Aronis v Chief Executive, Department of Natural Resources and Mines [2002] QLC 46

[2002] QLC 46 LAND COURT BRISBANE 6 June 2002 Re: Appeals against annual valuations Valuation of Land Act 1944 Property ID Nos: 9112998 and 9112996 Local Government: BCC-Yeerongpilly Maria Aronis (AV2001-269, AV2001-270) v. Chief Executive, Department of Natural Resources and Mines J U D G M E N T Background: [1] These matters relate to two properties at 3 and 17 Hayling Street, Salisbury, and are located about 9 kilometres radially south of the Brisbane GPO. The subject lands have areas of 311 m² (3 Hayling Street – AV2001-269), and 953 m² (17 Hayling Street - AV2001-270), and are described respectively as Lot 1 on RP 92106, (3 Hayling Street) and Lots 4 to 6 on RP 92106 (17 Hayling Street), Parish of Yeerongpilly. Both parcels are zoned as Business under the Town Plan of the Brisbane City Council (the Council) of 13 June 1987, effective at the date of valuation of 1 October 2000. Each is currently used for commercial purposes as offices at the relevant date of valuation. The key issues are comparison of sales, relativity, the method of valuation, impact of an adjoining medical clinic and the use of the land. [2] On 26 February 2001 the Chief Executive issued valuations of the subject lands at $42,000 (3 Hayling Street) and $90,000 (17 Hayling Street). Following objections the Chief Executive confirmed those figures on 1 July 2001. The appellant has now appealed claiming the unimproved value should more properly be $31,000 (3 Hayling Street) and $75,000 (17 Hayling Street). By agreement between the parties, both matters were heard concurrently. [3] At the hearing on 2 April 2002 leave was granted for the respondent to lead evidence to an amount of $112,500 for the subject land at 17 Hayling Street, following a letter to the court on 22 March 2002 outlining that intention. A copy of that letter had also been provided to the appellant on the same date. -- 1 of 21 -- 2 [4] Due to a communication problem between the parties, the appellant had not been aware of the contents of Mr McDonagh’s technical valuation reports, as required under s.23 of the Land Court Rules 2000. Mr Paterson explains that the valuation reports had been delivered by hand on 26 March 2002, to the last address for service given to the Chief Executive, in accordance with s.84 of the Valuation of Land Act 1944. Mr Aronis explains that he had found an unopened parcel at his front door on 30 March 2002. Unfortunately the documents had been damaged by rain. [5] There had been no verbal communication between the parties in respect of delivery of those documents. It was also noted that the date for hearing for 2 April 2002 had only been advised to the parties on 7 March 2002. In view of that shortened notice of hearing period, the court had directed exchange of materials at least seven days prior to 2 April 2002. [6] Peter Aronis appeared and gave evidence for the appellant. Mr R Paterson, Principal Legal Officer appeared for the respondent, calling evidence from Kenneth John McDonagh the departmental registered valuer responsible for determining the valuations. The evidence: (1) History of the valuations - [7] Mr Aronis details the history of previous valuations extending from 1992 to the current valuations. He explains that on each of those occasions the subject lands had been increased relatively consistently with similar properties, until the valuation at 1 October 1998. He notes for example that both subject lands had remained at the same unimproved values between 1 October 1994 and 1 October 1998 at $34,000 (3 Hayling Street) and $84,000 (17 Hayling Street). Following objections against the unimproved values at 1 October 1998, the valuations had been reduced by 10% to $31,000 (3 Hayling Street) and $75,000 (17 Hayling Street). Those values had then been retained for the valuations at 1 October 1999, but had increased at 1 October 2000, by 35.5% (3 Hayling Street) and 20% (17 Hayling Street). The new figure of $112,500 now argued for by the respondent would increase that valuation by 50% above the previous valuation of $75,000. The reason for the 10% reduction at 1 October 1998 is unknown to the court, and followed a s.68 offer following the objection conference. [8] Mr Aronis argues that the values of the subject lands had been severely impacted by the establishment of an abortion clinic in the medical centre located between the two properties at 11 Hayling Street. He advises that prior to public -- 2 of 21 -- 3 knowledge of that clinic in 1998, both properties had been virtually fully tenanted, except for some short periods between tenancies, or while new office fitouts were undertaken. He argues that new tenants were often obtained by personal referral by previous tenants, reflecting the strategic location of the premises to the larger industrial estates nearby at Salisbury, Acacia Ridge and Coopers Plains. Mr Aronis further advises that the adjoining property at 11 Hayling Street (where the clinic is now located) had previously been vacant for about four years up until 1998. [9] Since 1998 Mr Aronis advises that the subject lands had experienced major vacancies. The subject land at 3 Hayling Street comprises two office properties in a single building, both of which remained vacant until 1 January 2000 for one office, and 1 August 2000 for the other. The subject land at 17 Hayling Street comprises four offices in a single building, containing secure parking for buildings under the one storey building. One of the leases (unit 2) lapsed in 1998, and has remained vacant to the present. Units 3 and 4 became vacant in July 2001, and are also still vacant. The one remaining tenant occupies two units on a month to month basis. [10] Mr McDonagh advises that he had not been the valuer for any of the previous valuations, and that this current valuation was the first occasion on which he has sought general relativities in that area. He can offer no advice on why the previous valuations were reduced on objection at 1 October 1998, although he speculates that there had been limited sales evidence available at that time. He notes further that because of a paucity of sales of commercial properties in that locality in the current matter, he had seen the need to compare the subject land with residential lands for relativity purposes. From those comparisons he had concluded his current manual adjustments of the subject lands, because he believes the previous relativities with surrounding parcels were incorrect. He notes that commercial use cannot be valued less than residential lands. [11] Mr Aronis further notes that the subsequent valuations at 1 October 2001 had remained unchanged at $42,000 (3 Hayling Street) and $90,000 (17 Hayling Street). Mr McDonagh advises that those figures had not been amended under s.68 of the Act, pending a decision of this court in the current matter. However Mr Paterson correctly notes that those subsequent matters have no bearing on the current valuations under appeal. [12] Mr McDonagh advises that, following objections from some neighbouring residential lands opposite the subject commercial lands, he had reduced those residential valuations in order to reflect the general problems associated with traffic -- 3 of 21 -- 4 generated at such a commercial location. He concedes that also included some allowance for proximity to the clinic. (2) The use of the lands - [13] The subject lands are located in an established residential area of Salisbury, nearby to industrial lands. The area is serviced by a local primary school and parks and bus service, and convenient shopping is about one kilometre to the south in Lillian Avenue. The lands have good access to Hayling Street, which is bitumen sealed, with concrete kerbing and channelling. The subject land at 3 Hayling Street is on the corner of Hayling and Chalfont Streets, while 17 Hayling Street is on the corner of Hayling and Maverton Streets. There is an unnamed lane to the rear of both properties. Chalfont Street, Maverton Street and the unnamed lane are all bitumen sealed with concrete kerbing and channelling. The subject lands fall gently (about 1.5 metres) from north to south. All normal utility services are available. [14] Both subject lands are agreed to reflect semi-modern commercial properties in fair condition. Mr McDonagh has sought to provide some benefit of doubt to the appellant, and has valued them as inferior commercial properties. The use of the single building upon 3 Hayling Street is restricted to two offices, one of which is currently tenanted for use as a small office and storage area. While it was well maintained, refurbished, carpeted and air-conditioned, its current use as a workshop for refrigeration repairs is seen as an under-utilisation of such a facility for office space. Mr Aronis argues that such a lower valued tenancy arrangement reflects the difficulty of attracting a more upmarket tenant, due to the particular problems associated with the adjoining abortion clinic. [15] The use of the separate single building upon 17 Hayling Street, and its current level of vacancy, is argued by Mr Aronis to also be directly related to the presence of the clinic. He notes that prior to 1998 the units had remained fully tenanted, mainly, in his opinion, due to the competitive nature of the rents, and the appellant’s marketing strategy. He argues that a quality product at a competitive price had always ensured adequate leases. However he argues that changed with the introduction of the adjoining clinic, a factor beyond the appellant’s power with which to compete successfully. Any subsequent rents achieved have been at significantly discounted rates for a less than optimal type of commercial use. Mr Aronis advises that one existing tenant even relocated to an inferior site because the appellant had been unable to reduce the rents sufficiently, following the erection of the clinic. -- 4 of 21 -- 5 [16] Mr McDonagh agrees that the 17 Hayling Street building is neat and tidy, but he believes that the building is a bit dated, and he speculates that the current vacancies might reflect the lack of internal refurbishment. He notes that the building has a total floor area of about 590 m², on a suspended concrete floor. He concedes that the internal partitioning is not load bearing, and that no attempt at strata titling of the building has occurred. He also accepts that there has been no change of use or ownership at the relevant period, which might have precipitated a revision of the method of valuation. [17] Mr McDonagh confirms that the current use of the 17 Hayling Street site reflects an overall coverage of 60% of the whole site involving the three parcels, (Lots 4 to 6). He McDonagh believes that the recent refurbishment of 3 Hayling Street was possibly the reason why the appellant was subsequently able to lease it. However Mr Aronis notes that the subsequent lease was at a lower rent because of the presence of the clinic. [18] In respect of the 60% site coverage of the building, Mr Aronis advises that reflects the requirements of the Council, providing for 6 metre setbacks along Hayling and Maverton Streets, and a relaxation to 3 metres along the rear laneway. He argues that when the building was constructed in 1982, the Council had resisted construction of a new building on only one 311 m² parcel. [19] The appellant had initially only owned Lot 4, as part of the arrangement to purchase the existing building at 3 Hayling Street, but had subsequently purchased Lots 5 and 6 in order to proceed with the current building. There had apparently been two unsuccessful applications for development of the single Lot 4, both refused on the grounds of inadequate movement areas for vehicles. He advises that the building approval had only been given subject to amalgamating the three Lots into one building site. Mr Aronis also advises that initially the building on 3 Hayling Street had been used for two convenience shops, and 11 Hayling Street had been formerly a child care centre. The proposed use for offices by the appellants was seen as a use other than for convenience shopping purposes, requiring a larger site than the separate 311 m² of each small parcel. (3) Planning impact - [20] Both subject lands were zoned Business under the then effective Town Plan of 1987. However at the relevant date of valuation at 1 October 2000 the new City Plan 2000 had already been widely circulated for comment. The new City Plan 2000 became effective on 30 October 2000, and the zoning of the subject lands transferred -- 5 of 21 -- 6 to multi-purpose zone 4 (MP4), virtually the equivalent of the old local business zone. However Mr McDonagh recalls that site coverage under the old business zoning was up to 100%. [21] From his enquiries with the Council Mr McDonagh advises that maximum site coverage under the 1987 Town Plan had provided for the 60% cover of the current buildings on both subject lands. However under the proposed City Plan 2000 the maximum site coverage for commercial purposes was reduced to only 35%; for mixed commercial and residential purposes at 75%; and for residential use at 75%. For the current uses as commercial purposes, the existing buildings represents non- conforming uses above the levels allowed under the new legislation. As such it is agreed that they represent the highest and best uses of the two subject lands. [22] In respect of determining the highest and best use of the subject lands, I agree with Mr McDonagh that the proposed changes to the permitted site coverage, later confirmed in the new City Plan 2000, are matters for consideration in determining the value at the relevant date of 1 October 2000. While the new planning regime did not have legal force until it was formally gazetted on 30 October 2000, its policies and intentions had been widely known. The Full Court of Queensland clarified that matter in JR and DM Stubberfield v Valuer-General (1988-89) 12 QLCR 328, where Carter J said at page 340: “True it is that the land remained subject to the existing zoning at the date of valuation. That was therefore a relevant matter to be considered. It is also true that shortly before that date the local authority had published its intention to have a significant portion of the subject land changed from Residential to Public Open Space zoning. To my mind it is inconceivable that that fact would not have weighed upon the mind of the hypothetical purchaser who on the valuation date was considering the appropriate capital sum which he ought to pay to acquire the fee simple. Whether it would have in fact justified a sale at a different price on that account is not a question which is presently relevant. The valuer however was bound as a matter of principle to consider it rather than to ignore it as irrelevant.” [23] In the current matter Mr McDonagh has determined that any future redevelopment of the subject lands for commercial purposes was likely to be at a lesser site coverage, and the existing 60% site coverage was seen as therefore to be the highest and best use of the lands. [24] Mr Aronis made enquiries of the Council in respect of the setback requirements upon minimum sized such small sites for residential purposes. Mr McDonagh had not pursued that matter, and was unable to offer comment on Mr -- 6 of 21 -- 7 Aronis’ evidence in those respects. It is Mr Aronis’ understanding that if the subject lands were now to be redeveloped for residential purposes, while the site coverage could be increased to 75%, the effects of the 6 metre setbacks to all street frontages would severely restrict any residential development upon such small lots of only 311 m² in area. Because of the effects of existing residential setback alignments in the surrounding streetscapes, Mr Aronis was informed that relaxation of those 6 metre setbacks was unlikely. He notes that there was no special provision for small site developments in the Town Plan, and the general policy on minimum size lots under 400 m² would prevail, which are always subject to the consent of Council. (4) Impact of the clinic - [25] A contentious issue is the presence and operations of the adjoining medical clinic at 11 Hayling Street, lying between the two subject lands. Evidence was provided of a level of public concern with the establishment of a legal abortion clinic at that site in 1998. Mr Aronis argues that regular and repeated picketing of that site by various community action groups provides an environment for the subject lands which detract from their value as commercial properties. Mr McDonagh accepts the presence of the clinic, but argues that the appellant is overstating its impact upon the valuations. [26] Mr Aronis argues that the impact of the clinic has increased since 1998, at which time it had only been operating one day each week. He notes that the clinic at the relevant date operated five days each week, although there had been some recent reduction in operations, due to the need to refurbish and install a lift in the clinic building at 11 Hayling Street. Mr Aronis argues that part of the problem is associated with a lack of waiting rooms and parking facilities for the clinic, resulting in refuse and nuisance to the adjoining areas. As the nearest neighbours to the clinic the two subject lands are most severely affected. [27] Mr Aronis further argues that because of the very sensitive nature of its operations, there is a reluctance by prospective tenants to relocate into its proximity. He further provides evidence of abusive threatening contacts to his premises when an error in a public notice incorrectly showed the subject lands as the location of the clinic. Mr Aronis also draws reference to similar public animosity against similar clinics elsewhere in Brisbane and interstate. He argues that those disabilities are beyond his control to overcome. He notes that a police presence is regularly required at the clinic area. He advises of one occasion when damage was caused to the subject building at 17 Hayling Street due to a car being set alight in protest, it is believed, -- 7 of 21 -- 8 against the presence of the adjoining clinic. There had been a similar unsuccessful attempt some time previously. [28] While conceding the operation and presence of the clinic, Mr McDonagh had made personal enquiries with the existing tenants in the subject lands. Those tenants had indicated that the locality was a quiet area and, in their opinion, the clinic did not affect their businesses. However he concedes that the clinic could eliminate some tenants, and there could be some impact upon the level of rents for that purpose. On that advice, Mr McDonagh made no allowance for any adverse impacts by the operations of the clinic on those two commercial properties. However Mr McDonagh concedes that he believes that such a clinic could impact upon the value of adjoining residential uses, and he has made some allowance for that purpose for residences across Hayling Street. Mr McDonagh advises that other inferior type commercial premises in the general area, not located near such a clinic, had also remained vacant for several years at that time. [29] In respect of the impact of the presence of the clinic upon the market rentals of the two adjoining subject lands, Mr Aronis advises that the current annual rents at $88 per square metre reflects something less than the comparable similarly developed commercial properties in the area. He argues that those lesser rents reflect the difficulties being experienced with the adjoining clinic. [30] Mr McDonagh advises that the tenants in 3 Hayling Street believe that those rentals are reasonable. Mr McDonagh compares that $88 per square metre with prime Evans Road frontage commercial rents at $180 per square metre, and older style Evans Road frontages at $125 per square metres. He notes that even brand new offices in Evans Road have remained vacant for one year. Mr Aronis cautions about comparing ground level and upper floor level rentals in Evans Road. Mr Aronis advises that the $88 per square metre has remained the same since 2000, and the lower rates were only achieved after allowing extra incentives for the new tenants to relocate to the subject lands. [31] Mr McDonagh also provides evidence of other commercial properties in Cripps Street, where smaller shops of area 45 m² have asking rental prices of $120 per square metre to $154 per square metre. However he agrees that Cripps Street is near to Lillian Avenue, which is a superior commercial location. To further support his valuations Mr McDonagh provides evidence of other inferior backstreet commercial rentals. Those indicate rental return for inferior office space on Evans Road at between $115 per square metre and $125 per square metre. He could find no other -- 8 of 21 -- 9 cases where commercial properties adjoining a similar abortion clinic exist, and where public disquiet was evident. He also concedes that an abortion clinic is a sensitive issue in the community. [32] In an attempt to provide further assistance Mr McDonagh provides advice from local real estate agents in the area, in respect of other backstreet inferior premises in Jaybel Street, about 400 metres north of the subject land. He notes that those return rentals of $90 per square metre for areas of 70 m² to 200 m². However he has not personally inspected the condition of those buildings which were built in the 1970s. (5) The method of valuations - [33] In concluding his valuations, Mr McDonagh concedes that there is a paucity of sales of directly comparable commercial properties. In the absence of such sales he then turns to comparisons of the next nearest market segment for residential lands. He argues that normally the highest and best use of commercial lands reflects a level of values superior to that for residential lands. He further argues that when commercial lands lack demand for use for that purpose, then such lands tend to reduce in value until it equates with the residential type levels of value. He further argues that the valuation for the highest and best use for such commercial lands is never less than their value for residential purposes. [34] Mr McDonagh further argues that while commercial levels of value in the Salisbury area had remained unchanged at 1 October 2000, there had been an overall increase of up to 20% in the residential values for the same period. The larger sites about 800 m² had increased by 20%, while the smaller sites under 400 m² had increased at a lower rate. As he believes that sales of comparable lands is preferable to comparisons on a relativity basis, Mr McDonagh then seeks sales of residential lands. [35] Mr McDonagh argues that as the existing uses have a 60% site coverage, that use of the subject lands is seen as its highest and best use for valuation purposes. He notes that as 17 Hayling Street currently contains a building of floor area 590 m² (60% of site area), he has valued that as a single valuation containing three parcels. He believes it is not appropriate to investigate the potential for small lot single residential purposes on those parcels, as their highest and best use is for commercial purposes. Mr McDonagh argues that s.3(4) of the Valuation of Land Act 1944 directs that the existing use of the subject lands at the relevant date, is to be taken as its -- 9 of 21 -- 10 highest and best use under the current circumstances, where the existing buildings occupy a higher site coverage than that provided for in the new legislation pending. [36] In valuing 17 Hayling Street Mr McDonagh argues that it is valuation practice to value each of the three separate surveyed parcels, and then to apply an allowance for bulk ownership of those parcels. He advises that it would not be acceptable under such circumstances to provide three separate valuations for the three parcels. By allowing a factor of 7.5% bulk discount Mr McDonagh has made provision for a reduction in holding costs and allowances rising from single ownership. By also allowing at the rate of 2.5% per lot, he has provided for the slow nature of the commercial market in that area. He advises that by comparison, a bulk ownership for residential lands in that area, at that time, might reflect only 1% per lot or 3% for three comparable parcels. He notes the higher bulk allowance for the subject lands provides any benefit of doubt in the appellant’s favour. Mr McDonagh has applied the same approach to valuing the adjoining clinic at 11 Hayling Street comprising two lots, arriving at an unimproved value of $75,000 for that parcel. However he concedes that unimproved value should have been rounded to $76,000 to be consistent with the subject lands. [37] Mr Aronis contests the approach for 17 Hayling Street, arguing that it was never acceptable to Council for separate commercial developments on each of Lots 4 to 6. For that reason, at its highest and best use as commercial offices, he argues that the land at 17 Hayling Street should be valued as a single parcel of area 953 m². Mr Aronis further claims that if comparisons are being made on the basis of comparable residential lands, then the appropriate method for 17 Hayling Street should be to compare larger residential lands of area nearer to 953m², addressing all its positive and negative features. He argues that it should be either valued on the basis of commercial lands, or as residential lands, but not treated as commercial lands for its highest and best use, and then to selectively value it on a residential basis. [38] In valuing 17 Hayling Street Mr McDonagh has valued Lots 4 and 5 each at $40,000, and Lot 6 at $42,000, making an allowance of $2,000 for its corner location with its advantage of increase light and air. Mr Aronis challenges that approach for Lot 6 noting that the 6 metre setback on that parcel fronting Maverton Street severely restricts its building potential. [39] To support his overall assumption that commercial properties tend to at least equate to the residential lands, Mr McDonagh advises that an average residential rental in that part of Salisbury reflects about $170 per week. He argues that is inferior -- 10 of 21 -- 11 to the level of about $200 per week currently achieved for each of the two tenants in 3 Hayling Street. [40] In response to why Mr McDonagh has sought leave to amend the valuation of $90,000 to $112,500 now defended, he argues that the pending court proceedings had drawn his attention to the former incorrect method of valuing 17 Hayling Street as a single parcel instead of as three separate parcels. Mr Aronis notes that the former unimproved value of $90,000 had subsequently been maintained for the following valuation at 1 October 2001. Mr McDonagh advises that had been left to lie in abeyance pending the decision of the court in the current matters, and that would be amended in line with the court’s findings. [41] Mr McDonagh however concedes that if it was to be found that the appropriate method for valuing 17 Hayling Street was to compare it as a single parcel of multi titles, then the value would be at a reduced rate, suggesting perhaps to a level of the mid-$80,000 for a 800 m² parcel. (6) Relativities - [42] Adopting the approach of comparing the subject lands as if they were residential parcels, bearing in mind the agreed lack of directly comparable sales of commercial properties, Mr Aronis seeks comparisons with a range of parcels in the Salisbury/Moorooka locality. He draws comparisons with parcels on a relativity basis, adopting the determined unimproved value of those parcels. [43] Seeking first detailed comparisons with 3 Hayling Street (311 m²), Mr Aronis notes three lots of areas 382 m² to 405 m² in Tamblyn Street, Salisbury with unimproved values of $46,500 to $48,000; and also to three lots in Longdon Street, Coopers Plains of area of 405 m² with values at $46,000. He notes all of those parcels have superior environments reflecting surrounding residential lands, some with views and easy access to parklands. Most have access to quieter streets than the subject lands. Bearing in mind the indicated reduced building area of 3 Hayling Street (after allowing for street setback requirements), Mr Aronis argues that direct comparisons indicate that 3 Hayling Street is very inferior to all of those parcels, and therefore has a value much less than $46,000. [44] He then draws detailed comparisons with the larger 17 Hayling Street (953 m²) and larger parcels in Maurice Avenue, Salisbury (seven lots); Beckford Street, Moorooka (one lot); Tonk Street, Moorooka (one lot); Robinson Street, Moorooka (one lot); Nicholson Avenue, Salisbury (seven lots); Chalfont Street, Salisbury (five lots); McCarthy Road, Salisbury (one lot); Edna Street, Salisbury (one lot); Lillian -- 11 of 21 -- 12 Avenue, Salisbury (three lots) and Frewin Street, Salisbury (one lot). Collectively those 28 parcels reflect areas between 807 m² and 1130 m², representing values between $71,000 and $95,000 depending upon the individual quality of each parcel. [45] Mr McDonagh agrees that larger parcels have valuations of about $82,000 to $84,000 in that area. On each of those larger parcels compared on a relativity basis Mr Aronis notes that most have wide frontages, in quieter streets, often with good views, and surrounded by residential houses and some with direct access to parks. There is no major difference between Mr Aronis and Mr McDonagh in that, if 17 Hayling Street was to be treated as a large single residential home site, then the relativity supplied by Mr Aronis would not be inconsistent with the former value of about $90,000. That value for an area of 953 m² is consistent with Mr McDonagh’s estimate of about $85,000 for an 800 m² larger single residential site. However Mr Aronis argues that the larger residential parcels are superior to 17 Hayling Street, yet have values less than $90,000. Mr Aronis believes the value should be $75,000. [46] However Mr McDonagh argues that such a larger single residential site would be valued under s.17 of the Act as if there was no higher purpose available, such as for subdivision. That of course is not an option for 17 Hayling Street which has already been subdivided into three separate lots. Mr Aronis uses his wide range of relativity comparisons to provide an average for the court (transcript 26). Mr McDonagh is familiar with all of those selected parcels and argues some have inferior widths than the subject lands, one is nearer to the railway line, some are inside parcels and not corner lots, and one has a drainage problem. Overall, because of the different highest and best use of those parcels as single unit residential sites, Mr McDonagh believes direct comparisons provide no relevance to the subject lands. [47] As further assistance to explain the relativity between commercial and residential valuations, Mr McDonagh provides advice of values at a commercial centre at 10 Cripps Street, Salisbury mentioned earlier. That is a 326 m² site described as valuation No. 6071/0, with an unimproved value of $70,000 ($215 per square metre). The land is seen as superior to 3 Hayling Street due to its better location and exposure near Lillian Avenue, and the school site, and the higher passing traffic flows. [48] Mr McDonagh argues that on a direct comparison with 3 Hayling Street as commercial properties, he would conclude a rate of $157 per square metres or $49,000 for the subject land. He argues that while Hayling Street is a quieter street than Cripps Street, because of the corner location of 3 Hayling Street he has allowed -- 12 of 21 -- 13 some additional allowance for the better exposure of the subject land (5%). On a similar direct comparison basis Mr McDonagh estimates a value of $48,000 ($150 per square metre) for Lots 4 and 5, and $49,000 ($157 per square metre) for Lot 6 of 17 Hayling Street. Providing a bulk allowance of 7.5% would result in an estimated value of $134,000 for that parcel. [49] However Mr McDonagh agrees that 10 Cripps Street had remained at $70,000 since about 1995-96. Mr McDonagh believes the zoning of 10 Cripps Street is MP4, similar to the subject land. However Mr Aronis argues that because of the larger area of the other properties in that commercial complex at the corner of Lillian Avenue, Cripps Street and Blackwood Road, it was likely to be zoned as MP3. Mr McDonagh was unable to confirm the actual zoning, but agrees that due to a lack of sales of commercial lands the valuations of those parcels had not been increased for some time. [50] Mr McDonagh advises that the corner parcel at Cripps Street and Lillian Avenue has an area of 470 m² and a value of $250 per square metre. He notes also that the parcel at the corner of Cripps Street and Blackwood Road, (183 Blackwood Road) has an area of 802 m² and a value of $180 per square metre. He notes that the gross floor area of 10 Cripps Street is 60% of site cover, similar to the subject lands. He agrees that if that building was demolished the owners would only be able to build to a new site cover of 35% for commercial use or 75% for residential use under the new Town Plan. [51] Mr Aronis also draws comparisons with commercial lands at the corner of Lillian Avenue and Ainsworth Street, Salisbury, to the east of Cripps Street. He notes that parcel is being developed as a medical centre, and involved a string of former old shops. It is agreed that the Lillian Avenue frontage is superior to Cripps Street, and the parcels in that centre each have an area of 304 m², and each is valued at $54,000 ($178 per square metre). [52] Mr McDonagh agrees that site is a superior location to Cripps Street, but argues that the development of Cripps Street and Lillian Avenue is a more upmarket facility, thus impacting the level of commercial activity. On that basis the Cripps Street site is a superior commercial site to the Ainsworth Street site. He agrees that adjoining properties to commercial sites do have an impact upon their commercial relevance. By comparing the Ainsworth Centre to 3 Hayling Street, it is agreed that the former has a better location and more passing traffic. -- 13 of 21 -- 14 [53] Mr Aronis then draws further comparisons with shops at the corner of Ainsworth Street and Angela Street about 500 metres south-east of the subject lands, and about 450 metres north of Lillian Avenue (Exhibit 9). That parcel (valuation 5669/0) has an area of 1,601 m² and a value of $240,000 ($150 per square metre). Mr McDonagh argues that is a larger single parcel, thus reflecting a lower rate per square metre. [54] Mr Aronis also seeks relativity between the two subject lands and unimproved values of adjoining residential parcels in Hayling Street, Chalfont Street and Maverton Street. He notes that the unimproved values to the north at the corner of Hayling and Chalfont Streets (Lot 6), and to the east at Hayling and Maverton Streets (Lot 68) do not reflect any increase in value due to their corner location. He notes for example that Lot 68 (604 m²) has a value of $66,000, compared to the adjoining Lot 90 (668 m²) at $66,000, and Lot 69 (615 m²) at $65,000. [55] The relativities at Lot 6 reveal Lot 6 (716 m²) at $73,000, adjoining Lot 5 (731 m²) at $73,000, and adjoining Lot 2 (607 m²) at $73,000. [56] Mr McDonagh concedes those values, but advises that from memory Lots 6 and 2 in Hayling Street had been reduced by about $7,000 from their former value of $80,000, to allow for proximity to the commercial centre and the clinic. Mr McDonagh concedes that the previous valuer had made no allowance for corner location on those residential parcels. (7) Comparison of sales - [57] Mr Aronis provides no sales of comparable lands to support his estimate of the unimproved values, but is familiar with those supplied by the respondent. To support his valuations, Mr McDonagh provided the following sales of vacant Residential A lands compared to each of the individual parcels of the subject lands:  Sale 1 – (94 Pegg Road, Rocklea – Lot 41 on RP 43431). This is a 594 m² parcel located about 2 kilometres west of the subject lands, and west of Beaudesert Road in the suburb of Rocklea. The sale is located in an inferior locality opposite the Rocklea Showgrounds and Trotting Track. Although it adjoins open parkland, it has a superior shape and size but has a lower elevation (and was flooded in 1974) and inferior surrounding residential development. Overall the sale is seen as inferior to the subject land. The sale sold in April 1999 for $31,500, was analysed at $29,200, and has been applied at $29,000.  Sale 2 – (27 Kain Street, Coopers Plains – Lot 8 on SP115611). This is a 350 m² parcel located about two kilometres south of the subject lands, in the comparable residential suburb of Coopers Plains. The sale has a more regular -- 14 of 21 -- 15 shape and a greater width, and a superior size. Overall the sale is seen as superior to the subject lands. The sale sold in November 1999 for $60,000, was analysed at $55,000, and applied at $50,000.  Sale 3 – (49 Tamblyn Road, Salisbury – Lot 31 on SP 124241). This is a 364 m² parcel located about 650 metres southwest of the subject land. The sale is seen as superior in shape and size, but comparable in location and quality of environment. Overall the sale is seen as superior to the subject land. The sale sold in March 2000 for $55,000, was analysed at $53,310, and applied at $50,000. [58] In drawing comparisons with the above sales, Mr McDonagh has concluded unimproved values of $40,000 for each of the two inside lots of the subject lands (Lots 4 and 5); and $42,000 for each of the corner sites (Lots 1 and 6). Mr Aronis by comparison arrives at a value of $31,000 for Lot 1 (3 Hayling Street) after allowing for the major building setbacks required by the Council as discussed previously in paragraph 22. He argues that allowing for such setbacks upon Lot 1 (3 Hayling Street) it would result in a small useable building area, beside the high brick building of 11 Hayling Street. As such he concludes that as a residential parcel that lot would suffer severe disabilities compared to the sale parcels. Mr McDonagh concedes that perhaps those disabilities might result in a likely market value of about $40,000 for 3 Hayling Street. [59] In respect of comparisons with 17 Hayling Street, Mr Aronis notes that Mr McDonagh had initially drawn some comparisons with the larger parcel at 36 Davey Street (Exhibit 13). Mr McDonagh no longer seeks support from that sale, but advises that such a parcel was investigated in order to assess what the market might pay for a larger parcel (761 m²), with elevated views to the south, but opposite industrial lands. However he argues his current sales are the best comparisons of the values of residential lands. [60] Mr Aronis seeks support for his argument that sales evidence demonstrates his conclusion that the clinic is impacting the values of that area, by reference to a sale of an improved residential property opposite the subject land at 10 Hayling Street (Lot 2). He notes that dwelling was initially on the market about 6 months after the clinic opened in 1999 at an asking price of $119,500. He notes it has only recently gone under contract for $147,000. He compares such a price for an existing dwelling in an agreed superior locality, with a recent re-sale of a new replica highset Queenslander style dwelling on the land at 94 Pegg Road, Rocklea (Sale 1), at $184,000. Mr -- 15 of 21 -- 16 McDonagh rejects such comparisons noting the major differences in the quality and conditions of the dwelling upon those two parcels. On the evidence provided I get little assistance from this re-sale of an improved property. Decision: (i) The method of valuation - [61] At the heart of the difference between the parties in this matter is really the method of valuing the two parcels. It is agreed by both parties that the highest and best use of both parcels is for their current use as commercial offices. It is also agreed that the existing buildings occupy a site coverage of 60% of each parcel, and therefore reflects a higher use of the sites for commercial purposes that would otherwise be approved for a new development upon each parcel. On that basis the existing use of the buildings reflects the current highest and best use of the site at the relevant date of 1 October 2000. [62] It is also agreed that there are no comparable sales of commercial lands in the area to support any level of market for such parcels. That paucity of sales has resulted in a static level of value of commercial lands in Salisbury, particularly to the south near Lillian Avenue. However in that Lillian Avenue locality the current relativity between residential and commercial values supports the superior nature of the latter. [63] There is however evidence of increase in values for residential parcels in the immediate locality of the subject lands, to the extent that those residential values have risen beyond the previous commercial levels. The respondent then makes the assumption that the commercial land value should always be equal to residential land values, and draws his conclusions upon the latter. He does this in his understanding that such a comparative approach would be less than any direct relativity approach between commercial lands from other localities. On that basis he concludes that any benefit of doubt in respect of the appropriate level of commercial value would be resolved in the appellant’s favour (see The Commission of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358, per Dickson J at 373). [64] I would agree with Mr Paterson that great care needs to be taken in seeking any direct comparisons between lands of different highest and best uses. That was identified in ACF and Shirleys Limited v Valuer-General (1978) 5 QLCR 370, where the Land Appeal Court said at page 375: “We agree with counsel for the appellant company that relativity between valuations is a desirable principle which should be observed to ensure an equitable distribution of the rating burden. However, in our -- 16 of 21 -- 17 opinion, it is difficult, if not impossible, to extend the principle beyond relativity as between lands with a similar highest and best use or land types with some common nexus. … Obviously the sales of land within each individual category or purchased for a similar use provide the appropriate guide and basis. We do not think that relativity can be established with any degree of confidence as between various land categories with different highest and best uses.” [65] However that is not what Mr McDonagh has sought to do in the current matter. He has tried to use the residential sales merely to demonstrate, in his opinion, what a base level of value for commercial lands might be in that locality. [66] The respondent supports his claim of relativity between residential and commercial land, in a general comparison of rental returns from each type of land use. However in drawing such comparisons between the residential values and the commercial values, the respondent is not actually valuing the subject land as residential sites, but rather valuing the lands as equivalent size commercial land uses. In such comparisons the current actual use of the subject lands is accepted as its highest and best use. [67] The principle of the highest and best use of land has long been accepted by the courts, and is a factor governing the realisation of the market value of the land. It relates to the most advantage use of the land, having regard to existing planning controls and all other relevant factors. That principle was followed in Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410, at page 415. However in that matter Jacobs J went on to say at page 415: “In the first place, it is in my view wrong in principle to determine the highest and best use by comparison of the notional market value for commercial development on the one hand, and residential development on the other. Common experience shows that land ideally suited for commercial development will fetch a higher price per unit of area than residential land, but it does not follow that the highest and best use of all land is a commercial use, for the highest and best use means exactly what it says – the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential. The first task of the valuer is to determine what that use is, and then to value the land on that basis. It is not appropriate to determine the highest and best use by reference only to value.” [68] Now while that decision provides some caution in respect of adopting comparisons between commercial and residential land uses, as proposed by Mr McDonagh in the current matter, it does so only in respect of the principle of determining the highest and best use base only upon the value of the land. In the -- 17 of 21 -- 18 current matter it is agreed that the highest and best use is for commercial purposes, and the purpose of comparisons is merely to provide a benchmark of likely market value for that use. It is also noted that Jacobs J recognised the common experience in the market place that generally commercial lands have a higher value per unit than residential lands. [69] In drawing comparisons between the two different land uses, the method of comparisons needs careful application. For example, while it is important to compare commercial lands on a street frontage and depth basis, it is also common to seek comparisons upon a value per square metre basis, or noting the total area of floor space available under the planning control. However such per square metre comparisons are inappropriate for comparing residential lands. That principle was followed in Hans and Else Grahn v Valuer-General (1992-93) 14 QLCR 327, where the Land Appeal Court said at page 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 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.’” [70] The conclusion is therefore that in drawing direct comparisons between lots of similar size, used either for residential or commercial purposes, it is the overall site value which must be compared. That site value must also be the value for its highest and best use which, in the current matters, must be for the existing 60% site coverage of the existing commercial buildings. On that basis, 3 Hayling Street should be compared as a 311 m² parcel and 17 Hayling Street at a 953 m² parcel. [71] In seeking comparisons with 17 Hayling Street under the current circumstances, it is not appropriate, in my opinion, to value that land as if it comprised three separate small parcels, and then to apply a bulk discount for multiple ownership. While such a method of valuation is common practice for lands such as -- 18 of 21 -- 19 residential estates, where the eventual separate development of residences is proposed, the highest and best use of those lands is for separate living unit purposes. [72] In the current matter the evidence of Mr Aronis is that the Council was unlikely to approve new separate commercial buildings upon each of Lots 4, 5 or 6. The existing highest and best use of 17 Hayling Street is for its existing use as a larger site. Indeed such valuation practice is consistently demonstrated where multiple separately surveyed lots are collectively valued as a single overall commercial parcel. Evidence of that process may be found in major shopping centres and many central city buildings. It has no less application in the current matter at 17 Hayling Street. [73] In respect of the unimproved value of the subject lands, acknowledging the existing use of the buildings, I agree with Mr McDonagh that s.3(4) of the Valuation of Land Act 1944 directs that the unimproved value of the land shall reflect the existing use of the building. That principle was clarified by the Land Appeal Court in the decision of Department of Natural Resources v Golden Sands Community Title (AV99-280) 15 December, 2000, unreported. (ii) Comparison of sales - [74] In adopting comparisons with sales of similar lots of vacant or lightly improved lands, Mr McDonagh has followed a principle long preferred by the courts. (PH Clough v Valuer-General (1981-82) 8 QLCR 70 at 76; and also WM and TJ Fischer v Valuer-General (1983) 9 QLCR 44, at 46). In concluding his comparisons he has assessed 3 Hayling Street as being superior to Sale 1, (applied at $29,000) and inferior to Sales 2 and 3 (each applied at $50,000). After allowing for its corner location, he concludes an unimproved value of $42,000, although he concedes that relativities of corner parcels in that locality indicate an inconsistent approach to corner influence. On reflection Mr McDonagh concedes a value of $40,000 might be appropriate for 3 Hayling Street. [75] As noted in paragraph (62) as the comparisons provided are seen as equivalent sized parcels, but used for commercial purposes, I cannot accept Mr Aronis’ direct allowance for major setback requirements for residential purposes on 3 Hayling Street. That would be inconsistent with its accepted highest and best use. On that basis there is nothing to discredit Mr McDonagh’s conclusion, and I will accept $40,000 for 3 Hayling Street, prior to any conclusion in respect of the impact of the adjoining clinic. [76] In respect of comparisons with 17 Hayling Street as a parcel of size 953 m², I accept Mr McDonagh’s advice that the subject land could have a value slightly in -- 19 of 21 -- 20 excess of $85,000, which reflects the overall value of a parcel of 800 m² in that locality. On that basis the original basis of $90,000 would perhaps not be inconsistent. (iii) Relativities - [77] If I first compare 3 Hayling Street (311 m²) at a possible unimproved value of $40,000, I find that is not inconsistent with the relativities argued by Mr Aronis for lots in Tamblyn Street ($46,500), and Longdon Street ($46,000). [78] By similar comparisons of 17 Hayling Street (953 m²) at a possible unimproved value of $90,000, I find that is not inconsistent with the range of parcels between 807 m² and 1,130 m² supplied by Mr Aronis, and valued between $71,000 and $95,000. It is also consistent with Mr McDonagh’s estimate that larger parcels in the locality are valued at between $82,000 to $84,000. [79] In respect of Mr Aronis’ approach of relying upon an overall average of the wide range of relativities compared with the subject land, I note that the use of averaging values for comparison purposes was rejected by the courts in Daandene Pastoral Company Pty Ltd v Commissioner of Land Tax (1943) 7 The Valuer 299 at 305, where Williams J said in the High Court of Australia on 26 August 1943: “This method of averaging to my mind is unsound. The prices obtained at comparable sales should not be aggregated and averaged, especially when the prices obtained on sales of small areas are dealt with in this way in order to obtain the value per acre of a large area. The only safe course is to compare each sale with the subject land separately.” The correct method of comparison is to compare each parcel on an individual basis, noting the advantages and disadvantages of each separate parcel. (iv) The impact of the clinic - [80] The final matter for consideration is to ascertain whether it would be appropriate to make any further allowance for any impact upon the market value of the subject lands as a consequence of the use of the adjoining 11 Hayling Street. In that respect I am reminded that in ascertaining the market value of land, it is the relationship of a willing vendor and a willing buyer as defined in Spencer v The Commonwealth (1907) 5 CLR 418, at pages 432, which established how the land would be perceived in the market place. [81] Any prudent buyer was likely to be informed of the nature of the business of the adjoining abortion clinic. Depending upon personal beliefs, the use of that clinic may be seen to represent an environment of uncertainty about public approval or disquiet. There is some evidence that actions by unhappy protestors may encourage a -- 20 of 21 -- 21 reduction in the normal quiet ambience normally associated with residential purposes. Mr McDonagh agrees that he would personally would not wish to reside near such activities, and that he has in fact made some small reduction in the values of other residential lands across the road at 10 Hayling Street. He advises that he had allowed a 8.8% reduction in the unimproved values, following objections, to allow for proximity to the commercial centre and also the presence of the clinic (paragraph 56). [82] However Mr McDonagh has declined to allow any reduction in the unimproved values based upon the commercial uses of the subject lands. He has made that conclusion following discussions with the existing tenants of the subject lands. However he concedes that the scope of his knowledge of such impacts upon commercial lands is restricted only to his personal discussions with the current tenants. Bearing in mind the sensitive nature of the business of the adjoining clinic and the history of public concern expressed, I feel it would be appropriate to allow something for that relativity unique impact upon that locality. Accepting guidance from Mr McDonagh’s allowance of 8.8% for 10 Hayling Street, I will allow a reduction of 5% for the adverse impacts of the adjoining clinic at 11 Hayling Street. Summary: [83] In summarising these matters I believe bench mark values for the subject lands would be 3 Hayling Street ($40,000) and 17 Hayling Street ($90,000). If I then adjust those values by 5% for the impact of the clinic in that locality, I can conclude unimproved values of $38,000 (3 Hayling Street) and $85,000 (17 Hayling Street). Conclusion: [84] Having considered the whole of the evidence I am persuaded that the appellant has partly proved her case. The unimproved values as determined by the Chief Executive are set aside, and the unimproved values are determined in the sum of $38,000 (3 Hayling Street) and $85,000 (17 Hayling Street). NG DIVETT MEMBER OF THE LAND COURT -- 21 of 21 --