Ehrsam v Department of Natural Resources and Mines [2004] QLC 1

LAND COURT OF QUEENSLAND CITATION: Ehrsam v Department of Natural Resources and Mines [2004] QLC 1 PARTIES: Werner K Ehrsam and Susanne Ehrsam (appellants) v. Chief Executive, Department of Natural Resources and Mines (respondent) FILE NO: AV2003/0138 DIVISION: Land Court of Queensland PROCEEDING: Appeal against an Annual Valuation DELIVERED ON: 9 January 2004 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Mr JJ Trickett, President ORDER: The appeal is dismissed and the unimproved value applied to the subject land by the Chief Executive of Two Hundred and Fifty Thousand Dollars ($250,000) is affirmed. CATCHWORDS: Unimproved value - Valuation of Land Act 1944 - Unimproved value of improved land - Method of valuation - Comparable sales - Whether premium for scarcity of vacant land - Analysis of improved sales - Maurici v Chief Commissioner of State Revenue (2003) 77 ALJR 727 distinguished APPEARANCES: Mr WK Ehrsam for the appellants Mr GJ Smith, Senior Legal Officer, Department of Natural Resources and Mines for the respondent -- 1 of 7 -- 2 [1] This is an appeal by landowners in the City of Brisbane against the unimproved value applied to their land by the Chief Executive, Department of Natural Resources and Mines, as at 1 October 2002. Background [2] Under the provisions of the Valuation of Land Act 1944, the respondent Chief Executive determined that the unimproved value of the land owned by Mr and Mrs Ehrsam should be $250,000, as at 1 October 2002. Mr and Mrs Ehrsam objected against that valuation and following advice that their objection had been disallowed, they appealed to the Land Court, advising that their estimate of the unimproved value was $185,000. [3] That appeal was filed in the Land Court registry on 27 June 2003. The grounds of appeal included by attachment the matters raised in their objection to the Chief Executive. They are directed to what the landowners consider to be an unsatisfactory procedure adopted by the respondent to determine the unimproved value of land in inner city suburbs. They contend that there were few parcels of vacant land which sold in the 12 months since the last valuation of the area. Therefore, they argue, only a fraction of the lands is sampled and the unimproved value is extrapolated to the rest of the lands. They contend that these procedures should be reviewed and other methods need to be explored and implemented to stop spiralling land values. The appellants also contend that the unimproved value applied to their land at the previous valuation represented a greater percentage increase than the unimproved values applied to the other lands in the street. They objected to that valuation but received no explanation as to why the percentage increase had been greater than for the other properties. However, the appellants did not appeal to the Land Court at that time and I agree with Mr Smith's submission that this has no relevance to the present appeal. The Relevant Legislation [4] The responsibilities of the respondent are set out in the provisions of the Valuation of Land Act 1944. Under those provisions, the respondent is required to make annually, or periodically, a valuation of all land in a local government area; s.37. For the purposes of the Act, the valuation of each parcel of land is to be the "unimproved value" of that land, which is defined to mean 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 improvements on that land did not exist: s.3(1). However, the unimproved value shall in no case be less than the sum that would be obtained by deducting the value of improvements from the improved value at the time at which the value is required to be ascertained: s.3(2). -- 2 of 7 -- 3 [5] The "value of improvements" is defined to mean the added value which the improvements give to the land, irrespective of the cost of the improvements: s.5(1). However, the added value shall in no case exceed the amount that should reasonably be involved in effecting improvements of a nature and efficiency equivalent to the existing improvements: s.5(2). [6] The Act thus requires the respondent to ascertain the unimproved market value of each parcel of land as at the date of valuation, assuming that the improvements on the land were not there, but also assuming the existence of all present facilities and amenities external to the land, such as roads, power and other services. The Subject Land [7] The following summary has been taken from the unchallenged evidence contained in the valuation report submitted by the respondent's valuer, Mr MEW Denman. [8] The appellants' land is described as Lots 170-171 on RP 13153, Parish of Bulimba, County of Stanley, containing an area of 812 m². It is situated in Thynne Avenue, Norman Park, approximately 4 km east of the Brisbane Central Business District. It comprises two rectangular shaped inside allotments. It falls gently below street level, but is generally well elevated, with a suburban outlook towards the north. The land is about 500 metres east of the Norman Park railway station, about 750 metres north of St Thomas Catholic Primary School and about 550 metres south-west of Griffith University, Morningside TAFE and Seven Hills Primary School. The Coorparoo Secondary College and the Anglican Church Grammar School are located about 1 km to the west. It has the usual services, including water, sewerage, electricity and telephone. [9] The land is located in the "low density residential area" and is used as the site for a single dwelling house. The Approach of the Respondent's Valuer [10] Mr Denman gave evidence that the land had been valued by direct comparison with sales of comparable land in the locality. Although it comprises two allotments, Mr Denman explained that the land had been valued as the site for a single dwelling house under the provisions of s.17 of the Act, which requires that where land is exclusively used for purposes of a single dwelling house, any enhancement in the value of that land because it has been subdivided by survey, must be disregarded. [11] In support of the respondent's unimproved value of $250,000, Mr Denman relied on seven sales in the general vicinity of the subject land. Four of those sales were of land which was unimproved, except for clearing and some fencing. Those properties were all single allotments, ranging in area from 400 m² to 548 m², which sold between November 2001 and April 2002 at prices ranging from $209,000 to $320,000. -- 3 of 7 -- 4 [12] Another sale referred to by Mr Denman (Sale 3) was the sale of a property of 607 m² which was improved with a brick dwelling built about 1950. This dwelling house had been removed to make way for the development of a modern two-level residence. That property sold in December 2001 for $275,000 and Mr Denman allowed the amount of $5,000 for the cost of removing the old dwelling, adjusting the sale price to $280,000, in accordance with the principle approved by the High Court in Valuer-General v Fenton Nominees Pty Ltd (1982) 150 CLR 160. [13] The remaining two sales were of improved properties. One of those properties (Sale 6) adjoins the subject land. It has an area of 817 m² and sold in February 2002 for $402,000. That property was improved with a two-level timber dwelling built about 1910, the lower level being recently enclosed. Mr Denman analysed that sale by attributing a value of $130,000 to the dwelling, to show an unimproved value of $272,000. As at 1 October 2002 the respondent had applied an unimproved value to that land of $245,000. [14] The second improved sale was of a property with an area of 546 m², upon which was situated a timber cottage built about 1920. That property sold in September 2002 for $375,000 and Mr Denman analysed that sale by attributing a value of $95,000 to the dwelling, to show an unimproved value of $280,000. As at 1 October 2002 the respondent had applied an unimproved value to that land of $205,000. [15] From that sales evidence, Mr Denman considered that the respondent's valuation of $250,000 applied to the subject land to be well supported. The Case for the Appellants [16] Mr Ehrsam appeared and gave evidence on behalf of the appellants. He did not seriously challenge Mr Denman's sales basis or the analyses or comparability of the sales, except for the analysis of the first of the improved sales (Sale 6), which adjoins the subject land. Mr Ehrsam knew the house well and considered that it would cost much more than $130,000 to replace the house in the condition that it was in at the date of sale. [17] However, the principal argument of the appellants was with regard to the system of valuation and their opinion that the method of arriving at unimproved values is inappropriate. Mr Ehrsam elaborated on the appellants' contention that the process involves sampling only a fraction of properties (the sales) and extrapolating the values so obtained to other lands in the area. He contended that because of the scarcity of vacant land sales, there was insufficient data to support the resulting valuations. [18] Mr Ehrsam contended that his argument was supported by the recent decision of the High Court in Maurici v Chief Commissioner of State Revenue (2003) 77 ALJR 727. That case concerned an appeal by a landowner against the unimproved value applied to his -- 4 of 7 -- 5 improved property under the Land Tax Management Act 1956 (NSW) in accordance with s.6A of the Valuation of Land Act 1916 (NSW). The valuer for the Chief Commissioner had relied upon three sales of vacant land (one of which had been resold) to determine the value of the appellant's land and had disregarded sales of improved lands, as he did not consider that they were relevant in determining the unimproved value. [19] In allowing the appeal, the High Court held that the method of valuation adopted by the Chief Commissioner was unduly selective, as the valuer had considered four sales only and they were of vacant land. The High Court also held that the sales were not representative of sales in the area because vacant land in that area was scarce; furthermore, the sales evidence needed to be relevant and sufficient in volume. The High Court held that the Chief Commissioner's valuer had erred in ignoring reasonably contemporaneous sales of comparable improved land, particularly where there was a scarcity of vacant land, as such sales could not be disregarded. The Issues [20] The appellants contend that the process of arriving at unimproved values is unsatisfactory and that the procedures should be reviewed. To the extent that they are arguing for a change to the whole system, this is not a matter for this Court. Until altered by the legislature, the requirements are contained in the Valuation of Land Act 1944. [21] However, it seems to me that the appellants' argument is more with the procedure that was adopted by the respondent to determine unimproved values, rather than the legislative requirements. They argue that to value all lands by relying on a few sales of scarce unimproved lands, is inappropriate. They contend that their arguments are supported by the High Court in the Maurici case. [22] However, the present case can be distinguished from Maurici. The Queensland Land Appeal Court has recently considered the application of the Maurici case in Chief Executive, Department of Natural Resources and Mines v Spender [2003] QLAC 0086. That case, like the present matter, concerned an appeal by landowners against the unimproved value applied to their land by the Chief Executive under the provisions of the Queensland Valuation of Land Act 1944. Before the Land Court, the Chief Executive's valuer relied upon sales of vacant land to support the valuation. However, realising the implications of Maurici, just before the hearing he had prepared a schedule containing a summary of the details of four improved sales which he sought to tender in evidence. [23] Despite the objections of the landowners, the schedule was eventually admitted into evidence. However, while the analyses of the four improved sales largely supported the level of vacant land sales, there were no details of the valuer's analyses of those sales. In -- 5 of 7 -- 6 the event, the Land Court on the authority of Maurici, rejected the evidence provided by what it found to be the scarcity factor in the vacant land sales. The Court also found that the evidence of the improved sales was of little assistance in the absence of detailed analyses of those sales. [24] On appeal by the Chief Executive, the Land Appeal Court set aside the decision of the Land Court for the following reasons: s.45(4) of the Valuation of Land Act placed the burden of proof on the landowners; in order to prove that the valuation was flawed because the valuer having regard exclusively or virtually exclusively to sales of scarce unimproved lands, the landowners should prove that there was a group of comparable sales which went beyond sales of scarce vacant land; furthermore, they must show that on analysis the improved sales evidence demonstrated that the unimproved values reflected by those sales did not support the unimproved values reflected by the sales of scarce vacant land. In that case, the landowners produced no such proof. [25] Similarly, in the present case, the appellants have not produced any evidence to indicate that the sales of vacant land included a premium because of a scarcity factor. On the other hand, Mr Denman gave evidence that there was no scarcity of vacant land sales in the area. In addition to his supporting evidence derived from sales of improved land, he produced a schedule showing approximately 70 sales of vacant land in the general area. [26] In my view, the present case differs from that of Maurici. While in that case the valuer admitted that there was a premium paid for vacant land because of its scarcity, in the present case the valuer is of the view that there was no scarcity of vacant land sales and therefore there was no premium for scarcity in the sale prices. Furthermore, the sales of vacant land are well supported by his analyses of the sales of improved land. [27] The other issue related to the challenge by Mr Ehrsam to the amount attributed by Mr Denman to the value of the improvements on the adjoining property, Sale 6. However, Mr Denman was able to counter that criticism. Mr Ehrsam asserted that the house was in excellent condition at the time of sale and that it would cost well in excess of $130,000 to replace. However, the fact remains that the basic structure was about 90 years' old and allowance must be made for depreciation and perhaps obsolescence. In my view, despite that challenge Mr Denman's analysis remains intact. [28] Under cross-examination Mr Ehrsam conceded that as at 1 October 2002, a vacant site of 812 m² located in Thynne Avenue, Norman Park, would sell for $250,000. His argument was that the valuation was made by an inappropriate process. However, I find that the respondent has not acted upon a wrong principle or made a serious error of fact or that the -- 6 of 7 -- 7 valuation was made by a method fundamentally erroneous: Brisbane City Council v The Valuer-General (1978) 140 CLR 41 at 56-57. [29] For these reasons, I have come to the conclusion that the appellants have failed to discharge the onus of proving that the valuation is incorrect. The appeal must therefore be dismissed. Order The appeal is dismissed and the unimproved value applied to the subject land by the Chief Executive of Two Hundred and Fifty Thousand Dollars ($250,000) is affirmed. JJ TRICKETT PRESIDENT OF THE LAND COURT -- 7 of 7 --