CVR Investments Pty Ltd v Minister for Natural Resources and Minister for Mines [2002] QLC 60

LAND COURT OF QUEENSLAND CITATION: CVR Investments Pty Ltd v Minister for Natural Resources and Minister for Mines [2002] QLC 60 PARTIES: CVR Investments Pty Ltd (appellant) v Minister for Natural Resources and Minister for Mines (respondent) FILE NO: LA2002/0007 DIVISION: Land Court of Queensland PROCEEDING: Appeal under s.248 of the Land Act 1994 against the Minister’s decision of the purchase price with respect to an application for conversion of tenure of Special Lease No. 26/36747 DELIVERED ON: 30 July 2002 DELIVERED AT: Brisbane HEARD AT: Innisfail MEMBER: Mr JJ Trickett, President ORDER: The appeal is allowed, the purchase price decided by the Minister is set aside and the purchase price of the subject land for conversion purposes is determined at $33,000. CATCHWORDS: Unimproved value – Determination of purchase price of special lease for conversion purposes – Land Act 1994 – Industrial land in Cardwell – Comparison with sales – Sales after relevant date – Sales between family members. APPEARANCES: Mr V Randazzo (Director) for the applicant Mr R Blomfield (Senior Valuer) for the respondent -- 1 of 9 -- 2 [1] This is an appeal by the lessee of a special lease of land in the town of Cardwell against the Minister’s decision setting the purchase price for conversion of that special lease to freehold tenure at $40,000. Background [2] CVR Investments Pty Ltd is the lessee of Special Lease 26/36747 and has applied to freehold the land which is the subject of that special lease. It was accepted by the parties that the relevant date of the present application is 2 January 2001. The Minister decided that the purchase price for the conversion of the special lease was $40,000. Following an internal review process, the appellant appealed against the Minister’s decision as to the purchase price under s.428 of the Land Act 1994, contending for an unimproved value of $30,000. That appeal was received in the Land Court Registry on 7 January 2002. The Subject Land [3] Special Lease 26/36747 is in respect of land described as Lot 1811 on Plan C10460, Parish of Ellerbeck, containing an area of 2,833 m². That land is situated approximately 1.5 km north-west of the main business area of the town of Cardwell. It fronts Parker Street, which is an unformed gazetted street in its naturally timbered state. Therefore, at the relevant date there was no vehicular access to the subject land. It is situated approximately 50 metres from the intersection of the unmade Parker Street with Roma Street, which is a bitumen sealed street providing good access to that intersection. The eastern boundary of the subject land abuts the railway reserve of the main northern railway line. [4] The subject land was described by the respondent’s valuer as being a level to gently sloping regular shaped inside allotment, slightly below the level of adjoining land and sloping to the railway reserve along its eastern boundary. The land is subject to localized flooding caused in part by the damming effect of the railway line. Although the land had been selectively cleared, it had regrown with a light to medium forest cover. The valuer commented that the land would require some filling and leveling prior to development. He considered the western section of the land to be more economic to develop because of its higher natural elevation and proximity to services. [5] The land is zoned “Industrial” under the Planning Scheme for the Shire of Cardwell which was gazetted on 17 May 1997. It is designated as “Heavy Industrial” under the Development Control Plan for the town of Cardwell. -- 2 of 9 -- 3 [6] At the relevant date the land was unused. Electricity, telephone and reticulated town water are available along Roma Street and the valuer commented that both the Council and Ergon Energy have advised him that there would be no additional cost to supply electricity and reticulated water to the subject land, other than the standard connection fee. The Relevant Legislation [7] The process for conversion of tenure is set out in the Land Act 1994. A lessee may apply to convert a term lease to freehold land (s.166(1)). The Minister decides the purchase price for the conversion of a lease to a deed of grant (s.170(1)) and the lessee may appeal against the Minister’s decision on the purchase price (s.170(2)). The purchase price is the amount equal to the unimproved value of the land being offered as if it were fee simple and the market value of any commercial timber that is the property of the State on the land (s.170(3)). The unimproved value of the land is calculated at the day the Minister receives the conversion application (s.170(4)). [8] Unimproved value of land is defined as “… the amount an estate in fee simple in the land in an unimproved state would be worth if there were an exchange between a willing buyer and a willing seller in an arms-length transaction after proper marketing, if the parties had acted knowledgeably, prudently and without compulsion” (s.434(1)). The Valuation of Land Act 1944 does not apply to the meaning of unimproved value in this section (s.434(3)). [9] The term “unimproved state” includes, if the value of improvements and development work to the land performed by the State has not been paid to the State, the improvements and development work finished before the lease started or the deed of grant was issued (s.434(4)). [10] Every appeal against a decision under the Land Act must be, in the first instance, by way of internal review (s.422). A person who is dissatisfied with the review decision may appeal to the Land Court against the decision (s.427). [11] Under the provisions of s.429, the Court has the same powers as the decision-maker; an appeal is by way of re-hearing; and the Court may – (a) confirm the review decision; or (b) set aside the review decision and substitute another decision; or (c) set aside the review decision and return the issue to the Minister with directions the Court considers appropriate. -- 3 of 9 -- 4 The Minister’s Valuation [12] Registered Valuer Mr S Cross valued the subject land on behalf of the Minister at $40,000 as at the relevant date. He gave evidence that the valuation for conversion purposes was a difficult exercise because of the lack of recent comparable sales evidence and the cost of providing access and services, and the filling and leveling works which were required to be undertaken on the subject land. His investigations had resulted in only one relatively recent sale of land zoned “Industrial” in the town of Cardwell (Sale 1). That was an improved property of 1,012 m² situated in Liverpool Street, in a more established area of the town. That property sold in November 1998 for $115,000. It was developed with 10 mini storage sheds and security fencing. Mr Cross analysed the sale to show an unimproved value of $65,000. However, he was of the opinion that the sale was high when compared with the other sales evidence available in the town. [13] As part of that sales evidence, Mr Cross had regard to the two latest residential allotment sales, both of which are situated in Gregory Street and both of which have areas of 1,012 m². Those properties sold in February 2000 for $30,000 and September 2000 for $27,500. Although he reasoned the industrial land would usually sell for more than residential land all other things being equal, he felt that the difference between the sale prices of those two sales and his analysed land value for Sale 1 at $65,000 was too great, indicating that Sale 1 was a high sale and could not be relied upon. [14] In the absence of any other industrial sales, Mr Cross has regard to two 2,023 m² parcels in Roma Street (Sale 2 and Sale 3) which, although zoned “Urban”, were subsequently being used for industrial or semi-industrial purposes. Those allotments sold for $50,000 and $52,000 in June 1998 and June 1995 respectively. The only improvements on each of them was clearing and Mr Cross analysed those two sales to show $48,000 and $50,000 respectively. [15] Despite their early contract dates and their much better location, as they were close to the business centre of Cardwell, Mr Cross formed the opinion that they were the most useful comparisons with the subject land. However, those two sales and Sale 1 all had good access to bitumen streets and required no filling or leveling. In order to make a meaningful comparison between those sale properties and the subject land, Mr Cross conducted an exercise whereby he notionally brought the subject land to a condition similar to the sale properties. From his discussions with Council officers he concluded that it would cost $3,000 ($60 per lineal metre for 50 metres), to construct a basic gravel access road from Roma Street to the boundary of the subject land. He reasoned that as -- 4 of 9 -- 5 the maximum building area allowable under the Planning Scheme was 60% of the total site area, or 1,700 m², that would be the maximum area that a prudent purchaser would consider filling. He estimated that an average of 0.3 metres (or 500 m³) would be required to raise the level of the land to that of the adjoining land to the west. To that figure he applied a rate of $15 per m³ for the importation, compaction and leveling of the fill, which equated to a cost of $7,500. [16] With that notional development which would cost $10,500, Mr Cross considered that the subject land could be compared directly with the sales. Having regard to their respective locations, areas, and physical features, Mr Cross concluded that as a filled and level site with access, the subject land would have a value of $52,000. When the costs of filling and leveling and providing access were deducted, Mr Cross arrived at an unimproved value for the subject land in its present state of $40,000. [17] Mr Cross ascertained from Mr Lindsay Hallam, of Hinchinbrook Real Estate, that two 2,023 m² cleared “Industrial” zoned allotments (Lots 99 and 100), also situated on Roma Street in the vicinity of the subject land, were on the market at the relevant date with asking prices of $55,000 (inside Lot 99) and $60,000 (corner Lot 100). Mr Hallam advised Mr Cross that a formal offer of $38,000 had been received for Lot 100, but had been rejected by the vendor. Mr Cross reasoned that while these two properties had good bitumen street access, both required more filling and leveling than did the subject land prior to any development. In his opinion, that “evidence” (such as it was) also supported his reasoning. The Case for the Appellant [18] Mr V Randazzo, a director of the appellant company, appeared and gave evidence. He explained that the appellant company is in the concrete masonry manufacturing industry on the Atherton Tableland and had planned to develop the subject land for future expansion of its business as the site for a brickyard. [19] Mr Randazzo had instructed registered valuer Mr Peter Tuck to assess the unimproved value of the subject land for the purposes of conversion. Mr Tuck’s valuation report dated 16 October 2001 assessed the value as at 1 July 2000 at $30,000. However, Mr Tuck did not attend the hearing and I explained to Mr Randazzo that as Mr Tuck was not available to be cross-examined and have his reasoning and conclusions tested, I could place little weight upon his valuation. For the same reason, I could place little weight upon a market appraisal made by Mr Lindsay Hallam, of Hinchinbrook Real Estate, -- 5 of 9 -- 6 stating that in his opinion the market value of the subject land would be in the range of $30,000 to $34,000. [20] Mr Randazzo generally agreed with Mr Cross’ description of the subject land, apart from the extent of fill required. However, he disagreed with his method of assessing the unimproved value and the assumptions which Mr Cross had made. He regarded the notional development exercise as flawed and set out to demonstrate that it could lead to a wrong conclusion. He challenged the cost of providing access from Roma Street. Mr Cross had allowed at $60 per lineal metre for 50 metres. Mr Randazzo reasoned that as the subject land was being compared with sales each of which had bitumen street frontage, then the subject land must be notionally developed to the same standard, which would involve 85 metres of road construction, as the subject land had a frontage of 35 metres. Mr Randazzo had discussed the matter with Mr John Pettigrew, Chief Engineer for the Cardwell Shire Council. He explained that he wished to develop the land for industrial purposes as a brickyard which would require semi-trailers and trucks to enter and leave the site. According to Mr Randazzo, Mr Pettigrew told him that a gravel access road would be insufficient and that a basic bitumen access road 85 metres long, with 5.6m foundation and a single 3.6m of two coat bitumen, could be constructed for $20 per m², or $9,520. [21] With regard to Mr Cross’ estimate of the filling and leveling, Mr Randazzo disagreed that only 60% of the area should be filled. In his view the whole of the land should be filled to an average of 0.5m over the whole 2,833 m². He had obtained a quote from Cardwell Earthmoving Pty Ltd to fill and level the subject land at $10 per m³. Mr Randazzo calculated that this would cost $14,170, so that clearing, constructing the road and filling and leveling the subject land to a notional state comparable to the sales would cost $25,940, compared with Mr Cross’ estimate of only $10,500. [22] In addition, Mr Randazzo challenged the sales used by Mr Cross as a basis for the valuation. Despite its smaller area, Mr Randazzo considered Sale 1 to be superior to the subject land, as it was in a better location in a more established area and he stated that “it enjoys excellent visibility and is a beautifully drained block”. (Transcript page 12) [23] He rejected Sales 2 and 3, as they were zoned “Urban” and situated close to the centre of Cardwell. He described them as being well elevated, well drained with an excellent bitumen road and excellent exposure in a built-up area. In his view, there were no similarities between those two blocks and the subject land. [24] Mr Randazzo produced evidence of the sales of Lots 99 and 100, the two lots situated in the industrial area of Cardwell only a short distance from the subject land, which had -- 6 of 9 -- 7 been for sale at the time of Mr Cross’ investigations. Lot 99 on Plan C1046, together with Lot 1 on RP 700175, Parish of Ellerbeck, containing a total area of 3,440 m², sold in October 2001 for $18,500. However, it seems that this was a family transaction for a half interest in the property. [25] Lot 100 on Plan C1046, Parish of Ellerbeck, containing an area of 2,023 m², sold in November 2001 for $40,000. [26] Mr Randazzo had obviously inspected those properties. He disagreed with Mr Cross that both of the blocks require a greater amount of filling than the subject land. In fact, he said, they are fairly level sloping to the east; while Lot 100 does have a low area in the front of it, it has a higher area at the back which would compensate for it. He thought that some leveling with a grader would be all that was necessary to bring both those blocks to a suitable standard for development. In his opinion, the subject land was the lowest block in the area by far. [27] He expressed the view that those two sales were the only ones that were relevant to the valuation of the subject land and the only ones that were true and fair comparisons. He contended that as Lot 100 sold for $40,000, while Lot 99 and Lot 1 sold for the equivalent of $37,000, if fully filled and with a decent access road, the subject land would be worth $35,000 to $40,000 at best. If the true cost of bringing the land to that state was deducted, ie $40,000 less $25,940, the land would be worth only $14,060. However, he realised that such an amount was obviously too low and he was prepared to concede that someone would pay $20,000 to $25,000 for the subject land in its present state. The Issues [28] Mr Cross and Mr Randazzo have different impressions of the subject land. In Mr Cross’ view, the subject land is situated in the industrial area of Cardwell and with 50m of gravel road development and some filling and leveling would make a good block for industrial development. [29] On the other hand, in Mr Randazzo’s view, the subject land is situated in an area which is remote from the business area of Cardwell, requiring 85m bitumen road access and filling over the whole of the land. The cost of such development would be considerably more than envisaged by Mr Cross. [30] Mr Cross conceded that he had some difficulty in obtaining a basis for the valuation of the land. The only sale of industrial land was an improved sale and after analysis Mr Cross considered that it was too high. He therefore turned to the sales of two “Urban” -- 7 of 9 -- 8 zoned blocks, which had sold in 1998 and 1995 which had subsequent to their sale been used for purposes which could be regarded as industrial or semi-industrial. [31] However, Mr Randazzo rejected those sales for the reasons discussed. [32] Mr Cross had discussed the matter with a real estate agent and ascertained that there were two industrial properties not far removed from the subject land which were for sale at asking prices of $60,000 and $55,000. Although an offer of $38,000 for Lot 100 had been rejected, he felt that it did set the minimum level of value. [33] In my view, there is some substance in Mr Randazzo’s criticism of Mr Cross’ basis of valuation, but in the absence of any further evidence it would have been very difficult for him to have upset Mr Cross’ valuation of $40,000. However, Mr Randazzo did produce evidence of two sales of industrial land close to the subject land. [34] One of those sales, the sale of Lot 99 and Lot 1, is not an appropriate basis for the valuation, as it is a family transaction for a half share of the property. In my view, such sales must be treated with great caution as they may have been transacted for family or emotional reasons at something other than market value. I therefore reject the evidence of the sale of Lot 99 and Lot 1. [35] However, there is no evidence to indicate that the sale of Lot 100 in November 2001 for $40,000 is other than a bona fide sale. That sale was not available to Mr Cross at the time he made his valuation. In his oral evidence he made the point that it was some 11 months after the relevant date. However, he conceded that there was no great change of circumstances in Cardwell in that intervening period. On the principle in Daandine Pastoral Co Pty Ltd v. Commissioner of Land Tax (1943) 7 The Valuer 229, I accept that the sale of Lot 100 is an appropriate sale for comparison with the subject land. [36] Mr Cross and Mr Randazzo disagreed as to the comparability of that sale. Mr Cross thought the sale required more filling than did the subject land. On the other hand, Mr Randazzo rejected such argument as in his opinion, little filling or leveling would be required before Lot 100 would be suitable for development. Furthermore, Lot 100 is situated on a bitumen road. However, it is somewhat smaller. [37] Having regard to all the evidence in this case, I have come to the conclusion that the subject land required more development expenditure than estimated by Mr Cross and certainly more than Lot 100, before it could be used for industrial purposes. Furthermore, it is more remote from the centre of Cardwell than Lot 100. These factors indicate that Lot 100 is superior to the subject land in its present state, notwithstanding that it is smaller. -- 8 of 9 -- 9 [38] Mr Cross said that the sale of Lot 100 would not have greatly influenced him in arriving at his valuation of the subject land. Because at the time of making his valuation Lot 100 was not a sale, but only offered for sale, he did not inspect it in the same detail as he would if it had been a sale. On the other hand, Mr Randazzo has obviously inspected the property in detail. Where their evidence differs in relation to the physical features of Lot 100, I am more inclined to accept his description of the land than that of Mr Cross. For what it is worth, Mr Tuck’s description of the land supports that of Mr Randazzo. [39] Having regard to the whole of the evidence, I have come to the conclusion that by direct comparison, as Lot 100 is better situated, on a bitumen road and requires little by way of development before it could be used for industrial purposes, it is superior to the subject land. The cost of providing access and to fill and level the subject land would be greater. Furthermore, the evidence shows that at the relevant date there was little demand for industrial land in Cardwell. In my view, the unimproved value of the subject land at the relevant date is $33,000. Order [40] The appeal is allowed, the purchase price decided by the Minister is set aside, and the purchase price of Special Lease 27/36747 for conversion purposes is determined at Thirty-Three Thousand Dollars ($33,000). PRESIDENT OF THE LAND COURT -- 9 of 9 --