Eyles v Department of Natural Resources and Mines [2003] QLC 4

LAND COURT OF QUEENSLAND CITATION: Eyles v Department of Natural Resources and Mines [2003] QLC 4 PARTIES: Rhonda Eyles (applicant) v Chief Executive, Department of Natural Resources and Mines (respondent) FILE NO: AV2002/0379 DIVISION: Land Court of Queensland PROCEEDING: Appeal against annual valuation under the Valuation of Land Act 1944 DELIVERED ON: 6 February 2003 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Dr NG Divett ORDER: The appeal is dismissed, and the unimproved value of Lots 53 and 54 on RP 37247 as determined by the Chief Executive in the sum of $157,500 is affirmed. APPEARANCES: Miss R Eyles for the appellant Mr PM O’Donovan for the respondent Background: [1] This matter relates to land at 25 Archibald Street, Fairfield, and described as Lots 53 and 54 on RP 37247, Parish of Yeerongpilly. The subject land has an area of 809 m² and is located about 5 kilometres south-east of the Brisbane Central Business district. Access is good to Archibald Street which is bitumen sealed with concrete kerbing and channelling. All normal utility services are available, but the footpath is only formed earth surface. The subject land was zoned as Residential A under the Town Plan of 1987, and is located -- 1 of 11 -- 2 in the Low Density Residential area of the Brisbane City Plan 2000 effective at the date of valuation of 1 October 2001. The key issues are the nature of the land, relativity, impact of flooding, method of valuation and comparison of sales. [2] On 25 February 2002 the Chief Executive issued a valuation of the subject land at $157,500. Following an objection the Chief Executive confirmed that figure on 25 June 2002. The appellant has now appealed claiming the unimproved value should more properly be $113,000. [3] Rhonda Eyles appeared and gave evidence on her own behalf. Peter Michael O’Donovan, the departmental registered senior valuer responsible for determining the valuation, appeared and gave evidence for the respondent. Method of Valuation – [4] Ms Eyles explains that she had estimated her opinion of the unimproved value of the subject land on the basis of its previous valuation at 1 October 2000 at $113,000. She concedes that she had adopted that figure as she had no in-depth understanding of the forces impacting the value of property in that area. However Ms Eyles is concerned at the significant increases in property values now revealing themselves through the valuation system, and seeks a reassessment more aligned to the quality of life experienced on those lands, rather than some, in her opinion, theoretical interpretation of what the land is worth. [5] Ms Eyles explains that she had only relocated to Fairfield in 2002, having moved from West End for both personal and family reasons, and also as a result of escalating land values and consequential Council rating responsibilities in that area. She is now concerned that similar escalating land values are proposed for Fairfield. It is her argument that there is no direct link between the unimproved value for her land, and the values being orchestrated by the Real Estate Industry for properties. She concedes that she has some lack of understanding of market forces for land, but argues that the “market place” is not a true reflection of the value of land to owners. On that basis she is at odds with the current process for determining unimproved values in Queensland. [6] Ms Eyles also argues that as she now occupies a “character style dwelling” as defined under the Brisbane Town Plan, there should be some recognition of the additional costs inherent in the maintenance of such dwellings. She does not understand how the value of such a “character dwelling” site can be compared with vacant land sales, where there is no restriction upon the style of development materials of a more modern dwelling. -- 2 of 11 -- 3 Changes in the Valuation – [7] Another matter of concern to Ms Eyles is the rapidly accelerating changes in the unimproved value of the subject land over recent years. From her thirteen years of residence in West End, Ms Eyles notes that similar dramatic changes in land values has had a major impact upon quality of life experiences for residents, and is causing major disruptions to community life in that area. [8] Ms Eyles notes that increases in the unimproved value of the subject land have demonstrated rises from $82,000 (1997), $94,000 (1998 and 1999), $113,000 (2000) and $157,500 (2001). She argues that the most recent increase of $44,500 (39%) during the last year is totally unrealistic, and unsupportable. She argues that such large increases must reflect that the Chief Executive has made an error in his valuation in the current matter. The Nature of the Land – [9] Other matters which Ms Eyles argues have not be adequately accounted for in Mr O’Donovan’s valuation, include proximity to the major arterial Fairfield Road, noise from a nearby butchery business, and also potential impacts of flooding of the area. To support her case Ms Eyles supplies a newspaper article drawing reference to the potential health hazards of living on or near major arterial roads, with their inherent pollution problems. She argues that as the subject land is only about 100 metres west of Fairfield Road, it is likely to be impacted by similar noise and exhaust pollutions. Mr O’Donovan does not disagree, and has made allowance for any impacts, noting that his Sale 1 (23 Byrnes Street) would have similar conditions as the subject land. [10] In respect of the nearby butchery business, Ms Eyles advises that, while the actual butcher shop is located on Lot 3 on RP 910505 in Byrnes Street, the adjoining property at Lot 2 in Archibald Street is also owned by the butchery, and is a generator of noise, glare and traffic associated with the wholesale and retail butchery. Lot 2 is directly opposite the subject land, and suffers from parking problems from staff and customers, as well as large semi-trailer transports accessing the butchery buildings. Ms Eyles also notes that the Royal Society for the Prevention of Cruelty to Animals (RSPCA) site is located at the end of Archibald Street. However Mr O’Donovan notes that the RSPCA site is also located in similar proximity to his Sale 1, and in his opinion, is not a significant factor for consideration. In respect of the butchery business, Mr O’Donovan argues similar impacts would also have been considered in his Sale 1. Ms Eyles also concedes that she was -- 3 of 11 -- 4 aware of the nearby traffic problems when she purchased the subject land for $317,500 in August 2001. [11] Of more significance is the potential impact of flooding which might influence any hypothetical purchaser of the subject land. Ms Eyles advises that her inquiries of the Council, when she purchased the land in 2001, was that only the rear portion of the land was impacted by the major Brisbane River flooding in 1974. Mr O’Donovan confirms that understanding, and supplies a copy of a flood map showing the extent of the flood waters in 1974. (Exhibit 5). That map shows that only a small area including the north- western corner of Lots 53 and 54 (the subject land) actually were covered by flood waters. It is also agreed that those floods did not intrude upon Archibald Street in any way, and the subject land is predominantly above that flood level. [12] Mr O’Donovan also supplies a copy of a Brisbane City Council Bi-Map (Exhibit 4), showing a designated flood mitigation regulation line further to the east of the old flood line. Mr O’Donovan advises that he was advised by Council officers that the “flood mitigation regulation line” so depicted, is to represent an area where any element of further risks from flooding can be assessed by the Council, at any time of application for development in that area. His advice from the Council is that within the wider flood mitigation area so depicted, there is a safety factor built into the development consent process. However he is further advised by Council officers that in respect of the subject land, there would be no constraints applied by the Council on areas of the subject land, other than for the small area to the rear of that parcel. As a building site Mr O’Donovan sees such small limitation would not greatly affect its market value as a dwelling site. However he concedes that there would be a need to obtain Council consent permission for any development upon the site. Relativity – [13] In seeking comparisons on the basis of relativity with the subject land, Ms Eyles draws reference to a parcel to the west of the subject land at $150,000 (Lot 71 of area 809 m²), and also to a parcel to the east across Archibald Street at $126,000 (Lot 2 of area 400 m²). There is also a parcel in Byrnes Street at $112,000 (Lot 58 of area 400 m²). However Ms Eyles agrees that the adjoining parcel to the south of the subject land (Lots 55 and 56 of area 809 m²), and the adjoining parcel to the north of the subject land (Lots 51 and 52 of area 809 m²), both have unimproved values of $157,500 similar to the subject land. [14] Mr O’Donovan agrees that Lot 71 to the west is lower in elevation, and would have been impacted by the 1974 floods to a great extent, a factor reflected in its lower unimproved -- 4 of 11 -- 5 value. He also notes that Lot 2 across Archibald Street, and Lot 58 in Byrnes Street, are both only half the size of the subject land. Mr O’Donovan also notes that Lot 2 is slightly higher in elevation than the subject land. However he was unable to explain (without the departmental records for Lot 58) why that unimproved value was only $112,000, compared to Lot 2 at $126,000. But Mr O’Donovan argues that as a professional valuer he believes those unimproved values reflect fair and reasonable relativities in that area. On the evidence I would agree with that conclusion. Comparison of Sales – [15] Ms Eyles supplies no sales to support her estimate of the unimproved value of the subject land. Mr O’Donovan provides the following sales of vacant or lightly improved parcels to support his valuation:  Sale 1 – (23 Byrnes Street, Fairfield – Lot 58 on SP 131586). This is a 400 m² parcel of Residential A land located 30 metres from the subject land. The sale has similar services and disabilities as the subject land, but is slightly superior in elevation on a gently sloping site. While slightly superior in topography and elevation, because of its smaller size, the sale is inferior to the subject land. The sale sold in March 2001 for $140,000, was analysed at $138,000, but only applied conservatively at $112,000. [16] Mr O’Donovan explains that the information on Sale 1 was only received by the respondent after the date of valuation, and it was therefore only applied conservatively in view of the rising state of the market. He agrees that at the date of sale in March 2001 there had been a paucity of recent sales of vacant lands in that area, and at that time the sale price may have reflected a high sale. He gave any benefit of doubt to the appellant, and that sale’s evidence had therefore been applied conservatively in this matter. [17]  Sale 2 – (12 Wattle Avenue, Yeerongpilly – Lot 8 on SP 124637). This is a 664 m² Residential A parcel located about 0.8 kilometres south of the subject land. The sale has similar services, is smaller in size, and with inferior access due to its hatchet shape. However it is better elevated than the subject land. Overall the sale is inferior to the subject land. The sale sold in June 2001 for $160,000, was analysed at $150,000, and applied at $146,000. [18]  Sale 3 – (57 Ellesmere Street, Yeronga – Lot 21 on SP 133316). This is a 400 m² Residential A parcel located 0.5 kilometres west of the subject land. The sale has similar services, but is seen in a superior location, with potential restricted City views from the rear of the parcel between two dwellings. The sale has superior -- 5 of 11 -- 6 views and elevation, and while smaller, is seen overall as superior to the subject land. The sale sold in August 2001 for $196,000, was analysed at $194,000, and has been applied at $167,500. [19] While he has only relied upon the August 2001 sale of Sale 3, Mr O’Donovan notes that a subsequent resale of that land occurred after the relevant period for $240,000 in early 2002. He argues that while he does not rely upon that resale in the current matter, the latter resale supports the buoyant nature of the market place, and will be a matter for consideration in the next revaluation. [20] In respect of the broad comment as to whether there is a noticeable difference in the sale price of improved properties, where dwellings are of a “character” nature compared to conventional dwellings, Mr O’Donovan advises that sales in that locality support that either type of dwelling attracts similar prices and competition in the market place. Mr O’Donovan further advises that there are no vacant sales of land of area 809m² in that area at less than $150,000. Decision: [21] Before examining the evidence, I turn first to the legislation, and note that “unimproved value” of land is defined relevantly in s.3 of the Act which states: “3.(1) For the purposes of this Act – ‘unimproved value’ of lands 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.” [22] Now in seeking guidance in that matter, I note that the process of determining the unimproved value which is currently improved in some way, was addressed by the findings of the Privy Council in Tetzner v. Colonial Sugar Refining Company Limited General (1958) AC 50 where Their Lordships said at page 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. Their Lordships see no objection in the process of valuation to regarding the land as land situated in a sugar town. The valuer need not -- 6 of 11 -- 7 shut his eyes to the fact that there is a sugar manufacturing industry in existence, though he is not entitled to value the sugar mill and its accessory situated on the subject land. Their Lordships find themselves in agreement with an illustration given by the Learned Magistrate in his judgment. ‘If the undeveloped capital value of a city powerhouse is being assessed one does not assume a city without electricity and all the consequences of the lack of such an amenity.’” [23] That also followed the findings of the Privy Council in Tooheys Limited v. The Valuer- General (1925) AC 439 where Their Lordships said at page 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.” 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 the valuation are to be considered extant. [24] Now while the appellant might have some concerns with the nature of the existing property market as it manifests itself in Brisbane at the relevant period, I note that the definition of a bona fide sale between a seller and a purchaser was defined in the High Court of Australia, which has provided guidance in Spencer v The Commonwealth (1970) 5 CLR 418 where Griffith CJ said at p.432: “In my judgment the test of value of land is to be determined, not by enquiring what price a man desiring to sell could actually have obtained for it on a given day, ie whether there was in fact on that day a willing buyer, but by enquiring ‘What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’ It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together.” -- 7 of 11 -- 8 That definition of what constitutes a bona fide sale has long been adopted by the courts, and is a matter which must weigh heavily in the minds of a valuer when he seeks to analyse sales for comparison purposes. Changes in the Valuation – [25] I turn then to Ms Eyles’ concerns with the significant percentage change in the valuation, and whether that might indicate some error in the valuation. While I am aware that such percentage rises in values are often of concern to appellants in seeking to have confidence that their personal property has been fairly treated in any valuation, they in fact do not prove conclusively that any error has been made in the valuation process. Such rises may, at best, be an indicator to owners that they should further investigate the valuation, but there may be many reasons why a valuation has changed at what would appear to be a rate out of line with some overall statistical percentage. [26] This matter has been considered many times by the Courts, and I know from precedent that a large increase in itself is not evidence of some error in the valuation. I note, for example, in the decision of NR and PG Tow v Valuer-General (1978) 5 QLCR 378, where the Land Appeal Court said at page 381: “It follows that a large increase over and above the previous valuation is in itself not a relevant issue provided bona fide sales of comparable parcels support the new valuation.” [27] That matter was also considered in CH and BD Henricks v The Valuer General (1983) 9 QLCR 59, where in the Full Court of Queensland, Macrossan J (CJ) said at page 63: “The appellants also relied upon a schedule, exhibit 4 in the Land Appeal Court, which shows percentage increases in the value applied by the Valuer-General to a number of selected parcels of land from the date of the preceding valuation up to the March 1979 valuation date. The percentage increase shown in the selected case was in each instance considerably less than the increase applied to the subject land as between the two valuation dates. The weakness in such a selective comparison is obvious as there could be any number of reasons why blocks in the same valuation area should increase at different rates over a period of five years.” [28] As the Full Court said, there could be many reasons why parcels of land can increase at different percentage rates over a period of time. The real test is not the percentage increase in the unimproved values, but a comparison of the subject land with sales of comparable sites in the vicinity of the subject land at the time of the valuation. -- 8 of 11 -- 9 The Nature of the Land – [29] On the evidence I accept that in applying his Sale 1, Mr O’Donovan has allowed in his comparisons for both the attributes and disabilities of both that sale and the similar subject land. While the presence of the Council flood mitigation regulation line is a matter that a prudent buyer would consider in his offer for the land, prudent inquiries with the Council were likely to establish that the subject land is in fact free of flood risk, save for the small area at the rear of that parcel. Ms Eyles own purchase of the subject land reveals that conclusion, and I accept Mr O’Donovan’s opinion that it would have little impact upon the final value paid. Comparison of Sales – [30] In seeking comparisons of the subject land with sales of vacant lands, I note that precedents in many courts has established that process as the preferred method of determining unimproved value. For example, comparable sales were adopted in R and MM Barnwell v Valuer-General (1990-91) 13 QLCR 13, at 16 and in Commonwealth v Arkley (1952) 87 CLR 159, at p.170; and also in WM and TJ Fischer v Valuer-General (1983) 9 QLCR 44, where the Land Appeal Court said at p.46: “It is indeed a fundamental principle of valuation that the best basis for assessment of unimproved value is the use of sales of vacant or lightly improved parcels.” [31] Perhaps the clearest understanding however may be taken from the findings of the Land Appeal Court in PH Clough v Valuer-General (1981-82) 8 QLCR 70, where it said at page 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.” [32] I note also that the use of comparable sales provides evidence in the movement of a market over a period of time, particularly where vacant land is becoming scarce and therefore the resulting prices are indicating substantial increases. That was found in Hurdis v The Minister (1957) 2 LGRA 132, where Hardie J found at page 138: “Another matter which would be important to a prospective purchaser was the market upward trend of values of land during the period preceding the relevant date. … That increase, particularly in the latter portion of the period, would be a significant matter for a prospective purchaser to bear in -- 9 of 11 -- 10 mind when considering what would be a reasonable price for him to pay for the subject land. It has another significance also, in that it demonstrates that a sale otherwise comparable and useful for the purpose of establishing values in the area at a relevant date, would lose much of its comparability and usefulness if it took place at a point of time far or substantially removed from that date.” In adopting comparable sales I note also that minor differences between the sales and the subject land do not render the sale as non-comparable. It is the skills of an experienced valuer which draws an appropriate balance between the properties. [33] On the evidence before me I find that Mr O’Donovan has provided the following comparisons: Sale Area Applied Unimproved Value Comparison 1 2 3 Subject 400 m² 664 m² 400 m² 809 m² $112,000 $146,000 $167,500 $157,500 Inferior Inferior Superior - On that evidence there is nothing to conclude that Mr O’Donovan has made a serious error of fact, or has applied a wrong principle. Summary: [34] In respect of the current valuation of the subject land at $157,500, I note 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.” [35] I note also that the High Court of Australia directed in Brisbane City Council v The Valuer-General (1977-78) 140 CLR 41, where Gibbs J said at page 56: “In my opinion 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. [36] On the evidence there is nothing to dispute Mr O’Donovan’s findings. In the matter of the appellant’s responsibilities in respect of her Notice of Appeal I note that s.45(4) of the Act directs: -- 10 of 11 -- 11 “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.” Conclusion: [37] Having considered the whole of the evidence I am not persuaded that the appellant has proved her case. The appeal is dismissed, and the unimproved value of Lots 53 and 54 on RP 37247 as determined by the Chief Executive in the sum of $157,500 is affirmed. NG DIVETT MEMBER OF THE LAND COURT -- 11 of 11 --