale of another. [39] While Mr Smith agrees that he had not pursued a more in-depth analysis of the sale of the subject land, when he determined his valuation for 1 October 2001, he believes that the current valuation of $675,000 sits reasonably well with the sale price early in 2001. He argues that the change in market levels through 2001 meant that the land value had increased since January 2001. He notes his Sale 8 only three doors away for $1,100,000. However he notes that even accepting the unimproved value of the land at $675,000 still leaves a total of $175,000 for the added value of the improvements upon that sale as explained later. [40] Mr Smith also notes that he had been given subsequent information that improvements on the subject land needed considerable refurbishment, subsequently supported by the ongoing rebuilding program evident by the long-term presence of builders upon the site. Mr Churven agrees that the appellants have spent considerable expenditure on refurbishments, but argues that the building was sound, and in his opinion, worth a lot more than the $175,000 suggested by Mr Smith. Mr Churven argues that with a building area in excess of 500 square metres over three levels, which is aged only 10 years since construction, that was a low added value for the buildings and seemed unreasonable. [41] Mr Churven argues that in his opinion the real reason for Mr Smith overlooking the sale of the subject land, was because Mr Smith had focussed entirely upon vacant or near vacant lands, contrary to the directions of Maurici. -- 10 of 19 -- 11 Decision: Scarcity of Impacts - [42] I turn first to the matter of scarcity, and whether there was sufficient evidence in the market place to establish that such a factor existed in that area at the relevant dates. In respect to directions from Maurici, I note that there is one factor which distinguishes that decision from the current matter. In Maurici, the valuer for the respondent, Mr Croker, had agreed with the appellant that scarcity had existed in that area of Hunters Hill in Sydney. Indeed the High Court noted: [17] "The method adopted by the respondent suffered, in our opinion, from these defects. It was unduly selective. It looked, on a fair reading of Mr Croker's evidence, effectively exclusively to four sales (including a resale) only. Those were sales of vacant or substantially vacant land. They were not representative of sales in Hunters Hill. That must be so, because, as both sides accept, vacant land in Hunters Hill is scarce, if not to say, very scarce." (p.120) [43] In the current matter the respondent's valuers reject that there is a scarcity of sales in the area at the relevant dates, providing evidence of 20 sales of comparable waterfront lands, of which the selected sales were seen as representative. However Mr Churven argues that the sales chosen by the valuers reflected a different class of buyer than one representing the subject land. For that reason Mr Churven argues that the sales of vacant lands for redevelopment for unit purposes should be rejected, in preference to his sales of improved lands for single unit residential purposes at 121 Margate Parade, and 18 to 28 Prince Edward Parade. [44] To support Mr Churven's conclusion that a wider range of sales evidence should have been adopted by Mr Smith, I note that the High Court in Maurici concluded in paragraph [18] that on making a fair estimate of the value of the subject land: "A fair estimate could only be made here 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." [45] Further consideration of the Maurici decision was made in the matter of Department of Natural Resources and Mines v GE and JEJ Spender [2003] QLAC 0420, 19 December 2003, to be reported. In that matter the Land Appeal Court considered whether a premium should automatically be presumed to exist where sales of scarce parcels of land may be evident. The Land Appeal Court noted at paragraph [55]: "[55] It is seen as an observation of reality that a buyer of a scarce vacant parcel of land at a desirable location could be categorised as a special and different class of buyer to one not wishing to build and seeking an established dwelling. It might be a popular conception, particularly -- 11 of 19 -- 12 among those challenging a statutory land valuation, that a buyer of scarce land would be prepared to pay a premium over and above 'fair market value' because of that scarcity factor. However for that to be proved, or disproved, for the purposes of the statutory valuation process, analysis of the overall relevant market evidence is necessary. For example, just as a sale to an adjoining owner might be shown not to have included a premium, by reference to the overall market, a sale of a scarce vacant parcel needs to be considered in light of the overall market which includes sales of improved parcels." [46] The Land Appeal Court went on to say at paragraph [57]: "[57] Consequently, while purchasers of either improved or vacant land may be categorised as belonging to different segments of the market place, it does not necessarily follow that those segments are not strongly interlinked. The Maurici judgment recognises the error in a valuation basis being established from an overly selective segment of the market." [47] In the Spender matter the Member below had determined that the departmental valuer had unreasonably restricted his analysis to only a few scarce sales of vacant lands, and had ignored other sales of improved properties in his valuation determination. On the basis of Maurici the Member then rejected those scarce sales of vacant lands, and determined the unimproved value upon other criteria. In overturning that decision the Land Appeal Court accepted that the departmental valuer had considered a wider range of improved sales, although he had not shown those further sales as his supporting evidence, until the hearing, where acceptance of the further submission of those wider sales had not been allowed as evidence of the valuer's original intention. The Land Appeal Court found that the valuer "'did not provide a speaking report' as to the basis of his valuation of his improvements in his improved sales analysis. Nevertheless, his was the only professional evidence before the Land Court." (paragraph [82]). [48] In the current matter Mr Churven argues that it is unreasonable to compare the subject land with sales of lands, where a higher use, such as multi-units is anticipated, and where a different class of buyer is attracted. If I look then at the findings of Waddell J in Sher v Commissioner of Main Roads (supra), I find that the Court was presented with evidence of comparable improved sales, and relativities extending over a period from 1968 to 1974. The plaintiff's valuer had sought to compare the determined improved value of a sale, with that the subject land, and used that relativity in 1968 to establish the value of the subject land for compensation purposes in 1974. Waddell J found that such a valuation method may be useful for checking purposes, but its use is not supported for judicial determination of value, unless there is general agreement between the valuers. Waddell J found at 151: -- 12 of 19 -- 13 "Apart from this fundamental difficulty, it by no means follows that 1968 values are a reliable indication of the relative value of two properties in 1974, particularly where they are each of a different character and likely, as will be mentioned, to attract a different class of buyer". [49] Now that direction refers both to the "different character" of the lands, as well as the "different class of buyer". If I look then at the current matter, I find that the comparable sales reflect lands which are classed as waterfront lands, generally with water views across Moreton Bay. There is nothing specifically restrictive in the town planning provisions that would prevent either type of development on most of the sales. The major difference between the sales lies in the general topography and their size. [50] If I look then at the class of buyers reflected in the various sales, I note Mr Churven's concern that some of Mr Smith's sales reflect body corporate structures (paragraph [34]). While corporate ownership may suggest a higher end use for the land, it does not of itself conclusively prove that multiple unit development is necessarily seen in the market place as the most desirable end use. Indeed, where premium land for residential purposes is involved, particularly where waterfront or ocean views are included, the extent to which those who have the financial capacity to compete in the market place will extend themselves, will become evident. [51] That was noted in CR Gay v Chief Executive, Department of Natural Resources (1997-98) 17 QLCR 247, where the value of a prime waterfront parcel at Birkdale was considered. The Member noted at 272: "However the subject has clearly features including Bay frontage, size, privacy, views, aspect and mooring facilities which are superior to the 'Power' sale, and for which a potential purchaser seeking the very top of the range would pay a premium. The characteristics of the acquisition of scarce items such as paintings or works of art, demonstrate the extent to which those who can afford the best will extend themselves." [52] On balance I accept Mr Smith's evidence that the market for waterfront lands in that locality is now such that the various sectors for multi-unit or single residence sites has now merged into a single competitive market place. Whether an owner would choose to demolish an old improved site, or refurbish a dwelling, as has occurred with the appellants, is a matter of personal preference. However I agree with Mr Churven that it would also be wise to include his sales of single residences at his Sales 1, 2 and 3 in order to demonstrate that point. The sale of the subject land – [53] I turn then to the sale of the subject land which occurred within the relevant period for the 1 October 2001 valuation. In considering the relevance of that sale, I note the well -- 13 of 19 -- 14 established principle for determining the unimproved value of land set out by the High Court of Australia in Spencer v The Commonwealth of Australia (1907) 5 CLR 418 per Griffith CJ at 432. I note also the findings of The Chief Executive, Department of Lands v J and L Lorenzen (AV93-22), 1 June 1994, unreported, where the Land Appeal Court said at 4: "Whilst we agree that a sale of the subject land should always be considered in assessing its value we hasten to stress that such a sale is only prima facie evidence of its value. The weight which will be given to the sale is dependent upon a number of factors, the most important of which is whether the sale is in reasonable conformity with the market as demonstrated by other sales of comparable land." [54] In adopting the sale of the subject land, Mr Churven is confronted with the problem of determining the added value of improvements which should be deducted from the sale price in order to arrive at the unimproved value of the land. The matter of determining the added value of improvements was explored in O’Brien Nominee Pty Ltd v Valuer- General (1979) 6 QLCR 280, where the Land Appeal Court said at 284: "The basic properties have sold at prices considerably below the value of the improvements assessed on the traditional method of replacement cost less accrued depreciation. In such circumstances it is unrealistic to conclude that land, the commodity basic to the enterprise, has a minus or nominal value. It is logical to assume that in times of adversity and depression, when purchasers pay less for properties as a going concern, that the lesser price attaches not only to the land component but also to the improvements. The question facing valuers in analysing improved sales in these circumstances is what value is fairly to be attributed to the improvements? It appears to us that the only tenable approach is to abandon the traditional method of replacement cost as at the sale date less the depreciation and to adopt 'an added value concept'." [55] The matter of the relevance of adopting a sale of the subject land was also clearly clarified by the President of this Court in Determination of Rents and Unimproved Values for Conversion Purposes – Perpetual Lease Selections and Grazing Selections – Goondiwindi District (1974) 1 QLCR 45, who said at 48: "... whilst a sale of a subject property around about the relevant date in normal circumstances is cogent evidence of its value, it is always necessary to check the analysed value against the standard reflected by other sales of comparable properties to ensure that it conforms to the 'norm' of the market. If the sale does not so conform caution must be used in its application and it may be even proper to reject it if it is shown to be a sale out of line with the market 'norm'. This check becomes vital, in my opinion, in times of a varying market be it rising or falling or in times of -- 14 of 19 -- 15 an erratic market. One cannot assume, ipso facto, that the analysed sale figure equates fair market value for the subject purposes." [56] I note also that the High Court of Australia directed in respect of the added value that improvements bring to the land in Morrison & Ors v Federal Commissioner of Land Tax (1914) 17 CLR 498, where Griffith CJ said at 503: "… the term 'value of improvements' is defined to mean 'the added value which the improvements give to the land at the date of valuation irrespective of the cost of the improvements.' … Any operation of man on land which has the effect of enhancing its value comes within the definition of 'improvement'." [57] In considering the sale of the subject land as an improved property, I am also aware of the findings of the Supreme Court of New South Wales in Inez Investments Pty Ltd v JL Dodd (1980-81) 26 The Valuer 501. In that matter the plaintiff claimed damages from the valuer (Mr Dodd), who it was argued had incorrectly valued a property without reference to its purchase price. Carmichael J, noting guidance from the High Court in Spencer v Commonwealth of Australia (supra), per Griffith CJ at 432, and Isaacs J at 441, found in Inez Investments at 505: "It follows that where a valuation of a piece of real estate is sought as at particular date the most relevant information for analysis is the sale of that very property, if there be one, at or close to that date. The matters requiring analysis are: the terms and conditions of the contract, and was it a voluntary sale of a not anxious seller to a not anxious buyer?" [58] Now in the current matter the issues for consideration in analysing the sale of the subject land in January 2001 for $850,000, were the terms and conditions of the contract, and whether the sale was a voluntary sale at an arm's length situation. In respect of Mr Smith's concerns that the undisclosed Clause 1 of the contract of sale may have included certain provisions that precluded the use of that sale, I accept the verbal evidence from Mr Churven. The inclusion of a conditional agreement to a sale of another home unit at the Gold Coast, does not constitute by itself a reason for rejecting the sale of the subject land, as long as both sales were in line with the market at that time. [59] However I accept Mr Smith's evidence that in view of those uncertainties, and his inability to clarify his concerns, as well as the significant difference between the sale price and the former values at which the sale had been offered on the market, that would cause Mr Smith to apply caution in adopting the sale. The matter could have been quickly clarified had the conditions of Clause 1 been available to Mr Smith. [60] I believe that the extended period on the market, and the sale of the subject land following the unsuccessful auction, indicates that the sale was an arm's length transaction. On that -- 15 of 19 -- 16 basis I accept that the sale of the subject land is a matter for consideration in the valuation at 1 October 2001. In view of the significant changes that have occurred in the market since January 2001, the use of that sale for the subsequent 1 October 2002 valuation would appear less relevant. Comparison of sales – 1 October 2001 valuation - [61] If I turn then to the total sales evidence, I find that neither Mr Churven or Mr Smith have fully analysed Sale 1 (121 Margate Parade). While Mr Smith provides a rough estimate of the added value of the improved dwelling at about $200,000, leaving a land value of about $500,000, those figures may not truly reflect the actual values involved. Mr Churven challenges that low added value of the improvements, which he argues would be insufficient for a dwelling of that size and condition. If those figures were in reality only say $350,000 for the land, then the added value of the dwelling would have been $350,000, a figure nearer to Mr Churven's opinion. But such matters are merely speculation, and provide little assistance in this matter, except to note Mr Smith's opinion that 121 Margate Parade is an inferior locality than the subject land, and is also much smaller, and separated from the water by Margate Parade itself. Certainly 121 Margate Parade is considerably inferior to the subject land. [62] I turn then to Mr Churven's Sale 2 (18 to 28 Prince Edward Parade) and note that property is a single dwelling site, and therefore a similar use as the subject land. However the area of the sale is much larger than the subject land. Sale 2 is only one lot removed from Mr Smith's Sale 1 (36 Prince Edward Parade), which is about one third of the area of 18 to 28 Prince Edward Parade, and sold for about one third of the price of the latter. As both sales were occupied by dwellings at the date of sale, it could be concluded that the major part of the sale related to the value of the land areas. Without any meaningful analyses of the added value of the improvements upon 18 to 28 Prince Edward Parade, those conclusions provide little assistance in this matter, except to note that the sale is considerably superior to the subject land. In view of the lack of any meaningful analysis of Mr Churven's Sale 3 (18 Gayndah Esplanade) that sale is also of little assistance in these matter. [63] If I look then at Mr Smith's sales, I note that it is agreed that the market had increased significantly during 2001. I note also that residential home sites are generally purchased on a site basis. (H and E Grahn v Valuer-General (1992-93) 14 QLCR 327, at 330). However in this instance, as home site buyers must compete in the same limited market as unit developers, the market forces tend to move to a rate per square metre basis. For -- 16 of 19 -- 17 those reasons, Mr Smith has supplied comparative rates per square metre for his sales analysis comparisons. If allowances are made for the varying size of the sales, the analysed rates demonstrate the movement in the market from 2001 to 2002. [64] To summarise then Mr Smith's relevant sales, I find the following comparison: Sale Date Area Applied Value Analysed Comparison Sale Rate 1 3/2002 1,171 m² $630,000 $567 per m² Inferior 2 6/1999 946 m² $510,000 $544 per m² Inferior 3 9/1999 6,541 m² $3,300,000 $525 per m² Superior (amalgamated) 6 4/2002 810 m² $510,000 $980 per m² Inferior 7 12/2000 405 m² $207,500 $536 per m² Far inferior 8 7/2001 1,229 m² $730,000 $759 per m² Comparable Subject 1/2001 1,229 m² $675,000 $549 per m² - Land [65] In respect of the 1 October 2001 valuation, Sale 6 is well after the date of issue of the valuation, and is only useful to demonstrate the rising state of the market at this relevant date. Sale 7 is so far inferior as to provide little assistance. Because of its much larger size, the amalgamated Sale 3 is mainly useful to show that similar rates per square metre are reflected for the differing land uses. I believe that the most useful sales are Sales 1, 2 and 8, and the sale of the subject land. [66] Allowing for the smaller areas and the lower elevations of Sales 1 and 2, I agree that the parcels are inferior to the subject land. The two key sales would appear to be Sale 8 and the subject land. As both of those parcels have the same area, and location, being only 100 metres apart, the key difference between the sales lies in the date of the sale, and the added value of improvements. [67] If I consider first the analysed rates of those sales, I find that the subject land sold in January 2001 at about $549 per square metre, while Sale 8 sold some six months later in a rising market in July 2001 for about $759 per square metre. While amendments to the agreed added values of improvements would alter those analysed rates, the trend upwards for the later sale is evident. Clearly the subject land sold during a period when the market had been relatively stable, as evidenced by the failure to reach the original optimistic asking prices during 2000. The difference between the final selling price of Sale 8 and the subject land, must include some component for a rising market. -- 17 of 19 -- 18 [68] That then leaves an appraisal of the analyses of those two sales. If I consider Mr Smith's analysis of his Sale 8, I find that he has personally discussed that sale with the purchaser, and made an allowance for the short to medium term eventual redevelopment of that site as a single residence (see paragraph [25]). On that basis, allowing for the aged nature of the old flats, a high depreciation would not be unreasonable in estimating the added value of the improvements. It is important to remember that it is not the cost of such improvements, but only the added value that they bring to the land. Should that building later be demolished for redevelopment purposes, then the cost of such demolition would be an additional burden upon the new owner. I see no reason to reject Mr Smith's analysis of his Sale 8. [69] If I then consider the sale of the subject land, I find that the applied rate of that property at 1 October 2001 of $675,000, would indicate that the added value of the three-storey dwelling would only reflect about $175,000 (paragraph [40]). Now while there may be some support for Mr Churven's rejection of that low added value, bearing in mind the large size of the three-storey dwelling (500 square metres) and its relative short life span (10 years), that has not been demonstrated by evidence to the Court. [70] I also note Mr Corder's evidence that where sales occur in an area where subsequent redevelopments are in mind, then a higher than normal depreciation rate tends to apply (paragraph [31]). On balance, I accept Mr Smith's conclusion that an unimproved value for the subject land at 1 October 2001 of $675,000 is reasonable. The difference between the applied value for Sale 8 at $730,000, and the applied rate of $675,000 for the subject land, would appear to make some allowance for the difference in the added value of improvements. As vacant parcels, those two lots would clearly represent similar values for the land. 1 October 2002 valuation – [71] I turn then to Mr Corder's comparisons of sales, and note the following: Sale Date Area Applied Value Analysed Comparison Sale Rate 1 6/2002 779 m² $475,000 $616 per m² Inferior 2 4/2002 809 m² $660,000 $815 per m² Inferior 3 4/2002 1,275 m² $790,000 $686 per m² Inferior 5 8/2002 551 m² $475,000 $1,169 per m² Smaller Subject 1/2002 1,229 m² $880,000 $690 per m² - land -- 18 of 19 -- 19 If I consider the applied rate for the subject land of $880,000 ($716 per square metre), I find that it is consistent with the analysed rates for his sales, allowing for the smaller areas of Sales 1, 2 and 5. If I look at Sale 3, I note it has a similar size, but I agree with Mr Corder that it has an inferior access to Moreton Bay, and is inferior to the subject land. On that basis there is nothing to indicate that Mr Corder has made any error in his valuation. Summary: [72] Summarising this matter I am reminded that s.45(4) of the Act directs that the onus to prove his case rests upon the appellant. On the evidence Mr Churven has not demonstrated that either Mr Smith or Mr Corder have made any error of fact, or have followed an incorrect legal principle. On that basis I am also reminded that s.33 of the Act directs that in such circumstances the valuations as determined by the Chief Executive are deemed to be correct. Conclusion – [73] Having considered the whole of the evidence I am not persuaded that the appellants have proved their cases. The appeals are dismissed, and the unimproved values of Lot 96 on RP 30443 as determined by the Chief Executive in the sums of Six Hundred and Seventy- Five Thousand Dollars ($675,000) (AV2002/0370) and Eight Hundred and Eighty Thousand Dollars ($880,000) (AV2003/0468) are affirmed. NG DIVETT MEMBER OF THE LAND COURT -- 19 of 19 --