Auer v Department of Natural Resources, Mines and Energy [2004] QLC 69

LAND COURT OF QUEENSLAND CITATION: Auer v Department of Natural Resources, Mines and Energy [2004] QLC 69 PARTIES: Lawrence J and Rita M Auer (applicants) v. Chief Executive, Department of Natural Resources, Mines and Energy (respondent) FILE NO: AV2003/0456 DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under Valuation of Land Act 1944 DELIVERED ON: 30 July 2004 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Dr NG DIVETT ORDER: The appeal is dismissed, and the unimproved value of Lots 17 and 18 on RP 37651 as determined by the Chief Executive in the sum of Two Hundred and Eighty-Five Thousand Dollars ($285,000) is affirmed. CATCHWORDS: Valuation – Comparison of sales – Use of vacant land sales. APPEARANCES: Mr LJ Auer for the appellants. Mr Rabaa for the respondent Background: [1] This matter relates to land at 157 Park Road, Yeerongpilly and described as Lot 17 and 18 on RP 37651, Parish of Yeerongpilly. The subject land has an area of 841 square metres, and is located about 6.5 kilometres radially south of the Brisbane GPO. Access is good to Park Road which is bitumen sealed with concrete kerbing and channelling. The footpath -- 1 of 11 -- 2 is earth formed with a narrow concrete pavement. All normal urban utility services are available, and a regular bus service passes the subject land. The subject land is zoned Low Medium Density Residential Area under the Brisbane City Council (the Council) Plan of 30 October 2000, and effective at the date of valuation of 1 October 2002. The key issues are the nature of the land, the impact of traffic and adjoining business activity, changes in the valuation, relativity and comparison of sales. [2] In early 2003 the Chief Executive issued a valuation of the subject land at $285,000. Following an objection the Chief Executive confirmed that figure on 22 July 2003. The appellants have now appealed claiming that the unimproved value should more properly be $250,000. The matter was initially set down for hearing on 25 November 2003, but was adjourned at the request of the respondent due to illness reasons. There was no preliminary conference, and the matter went to hearing on 28 May 2004. [3] Lawrence Joseph Auer appeared and gave evidence for the appellants. Mr CP Rabaa, Counsel of Crown Law appeared for the respondent, calling evidence from Alwyn Charles Horne, the departmental registered valuer now accepting responsibility for the valuation, which had previously been determined by another registered valuer no longer available to defend the valuation. The Nature of the Land – [4] The subject land is used as a site of a single dwelling, and has been valued for that purpose under s.17 of the Valuation of Land Act 1944 (the Act). The subject land is slightly above street level at its frontage, with a slight fall to the rear, and a slight cross- fall to the north. [5] A key concern of the appellants is the impact of noise intrusions from passing traffic, and also from local home businesses adjoining the subject land. Mr Auer argues that while the bus route passing down Park Road is a convenience to local residents, he notes that the two bus services in that street total six buses per hour. That creates significant noise intrusions onto the subject land. Mr Auer also argues that the three educational facilities located along Park Road to the north of the subject land, also generate heavy vehicles and pedestrian traffic twice daily. He notes that passing students litter the street in the front of the subject land, causing increased need for repeatedly cleaning up the footpaths. He is also concerned with the loud intensity of some students which interferes with the appellants’ peaceful habitation of the subject land. [6] Of particular concern is the current increased traffic along Park Road during morning and evening peak periods, when motorists seek to “rat-run” between Ipswich Road and Fairfield Road in order to avoid traffic controlling systems. He advises that motorists in -- 2 of 11 -- 3 recent times now seek to avoid the many traffic lights along Ipswich Road by deviating into Gow Street and then along Park Road to the intersection of Fairfield Road near Venner Road traffic island. [7] Mr Horne agrees that can be occurring, but he argues that during other periods of the day Park Road is a relatively quiet street except for the periods before and after school. During those quieter periods Mr Horne notes that his inspections reveal few pedestrians, although he concedes that he has not inspected the area during peak traffic congestion. However Mr Horne feels that nearby Nathan Street would suffer from similar disabilities, as traffic found alternative routes from Fairfield Road to Ipswich Road. Mr Auer does not agree with that conclusion. [8] Mr Auer advises that noises are also created by several small business activities that occur on surrounding parcels. There is a violin music studio in a private residence immediately opposite the subject land, which causes regular noise; an auto electrician’s private residence diagonally across Park Road where vehicles are regularly serviced on the footpath; and an embroidery and oil machinery business which operates from the adjoining residence at 161 Park Road to the south of the subject land. While the auto electrician has no Council approval to operate from his private residence as a business site, he repeatedly appears to service vehicles, including large 8-ton trucks from that site. A motor cycle business in Ipswich Road also uses Park Road to test vehicles. [9] The most intrusive noise would appear to emanate from the at least ten delivery trucks daily which service the embroidery business next door at 161 Park Road. Those vehicles tend to operate from about 7 am each morning until 6 pm at night, and they are often accompanied by visitors who pass down a concrete footpath which is less than 3 metres from the appellants’ home. The appellants have formally complained to the Council that the conditions of operation for a “home business” are being exceeded, with no response by the Council. Mr Auer notes that rather than having only one employee on site, the adjoining business operates with three employees on one day in the week, and one employee on the other days. He argues that those increased activities must impact the effective residential quality of the subject land. [10] Mr Horne accepts that those intrusions do occur, but argues that they are only similar to other intrusions evident elsewhere in similar locations, and would be common along other areas of Park Road. He also argues that the schools are far enough removed from the subject land so as not to create a major nuisance. Mr Auer accepts that school children now often return home from school unattended by parents, unlike his earlier experience with his own children who were regularly supervised both to and from school. He notes -- 3 of 11 -- 4 with some resignation that such changes in parental supervision do not lead to a peaceful environment. [11] In respect of the current development controls existing upon the subject land, it is agreed that the existing dwelling is classified as “Character Housing” under the planning ordinances of the Council. Mr Horne is aware of those activities on adjoining properties, but he has made no allowance for activities which should be stopped by the Council. He notes that had there been an illegal non-conforming use of an adjoining property, then he could have made some allowance in the valuation. However he notes that the current activities could change at any time as people relocate their residences. He argues that the appellants are seeking to apply a very sensitive measure of noise intrusion, which is well above the normal levels evident elsewhere in the current society. Changes in the Valuation – [12] Another concern of Mr Auer is the rapidly increasing impact of the increased valuations upon his indebtedness for Council rating charges. He notes that public promises made by Council Aldermen that rate charges would not significantly increase over time, as a result of large increases in the unimproved values of land, have proved to be inaccurate. He concedes that is a separate matter to the current appeal, but notes that is part of the reason for his concerns with the current unimproved value of the subject land. Relativity - [13] Mr Rabaa notes that the subject land is a relatively large parcel of 814 square metres, compared to other properties in the area, and should therefore reflect a higher value than those smaller parcels. Mr Auer rejects that the subject land is of such significantly larger size, noting that other parcels in that part of Park Road are also relatively large in size. He notes for example that the adjoining parcel to the south of the subject land is twice the size of the subject land, and the land across Park Road is two and a half times the size of the subject land. He notes also that most of the parcels in the immediate area are larger parcels, and one has only recently been subdivided. [14] Mr Horne argues that at $285,000 the subject land area of 814 square metres is in appropriate relativity to the adjoining parcel at 161 to 163 Park Road of area 1,215 square metres at $400,000; and also in relation to the parcel across Park Road at 184 Park Road of area 2,059 square metres at $450,000. (See Exhibit 3 SmartMap p.7). I would agree with that conclusion. Comparison of Sales – [15] Mr Auer provides no sales of lands for comparison purposes, noting that there are seldom sales in Park Road. He advises that the adjoining residents in that area have all been -- 4 of 11 -- 5 long-term occupiers. Mr Horne agrees with that conclusion, arguing that is why he has had to seek sales elsewhere from more distant localities in Nathan Terrace, one street removed to the east, and Stephen Street to the west of Fairfield Road. Mr Horne provides the following sales from a sales schedule used by the previous valuer:  Sale 1 – (37 Nathan Terrace, Yeerongpilly – Lot 10 on RP 41046). This is a 405 square metre vacant parcel located about 0.2 kilometres north-east of the subject land. The sale has similar access and services, and is slightly above street level at its frontage, but rising gently to the rear boundary. The sale is seen as far enough away from local businesses so as not to be seen as a detriment. The sale is smaller than the subject land, and Nathan Terrace is seen having only marginally less traffic impacts. Overall the sale is seen as inferior to the subject land. The sale sold in January 2000 for $200,000, was analysed at $199,000, and applied at $186,000 [16]  Sale 2 – (25 Stephen Street, Yeronga – Lot 18 on RP 37929). This is a 407 square metre vacant parcel located about 1 kilometre north-west of the subject land. There are similar services available and there is good access to Stephen Street. The sale is on street level at the frontage, with a gradual rise to the rear. There are some blocks of units nearby, and the sale may suffer from local flooding during heavy rain. The sale is smaller in area, but is located in a superior locality. Overall the sale is seen as inferior to the subject land. The sale sold in May 2002 for $228,000, was analysed at $225,000, and applied at $210,000. The sale resold in July 2003 for $240,000, and again in September 2003 for $309,000. [17] Mr Horne advises that he had adopted the sales schedule previously used by the valuer who originally determined the valuation. He notes that while there may have been some other sales in the area, for various reasons he had not adopted those sales. While he had need to readjust the application of the sales, Mr Horne concludes that $285,000 for the subject land was a conservative valuation. Mr Horne argues that as both of his sales are only half the size of the subject land, clearly they would sell for less than the larger subject land. He agrees that Stephen Street is a better location than Nathan Terrace or Park Road, noting the later two resales of Sale 2 which reflect the demand for lands near to the river, even where there are no views of the water. [18] Mr Horne argues that purchasers are seeking larger lots among nice old homes, particularly where they are handy to schools. He notes that both Sale 1 in Nathan Terrace, and the subject land, meet those criteria. Mr Horne comments that Sale 1 of only 407 square metres for $200,000, which was applied at $186,000, indicates the level of values seen at $285,000 for 814 square metres for the subject land. Mr Horne sees his Sale 1 as his key sale. He agrees that Sale 1 was part of an original property of two subdivided lots, one of which (Sale 1) was sold off for erection of a single dwelling. He understands those properties have recently resold again. Mr Horne only uses his Sale 2 -- 5 of 11 -- 6 (25 Stephen Street) as a supporting sale. Mr Horne also notes that Sale 1 (37 Nathan Terrace) is at a lower elevation than the subject land. [19] In respect of adjoining impacts Mr Horne advises that properties surrounding Sale 1 are mainly residential, while there are four or five blocks of Units near to Sale 2 in Stephen Street. He agrees that there is a block of units behind the subject land. Mr Rabaa notes that there was a handicapped person’s centre in Oloan Street off Park Road, and towards the rear of Sale 1. Mr Rabaa speculates that might generate noise intrusions on to Sale 1, similar to those experienced at the subject land. However Mr Auer advises that centre is a School for the Oral Deaf, and noise levels there are minimal. Mr Auer notes that Stephen Street is a No Through Road with much less traffic movements. Decision: The Legal Principles - [20] Before considering the evidence I note that the unimproved value of the subject land is to be determined in accordance s.3(1) of the Act which relevantly states: “3.(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.” [21] While the subject land is currently developed as a residential dwelling, s.3(1)(b) directs that those improvements are to be ignored as if they had never existed. Guidance in that regard follows directions in the decision of the Privy Council in Tooheys Limited v. The Valuer-General (1925) AC 439 where Their Lordships said at 443: “Now, what he has to consider is what the land would fetch as at the date of valuation if the improvements made had not been made. Words could scarcely be clearer to show that the improvements were to be left entirely out of view. They are to be taken, not only as non-existent, but as if they never had existed. It is, therefore, to approach the question from a completely wrong point of view to begin with a valuation which takes in the improvements and then proceed by means of subtraction of a sum arrived at by an independent valuation in order to find the required figure. What the Act requires is really quite simple. Here is a plot of land; assume that there is nothing on it in the way of improvements; what would it fetch in the market? It will be observed that the value is not what has been sometimes designated by the expression ‘prairie value’. The land must be taken as it exists at the date of valuation.” -- 6 of 11 -- 7 [22] That was further clarified in the findings of the Privy Council in Tetzner v. Colonial Sugar Refining Company Limited (1958) AC 50, where Their Lordships said at 57: “What in Their Lordships’ opinion is required in the present case is that the physical improvements, with any value which they attach to the land on which they are situated, be excluded from the valuer’s computation. The land will then be valued as land devoid of buildings but situated in the community with the amenities and facilities which have grown up around it.” In simple terms the land is to be treated as if all improvements had not occurred, while all the existing surrounding developments at the time of valuation are to be considered extant. [23] I note also that s.33 of the Act directs: 33. Any and every valuation, or alteration of the valuation, of any land made, or purporting to be made, under this Act by the chief executive shall be deemed to be correct until proved otherwise upon objection or appeal or until altered or further altered.” And in respect of a notice of appeal against an annual valuation under the Act, s.45(4) states: “45.(4) Such notice shall state the grounds of appeal and the appeal shall be limited to the grounds so stated and the burden of proving any and every such ground shall be upon the owner.” Changes in the Valuation – [24] While Mr Auer has concern with the increasing level of ratings charges from the Council, I note that the level of rating charges is entirely a matter for the local government, which is empowered under s.48 of the City of Brisbane Act 1924 to determine appropriate rating system for the area under its control. The Council may determine a minimum rate levy in whatever way the Council considers appropriate (s.56(1)); and which may be categorised how the Council’s sees as appropriate (s.56(2)). The Council has adopted the determination of unimproved values of individual parcels as its basis of assessing rating charges. Those unimproved values are provided under s.72(1)(c) of the Valuation of Land Act 1944. [25] The matter of a fair and equitable rating system was raised previously in the matter of Poole Island Holdings Pty Ltd v Chief Executive, Department of Natural Resources. In that matter the appellant Dr Rosanove sought to challenge the method of valuation outlined in the Valuation of Land Act 1944; suggesting that the Act was outdated, and should be amended. In rejecting such a proposal the Land Appeal Court noted at para (3): -- 7 of 11 -- 8 “The jurisdiction of this Court on appeal and the Land Court at first instance does not extend to a consideration of such matters as rates or rents, but is confined to valuations made under the Valuation of Land Act 1944. That was made clear by the Land Appeal Court in NR and PG Tow v Valuer-General (1978) 5 QLCR 378, where the Land Appeal Court said at 381: ‘The Valuer General and the Court are concerned with finding unimproved value and not with the amount of rates that may be levied as a result. Rates are fixed by local authorities and may be varied annually according to the fiscal requirements of the local authority concerned. Any such variation may be made at any time during a valuation period and may be entirely independent of a new and increased valuation.’” In the current matter Mr Auer’s appeal must be considered in light of the legislation which is the direction of the Parliament. It is within that context that all parties must seek to determine the unimproved value of the land. It is this Court’s responsibility to ensure that the Chief Executive follows that direction. Any amelioration of rate indebtedness to the Council lies entirely within the power of the Council itself to provide a remedy. Nature of the Land – [26] I turn then to the evidence and note that the subject land has been valued as a “single dwelling house” under s.17 of the Act which relevantly states: “17.(1) In making a valuation of the unimproved value of land exclusively used for purposes of a single dwelling house or for purposes of farming, any enhancement in that value for that 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. (2) In subsection (1) – ‘single dwelling house’ means – (a) a dwelling used solely for habitation by a single household”. On that basis the subject land is considered only as one parcel of area 814 square metres, and the potential of the separate Lots 17 and 18 are ignored in the valuation. 027] In considering the nature of the subject land, I note that the only difference between the parties lies in their interpretation of a recent level of impact from noise from passing pedestrians and vehicles, or surrounding home businesses. Mr Horne sees the local environment as similar to that surrounding his sales evidence; while Mr Auer notes the changing nature of the local home businesses, and the intrusions they bring to the subject land. -- 8 of 11 -- 9 [28] In respect of the bus services I believe any convenience would balance the repeated noise of the buses. While Mr Horne may feel that Nathan Terrace would have similar traffic flows, the presence of the two bus services would suggest that Park Road is a more trafficked route from Ipswich Road to Fairfield Road. On balance I believe there would be greater noise intrusions at the subject land than at Sale 1 in Nathan Terrace. Certainly Sale 2 in Stephen Street would be quieter. However those noise levels would also impact adjoining properties in Park Road, with the existent relativities in paragraph [14] would suggest has been consistently allowed for. On that basis I believe Mr Horne has allowed adequately for the traffic noise impacts. [29] In respect of the noise from the adjoining home businesses at 161 to 163 Park Road, I note the appellants’ formal complaint to the Council has so far failed to cease any inconsistent operations of that business. That may because of some apathy from the Council, but it may also be that Council investigations have not proved that any inconsistency was occurring. On balance those noise intrusions may be more related to the appellants’ desires to retain what was a pleasant environment, but which is now changing as the City develops. On the evidence I am persuaded that Mr Horne has appropriately allowed for local noise concerns. However I would encourage the respondent to further monitor those activities should they persist. Should any become illegal non-conforming activities, then some further allowance may be appropriate. Comparison of Sales – [30] I turn then to the use of the comparisons with sales of vacant lands, and I note that Mr Horne has followed precedent long adopted by courts. In adopting comparisons with sales of vacant or lightly improved lands, Mr Horne has followed precedent long held by courts at all levels. That was directed in WM and TJ Fischer v Valuer-General (1983) 9 QLCR 44, at46; R and MM Barnwell v Valuer-General (1990-91) 13 QLCR 13, at 17; and also in PH Clough v Valuer-General (1981-82) 8 QLCR 70, where the Land Appeal Court said clearly 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.” [31] In seeking to understand the process of valuation itself, I am reminded that it is not merely a mathematical process. That was clarified in the matter of Chief Executive, Department of Natural Resources v Radlett Enterprises Pty Ltd (1997-98) 18 QLCR 397, where the Land Appeal Court said at 404: -- 9 of 11 -- 10 “As Mason J said in ‘Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd’ (1980-81) 146 CLR 336 at page 381: ‘Valuation is a matter of estimation, not a precise mathematical calculation.’ Valuation is intended to be an interpretation of a market, which in itself is imprecise, even when it is created by vendors and purchasers who satisfy the often quoted qualifications necessary to meet the test explained in Spencer v The Commonwealth of Australia (1907) 5 CLR 418.” [32] In the matter of In Spencer v The Commonwealth of Australia (supra) the criteria for establishing market value land was clarified by the High Court, where Isaacs J (later CJ) said at 441: “To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.” [33] If I then compare Mr Horne’s two sales I find: Sale Area Applied Value Comparison 1 405 square metres $186,000 Inferior/smaller 2 407 square metres $210,000 Inferior/smaller Subject land 814 square metres $285,000 - While Sale 2 is a superior location, that Sale also has noise and traffic from surrounding units. The method of comparison in respect of residential lands was clearly defined in Hans and Else Grahn v Valuer-General (1992-93) 14 QLCR 327, where the Land Appeal Court rejected the use of a rate per square metre approach, and said at 330: “The appellants fail on this point because the appropriate basis for the valuation of a residential lot is not the application of a rate per square metre but an assessment of the unimproved value of each lot as land used for single unit residential purposes. As the Land Appeal Court said in its decision on the appellants’ previous appeal (H and E Grahn v. The Valuer-General, AV89-246 and 247, 13 December 1990): ‘for the purpose of valuing residential sites, the preferable method of comparison is on a site to site basis and not on the -- 10 of 11 -- 11 basis of a unit area valued comparison. Site for site comparison should take into comparison such matters as the size of the lots, the situation of and access to the lots, the shape and topography of the lots etc. and comparisons on a unit area basis do not necessarily reflect valuation considerations for the above features.’” Summary: [34] In summarising this matter I note that responsibility falls upon the appellants to prove their case. That has not occurred, and the valuation of $285,000 by Mr Horne is not discredited. I note also that the High Court has directed in Brisbane City Council v The Valuer-General (1977-78) 140 CLR 41, where Gibbs J speaking of the provisions of the Valuation of Land Act 1944, said at 56: “… once it is shown that in making the valuation the Valuer-General acted upon a wrong principle or made a serious error of fact, the presumption created by section 13(7) is rebutted.” (Section 13(7) as it then was is now section 33, which states that a valuation is deemed to be correct unless proved to the contrary.) Conclusion: [35] Having considered the whole of the evidence I am not persuaded that the appellants have proved their case. The appeal is dismissed, and the unimproved value of Lots 17 and 18 on RP 37651 as determined by the Chief Executive in the sum of Two Hundred and Eighty-Five Thousand Dollars ($285,000) is affirmed. NG DIVETT MEMBER OF THE LAND COURT -- 11 of 11 --